Hoover v. May Dept. Stores Co.

• Decision Date: 05 July 1978
• Docket Number: 77-189,Nos. 77-153,s. 77-153
• Parties: , 19 Ill.Dec. 147 Ronald HOOVER et al., Plaintiffs-Appellees, v. The MAY DEPARTMENT STORES COMPANY, Defendant-Appellant. Consolidated.
• Court: United States Appellate Court of Illinois

Page 762

378 N.E.2d 762

62 Ill.App.3d 106, 19 Ill.Dec. 147

Ronald HOOVER et al., Plaintiffs-Appellees, v. The MAY DEPARTMENT STORES COMPANY, Defendant-Appellant.

Nos. 77-153, 77-189 Consolidated.

Appellate Court of Illinois, Fifth District.

July 5, 1978.

Robert S. Allen, Frank P. Wolff, Jr., Lewis, Rice, Tucker, Allen & Chubb, St. Louis, Mo., Norman J. Gundlach, Gundlach, Lee, Eggman, Boyle & Roessler, Belleville, Newton N. Minow, Kirk B. Johnson, Sidley & Austin, Chicago, for defendant-appellant.

Richard Shaikewitz, Wiseman, Shaikewitz, McGivern & Wahl, Alton, Neil N. Bernstein, St. Louis, Mo., for plaintiffs-appellees.

JONES, Justice:

This is an appeal by defendant May Department Stores Company from a judgment of the circuit court of Madison County in favor of plaintiffs Ronald Hoover and Sheila Ruth, individually, and as representatives of a class composed of defendant's charge account customers.

The judgment appealed from is a summary judgment with detailed findings entered on March 2, 1977 pursuant to the parties' separate motions for summary judgment and May's motion to dismiss the action as a class action. Since portions of the order were necessarily interlocutory in nature, the court, on the motion of defendant, entered a modification order March 25, 1977 pursuant to Supreme Court Rule 308 (Ill.Rev.Stat.1975, ch. 110A, par. 308) covering all of the findings and directives of the judgment. We granted the defendant's application for an interlocutory appeal and therefore have all aspects of the case before us for review.

One of the divisions of defendant May Department Stores Company is the Famous-Barr Company. Famous-Barr Company is a concern which sells a broad range of merchandise for cash or credit through 12 outlets or stores in the St. Louis metropolitan area. The St. Louis metropolitan area encompasses cities and towns in both Illinois and Missouri. One of the Famous-Barr stores is located in Illinois, the remainder are in Missouri. This case involves Famous-Barr's policy with respect to issuance of "Eagle Stamps" to the customers of its stores. Eagle Stamps are trading stamps which defendant issues as a sales promotion program. The facts are not in dispute, only the legal effect to be ascribed to them.

Famous-Barr has issued Eagle Stamps in connection with sales of merchandise at its stores since the early 1900's. Its policy as to which of its customers are entitled to receive the stamps apparently has been unchanged since the inception of the stamp program.

Under this policy only cash customers and charge account customers who pay their entire balance before the next billing date after receiving a statement are entitled to receive Eagle Stamps. The charge account customer who decides to pay for his purchases in one or more deferred payments cannot obtain stamps, either after a partial payment or upon complete payment of all balances due. Moreover, if a charge account customer, upon the first appearance on his monthly statement of an amount for new purchases, immediately remits payment in that amount, he is still not entitled to any stamps if he has a balance carried over from previous billing cycles since Famous-Barr's policy is to apply all payments towards the oldest balances first.

The procedures for obtaining the stamps are as follows. When a customer purchases an item in a Famous-Barr store by cash or check he receives a receipt. He may then take the receipt to the Eagle Stamp counter in that store or any other Famous-Barr store and exchange it for stamps. A charge account customer who pays his entire balance by mail before his next billing date receives a receipt with his next monthly statement that can be exchanged for stamps at any Eagle Stamp counter in any Famous-Barr store. If he pays his entire bill during this period in person he is issued stamps at that time. One stamp is issued for every 10$ of qualified purchases. The stamps are then pasted into books and either redeemed for cash at an Eagle Stamp counter or redeemed for merchandise certificates which are honored by any Famous-Barr store.

During most of the time relevant to this suit, an Eagle Stamp book held 1,250 stamps. Famous-Barr's policy was to accept only full books of stamps at its stamp counters. However, the Eagle Stamp Company, another division of defendant May Company, redeems partial books and loose stamps as a customer convenience if unusual circumstances exist. Each full book was exchangeable for $2.25 in cash, or, upon election by the customer, $2.50 in merchandise certificates.

Sometime in 1976, the Eagle Stamp Company began supplying stamp books that hold 1,500 stamps. Since these books are redeemable for $2.70 cash of $3 in merchandise certificates, the relative cash value of the stamp has remained constant at 18$ per each $10 of purchases, in other words, 1.8% Of the purchase price.

Both of the named plaintiffs are Illinois residents who have charge accounts with Famous-Barr and have shopped at stores in both Missouri and Illinois, purchasing items in both States pursuant to their charge agreements. The complaint upon which the instant summary judgment order was entered is a class action brought on behalf of these plaintiffs and all other persons, whether Illinois residents or not, who have purchased goods from Famous-Barr stores pursuant to charge agreements and have paid for the goods in more than one installment.

The complaint alleged that the above stated policy of denying stamps to charge customers who pay their statements in installments violates the Illinois Retail Installment Sales Act (Ill.Rev.Stat.1975, ch. 121 1/2, pars. 501-533) in that the forfeiture of this 1.8% Or 2% "Eagle Stamp discount" is a component of the "finance charge" which under the Act should have been, but was not, disclosed in the charge account agreement and monthly statements and the inclusion of which caused the finance charge actually assessed to be in excess of that allowable under the Act.

Count two of the complaint contained similar allegations with respect to the Missouri Retail Credit Sales Act (R.S.Mo.1969, secs. 408.250-408.370 (1975 Supp.) ). The count charges that the denied Eagle Stamp discount results in an increase in the "time charge" paid beyond that allowable by law and that the "time charge" was not properly disclosed under the Missouri Act because the discount's value was not included in the agreement or statements.

The two remaining counts of the complaint allege violations, of the Illinois Consumer Fraud and Deceptive Business Practices Act (Ill.Rev.Stat.1975, ch. 121 1/2, par. 261 Et seq.) and the Missouri Merchandising Practices Act (R.S.Mo.1969, sec. 407.010 (1975 Supp.) Et seq.) based on misleading statements and deliberate concealments of defendant's Eagle Stamp policy.

In its judgment the trial court held the loss of the Eagle Stamp discount to be a "finance charge" within the meaning of the Illinois Retail Installment Sales Act and to be a part of the "time charge" under the Missouri Retail Credit Sales Act. The court further found the defendant's failure to disclose this portion of the charges to be respective violations of section 25 and 408.290 of the Illinois and Missouri Acts (Ill.Rev.Stat.1975, ch. 121 1/2, par. 525 and R.S.Mo.1969, sec. 408.290 (1975 Supp.)), and that the resultant charges were in excess of those allowable under section 28 of the Illinois Act (Ill.Rev.Stat.1975, ch. 121 1/2, par. 528) and section 408.300.2 of the Missouri Act (R.S.Mo.1969, sec. 408.300.2 (1975 Supp.)).

On the two fraud counts, the court held that defendant's disclosures were misleading as a matter of law but found that the ordering of further relief was unnecessary since even a full disclosure of the unlawful practices would not have been a defense to defendant's violations of the Illinois Retail Installment Sales Act and the Missouri Retail Credit Sales Act. See Ill.Rev.Stat.1975, ch. 121 1/2, par. 513 and R.S.Mo.1969, sec. 408.350 (1975 Supp.).

In addition, the court in the judgment: (1) adjudged the action to be a proper class action; (2) permanently enjoined the defendant from pursuing the policy of non-issuance of stamps described above; (3) declared defendant a constructive trustee of all excessive finance charges collected since November 5, 1968 and ordered it to make restitution of such; (4) ordered the defendant to make a complete accounting of the names and last known addresses of every class member and the amount due to each, including interest; (5) ordered the defendant to set aside a fund of $9,000,000 from which to satisfy the terms of the decree; (6) directed defendant to provide notice to all class members so as to advise them of the terms of the decree and their right to "elect out" of the class by mailing an appropriate notice to the court; and (7) provided for the award of reasonable attorneys' fees and costs to plaintiffs' attorneys to be paid out of the fund to be created by defendant.

There are three main issues in this appeal: (1) was this a proper class action; (2) did defendant's Eagle Stamp policy violate the Illinois and Missouri Sales Acts, resulting in the imposition of an excessive "finance charge" or "time charge" within the meaning of the respective Acts; and (3) was the relief awarded proper. In addition, the class action issue contains subissues, such as the necessity of prejudgment notice to class members and the existence or necessity of a "common fund" for class relief.

We turn first to the issue of the propriety of the trial court's allowing this action to be maintained as a class action.

Our supreme court has recently noted that the class action is a potent procedural vehicle which under its terms allows claims of numerous persons to be decided without the personal appearance of each and permits the vindication of the rights of numerous persons in a single action when for many reasons individual actions would be impracticable. Steinberg...