An appeal now pending before the Montana Supreme Court could have significance for businesses that use prepaid cards to make refunds to customers.
In Bratton v. Sisters of Charity of Leavenworth Health System, Inc., the plaintiff filed a lawsuit against SCL Health (SCL), her healthcare provider, in Montana district court alleging that SCL violated Montana law by directing its bank to issue two prepaid cards to the plaintiff to refund credit balances on her account with SCL. One of the cards refunded an overpayment that SCL received from the plaintiff’s insurer.
The plaintiff claimed that SLC violated Montana law by transferring to the bank its obligation to refund the credit balances on her account to the bank without her consent. The court rejected this argument, finding that SCL did not need the plaintiff’s consent. According to the court, SCL did not transfer its duty to the bank to make the refunds but instead had the bank withdraw money from SCL’s general account and send the cards to the plaintiff. In the court’s view, this situation was similar to SLC giving authorization to its bank to issue a wire transfer or cashier’s check. It found that the plaintiff’s consent was not necessary “just because SLC Health refunded Bratton’s money in a manner Bratton found inconvenient.”
The court also rejected the plaintiff’s claims of conversion, unjust enrichment and constructive trust, as well as her claim under the Montana Consumer Protection Act (MCPA), making the following findings:
- Although the plaintiff was owed the funds, there was no conversion when the bank issued the cards. The refund obligation created a debtor-creditor relationship between SCL and the plaintiff. There can be no action against the debtor for conversion of the funds representing the indebtedness where there is no obligation to return identical money but only a debtor-creditor relationship.
- SCL was not unjustly enriched and no constructive trust arose because although SCL received a benefit when the plaintiff paid her account balance before it was paid by her insurer, SCL did not retain the benefit.
- There was no MCPA violation because the plaintiff could not show an ascertainable loss since the cards remained available for her use and SCL’s practice of authorizing its bank to issue prepaid cards to make refunds to patients who have overpaid is not a deceptive business tactic.
Briefing is currently underway in the Montana Supreme Court, with the plaintiff having filed her opening brief. The Montana Bankers Association, the American Bankers Association, and the Consumer Bankers Association have been granted leave to file an amicus brief in support of SLC. In their motion seeking leave to file the amicus brief, the trade groups asserted that the plaintiff’s position “that cash and checks are the only acceptable mediums of exchange aims to limit [consumers’] options and thus limit Montanans’ access to technological innovations that facilitate modern commerce. It also aims to limit the ability of banks and other consumer financial institutions to adapt to a modern economy that is becoming less dependent on cash and checks.”
The amicus brief must be filed by November 4, which is also the deadline for SCL to file its reply brief.