864 N.W.2d 885
Wis. Ct. App.2015Background
- Travel Services (Castaways Vacations, William Bailey, Christy Spensberger, Travel Services, Inc.) sold travel-club memberships via distributors (notably Going Places) to Wisconsin residents; memberships cost ~$3,000–$4,000 plus $199 annual fee.
- Going Places mailed individually addressed postcards (≈460,000) promising prizes and vouchers and ran pressured in-person sales using Travel Services’ posters and bylaws that promised large discounts and particular club locations; 884 Wisconsin residents purchased memberships and received bylaws.
- Consumers testified the prizes/vouchers were effectively worthless and the promised discounts were unavailable or duplicable through other means; about 80% of members stopped paying annual fees within four years.
- A jury found violations of Wis. Stat. § 100.171 (prize notices), Wis. Stat. § 100.18 (deceptive practices), and Wis. Admin. Code § ATCP 127.44(15) (misrepresentations in mail transactions).
- The circuit court awarded $3,803,562 in restitution (State’s proposed calculation) and forfeitures totaling $841,599.50; Travel Services appealed, challenging burden placement for restitution, exclusion of its expert report, the count of violations for forfeitures, and due-process concerns.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard/burden for proving restitution amount | State: its proposed calculation reasonably approximated purchasers' net pecuniary loss and satisfied Tim Torres relaxed proof standard | Travel Services: court improperly shifted burden to it to disprove State's restitution figure | Court: no burden shift; State presented sufficient evidence under Tim Torres and restitution award was a permissible exercise of discretion |
| Exclusion of defendant's expert report (Breeden) | State: report irrelevant and unhelpful to factfinder | Travel Services: report should have been admitted to contest restitution amount | Court: exclusion proper under pre-Daubert standard because report lacked case-specific quantified offsets; any error harmless because court would have given it little or no weight |
| Number of violations for forfeiture (§ 100.171 and ATCP 127.44(15)) | State: each postcard and each misrepresentation to each purchaser constitutes a separate violation (460,000 postcards; 4 misrepresentations × 884 purchasers = 3,536) | Travel Services: count should not treat every postcard/misrepresentation as a separate violation; relied on Menard to argue fewer independent acts | Court: statutory/regulatory text and purpose support treating each targeted communication/misrepresentation to an individual as a separate violation; affirmed counts (each postcard and each misrepresentation per purchaser) |
| Due process/fair warning | State: statutory scheme and precedent sufficiently clear | Travel Services: award and counting method were unforeseeable/new interpretations and burden procedure impaired procedural fairness | Court: no due-process violation — interpretations were consistent with statute/regulation and Tim Torres; no retroactive or unforeseeable construction |
Key Cases Cited
- Tim Torres Enters., Inc. v. Linscott, 142 Wis. 2d 56 (Ct. App. 1987) (relaxed proof standard for pecuniary loss under Wis. Stat. § 100.18)
- Menard, Inc. v. State, 121 Wis. 2d 199 (Ct. App. 1984) (each publication/edition can be separate violation in advertising forfeiture context)
- United States v. Reader's Digest Ass'n, 662 F.2d 955 (3d Cir. 1981) (each letter in mass direct-mailing is a separate violation for deterrence and punitive effect)
- Daubert v. Merrell Dow Pharm., 509 U.S. 579 (U.S. 1993) (standard for admissibility of expert testimony cited; not controlling here because action commenced pre-Daubert)
- Federal Trade Comm'n v. Febre, 128 F.3d 530 (7th Cir. 1997) (FTC burden-shifting approach: reasonably approximated net losses, then defendant must show inaccuracy)