503 F.2d 1161 (7th Cir. 1974), 73-1793, Haynes v. Logan Furniture Mart, Inc.
|Citation:||503 F.2d 1161|
|Party Name:||Luther HAYNES and Lenita Haynes, Plaintiffs-Appellants, v. LOGAN FURNITURE MART, INC., an Illinois corporation, Defendant-Appellee.|
|Case Date:||October 02, 1974|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued April 15, 1974.
Rehearing and Rehearing En Banc Denied
Oct. 31, 1974.
James O. Latturner, Marthe C. Purmal, Joel Stein, Chicago, Ill., for plaintiff-appellants.
Joseph M. Solon, Chicago, Ill., for defendant-appellee.
Before CUMMINGS, PELL and SPRECHER, Circuit Judge.
PELL, Circuit Judge.
This is an action for damages brought by Luther Haynes and his wife, Lenita Haynes, alleging that a form retail installment contract of Logan Furniture Mart, Inc. (Logan) which was used by Logan in its installment sales during the period July 1-- December 31, 1969, and one of which the plaintiffs had executed on July 24, 1969, violated numerous requirements of Regulation Z, 12 C.F.R. 226, promulgated by the Federal Reserve Board pursuant to 1604 of the Commercial Credit Protection Act, 15 U.S.C. 1601 et seq., commonly known as the Truth in Lending Act. The district court denied the plaintiffs' motion to proceed as a class action, ruling that while the prerequisites of subdivision (a) of Rule 23, Fed.R.Civ.P., were satisfied, the suit was not of a type which could be maintained as a class action under subdivision (b) of that rule.
The district court then held, notwithstanding the fact that the Logan form contract failed to comply with at least nine applicable provisions of Regulation Z, 1 Logan was not liable because of its reliance on the opinion of its legal counsel that the contract complied with the pertinent aspects of the regulation. On this appeal the plaintiffs stressed three particular violations, to which Logan by way of concession responded that these violations were established by the court's order and required no further argument.
A suit may be maintained as a class action if in addition to satisfying the requisites of subdivision (a) of Rule 23, Fed.R.Civ.P., 2 the action is of a type in which common questions of law or fact predominate and for which a class action is superior to other available means for adjudicating the controversy. 3 In denying
the motion to proceed as a class action, the court below ruled that:
'a class action on this type of claim with liquidated or double damages and attorneys' fees is neither a fair nor an efficient method of adjudicating the controversy, particularly before the validity and interpretation of the controlling statute and regulations have become better tested and settled.'
While it is true that trial courts are generally afforded great latitude in determining the fairest and most efficient mode of adjudication when such judgments are predicated on careful factual examination, e.g., City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295, 300 (2d Cir. 1969), the trial court's decision to deny class acton status in this case was posited on the legal theory that the procedural device of class actions is incompatible with the substantive ends to which the Truth in Lending Act is addressed. We cannot agree.
The Truth in Lending Act, as this appellation strongly suggests, was a legislative response to a public need to be fairly and honestly apprised of the actual cost of using someone else's money. The Act also, of course, serves the purpose of introducing uniformity among the methods which have been previously employed for the purported objective of stating interest rates. Borrowers and consumers are now hopefully enabled to compare credit terms and to avoid the uninformed and/or misinformed use of credit. If they are to be paying a maximum allowable rate they at least will be doing so on a choice basis predicated on knowledge of what they are doing.
In contrast with the statute's obvious purposes, the modes of enforcement embodied in the Act suggest a complex, somewhat confusing scheme. The Act incorporates both the Senate's reliance on private enforcement, including federal jurisdiction without regard to a minimal amount and an individual incentive to litigation in the form of statutory damages of twice the finance charges imposed in the transaction at issue but not less than $100, plus attorneys' fees and court costs, as well as the House provision for federal administrative enforcement of the Act. However, neither branch of the legislature apparently considered the possibility of class actions in Truth-in-Lending cases. Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 343-344 (10th Cir. 1973). More particularly, 'Congress never foresaw the problem class actions would present: Multiplication of the individual minimum recovery of $100 by the number of members of a large class makes potential liability astronomical.' Note, Class Actions
Under the Truth in Lending Act, 83 Yale L.J. 1410, 1411 (1974).
The seminal case on denial of class action status is Ratner v. Chemical Bank New York Trust Co., 54 F.R.D. 412 (S.D.N.Y.1972). The plaintiff in Ratner alleged that the bank had violated the Act's disclosure requirement by failing to show the annual percentage rate on a bank credit card monthly statement, even though no finance charge had been imposed and no interest rate had yet been applied. The alleged class was comprised of 130,000 cardholders, and under the terms of the statute, the bank's potential liability...
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