Seventh Circuit Reverses Denial Of Class Certification Over ATM Fees

Several weeks after reinstating certification of two multistate consumer class actions involving defective, moldy washing machines in Butler v. Sears, Roebuck & Co., the Seventh Circuit has again upheld the viability and desirability of consumer class actions in another opinion authored by Judge Richard Posner, Hughes v. Kore of Indiana Enterprise Inc. (slip opinion available here). In Hughes, the Seventh Circuit reaffirmed some basic principles of class actions that seem to have been obscured of late, including the utility of class actions for prosecuting small value claims and the propriety of deterrence as a goal for class actions.

The conduct at issue in Hughes was the defendant’s alleged failure to post the required notice of a $3 transaction fee that its ATMs charged to users (over 2800 times during the class period). The district court held that the plaintiffs would be better off forgoing class certification, since class members would receive only a few dollars each, but could receive statutory damages of between $100 and $1000 for individual suits.

The Seventh Circuit reversed, observing that individual actions would be extremely unlikely due to the inability of a plaintiff to enlist a competent attorney to press such an action: “What lawyer could expect the court to award an attorney’s fee commensurate with his efforts in the case, if the client recovered only $100?” Instead, the court indicated that the better course would be to proceed with a class action, and instead of attempting to distribute very small awards to individual class members, to disburse the recovery to a charity under the cy pres doctrine. Even if the remedy were thus “purely punitive,” the court held that would be better than individual suits, as one of the proper goals of a class action is to prevent the defendant from “walking away from the litigation scot-free.”