Judge Posner of the United States Court of Appeals for the Seventh Circuit is one of the most influential judges in the United States. In Hughes v. Kore of Indiana Enterprise, Inc., No. 13-8018 (7th Cir., decided September 10, 2013), the Seventh Circuit, with Judge Posner writing the opinion, allowed an appeal from a district judge’s decertification of a class action to further develop class action law regarding issues of notice in cases in which potential damages per class member are very small and whether class actions are suitable for such cases.
The underlying facts of Kore involved a suit by users of various ATMs near a college campus because the ATMs failed to have notices affixed on the ATMs notifying users that they would be charged a fee for using the ATM and also for the lack of on-screen transactional notice while using the ATM. While the law has since been amended to eliminate the sticker notice requirement, Kore is important because the damages per alleged transaction were assumed to be only $3.57 per transaction at most and required a plaintiff to prove that had he known that there was a $3.00 fee, he would not have used the ATM. The district judge decertified on the grounds that the individuals would do better if they filed an individual lawsuit because the federal statute allowed recovery of more money per individual claimant (i.e. $100 to $1,000 versus the $3.57 per transaction stipulated in the class action) and because ATMs do not store users’ names but instead assign transactional numbers to each transaction.
Judge Posner’s opinion was quick to point out that “the smaller the stakes to each victim of unlawful conduct, the greater economies of class action treatment and the likelier that the class members will receive some money.” Judge Posner also pointed out that because the small amounts of money involved would not provide meaningful relief to the class members, the best solution may be a “cy pres” decree that awards money to a charity instead of the class. According to the Court, payment of $10,000 to a charity whose mission coincided with the interest of the class would amplify the effect of the modest damages in protecting consumers. Judge Posner also suggested that a time saving alternative might be a class action with a stated purpose, at the outset of the suit, of a collective award to a specific charity. Hughes v. Kore of Indiana Enterprise, Inc., No. 13-8018 (7th Cir., decided September 10, 2013).
With respect to the issue of notice to class members only identified by transaction numbers, Judge Posner opined that affixing stickers on the ATMs involved in the lawsuit and notice in the principal newspaper and Kore’s website would be reasonable notice under the circumstances and would avoid the cost involved in trying to subpoena each bank’s records to try and determine the identity of the class members. Finally, Judge Posner warned that class actions should still be permitted when the stakes are small and likely to be swamped by the expenses of litigation. It is up to the Courts to not “allow the litigation expenditure tail to wag the remedy dog.” Hughes v. Kore of Indiana Enterprise, Inc., No. 13-8018 (7th Cir., decided September 10, 2013), citing, In re Baby Products Antitrust Litigation, 708 F.3d 163, 179 (3rd Cir. 2013).
Judge Posner’s suggestions for resolving small dollar class actions have merit and by using the cy pres mechanism, the award can benefit the entire community without breaking the bank or killing the goose that lays the golden egg. The opinions in this blog are solely the author’s and any comments, suggestions or replies can be sent to firstname.lastname@example.org.