Grigg v. Michigan Nat. Bank, AFL-CIO

• Citation: 274 N.W.2d 752,405 Mich. 148
• Decision Date: 17 January 1979
• Docket Number: AFL-CIO,No. 5,Docket No. 59308,5
• Parties: Sarah GRIGG, for herself and on behalf of all other customers of Michigan National Bank, who have incurred interest charges pursuant to their use of Michigan Bankard and Michigan BankAmericard credit cards, Plaintiffs- Appellants, v. MICHIGAN NATIONAL BANK, a national banking association, Defendant-Appellee, Metropolitan DetroitCouncil, an unincorporated voluntary association, Amicus Curiae. Calendar
• Court: Supreme Court of Michigan

Page 752

274 N.W.2d 752

405 Mich. 148

Sarah GRIGG, for herself and on behalf of all other customers of Michigan National Bank, who have incurred interest charges pursuant to their use of Michigan Bankard and Michigan BankAmericard credit cards, Plaintiffs- Appellants, v. MICHIGAN NATIONAL BANK, a national banking association Defendant-Appellee Metropolitan Detroit AFL-CIO Council, an unincorporated voluntary association, Amicus Curiae.

Docket No. 59308.

Calendar No. 5.

Supreme Court of Michigan.

Argued March 7, 1978.

Decided Jan. 17, 1979.

George Kratchman, Southfield, Ronald J. Prebenda, Detroit, for plaintiffs-appellants.

Fraser, Trebilcock, Davis & Foster, Lansing, for defendant-appellee; by Everett R. Trebilcock, Michael E. Cavanaugh, Lansing.

BEFORE THE ENTIRE BENCH (except FITZGERALD, J.).

COLEMAN, Chief Justice.

On June 3, 1971 Sarah Grigg commenced this action in circuit court on behalf of herself and other Michigan BankAmericard holders who had incurred finance charges on accounts between June 3, 1969 and the date of filing. The substantive merits of plaintiff's complaint have not been decided, so are not at issue. The sole question is whether the requirements of initiating a class action under Michigan statutes and court rules have been met. There is little Michigan precedential guidance as to such requirements, so it is understandable that attorneys and courts have presented a confusing combination of Federal and state law for analysis.

I. Case History

The plaintiff alleged that the defendant, a national bank doing business in Michigan, had levied finance charges higher than permitted by Michigan law. She alleged this violated 12 U.S.C. § 85, ¹ which generally prohibits a national bank from charging interest rates higher than the rates permitted by the laws of the state in which the bank is located. She asked the circuit court to enjoin the defendant permanently from charging such rates and to award her and the other affected BankAmericard holders the monetary damages authorized by 12 U.S.C. § 86. ² She also asked for an award of costs and reasonable attorney fees.

After the defendant filed an answer denying the allegations in the plaintiff's complaint, the plaintiff moved for summary judgment on the merits and for an order requiring the defendant to notify other potentially aggrieved BankAmericard holders of the pendency of the action. The defendant responded with a cross motion for summary judgment on the merits and a brief in opposition to the plaintiff's motion to require notice. In this brief, the defendant argued that it should not have to issue notice unless it had first been found liable on the merits. The defendant also filed a motion for summary judgment claiming that as a matter of law, 12 U.S.C. §§ 85, 86 did not permit a plaintiff to sue on behalf of other individuals to recover the statutorily authorized damages.

While these motions were pending, the defendant stopped using the billing practices of which the plaintiff complained. This effectively mooted the plaintiff's request for injunctive relief.

The circuit court decided to rule only on the defendant's motion for summary judgment concerning the propriety of a representative lawsuit under 12 U.S.C. § 85, 86. The court ruled that these statutes did not permit a plaintiff to sue in a representative capacity.

The plaintiff appealed and the Court of Appeals reversed in an unpublished per curiam opinion. Docket No. 15,891 (June 22, 1973). The defendant appealed but this Court denied leave to appeal. 390 Mich. 810 (1973). The United States Supreme Court denied the defendant's application for a writ of certiorari. 419 U.S. 840, 95 S.Ct. 70, 42 L.Ed.2d 67 (1974).

Upon return to circuit court, the plaintiff argued that the motions for summary judgment on the merits previously filed by the parties should be decided first. Then, if the defendant were found liable, the questions relating to the maintenance of a representative action could be decided. The defendant, on the other hand, argued that the merits should not be decided unless the court determined that the action could proceed on a representative basis.

The court chose to follow the defendant's format and after further briefing and hearings ruled that the action would not be allowed to proceed on a representative basis because:

"1. There's no common question of fact as to each member of the class and an analysis of the case reveals there could be different questions of law involved as to each member.

2. The rights here are severable as each member of the class's claim is different.

3. For this Court to handle this case as a class action is totally unmanageable.

4. It is not a superior method of litigating claims in this case. What the Court would be doing is trying thousands of small claim cases. In essence numerous mini trials within the class action itself.

5. The plaintiff does not fairly or adequately represent the class in this case.

6. Plaintiff in her deposition said that she wouldn't pay the cost of notices to all members of the class estimated around $86,000 to over $100,000. She contemplated said notices to be mailed by and at the cost of the defendant.

7. To require the defendant to send notices would be a horrendous and possibly annihilating punishment and most unjust." (Opinion of the circuit court, May 30, 1975.)

The court also ruled that the plaintiff's individual claim for damages, which, it was said, only amounted to around $200, including interest from 1969, did not satisfy the amount-in-controversy requirement for circuit court jurisdiction. The court gave the plaintiff the option of having the case transferred to district court or having it dismissed altogether. The plaintiff elected not to proceed individually in district court and the case was therefore dismissed.

The plaintiff appealed but the Court of Appeals affirmed. 72 Mich.App. 358, 249 N.W.2d 701 (1976). Using a mixture of state and Federal law and procedure, the panel concluded that the plaintiff could not sue on behalf of the other potentially aggrieved BankAmericard holders because she was unwilling to pay for notice to the other holders, she was a secretary for some of the attorneys handling her case, and the case was unmanageable as a representative action and therefore not a superior method of litigating the individual claims. The panel also concluded that although the substantive merits of the case could have been decided first, the ultimate unmanageability of the case on a representative basis made it unnecessary to do so.

We remand to the trial court for further proceedings consistent with this opinion.

II. Facts

Although the substantive merits of the plaintiff's complaint are not involved in this appeal, some understanding of the defendant's credit card operation and the billing practices that the plaintiff claims were illegal is necessary in order to analyze the procedural question presented.

A Systems of Billing

The purchase of goods or services with a BankAmericard is a three-party transaction. The customer using the car receives the purchased items from a merchant. The merchant then sells the account receivable generated by the purchase to the defendant at a discount. The defendant then bills the cardholder for the full amount of the debt. In this case the cardholder's first contract with BankAmericard provided for a finance charge of 1.5 percent per month (18 percent annually) on the unpaid balance. The subsequent contract was for .0493 percent per day.

Because the number of cardholders is very large, it is not economically feasible to bill them all on the same day. Therefore, the defendant divides the cardholders into smaller, more manageable groups and bills each group on a different day of the month. For example, group one might be billed on the first day of every month, group two on the second, etc. This day is called the billing date.

If the billing date for a particular group happens to fall on a Sunday or a holiday in a given month, the group is billed on the immediately preceding work day. The billing date for each group is the last day of that group's billing cycle. The number of days in a group's billing cycle will vary depending on the billing date, the number of days in the month or months spanned by the billing cycle and whether the billing date falls on a Sunday or a holiday.

During the time period pertinent to this appeal, the defendant's BankAmericard holders were divided into 20 separate billing groups.

From June to October of 1969, the defendant did not impose a finance charge on purchases made with a BankAmericard if the cardholder paid for the purchases in full within 25 days of the cardholder's billing date. Thus, for example, if a cardholder purchased $200 of goods or services in June, had a billing date of July 1 and paid the defendant $200 by July 26, no finance charge would be imposed. If, however, the purchases were not paid for in full within 25 days, the defendant would impose a finance charge. The finance charge was calculated by multiplying the amount not paid by 1.5 percent. Thus, in the above example, if the cardholder only paid $40 by July 26, the August 1 bill would include: (1) the $160 in principal still owed for the June purchases, and (2) a finance charge of $2.40 (1.5% X $160). If the cardholder had purchased another $100 of goods or services It was possible that the amount remaining unpaid upon which a finance charge would be imposed could include all or part of the previous month's finance charge. However, because the defendant applied partial payments first to unpaid finance charges and then to principal, a cardholder would not have a finance charge imposed on the previous month's finance charge unless the amount paid by the cardholder on the current bill was less than the amount owed for previous finance charges. In the example above, the cardholder would not have a finance charge imposed on the previous finance...