# State of Iowa Ex Rel. Thomas J. Miller, Attorney General for Iowa v. Vertrue, Incorporated F/K/A Memberworks, Inc., a Delaware Corporation Adaptive Marketing, LLC, a Delaware Limited Liability Company Idaptive Marketing, LLC, a Delaware Limited Liability Company

> Supreme Court of Iowa · July 5, 2013 · 834 N.W.2d 12

URL: https://www.frixlaw.com/law-library/cases/4249464

## Case

- **Full name:** STATE of Iowa Ex Rel. Thomas J. MILLER, Attorney General for Iowa, Appellee, v. VERTRUE, INCORPORATED F/K/A Memberworks, Inc., a Delaware Corporation; Adaptive Marketing, LLC, a Delaware Limited Liability Company; Idaptive Marketing, LLC, a Delaware Limited Liability Company, Appellants
- **Court:** Supreme Court of Iowa
- **Decided:** July 5, 2013
- **Citations:** 834 N.W.2d 12; 2013 Iowa Sup. LEXIS 81; 2013 WL 3377866
- **Precedential status:** Published
- **Opinion:** Opinion by Cady
- **Judges:** Cady, Mansfield
- **Cited by:** 28 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4249464

## How later opinions describe it (automated extraction)

- noting the OIA’s “self-evident goal of protecting Iowa consumers who are vulnerable to unfair sales tactics because of their age”
- noting Iowa does not recognize the voluntary-payment doctrine, but even if it did, it would not apply in cases involving fraud

## Opinion text

IN THE SUPREME COURT OF IOWA
No. 11–0449

Filed July 5, 2013

STATE OF IOWA ex rel. THOMAS J. MILLER,
Attorney General for Iowa,

Appellee,

vs.

VERTRUE, INCORPORATED f/k/a MEMBERWORKS, INC., a Delaware
Corporation; ADAPTIVE MARKETING, LLC, a Delaware Limited Liability
Company; IDAPTIVE MARKETING, LLC, a Delaware Limited Liability
Company,

Appellants.

Appeal from the Iowa District Court for Polk County, Robert A.

Hutchison, Judge.

Seller of buying club memberships appeals the district court’s

rulings that its solicitation and business practices violated the buying

club membership law and the consumer fraud act. The State cross-

appeals. AFFIRMED IN PART, REVERSED IN PART, AND MODIFIED.

Mark McCormick and Margaret C. Callahan of Belin McCormick,

P.C., Des Moines, and Jeffrey R. Babbin and Kim E. Rinehart of Wiggin

and Dana LLP, New Haven, Connecticut, for appellants.

Thomas J. Miller, Attorney General, Jeffrey S. Thompson, Deputy

Attorney General, and Steven M. St. Clair and Julia S. Kim, Assistant
Attorneys General, for appellee.
2

CADY, Chief Justice.

In this appeal and cross-appeal, we must consider numerous

issues in an action brought by the Attorney General of Iowa against

Vertrue Incorporated alleging violations of the Buying Club Membership

Law (BCL), pursuant to Iowa Code chapter 552A (2005), and the Iowa

Consumer Fraud Act (CFA), pursuant to Iowa Code section 714.16. The

State also sought civil penalties for consumer frauds committed against

the elderly pursuant to Iowa Code section 714.16A. The district court

found: (1) a number of Vertrue’s marketing and sales practices violated
the BCL and the CFA, (2) application of the BCL to Vertrue’s solicitation

practices did not violate the dormant Commerce Clause, and (3) Vertrue

did not commit consumer frauds against the elderly in violation of

section 714.16A. The court entered judgment awarding $25,250,736.19

in consumer reimbursement for fees paid in connection with

memberships sold in violation of the BCL or CFA, civil penalties in the

amount of $2,820,000, and $725,240.05 in attorney fees and costs. On

our review, we affirm the judgment of the district court in part, reverse in

part, and modify the judgment.

I. Factual and Procedural Background.

Vertrue sells memberships in buying programs that give members

the option to purchase various goods and services at discounted rates.

Since 1989, Vertrue has enrolled 863,970 Iowans in membership

programs. To entice membership into the programs, Vertrue frequently

offered gift cards and other “cash back” rewards. Further, Vertrue

consistently offered consumers free trial memberships with a negative

option—meaning consumers would be charged the full price of the
membership if they failed to call and cancel within the designated trial

period. Normally, once individuals were enrolled in one of Vertrue’s
3

membership programs, their credit cards or bank accounts were charged

on a monthly basis until they contacted Vertrue and canceled the

membership.

In 1999, the Consumer Protection Division (CPD) of the Iowa

Attorney General’s Office began receiving a high volume of complaints

from Iowans regarding Vertrue’s marketing and business practices. In

response to these complaints, the CPD commenced an investigation in

December 2004 to assess the legality of Vertrue’s business practices. As

part of the investigation, the CPD sent approximately 400 written surveys
to Iowans who had been enrolled in one of four membership programs

offered by Vertrue since April 1, 2003. Of the eighty-eight survey

respondents, sixty-seven percent indicated they were either unaware of

their membership or did not authorize the membership charges, or both.

None of the survey respondents indicated consumer satisfaction.

Based in part on the results of the CPD investigation, on May 12,

2006, the Attorney General initiated this action against Vertrue alleging

violations of the BCL and the CFA. The State sought consumer

restitution, injunctive relief, and civil penalties under both the BCL and

the CFA, and additional civil penalties for consumer frauds committed

against the elderly pursuant to Iowa Code section 714.16A.

The State subsequently filed an amended petition to add Vertrue

affiliates, Adaptive Marketing, LLC and Idaptive Marketing, LLC, as well

as West Telemarketing Corporation and West Corporation, as

defendants. The West defendants later settled and were dismissed from

the litigation. The remaining defendants, Vertrue, Adaptive, and Idaptive

(collectively Vertrue)1 filed an answer to the State’s amended petition

1Adaptive is a wholly owned subsidiary of Idaptive, which is a wholly owned
subsidiary of Vertrue.
4

denying liability under the BCL and CFA. Vertrue asserted

counterclaims requesting declaratory orders establishing the legality of

its sales practices under the BCL and CFA. Additionally, Vertrue sought

a declaratory judgment establishing that application of the BCL to its

mail, telephone, and Internet solicitations would violate the dormant

Commerce Clause of the United States Constitution.

The district court bifurcated trial. The first phase addressed the

issue of liability. The district court reaffirmed its previous summary

judgment rulings and held the BCL was applicable to Vertrue’s mail,
telephone, and Internet solicitations and that these solicitations violated

the BCL. The district court further held that application of the BCL to

Vertrue’s solicitations did not violate the dormant Commerce Clause.

Additionally, the district court concluded several of Vertrue’s marketing

and business practices constituted unfair practices and deceptive acts

under the CFA. However, the court found the BCL did not apply to

Vertrue’s financial, privacy, or health membership programs, and the

State was not entitled to additional civil penalties for consumer frauds

committed against the elderly.

During the remedies phase of the trial, the district court

interpreted Iowa Code section 714.16(7) to require the State to prove

reliance, damages, intent to deceive, and knowledge of falsity in order to

obtain a consumer reimbursement award for both the BCL and CFA

violations. The court found the State proved ninety percent of Iowa

consumers would have canceled Vertrue’s programs had they received

BCL-compliant disclosures and accordingly ordered consumer

reimbursement of ninety percent of Vertrue’s net revenues from non-
BCL-compliant solicitations. This figure amounted to $22,715,073.65.

An additional $2,535,662.54 was awarded for CFA violations, making the
5

total reimbursement award $25,250,736.19. The court also awarded a

total of $2,820,000 in civil penalties for the BCL and CFA violations and

$725,240.05 for costs and attorney fees. Finally, the court entered

various injunctive orders requiring Vertrue to comply with the provisions

of the BCL and CFA.

Vertrue appealed. It claimed the district court erred in finding the

BCL applied to its mail, telephone, and Internet sales; the application of

the BCL to Vertrue’s mail, telephone, and Internet sales did not violate

the dormant Commerce Clause; there was sufficient evidentiary support
for the BCL reimbursement award and such an award was equitable;

there was sufficient evidence of the CFA violations regarding Vertrue’s

telemarketing solicitations and sufficient evidence for the respective

reimbursement award; and there was sufficient evidence to support a

CFA reimbursement award for the practice of requiring dual cancellation

requests for memberships bundled into a single Internet transaction.

The State cross-appealed. It argued the district court erred in

finding the record did not support an award of additional civil penalties

for consumer frauds committed against the elderly; the BCL did not

apply to Vertrue’s financial, privacy, and health programs; a BCL

reimbursement award requires proof of reliance, damages, intent to

deceive, and knowledge of falsity; a reimbursement reward for a CFA

claim of concealment, suppression, or omission of a material fact

requires proof of reliance, damages, intent to deceive, and knowledge of

falsity; and there was insufficient evidence of reliance, damages, intent to
6

deceive, and knowledge of falsity to support a finding of a CFA violation

for Vertrue’s “breakage” practices.2

II. Application of the Buying Club Membership Law.

A. Scope of Review. Our review of this equity ruling is de novo;

however, we review the district court’s interpretation of chapter 552A for

correction of errors at law. See Iowa Film Prod. Servs. v. Iowa Dep’t of

Econ. Dev., 818 N.W.2d 207, 217 (Iowa 2012). We also review de novo

the district court’s ruling on questions of constitutional law. Homan v.

Branstad, 812 N.W.2d 623, 628–29 (Iowa 2012). In reviewing a challenge

under the dormant Commerce Clause of the United States Constitution,

“[o]ur function is to determine, to the best of our ability, how the United

States Supreme Court would decide this case under its case law and

established dormant Commerce Clause doctrine.” KFC Corp. v. Iowa

Dep’t of Revenue, 792 N.W.2d 308, 322 (Iowa 2010). Thus, we do not

“engage in independent constitutional adjudication” or “seek to improve

or clarify Supreme Court doctrine.” Id.

B. Preservation of Error. The State contends Vertrue’s proposed

interpretation of section 552A.3, as well as its dormant Commerce
Clause claim, were not properly preserved for appeal. Our error

preservation rules provide that error is preserved for appellate review

when a party raises an issue and the district court rules on it. Meier v.

Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). Vertrue clearly presented to

the district court the issue of whether section 552A.3 applied to

solicitations that were not made in person. The record demonstrates the

parties debated the “irrespective of the place or manner of sale” clause of

2Breakage refers to the business practice of intentionally imposing needless
barriers to the consumer’s receipt of the free premiums offered to induce membership
enrollment.
7

section 552A.3 at length and the district court rejected Vertrue’s

interpretation. Moreover, the State acknowledges that “the court ruled

the BCL did not violate the Commerce Clause [and] Vertrue filed a

motion to reconsider.” Accordingly, we conclude Vertrue has properly

preserved error on both of these arguments.

C. Statutory Framework. In 1993, our legislature enacted the

BCL to protect consumers by regulating the sale of buying club

memberships. See 1993 Iowa Acts ch. 60, §§ 1–5 (codified at Iowa Code

§§ 552A.1–.5 (Supp. 1993)).3 The Act essentially regulates membership
sales in two ways. It imposes duties and restrictions on merchants of

buying club memberships and establishes public and private remedies

for violating its terms. See Iowa Code §§ 552A.3–.5 (2005). The section

at issue incorporates the disclosure and notice requirements of the Iowa

Door-to-Door Sales Act (DDSA). See id. § 552A.3. It provides:

The requirements of sections 555A.1 through 555A.5,
relating to door-to-door sales, shall apply to sales of buying
club memberships, irrespective of the place or manner of
sale or the purpose for which they are purchased. In
addition to the requirements of chapter 555A, a contract
shall not be enforceable against a person acquiring a
membership in a buying club unless the contract is in
writing and signed by the purchaser.

Id.; see also id. §§ 555A.1–.6 (regulating door-to-door sales).
The DDSA imposes numerous requirements on door-to-door sales.

Notably, the DDSA requires sellers to provide buyers with a copy of the

completed written contract at the time of execution and further requires

that the contract include a statement written in large boldface print

3Prior to 1993 sellers of buying club memberships were not subject to special
regulation. Such sellers were required to apply for a “certificate of authority” to do
business from the insurance commissioner. Iowa Code § 503.5 (1993). If “satisfied that
the business [wa]s not in violation of the law, or against public policy, and that the
certificate or contract [wa]s in proper form,” the commissioner was authorized to issue
the certificate of authority. Id.
8

advising the buyer of the right to cancel the transaction within three

business days. Id. § 555A.2. A more detailed notice explaining the right

to cancel must be attached to the contract. Id. § 555A.3. The DDSA also

imposes an obligation to supplement the written right to cancel with an

oral statement of the right at the time the contract is signed. Id.

§ 555A.4. The legislature enacted the DDSA in 1973 because home

solicitation sales can often involve unfair, high pressure tactics. See

1973 Iowa Acts ch. 291, §§ 1–6 (codified at Iowa Code §§ 713B.1–.6

(1975) (current version at Iowa Code §§ 555A.1–.6)).
D. Statutory Interpretation. Vertrue’s argument rests on the

premise that section 552A.3’s notice and disclosure requirements can

only be accomplished by in-person conduct. Vertrue asserts that many

of the DDSA requirements as incorporated by the BCL would be

impracticable or impossible to perform by merchants who sell buying

club memberships by mail, telephone, or the Internet. For example,

Vertrue points out that a merchant who uses the mail or Internet to

make a sale cannot orally inform the buyer of the right to cancel.

Likewise, Vertrue points out that a merchant who uses the telephone to

negotiate a sale of a buying club membership cannot hand the seller a

copy of the contract. Consequently, Vertrue asserts the legislature only

intended section 552A.3 to apply to in-person sales of buying club

memberships.

The State, by contrast, asserts that section 552A.3 operates to

make the incorporated DDSA notice and disclosure requirements

applicable to all buying club membership sales, regardless of the place or

means employed in the transaction. The State adds that section 552A.3
can be satisfied by supplementing direct mail and Internet transactions

with coordinated telephone contact and the transfer of documents by
9

mail or facsimile. It further points out that Internet transactions can be

supplemented with telephone messages and electronic signatures.

Our obligation is to interpret the statute based on the language

used by our legislature. See Auen v. Alcoholic Beverages Div., 679

N.W.2d 586, 590 (Iowa 2004) (“We determine legislative intent from the

words chosen by the legislature, not what it should or might have said.”).

Here, the statute provides specific directions. It provides that the

requirements for door-to-door sales “apply to sales of buying club

memberships, irrespective of the place or manner of sale.” Iowa Code
§ 552A.3 (emphasis added). Section 552A.3 of the BCL is not the first

occasion our legislature has had to use the phrase “irrespective of the

place or manner of sale.” It used this same phrase in the definitions

section of the DDSA to enlarge the scope of the DDSA requirements in

the sale of funeral services and merchandise, as well as the sale of social

referral services. Id. § 555A.1(3)(b). Under this section, the requirements

for door-to-door sales apply to the sale of funeral services and

merchandise and social referral services “irrespective of the place or

manner of sale.” Id. Thus, sales in these two areas must follow the

DDSA requirements even though the DDSA technique is not used. Yet,

we have not had an occasion to interpret the phrase.

It is clear our legislature has defined a door-to-door sale in the

context of “place” and “manner.” The “manner” must involve a personal

solicitation of a sale by the seller or the seller’s representative, including

sales in response to an invitation by a buyer. Id. § 555A.1(3)(a). The

“place” is limited to “a place other than the place of business of the

seller.” Id. Thus, when the legislature declares DDSA requirements
apply to buying club membership sales “irrespective of the place or

manner,” it is declaring the requirements apply without regard to the
10

“place” or “manner” that define door-to-door sales. In other words, the

requirements of the DDSA apply to sales at the “place” of the business of

the seller and to sales transacted in a “manner” that is not restricted to

in-person solicitation.

Vertrue accurately described some of the difficulties it will

encounter in attempting to transact its buying club membership sales by

mail, telephone, and the Internet when it is required to follow consumer

protection practices developed for person-to-person transactions. Yet, we

must focus on the clear language of the statute to direct the outcome,
not the difficulty of compliance under a particular business model.

Thus, we conclude the trial court properly interpreted section 552A.3 to

apply the requirements of the DDSA to the selling of all buying club

memberships.

E. The Dormant Commerce Clause. Vertrue contends that even

if the BCL applies to its mail, telephone, and Internet transactions, it

does so in violation of the Commerce Clause of the United States

Constitution. Since compliance with the BCL is “unworkable” unless the

buying club membership transaction occurs in person, Vertrue

maintains the BCL discriminates against out-of-state sellers—

unconstitutionally favoring sellers who establish a physical presence in

Iowa, thereby investing in Iowa employees and facilities.

The United States Constitution grants Congress the power “[t]o

regulate Commerce . . . among the several States.” U.S. Const. art. I, § 8,

cl. 3. The Commerce Clause “has long been seen as a limitation on state

regulatory powers, as well as an affirmative grant of congressional

authority.” Fulton Corp. v. Faulkner, 516 U.S. 325, 330, 116 S. Ct. 848,
853, 133 L. Ed. 2d 796, 804 (1996). The limitation on state regulatory

powers—termed the “dormant Commerce Clause”—“ ‘prohibits economic
11

protectionism—that is, “regulatory measures designed to benefit in-state

economic interests by burdening out-of-state competitors.” ’ ” Id.

(quoting Associated Indus. of Mo. v. Lohman, 511 U.S. 641, 647, 114

S. Ct. 1815, 1820, 128 L. Ed. 2d 639, 646 (1994)). Thus, “the

[Commerce] Clause is both a ‘prolific sourc[e] of national power and an

equally prolific source of conflict with legislation of the state[s].’ ” Kassel

v. Consol. Freightways Corp. of Del., 450 U.S. 662, 669, 101 S. Ct. 1309,

1315, 67 L. Ed. 2d 580, 586 (1981) (quoting H. P. Hood & Sons, Inc. v.

Du Mond, 336 U.S. 525, 534, 69 S. Ct. 657, 663, 93 L. Ed. 865, 872
(1949)).

Modern dormant Commerce Clause jurisprudence is principally

concerned with effectuating

the Framers’ purpose to “preven[t] a State from retreating
into economic isolation or jeopardizing the welfare of the
Nation as a whole, as it would do if it were free to place
burdens on the flow of commerce across its borders that
commerce wholly within those borders would not bear.”

Fulton, 516 U.S. at 330–31, 116 S. Ct. at 853, 133 L. Ed. 2d at 805

(quoting Okla. Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 180,

115 S. Ct. 1331, 1335–36, 131 L. Ed. 2d 261, 268 (1995)). The United

States Supreme Court has adopted a two-tiered approach to analyzing
state economic interest regulation pursuant to the dormant Commerce

Clause:

When a state statute directly regulates or discriminates
against interstate commerce, or when its effect is to favor in-
state economic interests over out-of-state interests, we have
generally struck down the statute without further inquiry.
When, however, a statute has only indirect effects on
interstate commerce and regulates evenhandedly, we have
examined whether the State’s interest is legitimate and
whether the burden on interstate commerce clearly exceeds
the local benefits.
12

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573,

579, 106 S. Ct. 2080, 2084, 90 L. Ed. 2d 552, 559–60 (1986) (citations

omitted)). The party challenging the constitutionality of the statute bears

the burden of demonstrating the statute discriminates either on its face

or in practical effect. Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S. Ct.

1727, 1736, 60 L. Ed. 2d 250, 262 (1979).

If the challenger demonstrates that the restriction on interstate

commerce is discriminatory, a “virtually per se rule of invalidity”

applies—even if the restriction is related to a legitimate local purpose.
Chem. Waste Mgmt., Inc. v. Hunt, 504 U.S. 334, 344 & n.6, 112 S. Ct.

2009, 2015 & n.6, 119 L. Ed. 2d 121, 133 & n.6 (1992) (citation and

internal quotation marks omitted). In order to validate such a statute,

the government carries the heavy burden of proving the regulation

“advances a legitimate local purpose that cannot be adequately served by

reasonable nondiscriminatory alternatives.” New Energy Co. of Ind. v.

Limbach, 486 U.S. 269, 278, 108 S. Ct. 1803, 1810, 100 L. Ed. 2d 302,

311 (1988).

On the other hand, if the law “regulates even-handedly to

effectuate a legitimate local public interest, and its effects on interstate

commerce are only incidental, it will be upheld unless the burden

imposed on such commerce is clearly excessive in relation to the putative

local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct.

844, 847, 25 L. Ed. 2d 174, 178 (1970). In this context, the challenger

carries the burden of proving excessiveness. Pharm. Care Mgmt. Ass’n v.

Rowe, 429 F.3d 294, 313 (1st Cir. 2005). In evaluating a regulation’s

putative local benefits, the court proceeds with deference to legislative
judgments. See CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 92,

107 S. Ct. 1637, 1651 95 L. Ed. 2d 67, 87 (1987). However, a law
13

“designed for [a] salutary purpose nevertheless may further the purpose

so marginally, and interfere with commerce so substantially, as to be

invalid under the Commerce Clause.” Kassel, 450 U.S. at 670, 101

S. Ct. at 1316, 67 L. Ed. 2d at 587.

With these principles in mind, we turn to the task of evaluating the

constitutionality of section 552A.3. Initially, we note section 552A.3 is

not facially discriminatory—it does not reference interstate commerce or

interstate interaction. Instead, it regulates in an evenhanded manner by

applying the notice and disclosure requirements to any seller of
“memberships” to a “buying club,” as those terms are defined in section

552A.1, “without regard to whether . . . the sellers are from outside the

State.” Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471–72,

101 S. Ct. 715, 728, 66 L. Ed. 2d 659, 674 (1981); see also Iowa Code

§§ 552A.1, .3. Moreover, section 552A.1 does not set forth a definition

limited to interstate sellers of buying club memberships, nor does it

exclude local sellers. See Iowa Code §§ 552A.1–.2.

We acknowledge compliance with the requirements of section

552A.3 for contemporaneous written and oral obligations at the time of

the transaction may be difficult for out-of-state sellers with no in-state

presence. Yet, the restrictions at issue place the same burden on all

sellers using the telephone, mail, or Internet to transact a sale in Iowa.4

See SPGGC, LLC v. Blumenthal, 505 F.3d 183, 194 n.3 (2d Cir. 2007).

But see Dean Milk Co. v. City of Madison, 340 U.S. 349, 354–55, 71 S. Ct.

295, 298–99, 95 L. Ed. 329, 333–34 (1951) (holding a Madison,

4The burdens on these sales hardly render them impossible. Numerous
business transactions that formerly were conducted in person are now conducted by
other methods. Technological evolution has changed the methods of doing business,
including the presentation and signing of documents. Furthermore, Internet
communication and transfer of documents can be supplemented by telephone
communications to satisfy required oral communications.
14

Wisconsin, ordinance was unconstitutional because it had the practical

effect of excluding “from distribution in Madison wholesome milk

produced and pasteurized in Illinois”). “The fact that the burden of a

state regulation falls on some interstate companies does not, by itself,

establish a claim of discrimination against interstate commerce.” Exxon

Corp. v. Governor of Md., 437 U.S. 117, 126, 98 S. Ct. 2207, 2214, 57

L. Ed. 2d 91, 100 (1978).

Section 552A.3 does not afford Iowa sellers a competitive

advantage or cause out-of-state sellers to “surrender whatever
competitive advantages they may possess.” Brown-Forman, 476 U.S. at

580, 106 S. Ct. at 2085, 90 L. Ed. 2d at 560. Therefore, we cannot

conclude that section 552A.3 has the practical effect of discriminating

against out-of-state economic interests.

As a result, the dormant Commerce Clause claim asserted by

Vertrue devolves into a question of whether the indirect, incidental

burdens imposed on interstate commerce by section 552A.3 are “clearly

excessive in relation to the putative local benefits.” Pike, 397 U.S. at

142, 90 S. Ct. at 847, 25 L. Ed. 2d at 178. The protection of consumers

and the curtailment of unfair business practices have long been

recognized as significant interests in determining whether statutory

regulations violate the Commerce Clause. See CTS, 481 U.S. at 93, 107

S. Ct. at 1652–53, 95 L. Ed. 2d at 88 (finding no violation of the dormant

Commerce Clause and noting Indiana’s statute regulating corporate

takeovers served the “substantial interest in preventing the corporate

form from becoming a shield for unfair business dealing”); Int’l Dairy

Foods Ass’n v. Boggs, 622 F.3d 628, 649 (6th Cir. 2010) (holding that
burdens placed on interstate commerce by Ohio milk labeling regulation

did not outweigh the consumer protection benefits); Allstate Ins. Co. v.
15

Abbott, 495 F.3d 151, 161–62 (5th Cir. 2007) (holding that Texas statute

restricting ability of auto insurers to operate body shops did not violate

dormant Commerce Clause because, despite “stray protectionist

remarks,” the legislative record demonstrated legislation was enacted to

protect consumers from predatory insurance practices); Alliance of Auto.

Mfrs. v. Gwadosky, 430 F.3d 30, 38–40 (1st Cir. 2005) (holding that

burden on interstate commerce from Maine statute prohibiting

automobile manufacturers from recovering warranty repair costs for

which manufacturers were required to reimburse automobile dealers did
not outweigh the state’s interest in protecting residents from “frauds,

impositions and other abuses” (citation and internal quotation marks

omitted)). Furthermore, “because consumer protection is a field

traditionally subject to state regulation, ‘[w]e should be particularly

hesitant to interfere with the [State’s] efforts under the guise of the

Commerce Clause.’ ” SPGGC, 505 F.3d at 194 (quoting United Haulers

Ass’n v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 344,

127 S. Ct. 1786, 1796, 167 L. Ed. 2d 655, 668 (2007)).

Notwithstanding, Vertrue argues the burdens are clearly excessive

because the record does not contain any actual evidence of consumer

protection benefits. However, “under Pike, it is the putative local benefits

that matter. It matters not whether these benefits actually come into

being at the end of the day.” Pharm. Care, 429 F.3d at 313.

Furthermore, Vertrue has not identified any substantial impediments on

interstate commerce that outweigh the consumer protection benefits. We

acknowledge the minimal burden section 552A.3 imposes on the

interstate sale of buying club memberships in the form of compliance
costs. Nevertheless, even a burdensome regulation does not necessarily

violate the dormant Commerce Clause because it affects the profits of
16

individual sellers. “[T]he Clause protects the interstate market, not

particular interstate firms, from prohibitive or burdensome regulations.”

Exxon, 437 U.S. at 127–28, 98 S. Ct. at 2215, 57 L. Ed. 2d at 101.

Under a contrary interpretation, “almost every state consumer protection

law would be considered ‘protectionist’ in a sense prohibited by the

Constitution.” SPGGC, 505 F.3d at 194–95 (holding that Connecticut

Gift Card Law prohibiting in-state sales of gift cards with inactivity fees

and expiration dates did not regulate out-of-state commerce in violation

of dormant Commerce Clause, even though out-of-state sellers
necessarily incurred compliance costs).

Based on the preceding, we affirm the district court’s conclusion

that section 552A.3 does not violate the dormant Commerce Clause.

F. Applicability of the BCL to Vertrue’s Financial, Privacy, and

Health Membership Programs. The State cross-appealed the district

court’s ruling regarding the applicability of the BCL to Vertrue’s sales of

financial, privacy, and health membership programs. In its posttrial

brief, the State argued any membership that offers consumers the option

to purchase one or more goods or services at a discount (discount

features) should be subject to the BCL. The district court rejected this

argument in regard to Vertrue’s financial and privacy programs,

reasoning that such an interpretation would reach too broadly

encompassing entities that “cannot reasonably be considered buying

clubs.” While most of Vertrue’s financial and privacy programs offered

discounts, the court considered these to be ancillary benefits and

concluded the BCL applies only to membership programs in which the

primary benefit is the option to purchase discounted goods or services.5

5This case concerns the entitlement to purchase goods or services at a discount.

However, we acknowledge section 552A.1 applies not only to purchases at a discount,
17

The district court also concluded the BCL did not apply to Vertrue’s

health programs, reasoning they are similar to Health Management

Organizations (HMO) or Preferred-Provider Organizations (PPO), which

the legislature likely did not seek to regulate in enacting the BCL.

Section 552A.1 of the BCL provides the following definitions:

As used in this chapter, unless the context otherwise
requires:
1. “Buying club” means a corporation, partnership,
unincorporated association, or other business enterprise
which sells or offers for sale to the public generally
memberships or certificates of membership.
2. “Contract” means the agreement by which a person
acquires a membership in a buying club.
3. “Membership” means certificates, memberships,
shares, bonds, contracts, stocks, or agreements of any kind
or character issued upon any plan offered generally to the
public entitling the holder to purchase merchandise,
materials, equipment, or service, either from the issuer or
another person designated by the issuer, either under a
franchise or otherwise, whether it be at a discount, at cost
plus a percentage, at cost plus a fixed amount, at a fixed
price, or on any other similar basis.

Iowa Code § 552A.1. Section 552A.2 contains a list of exemptions

excluding certain types of businesses and organizations from the

coverage of the BCL. The parties agree that none of the exemptions

apply to any of Vertrue’s financial, privacy, or health programs.
The legislature has provided no further guidance for determining

whether the definition of buying club membership excludes plans that

offer an entitlement to purchase discounted goods and services when the

membership plan also, or perhaps primarily, offers consumers other

distinct benefits. In interpreting section 552A.1, we apply well-settled

principles of statutory construction in order “to give effect to the

_________________________
but also to purchases “at cost plus a percentage, at cost plus a fixed amount, at a fixed
price, or on any other similar basis.” See Iowa Code § 552A.1(3).
18

legislative intent of [the] statute.” Watson v. Iowa Dep’t of Transp. Motor

Vehicle Div., 829 N.W.2d 566, 569 (Iowa 2013) (citation and internal

quotation marks omitted). The BCL is a remedial statute; accordingly,

we construe it liberally to effectuate its purposes. State ex rel. Miller v.

Cutty’s Des Moines Camping Club, Inc., 694 N.W.2d 518, 528 (Iowa

2005).

A straightforward reading of section 552A.1 would make the BCL

applicable to “any plan offered generally to the public entitling the holder

to purchase merchandise, materials, equipment, or service . . . at a
discount,” notwithstanding the other consumer benefits the district court

concluded were the “primary purpose” of those membership plans.6 Iowa

Code § 552A.1(3). We acknowledge that this interpretation could, in

theory, encompass membership plans the legislature may not have

intended to regulate. However, adoption of a “primary purpose”

limitation would undoubtedly encumber the BCL and leave it vulnerable

to circumvention by clever fraudsters. Dier v. Peters, 815 N.W.2d 1, 11

(Iowa 2012) (“[T]ribunals [should have] the liberty to deal with [fraud] in

whatever form it may present itself.” (Citation and internal quotation

marks omitted.)); cf. State ex rel. Miller v. Hydro Mag, Ltd., 436 N.W.2d

617, 621 (Iowa 1989) (noting that consumer fraud protections are

undermined by reading unlisted elements into a CFA analysis). If we

were to imply such a limitation into section 552A.1, future sellers would

be afforded an opportunity to evade BCL enforcement by meticulously

balancing discount and nondiscount features and otherwise obscuring

the primary purpose of a program that is, in essence, a buying club

6We find error in the district court’s ruling in several respects. Many of the
programs excluded by the district court, some of which offer a far greater number of
discount features than any other purported benefits, would clearly fit within the
“primary purpose” definition it adopted.
19

membership. The district court’s reliance on the fact “the programs

[we]re not marketed as discount programs” renders the BCL open to this

sort of perversion. Moreover, as the primary benefit of any given

membership can vary significantly from consumer to consumer, the

inherent vagueness in the primary purpose rationale increases the

likelihood BCL enforcement will be rendered illusory as courts struggle to

determine whether a program’s discount features predominate over the

nondiscount features. In addition, implying a primary purpose limitation

into the BCL would require us to invent satisfactory principles and
standards for guiding a treacherous inquiry with no legislative guidance.

It is also noteworthy that none of Vertrue’s programs provide any

independent services to consumers. The programs at issue, without

exception, involve the bundling of numerous goods and services from

various merchants. Upon bundling the goods and services into one

membership, Vertrue offers consumers the membership at a monthly

rate. We recognize that this practice does not fit within the literal

definition of a buying club membership under section 552A.1 because it

does not “entitl[e] the holder to purchase” goods and services at a

discount. However, this practice is strikingly similar to the

administration of the classic buying club membership established in

section 552A.1. Both practices offer the consumer the ability to receive

various goods and services at a predetermined rate.

As noted above, the purpose of the BCL is to protect consumers

from overreaching merchants of buying club memberships. Many of

Vertrue’s financial, privacy, and health programs contain manifold

discount features that unquestionably predominate over any other
purported benefits. Additionally, the record is replete with examples of

consumers who were unwittingly enrolled in Vertrue’s financial, privacy,
20

and health programs through the use of misleading solicitations and

overreaching marketing tactics. While a case may come along in which a

literal application of section 552A.1 would lead to results so absurd that

a limitation must be implied into its interpretation, this is not that case.

The BCL contains exemptions, but it does not exempt memberships that

offer financial, privacy, or health-related discounts or programs that

contain only one discount feature. See Iowa Code § 552A.2(3). Thus, the

plain language of the statute dictates all of Vertrue’s financial, privacy,

and health memberships that offer one or more discount features are
subject to the terms of the BCL. Accordingly, we reverse the district

court’s ruling to the extent it excluded these programs. Our resulting

modification of the district court’s BCL reimbursement award is

discussed below.

III. Reimbursement Under the BCL and CFA.

A. Scope of Review. Our review of this equity ruling is de novo;

however, we review the district court’s interpretation of sections 552A.5

and 714.16(7) for correction of errors at law. See Iowa Film, 818 N.W.2d

at 217.

B. Analysis. The parties dispute the requisite elements of proof

required to obtain a reimbursement award under the BCL as well as

under the CFA. The CFA sets forth the remedies available upon proof of

an unlawful practice. Iowa Code § 714.16(7). It states, in relevant part,

as follows:

Except in an action for the concealment, suppression, or
omission of a material fact with intent that others rely upon
it, it is not necessary in an action for reimbursement or an
injunction, to allege or to prove reliance, damages, intent to
deceive, or that the person who engaged in an unlawful act
had knowledge of the falsity of the claim or ignorance of the
truth.
21

Id. Any violation of the BCL also violates section 714.16(2)(a) of the CFA.

Id. § 552A.5(1). Accordingly, any violation of the BCL triggers remedies

under section 714.16(7) of the CFA. The CFA states, in part:

The act, use or employment by a person of an unfair
practice, deception, fraud, false pretense, false promise, or
misrepresentation, or the concealment, suppression, or
omission of a material fact with intent that others rely upon
the concealment, suppression, or omission, in connection
with the lease, sale, or advertisement of any merchandise or
the solicitation of contributions for charitable purposes,
whether or not a person has in fact been misled, deceived, or
damaged, is an unlawful practice.

Id. § 714.16(2)(a).

In its liability ruling, the district court concluded Vertrue’s

marketing practices independently violated the BCL and CFA. In the

CFA portion of its analysis, the court concluded Vertrue’s direct mail,

telephone, and Internet solicitation practices amounted to unfair

practices. Additionally, the district court concluded Vertrue’s direct mail

solicitations were deceptive.

Furthermore, the district court concluded Vertrue’s breakage

practices violated the CFA. Breakage refers to the practice by which “free

premiums (e.g., $25 Wal-Mart gift card) that are used to lure consumers

into trial memberships are never actually provided to the consumers.”

The court referred to Vertrue’s practice as a “double breakage model”

because it required “consumers to jump two sets of unnecessary hurdles

. . . for the sole purpose of making it difficult for consumers to redeem

the promised premium.” The district court held this practice was

deceptive, unfair, and an omission of a material fact under the CFA. See

id.

In the remedies trial, the State argued that proof of reliance,
damages, intent to deceive, and knowledge of falsity are never required to
22

obtain reimbursement under the CFA, even in a claim alleging

“concealment, suppression, or omission of a material fact.” See id.

§ 714.16(7). Alternatively, the State argued that all of the remedies

contained in section 714.16(7) are available for any violation of the BCL

without proof of additional elements. The district court rejected both

arguments, reasoning a BCL violation “is by definition a concealment or

omission.”

Consequently, the district court proceeded to evaluate the State’s

evidence of reliance. The court relied primarily on the testimony of
Vertrue’s expert, Thomas Maronick, who testified at trial that ninety

percent to ninety-five percent of Vertrue’s Internet customers would not

have signed up for a membership if Vertrue were required to conduct in-

person disclosures. Based predominantly on Maronick’s testimony, the

court concluded ninety percent of consumers who purchased Vertrue’s

membership programs would have canceled within the three-day period

had Vertrue complied with the BCL. Accordingly, the district court

ordered a reimbursement award of ninety percent of the net membership

fees Vertrue acquired by means of non-BCL-compliant solicitations. This

figure came to $22,715,073.65. However, the court denied CFA

reimbursement for Vertrue’s breakage practice upon concluding there

was “no evidence in the record upon which to make a finding of reliance.”

On appeal, Vertrue disputes the reliance aspect of the district

court’s reimbursement award, arguing there is no logical connection

between Maronick’s testimony and the district court’s conclusion that

ninety percent of Iowa consumers would have canceled had they received

BCL-compliant disclosures.7 The State counters that the district court’s

7Maronick’s testimony was presented by Vertrue for the purpose of establishing
that compliance with section 552A.3 of the BCL would cripple Vertrue’s ability to
conduct its business. This argument was also based on Vertrue’s faulty premise under
23

ruling was adequately supported by record evidence and Maronick’s

testimony constituted a principled basis for evaluating reliance.

Additionally, the State cross-appealed the district court’s rulings

regarding the applicability of section 714.16(7)’s additional proof

elements to a remedial determination for both BCL and CFA violations.

We find it unnecessary to address Vertrue’s arguments regarding

the sufficiency of the evidence to support the district court’s findings on

reliance. Additionally, because we conclude that the State was entitled

to full BCL reimbursement without a reliance-based reduction for
Vertrue’s mail, telephone, and Internet solicitations, we do not reach the

State’s argument that it was not required to prove section 714.16(7)’s

additional elements in order to obtain reimbursement for the same

programs under the CFA.

1. Reimbursement under the BCL. First, we consider what proof

must be shown to obtain a reimbursement award for a violation of the

BCL. In order to obtain reimbursement in cases alleging “concealment,

suppression, or omission of a material fact,” the State must prove

“reliance, damages, intent to deceive, [and] . . . knowledge of the falsity of

the claim or ignorance of the truth.” Id. These requirements are

recognizable as elements in a claim for common law fraud. See Dier, 815

N.W.2d at 7 (setting forth the traditional elements of a common law fraud

claim).

Section 714.16(2)(a) establishes various unlawful practices under

the CFA, one of which is “the concealment, suppression, or omission of a

material fact with intent that others rely upon [it] . . . in connection with

the . . . sale . . . of any merchandise.” Our reading of section 714.16, as

_________________________
which compliance with section 552A.3 requires in-person interaction at the time of the
transaction.
24

well as our precedent, leads to the inexorable conclusion that each of

these unlawful practices is a distinct line of inquiry under the CFA. See

Cutty’s, 694 N.W.2d at 527 (“[D]eceptive and unfair practices are distinct

lines of inquiry . . . . [W]hile a practice may be both deceptive and unfair,

it may be unfair without being deceptive.” (Citation and internal

quotations marks omitted.)). Similarly, we read section 552A.5 of the

BCL as effectively making violations of the BCL an additional distinct

unlawful practice under section 714.16(2)(a).

The legislature specifically required proof of the additional common
law fraud elements in order to obtain reimbursement for only one

distinct unlawful practice—“concealment, suppression, or omission of a

material fact.” See Iowa Code § 714.16(7). The legislature demonstrated

its intent to single out this particular unlawful practice by using the

exact same language that appears in section 714.16(2)(a). Compare id.

§ 714.16(7), with id. § 714.16(2)(a). BCL violations are not listed as one

of the unlawful practices for which the State must prove the additional

common law fraud elements in order to obtain injunctive relief or a

reimbursement award. See id. § 714.16(7). We have consistently

“observed that legislative intent is expressed by omission as well as by

inclusion.” Watson, 829 N.W.2d at 570. By only listing “concealment,

suppression, or omission of a material fact” in section 714.16(7) and

excluding the other types of unlawful practices established by section

714.16(2)(a), we think it clear the legislature intended the additional

proof elements to apply only to the listed unlawful practice. As we said

in State ex rel. Miller v. Pace, the CFA “is not a codification of common

law fraud principles” and, accordingly, absent explicit direction from the
legislature, we decline to impose upon the State the burden of proving

common law fraud elements in order to obtain reimbursement for
25

unlawful practices not specifically listed as requiring additional proof

under section 714.16(7). 677 N.W.2d 761, 770 (Iowa 2004).

Moreover, there is nothing in the legislative scheme suggesting the

legislature intended that a remedy be crafted by determining what kind

of CFA cause of action an alleged BCL violation most resembles. No

statutory guidance has been set forth for this determination. Thus, in

assessing what remedies are available for a BCL violation under section

714.16(7), the district court was not authorized to engage in an analysis

to determine which CFA cause of action the BCL violation generally
supports.

A contrary conclusion may suggest the State is required to prove a

violation also amounted to a “concealment, suppression, or omission of a

material fact” in order to be entitled to recovery for any BCL violation.

However, the BCL, as well as a number of other consumer protection

statutes that incorporate the remedies provisions of the CFA,8 prohibits

acts section 714.16(2)(a) was not designed to prevent. See State ex rel.

8Numerous consumer protection statutes incorporate the remedies provision of

the CFA by referencing section 714.16 in an identical or similar fashion to section
552A.3. See, e.g., Iowa Code § 9D.4(3) (2013) (Travel Agencies and Agents); id. § 13C.8
(Organizations Soliciting Public Donations); id. § 126.5(5) (Drugs, Devices, and
Cosmetics); id. § 261B.12(3) (Registration of Postsecondary Schools); id. § 321.69(11)
(damage disclosure statement); id. § 321.69A(4) (Disclosure of repairs to new vehicles);
id. § 322G.10 (Defective Motor Vehicles (Lemon Law)); id. § 516D.9 (Rental of Motor
Vehicles); id. § 516E.15(l)(a)(l) (Motor Vehicle Service Contracts); id. § 523A.807(1)
(Cemetery and Funeral Merchandise and Funeral Services); id. § 523G.9(7) (Invention
Development Services); id. § 523I.205(1) (Iowa Cemetery Act); id. § 535C.10(2) (Loan
Brokers); id. § 537B.6 (Motor Vehicle Service Trade Practices Act); id. § 543D.18A(2)
(Penalties for improper influence of an appraisal assignment); id. § 552.13(2) (Physical
Exercise Clubs); id. § 554.3513(6) (Civil remedy for dishonor of a check, draft, or order);
id. § 555A.6(2) (Door-to-Door Sales Act); id. § 557B.14(1) (Membership Campgrounds);
id. § 714.21A (Civil enforcement for specified sections of chapter 714 (Theft, Fraud, and
Related Offenses)); id. § 714A.5 (Pay-Per-Call Service); id. § 714B.7 (Prize Promotions);
id. § 714D.7(1) (Telecommunications Service Provider Fraud); id. § 714E.6(1)
(Foreclosure Consultants); id. § 714F.9(1) (Foreclosure Reconveyances); id. § 714G.11
(Consumer Credit Security); id. § 715A.8(4) (Identity theft); id. § 715C.2(8)(a) (Personal
Information Security Breach Protection); id. § 716A.6(3)(a) (Electronic Mail).
26

Miller v. Santa Rosa Sales & Mktg., Inc., 475 N.W.2d 210, 218 (Iowa 1991)

(noting the DDSA and the statute governing lotteries prohibit acts section

714.16(2)(a) was not designed to prevent). Furthermore, requiring this

additional showing would render these consumer protection statutes,

including the BCL, either ineffective or redundant in direct contravention

of clear legislative intent.

We acknowledge that the legislative language applies the additional

proof requirements to “action[s] for the concealment, suppression, or

omission of a material fact.” Iowa Code § 714.16(7) (2005) (emphasis
added). However, we think “action” contemplates a “cause of action.”

Therefore, the additional common law fraud elements must be proven for

causes of action alleging “concealment, suppression, or omission of a

material fact.” In turn, the State is not required to prove the additional

elements for every violation of section 714.16(2)(a) in any lawsuit that

alleges concealment, suppression, or omission of a material fact in

addition to other unlawful practices.9 Thus, the most rational,

straightforward application of section 714.16(7) only requires the State

to prove the additional common law fraud elements in order to obtain

reimbursement or injunctive relief on a claim of “concealment,

suppression, or omission of a material fact” under section 714.16(2)(a).

9It goes without saying that an act may amount to a concealment, suppression,

or omission of a material fact, as well as one of the other unlawful acts contained in
section 714.16(2)(a). See Cutty’s, 694 N.W.2d at 527 (“[W]hile a practice may be both
deceptive and unfair, it may be unfair without being deceptive. The disjunctive
language of the Iowa Act clearly requires proof of only one, not both, sorts of conduct.”
(Citation and internal quotation marks omitted.)); Pace, 677 N.W.2d at 766 (affirming
district court ruling that defendant’s “conduct constituted an ‘unfair practice’ and
‘deception’ under the consumer fraud provision of chapter 714”). It would not make
sense to require proof of the additional common law fraud elements when the State
proves an unlawful act, such as deception, simply because the underlying conduct also
amounted to a concealment, suppression, or omission of a material fact. The same
applies for a BCL violation.
27

2. Equitability of the BCL reimbursement award. Vertrue next

contends the reimbursement award for its BCL violations contravenes

principles of equity. Vertrue first asserts the voluntary payment doctrine

precludes any award of reimbursement. The Seventh Circuit has

explained the doctrine as a common law principle according to which “ ‘a

plaintiff who voluntarily pays money in reply to an incorrect or illegal

claim of right cannot recover that payment unless he can show fraud,

coercion, or mistake of fact.’ ” Spivey v. Adaptive Mktg. LLC, 622 F.3d

816, 822 (7th Cir. 2010) (quoting Randazzo v. Harris Bank Palatine, N.A.,
262 F.3d 663, 666 (7th Cir. 2001)). In support of this argument, Vertrue

cites Spivey in which the Seventh Circuit, relying on the voluntary

payment doctrine, affirmed the district court’s grant of summary

judgment to a defendant telemarketing company in a consumer class

action alleging breach of contract and unjust enrichment. Id. at 817,

824.

We have never recognized the voluntary payment doctrine and

decline to do so now. Even if we did recognize the doctrine, it would not

apply here because, unlike the plaintiffs in Spivey, the State has proven

consumer fraud. See id. at 822 (noting the voluntary payment doctrine

is inapplicable in cases in which fraud is shown). Moreover, application

of the doctrine in consumer protection actions would have the effect of

judicially vitiating consumer protection legislation. The CFA is a

remedial statute, and accordingly, we are bound to give it a liberal

interpretation, not an illusory one. See Cutty’s, 694 N.W.2d at 527–28.

Numerous courts have declined to apply the voluntary-payment doctrine

in actions alleging violations of consumer protection statutes, concluding
such an application would subvert the underlying purpose of these

statutes. See, e.g., Southstar Energy Servs., LLC v. Ellison, 691 S.E.2d
28

203, 206 (Ga. 2010) (“Judicially imposing [Georgia’s legislatively enacted

voluntary payment doctrine] on consumers’ statutory right to bring an

action contravenes the clear legislative intent that the protection of

consumers is the most important factor for any decision made under the

Natural Gas Act.”); Ramirez v. Smart Corp., 863 N.E.2d 800, 810 (Ill. App.

Ct. 2007) (“The effect of such transgressive acts [that violate statutorily-

defined public policy], generally speaking, is that the voluntary payment

rule will not be applicable.”); Huch v. Charter Commc’ns, Inc., 290 S.W.3d

721, 727 (Mo. 2009) (“To allow [the defendant] to avoid liability for this
unfair practice through the voluntary payment doctrine would nullify the

protections of the [Missouri Merchandising Practices Act] and be contrary

to the intent of the legislature.”); Indoor Billboard/Wash., Inc. v. Integra

Telecom of Wash., Inc., 170 P.3d 10, 24 (Wash. 2007) (“[T]he voluntary

payment doctrine is inappropriate as an affirmative defense in the . . .

context [of Washington’s Consumer Protection Act], as a matter of law,

because we construe the CPA liberally in favor of plaintiffs.”). We agree.

Vertrue also argues the State’s delay in enforcing section 552A.3

renders a reimbursement award inequitable. According to Vertrue, the

thirteen years between the enactment of the BCL in 1993 and the State’s

initiation of this action in 2006 allowed Vertrue’s understanding of Iowa

law to crystallize and resulted in an unduly large and burdensome

award. Vertrue further argues the State can uphold the public interest

through the use of civil penalties and future enforcement without

pursuing reimbursement claims, many of which would be time-barred if

brought by individual consumers. Vertrue has not cited any cases or

known legal principles that appear to support these arguments.
However, in our view, these arguments can essentially be characterized

as claims of laches and equitable estoppel.
29

Laches, however, does not apply against the government. See

State ex rel. Weede v. Iowa S. Utils. Co. of Del., 231 Iowa 784, 838, 2

N.W.2d 372, 400 (1942). Similarly, estoppel by acquiescence only

applies against the government in the most exceptional cases. Bailiff v.

Adams Cnty. Conference Bd., 650 N.W.2d 621, 627 (Iowa 2002). No

exceptional circumstances justify the doctrine’s application here. See id.

Accordingly, we reverse the district court’s ruling to the extent it

required proof of reliance, damages, intent to deceive, and knowledge of

falsity in order to obtain a BCL reimbursement award. In light of this
holding and our previous holding that Vertrue’s financial, privacy, and

health program are covered by the BCL, we modify the district court’s

BCL reimbursement award to $36,308,187.58—the figure reflected in the

record for net payments received for non-BCL-compliant membership

programs.

IV. Evidentiary Support for CFA Violations Based on Vertrue’s
Telemarketing and Internet Practices.

A. Scope of Review. Our review of this equity action is de novo.

See Iowa Code §§ 552A.5, 714.16(7); see also Iowa R. App. P. 6.907.

Accordingly, “[w]e give weight to the findings of the district court,

particularly concerning the credibility of witnesses; however, those
findings are not binding upon us.” In re Marriage of McDermott, 827

N.W.2d 671, 676 (Iowa 2013); accord Iowa R. App. P. 6.904(3)(g).

“Nonetheless, the appellant is not entitled ‘to a trial de novo, only review

of identified error de novo.’ Consequently, ‘our review is confined to

those propositions relied upon by the appellant for reversal on appeal.’ ”

Pace, 677 N.W.2d at 767 (quoting Hyler v. Garner, 548 N.W.2d 864, 870
(Iowa 1996) (emphasis omitted)).
30

B. Analysis. Vertrue contends the record does not support the

district court’s finding of CFA violations based on its telemarketing

solicitations. Specifically, Vertrue argues the district court erred in

concluding a telemarketing script for its Home Works Plus program and

a recorded telemarketing exchange contained deceptive and unfair

features. Additionally, Vertrue challenges the reliability of exhibit 620, a

spreadsheet listing ninety-one different Vertrue telemarketing scripts,

which the State introduced during the remedies phase of the trial.

Vertrue also assigns error to the district court’s finding that Vertrue’s
practice of requiring separate cancellation phone calls in situations in

which more than one membership was purchased in a single Internet

transaction (bundled Internet memberships) to be unfair and deceptive.10

We examine Vertrue’s solicitations and business practices to

determine whether they involve unfair or deceptive features in violation of

the CFA. “ ‘[D]eceptive and unfair practices are distinct lines of

inquiry. . . . [W]hile a practice may be both deceptive and unfair, it may

be unfair without being deceptive.’ ” Cutty’s, 694 N.W.2d at 527 (quoting

Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1367 (11th Cir. 1988)).

We have said that “ ‘[d]eception occurs primarily (though not exclusively)

at the formation stage of a contract. Conversely, unfairness occurs

primarily (though not exclusively) with respect to the substance or

performance of a contract.’ ” Id. (quoting Michael M. Greenfield,

10Alternatively, Vertrue argues that the district court erred in ordering CFA
reimbursement for all net revenues received from both of the bundled Internet
membership programs instead of limiting reimbursement to the “add-on” fees incurred
in the second program after the first one was canceled. Because we concluded the
State was entitled to reimbursement under the BCL for these programs, we find it
unnecessary to reach any questions regarding reimbursement for CFA violations.
Accordingly, we address Vertrue’s arguments regarding CFA violations solely for the
purpose of determining whether the record supports the district court’s order of civil
penalties in relation to Vertrue’s conduct.
31

Consumer Law: A Guide for Those Who Represent Sellers, Lenders, and

Consumers § 4.1, at 161 (1995)).

The CFA defines deception as “an act or practice which has the

tendency or capacity to mislead a substantial number of consumers as to

a material fact or facts.” Iowa Code § 714.16(1)(f). To ascertain whether

a practice is likely to mislead in the consumer protection context, courts

typically evaluate the overall or “net impression” created by the

representation. FTC v. Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th

Cir. 2006); see also FTC v. USA Fin., LLC, 415 F. App’x 970, 973 (11th
Cir. 2011) (“The overall impression created by the calls was that

consumers were receiving a card that could be used to make purchases

anywhere.”); Beneficial Corp. v. FTC, 542 F.2d 611, 616 (3d Cir. 1976)

(“[T]he tendency of the advertising to deceive must be judged by viewing

it as a whole, without emphasizing isolated words or phrases apart from

their context.”); Murray Space Shoe Corp. v. FTC, 304 F.2d 270, 272 (2d

Cir. 1962) (“In deciding whether petitioner’s advertising was false and

misleading we are not to look to technical interpretation of each phrase,

but must look to the overall impression these circulars are likely to make

on the buying public. And statements susceptible of both a misleading

and a truthful interpretation will be construed against the advertiser.”

(Citations omitted.)). “A solicitation may be likely to mislead by virtue of

the net impression it creates even though the solicitation also contains

truthful disclosures.” Cyberspace.Com, 453 F.3d at 1200. “A misleading

impression created by a solicitation is material if it ‘involves information

that is important to consumers and, hence, likely to affect their choice of,

or conduct regarding, a product.’ ” Id. at 1201 (quoting In re Cliffdale
Assocs., Inc., 103 F.T.C. 110, 165 (1984)).
32

Section 714.16(1)(n) defines unfair practice as “an act or practice

which causes substantial, unavoidable injury to consumers that is not

outweighed by any consumer or competitive benefits which the practice

produces.” We have recognized that many courts consider an unfair

practice to be “nothing more than conduct ‘a court of equity would

consider unfair.’ ” Cutty’s, 694 N.W.2d at 525 (quoting S. Atl. P’ship of

Tenn., L.P. v. Riese, 284 F.3d 518, 535 (4th Cir. 2002) (emphasis

omitted)). Accordingly, “statutes that prohibit ‘unfair practices’ are

designed to infuse flexible equitable principles into consumer protection
law so that it may respond to the myriad of unscrupulous business

practices modern consumers face.” Id.

1. The Home Works Plus script. The district court found numerous

deceptive and unfair features in the following script used for inbound

telemarketing11 solicitations of Vertrue’s Home Works Plus program:

“To thank you, we’re sending you a voucher for a free
$25 gift card to The Home Depot with a risk-free 30-day trial
membership in Home Works Plus. Offered by Major Savings,
this service offers you hundreds of dollars in savings at
stores like The Home Depot, Kmart, Circuit City, Linens and
Things, Macy’s and more of your favorite stores through their
gift card program. You can also save up to 40% on name
brand furniture, appliances, electronics and more through
the Home Works Plus discount shopping service. Now if you
want to cancel, just call the toll free number in your welcome
package in the first 30 days and you won’t be charged. And
with your OK today, if you decide not to cancel, after the 30
day trial the service is automatically extended to a full year
for just $139.95, charged as Home Works Plus to the credit
card you provided today and the free $25 gift card to The
Home Depot is yours to claim just for trying the program,
OK?”

11Inbound telemarketing generally occurs when a consumer initiates a call to
purchase a product or service from an unrelated business having a partnership
arrangement with Vertrue. For example, a consumer may call to place a catalog order.
At the conclusion of the call, the partner either personally solicits the consumer or
transfers the consumer to one of Vertrue’s sales representatives for the purpose of
trying to “upsell” (e.g., offer) the consumer a trial membership.
33

Vertrue’s telemarketers also requested consent a second time, in

the following terms:

Great. Your welcome packet will arrive within two
weeks, but you can access your benefits within the next 3
business days or cancel anytime by calling 1-800-XXX-
XXXX. Now, Mr./Mrs. (last name), to confirm your (product
name) order I’ll need to verify the last four digits of your
credit card. What are the last four digits of the credit card
you’re using today?

We conclude the script is misleading. Opening with an ostensible

“thank you” does not promptly disclose the purpose of the interaction,

but rather fosters the misleading impression that the new interaction is

somehow related to the initial transaction. See FTC v. Publishers Bus.

Servs., Inc., 821 F. Supp. 2d 1205, 1224 (D. Nev. 2010) (concluding

defendant’s call script was deceptive because it did not promptly disclose

the purpose of the call, but rather purported to offer a “small surprise”).

This serves to exploit consumers by creating the impression that the

business they had just knowingly patronized was offering a $25 gift card

to encourage future patronage. Cf. Floersheim v. FTC, 411 F.2d 874, 876

(9th Cir. 1969) (finding debt-collecting forms from private collections

company deceptive partly because they “create[d] the impression that
they c[a]me from the government or some other official source”).

Vertrue was not offering to send the consumer a $25 gift card as a

“thank you” because, at that point, the consumer had not done anything

to receive the gratification of Vertrue. As the record demonstrates, the

actual purpose of the $25 gift card was to lure unwitting consumers into

enrolling in membership programs. Furthermore, the $25 gift card was

not a gift, but rather was a term of the offer surreptitiously made by

Vertrue. Therefore, the manner in which the script opened dialogue with
the potential consumer was likely to be misleading. In order to avoid
34

violating the prohibitions of section 714.16(2)(a) against deceptive acts,

at the very least, a telemarketer should disclose rather than obscure the

purpose of the interaction at its outset. See FTC v. Bay Area Bus.

Council, Inc., 423 F.3d 627, 635 (7th Cir. 2005) (finding telemarketing

script to be misleading in violation of the Federal Trade Commission Act

and the Telemarketing Sales Rule when the opening lines refer to the

consumer’s “recent application for ‘a credit card’ ” thereby obscuring the

nature of the offer and misleading consumers into believing the call

constituted an offer for a credit card).
The script effectively conveyed the impression the consumer was

not forming a binding agreement, but rather was merely acquiescing to a

“risk free” gift from the caller. See Publishers Bus. Servs., 821

F. Supp. 2d at 1224 (holding call script was deceptive in part because it

claimed “there is no catch involved”). Vertrue asserts the transaction

was risk free because a consumer could avoid financial obligation by

canceling within the thirty-day trial period. According to Vertrue, “the

script stated, in easily understandable fashion, all of the program’s

material terms” and “had consumers paid attention, they did or would

have understood.” This argument is based on the flawed presumption

that consumers, in fact, understood the true purpose of the interaction.

See id. at 1225 (rejecting argument that consumers acted unreasonably

by agreeing to terms in telemarketing pitch without listening carefully

because the evidence demonstrated that the consumers were “[un]aware

they [we]re agreeing to terms to which they w[ould] later be held”).

However, the telemarketer’s sales pitch, which briskly transitioned from

a deceptive “thank you,” to the hastily recited terms, and then to an
abrupt “OK?” did not reveal to consumers that they were being

confronted with a purchase decision. Nor is it likely that an ordinary
35

consumer would understand they were agreeing to enroll in a

membership program with attendant financial obligations by approving

the mailing of a gift card.

Furthermore, the CPD survey of Vertrue members suggested that

sixty-seven percent of respondents were unaware of their memberships

and/or did not believe they had authorized Vertrue to charge their credit

cards. Data collected from Vertrue’s own internal marketing studies

demonstrates that 84.6% of members never used their memberships.

The fact that the vast majority of Vertrue’s members never benefited at
all from their memberships is persuasive evidence that Vertrue’s

telemarketing solicitations misled a substantial number of consumers as

to the material facts underlying the transactions. Cf. FTC v. Stefanchik,

559 F.3d 924, 929 (9th Cir. 2009) (“Given the voluminous evidence

showing that very few people made money using the Stefanchik Program

as promised in the advertising materials and telemarketing pitches . . .

we conclude . . . the marketing material made misrepresentations in a

manner likely to mislead reasonable consumers.”). The statistical data

presented by the State is consistent with the trial testimony of numerous

consumers stating they were misled by telemarketing pitches containing

features identical to those contained in the Home Works Plus script.

Complaints to the CPD and Better Business Bureau (BBB) were also

consistent with the State’s contention that multitudes of consumers

unknowingly enrolled in one of Vertrue’s memberships as a result of

similar telemarketing solicitations. A sample of BBB complaints from

Vertrue’s members was analyzed by the State, and the data suggested

that about seventy-five percent involved consumers complaining about
“unauthorized charges.” Clearly, evidence that consumers were in fact

misled is relevant to determining whether a solicitation had a tendency to
36

mislead. See State ex rel. Miller v. Nat’l Dietary Research, Inc., 454

N.W.2d 820, 825 (Iowa 1990). The record demonstrates Vertrue had

knowledge of the nature and number of BBB complaints and continued

these practices nonetheless.

The district court correctly rejected Vertrue’s request to focus on

the second request for consent and properly considered the net

impression created by the solicitation. Cf. FTC v. Wash. Data Res., 856

F. Supp. 2d 1247, 1274 (M.D. Fla. 2012), aff’d, 704 F.3d 1323 (11th Cir.

2013) (holding disclaimer in retainer agreements was received “far too
late” to cure the misleading net impression created by deceptive

telemarketing sales script). The presence of a disclosure or request for

consent does not alone cure a misleading solicitation if the net

impression remains deceptive because material elements of the

transaction remain obscured. Cf. Cyberspace.Com, 453 F.3d at 1200–01

(holding misleading solicitation for Internet service was deceptive

notwithstanding disclosure in fine print); In re Raymond Lee Org., Inc.,

Docket No. 9045, 1978 WL 206103, at *100 (F.T.C. Nov. 1, 1978) (“[T]he

contract disclaimers relied upon by respondents are insuffic[ient] to

counter the overall impression fostered by RLO’s written and oral

representations.”), aff’d sub nom Lee v. FTC, 679 F.2d 905 (D.C. Cir.

1980). Here, the second request for consent did not alleviate the

misleading net impression because it did not repeat the terms of the

membership. Rather, it reinforced the false impression the consumer

was receiving a complimentary gift from the initial business by asking

only for confirmation of the last four digits of the credit card the

consumer used in the unrelated purchase.
Of course, the underlying performance terms of the membership

offer were material as they presumably constituted the most important
37

factor affecting consumers’ decisions to enter into a long-term obligation

to pay Vertrue monthly premiums. See Cyberspace.Com, 453 F.3d at

1201; see also Publishers Bus. Servs., 821 F. Supp. 2d at 1225

(“[Telemarketers’] representations are material because the net

impression has a tendency to mislead the consumer into agreeing to a

long-term obligation to pay [defendant] hundreds of dollars.”).

Accordingly, misleading consumers about such terms constitutes a

deceptive act.

Vertrue’s focus on the testimony of four members who made use of
their memberships was unconvincing in the face of the evidence as a

whole. See FTC v. Tashman, 318 F.3d 1273, 1278 (11th Cir. 2003)

(holding the district court erred in focusing “on a few satisfied

customers” when overwhelming evidence demonstrated misleading

representations). The weight of the evidence reveals the majority of

Vertrue’s members never used Vertrue’s services, and a surprising

number did not even know they were members. In sum, the record

contains extensive evidence that the Home Works Plus telemarketing

script had the tendency to mislead a substantial number of consumers

as to the material terms of the transaction, and the use of it was

therefore a deceptive act under section 714.16(2)(a).

For many of the same reasons, we conclude the use of the script

also constituted an unfair practice. A course of conduct contrary to what

an ordinary consumer would anticipate contributes to a finding of an

unfair practice. See Cutty’s, 694 N.W.2d at 530 (considering conduct

that an ordinary consumer would not anticipate as a factor contributing

to unavoidable injury). By creating the misleading impression that the
consumer was still dealing with the original business with which they

had just made an unrelated purchase, the script created a situation
38

unanticipated by consumers. There was a substantial likelihood this

concealment would result in unavoidable injury to consumers who were

unaware they were agreeing to join a membership program at a monthly

premium. See id. (noting that ambiguous documents designed to lure

“unwitting consumers into ownership” could result in unavoidable

consumer injury). In light of record evidence demonstrating that 84.6%

of Vertrue’s members never used their memberships, we cannot conclude

the script resulted in any prevailing consumer or competitive benefits.

Accordingly, we also affirm the district court’s ruling that the use of the
script constituted an unfair practice under section 714.16(2)(a).

2. The recorded telephone exchange. Vertrue also claims the

district court erred by concluding that a recording of an outbound

telemarketing solicitation demonstrated an unfair and deceptive act in

violation of the CFA. Vertrue’s outbound telemarketing solicitations were

generally administered by third-party vendors hired to call consumers

and market Vertrue’s programs. In the recording, a telemarketer solicits

seventy-six-year-old Patricia Ackelson to purchase a program called

“Simple Escapes.” Ackelson testified at the liability trial that the

interaction arose from an unexpected call she received from a

telemarketer.

Vertrue’s recording of part of the exchange was introduced into

evidence. Ackleson was informed she would receive a thirty-day trial for

a one-dollar fee, and she could cancel the membership by calling an 800

number. As above, the caller then requested a simple cumulative assent

to the terms without determining whether Ackelson understood them.

After Ackelson responded, “alright,” the caller gave her some additional
information about using the program and then, bizarrely, sought a

second confirmation of assent by asking Ackelson for her city of birth.
39

Vertrue contends that Ackelson’s testimony demonstrates that she

understood the “general nature” of the transaction, she was interested in

the program, and she understood the trial period. Therefore, according

to Vertrue she cannot be found to have been deceived or subjected to an

unfair practice. At the trial, Ackelson was hearing the tape-recorded

exchange for at least the fourth time. Yet, immediately afterwards she

was unable to indicate numerous essential aspects of the exchange

including the name of the membership program in which she was

enrolling, why she was being charged one dollar, whether there was a gift
card involved, or why she had been asked for her city of birth. She

described the telemarketer’s presentation as “really, really fast.” Even

though she believed that she had canceled the membership within the

thirty-day membership period she remained enrolled in the program for

twelve months at a monthly fee of $14.95. She only received a refund for

one of these monthly payments, and she never received a gift card. She

never used the membership, and when she realized she was being

charged for it, she called the Attorney General’s Office.

A review of the recorded exchange illustrates the manner in which

Vertrue’s telemarketing solicitations were incontestably deceptive and

unfair in practice. As the district court noted, the “telemarketer had a

heavy accent, and spoke at a very fast pace, rendering much of the pitch

unintelligible.” Our review demonstrates that critical portions of the

exchange cannot be understood without carefully scrutinizing the

recording. It would have been unreasonable for the telemarketer to

presume that Ackelson would have had an opportunity to record the

telephone number provided for cancellation. In addition, it would have
been unreasonable for the telemarketer to presume Ackelson had

acquired a basic understanding of the essential terms of membership
40

enrollment. Yet, the telemarketer made no attempt to verify that

Ackelson had actually understood and assented to those terms. Rather,

the telemarketer relied on a general indication of assent to proceed and

then requested Ackelson’s city of birth as a means of verifying her assent

to the enrollment terms. This delusive manner of requesting assent

further created the misleading impression that the consumer was merely

verifying personal information for the purpose of receiving a benefit from

a familiar business as a result of a recent transaction.

This unintelligible telemarketing pitch that proceeded at a
lightning pace was likely to mislead consumers as to the material terms

of the transaction. See FTC v. Kuykendall, 371 F.3d 745, 757–58 (10th

Cir. 2004) (finding a violation of the Telemarketing Sales Rule sufficient

to support violation of injunction entered in previous FTC enforcement

action when, inter alia, telemarketers used “rapid fire and confusing

language” in a magazine subscription sales pitch); Publishers Bus. Servs.,

821 F. Supp. 2d at 1225 (finding telemarketing pitch to be misleading

when, inter alia, the telemarketer spoke so rapidly that consumers were

confused as to the terms of the offer). Similarly, the misleading nature of

the telemarketing pitch is likely to have resulted in substantial,

unavoidable injury by causing Ackelson to pay twelve monthly premiums

without fully understanding the fact she had enrolled or the terms of the

program. Vertrue has not identified any cognizable competitive or

consumer benefits attendant to the telephone solicitation of Ackelson.

Vertrue argues that “the recording does not constitute a full and

fair representation of the exchange” because Vertrue does not record

entire telemarketing calls, but only the portions in which the consumers
confirm acceptance. However, Vertrue presented nothing more than an

assertion that in the opening of the call the telemarketer adequately
41

explained the program to Ackelson. This assertion is unsupported in a

record otherwise replete with evidence Vertrue consistently utilized

telemarketing scripts with misleading features. See Publishers Bus.

Servs., 821 F. Supp. 2d at 1225–26 (noting record evidence

demonstrated that corporation’s telemarketers selectively disclose

material terms, “speak quickly,” and “evade consumer questions” and

rejecting corporation’s “bare assertions” to the contrary). Accordingly, we

affirm the district court’s ruling that the telemarketing exchange with

Ackelson was deceptive and constituted an unfair act under section
714.16(2)(a).

3. Reliability of exhibit 620. The State introduced a spreadsheet

indicating ninety-one of Vertrue’s telemarketing scripts contained

purportedly unfair or deceptive features. In the spreadsheet, the State

indicated whether each script contained any of five allegedly deceptive or

unfair characteristics. Vertrue argues exhibit 620 was not a reliable

basis for the district court to conclude the ninety-one scripts at issue

contained CFA violations because, in order to make this determination,

each script must be considered individually in its respective context.

In its remedies ruling, the district court listed fifteen CFA

violations it found to be knowing, purposeful, and harmful to thousands

of Iowans. The district court noted the “pronounced need to deter”

future violations and ordered “a civil penalty in the highest amount,

$40,000.00,” for each violation. The designated violations relating to

telemarketing solicitations included “risk free” representations,

unintelligible telemarketing pitches, and the false claim “that any part of

the transaction [wa]s intended as a ‘thank you.’ ”
Vertrue does not dispute that 4451 members joined its Home

Works Plus program as a result of the Home Works Plus telemarketing
42

script discussed earlier. Nor does Vertrue dispute that 25,405 members

joined the Simple Escapes program as a result of telemarketing pitches

based on scripts similar to the one used to solicit Ackelson. Our review

of the Home Works Plus script and the telemarketing phone call to

Ackelson demonstrate the civil penalties the district court ordered based

on the three above-mentioned telemarketing practices were easily

supported by the record without any reliance on exhibit 620. Therefore,

we decline to address Vertrue’s arguments regarding the district court’s

reliance on exhibit 620.
4. Dual cancellation requirement for bundled Internet membership

sales. In the liability ruling, the district court reviewed evidence that in

addition to posttransaction Internet marketing, Vertrue also maintained

direct Internet marketing on its own Web sites. As stated by the district

court,

Vertrue maintains its own website FreeScore.com, where the
consumers can purchase a service involving credit scores.
However, Vertrue bundles another distinct product, Privacy
Plus, with the purchase of the initial service, for an
additional monthly fee . . . . Thus, to purchase the initial
service, a consumer must purchase Privacy Plus, although
this fact is obscured as much as possible. . . . [T]here is no
ambiguity that to cancel both services, a member must call
two separate 800 numbers, even though the consumer had
no choice but to purchase both services together. Most
consumers will likely be unaware of the purchase of the
second service (much like the post-transaction solicitations
discussed above), and that when the consumer calls an 800
number to cancel the primary service, he or she will
continue to be billed for the (unknown) add-on service.
Moreover, even for the wary consumer that understands that
two services are being purchased with only one click of the
mouse, such a consumer may not understand that calling
one number to cancel does not cancel both services, despite
the “one-click” nature of the initial purchase.

(Citations omitted.)
43

The testimony of Bruce Douglas, the vice president of marketing,

during the liability trial demonstrates that the practice of bundling

memberships in Internet transactions occurred precisely as described by

the district court. The district court concluded that the practice violated

the CFA and ordered remedies accordingly. Vertrue challenges the

district court’s rulings as to liability and the remedy in respect to the

dual cancellation requirement. However, we review the record only to

determine whether it supports the district court’s award of a civil penalty

based on the foregoing practice. Vertrue argues that its practice of
requiring two separate cancellation phone calls for bundled Internet

membership sales is not unfair or deceptive because “the two programs

enrolled in through a single transaction were shown by separate entries

on the consumer’s credit card statement [and e]ach entry provided the

name of the program accompanied by a toll-free” cancellation phone

number.

Douglas testified that the primary benefit of Privacy Matters 1-2-3

service on FreeScore.com was to provide “access to credit information

and credit monitoring [of] your report and sending you alerts if anything

should change with those reports.” A liability trial exhibit showed the

three browser pages viewed by consumers registering for the Privacy

Matters 1-2-3 service on FreeScore.com. The first Web page enticed

consumers to enroll in Privacy Matters 1-2-3 with a large, bright, and

attractive display as well as a passage stating:

Sign up here and along with your FREE 7-day trial in
Privacy Matters 1-2-3 you’ll get instant, online access to your
FREE 3-in-1 Credit Report and Triple Credit Scores.
Privacy Matters 1-2-3 makes it easy to . . .
● Check that your information is accurate with your 3-in-1
Credit Report and Triple Credit Scores.
44
● Stay on top of your information with Triple Credit Report
Monitoring and daily alerts whenever critical changes occur
in your credit file at all 3 credit bureaus.
● Other important benefits.

Nowhere on the browser page did the solicitation refer to the Privacy Plus

membership or any other program that the consumer would be enrolled

in by clicking the large, bright “START NOW” button.

The second browser page instructed the consumer as follows:

Step 1 of 2. Complete the form below. (See Offer
Details.) In addition to Privacy Matters 1-2-3, you’ll also
receive Privacy Plus*. Click here for details.

Web form fields appeared below for consumers to enter their names and

contact information.

Covertly, on the left-hand side of the second browser page, in fine

print, the essential offer terms were set forth. In the reproduction

introduced into evidence, the print in which these details are set forth is

so tiny that it is nearly unreadable. The consumer is instructed that

they will be charged a “$1.00 monthly refundable processing fee” to

enroll in the Privacy Matters 1-2-3 “7-day FREE trial.” The fine print

goes on to explain that after seven days “it’s just $29.95 per month.” A

toll-free number is provided, and the consumer is instructed to call and

cancel within seven days to avoid charges.

A separate shorter paragraph of fine print below instructs the

consumer that:

By clicking “Submit” on the next page you also agree to
activate your separate membership to Privacy Plus at the
special low price of just $2.00 per month. To ensure
continuous service, your membership will be automatically
charged/debited each month at the then-current
membership fee to the credit card you provide today or from
the checking account associated with the debit card you
provide today.
45

The passage further instructs the consumer to call a different toll-free

number to cancel the Privacy Plus membership if the consumer is

dissatisfied for any reason.

Another passage in the same fine print placed at the bottom of the

browser page instructs the consumer that

[p]articipating vendors are neither sponsors, co-sponsors nor
affiliates of Privacy Plus. Gift card/certificate savings are an
exclusive offer of Privacy Plus and are valid only on gift
cards/certificates purchased through Privacy Plus. Please
see back of gift card/certificate for terms and conditions of
use. All vendor trademarks and copyrights remain the
property of the individual vendor. Privacy Plus uses vendor
names, logos and any other vendor material by permission of
each vendor. Please visit the Privacy Plus website or call
Member Savings for complete terms and conditions related
to participating vendors.

This passage is the only opportunity on the three sign-up browser pages

to consider information relating to the actual nature of the Privacy Plus

program. Even in the unlikely event a consumer noticed and read the

passage, the degree of vagueness employed would likely not permit an

ordinary consumer to recognize that Privacy Plus was actually a buying

club membership.12

The third browser page contained Web form fields for consumers to

enter their payment information. Additionally, it contained more colorful
and enticing endorsements of Privacy Matters 1-2-3 in large legible print.

Below the Web form fields, the fine print returned in a passage that

stated:

Typing my e-mail address below will constitute my electronic
signature and is my written authorization to charge/debit
my account according to the Offer Details. By clicking

12The district court ruled that Vertrue’s privacy programs did not qualify as

buying club memberships. As discussed above in part II.F., we disagree with the
district court’s conclusion that the sale of the Privacy Plus program in this context did
not constitute the sale of a buying club membership.
46
“Submit”, I have read and agree to the Privacy Matters 1-2-3
and Privacy Plus Offer Details on the previous page and the
Privacy Policy and Terms and Conditions for both programs.

As the district court stated, information indicating that the

purchase of the Privacy Matters 1-2-3 program would also result in a

simultaneous purchase of the separate Privacy Plus program was

“obscured as much as possible.” The covert fine print setting forth the

dual nature of the transaction was misleading. The design, content, and

layout of the sign-up browser pages created an overall net impression

that consumers were purchasing one program for the purpose of
monitoring their credit scores. See FTC v. Commerce Planet, Inc., 878

F. Supp. 2d 1048, 1067–68 (C.D. Cal. 2012) (finding Internet solicitation

to be unfair and deceptive when, inter alia, a “disclosure—by its

placement, wording, colorization, spacing, and size of the text—was

designed not [to] be clear and conspicuous, but rather to mask

information . . . without entirely omitting the information”). The

similarity in the names of the two programs suggested that Privacy Plus

was a related component of the program in which the consumer was

initially interested.

However, the deception did not end there. The fact that the

consumer was required to call a separate number to cancel Privacy Plus

appears only once in fine print. Thus, even the hypervigilant consumer

that recognized he or she had enrolled in two memberships

simultaneously could still be easily misled into thinking that by calling to

cancel the initial membership, both memberships would be canceled.

There is no question as to whether the information obscured by Vertrue

in a misleading fashion was material. The information regarding the
enrollment in Privacy Plus and the procedure for cancellation constituted

essential terms of the offer with attendant performance obligations.
47

Accordingly, we conclude Vertrue’s practice of requiring dual cancellation

requests for memberships bundled into a single Internet transaction was

deceptive in violation of section 714.16(2)(a). Additionally, this scheme

was an unfair practice because it was likely to result in unavoidable

injury to consumers who did not realize by purchasing one service they

were obligating themselves to pay a monthly premium for a separate

membership. Again, we are unable to identify any attendant consumer

or competitive benefits justifying this practice.

Vertrue also relies on the voluntary payment doctrine set forth in
Spivey, 622 F.3d at 822, in support of its argument that it was not unfair

or deceptive to require separate cancellation of “memberships through

means that were readily identifiable on credit card billings.” We rejected

Vertrue’s invocation of the voluntary payment doctrine in the context of

BCL reimbursement and see no reason to reach a different result here.

Accordingly, we affirm the district court’s liability finding and the civil

penalty ordered for the practice of requiring dual cancellation requests

for memberships bundled into a single Internet transaction.

V. Consumer Frauds Committed Against the Elderly.

The State sought additional civil penalties for consumer frauds

committed against the elderly under section 714.16A. The district court

ruled against the State on this issue, concluding

the State has failed to carry its burden of proof that the
Vertrue [defendants] have targeted older Iowans . . . .
Vertrue has attempted to take advantage of all consumers
equally, and [has] not directed its efforts against any age
group.

The State has cross-appealed this issue. Our review of this equity ruling

is de novo; however, we review the district court’s interpretation of
48

section 714.16A for correction of errors at law. See Iowa Film, 818

N.W.2d at 217.

Section 714.16A reads as follows:

1. If a person violates section 714.16, and the
violation is committed against an older person, in an action
brought by the attorney general, in addition to any other civil
penalty, the court may impose an additional civil penalty not
to exceed five thousand dollars for each such violation. . . .
....
2. In determining whether to impose a civil penalty
under subsection 1, and the amount of any such penalty,
the court shall consider the following:
a. Whether the defendant’s conduct was in willful
disregard of the rights of the older person.
b. Whether the defendant knew or should have known
that the defendant’s conduct was directed to an older
person.
c. Whether the older person was substantially more
vulnerable to the defendant’s conduct because of age, poor
health, infirmity, impaired understanding, restricted
mobility, or disability, than other persons.
d. Any other factors the court deems appropriate.
3. As used in this section, “older person” means a
person who is sixty-five years of age or older.

Iowa Code § 714.16A.

Subsection (d) authorizes the court to consider whether the

merchant targeted the elderly if the court considers this to be an

“appropriate” factor. See id. § 714.16A(2)(d). However, “targeting”

implies intentional conduct and there is no legitimate statutory basis for

concluding that the State must carry the burden of showing the elderly

were intentionally targeted. Imposing this burden on the State is in

direct contravention of subsections 2(a) and (b), which expressly direct

the court to consider levels of culpability equivalent to those required for
a showing of recklessness or negligence. Compare id. § 714.16A(2)(a)

(directing the court to consider “[w]hether the defendant’s conduct was in
49

willful disregard of the rights of the older person”), and id.

§ 714.16A(2)(b) (directing the court to consider “[w]hether the defendant

knew or should have known that the defendant’s conduct was directed to

an older person”), with Peter v. Thomas, 231 Iowa 985, 992, 2 N.W.2d

643, 646–47 (1942) (“We think our court has held to the true rule

heretofore that to constitute recklessness there must be shown a

conscious disregard of the rights of others . . . .” (Citation and internal

quotation marks omitted.)), Estate of Harris v. Papa John’s Pizza, 679

N.W.2d 673, 680 (Iowa 2004) (“In order to prove negligent supervision, a
plaintiff must show: (1) the employer knew, or in the exercise of ordinary

care should have known, of its employee’s unfitness at the time the

employee engaged in wrongful or tortious conduct . . . .”), and Morgan v.

Perlowski, 508 N.W.2d 724, 728 (Iowa 1993) (affirming trial court’s denial

of motion notwithstanding the verdict in which, inter alia, “a jury issue

was generated as to whether [defendant] knew or should have known he

had the ability to control the person or persons causing injury”).

In drafting subsection (2), the legislature employed language that

invokes traditional legal standards with definitions commonly assigned

in our jurisprudence. See Taft v. Iowa Dist. Ct., 828 N.W.2d 309, 319

(Iowa 2013) (interpreting sexual predator commitment statute and

concluding that the legislature “attached to the words ‘relevant and

reliable’ meanings commonly assigned to them in our jurisprudence”).

Accordingly, we conclude the legislature has directed the court to

consider whether the conduct challenged under section 714.16A evinced

negligent or reckless indifference to the rights of elderly Iowans. Reading

a requirement of intentional targeting into section 714.16A would defeat
legislative intent.
50

On our de novo review, we conclude the State made the showing

necessary to prove liability under section 714.16A. The State presented

compelling evidence that Vertrue’s marketing practices

disproportionately affected elderly Iowans. The State constructed

statistical databases by cross-referencing information obtained from

Vertrue in discovery, with motor vehicle division, social security, and

background investigation databases. These statistical calculations

demonstrated that of the fifty direct mail enrollees who had the most

billings with no incidence of benefit usage, forty-six percent were over the
age of sixty-five. The corresponding figure was thirty-one percent for

Internet enrollees, thirty percent for outbound telemarketing enrollees,

and fifty-two percent for inbound telemarketing enrollees. Additionally,

the State’s calculations demonstrated that persons aged sixty-five or

older constituted fifty percent of all Iowa members that were billed ninety

or more times without ever using program benefits. Clearly, the elderly

were overrepresented in these statistical populations. State Data Center

figures indicated that about nineteen percent of all Iowans were sixty-five

or older during the relevant time frame.

Vertrue has not attempted to refute the accuracy of the State’s

statistical evidence but, rather, has repeatedly argued it did not direct its

marketing plans at the elderly, and programs were not designed to

appeal to a specific age group. The gist of all of Vertrue’s arguments

regarding liability under section 714.16A is that they did not violate the

statute because they did not target the elderly. These arguments miss

the mark.

In addition to reviewing the State’s statistical evidence, the district
court acknowledged that contrary to the “trial testimony of Jeff Paradise,

[the Vice President of Product], who stated that age was not discussed[,]
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internal company documents include demographic studies that examine

age data extensively.” One study conducted by Vertrue demonstrated

19.4% of enrollees in its Privacy Matters 1-2-3 program who never used

any program benefits were over the age of sixty-five. This was the third

highest percentage for any age group. However, persons in the over-

sixty-five age group only constituted 15.8% of one-time benefit users.

The corresponding figure for persons in the over-sixty-five age group who

were two-time benefit users plummeted to 6.3%—the lowest figure for all

age groups except the under-twenty-five age group. These figures
demonstrated that persons over the age of sixty-five were among the

most likely to enroll in the program and among the least likely to use the

program benefits. Again, the weight of the evidence suggests that these

persons never accessed the purported membership benefits because they

did not know they were deceived into enrolling. An accompanying

internal report noted that, “Almost half (46%) of the Privacy Matters

visitors are age 55 or more . . . . The biggest skew is in visitors over age

55.” Not only did Vertrue have access to the information necessary to

generate the statistics produced by the State, to some extent, they

actually did. Accordingly, the trial record demonstrates that Vertrue, at

the very least, should have known that their fraudulent strategies

disproportionately affected the elderly.

Additionally, the record was replete with testimony of Iowans over

the age of sixty-five who testified they could not read important

disclosures contained in Vertrue’s marketing and program materials

because their vision, compromised by old age, rendered the fine print

illegible. This testimony is corroborated by extensive record evidence.
Common sense dictates that, similarly, the elderly were substantially

more vulnerable to Vertrue’s indecipherable, rapid-fire telemarketing
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pitches due to the auditory deficiencies that disproportionally affect the

elderly.

The State convincingly carried the burden set forth by the

statutory factors in section 714.16A(2). We will not read an intent

requirement into the statute that would undermine the statute’s self-

evident goal of protecting Iowa consumers who are vulnerable to unfair

sales tactics because of their age. For these reasons, we reverse the

district court finding that Vertrue did not violate section 714.16A. As

discussed above, pursuant to section 552A.5 of the BCL, a BCL violation
is a violation of section 714.16(2)(a). Therefore, under section 714.16A,

the State is entitled to civil penalties for CFA as well as BCL violations.

The district court identified fifteen CFA violations and 104 BCL violations

for the purposes of awarding civil penalties. Upon our de novo review, we

increase the district court’s award of civil penalties by $180,000 for a

total of $3,000,000 in civil penalties for BCL and CFA violations.

VI. Conclusion.

We affirm the district court’s rulings regarding the applicability of

the BCL to Vertrue’s mail, telephone, and Internet solicitations.

Likewise, we affirm the district court’s ruling that application of the BCL

to Vertrue’s solicitations does not violate the dormant Commerce Clause.

We reverse the district court’s ruling regarding the applicability of the

BCL to Vertrue’s financial, privacy, and health programs. Additionally,

we reverse the district court’s interpretation of section 714.16(7) of the

CFA to the extent it requires the State to prove additional common law

fraud elements in order to obtain a reimbursement award for BCL

violations. We affirm the reimbursement award for BCL violations as
modified. We also affirm the district court’s ruling that there was

sufficient evidence to support a finding of CFA violations based on
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Vertrue’s telemarketing and Internet practices. Finally, we reverse the

district court’s ruling that the State was not entitled to civil penalties for

consumer frauds committed against the elderly and enhance the award

of civil penalties accordingly.

AFFIRMED IN PART, REVERSED IN PART, AND MODIFIED.

All justices concur except Mansfield, J., who takes no part.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4249464. Public record. Not legal advice.