53 F.R.D. 539 (W.D.Pa. 1971), C. A. 69-1326, Katz v. Carte Blanche Corp.
|Docket Nº:||Civ. A. 69-1326.|
|Citation:||53 F.R.D. 539|
|Opinion Judge:||TEITELBAUM, District Judge.|
|Party Name:||Reuben J. KATZ, on behalf of himself and all others similarly situated, Plaintiff, v. CARTE BLANCHE CORPORATION, Defendant.|
|Attorney:||Howard A. Specter, Litman, Litman, Harris & Specter, Pittsburgh, Pa., for plaintiff. John H. Morgan, Eckert, Seamans & Cherin, Pittsburgh, Pa., for defendant.|
|Case Date:||November 18, 1971|
|Court:||United States District Courts, 3th Circuit|
As Amended Nov. 26, 1971.
Action by credit card holder on his own behalf and on behalf of other persons similarly situated, alleging violation of Truth in Lending Act by issuer of credit card with respect to disclosure of finance charges. The District Court, 52 F.R.D. 510, determined that class proposed to be maintained satisfied some of prerequisites of rule governing class actions, but withheld decision as to satisfaction of other prerequisites. Thereafter, the District Court, Teitelbaum, J., held that such action was manageable as a class action and could be maintained as such, despite individual questions as to use to which card holder put his credit card and damages he suffered.
OPINION ON MOTION BY PLAINTIFF FOR DETERMINATION OF CLASS ACTION
This is the second and dispositive opinion in this action relative to the
plaintiff's Motion For Determination of Class Action under Federal Rule of Civil Procedure 23. Brought representatively by Reuben Katz, formerly an authorized holder of one of the defendant, Carte Blanche Corporation's credit cards, this action seeks damages not only on behalf of Mr. Katz, but also on behalf of all those similarly situated, i. e., all those authorized holders of one of the defendant's credit cards since July 1, 1969, for what are alleged to be violations of the Truth In Lending Act1 and Regulation Z (12 C.F.R. 226) promulgated thereunder. Specifically, the allegations surround the disclosures made (or not made) by the defendant with respect to certain ‘ finance charges': (1) the annual membership fee which the defendant charges its cardholders, (2) the late charge which the defendant assesses its cardholders' unpaid overdue balances, and (3) the finance charge which is imposed upon unpaid balances which are outstanding pursuant to defendant's extended payment plan. The class which the plaintiff seeks to represent numbers in excess of 600,000 members.
PREDOMINANCE AND SUPERIORITY
In Katz v. Carte Blanche Corporation, 52 F.R.D. 510 (D.C.W.D.Pa., 1971) (Katz I), we decided that the class proposed to be maintained and represented by the plaintiff in this action satisfied the prerequisites of Subsection (a) of F.R.Civ.P. 23, but withheld decision, pending further proceedings, as to the satisfaction of the provisions of Subsection (b)(3)2 thereof. Essentially, to satisfy Subsection (b)(3) it must be found that,
‘ . . . the questions of law or fact common to the members of the class predominate over any 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.’
We noted in Katz I that the difficulties likely to be encountered in the management of a class of the proportions of that proposed in the instant action was of crucial consideration to both of these required findings. Specifically, we found problematical the highly personalized nature of the individual question regarding the use (consumer or business) to which the defendant's credit card is put, and queried the possibility of a test case, as a superior alternative, in light of the provision of the Truth In Lending Act for recovery by a successful plaintiff of costs and reasonable attorney's fees.
Some confusion surrounded the meaning of the term test case. A classic test case with binding legal effects on all those affected by its outcome is not possible, of course, without the express consent of all those affected, both parties and non-parties. In the case sub judice in which the obtaining of the express consent of non-nominal parties is an impracticability, the procedural device by which to bind all non-nominal parties to the outcome of the case is the class
action.3 The term test case as applicable here, therefore, means a test case for practical purposes. In other words, if the plaintiff's motion for determination of a class action is denied the instant action becomes, in practical effect, a case not legally binding upon anyone other than Mr. Katz, and it is the superiority of that alternative which we must evaluate.
Sheer size of a class is not negatively determinative of the issue of the superiority of a class action. Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2d Cir. 1968). The critical determinant is that of its manageability— judicially, administratively and practically— as a class action. In Katz I we observed that the manageability inquiry is also that upon which the issue of whether or not the common issues predominate over the individual issues turns. The findings as to the manageability of at least the instant action as a class action, thus intertwines the two requirements of the provisions of Subsection (b)(3), and the core consideration evolves as whether or not the instant action is manageable as a class action in light of the individual question as to the use, consumer or business, which we originally found so problematical.
The defendant urges that the subjectivity of that question makes the class unmanageable. It urges that it would be entitled to cross-examine each member of the class4 as to the nature of the use to which he put his Carte Blanche credit card.5 The existence of an individual question, however, is not unique to this case. Almost all of the actions sought to be maintained as class actions under Subsection (b)(3) since the amendment of F.R.Civ.P. 23 in 1966 have alleged either securities frauds or antitrust violations. And in each of those kinds of actions individual questions are present. Our initial inquiry, then, will be for the purpose of deciding whether or not the individual questions in those kinds of actions are more manageably resolvable than the individual question which pervades this action.
In the class action cases alleging antitrust violations the individual questions of damages and membership in the class6 have, almost universally,7 been deemed to be not insurmountable obstacles.
Illustrative of the principles involved are Eisen v. Carlisle & Jacquelin, 52 F.R.D. 253 (D.C.S.D.N.Y.1971) and City of Philadelphia v. American Oil Co., 53 F.R.D. 45 (D.C.N.J., 1971). In Eisen, a class of potentially 6,000,000 public shareholders who had engaged in ‘ odd-lot’ transactions was determined to be manageable. Facilitating that determination was the fact that the answers to the two individual questions involved were reasonably subject to verification by the defendant independent of a member's mere assertion. Those facts so ascertainable were (1) the identity of a member of the class and (2) the number of ‘ odd-lot’ transactions in which a member had engaged. The court decided that if liability were established, an approximation of the aggregate damages to the class could be computed, and a claim to that aggregated amount could be asserted by members of the class and could be verified by the member's stockbroker. The class was defined as all those public shareholders who engaged in ‘ odd-lot’ transactions. What was verifiable in Eisen was essentially membership in the class and damages.
In the instant action although the definition of the class includes all those who used the Carte Blanche credit card for business as well as consumer purposes, proof of the use to which a card was put by a cardholder is fairly analogous to proving membership in a class. The obvious, and perhaps ultimately fatal, difference is that in this case, proof of the use to which a card was put by a cardholder admits neither of such convincing independent confirmation nor of such an aggregation of the total damages to the class. It was for that reason that one of the classes proposed in City of Philadelphia was found to be unmaintainable. In that case, a variety of plaintiffs alleging antitrust violations proposed a variety of classes for the maintenance of class actions against a multitude of gasoline companies. Among the classes proposed were, in the States of Delaware, New Jersey and Pennsylvania, (1) all governmental entities that purchased the defendants' products, (2) all taxicab owners and operators who purchased the defendants' products, (3) all those commercial truckers who purchased defendants' products in tank wagon quantities, and (4) all those individual motorists who purchased defendants' products. On the theory that while those members of classes (1), (2), and (3) were likely to have retained records which would support membership in the class and damage claims, those of class (4) were unlikely to have retained such records, the Court found only classes (1), (2), and (3) manageable. Thus in neither Eisen nor City of...
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