Opinion ID: 357378
Heading Depth: 2
Heading Rank: 2

Heading: Superiority of a Class Action

Text: 18 This is a classic case for a Rule 23(b)(3) class action. The claims of a large number of individuals can be adjudicated at one time, with less expense than would be incurred in any other form of litigation. The claims are relatively small, said even by the plaintiffs to average less than $100 each, and the question of law is one that applies alike to all. While it may be necessary to make individual fact determinations with respect to charges, if that question is reached, these will depend on objective criteria that can be organized by a computer, perhaps with some clerical assistance. It will not be necessary to hear evidence on each claim. 19 A number of similar class actions have been certified by district courts, 5 and appear to have been susceptible of management. Certification will achieve one of the primary purposes of the class action, enhanc(ing) the efficacy of private actions by permitting citizens to combine their limited resources to achieve a more powerful litigation posture. Hawaii v. Standard Oil Co. of California, 1972, 405 U.S. 251, 266, 92 S.Ct. 885, 893, 31 L.Ed.2d 184. We consider separately each of the factors that are argued to militate against certification.
20 The legal issues, as the trial court correctly noted, are whether the finance or service charge made is subject to the Mississippi statute on usury for such a charge might be considered exempt from the statute; whether the charge is interest and, if so, what rate of interest is permissible; and whether the rate actually paid in any given case is to be determined on a daily, monthly, or other basis, and what dates are to be used for determination of the rate. If the legal issues are resolved in favor of some or all of the members of the class, there would then be factual questions; whether the permissible rate was exceeded in any given case, and, if so, by what amount. 21 In determining these issues, it may (or may not, dependent upon Mississippi law), be important that the effective daily rate or monthly rate paid would vary from one account to another. If Mississippi law proscribes or permits a 11/2% Charge Per se, the effective daily rate will be unimportant. If Mississippi law determines whether a charge is usurious not by the nominal rate imposed but by referenced to the average daily rate charged, then whether the effective rate is based upon the period commencing when the bank receives the bill or when the customer receives the bill may determine whether the rate is usurious. Additionally, if the period ends on the date the charge is actually paid, as opposed to the date the charge is due, the effective rate charged a customer who paid his account five days after receiving a billing showing a finance charge (35 days after the charge was computed at the rate of 11/2% A month) would be different from the rate paid by another customer who paid 29 days after receiving the bill (59 days after the charge was compiled. 22 Thus, it may (or again, may not, dependent on whether Any charge made was usurious under Mississippi law, or whether every 11/2% Charge made was excessive, or whether some other standard applies) be necessary to reconstruct each card holder's account. Neither the trial court nor we can know in advance of a substantive decision whether it is necessary to make a computation (after all, the charge may be valid); or, if it is, how Mississippi law determines what is usurious and by what standards the computations are to be made. The best scenario for the utility of a class action is constructed if the trial court decides that the charge can never be considered usurious; the defendant disposes of 90,000 potential claims in one coup. The worst hypothesis will materialize if the court decides that Mississippi law requires the rate to be computed on each individual account on a daily-rate basis. 23 Whether the testimony of plaintiffs' expert (who has done a similar job before) or defendant's expert (who obviously fears disaster) be accepted, no computation need be made, and no costs need be incurred until the trial court determines the applicable Mississippi rule and, if Mississippi law appears to create liability, sets standards for its application, perhaps by an inexpensive preliminary sample of accounts. 24 Hence, common questions predominate for purposes of satisfying Rule 23(b)(3); the issues unique to each claim, if any are raised, are not so complex as to make the costs of determination prohibitive, or to require individual evidentiary hearings.2. Availability of Other Relief 25 The potential class members cannot effectively secure relief, if any is due, by another type of action. The suggestion by the defendant that each plaintiff might resort to a Mississippi small claims court assumes that the procedures of such courts are adequate for the sophisticated type of claim here presented, and that Mississippi state courts could handle this volume of suits. Moreover, the national bank defendant could remove every such case to federal court. 28 U.S.C. §§ 1337 and 1441(b); See Partain v. First Nat'l Bank, 5 Cir. 1972, 467 F.2d 167. Cf. Marquette Nat'l. Bank v. First Nat'l. Bank, D.Minn.1976, 422 F.Supp. 1346. 26 What is more important is that each plaintiff has the right to seek relief in federal court. If even one-twentieth of them chose to do so, the court would have 5000 suits to dispose of, approximately four times the total number of suits of all kinds filed with its clerk annually. 6 Should a federal forum be used for such individual actions, the cost of each action would surely increase, as would the cost of determining damages. The alleged statutory wrong may go unchallenged because the costs of proof exceed the likely recovery. See Wright & Miller, Federal Practice and Procedure, § 1779 at 61 (1972 ed.). 27 Even assuming Arguendo that multiple individual actions were feasible, they would be wasteful and uneconomical. This is precisely the problem that Rule 23 was designed to prevent. The very purpose to be served by a class action is the opportunity it affords to prevent a multiplicity of suits based on a wrong common to all. Green v. Wolf Corp., 2 Cir. 1968, 406 F.2d 291, Cert. denied, 1969, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766. 3. Impact on Defendant 28 In Truth-in-Lending actions, Congress has manifested its concern about suits potentially ruinous to defendants by limiting recovery. 15 U.S.C. § 1691e. There appears to be no comparable limit for class actions under the National Banking Act although recovery is limited in actions of this type to twice the amount of the interest paid. 12 U.S.C. § 86. See McCollum v. Hamilton Nat'l Bank, 1938, 303 U.S. 245, 247, 58 S.Ct. 568, 570, 82 L.Ed. 819; Coral Gables First Nat'l Bank v. Constructors of Fla., Inc., Fla.App. 1960, 119 So.2d 741; First Nat'l Bank v. Lowery, 1937, 234 Ala. 56, 173 So. 382; First Nat'l Bank v. Davis, 1911, 135 Ga. 687, 70 S.E. 246. We find no evidence that Congress otherwise sought to protect the net worth of national banks against damaging suits if, in fact, they overcharged their customers. If it be assumed, however, that courts should heed hurricane warnings about potential disasters to defendants and use them as a reason to evacuate imperilled defendants from class actions, then we consider this danger to Consurve to be less than catastrophic. If it is assumed that the defendant is correct when it states that about 35% Of the card holders paid no service charge, then the number of potential claimants is 60,000. If the average recovery is $100 each, the potential liability is large ($12,000,000) but not ruinous to a defendant with capital accounts of $45,000,000 and with assets of $520,000,000. 29 Unlike the situation under some statutes, we are not concerned with a fixed minimum penalty of a substantial amount for a technical violation, See Partain v. First Nat'l Bank of Montgomery, M.D.Ala.1973, 59 F.R.D. 56, 60-61, that if magnified, would exact a punishment unrelated to statutory purposes. Compare Ratner v. Chemical Bank N. Y. Trust Co., S.D.N.Y.1972, 54 F.R.D. 412. Because considering the financial impact of a judgment presupposes success on the merits and requires the trial court to express an opinion on the harshness Vel non of a particular remedy prior to trial itself, it ought to be allowed only in extreme cases.4. Mississippi Usury Law and Aggregation 30 Nor is the attitude of Mississippi law disfavoring usury suits sufficient to deter the entertainment of this class action. Usury claims are penal in Mississippi and are viewed as personal to the borrower; the aggregation of such claims is condemned. 7 Fry v. Layton, 1941, 191 Miss. 17, 2 So.2d 561. 8 Of course, we deal here with a claim against a national bank, controlled in matters of procedure by the Federal Rules of Civil Procedure. John R. Alley & Co. v. Federal Nat'l Bank of Shawnee, 10 Cir. 1942, 124 F.2d 995; the action is regulated by federal law, although the federal statute may look to local law as surrogate federal law for determining the permissible interest charges. 12 U.S.C. § 85. 9 As we said in Partain v. First Nat'l Bank of Montgomery, 5 Cir. 1972, 467 F.2d 167, 173: 31 This interplay between the federal statute and State usury laws is elucidated by Evans v. National Bank, 251 U.S. 108, 40 S.Ct. 58, 64 L.Ed. 171 (1919): The National Bank Act establishes a system of general regulations. It adopts usury laws of the states Only insofar as they severally fix the rate of interest; by National Bank v. Johnson, 104 U.S. 271, 26 L.Ed. 742 (1881): The sole particular in which national banks are placed on an equality with natural persons is as to the Rate of interest, and not as to the character of contracts they are authorized to make . . . . 32 (Emphasis added & original) 33 Hence, the state law with respect to aggregating usury claims that derive from state law is inapposite with respect to claims founded on federal statute, and would yield to Rule 23, F.R.C.P., even if relevant. 5. Manageability 34 The case presents no unusual difficulties in class management. While the class is large, it is peculiarly manageable. All the members live in one state, the defendant has each member's address on a computer; both that address and the itemized history of each account can readily be obtained. 35 After substantive rulings are made on the basic issues of liability and damage computation, the case is so manageable that a computer, either in the bank itself or leased elsewhere, can handle its Administration as distinguished from the ultimate computation which may in some instances require clerical personnel. The task is not a particularly difficult one when compared to the work that the bank ordinarily performs on its own computer. Under any theory the work involved in the refund computation procedure will represent only a small fraction of the work originally done on the credit card accounts by the bank's computer operation. The evidence shows that this ordinary work was done with such comparative ease that the computer could also do all of the other work of the bank, plus the work of 60 or 70 other banks under contract with it and continue to advertise for more business. 36 We do not agree with the trial court that there is a serious possibility that the defendant, faced with the enormous task of defending these thousands of claims, might be pressured into a compromise settlement or even a compromise on procedure to minimize the enormous cost and disruption of its normal business functions. We do not minimize the effect of strike actions, and we certainly do not applaud them. But, as we have indicated, the specter of large cost will materialize only if, after a preliminary hearing, it appears likely that damages are actually due a large number of class members. Only then, after liability is determined, will there be substantial cost, either in defense or in payment of damages. 37 The lower court alluded to the potential problem of counter-claims. This likewise can be handled, if that point is reached, by adopting standards and classifying the claims. See Weit v. Continental Illinois Nat'l. Bank, N.D.Ill.1973, 60 F.R.D. 5. If the court should conclude at any time that the entire group of counter-claims makes the plaintiffs' claims on behalf of such persons unmanageable, the court has the continuing authority under Rule 23 to issue a supplemental order excluding counter-claim defendants from the plaintiff class or separating and severing the class into two different classes, one with counter-claims and one without counter-claims. As Judge Johnson said in Partain, supra : 38 The potential assertion of counter claims against these few members of the proposed class cannot be allowed to defeat an otherwise valid class action when to do so would effectively deprive thousands of class members of the relief to which they are entitled. At the same time the rights of the defendant should be protected. 39 59 F.R.D. at 59. 40 Of course, the easiest way for any court to handle complex class litigation is simply to deny certification; this may have the real effect of permitting a defendant to violate a federal statute either with impunity or minor expense. In the present case few of the individual claimants would have the resources necessary to litigate against a well-financed defendant. This consideration underlies the decision of the Seventh Circuit in Hohmann v. Packard Instrument Co., 7 Cir. 1968, 399 F.2d 711, which found a similar situation a classic one for sustaining the class action involved. Quoting its prior decision in Weeks v. Bareco Oil Company, 7 Cir. 1941, 125 F.2d 84, 90, the court said: 41 To permit the defendants to contest liability with each claimant in a single, separate suit, would, in many cases give defendants an advantage which would be almost equivalent to closing the door of justice to all small claimants. This is what we think the class suit practice was to prevent. 42 399 F.2d at 715. 43 For these reasons, we REVERSE and REMAND to the trial court for further proceedings consistent with this opinion. 44