Wheeler v. The Fitness Formula, LTD. et al
Filing
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MEMORANDUM Opinion and Order: Assuming for the purposes of the instant motion that defendants violated section 1693e(b) of the EFTA by failing to give advance notice of varying charge amounts, their violation was unintentional, and the result of a bona fide error despite having maintained procedures reasonably adapted to avoid that error. Consequently, to the extent that plaintiff seeks to hold defendants liable under section 1693e(b) of the EFTA for the six erroneous charges, defendants 9; motion for partial summary judgment 45 is granted. The case remains set for a status on December 6, 2018, at 9:00 a.m., and the parties should be prepared to identify plaintiffs remaining claims. Signed by the Honorable Robert W. Gettleman on 11/14/2018. Mailed notice (cn).
IN THE UNITED STATES DISTR ICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVIS ION
MARK WHEELER,
Plaintiff,
v.
THE FITNESS FORMULA, LTD., and
LAKEVIEW FITNESS EAST, LLC,
Defendants.
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Case No. 18 CV 582
Judge Robert W. Gettleman
MEMORANDUM OPINION AND ORDER
Plaintiff Mark Wheeler’s debit card was erroneously charged six months’ worth of gym
membership dues by defendants The Fitness Formula, Ltd., and Lakeview Fitness East, LLC.
After catching their mistake, defendants refunded plaintiff for the erroneous charges. Plaintiff
filed this putative class action, bringing claims under the Electronic Fund Transfer Act
(“EFTA”), 15 U.S.C. §§ 1693e(b); 1693l, and under the Illinois Consumer Fraud Act, 815 ILCS
505/2. Defendants move for partial summary judgment on the EFTA claim, arguing that they
are not liable for violating section 1693e(b).
Plaintiff claims that defendants violated section 1693e(b) by failing to give him advance
notice of the erroneous charges. Under the EFTA, defendants may (subject to conditions not
relevant here) charge a member’s debit card at recurring intervals, such as once a month for
membership dues. If these recurring charges “may vary in amount,” however, defendants must
give members “reasonable advance notice.” Id. No such notice, plaintiff argues, was given for
the erroneous charges.
Defendants argue that they are entitled to summary judgment for two reasons. First, they
did not violate section 1693e(b) because—although they erroneously double-charged plaintiff for
six months—none of those charges varied in amount from what plaintiff had authorized for his
monthly gym membership dues. Second, even if they violated section 1693e(b), section
1693m(c) shields them from liability because their violation was, (1) unintentional, and (2) the
result of a bona fide error despite having maintained procedures reasonably adapted to avoid that
error.
If either of defendants’ arguments are correct, they are entitled to summary judgment.
The court need not find that a violation occurred to consider if defendants can successfully assert
the bona-fide error defense. See Kort v. Diversified Collection Services, Inc., 394 F.3d 530, 536
(7th Cir. 2005) (affirming a grant of summary judgment for a defendant sued under the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692, and assuming that the defendant violated the statute
only for the purpose of considering the statute’s bona-fide error defense). Here, assuming
without deciding that defendants violated section 1693e(b), the court agrees that their violation
was unintentional and the result of a bona fide error despite having maintained procedures
reasonably adapted to avoid that error. Consequently, to the extent that plaintiff seeks to hold
defendants liable for violating section 1693e(b) as to the six erroneous charges, defendants’
motion for partial summary judgment is granted.1
1
Because the parties’ briefs discuss little else, the motion is granted as to the six erroneous charges only.
The court expresses no opinion on whether any other charges violated section 1693e(b).
2
BACKGROUND 2
Having been a member of one of defendants’ gyms for three years, plaintiff added his
spouse to his membership by electronically signing a new agreement. The new agreement
authorized defendants to withdraw monthly membership fees from plaintiff’s debit card; these
fees were $79.95 for himself and $55 for his spouse, or $134.95 in total. The next month,
however, plaintiff’s debit card was charged not only these fees, but also an extra $79.95. He
continued to be charged an extra $79.95 for five more months. Defendants then discovered their
billing errors and, within a day, credited plaintiff’s account for the six erroneous charges.
The person who caught the erroneous charges was a customer service manager, Austin
Martin. Each month, Martin reviews a list of members whose cards had been declined. When
he saw plaintiff’s name on that list, he noticed the erroneous charges. Martin credited those
charges back to plaintiff’s account, called plaintiff to tell him about what had happened, and,
when he could not reach plaintiff, left a voicemail.
Although Martin caught the erroneous charges when he did his monthly review, his
formal job responsibilities do not include auditing customer bills for errors. That was the
responsibility of an accountant, Susan Remandas. Remandas knew that defendants’ billing
software sometimes, for unknown reasons, erroneously double-bills members when they enter
into new membership agreements. New agreements supersede old agreements, and fees under
old agreements are not to be charged. Defendants’ billing software, however, sometimes
erroneously bills members for fees under both. To catch those billing errors before members
were charged, Remandas developed a procedure that she calls a “double repetitive audit.”
2
The facts are taken from the parties’ L.R. 56.1 statements and from the depositions and exhibits on file.
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Defendants’ policy and practice required her to complete the audit and resolve billing errors
before members were charged for the month.
Remandas limited her double-repetitive audit to accounts belonging to members who had
entered into a new agreement within the last month. The audit, which she performed at least
four times a week, had the following procedures:
1.
From the gym’s electronic billing system, download a Microsoft Excel spreadsheet
containing member names, member account numbers, billed item descriptions, and
billed item amounts.
2.
Sort the spreadsheet by the column containing member account numbers.
3.
In an empty column, input an Excel formula to compare the billed item amounts of
adjacent rows. If adjacent rows have the same billed item amount, the formula,
EXACT, will return an answer of “TRUE.”
4.
For rows where EXACT returned an answer of TRUE, return to the gym’s billing
system records to determine if the member had been erroneously double-billed.
5.
If the member had been erroneously double-billed, remove the second bill.
6.
When the audit is complete, open the pre-billing checklist (an Excel spreadsheet listing
procedures that had to be completed before billing members for the month). Find the
section of the checklist titled “Double Repetitives.” Enter initials and the audit
completion date.
The Microsoft Excel spreadsheet that Remandas used to perform the audit would contain
200 to 300 rows; among them, about 10 rows would return an answer of TRUE. Those 10 rows
reflected potential double-bills that Remandas would need to investigate in the gym’s billing
system, and she would remove bills that she determined were duplicates, thus ensuring that they
would not be charged to member accounts. Each audit took one to two hours. In her
deposition, Remandas testified that plaintiff’s erroneous charges must have been the result of her
own mistake, and that except for plaintiff’s case, she was not aware of any member ever having
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been erroneously charged twice. This was confirmed by defendants’ chief financial officer,
Brian Singleton, who testified in his deposition that in the last eight years, no member had been
erroneously charged twice. The audit procedures were established nine years ago.
DISCUSSION
Summary judgment is appropriate if there is no genuine dispute of a material fact and the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. Defendants argue
that they are entitled to judgment as a matter of law on their bona-fide error defense, which arises
under section 1693m(c) of the EFTA. Section 1693m(c) shields defendants from liability when
their violation was, (1) unintentional, and (2) the result of a bona-fide error despite having
maintained procedures reasonably adapted to avoid that error.
Concerning intent, plaintiff argues that because the alleged violation was failing to give
advance notice, defendants can assert the bona-fide error defense only if they tried to give notice.
Mere efforts to avoid charging varying amounts is not enough. According to plaintiff,
defendants may assert the defense only if they had, for example, used a reliable computer
program to email him a notice letter, yet the program failed to send the email. Such an
interpretation of section 1693m(c)’s intent requirement, however, is nonsensical. Defendants
could not have given plaintiff advance notice of charges that they had no intention of charging.
If defendants violated the advance notice requirement as soon as they erroneously charged
plaintiff’s debit card, then preventing that erroneous charge was the only way for them to
comply. Because the parties agree that the erroneous charges were unintentional and that
defendants tried to prevent those charges, defendants’ failure to give advance notice was also
unintentional.
5
Plaintiff does not dispute that defendants’ accountant, Susan Remandas, maintained a
double repetitive audit procedure designed to catch double billing errors before they were
erroneously charged to member accounts. Defendants’ bona-fide error defense thus turns on
whether the audit was reasonably adapted to catch double-billing errors. The audit was not
reasonably adapted, plaintiff argues, because defendants could have documented the procedure,
double-checked the worksheets, and stored copies of completed audits. They did none of this.
Defendants also could have expanded the audit’s scope beyond members who had entered into
new agreements in the last month, which would have given them more than just one chance to
catch their initial error.
Such procedures might have been logical. Yet the life of the law has not been logic, but
experience, and experience shows that the audit was reasonably adapted to avoid violations.
Neither Remandas, who had performed the audit for a decade, nor Singleton, who supervised her
during that time, knew about any member other than plaintiff who had been erroneously double
charged in the last nine years. There is therefore no genuine dispute that the audit’s failure rate
was low. In contrast, the costs of increased precautions were high: Remandas testified that she
spent one or two hours a week on these audits, four times a month; having another accountant
review her work might double that time. See Ross v. RJM Acquisitions Funding LLC, 480 F.3d
493, 498 (7th Cir. 2007) (affirming a ruling that a debt collector was entitled to the bona-fide
defense under the Fail Debt Collection Practices Act, 15 U.S.C. § 1692k(a), reasoning in part that
“investment would be disproportionate to the slight aggregate harms resulting from the handful
of [violations] that modest procedures occasionally let through the sieve”); Kort, 394 F.3d at 539
(“[Section] 1692k(c) does not require debt collectors to take every conceivable precaution to
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avoid errors; rather, it only requires reasonable precaution.”). Defendants’ audit was costeffective and reasonable.
Plaintiff emphasizes that the audit found 10 potential double billings every month, but
that is beside the point—Remandas removed those bills before members were charged. That she
did not do so in plaintiff’s case shows only that the audit was imperfect and vulnerable to human
mistake. The bona-fide error defense, however, demands not perfection, but a procedure
reasonably adapted to avoid violations. Defendants’ audit was such a procedure.
CONCLUSION
Assuming for the purposes of the instant motion that defendants violated section
1693e(b) of the EFTA by failing to give advance notice of varying charge amounts, their
violation was unintentional, and the result of a bona fide error despite having maintained
procedures reasonably adapted to avoid that error. Consequently, to the extent that plaintiff
seeks to hold defendants liable under section 1693e(b) of the EFTA for the six erroneous
charges, defendants’ motion for partial summary judgment is granted. The case remains set for a
status on December 6, 2018, at 9:00 a.m., and the parties should be prepared to identify
plaintiff’s remaining claims.
ENTER:
November 14, 2018
__________________________________________
Robert W. Gettleman
United States District Judge
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