Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Wis. App.: Travel club liable for each misrepresentation of services, (Apr 14, 2015)

By Jody Coultas, J.D.

A circuit court properly entered a judgment requiring travel club Travel Services, Inc. to pay $3,803,562 in restitution and $841,599.50 in forfeitures to the State of Wisconsin, based on false and deceptive representations made to Wisconsin residents about the discounts and services offered by the club, according to a Wisconsin appellate court (State of Wisconsin v. Going Places Travel Corporation, April 14, 2015, Stark, L.).

Travel Services operated various travel clubs, in which members were supposed to receive exclusive discounts on travel. Sales presentations for club membership promised free trips and prize vouchers, as well as substantial discounts on travel. At trial, club members testified the vouchers were essentially worthless because they did not work, involved paying out money, or had so many restrictions that they were unusable. Club members also found they could get the same, or better, deals online or by calling the destination or hotel directly.

A jury found that Travel Services made multiple misrepresentations and failed to disclose required information when selling travel club memberships to Wisconsin residents, in violation of the Wisconsin Consumer Protection Act (CPA). The circuit court entered a judgment requiring Travel Services to pay restitution and forfeitures. Travel Services challenged the amount of restitution and forfeitures.

Restitution. The circuit court did not err in awarding Wisconsin over $3 million in restitution, according to the court. The State requested restitution, calculated by multiplying the average cost of an initial club membership by the number of Wisconsin residents who purchased memberships, then adding the average annual fees those members paid, and subtracting rebates and refunds. Travel Services argued the court erred by improperly shifting the burden of proof to Travel Services regarding the amount of restitution. The court found that the evidence presented by the State was sufficient to support its proposed pecuniary loss figure, and was not convinced by the contrary evidence presented by Travel Services. This was not a shift of burden, but a finding that the evidence supported the State’s figure. The evidence further supported the argument that all 884 consumers who purchased memberships suffered pecuniary losses because they paid membership fees to obtain access to discounts that did not exist, and were therefore entitled to refunds. Travel Services failed to show that at least some club members received economic benefits as a result of their memberships.

Forfeitures. Each postcard sent by Travel Service to Wisconsin residents was a separate violation of the CPA provision regulating prize notices, according to the court. Travel Services incorrectly argued that, for purposes of calculating forfeitures, it did not matter how many postcards it mailed, because it was the number of “independent acts”—mass mailings in this case—that mattered. Each time Travel Services prepared and mailed a postcard, however, could constitute an independent act involving a separate choice, the court concluded, noting that adopting Travel Services’ interpretation of a violation of the CPA would “eviscerate any punitive or deterrent effect” of the forfeitures. Therefore, the challenge to the forfeiture award was denied.

The cases are Appeal Nos. 2014AP1859, 2014AP1860, 2014AP1861, and 2014AP1862.

Attorneys: Anthony Russomanno, Assistant Attorney General, for State of Wisconsin. Steven M. Biskupic (Biskupic & Jacobs, SC) for Castaways Vacations, Inc. and Travel Services, Inc.

Companies: Travel Services, Inc.

Cases: StateUnfairTradePractices WisconsinNews