Voluntary Payment Doctrine: A Useful Affirmative Defense or Instrument of Evil?

The VPD is an affirmative defense available in specific situations in which a payment is voluntarily made under a mistake of law. It does not apply under contracts that impose a legally enforceable duty to pay. Essentially, absent “fraud, duress, compulsion or mistake of fact, money, voluntarily paid by one person to another on a claim of right to such payment, cannot be recovered merely because the person who made the payment mistook the law as to his liability to pay.” Salling v. Budget Rent-A-Car Systems, Inc., 672 F.3d 442, 444 (6th Cir. 2012) (internal quotation marks omitted). If a defendant can show that a payment was voluntary, the plaintiff must demonstrate that an exception—fraud, duress, or mistake of fact—precludes application of the VPD. 

Simply, the VPD requires an engaged consumer: “The ‘voluntary’ in the voluntary payment doctrine does not entail the mere payment of the bill or fee. For example, some customers might not pay their cable television bills if their cable provider did not threaten termination of service due to non-payment. In this sense, payment of any bill or fee is not ‘voluntary.’ Rather, the voluntariness in the doctrine goes to the willingness of a person to pay a bill without protest as to its correctness or legality.” Putnam v. Time Warner Cable of Southeastern Wisconsin, Ltd. Partnership, 255 Wis. 2d 447, 459-60, 649 N.W.2d 626 (2002) (emphasis added). 

Analogous to the criminal system, a mistake of law is not an excuse for action (or inaction). When circumstances provide consumers and/or commercial entities (potential plaintiffs) with a mechanism to avoid payment but such mechanism is disregarded, the VPD is appropriately used as a defense to a demand for repayment. For example, if a reasonable alternative to payment is available, the plaintiff cannot claim duress.  

The distinction between situations where a reasonable alternative is or is not available can feel like a fine line, but it is an important one. The Nevada Supreme Court provided a useful discussion of this distinction in Nevada Ass’n Servs., Inc. v. Eighth Jud. Dist. Ct., 130 Nev. Adv. Op. 94, 338 P.3d 1250 (2014), reh’g denied (Mar. 23, 2015). There, the court noted that when a municipal power company threatened to terminate service to a business for failure to pay disputed charges, the power company was the sole electricity supplier available, and the business had no formal or statutory mechanisms to protest the charges, then no reasonable alternative was available and the VPD did not apply. Id. at 1255 (citing Ross v. City of Geneva, 43 Ill. App. 3d 976, 357 N.E.2d 829 (Ill. App.1976), aff'd, 71 Ill. 2d 27, 373 N.E.2d 1342 (1978)). 

By comparison, the court observed that when the federal government threatened to remove an insurance company from a list of approved sureties for government contracts for failure to make an alleged overpayment, but federal law authorized the company to request a delay of payment, then a reasonable alternative was available to the voluntary payment and the VPD barred the claim. Id. (citing Employers Ins. of Wausau v. United States, 764 F.2d 1572 (Fed. Cir.1985)). 

Vitriol toward the VPD often arises from decisions appearing to run counter to public policy, like consumer protection. See, e.g., Spivey v. Adaptive Marketing LLC, 622 F.3d 816, 823 (7th Cir. 2010) (VPD precludes consumer from recovering $500 in annual credit card payments to a telemarketing company over a span of 5 years, when the consumer did not realize he had agreed to the payments but “made no effort to discover the nature of the charge to his credit card and paid it in silence”); Dillon v. U-A Columbia Cablevision of Westchester, Inc., 100 N.Y.2d 525, 526, 790 N.E.2d 1155, 760 N.Y.S.2d 726 (2003) (VPD bars customer recovery of late fees paid to a cable television company, even though such fees were allegedly unlawful penalties, mischaracterized as administrative fees.)  

Using such cases to call for an end of the VPD entirely, however, ignores the benefits the VPD imparts. By requiring an engaged consumer, the VPD bars litigation in situations that should have been addressed outside of the legal system. This saves significant taxpayer dollars and judicial resources. Such a doctrine should be applied with care in view of public policy objectives, but not eliminated. 

Keywords: business and commercial, litigation, consumer protection, public policy, voluntary payment doctrine, VPD, reasonable alternative  

_{James D. Abrams is a partner and Erica L. Cook is an associate at Taft, Stettinius & Hollister, LLP, in Columbus, Ohio.}

_{Copyright © 2016, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).}