Christ v. Beneficial Corp.

• Citation: 547 F.3d 1292
• Decision Date: 28 October 2008
• Docket Number: No. 06-14828.,No. 07-10246.,06-14828.,07-10246.
• Parties: Kenneth R. CHRIST, Jr., Plaintiff-Appellee, v. BENEFICIAL CORPORATION, Beneficial Florida, Inc., Beneficial Management Corporation of America, Beneficial Insurance Group, Inc., Wesco Insurance Company, Beneficial Insurance Agency of Nevada, Wilmington Property And Casualty, Defendants-Appellants. Kenneth R. Christ, Jr., on behalf of himself and all others similarly situated, Plaintiff-Appellee, v. Beneficial Corporation, Beneficial Management Corporation of America, Beneficial Insurance Group, Inc., Beneficial Insurance Agency of Nevada, Wesco Insurance Company, Wilmington Property and Casualty Insurance Company, n/k/a Wesco Insurance Company, Beneficial Florida, Inc., BFC Insurance Agency of Nevada, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

547 F.3d 1292

Kenneth R. CHRIST, Jr., Plaintiff-Appellee, v. BENEFICIAL CORPORATION, Beneficial Florida, Inc., Beneficial Management Corporation of America, Beneficial Insurance Group, Inc., Wesco Insurance Company, Beneficial Insurance Agency of Nevada, Wilmington Property And Casualty, Defendants-Appellants.

Kenneth R. Christ, Jr., on behalf of himself and all others similarly situated, Plaintiff-Appellee, v. Beneficial Corporation, Beneficial Management Corporation of America, Beneficial Insurance Group, Inc., Beneficial Insurance Agency of Nevada, Wesco Insurance Company, Wilmington Property and Casualty Insurance Company, n/k/a Wesco Insurance Company, Beneficial Florida, Inc., BFC Insurance Agency of Nevada, Defendants-Appellants.

No. 06-14828.

No. 07-10246.

United States Court of Appeals, Eleventh Circuit.

October 28, 2008.

Douglas N. Campbell, Douglas N. Campbell & Associates, P.C., Atlanta, GA, Michael B. Colgan, Glenn, Rasmussen, Fogarty, P.A., Tampa, FL, Daniel H. Squire, Naracha D. Steimer, Wilmer Cutler Pickering Hale and Dorr, LLP, Bridgette L. Kaiser, Washington, DC, James C. Huckaby, Jr., Clarence M. Small., Jr., Deborah Alley Smith, Christian & Small LLP, John Winston Scott, Scott, Dukes & Geisler, P.C., Mark J. White, White, Arnold, Andrews & Dowd, P.C., Birmingham, AL, Christopher R. Lipsett, Michael A. Granne, Kathryn C. Arnold, Wilmer Cutler Pickering LLP, Christopher R. Lipsett, New York City, Kevin H. Moriarty, Hale and Dorr, LLP, Washington, DC, for defendants-appellants.

R. Timothy Morrison, Pope, McGlamry, Kilpatrick, Morrison & Norwood, LLP, Atlanta, GA, C. Neal Pope, Wade H. Tomlinson, III, Pope McGlamry Kilpatrick, Morrison & Norwood, LLP, Columbus, GA, Lanny S. Hines, Lanny Hines & Associates, Birmingham, AL, Robert Scott, Johnson, Franzen & Salzano, P.C., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Florida.

Before TJOFLAT, ANDERSON and HILL, Circuit Judges.

TJOFLAT, Circuit Judge:

Plaintiff borrower, Kenneth R. Christ Jr., sued his lender, Beneficial Florida, Inc. ("BFI"), and a number of affiliated corporations for violating the Truth in Lending Act ("TILA"). Christ alleged that BFI listed a fee for non-filing insurance ("NFI") in the wrong column of a disclosure form. The district court certified a class of plaintiffs represented by Christ, granted summary judgment on the merits in favor of the plaintiff class, and awarded injunctive relief and over $22 million in restitution or disgorgement pursuant to the Declaratory Judgment Act. We vacate the class certification and the award of injunctive relief and restitution or disgorgement. Because this leaves the plaintiff class without a remedy, we do not reach the question of whether the district court erred by granting summary judgment for the plaintiff class on the merits.

I.

On September 21, 1994, BFI issued to Christ a consumer loan in the amount of $1,954.55. The loan was secured by "Certain Household Goods" and a "Motor Vehicle." The disclosure form indicated that BFI charged Christ $14 for a "Non-Filing Insurance Premium," which was listed as a separate item under "Itemization of Amount Financed."¹ BFI bought the NFI policy from Wesco Company ("Wesco"). The policy covered losses that resulted when a lender's failure to perfect its security interest in collateral prevented the lender from repossessing the collateral, retaining proceeds from the collateral, or otherwise enforcing its rights. Pursuant to Florida law, the policy form and premium rate had been approved by the Florida Department of Insurance (the "Department"), now known as the Florida Office of Insurance Regulation.²

On May 19, 1998, Christ brought suit under TILA in the Middle District of Florida. Christ sued BFI and a number of its affiliates, Beneficial Corporation ("Beneficial"), Beneficial Management Corporation of America ("BMCA"), Beneficial Insurance Group, Inc. ("BIGI"), Wesco, BFC Insurance Agency of Nevada ("BFCIA"), and Wilmington Property and Casualty Company n/k/a Wesco.³ He claimed that the NFI premium should have been disclosed in the "Finance Charge" column of the disclosure form rather than the "Amount Charged" column because (1) the NFI premium was not for "insurance," and alternatively, (2) even if the NFI premium was for insurance, it was not for non-filing insurance. The complaint sought actual damages, statutory damages, a permanent injunction prohibiting the practice of purchasing NFI and charging NFI premiums, a declaratory judgment, an accounting, and disgorgement.⁴

A month later, the Judicial Panel on Multi-District Litigation ("MDL") transferred the case to the Middle District of Alabama for consolidated pretrial proceedings with similar cases. Christ then moved under Federal Rule of Civil Procedure 23(b)(2) for certification of a nationwide class of borrowers who were charged an NFI fee by any of Beneficial's consumer lending subsidiaries. Christ also moved for partial summary judgment under the Declaratory Judgment Act, 28 U.S.C. § 2201. He sought a declaration that his claims were not precluded by the McCarran-Ferguson Act, 15 U.S.C. §§ 1012 et seq., and that defendants violated TILA's disclosure requirements. Defendants filed oppositions to Christ's motions and a motion for summary judgment.

On August 24, 2000, the MDL court entered an order conditionally certifying an injunctive class under Rule 23(b)(2). It "deem[ed] Beneficial's consumer finance and insurance subsidiaries as its alter ego," and it accordingly pierced the corporate veil of BFI to its parent Beneficial and then to Beneficial's other subsidiaries BMCA, Wesco, BIGI, and BFCIA. See In re Consol. Non-Filing Ins. Fee Litig., 195 F.R.D. at 690. The court conditionally certified Christ as the representative of a class of "all persons in the United States who were charged a fee for non-filing insurance by one of the consumer finance subsidiaries of the Beneficial Corporation at anytime from May 19, 1994 to the present." Id. at 696. Significantly, the court held that "[i]njunctive and declaratory relief are available under TILA," id. at 692, and that "it is TILA, not state law, that determines what may be charged and disclosed as an `amount financed,' as opposed to a `finance charge.'" Id. at 693. On February 26, 2001, the MDL court denied defendants' motion for summary judgment and granted summary judgment to the plaintiff class with respect to the McCarran-Ferguson Act and TILA. It remanded the case to the Middle District of Florida on July 23, 2002.⁵

On December 17, 2002, the district court ordered an accounting in part to "determine the amount due to the Plaintiff class as restitution for Defendants' violation of the Truth in Lending Act." The district court also conducted a jury trial "on the issue of alter ego, as it related to Beneficial Corporation, Beneficial Management Corporation of America, and their subsidiaries." On July 9, 2003, the jury found that "the plaintiff has carried its burden of proving that probably for purposes of non-filing insurance, the subsidiaries of Beneficial Corporation were its alter ego."

The district court subsequently conducted a separate bench trial on damages. During the trial, class counsel withdrew its demand for statutory damages and conceded that because there was no detrimental reliance, class members were not entitled to actual damages. Christ v. Beneficial Corp., No. 2:98-cv-210-JEF-SPC, 2006 WL 2385028, at *2, 2006 U.S. Dist. LEXIS 58448, at *9. (M.D.Fla. Aug. 17, 2006); see Turner v. Beneficial Corp., 242 F.3d 1023, 1024 (11th Cir.2001) (en banc) (holding that detrimental reliance is an element of a TILA claim for actual damages). This left only the question of restitution or disgorgement damages. On August 17, 2006, invoking the Declaratory Judgment Act, the district court awarded to the plaintiff class injunctive relief and over $22 million as restitution or disgorgement of the NFI fees. Id. at *2, 2006 U.S. Dist. LEXIS 58448, at *12-14. Following the entry of final judgment against them, the defendants appealed.⁶

We vacate, in turn, the district court's orders (1) certifying the class of plaintiffs under Rule 23(b)(2) and (2) awarding injunctive relief and restitution or disgorgement.⁷

II.

The MDL court certified a nationwide class of plaintiffs under Rule 23(b)(2), which provides for such a class only if the defendant has "acted ... on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed.R.Civ.P. 23(b)(2). TILA does not expressly provide for private injunctive relief, but neither does it expressly preclude it. The district court inferred from TILA's silence that TILA provides private injunctive relief. We disagree.

A.

"[W]ith rigorous regard for providing consumers with full disclosure of the terms and conditions of credit purchases, Congress fashioned an elaborate system of remedies and penalties to effectuate compliance with the Truth in Lending Act and to redress grievances stemming from its violation." Sosa v. Fite, 498 F.2d 114, 117 (5th Cir.1974).⁸ First, Congress designated certain federal agencies, including the Federal Trade Commission, as the primary enforcement agencies of TILA, with the power to enforce compliance through "[a]ll of [its] functions and powers," including orders of restitution. 15 U.S.C. § 1607(a)-(c); see Turner v. Beneficial Corp., 242 F.3d 1023, 1025 & n. 4 (11th Cir.2001). Second, Congress "impose[d] criminal liability on persons who willfully and knowingly violate the statute." 15 U.S.C. § 1611.

Congress also "creat[ed] a system of `private attorney generals,'" permitting "aggrieved consumers to participate in policing the Act." Thomas v. Myers-Dickson Furniture Co., 479 F.2d 740, 748 (5th Cir.1973), superseded on other grounds, 15 U.S.C. § 1640(g), as recognized in Turner v. Firestone Tire & Rubber, ...