Re: Mexico Money Transfer Litigation

• Decision Date: 29 October 2001
• Docket Number: Nos. 01-1172,01-1176,s. 01-1172
• Citation: 267 F.3d 743
• Parties: (7th Cir. 2001) In the Matter of Mexico Money Transfer Litigation
• Court: U.S. Court of Appeals — Seventh Circuit

Page 743

267 F.3d 743 (7th Cir. 2001)

In the Matter of Mexico Money Transfer Litigation

Nos. 01-1172, 01-1176

In the United States Court of Appeals For the Seventh Circuit

Argued September 7, 2001

Decided October 4, 2001

Petition for Rehearing and Rehearing En Banc

Denied Oct. 29, 2001

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 98 C 2407 & 98 C 2408--Rebecca R. Pallmeyer, Judge. [Copyrighted Material Omitted] Before Bauer, Easterbrook, and Manion, Circuit Judges.

Easterbrook, Circuit Judge.

"Send $300 to Mexico for $15." This tag line, typical of promotions by the two defendants (MoneyGram and Western Union, plus its subsidiary Orlandi Valuta), is at the core of these consolidated class actions. Plaintiffs contend that "for $15" is fraudulent because the wire transfer companies collect for their services not only cash paid over the counter (the $15) but also the difference between the retail currency exchange rate quoted to customers and the wholesale (interbank) rate, for transactions of $5 million or more, at which the defendants buy pesos. Plaintiffs believe that the quoted price must include the difference in foreign exchange rates (the "fx spread", which averages about $25 per transaction) or that the defendants must at least reveal the price that they pay for pesos, so that the customers may work out the spread for themselves. The classes sought treble damages under the Racketeer Influenced and Corrupt Organizations Act (rico), 18 U.S.C. sec.sec. 1961-68, and state anti-fraud laws. Class representatives estimated that defendants make as much as $300 million per year from the fx spread, and they sought treble this sum, over many years, as damages. The proposed recovery thus ran into the billions of dollars.

The class got much less. The defendants- -which contended that they have not committed fraud because they reveal exactly how many pesos will be delivered in Mexico for exactly how many dollars-- were unwilling to pay very much on what they deemed a weak claim. Moreover, to curtail the risk of fraud, they were unwilling to pay any cash except to class members who established their identities. For many members of the class, who are either not lawful residents of the United States or otherwise unwilling to submit personal details, mandatory identification would block relief. So the parties settled the case on other terms. Defendants agreed to disclose in future transactions and advertisements that there is a fx spread and that each defendant sets its own retail price of pesos, and to provide a toll-free telephone number from which customers can learn the going retail exchange rate. They also agreed to provide class members with coupons entitling them to $6 off the price of one future wire transfer for every transfer made since November 1993. (To simplify the exposition we disregard some additional details, which may be found in the district court's opinion.) The face value of coupons to be made available approaches $400 million. Finally, defendants agreed to pay about $4.6 million to organizations that assist the Mexican-American community; the parties call this "cy pres relief" in recognition of the fact that many class members will prove to be unidentifiable, will not claim their coupons, or will not use all coupons they receive. Finally, the defendants agreed to bear the expense of notifying the class (which normally must be borne by the representative plaintiffs, see Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974); White v. Sundstrand Corp., 256 F.3d 580 (7th Cir. 2001)) as well as the expense of administering the settlement; these outlays have been estimated at about $16 million, to which about $10 million in attorneys' fees will be added. After receiving notice under Fed. R. Civ. P. 23(c)(2), about 2,800 class members opted out, retaining their right to sue independently. Raul Garcia and Lydia Bueno intervened and objected to the settlement. The district court held a hearing under Rule 23(e), took testimony from the objectors and several expert witnesses, and later approved the compromise and entered the proposed consent decree. 2000 U.S. Dist. Lexis 18863 (N.D. Ill. Dec. 21, 2000).

According to the objectors, the court should not have certified a nationwide class, or indeed allowed the litigation to proceed in Illinois (rather than California, where about a third of the class members reside). They also think that the class should have received more, and in particular should have been compensated in cash rather than coupons. Most of the objectors' arguments occasion little or no discussion. For example, their complaint about the location of the court not only overlooks the fact that rico authorizes nationwide service of process, see 18 U.S.C. sec.1965; Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671-72 (7th Cir. 1987), but also supposes that this suit has proceeded "in Illinois," as if the district court were exercising the power of that state. A state court might well have the necessary authority, see Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), but no matter. This suit is in a United States District Court, which exercises the judicial power of the nation. All class members and defendants live within the territorial jurisdiction of the district court, given sec.1965. If both the representatives and the defendants are satisfied with venue (which they are) individual class members have no complaint. Only two of the other objections require treatment: the propriety of class certification in light of potential differences among state laws, and the adequacy of the defendants' payments.

The district court found that the class meets all requirements of Rule 23(a) (numerosity, commonality, typicality, and adequacy of representation), plus the requirements of Rule 23(b)(3) (predominance of common over individual disputes and superiority of class disposition). It is hard to quarrel with these conclusions. The class is very large; each individual claim is small; the defendants handled all wire transfers the same way. Sometimes class treatment will be inappropriate even if all of these things are true, when recovery depends on law that varies materially from state to state. See, e.g., Isaacs v. Sprint Corp., 2001 U.S. App. Lexis 18324 (7th Cir. Aug. 14, 2001); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir. 2001); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995). The class representatives avoided this pitfall in two ways: first, they confined their theories to federal law plus aspects of state law that are uniform; second, they asked for certification of a class for settlement only, a step that the Supreme Court approved in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997). Given the settlement, no one need draw fine lines among state-law theories of relief. By relying principally on federal substantive law, the representative plaintiffs followed the pattern of antitrust and securities litigation, where nationwide classes are certified routinely even though every state has its own antitrust or securities law, and even though these state laws may differ in ways that could prevent class treatment if they supplied the principal theories of recovery. See, e.g., In re Prudential Insurance Co. Sales Practice Litigation, 148 F.3d 283, 314-15 (3d Cir. 1998). Many opinions, of which Amchem is one, 521 U.S. at 625, give consumer fraud as an example of a claim for which class treatment is appropriate.

Nonetheless, the objectors imply, these class representatives are inadequate because they failed to investigate and deploy every potential state-law theory. Why they should have an obligation to find some way to defeat class treatment is a mystery. It is best to bypass marginal theories if their presence would spoil the use of an aggregation device that on the whole is favorable to holders of small claims. Instead of requiring the plaintiffs to conduct what may be a snipe hunt, district judges should do what the court did here: Invite objectors to identify an available state-law theory that the representatives should have raised, and that if presented would have either increased the recovery or demonstrated the inappropriateness of class treatment.

Our objectors believe that they have found such a theory, rooted in a...