Judge Posner of the Seventh Circuit, a prolific writer of class action opinions in recent years, recently wrote a new decision addressing whether a class action with small stakes could properly be decertified.  The decision includes some extensive commentary on how such a case might be resolved.  Notably, this was a case where the defendant did not oppose class certification in the district court, and did not file any brief in the court of appeals, so the court did not have the benefit of adversarial briefing on the issues. 

Hughes v. Kore of Indiana Enterprise, Inc., No. 13-8018, 2013 U.S. App. LEXIS 18873 (7th Cir. Sept. 10, 2013) involves a class action brought against a company that owns ATM machines.  The complaint alleged that the defendant failed to post stickers on ATM machines advising of a $3 fee to withdraw funds, in accordance with a requirement of the federal Electronic Funds Transfer Act (which has subsequently been eliminated, so don’t get all excited about collecting $100 if you come across an ATM without the sticker).  The Act imposes, in an individual suit, actual damages or statutory damages of at least $100, but not more than $1000.  In a class action, damages are limited to the lesser of $100,000 or 1% of the defendant’s net worth (here, that was $10,000).  Id. at *2-3.  The district court decertified the class on the grounds that: (1) class members would be better off suing individually, where they could collect at least $100 each; and (2) the class members could not be identified and notified of the suit. 

The Seventh Circuit reversed the decertification of the class.  Judge Posner’s opinion first explained that individual lawsuits would be impractical.  Although attorneys’ fees are available under the statute, “[w]hat lawyer could expect the court to award an attorney’s fee commensurate with his efforts in the case, if his client recovered only $100?  There is no indication that many people, or indeed any people, have filed individual claims [under the statute].”  Id. at *5.  Judge Posner further explained that distributing the $10,000 maximum recovery to the class members, who would each receive about $3.57, probably would not warrant them spending the time to submit a claim.  He suggested, however, that the $10,000 (assuming that amount was awarded) be distributed, as cy pres relief, to a consumer protection charity.  Judge Posner wrote that “the cy pres remedy may be the only one that makes sense,” and “[a] time-saving alternative might be a class action with the stated purpose, at the outset of the suit, of a collective award to a specific charity.”  Id. at *14-15.  But is that something the court could ever do as a remedy after a trial, as opposed to in a settlement?  Is that a proper way of distributing a money judgment after trial?  There is no discussion of that subject in the opinion. 

With respect to identification of class members, identifying the people who withdrew money from the ATMs during the relevant time period would require subpoenaing hundreds of banks to match account numbers (retained by the ATMs) to the approximately 2800 individuals who were class members.  The Seventh Circuit concluded that this effort would not be “reasonable,” and therefore notice by publication could be issued.  I’m not sure about this.  Although certainly a fair amount of effort would be required by plaintiffs’ counsel to serve the subpoenas, and there would be costs involved in paying the process servers, etc., it seems odd that due process rights of absent class members to individual notice (as required under Supreme Court precedent) could be ignored simply because there is time and cost involved in serving hundreds of subpoenas.  The class members certainly could be identified and there would be only 2800 of them; it just would be time consuming and somewhat expensive to identify them and send them something in the mail. 

This decision, along with other court of appeals opinions over the last several years, frame a significant debate among the courts of appeals on what the proper role of the judiciary is in a class action where cy pres relief is sought, or, more typically, agreed upon in a settlement.  The Third Circuit, for example, in In re Baby Products Antitrust Litigation (blog post), suggested that individual payouts, even if they are small, should generally be favored over cy pres relief.  And, in In re Lupron Marketing & Sales Practices Litigation (blog post), the First Circuit also concluded that payments to class members generally should be preferred, and that courts should not be placed in the role of deciding how to distribute cy pres funds.  On one hand, cy pres relief can be a practical way to settle class actions that otherwise would be difficult to settle and can serve an important purpose in that regard.  But on the other hand, is supporting charities a proper function of the court system?  I expect we’ll see this debate continue. 

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.