April 14, 2015 – A company that sold travel club memberships to Wisconsin consumers must pay more than $4.6 million in restitution and fines for misrepresentations and a failure to disclose certain information on solicitations, a state appeals court has ruled.

In 2010, the state filed legal action against Going Places Travel Corp., Castaways Vacations Inc., and Travel Services Inc. for deceptive and misleading sales tactics.

Illinois-based Travel Services operated “travel clubs” and induced consumers to pay membership fees in exchange for access to discount travel deals. Going Places sold the memberships through presentations and postcards promising free trips and prizes.

In presentations, Going Places salespeople promised huge discounts on hotel and condo rentals, and cruises. Consumers paid between $3,000 and $4,000 to join the clubs, with an annual fee of $199 to maintain the travel club membership.

At trial, 11 Wisconsin residents said they purchased a membership, but promised prize vouchers were essentially unusable because of restrictions. They also testified that the promised deals were not exclusive – similar discounts were readily available online.

Going Places had sold 884 memberships. A unanimous jury found that Travel Services misrepresented the exclusivity of member benefits, the available discounts, and sent 460,000 solicitation postcards that violated Wisconsin law on prize notices.

The state moved for $3.8 million in restitution for the 884 residents who purchased travel club memberships, based on the average initial membership cost and annual membership fees, but subtracting $51,691 for rebates and refunds actually received.

The state sought $200,000 for 2,000 violations of the prize notice law – even though the jury found 460,000 violations – at $100 per violation instead of the maximum $5,000.

It also sought $353,600 in fines for misrepresentation violations in club membership bylaws and sales posters. Each membership amounted to four violations with a maximum penalty of $10,000 per violation. But the state only sought $100 per violation. 

Ultimately, the circuit court entered judgment pursuant to the state’s requests. Travel Services appealed, arguing the circuit court improperly shifted the burden of proof to Travel Services to show why the state’s restitution figures were incorrect.

But in the consolidated cases of State v. Going Places Travel Corp., 2014AP1859-62 (April 14, 2015), a three-judge panel for the District III Court of Appeals affirmed.

“The problem with Travel Services’ argument, though, is that the circuit court in this case did not shift the burden of proof to Travel Services,” wrote Judge Lisa Stark. “[T]he court simply concluded that the record as a whole supported the state’s figure.”

The appeals court said the real issue “is whether the evidence was sufficient to support the court’s exercise of discretion in setting the amount of restitution.” The panel ruled that the evidence at trial was sufficient to support the circuit court’s discretionary award.

The panel also rejected Travel Services’ argument that a report from its expert witness, an economics professor, was improperly excluded as irrelevant. The professor gave a general opinion that restitution should be reduced by the value of services to members.

“[E]ven if Breeden’s general opinion had been accepted by the court, Travel Services failed to provide any evidence supporting the value of those services provided to club members for the court to calculate the offset,” Judge Stark wrote for the panel.

Travel Services also argued that the circuit court improperly determined the number of consumer law violations to arrive at forfeiture amounts. The panel wasn’t convinced.

“Travel Services seemingly contends that its mailing of more than 460,000 postcards over two and one-half years should subject it to no greater penalty than mailing one or a few one or several occasions,” Judge Stark wrote.

“Not only is that result inconsistent with the plain language of Wis. Stat. § 100.171, it would provide no disincentive to violators against multiplying their wrongdoing.”

Finally, the panel rejected Travel Services’ argument that the restitution and forfeiture amounts imposed violated its due process right to fair warning through an unforeseeable and retroactive judicial application of consumer law statutes.

“The court’s findings were consistent with the plaint language of the relevant statutes and regulations,” Judge Stark wrote. “[T]he circuit court’s findings regarding the number of violations did not violate Travel Services’ due process right to fair warning.”

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