Source: https://class-law.com/2010/09/29/ninth-circuit-reverses-denial-of-class-certification-holding-that-disproportionality-of-actual-harm-suffered-enormity-of-the-potential-liability-and-good-faith-compliance-fail-to-justify-denial-of/
Timestamp: 2019-04-24 23:54:47+00:00

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With respect to disproportionality, the court concluded that “passing reference to denial of class certification [in a Congressional report relating the amendment of FACTA] is sufficient to overcome the plain text of the statute and congressional silence on the issue of class relief, both of which strongly suggest that the proportionality of the damages is an irrelevant consideration in effectuating FACTA’s compensatory and deterrence purposes.” Id. *11.
It is widely accepted that class certification “may force a defendant to settle rather than incur the costs of defending a class action and run the risk of potentially ruinous liability.” Fed.R.Civ.P. 23, Advisory Committee Notes to 1998 Amendments. Indeed, “[e]ven in the mine-run case, a class action can result in ‘potentially ruinous liability.’ ” Shady Grove, 130 S.Ct. at 1465 n. 3 (Ginsburg, J., dissenting) (quoting Fed.R.Civ.P. 23, Advisory Committee Notes to 1998 Amendments); see also Prado-Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1274 (11th Cir.2000) (“[E]ven ordinary class certification decisions by their very nature may radically reshape a lawsuit and significantly alter the risk-benefit calculation of the parties….”); Turoff v. Union Oil Co. of Cal., 61 F.R.D. 51, 54 (N.D.Ohio 1973) (“In many fields, ranging from mortgage foreclosures to securities laws, the courts enforce recoveries which result in bankruptcy without indulging in the legislative function of ruling that the law permitting such a recovery could not have been intended to harm anyone to such a degree.”).
The decision to certify a class thus necessarily “places pressure on the defendant to settle even unmeritorious claims.” Shady Grove, 130 S.Ct. at 1465 n. 3 (Ginsburg, J., dissenting). See also Coopers & Lybrand v. Livesay, 437 U.S. 463, 476 (1978) (“Certification of a large class may so increase the defendant’s potential damages liability and litigation costs that he may find it economically prudent to settle and to abandon a meritorious defense.”). We have held, however, that “[t]he fairness of the pressure i.e., the sociological merits of the small claims class action[,] is not a question for us to decide.” Blackie v. Barrack, 524 F.2d 891, 899 (9th Cir.1975). [FN8] Accord Chamberlan v. Ford Motor Co., 402 F.3d 952, 960 (9th Cir.2005) (rejecting the notion that certification of a large class creates pressure to settle that is per se unreasonable); Klay, 382 F .3d at 1275 (“Mere pressure to settle is not a sufficient reason for a court to avoid certifying an otherwise meritorious class action suit.”); In re Visa Check/Master Money Antitrust Litig., 280 F.3d 124, 145 (2d Cir.2001), superseded by statute on other grounds as stated in Attenborough v. Constr. & Gen. Bldg. Laborers’ Local 79, 238 F.R.D. 82, 100 (S.D.N.Y.2006) (holding that the sheer size of a class–and the concomitant size of liability–“alone cannot defeat an otherwise proper certification”). If the size of a defendant’s potential liability alone was a sufficient reason to deny class certification, however, the very purpose of Rule 23(b)(3)–“to allow integration of numerous small individual claims into a single powerful unit”–would be substantially undermined. Blackie, 524 F.2d at 899.
Id. *12. The court reasoned that “whether the potential for enormous liability can justify a denial of class certification depends on congressional intent.” Id. *13. The court concluded that “allowing consideration of the potential enormity of any damages award would undermine the compensatory and deterrent purposes of FACTA.” Id.
The court also rejected defendant’s argument that a demonstration of good faith after filing of the complaint is a legitimate ground to deny certification under Rule 23(b)(3). Id.
We hold that the district court’s consideration of AMC’s post-complaint good faith compliance was inconsistent with congressional intent in enacting FACTA. Congress did not include any safe harbor or otherwise limit damages for good faith compliance with the statute after an alleged violation. The mere fact that AMC changed the content of its receipts to comply with FACTA after the lawsuit was filed does not suggest that certification of the class would have limited deterrent effect. To the contrary, we are quite sure that certification of a class here would preserve, if not amplify, the deterrent effect of FACTA. Because Bateman’s complaint clearly alleged that he was seeking classwide damages, we can reasonably surmise that AMC’s speedy compliance with FACTA was promoted, at least in part, by the specter of a substantial damages award. Thus, to deny class certification on this ground would communicate to other potential violators that, as long as they comply with FACTA after a complaint is filed, they may avoid liability for widespread violations. In other words, to deny class certification on this ground undermines the deterrent effect of FACTA itself.
Before Circuit Judges Betty B. Fletcher and Richard A. Paez and Senior District Judge Donald E. Walter (Judge Walter is a District Judge in the Western District of Louisiana who sat by designation). Circuit Judge Paez wrote the opinion for the court.
Appeal from the United States District Court for the Central District of California, Hon. Florence-Marie Cooper. D.C. No. 2:07-cv-00171-FMC-AJW.
Gregory N. Karasik, Spiro Moss LLP, Los Angeles, CA, for plaintiff-appellant Michael Bateman.
Robert H. Platt, Manatt, Phelps & Phillips LLP, Los Angeles, CA, for defendant-appellee American Multi-Cinema, Inc.
Adel James Chareq, Hudson Cook LLP, Washington D.C., for amicus curiae Consumer Data Industry Association.

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