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  • WisBar News
    January 24, 2013

    Plaintiff Survives Appeal in Billing Scam Case Against Telecommunications Companies

    Jan. 24, 2013 – A business that sued several telecommunications companies alleging the companies together engaged in deceptive billing practices has cleared another major hurdle.

    Metropolitan Business Services (MBS), an accounting firm, sued AT&T Wisconsin, ILD Telecommunications (ILD), and two other companies, claiming they engaged in a “cramming” scheme to bilk MBS for small, unauthorized charges over a period of time.

    MBS’s cramming claim, pursued under Wis. Stat. sections 100.207(2) and (3)(a), went to the Wisconsin Supreme Court, which ruled that the “voluntary payment doctrine” did not bar the claims, even though MBS paid the bills. Under the common law voluntary payment doctrine, a party can’t sue to recover payments made knowingly and voluntarily, absent fraud or duress.

    MBS also sued under the state’s marketing and trade practices law, section 100.18, and the Wisconsin Organized Crime Control Act (Organized Crime Act), Wis. Stat. sections 946.80-88.

    A supreme court majority ruled that the voluntary payment doctrine is never applicable to claims under section 100.207. It did not rule on MBS’s other claims.

    The circuit court had dismissed several of MBS’s allegations based on the voluntary payment defense, and the appeals court affirmed. Thus, the supreme court sent the case back to the appeals court to determine which claims can now proceed in circuit court.

    In MBS-Certified Public Accountants LLC v. Wisconsin Bell Inc., 2008AP1830 (Jan. 23, 2013), the District I Wisconsin Court of Appeals ruled that all of MBS’s claims can proceed.

    Anti-Cramming Statutes Apply

    Wis. Stat. section 100.207(2) states that a person may not make false, misleading or deceptive representations regarding the provision of telecommunications services or omit material information necessary to make the statement not false, misleading or deceptive.

    The three-judge appeals court held that section 100.207(2) “does not limit prohibited representations to those made directly to the party alleging the violation,” rejecting ILD’s claim that it never forwarded billing information directly to MBS, the primary carrier did.

    Wis. Stat. section 100.207(3)(a) states that a person cannot engage in negative option or negative enrollment billing, which requires a customer to opt-out of services.

    The provision also prohibits telecommunications companies from billing customers for services they did not affirmatively order, unless the service is required to be provided by law.

    The appeals court rejected ILD’s argument that it could not violate section 100.207(3)(a) because ILD is a billing “consolidator” and did not actually bill MBS; they simply collected, packaged, and communicated billing information to the primary phone carrier, Wisconsin Bell.

    “We conclude that the complaint adequately alleges that all defendants, in their various roles in the cramming scheme, ‘engage[d] in negative option billing,’” wrote Judge Patricia Curley.

    “As described in the complaint, ILD’s role is more significant than that of an internet provider or the post-office, which have no role in putting together the bills they deliver,” Curley continued.

    It also struck ILD’s assertion that MBS is not a “consumer” protected by section 100.207(3)(a) because it is a limited liability company. The appeals court ruled the law protects “customers.”

    Misleading Representations in Phone Bills

    The circuit court dismissed MBS’s claims under Wis. Stat. section 100.18, which prohibits anyone from making untrue, deceptive, or misleading statements with respect to services, concluding that phone bills don’t constitute “advertisements” or “sales promotions.”

    The appeals court held otherwise: “We conclude the plain language of the statute shows that statements or representations may be actionable even when contained in bills or other documents not traditionally considered ‘advertisements,’” Judge Curly wrote.

    The panel also ruled that the voluntary payment doctrine did not bar the section 100.18 claims, and that MBS may pursue this claim against all four telecommunications companies.

    Racketeering Activity

    MBS argued that the telecommunications companies engaged in a “pattern of racketeering activity” through organized felony theft of more than $2,500, contrary to the Organized Crime Act. The circuit court concluded that the voluntary payment doctrine precluded these claims.

    Again, the appeals court reversed, concluding that applying the doctrine would frustrate the purpose of the Organized Crime Act. It also ruled that MBS’s complaint properly alleged a pattern of racketeering activity in the cramming scheme, despite the minimal billing charges.

    “In the circumstances before us, it is not inappropriate to aggregate the discrete charges to constitute acts of theft of $2500 or more,” Judge Curley wrote.

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