Opinion ID: 2636870
Heading Depth: 2
Heading Rank: 3

Heading: The Penalty Class

Text: Linder's penalty class claim alleges that Thrifty violated the Credit Card Act by using credit card forms with a preprinted space for cardholders to fill in their telephone numbers. (See § 1747.8.) The trial court denied Linder's motion for certification in its entirety, but its minute order addressed only the proposed surcharge class. In the Court of Appeal, Thrifty repeated the same arguments it made to the trial court to support denial of the penalty class certification. First, Thrifty contended Linder could not allege or show that Thrifty refused to complete credit card transactions without the personal information, that it used the information for any purpose or benefit, or that its use of unlawful forms damaged class members. Second, Thrifty asserted the evidence would exonerate it from any liability pursuant to section 1747.8, subdivision (e), which provides that no civil penalty shall be assessed for a violation of this section if the defendant shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error made notwithstanding the defendant's maintenance of procedures reasonably adopted to avoid such an error. Finally, Thrifty argued the penalty class was not suited to class treatment because Thrifty would face economic annihilation through the aggregation of statutory penalties. The Court of Appeal agreed certification was improper, finding that the aggregate amount of the potential penalties would be either too small to support the burdens of class certification or too onerous in relation to the alleged wrongdoing. To the extent Thrifty's first and second contentions challenged the sufficiency of the penalty claim and argued the merits of an anticipated defense, they were not proper considerations on a motion for certification. Accordingly, the lower courts acted appropriately to the extent they implicitly rejected such contentions. We now turn to the concern over aggregate penalty amounts. Section 1747.8, subdivision (e) provides in relevant part that violators of the statute shall be subject to a civil penalty not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation, to be assessed and collected in a civil action brought by the person paying with a credit card.... In assessing Thrifty's potential liability, the Court of Appeal viewed the statutory penalties as calling for either (1) a total penalty of $1,250 for the entire class (by regarding Linder as one violation and the class as a whole as a second violation), which would not justify the cost and effort of class treatment, or (2) one $250 penalty for Linder and additional penalties of $1,000 for each other member of the class, which could very well bankrupt Thrifty by the imposition of penalties far exceeding anything the Legislature could have had in mind when it enacted the statute. The court then expressed its agreement with Ratner v. Chemical Bank New York Trust Company (S.D.N.Y.1972) 54 F.R.D. 412 ( Ratner which held that a class action is not the superior method for adjudicating a controversy where, among other things, statutory damages would be wholly out of proportion to the alleged wrongdoing. The foregoing analysis is flawed. First, the Court of Appeal plainly erred in concluding that only two violations of section 1747.8 could be found if Thrifty is shown to have presented unlawful forms to thousands of cardholders. Second, section 1747.8 does not mandate fixed penalties; rather, it sets maximum penalties of $250 for the first violation and $1,000 for each subsequent violation. (§ 1747.8, subd. (e).) Accordingly, the situation here is vastly different from that in Ratner, supra, 54 F.R.D. 412, where the statute at issue provided for minimum damages of $100 and thus implicated minimum class damages in the neighborhood of $13 million. (See 54 F.R.D. at pp. 414, 416.) [10] In sum, the Court of Appeal's analysis was premised upon a false dilemma. Contrary to the court's assumption, there is an entire range of penalties available between what was perceived as the too small amount of $1,250 for the entire class and the too onerous amount of $1,000 for each class member. Since the dilemma contemplated on appeal does not actually exist, it constitutes an insufficient basis for upholding the denial of certification.