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Case of the Month September 2009

Misleading Rebate Program Costs Organizers $5.73M

State v. Kool View Co.

Consumer Protection - Deceptive Acts/Practices
Consumer Protection - False Advertising
Fraud & Misrepresentation - Negligent Misrepresentation

Specific Liability:
Misrepresenting to consumers the available amount of money in rebate program violated state law

General Injury:
Monetary damages

Jurisdiction:
State: Wisconsin
Court: Circuit Court of Wisconsin, Fifth Judicial District, Dane County.

Related Court Documents:
Plaintiff's amended complaint: 2007 WL 6439315
Defendants Kool View and Anderson's answer: 2007 WL 6439316
Defendant Matthew Stubbs' answer: 2007 WL 6439320
Defendant Timothy Stubbs' answer: 2007 WL 6439319
Defendant NRF's answer: 2007 WL 6439318
Defendant Golden's answer: 2007 WL 6439317
Order re: amended complaint: 2008 WL 6094826
Order re: consent judgment against Kool View and Anderson: 2009 WL 1360125
Order re: consent judgment against Matthew Stubbs: 2009 WL 1360126
Judgment: 2009 WL 872481

Case Name:
State v. Kool View Co., Alan Anderson, National Rebate Fund Inc. d/b/a National Energy Rebate Fund, Timothy Stubbs, Matthew Stubbs and Dan Golden

Docket/File Number:
2007CX43

Judgment:
Plaintiff, $5,728,121.31 from defendants NRF, the Stubbs, Kool View and Anderson

Judgment Date:
March 25, 2009

Judge:
Steven D. Ebert

Attorneys:
Plaintiff: J.B. Van Hollen, Attorney General, Madison, Wis.; John S. Greene, Assistant Attorney General, Madison, Wis.; Lara A. Sutherlin, Assistant Attorney General, Madison, Wis.
Defendants (Kool View and Anderson): James I. Statz, Laura E. Callan and Jennifer L. Amundsen, Solheim Billing & Grimmer, Madison, Wis.
Defendants (NRF, the Stubbses and Golden): John C. Carlson Jr., Lawton & Cates, Madison, Wis.
Defendant (Matthew Stubbs and Golden): John C. Thomure, Michael Best Friedrich LLP, Milwaukee, Wis.

Trial Type:
Bench

Experts:
Plaintiff: Sridhar Moorthy, PhD, marketing, University of Toronto, Toronto, Canada
Defendants (Matthew Stubbs and Golden): Hal Stinchfield, marketing, Promotional Marketing Insights Inc., Long Lake, Minn. Other defendants: None mentioned

Breakdown of Award:
$3,868,650.00 to plaintiff from defendants NRF and Timothy Stubbs for Wisconsin consumer restitution
$1,520,179.00 to plaintiff from defendants NRF and Timothy Stubbs for civil forfeitures, penalties and assessments
$119,292.31 to plaintiff from defendants NRF and Timothy Stubbs for attorney fees and costs
$220,000.00 to plaintiff from defendants Kool View and Anderson as per consent judgment
$20,000.00 to plaintiff from defendant Michael Stubbs as per consent judgment

Summary of Facts:
National Rebate Fund Inc., based in Colorado, markets and administers an energy rebate program to merchants around the country. The merchants, in turn, use the program as part of a sales strategy to generate interest in energy saving and conserving resources.

In late 2004 NRF solicited Kool View Co., a manufacturer and installer of residential windows, sunrooms and basements, to participate in the program.

The state of Wisconsin filed a Dane County Circuit Court consumer protection lawsuit against NRF and Kool View, claiming the program was a fraud.

The state said the program offered consumers a 100 percent rebate for the purchase of expensive, high-end windows, sunrooms, and basement refurnishing. Between January 2005 and mid-July 2007, NRF issued more than $3 million worth of rebates to 200 customers, the state said. The amount held in escrow to redeem those rebates, however, was far less, the plaintiff alleged.

According to the state, NRF held only 8 percent of the face value of the rebate vouchers issued in a particular month. “The only way there would be enough money to make rebates of 100 percent to eligible consumers is if at least 92 percent of the rebates go unpaid,” the state said.

NRF was counting on rebate voucher holders' ineligibility to claim the rebates because they failed to comply with the redemption requirements, the state alleged.

The plaintiff claimed misrepresentation under Wis. Stat. 100.18, misrepresentation regarding door-to-door sales under Wis. Admin. Code ch. ATCP (agriculture, trade and consumer protection) 127, and misrepresentation regarding mail solicitations under ATCP 127.

The state included Kool View owner Alan Anderson, and NRF president Timothy Stubbs, national sales manager Matthew Stubbs and national account executive Dan Golden as defendants, claiming they personally took part in the scheme. In particular, Matthew Stubbs compiled information regarding participating Kool View customers to generate reports showing the customers' energy savings, which Kool View could then use in its marketing efforts, the state said.

The plaintiff sought civil forfeitures against the defendants of between $50 and $200 for each violation of Section 100.18, and between $100 and $10,000 for each violation of the ATCP. The plaintiff also sought restitution for consumers duped by the fraud.

The defendants filed individual responses, each denying the state's allegations. NRF filed a cross-claim against Kool View, seeking contribution, indemnification and subrogation.

In a motion to dismiss, the defendants argued that the plaintiff's claims were based on a theory of common law fraud, which required pleading with particularity.

They added the state's claims against the Stubbses and Golden were collectively listed as “NRF” and did not list which individual made which statement. The state did not make any claims that the individuals were acting outside the scope of their employment, which would leave them open to personal liability, the defendants contended.

Regardless of whether the state's allegations sound in fraud, the plaintiff's claims fail under the less restrictive pleading requirements of Wis. Stat. 802.02(1)(a), the defendants argued.

Judge Steven Ebert ruled the defendants' arguments were unpersuasive and denied the motion. In his August 2008 order, the judge said the statements in the plaintiff's complaint “sufficiently connect the individual defendants to the acts of NRF.”

The plaintiff dismissed Golden in February 2009.

Later that month the state entered a consent judgment with Kool View and Anderson for $200,000 and a second consent judgment with Michael Stubbs for $20,000.

When Timothy Stubbs failed to appear for a scheduling conference, Judge Ebert entered default judgment against the defendant and NRF.

In late March Judge Ebert issued judgment against Timothy Stubbs and NRF, ordering them to pay more than $5.5 million. The bulk of the judgment, about $3.87 million, will repay Wisconsin consumers.

Court: Circuit Court of Wisconsin, Fifth Judicial District, Dane County.

Westlaw Citation:
2009 WL 1650010

West's Jury Verdicts - Wisconsin Reports Citation:
West’s J.V. Wis. Rep., Vol. 5, Iss. 1, p. 3 (2009)