Lee v. Buth-Na-Bodhaige, Inc.

• Decision Date: 06 September 2019
• Docket Number: NO. 5-18-0033,5-18-0033
• Parties: Henry LEE, on Behalf of Himself and All Others Similarly Situated, Plaintiff-Appellee, v. BUTH-NA-BODHAIGE, INC., a Delaware Corporation, d/b/a The Body Shop, and Does 1-10, Defendants-Appellees (Jenna Dickenson, Objector-Appellant).
• Court: United States Appellate Court of Illinois

2019 IL App (5th) 180033

143 N.E.3d 645

436 Ill.Dec. 816

Henry LEE, on Behalf of Himself and All Others Similarly Situated, Plaintiff-Appellee,

v. BUTH-NA-BODHAIGE, INC., a Delaware Corporation, d/b/a The Body Shop, and Does 1-10, Defendants-Appellees(Jenna Dickenson, Objector-Appellant).

NO. 5-18-0033

Appellate Court of Illinois, Fifth District.

September 6, 2019

Natalie T. Lorenz and Laura E. Schrick, of Mathis, Marifian & Richter, Ltd., of Belleville, and Eric A. Isaacson (pro hac vice), of La Jolla, California, for appellant.

Joshua C. Dickinson, of Spencer Fane LLP, of Omaha, Nebraska, Thomas W. Hayde, of Spencer Fane LLP, of St. Louis, Missouri, and Robert L. Lash, of Hur & Lash, LLP, of New York, New York, for appellee Henry Lee.

Christopher M. Murphy, of McDermott, Will & Emery LLP, of Chicago, and Kerry A. Scanlon and Jeremy M. White, of McDermott, Will & Emery LLP, of Washington, D.C., for other appellees.

JUSTICE CATES delivered the judgment of the court, with opinion.

¶ 1 Objector, Jenna Dickenson, appeals from a judgment granting "Final Approval of a Settlement Agreement" in a class action lawsuit brought by plaintiff, Henry Lee, against defendant, Buth-Na-Bodhaige, Inc., d/b/a The Body Shop (The Body Shop), for alleged willful violations of the federal Fair and Accurate Credit Transactions Act of 2003 (FACTA) ( 15 U.S.C. § 1681c(g)(1) (2012) ). Dickenson challenges, among other things, the ability of Lee to adequately represent the settlement class, the adequacy of the notice to members of the settlement class, and the fairness, reasonableness, and adequacy of the "coupon settlement." For reasons that follow, we vacate the judgment and remand this case for further proceedings consistent with this opinion.

¶ 2 I. BACKGROUND

¶ 3 A. The Fair and Accurate Credit Transactions Act

¶ 4 Lee filed a putative class action suit against defendant, The Body Shop, to recover statutory damages for alleged willful noncompliance with FACTA. Passed in 2003, FACTA amended the Fair Credit Reporting Act (FCRA) ( 15 U.S.C. § 1681 (2012) ). The FCRA was enacted for the purposes of ensuring fair and accurate credit reporting, promoting efficiency in the banking system, and protecting consumer privacy. See 15 U.S.C. § 1681 (2012). The FACTA amendments were intended to thwart identity theft and credit and debit card fraud. See 15 U.S.C. § 1681c(g) (2012). Section 1681c(g)(1) of Title 15 provides:

"Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction." 15 U.S.C. § 1681c(g)(1) (2012).

¶ 5 Persons engaged in either willful or negligent noncompliance with FACTA's requirements are subject to civil liability. See 15 U.S.C. §§ 1681n, 1681o (2012). In a case of willful noncompliance, a merchant is liable to the affected consumer for actual damages resulting from the violation or statutory damages ranging from $100 to $1000. 15 U.S.C. § 1681n(a)(1)(A) (2012). A willful violator may also be liable for punitive damages as allowed by the court, costs of the action, and reasonable attorney fees as determined by the court. 15 U.S.C. § 1681n(a)(2), (3) (2012). In the case of negligent noncompliance, a merchant is liable to the consumer for actual damages, as well as costs of the action and reasonable attorney fees as determined by the court. 15 U.S.C. § 1681o (2012).

¶ 6 The foregoing penalties for willful violations of FACTA are the result of a 2008 amendment that modified the definition of willful noncompliance. See Credit and Debit Card Receipt Clarification Act of 2007 (Clarification Act) ( 15 U.S.C. § 1681n(d) (2012) ). The legislation was enacted in response to a waterfall of lawsuits alleging a willful violation of FACTA under circumstances where a cardholder's account number was properly truncated, but the expiration date was displayed on the printed receipt. See Clarification Act, Pub. L. No. 110-241, § 2, 122 Stat. 1565. Under section 1681n(d) of Title 15, any person who printed an expiration date on any receipt provided to a cardholder at a point of sale or transaction between December 4, 2004, and June 3, 2008, but otherwise complied with section 1681c(g), would not be held in willful noncompliance by reason of printing the expiration date on the receipt. 15 U.S.C. § 1681n(d).

¶ 7 B. The Federal Court Action

¶ 8 On December 7, 2015, Lee used his American Express credit card to make a purchase at one of defendant's retail stores located on Lexington Avenue in New York, New York. The purchase amount was $19.60. Upon completion of the purchase, Lee received a computer-generated sales receipt. The receipt contained the first six and last four digits of Lee's 16-digit credit card account number.

¶ 9 On February 12, 2016, Lee filed a putative class action complaint in the United States District Court for the Southern District of New York (Federal Court Action) and alleged that The Body Shop failed to truncate credit card and debit card account numbers on electronically printed receipts in willful violation of FACTA. Lee v. Buth-Na-Bodhaige , Inc. , No. 1:16-cv-01104-LTS, 2017 WL 2693795 (S.D.N.Y. Jan. 24, 2017) (verdict and settlement summary).

¶ 10 In January 2017, the parties reached a tentative settlement that covered a nationwide class of plaintiffs. In March 2017, the federal court in New York granted an "Order of Preliminary Approval of the Settlement" (Federal Approval Order). Subsequent to the issuance of notice, five objectors challenged the Federal Approval Order. In response to certain challenges raised by the objectors, including Dickenson, the federal court issued orders in August and September 2017, directing Lee to show cause why the Federal Court Action should not be dismissed for lack of standing under article III of the United States Constitution for failure to plead a "concrete" injury resulting from the alleged FACTA violation. On October 16, 2017, Lee requested that the federal court voluntarily dismiss the Federal Court Action, without prejudice. On October 18, 2017, the Federal Court Action was dismissed, without prejudice. Lee v. Buth-Na-Bodhaige, Inc. , No. 1:16-cv-01104-LTS (S.D.N.Y. Oct. 18, 2017), https://ecf.nysd.uscourts.gov/doc1/127121191611 [https://perma.cc/U4TR-WKHV].

¶ 11 C. The St. Clair County Action

¶ 12 On October 17, 2017, just one day after requesting dismissal of the Federal Court Action, Lee filed a putative class action complaint against The Body Shop in the circuit court of St. Clair County, Illinois. The allegations in the St. Clair County complaint were essentially identical to those made in the Federal Court Action. In the St. Clair County complaint, Lee alleged that The Body Shop operated hundreds of stores throughout the United States, including four retail locations in Illinois; that defendant's stores accepted credit cards and debit cards for the transaction of its business within the meaning of FACTA; that FACTA was enacted by Congress to curb identity theft; and that merchants such as The Body Shop were given three years to comply with the requirements of the federal statute. Lee further alleged that he had used his American Express card to make a purchase at one of defendant's stores located on Lexington Avenue in New York City, New York, and that, upon completion of the purchase, the Body Shop provided him with an electronic sales receipt containing the first 6 digits and the last 4 digits of his credit card number, for a total of 10 digits.

¶ 13 Lee asserted that The Body Shop's failure to truncate the credit card account number on his receipt was a willful violation of the requirements set forth in FACTA. He averred, upon information and belief, that The Body Shop had failed to comply with FACTA's truncation requirements at other retail locations throughout the relevant class period, and that The Body Shop continued to act in willful disregard of FACTA's requirements. Lee claimed that The Body Shop either recklessly failed to review its own compliance with FACTA or intentionally opted to save money by not bringing its stores into compliance with FACTA. On behalf of himself and all others similarly situated, Lee sought statutory damages, punitive damages, attorney fees and costs, and prejudgment and postjudgment interest. Lee did not seek actual damages on behalf of himself or any members of the putative class.

¶ 14 The proposed class identified in the St. Clair County complaint¹ was exactly the same as that proposed in the Federal Court Action:

"All persons who used either a Visa, MasterCard, or Discover debit or credit card, and/or American Express credit card at any of Defendant's locations where Defendant provided an electronically-printed receipt at the point of sale or transaction that displayed the expiration date of that person's credit or debit card or more than the last five digits of that person's credit or debit card for a time period beginning five years prior to the filing of this lawsuit until the date the class is certified."

According to the complaint, at least 7282 residents of Illinois, including 44 residents of St. Clair County, were members of the putative class, although Lee did not name a putative class member from St. Clair County, or Illinois, generally.

¶ 15 D. Motion for Preliminary Approval

¶ 16 On October 18, 2017, one day after filing his state court complaint, Lee filed "Plaintiff's Unopposed Motion For Preliminary Approval of Class Action Settlement Agreement" (Plaintiff's Unopposed Motion), pursuant to section 2-801 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-801 et seq. (West 2016)). Lee requested that the circuit court grant preliminary approval of the class action settlement agreement (Settlement Agreement), issue an order of conditional certification of a class for settlement purposes, appoint Lee as the...