496 F.2d 747 (3rd Cir. 1974), 72-1054, Katz v. Carte Blanche Corp.
|Citation:||496 F.2d 747|
|Party Name:||Reuben J. KATZ, on behalf of himself and all others similarly situated, v. CARTE BLANCHE CORPORATION, Appellant.|
|Case Date:||March 15, 1974|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
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Cloyd R. Mellott, John H. Morgan, Robert W. Doty, James S. Curtin, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for appellant.
Roslyn M. Litman, Howard A. Specter, David R. Brown, Litman, Litman, Harris & Specter, Pittsburgh, Pa., for appellee.
Argued Feb. 1, 1973
Before SEITZ, Chief Judge, ALDISERT, Circuit Judge and FISHER, District Judge.
Reargued Nov. 15, 1973.
Before SEITZ, Chief Judge, and VAN DUSEN, ALDISERT, ADAMS, GIBBONS, ROSENN, HUNTER, WEIS and GARTH, Circuit Judges.
GIBBONS, Circuit Judge.
This appeal is before us pursuant to the Interlocutory Appeals Act of 1958, 28 U.S.C. § 1292(b). The appellant Carte Blanche Corporation (Carte Blanche) seeks review of an order of the district court which granted the pretrial motion of the plaintiff Katz that his suit be maintained as a class action under Rule 23(b)(3) of the Federal Rules of Civil Procedure and directed that notice be sent to the alleged members of the class.
Carte Blanche is a national credit card company. Its members pay an annual membership fee of $15.00 which gives them the privilege of charging items at the company's associated establishments. Carte Blanche purchases the charge slips from the associated establishments at a discount, and invoices the members for the face amount. Katz, who after intervening was substituted for a previously named plaintiff, Stept, seeks statutory damages and costs of suit, including a reasonable attorneys fee, for Carte Blanche's alleged failure to make pretransaction and transaction disclosures regarding the computation of finance charges to its members in violation of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1681t. The three allegedly improperly disclosed finance charges are:
(1) The $15 annual membership charge; 1
(2) The late charge assessed on overdue unpaid balances; 2 and
(3) The finance charge on an extended payment plan for purchase of airline tickets.
TILA's disclosure provisions apply only to extensions of consumer credit. Thus persons using a Carte Blanche credit card for business are not protected by the Act from the allegedly inadequate disclosures. Katz claims to be a nonbusiness card user, and to represent all other
such users. He seeks recovery pursuant to 15 U.S.C.A. § 1640(a):
'Except as otherwise provided in this section, any creditor who fails in connection with any consumer credit transaction to disclose to any person any information required under this part to be disclosed to that person is liable to that person in an amount equal to the sum of
(1) twice the amount of the finance charge in connection with the transaction, except that the liability under this paragraph shall not be less than $100 nor greater than $1000; and
(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney's fee as determined by the court.'
Katz, or any other card holder, in order to establish Carte Blanche's liability under § 1640(a), must show: (1) that a given charge was a finance charge within the meaning of TILA; (2) that the disclosure with respect to that charge was not in compliance with the applicable TILA regulations; and (3) that the charge was imposed in connection with a consumer credit transaction, not a business transaction. The first two showings focus on the uniform conduct of Carte Blanche. The third showing focuses on the separate conduct, and possibly the subjective intention, of each Carte Blanche member. In the district court Katz moved for a determination that the case proceed as a class action in which he represented a class consisting of all Carte Blanche credit card holders, since all such holders had been charged the $15 annual membership fee, and such a class would include all who had been assessed an overdue payment charge or an extended payment airline ticket charge. That class would include somewhere between 717,000 and 800,000 members. If Katz succeeded in establishing liability to every class member for the minimum recovery specified in § 1640(a) (1) the liability would be substantially in excess of Carte Blanche's net worth. The record does not establish how many would be included in a class restricted to members who had been assessed late charges since the effective date of TILA. Nor does it establish the number of persons who have paid extended payment charges for airline tickets, although Katz estimates this number at 40,000.
The district court first considered whether Katz' complaint satisfied the prerequisites of Fed.R.Civ.P. 23(a), The court readily concluded that the class was too numerous for joinder of all members, that there were questions of law or fact common to the class, and that Katz would fairly and adequately represent the class. Thus three of the prerequisites of rule 23(a) were satisfied. In examining the fourth prerequisite, 'the claims . . . of the representative parties are typical of the claims . . . of the class,' Fed.R.Civ.P. 23(a)(3), the court was aware that each class member in order to recover would have to show that the transaction on which he based his claim was a consumer and not a business transaction. But concluding that Katz' claims were coincident and not in conflict with those of the class, it found this requirement was satisfied as well. The district court had doubts, initially, that it could make the findings required by rule 23(b)(3) that questions of law or fact common to the class predominate over questions affecting only individual members and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. See Katz v. Carte Blanche Corp., 52 F.R.D. 510 (W.D.Pa.1971). After further briefing and argument, however, the district court, over Carte Blanche's strenuous objection, overcame its doubts and entered an order (1) granting Katz's motion that the action proceed as a class action on behalf of all authorized holders of one of Carte Blanche's credit cards since July 1, 1969, the effective date of TILA, and (2) directing that a notice of the pendency of the action be sent to
each class member, the initial cost, estimated at $37,500, to be borne by Katz. See Katz v. Carte Blanche Corp., 53 F.R.D. 539 (W.D.Pa.1971). The form of notice is reproduced at 53 F.R.D. 547. The district court simultaneously certified that the order involves a controlling question of law as to which there is a substantial ground for a difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation. A panel of this court permitted an appeal to be taken.
Appealability of Rule 23(b)(3) Orders
We are met at the outset with the contention that the appeal should be dismissed because permission to appeal pursuant to 28 U.S.C. § 1292(b) was improvidently granted, in that an appeal under that section is not appropriate to review a district court's favorable class action determination under rule 23(a) and 23(b)(3). That contention is based upon a misapprehension of the intended purpose of the Interlocutory Appeals Act and a misunderstanding of the role of the district court judge in granting or denying leave to proceed as a class action under rule 23(b)(3).
A class action determination, affirmative or negative, is not in this circuit a final order appealable under 28 U.S.C. § 1291. Hackett v. General Host Corp., 455 F.2d 618 (3d Cir.), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1972). Compare id. with Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967). If a district court denies class action treatment, even on discretionary grounds, and certifies, pursuant to rule 54(b), that the order dismissing the complaint against the absent class members is a final judgment, such an order is appealable. See Hayes v. Sealtest Foods Division of National Dairy Products Corp., 396 F.2d 448 (3d Cir. 1968). But rule 54(b) does not provide a means for reviewing the grant of class action treatment. If the court in entering a class action order acts outside its jurisdiction, Shutte v. Armco Steel Corp., 431 F.2d 22 (3d Cir. 1970), cert. denied, 401 U.S. 910, 91 S.Ct. 871, 27 L.Ed.2d 808 (1971), or in disregard of appropriate procedural safeguards, Swindell-Dressler Corp. v. Dumbauld, 308 F.2d 267 (3d Cir. 1962), the order may be reviewable by mandamus. But if the court has acted within its jurisdiction pursuant to appropriate procedural safeguards and in a nonarbitrary manner, mandamus will not lie. Solomon v. Continental American Life Insurance Co., 472 F.2d 1043, 1046 (3d Cir. 1973); Hackett v. General Host Corp., supra, 455 F.2d at 626; Weight watchers of Philadelphia, Inc. v. Weight Watchers International, Inc., 455 F.2d 770, 775 (2d Cir. 1972); Interpace Corp. v. City of Philadelphia, 438 F.2d 401, 404 (3d Cir. 1971). Thus if there is any route open for the interlocutory review of the grant of class action treatment under rule 23(b)(3) in this circuit, it is only pursuant to 28 U.S.C. § 1292(b).
We have, in Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 734 (3d Cir. 1970), cert. denied, 401 U.S. 974, 91 Ct. 1190, 28 L.Ed.2d 323 (1971), in an appeal pursuant to § 1292(b), reviewed and reversed the grant of class action treatment. See also Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336...
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