State v. Going Places Travel Corp.
| Decision Date | 14 April 2015 |
| Docket Number | 2014AP1860,Nos. 2014AP1859,2014AP1861,2014AP1862.,s. 2014AP1859 |
| Citation | 362 Wis.2d 414,864 N.W.2d 885 |
| Parties | STATE of Wisconsin, Plaintiff–Respondent, v. GOING PLACES TRAVEL CORPORATION, Perry T. Ruiz and Lisa Ann Ruiz, Defendants, Castaways Vacations, Inc., William Bailey, Christy Spensberger and Travel Services, Inc., Defendants–Appellants. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendants-appellants, the cause was submitted on the briefs of Steven M. Biskupic, Michelle L. Jacobs and Vanessa K. Eisenmann of Biskupic & Jacobs, S.C., Mequon.
On behalf of the plaintiff-respondent, the cause was submitted on the brief of J.B. Van Hollen, attorney general and Anthony D. Russomanno, assistant attorney general.
Before HOOVER, P.J., STARK and BLANCHARD, JJ.
¶ 1 A jury found that Castaways Vacations, Inc., William Bailey, Christy Spensberger, and Travel Services, Inc. (collectively, Travel Services) made multiple misrepresentations and failed to disclose required information when selling travel club memberships to Wisconsin residents, in violation of two state statutes and one administrative code provision. The circuit court entered a judgment requiring Travel Services to pay $3,803,562 in restitution and $841,599.50 in forfeitures.
¶ 2 Travel Services now appeals, challenging the amount of restitution and forfeitures. It argues: (1) the circuit court improperly shifted the burden of proof to Travel Services with respect to the amount of restitution; (2) the court erred by excluding a report prepared by Travel Services' expert witness regarding the amount of restitution; (3) the court improperly counted the number of violations for purposes of calculating the forfeitures; and (4) the judgment violated Travel Services' right to due process. We reject these arguments and affirm the judgment, as well as an order denying Travel Services' motion for reconsideration.
¶ 3 The State filed this forfeiture action against Travel Services, Going Places Travel Corporation, Perry Ruiz, and Lisa Ruiz on February 19, 2010. As relevant to this appeal, the complaint alleged the various defendants violated the following statutory and administrative code provisions: Wis. Stat. § 100.171, which governs prize notices; Wis. Stat. § 100.18, which prohibits any person, firm, or corporation from making an untrue, deceptive, or misleading statement or representation with the intent to sell or induce the sale of any product or service; and Wis. Admin. Code § ATCP 127.44(15), which prohibits a seller from making any false, deceptive or misleading representation to a consumer in a mail transaction.1
¶ 4 At trial, evidence was introduced that Travel Services operated various travel clubs. In exchange for a membership fee, members in the clubs were supposed to receive exclusive discounts on travel. Travel Services relied on distributors to sell memberships in its clubs. Going Places, operated by Perry Ruiz, acted as a distributor for Travel Services in Wisconsin. Going Places sold memberships in Travel Services' “Phoenix Vacation Club” and “Castaways Vacation Club.”
¶ 5 Going Places used pressured sales presentations to sell memberships in Travel Services' clubs. To promote these presentations, Going Places sent postcards to Wisconsin residents at their homes, promising free trips and prize vouchers. The postcards were addressed to the recipients by name and were mailed in batches of 5,000 to 10,000 per week for two and one-half years.
¶ 6 At the sales presentations, customers were promised substantial discounts on travel. As relevant here, customers were shown posters, created by Travel Services, which promised discounts of up to 65% off hotel costs and 75% off condominium rentals. Customers also received written club bylaws, prepared by Travel Services. The bylaws promised various discounts to members, including up to 75% off condominium rentals, 50% off cruises, and 65% off hotel costs. The bylaws also represented that the travel clubs were located in Indiana, Kentucky, and Texas. In addition, the bylaws represented that each club was “an independently owned and operated travel club offering travel services for use exclusively by eligible Club members only.”
¶ 7 Consumers typically paid between $3,000 and $4,000 to join Travel Services' clubs. Thereafter, a yearly fee of $199 was required to maintain a club membership. To access the club's promised discounts on travel amenities, a member would use the club's website or phone number. Both were operated by Travel Services, which was located in Illinois. The addresses listed on the clubs' bylaws were actually UPS mail boxes. Mail sent to those addresses was forwarded to Travel Services in Illinois.
¶ 8 At trial, the State presented testimony from eleven Wisconsin residents who purchased memberships in Travel Services' clubs. Some of these witnesses testified to receiving postcards or phone calls promising prize vouchers. However, the witnesses testified the vouchers were essentially worthless because they did not work, involved paying out money, or had so many restrictions as to be unusable. Ruiz confirmed in his trial testimony that very few prize vouchers ever culminated in the consumer receiving the promised prize.
¶ 9 The State's consumer witnesses also testified they were promised substantial discounts on travel at the sales presentations they attended. However, after joining Travel Services' clubs, they found they could get the same, or better, deals simply by going online themselves or calling the destination or hotel directly. Conversely, Travel Services presented one witness who testified he was satisfied with his club membership and greatly valued the club's services. Other evidence at trial showed that, within four years of purchase, approximately 80% of club members stopped paying the yearly fees required to maintain their memberships.
¶ 10 In all, Going Places sold 884 memberships in Travel Services' clubs to Wisconsin residents. The parties stipulated that 884 copies of the clubs' bylaws were provided to Wisconsin consumers. The parties also stipulated that Wisconsin government entities had received 114 complaints about Travel Services' clubs.
¶ 11 A unanimous jury found that Travel Services' bylaws misrepresented the locations of the travel clubs, the exclusivity of member benefits, and the discounts available to club members. The jury also found that the posters used during the sales presentations misrepresented the available discounts. The jury further found that Going Places, acting as an agent of Travel Services, mailed more than 460,000 postcards to Wisconsin consumers, each of which omitted one or more of the disclosures required by Wis. Stat. § 100.171.
¶ 12 The State subsequently moved for judgment, arguing the jury's verdict established that Travel Services violated Wis. Stat. §§ 100.171, 100.18, and Wis. Admin. Code § ATCP 127.44(15). The State requested $3,803,562 in restitution, calculated by multiplying the average cost of an initial club membership ($3,424) by the number of Wisconsin residents who purchased memberships (884), then adding the average annual fees those members paid ($828,437), and subtracting rebates and refunds ($51,691).
¶ 13 The State also sought forfeitures for Travel Services' violations of Wis. Stat. § 100.171 and Wis. Admin. Code § ATCP 127.44(15). The State argued the jury's verdict established 460,000 violations of Wis. Stat. § 100.171 —one for each postcard sent to a Wisconsin resident. However, “to temper the size of the forfeiture[,]” the State asked the court to enter a judgment finding only 2,000 violations of § 100.171. Although the State could have requested a forfeiture of up to $5,000 per violation, see § 100.171(7)(a), the State requested the minimum $100 forfeiture for each violation, resulting in a total of $200,000.
¶ 14 With respect to Wis. Admin. Code § ATCP 127.44(15), the State argued Travel Services violated that provision 3,536 times, calculated by multiplying the number of misrepresentations in the bylaws and posters (4) by the number of Wisconsin residents who purchased travel club memberships (884). Although the State could have requested a forfeiture of up to $10,000 per violation, see Wis. Stat. § 100.26(6), the State requested the minimum $100 forfeiture for each violation, resulting in a total of $353,600.
¶ 15 Travel Services opposed the State's motion for judgment, arguing the State had failed to establish that each Wisconsin consumer who purchased a membership in one of Travel Services' clubs suffered a net pecuniary loss due to Travel Services' conduct. In support of this argument, Travel Services submitted an expert report from economics professor Charles Breeden, who opined that the State's proposal for calculating restitution “fail[ed] to meet the commonly cited standard of a reasonable degree of professional certainty due to ... its complete failure to deduct the value of travel services that were provided to members and thus do not constitute pecuniary losses to them [.]” Travel Services also challenged the forfeitures the State requested, arguing the number of violations should be much smaller because the individual postcards and misrepresentations did not constitute separate violations.
¶ 16 The circuit court held a hearing on the State's motion for judgment on June 2, 2014. During the hearing, the court granted the State's motion to exclude Breeden's report, concluding it was irrelevant and would not assist the court in making its decision. After hearing argument from both sides, the court ordered restitution and forfeitures in the amounts requested by the State. Following the addition of statutorily mandated surcharges, the total amount of the forfeitures came to $841,599.50.
¶ 17 Travel Services moved for reconsideration, arguing the judgment violated its right to due process. The circuit court denied Travel Services' motion after a hearing. This appeal follows.
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