Putnam v. Time Warner Cable, 99-2078.

• Court: United States State Supreme Court of Wisconsin
• Citation: 649 N.W.2d 626,255 Wis.2d 447,2002 WI 108
• Docket Number: No. 99-2078.,99-2078.
• Parties: Kerry L. PUTNAM, Carol L. Smith-Carter and Louis Boutan, individually and on behalf of all others similarly situated, Plaintiffs-Appellants-Petitioners, v. TIME WARNER CABLE OF SOUTHEASTERN WISCONSIN, LIMITED PARTNERSHIP, Defendant-Respondent.
• Decision Date: 16 July 2002

255 Wis.2d 447
2002 WI 108
649 N.W.2d 626

Kerry L. PUTNAM, Carol L. Smith-Carter and Louis Boutan, individually and on behalf of all others similarly situated, Plaintiffs-Appellants-Petitioners,
v.
TIME WARNER CABLE OF SOUTHEASTERN WISCONSIN, LIMITED PARTNERSHIP, Defendant-Respondent

No. 99-2078.

Supreme Court of Wisconsin.

Oral argument February 4, 2002.

Decided July 16, 2002.

255 Wis.2d 452

For the plaintiffs-appellants-petitioners there were briefs by John C. Cabaniss and Law Office of John C. Cabaniss, Milwaukee, and John J. Carey and Carey & Danis, LLC, St. Louis, Missouri, and oral argument by John C. Cabaniss.

For the defendant-respondent there was a brief by Robert H. Friebert, Jeremy P. Levinson and Friebert, Finerty & St. John, S.C., Milwaukee, and oral argument by Robert H. Friebert.

¶ 1. DAVID T. PROSSER, J.

This is a review of a published decision of the court of appeals,¹ which affirmed an order of the Milwaukee County Circuit Court, Lee E. Wells, Judge, dismissing with prejudice an action brought by a putative class of cable television customers against Time Warner Cable of Southeastern Wisconsin, Limited Partnership (Time Warner).

¶ 2. Two issues are presented for review. First, does the voluntary payment doctrine preclude cable television customers from recovering the portion of monthly late-payment fees that they claim constitutes unlawful liquidated damages if the customers paid the fees without expressing any objection or protest? Second, did the circuit court erroneously exercise its discretion

255 Wis.2d 453

when it concluded that the customers' request for a declaration of rights and injunctive relief to prevent Time Warner from imposing such late-payment fees in the future was not justiciable because the customers failed to allege a present harm

¶ 3. We hold that the voluntary payment doctrine bars cable customers from recovering monetary damages for their payment of allegedly unlawful fees without objection or protest, if the customers do not properly allege mistake of fact on their part or fraud or duress on the part of the cable company. We also conclude, however, that the circuit court misapplied the law with respect to justiciability requirements for declaratory judgments. Therefore, the customers' claims for declaratory relief should be permitted to go forward.

I. BACKGROUND

¶ 4. The issues in this case stem from Time Warner's imposition of a $5.00 late-payment fee on cable customers who fail to pay their monthly cable bill by the time specified in their contract. Three of these customers, Kerry L. Putnam, Carol L. Smith-Carter, and Louis Boutan, individually and on behalf of a putative class of similarly situated customers (the customers or plaintiffs), brought an action to recover monetary damages for that portion of the fee which, they claim, is not reasonably related to Time Warner's actual costs incurred as a result of late payments.² The

255 Wis.2d 454

customers also sought declaratory and injunctive relief to prevent Time Warner from imposing such fees in the future

¶ 5. The customers' amended complaint contained numerous allegations against Time Warner. The complaint alleged that customers are required, upon "installation and/or other activation of cable television programming," to execute an adhesion contract, unilaterally constructed by "Time Warner, a licensed monopoly." It asserted that this contract expressly requires customers to prepay for the first month of cable service, and Time Warner thereafter imposes a $5.00 late fee on customers who subsequently fail to pay their cable bills by the monthly due date.³ The complaint further alleged that Time Warner's late fee "does not, in fact, bear a reasonable relationship to the costs incurred by Time Warner solely as a result of the late payments and/or late paying customers," nor is it a reasonable estimate of that cost. It asserted that the actual cost facing Time Warner for a single late payment is between $0.38 and $0.48. The complaint also alleged that Time Warner's collection of late fees constitutes a double recovery because Time Warner has already incorporated nonpayment collection costs into its basic cable rates, which have been approved by the Federal Communications Commission. The complaint alleged that Time Warner "omitted, and continues to omit, conceal, and misrepresent

255 Wis.2d 455

the unreasonable basis for the late fee and its true nature as a penalty for late payment," and does so fraudulently

¶ 6. Finally, the complaint alleged that the customers, "[i]n reliance on [Time Warner's] concealments, suppressions, and omissions ... paid at least one excessive and unconscionable late fee to Time Warner" and that Time Warner customers paying late fees do so "under duress and the real and imminent threat that Time Warner, a monopolist for cable television programming ..., would disconnect the cable television services of a late paying customer."

¶ 7. Time Warner moved to dismiss all the customers' claims on multiple grounds, among them that all the claims were precluded by the voluntary payment doctrine. In response, the customers asserted that the doctrine was inapplicable for two reasons. First, the customers did not possess knowledge of all the facts relevant to the late-fee charges because Time Warner deceptively concealed those facts. Second, the customers lacked a meaningful opportunity to contest the late fees. After hearing these arguments, the circuit court determined that the voluntary payment doctrine barred the customers' recovery of past late-fee payments in excess of Time Warner's actual costs. The court also concluded that the claim for declaratory and injunctive relief was not ripe for resolution because the amended complaint failed to allege that any customer had presently refused to pay a late fee. It therefore granted the motion to dismiss and denied the customers' petition for leave to further amend their complaint.

¶ 8. In affirming both conclusions, the court of appeals advanced multiple reasons why, "regardless of the truthfulness of the customers' assertions, the voluntary payment doctrine precluded their claims for

255 Wis.2d 456

recovery of late-fee payments in excess of Time Warner's actual costs." Putnam v. Time Warner Cable of SE Wis., 2001 WI App 196, ¶ 9, 247 Wis. 2d 41, 633 N.W.2d 254. First, the customers failed to allege that Time Warner had any duty to disclose the specific factors affecting the late fee amount, and Time Warner had no duty. Id. at ¶ 10. Second, the amended complaint did not allege that fraudulent actions by Time Warner materially affected the customers' decisions to pay the late fees. "If the customers never considered the propriety of the late fees before paying them, they certainly did not pay the fees as a result of any fraudulent misrepresentation or concealment." Id. at ¶ 11. Third, "at most, [the customers] paid [the late fees] ... because of a mistake of law regarding whether Time Warner was legally entitled to charge the $5.00 late fee." Id. at ¶ 12. Fourth, the customers failed to establish that they paid the late fee as a result of fraud or mistake perpetrated by Time Warner. Id. at ¶ 13. Finally, the customers' claim that they were subject to Time Warner's threats of disconnecting cable service for not paying a late fee did not rise to the level of economic duress as a matter of law. Id. at ¶ 14.

¶ 9. The court of appeals also noted that, despite some legal differences between the customers' claim of unlawful liquidated damages and their other claims for monetary relief, the customers' unlawful liquidated damages claim was also properly dismissed based on their voluntary payments. Id. at ¶¶ 15-21. Finally, as to the declaratory judgment action, the court deferred to the circuit court's decision that the action was not ripe for judicial review and declaratory relief. Id. at ¶ 27.

¶ 10. On appeal to this court, the customers present two arguments. They maintain that the circuit

255 Wis.2d 457

court erred in applying the voluntary payment doctrine in this case to claims based on unlawful liquidated damages. They also contend that the circuit court erred in disallowing their claims for declaratory and injunctive relief.

[1]

¶ 11. Because this dispute involves a motion to dismiss based on the legal insufficiency of the complaint, the circuit court was required to assume the truth of all factual allegations in the complaint. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 245, 593 N.W.2d 445 (1999). In analyzing this case, we likewise take as true all allegations made in the customers' amended complaint and draw all reasonable inferences in favor of the customers. Upon a motion to dismiss, "Unless it seems certain that no relief could be granted under any set of facts that the plaintiff could prove, dismissal of the complaint is improper." Id.

II. ANALYSIS

A. Voluntary Payment Doctrine

¶ 12. We first address whether the voluntary payment doctrine bars customers of Time Warner from recovering damages for an unlawful liquidated damages claim.

[2]

¶ 13. The voluntary payment doctrine places upon a party who wishes to challenge the validity or legality of a bill for payment the obligation to make the challenge either before voluntarily making payment, or at the time of voluntarily making payment. See 66 Am. Jur. 2d Restitution and Implied Contracts § 108 (2001) ("The rule is well settled that a person cannot recover

255 Wis.2d 458

money that he or she has voluntarily paid with full knowledge of all of the facts and without fraud, duress, or extortion in some form, and that no action will lie to recover the voluntary payment."); Restatement (First) of Restitution § 112 (1937). The basic description of the doctrine, as employed by the court of appeals, is not in dispute.

The voluntary payment doctrine provides that "as between [person] and [person], money paid voluntarily, with knowledge of all the facts, and

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