H & L Spotlight Brief

Horvitz & Levy LLP is pleased to feature one of its appellate briefs in a pending or recently decided appeal on a rotating quarterly basis. This quarter, we spotlight an amicus brief submitted on behalf of the Chamber of Commerce of the United States of America in an appeal pending before the U.S. Court of Appeals for the Ninth Circuit, Soualian v. International Coffee & Tea LLC, Case Number 07-56377. (Read the amicus brief.)

The Soualian appeal presents the Ninth Circuit with an important legal issue concerning the extent of a federal district court's discretion to decide whether a damages class action is the superior method of adjudication.

The plaintiff in Soualian received a single receipt from the defendant that included her credit card's expiration date. She brought a damages class action, arguing that the defendant's receipts violated the Fair and Accurate Credit Transactions Act, which prohibits those who accept credit and debit cards in business transactions from including "more than the last 5 digits of the card['s] number or the [card's] expiration date" on certain electronically-printed receipts. 15 U.S.C.A. section 1681c(g). When a business willfully violates this law, consumers are entitled to recover between $100 to $1,000 in statutory damages, as well as attorney's fees and costs, without showing they suffered any actual harm. See 15 U.S.C.A. sections 1681n(a)(1)(A), (a)(3). They may also seek punitive damages. See 15 U.S.C.A. section 1681n(a)(2). According to the district court in Soualian, if a class action were to be certified in that case, the defendant would face between approximately $4.8 million and $48 million in classwide statutory damages alone.

Reportedly, various plaintiffs have filed hundreds of class actions throughout the country alleging violations of the Fair and Accurate Credit Transactions Act, even though experts and courts indicate that consumers suffer no harm when their credit or debit card's expiration date is included on a receipt. Given the number of sales transactions at issue in these class actions nationwide, consumers' entitlement to statutory damages without proof of harm as well as attorney's fees and costs (not to mention the availability of punitive damages) exposes businesses to enormous liability.

District courts may not certify a damages class action if other methods of adjudication are just as good as or better than class treatment. The question before the Ninth Circuit in Soualian is whether federal district courts have the discretion to deny class certification for failing to satisfy this so-called "superiority" requirement where a class action would expose a defendant to staggering classwide damages far out of proportion to any harm suffered, especially when a federal law provides potential class members with every incentive to bring individual lawsuits to vindicate their statutory rights.

The amicus brief argues that district courts enjoy the broad and pragmatic discretion to deny class certification under these circumstances, examining (1) the purpose of the superiority requirement, which mitigates the dangers of a damages class action by requiring courts to balance the benefits of a class action with the undesirable results it could bring about, (2) the policy rationales for continuing to vigorously enforce the limits this balancing process imposes on class certification, and (3) how courts have applied the superiority requirement to respect this balancing process. The amicus brief also addresses the devastating consequences many businesses could suffer and the harms the public at large may face if federal courts certified class actions in the hundreds of Fair and Accurate Credit Transactions Act lawsuits filed nationwide.

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