Reading opinions by Judge Richard Posner of the 7th Circuit Court of Appeals is like jumping waves in a calm ocean. You bob along in the buoyancy of Posner’s ideas until you turn around to face shore and wonder how you drifted so far from where you started. So it is in an 11-page ruling Tuesday, addressing whether a class of ATM users may be certified to seek statutory damages under the Electronic Funds Transfer Act for a tiny defendant’s failure to post stickers notifying users of ATM fees. As you know, these are more turbulent waters than they first appear, roiled by uncertainty about constitutional standing and appropriate classwide relief. Posner’s prose nevertheless carries you along so forcefully that you don’t even notice until you’re done that he has deposited you in a land where all the rules are Posner-made.
Okay, I’m exaggerating. But once again, the iconoclastic appellate judge has issued an important opinion on consumer class actions that reflects his vision, as an economic rationalist, of the potential efficiencies of resolving hundreds or thousands of individual claims with a single proceeding. He did it last month when, on remand from the U.S. Supreme Court, he and two 7th Circuit colleagues recertified a class of Sears washing-machine purchasers for the purposes of determining whether Sears is liable for a design that supposedly results in a moldy odor. Sears has called the ruling “judicial fiat.” In the new opinion, Posner and his fellow 7th Circuit panelists Daniel Manion and Diane Wood urge trial judges to use common sense in deciding whether to certify a consumer class seeking statutory damages, focusing on realistic solutions and not hypothetical problems.
The case is another in the spate of class actions filed against banks that supposedly failed to comply with the ATM law’s requirement that they not only notify users of add-on charges with an on-screen alert after users have begun their transactions but also provide advance warning of fees on the ATM machine itself. (That requirement has since been dropped in an amendment to the law.) Congress called for individual damages of between $100 and $1,000, but also anticipated class actions in which total damages could amount to $500,000 or 1 percent of the defendant’s net worth, whichever is less. In the class action before Posner, a class brought claims against the ATM operator Kore, which owned ATMs in two Indianapolis bars frequented by college students. U.S. District Judge Jane Magnus-Stinson of Indianapolis first certified the class based on 2,800 transactions at the two ATMs but later changed her mind for two reasons. With maximum classwide damages of $10,000 because of Kore’s small net worth, she said, class members might be better off suing individually for at least $100. She was also concerned that potential class members couldn’t be properly notified about a $10,000 settlement because it would cost so much to figure out who they were based on banking records.
Class counsel at Travis & Calhoun and The Frasher Law Firm asked the 7th Circuit to review the decertification ruling, arguing that Magnus-Stinson’s reasoning would gut class actions based on consumer protection statutes, many of which are fashioned with similar caps on classwide damages. Kore’s lawyers at Metzger Rosta did not oppose the appeal and did not submit a brief in opposition. (They also did not return my call.) Posner grabbed the opportunity to “further the development of class action law regarding issues of notice in cases in which the potential damages per class member are very slight, and the suitability of class action treatment of such cases.”
His opinion first considered Judge Magnus-Stinson’s finding that class members might do better to sue on their own for statutory damages of $100. (Posner said it was improbable they could seek more because Kore charged a small ATM fee.) What lawyer would bring a suit for $100, even in the anticipation that the defendant would have to pay fees? No reasonable and competent lawyer, according to Posner, who also noted that lawyers have not brought individual actions seeking statutory damages for violations of the ATM law.