The Montana Supreme Court, in Bratton v. Sisters of Charity of Leavenworth Health System, Inc., has ruled that a health care provider’s use of prepaid cards to make refunds to patients did not violate Montana law.

In the lawsuit, the plaintiff alleged that SCL Health (SCL), her healthcare provider, violated Montana law by directing its bank to issue two prepaid cards to the plaintiff to refund credit balances on her account with SCL.  A Montana district court had granted summary judgment in favor of SCL on the plaintiff’s claims 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, as well as her claims of conversion, constructive trust based on unjust enrichment, money had and received, and unfair or deceptive acts or practices under the Montana Consumer Protection Act (MCPA).

With the exception of her conversion claim, the plaintiff appealed from the district court’s grant of summary judgment in favor of SCL.  Recognizing the case’s significance for businesses that use prepaid cards to make refunds, the Montana Bankers Association, the American Bankers Association, and the Consumer Bankers Association filed an amicus brief with the Montana Supreme Court in support of SCL.

In affirming the district court’s grant of summary judgment to SCL, the Montana Supreme Court concluded:

  • Transfer of obligation to make refunds.  SCL did not transfer its duty to the bank to make the refunds. The bank’s debiting of the money that it loaded on the prepaid cards sent to the plaintiff from SCL’s general account established that payment came from SCL’s funds and not the bank’s.  The record also demonstrated a continuous acknowledgment by SCL that it remained liable for the refunds due the plaintiff, despite its use of the bank to distribute the refunds.  Rather than delegate its duty to make the refunds, SCL fulfilled its duty by transferring its funds to pay its obligation to the plaintiff.  SCL merely delegated the performance of that duty to the bank, meaning the actual delivery of the money to the plaintiff.
  • Constructive trust based on unjust enrichment.  SCL was not unjustly enriched and no constructive trust arose because although SCL received a benefit when both the plaintiff and her insurer paid for medical services, SCL did not retain the benefit.  Even if the savings SCL realized by issuing prepaid cards to the plaintiff for her refunds rather than checks could be a “benefit conferred” on SCL for purposes of an unjust enrichment claim, any such benefit was eliminated when the plaintiff requested issuance of her refunds by checks and such checks were issued to her.
  • MCPA.  The plaintiff could not show an ascertainable injury necessary to establish an MCPA claim because she had received the refunds owed her by SCL, initially by way of the prepaid cards and ultimately by issuance of the checks.  (Because an ascertainable injury was required to establish an MCPA claim, the court found it unnecessary to further address the plaintiff’s claim that SCL’s practices were unfair or deceptive.)
  • Money had and received.  The plaintiff could not establish such a claim (which is generally based on the defendant’s failure to pay to the plaintiff money that it received for payment to the plaintiff) because she received the money owed to her by SCL and SCL’s use of the bank to distribute the payments, contrary to plaintiff’s allegation, did not equate to SCL disclaiming the obligation to refund the money to her.