474 F.2d 336 (10th Cir. 1973), 72-1494, Wilcox v. Commerce Bank of Kansas City

Docket Nº:72-1494.
Citation:474 F.2d 336
Party Name:Marie WILCOX et al., Appellants-Plaintiffs, v. COMMERCE BANK OF KANSAS CITY, a corporation, Appellee-Defendant.
Case Date:February 20, 1973
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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474 F.2d 336 (10th Cir. 1973)

Marie WILCOX et al., Appellants-Plaintiffs,


COMMERCE BANK OF KANSAS CITY, a corporation, Appellee-Defendant.

No. 72-1494.

United States Court of Appeals, Tenth Circuit.

February 20, 1973

Argued and Submitted Nov. 13, 1972.

Rehearing Denied March 19, 1973.

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[Copyrighted Material Omitted]

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Ronald L. Gold, Shawnee Mission, Kan., for appellants.

Thomas J. Wheatley, Kansas City, Mo. (Maurice J. O'Sullivan, Jr., and Edward M. Boddington, Jr., Kansas City, Kan., on the brief), for appellee.

Before LEWIS, Chief Circuit Judge, McWILLIAMS, Circuit Judge, and CHRISTENSEN, Senior District Judge. 1

CHRISTENSEN, Senior District Judge.

Appellee is a large commercial bank which operates for its area a franchise credit card system known as BankAmericard. Appellants are holders of such credit cards of the bank. Their complaint in the district court was "on behalf of themselves and all other credit card holders" of appellee for alleged violations of the federal Truth in Lending Act, 15 U.S.C. § 1637(a)(1) and (4) and (b)(2), (5) and (6), 2 and for the relief

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provided by 15 U.S.C. § 1640(a)(1) and (2). 3 The merits of the named plaintiffs' claims were not reached 4 as the district court denied their motion 5 for determination that the case could be maintained as a class action. 6 Appellants sought in this court and were granted an interlocutory appeal of such denial upon appropriate indication from the trial court that it was of the opinion that the order of denial involved a controlling question of law as to which there was substantial ground for differences of opinions and that an immediate appeal from the order may materially advance the ultimate determination of the litigation. 28 U.S.C. § 1292. The sole question before us is whether the court below abused its discretion in refusing to permit the suit to be maintained as a class action pursuant to Rule 23, Fed.R.Civ.P. 7


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Those similarly situated on whose behalf the action purportedly was brought number approximately 180, 000 persons. There is no question but that appellee's business involves an "open end consumer credit plan" covered by the Act 8 and that plaintiffs and members of the proposed class are cardholders under said plan. 9 Plaintiffs' second amended complaint, on the basis of which the class action aspect of the case was proposed and terminated, clearly alleged violations of the Act as against plaintiffs and the members of the proposed class 10 and on their behalf sought damages of at least $100.00 for each class member and as to each violation 11 totaling "in excess of One Million Dollars per month" within the one-year period of limitations provided in the Act. 12 It has been pointed out by appellee that since five separate violations as to each member of the class are alleged, each presumably occurring monthly, its penalty exposure might exceed one billion dollars.

The basic problem of the amenability of civil suits for violation of the Truth in Lending Act to class action treatment has been before numerous district courts with varying results. 13 Insofar as we are aware no court of appeals has yet

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squarely decided the issue, although it is known that several appeals presenting it are now pending elsewhere. 14

The reasoning of the court below in denying class action status in this case is similar to that by which other district courts have reached the same conclusion. Judge O'Connor points out in his memorandum decision 15 that in order to maintain their suit as a class action plaintiffs must satisfy the four requirements of Rule 23(a) and any one of the three subdivisions of Rule 23(b). 16 The requirements of Rule 23(a) were found

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to have been met. The remaining question in the court's view was whether subdivision (b)(3), "the only one of the three subdivisions which might apply to plaintiffs", was satisfied as well. Attention was focused upon whether the class action was "superior to" other available methods "because that issue appears to be dispositive of the case".

Impressed with Judge Frankel's reasoning in the leading case of Ratner v. Chemical Bank New York Trust Company, 329 F.Supp. 270 (S.D.N.Y.1971), the trial court found that case, and Rogers v. Coburn Finance Corp. of Dekalb, 53 F.R.D. 182 (N.D.Ga.1971), to be more persuasive than Katz v. Carte Blanche Corporation, 52 F.R.D. 510, 53 F.R.D. 539 (W.D.Pa.1971), another leading case sustaining the propriety of class action proceedings under similar circumstances. Factors the court reemphasized were the special and particular authorization of the Act, 15 U.S.C. § 1640(e), creating a species of "private attorney general" to participate prominently in enforcement; the minimum damages of $100 plus costs and attorney's fees recoverable without proof of any actual damages; the huge potential liability for alleged violations of the Act should the class action be maintained to its conclusion; the lack of any need or justification for class action proceedings in the circumstances of a Truth in Lending case; and the "absurd and stultifying extreme" the case would assume as a class action in spite of the essentially inconsistent remedy prescribed by Congress as a means of private enforcement. Exercising that "considerable discretion of a pragmatic nature" required by the "broad and open ended terms" 17 of Rule 23, Judge O'Connor determined that a class action in this case was not superior to the statutory method of individual recoveries. He, as did Judge Frankel in Ratner, considered the available statutory remedy vis-a-vis the "horrendous, possibly annihilating punishment, unrelated to any damage", which would be a likely product of cases such as this if permitted to proceed as class actions. He also advanced further reasons to the same effect "inherent in the purposes of a class action" and exemplified by current criticisms of the operation of Rule 23. 18 He indicated his view that the application of class action treatment to Truth in Lending cases would be an over-extension of the Rule. 19

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This latter aspect of the opinion below doubtlessly inspired appellant's basic thesis that the ruling was a policy decision which cavalierly denied class action status to such actions generally despite their being within, or even required by, the criteria laid down in Rule 23. In variation of this theme appellants say that the decision flies in the face of the established rule that "if there is to be any error made, let it be in favor and not against the maintenance of the class action"; 20 that the trial court failed to consider criteria established by the Rule itself; that it improperly considered the merits of the case in arriving at its decision, and that the Truth in Lending Act has not been exempted expressly or impliedly from the application of Rule 23.

Apart from any inherent incongruity between the remedies provided by the Truth in Lending Act and Rule 23, we agree that there is nothing in the Act itself, the Rule, or the notes of the Advisory Committee on Rules of Civil Procedure with respect to it which expressly or impliedly precludes class actions in this type of case. The legislative history of the Act throws scant light on the problem. 21 To find any congressional

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intent to preclude at all events treatment of such cases under Rule 23 would be a work of clairvoyance and not of construction or interpretation.

On the other hand, notwithstanding the likelihood that most if not all of the requirements expressed in the Rule would be present, there is nothing to suggest a congressional intent that Truth in Lending cases should always, or generally, be handled as class actions. Any automatic application of the Rule irrespective of its realistic implications would be just as improbable as a matter of congressional intent as the total preclusion of its use in consumer suits of this nature. If we were to hazard a reconstruction of pertinent congressional intent from the enactment of the Truth in Lending Act, it would be that a mandate for general class action treatment of all of these cases, on the one hand, or for none of these cases as class action, on the other, was not intended in view of a congressional confidence in case by case determinations by qualified and informed trial judges with a wide general discretion and specific leeway under Rule 23 itself to avoid inferior, unfair or senseless applications of it.

We cannot agree that Esplin v. Hirschi, supra, dictates a position in this circuit inhospitable to such a discretion as to Truth in Lending cases. That case turned primarily upon whether common questions were predominant in a securities case where class action treatment was not unusual and in which it threatened no far-reaching consequences one way or another. This court was there persuaded that class action treatment, contrary to the views of the trial judge, was called for. Judge Hill's opinion in Esplin has been widely cited in not only justification but encouragement of class action treatment in appropriate cases and continues to represent the considered views of this court. But its doctrine should not be extended to limit unreasonably the sound discretion of trial courts in cases such as this, where discretion may be the key to a realistic administration of Rule 23, particularly with respect to a determination of the most fair and efficient procedure. 22 One of the reasons expressed in that case for a liberal application of the Rule was the retained power of the trial court later to establish sub-classes or even to abrogate the class status should developments indicate; here, developments...

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