13 APPEAL NO. 13-8018 NO. UNITED STATES COURT OF...

NO. ________________________

________________________________________________________________________

UNITED STATES COURT OF APPEALSFOR THE SEVENTH CIRCUIT

_________________________________________________________________________

DAVID HUGHES, individually and on behalf of all others similarly situated,

Plaintiff – Petitioner

KORE OF INDIANA ENTERPRISE, INC.,KORE ENTERPRISES, INC. and

ON KORE, LLCDefendants – Respondents

__________________________________________________________________

On Petition for Permission to Appeal from the U.S. District Court, Southern District of Indiana, Indianapolis Division,

Case No. 1:11-cv-01329-JMS-MJDHonorable Jane Magnus-Stinson, Judge

________________________________________________________________

FED. R. CIV. P 23(f) PETITION FOR PERMISSION TO APPEAL

Eric G. CalhounTravis & Calhoun, P.C.1000 Providence Towers East5001 Spring Valley RoadDallas, Texas 75244(972) 934-4100 Telephone(972) 934-4101 Facsimile

Ryan FrasherThe Frasher Law Firm, P.C. 155 East Market Street, Ste. 450Indianapolis, IN 46204 (317) 634-5544 Telephone(317) 630-4824 Facsimile

ATTORNEYS FOR PLAINTIFF – PETITIONERDAVID HUGHES

SHORT RECORDFILED 7/31/13APPEAL NO. 13-8018

Case: 13-8018 Document: 1 Filed: 07/31/2013 Pages: 40

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CERTIFICATE OF INTERESTED PERSONS

Pursuant to Fed. R. App. P 12(b), Petitioner certifies as follows:

The undersigned counsel of record certifies that the following listed persons and entities

as described in the Fed. R. App. P 12(b), have an interest in the outcome of this case. These

representations are made in order that the judges of this Court may evaluate possible

disqualification or recusal.

Plaintiffs – Petitioner:

David Hughesand all other similarly situated

Attorneys for Plaintiffs – Petitioner:

Eric G. CalhounTravis & Calhoun, P.C.1000 Providence Towers East5001 Spring Valley RoadDallas, Texas 75244(972) 934-4100 Telephone(972) 934-4101 Facsimile

Ryan FrasherThe Frasher Law Firm, P.C. 155 East Market Street, Ste. 450Indianapolis, IN 46204 (317) 634-5544 Telephone(317) 630-4824 Facsimile

Defendants – Respondents:

Kore of Indiana Enterprises, Inc.Kore Enterprises, Inc. On Kore, LLC

Attorneys for Defendants – Respondents:

Thomas E. Rosta METZGER ROSTA LLP 32 South 9th Street Noblesville, IN 46060


ii

(317) 219-4606

Judicial Officer:

Jane Magnus-StinsonUnited States District Judge Southern District of Indiana

Eric G. Calhoun/S/ Eric G. Calhoun

Attorney of Record forPlaintiff - Petitioner


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TABLE OF CONTENTS

I. PETITION FOR PERMISSION TO APPEAL................................................................... 1

II. STATEMENT OF FACTS AND PROCEEDINGS BELOW ........................................... 2

A. The Claims .................................................................................................................... 2

B. Electronic Funds Transfer Act ...................................................................................... 3

C. Class Certification ......................................................................................................... 6

III. QUESTIONS PRESENTED .............................................................................................. 7

IV. RELIEF SOUGHT ............................................................................................................. 7

V. REASONS WHY THE APPEAL SHOULD BE ALLOWED .......................................... 7

A. The Basis for Appeal Under Rule of Civil Procedure 23(f) ........................................ 7

B. The Court Erred by Finding Individual Lawsuits Superior to Class Treatment due to the Availability of Individual Statutory Damages ..................................................... 9

C. The District Court Erred by Decertifying the Class Due to Impracticability of ...........Individual Notice ..................................................................................................... 11

D. The Court Erred in Finding that the "Consumer Account" Definition per se Precludes Class Treatment ........................................................................................................ 13

VI. CONCLUSION ................................................................................................................ 15


iv

TABLE OF AUTHORITIES

Anthony v. Fifth Third Bank (Chicago),

Cases

No. 08-C-4359 (N.D. Ill. April 28, 2009).................................................................................. 13

Arbelo v. Charter One Bank, No. 08- 1516 (N.D. Ill. June 16, 2009)...................................................................................... 13

Arbelo v. L&M Produce, Inc., No. 09-C-3428 (N.D. Ill. December 21, 2009).......................................................................... 12

Armes v. Sogro, Inc., 2011 WL 1197537 (E.D. Wis. March 29, 2011)........................................ 11

Arthur v. Valwood Park Federal Credit Union, No. 3:10-cv-00952-B (N.D. Tex. March 3, 2011)..................................................................... 12

Barlo v. First Financial Bank, N.A., No. 2:10-cv-235 (N.D. Ind. March 18, 2011)............................................................................ 12

Barnett v. Experian Information Solutions,No. 2-cv-175, 2004 WL 4032909 (E. D. Tex., Sept. 30, 2004) ................................................ 15

Barreto v. Center Bank, No. 10-cv-6554 (N.D. Ill. March 24, 2011) .............................................................................. 12

Blair v. Equifax Check Services, Inc., 181 F.3d 832 (7th Cir. 1999) ........................................................................................................ 8

Breslow v. Prudential-Bache Properties,1994 WL 478611 (N.D. Ill. Sept. 1, 1994)................................................................................ 12

Bruner v. America United Bank & Trust Company, No. 08-C-124 (N.D. Ill. October 29, 2008) ............................................................................... 13

Buechler v. G.C.K., Inc., No. 1:10-cv-3188-ELH (Md. July 13, 2011)............................................................................. 13

Burns v. First American Bank, 2006 WL 3754820 (N.D. Ill. December 19, 2006)...................................................................... 9

Carbajal v. Capital One¸ 219 F.R.D. 437 (N.D. Ill. 2004) .............................................................................................. 1, 8

CE Design v. Beaty Constr., Inc.,2009 WL 192481 (N.D. Ill. Jan. 26, 2009)................................................................................ 13


v

Clemmer v. Key Bank, N.A.,539 F.3d 349 (6th Cir. 2008) ...................................................................................................... 15

Couch v. Indians, Inc., No. 1:11-00963-MJD-WTL (S.D. Ind., June 25, 2012) ............................................................ 12

Dover v. GNC Community Federal Credit Union, No. 09-cv-810 (W.D. Pa. February 16, 2010) ........................................................................... 13

Dragotta v. Northwest Bancorp, Inc., d/b/a Northwest Savings Bank, No. 09-cv-632 (W.D. Pa. November 23, 2009)......................................................................... 13

Escalante v. Lincoln Park Savings Bank, No. 08-C-6152 (N.D. Ill. April 14, 2009).................................................................................. 13

Escalante v. Travelex Currency Services, Inc. f/k/a Travelex America, Inc. d/b/a Travelex, No 09-C-2209 (N.D. Ill. September 16, 2009).......................................................................... 12

Gaylor v. Comala Credit Union, Cause No. 2:10-cv-00725-MHT (M.D. Ala. November 17, 2011) ........................................... 12

Greiff v. First Commonwealth Bank, No. 10-1224 (W.D. Pa. March 3, 2011) .................................................................................... 13

Hart v. Guardian Credit Union, Cause No. 2:10-cv-00855 (M.D. Ala. June 16, 2011) .............. 12

Howard v. The Canandaigua National Bank and Trust Company, No. 09-cv-6513 (November 3, 2010) ........................................................................................ 13

Hughes v. Cardinal Federal Savings & Loan Assoc.,97 F.R.D. 653 (S.D. Ohio 1983)................................................................................................ 14

Hull v. Owen County State Bank,No. 1:11-cv-1303-SEB-MJD (S.D. Ind., January 14, 2013) ..................................................... 12

Jackman v. Global Cash Access Holdings, Inc., No 09-cv-897-TFM (W.D. Pa. December 3, 2009)................................................................... 13

Jackson v. JSC Federal Credit Union, No. H-10-2976 (S.D. Tex. January 13, 2011) ........................................................................... 12

Johnson v. West Suburban Bank, 225 F.3d 366 (3rd Cir. 2000) ........................................................................................................ 9

Kohen v. Pacific Investment Management Company, LLC 571 F.3d 672 (7th Cir. 2009) ...................................................................................................... 14


vi

Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997) .................................................................................................... 1, 8

Markoff v. Independent Bank, No. 09-12639 (E.D. Mich. January 18, 2011) ........................................................................... 12

Marsh v. ATM Capital Management, Inc.,No. 07 C 5808 (N.D. Ill. July 21, 2008) .................................................................................... 13

Matz v. Household Intern. Tax Reduction Inv. Plan,687 F. 3d 824 (7th Cir. 2012) ....................................................................................................... 8

Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781 (7th Cir. 2004) ...................................................................................................... 11

Murry v. GMAC Mortgage Corp.,434 F.3d 948 (7th Cir. 2006) ........................................................................................................ 9

Nolf v. Allegheny Valley Bank of Pittsburgh, No. 09-645 (W.D. Pa. October 16, 2009).................................................................................. 13

Osada v. Experian Information Solutions, Inc., 2012 WL 1050067 (N.D. Ill. March 28, 2012).................................................................... 10, 11

Parker v. First-Citizens Bank & Trust Company, et al, No. 3;09-0588 (M.D. Tenn. October 1, 2009)........................................................................... 13

Parker v. Suntrust Bank, No. 3:09 0706 (M.D. Tenn. December 21, 2009) ..................................................................... 13

Poechmann v. Alerus Financial, National Association,No. 10-cv-4186 (Minn. July 1, 2011)........................................................................................ 12

Polevoy v. Devon Bank, No. 08-C-4822 (N.D. Ill. February 3, 2009).............................................................................. 13

Popovic v. Dollar Bank, No. 2:10-cv-00432-NBF (W.D. Pa. September 3, 2010) App .................................................. 13

Popovic v. USX Federal Credit Union, No. 09-cv-631 (W.D. Pa. February 17, 2010) ........................................................................... 13

Reich v. Unity One Credit Union, No 0:10-cv-00606-JJG (Minn. May 05, 2011).......................................................................... 12


vii

Sanchez v. Lowell Lebermann, Inc.,79 F.R.D 21 (W.D. Tex. 1978).................................................................................................. 14

Shurland v. Bacci Café & Pizzeria on Ogden, Inc., 271 F.R.D. 139 (N.D. Ill. 2011) ................................................................................................ 13

Siragusa v. Advance Financial Federal Credit Union, No. 2:09-cv-328-TLS (N.D. Ind. March 16, 2010) ................................................................... 12

Stone v. Corus Bank, N.A., No. 08-cv-1746 (N.D. Ill. April 9, 2009) .................................................................................. 12

Stone v. Marquette Bank, No 08-cv-6388 (N.D. Ill. June 10, 2009)................................................................................... 12

Thomas v. Mid-Missouri Bank, No. 10-3139-CV-S-ODS (W.D. MO. December 9, 2010) ........................................................ 12

Vitatoe v. Citizens State Bank of New Castle, No. 1:11-cv-1312 WTL-DML (S.D. Ind., October 4, 2012)..................................................... 12

Walker v. Calusa Inv., LLC, 244 F.R.D. 502 (S.D. Ind. 2007) ................................................................................................. 8

Wells v. McDonough,188 F.R.D. 277 (N.D. Ill. 1999) (FDCPA)............................................................................... 14

Young v. First Federal Savings & Loan,1:11-cv-1242-MJD-JMS (S.D. Ind., November 16, 2012)........................................................ 12

12 CFR § 205.16(c)......................................................................................................................... 3

Regulations


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15 U.S.C. § 1693 (d)(3B)................................................................................................................ 3

Statutes

15 U.S.C. § 1693m(a)(2)(B) ....................................................................................................... 2, 615 U.S.C. §1603 ("TILA")............................................................................................................ 1415 U.S.C. §1692a(5) ("FDCPA") ................................................................................................. 1415. U.S.C. § 1693 (d)(3)(C) ............................................................................................................ 3

Treatises

3 NEWBERG ON CLASS ACTIONS § 8:4 (4th ed. 2013) .................................................................... 126 NEWBERG ON CLASS ACTIONS § 21:1 (4th ed. 2013) .................................................................... 96 NEWBERG ON CLASS ACTIONS § 21:15 (4th ed. 2013). .................................................................. 9


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I. PETITION FOR PERMISSION TO APPEAL

Petitioner, David Hughes, submits this petition for permission to appeal the district

court's July 10, 2013, order decertifying class (the "Order") (attached hereto as Exhibit A). The

district court sua sponte decertified a class of consumers that were charged illegal fees in

violation of the Electronic Funds Transfer Act, 15 U.S.C. § 1631 et seq ("EFTA") at Defendant

Kore of Indiana Enterprise, Inc.'s ("Defendant") automated teller machines ("ATMs") on several

grounds. Defendant does not take a position on this Petition and counsel for Defendant

represented that he does not intend to file a brief in opposition.

First, the district court erred in its conclusion that because the EFTA provides for

individual damages and attorney's fees, individual actions are superior to a class action. The

district court's ruling directly conflicts with Seventh Circuit precedent, other opinions from the

Southern District of Indiana and other district court decisions in this Circuit.1 The EFTA

expressly provides for class action treatment and a class measure for damages.2

Second, the district court erred by finding the class unmanageable where direct,

individual notice to class members could not be made in a practical manner. There is no list of

names and addresses of persons that used Defendant's ATMs. Respectfully, the district court

Accepting the

district court's rationale would effectively preclude EFTA class actions and class actions under

similar consumer protection statutes. This would defeat congressional intent to allow a class

remedy and undermine Federal Rule of Civil Procedure 23's ("Rule 23") purposes. Moreover, the

likelihood of individual lawsuits to prosecute consumer's claims is remote, if not non-existent.

1 See Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997) (holding that de minimus recovery for class members does not preclude class treatment); Carbajal v. Capital One¸ 219 F.R.D. 437, 444 (N.D. Ill. 2004) (holding that the availability of individual statutory damages does not preclude class treatment under analogous provisions of the FDCPA.); Walker v. Calusa Inv., LLC, 244 F.R.D. 502, 511 (S.D. Ind. 2007).

2 15 U.S.C. § 1693m(a)(2)(B).


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misapplied Rule 23(c)(2)(B) which requires "the best notice that is practicable under the

circumstances" to class members. Rule 23 does not require actual, direct notice to all class

members when to do so would not be practical given the amounts at stake, the legal and practical

impediments to individual notice and the cost of such notice. Rather, notice should be given by

alternative means and the class should not be decertified. Moreover, in analogous cases other

forms of notice have routinely been found by numerous courts to satisfy Rule 23's best

practicable notice standard and due process. In those cases, the classes have not been

unmanageable due to the absence of direct notice.

Finally, the district court erred by sua sponte decertifying the class on the grounds that it

would be problematic to identify which consumers qualified for protection under the EFTA. No

evidence or argument was presented by Defendant that any of the persons that were charged a

fee at its ATMs did not meet the test for a consumer under the EFTA. Again, this rationale, that

identifying consumer accounts is an unmanageable individual issue, would preclude virtually all

class actions under the EFTA and other similar consumer protection statutes. Notably, none of

these arguments were raised by Defendant in opposition to class certification.

II. STATEMENT OF FACTS AND PROCEEDINGS BELOW

A. The Claims

Plaintiff filed his amended class action complaint against Defendant Kore of Indiana

Enterprise, Inc., Kore Enterprises, Inc. and On Kore, LLC as co-defendants (collectively

“Defendant” or “Defendants”). [ECF Doc. 52]. The complaint alleged violations of the EFTA.

The lawsuit alleges that Defendant is the owner and operator of two ATMs located at: (1) 814

Broad Ripple Avenue, Indianapolis, IN 46220, inside Average Joe’s, a bar; and (2) 826 Broad

Ripple Avenue, Indianapolis, IN 46220, inside the Rock Lobster General Store, (the "ATMs").

.


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The complaint further alleged that Defendant’s ATMs did not have the required exterior notice

that a person using the ATMs would be charged a fee. The EFTA and its implementing

regulation, 12 CFR § 205 et seq., commonly known as Regulation E, specifically required that in

order to charge a fee for providing electronic funds transfer services, the ATM must have a

notice posted on the exterior of the machine in a prominent and conspicuous location, stating that

a fee will be charged.3 In the absence of the exterior notice, a fee may not be charged.4

B. Electronic Funds Transfer Act5

In 1999 Congress passed legislation establishing that while financial institutions and

other operators of ATMs have the authority to impose usage fees on out-of-network consumers,

they must first comply with certain disclosure requirements calculated to ensure transparency

with respect to the fees. The bill, known as the ATM Fee Reform Act, was sponsored by

Congresswoman Marge Roukema (R. New Jersey), then Chairwoman of the House Financial

Institutions Subcommittee. It was included as Title VII of the Gramm-Leach-Bliley Act that

deregulated the banking, insurance and securities industry by repealing the Glass-Steagall Act

(See Pub. L. No. 106-102, §§ 701-05, 113 Stat. 1338 (1999)), and was ultimately codified as part

of the EFTA, 15 U.S.C. § 1693b, et seq., which in turn was originally enacted as an amendment

to the Consumer Credit Protection Act, 15 U.S.C. § 1601, et seq., (“CCPA”).

15 U.S.C. § 1693b(d)(3)(A) and (B), and the implementing regulation, 12 C.F.R. §

205.16(b) and (c), require an ATM operator who imposes a fee on a consumer for "host transfer

services" (an electronic fund transfer or a balance inquiry) to provide notice to the consumer of

3 See 12 CFR § 205.16(c); 15 U.S.C. § 1693 (d)(3B).4 15. U.S.C. § 1693 (d)(3)(C); 12 CFR 205.16(e).5 The EFTA was amended in January 2013. However, the amendment was not retroactive and has no bearing on this case.


4

the fee before the consumer is committed to the transaction. Specifically, 12 C.F.R. § 205.16(b)

states:

General. An automated teller machine operator that imposes a fee on a consumer for initiating an electronic fund transfer or a balance inquiry shall:

(1) Provide notice that a fee will be imposed for providing electronic fundtransfer services or a balance inquiry; and

(2) Disclose the amount of the fee.

15 U.S.C. § 1693b(d)(3)(B), and its implementing regulation, 12 C.F.R. § 205.16(c),

specifies the notice to be provided to consumers. 12 C.F.R. § 205.16(c) states:

(c) Notice requirement. To meet the requirements of paragraph (b) of this section, an automated teller machine operator must comply with the following:

(1) On the machine. Post in a prominent and conspicuous location onor at the automated teller machine a notice that:

(i) A fee will be imposed for providing electronic fund transferservices or for a balance inquiry; or

(ii) A fee may be imposed for providing electronic fund transfer services or for a balance inquiry, but the notice in this paragraph (c)(1)(ii) may be substituted for the notice in paragraph (c)(1)(i) only if there are circumstances under which a fee will not be imposed for such services; and

(2) Screen or paper notice. Provide the notice required by paragraphs(b)(1) and (b)(2) of this section either by showing it on the screen of theautomated teller machine or by providing it on paper, before the consumer is committed to paying a fee.

Pursuant to this regulation, the notice physically attached to the ATM must comply with 12

C.F.R. § 205.16(c), either by stating that a fee will be imposed, or if there are circumstances in

which a fee will not be imposed, that a fee may be imposed.

15 U.S.C. § 1693b(d)(3)(C), and its implementing regulation, 12 C.F.R. §205.16(e),

provide that no fee may be imposed by an ATM operating in connection with any electronic fund


5

transfer initiated by a consumer for which a notice is required unless the consumer is provided

the notices required pursuant to 12 C.F.R. § 205.16(c). Specifically, 15 U.S.C. § 1693b(d)(3)(C)

states in relevant part:

(C) Prohibition on fees not properly disclosed and explicitly assumed byconsumer. No fee may be imposed by any automated teller machine operator in connection with any electronic fund transfer initiated by a consumer for which anotice is required under subparagraph (A), unless – (i) the consumer receives suchnotice in accordance with subparagraph (B); and (ii) the consumer elects tocontinue in the manner necessary to effect the transaction after receiving suchnotice.

Similarly, 12 C.F.R. § 205.16(e) provides that:

(e) Imposition of fee. An automated teller machine operator may impose a fee on aconsumer for initiating an electronic fund transfer or a balance inquiry only if

(1) The consumer is provided the notices required under paragraph (c) of this section, and

(2) The consumer elects to continue the transaction or inquiry after receiving such notices.

In connection with 2006 amendments to the EFTA, the Board of Governors of the

Federal Reserve published its Final Rule and official staff interpretation which, inter alia,

explained the EFTA's disclosure requirements as follows:

The final rule clarifies the two-part disclosure scheme established in Section904(d)(3)(B) of the EFTA. The first disclosure, on ATM signage posted on orat the ATM, allows consumers to identify quickly ATM that generally chargea fee for use. This disclosure is not intended to provide a complete disclosureof the fees associated with the particular type of transaction the consumerseeks to conduct. Until a consumer uses his or her card at an ATM, the ATMoperator does not know whether a surcharge will be imposed for that particularconsumer. Rather, it is the second, more specific disclosure, made either on theATM screen or an ATM receipt, that informs the customer before he or she iscommitted to the transactions whether, in fact, a fee will be imposed for thetransaction and the amount of the fee….

71 F.R. 1638, 1656 (emphasis added).


6

Thus, the statute and regulation required that a physical notice must be displayed

informing consumers that the ATM imposes a surcharge and that the ATM screen must

definitively state that a fee will be imposed, before that fee is imposed.

The EFTA imposes strict liability upon ATM operators that fail to comply with its

disclosure requirements.6 A plaintiff seeking statutory damages under the EFTA need not prove

that he or she sustained any actual financial loss, or that he or she relied upon the lack of

mandatory disclosure as an inducement to enter into a transaction.7

The EFTA further provides that an ATM operator that fails to comply with the statute is

liable to consumers for statutory damages, costs and reasonable attorneys’ fees.8 Here, Plaintiff

seeks statutory damages on behalf of the class. No showing of reliance is required.9 In addition,

the EFTA specifically provides for class action treatment of claims for violating the statute.10

Damages in a class action are capped at the lesser of $500,000.00 or 1% of the defendant's net

worth.11

C.

Here, Defendant contends that its net worth caps statutory damages at approximately

$10,000.00.

Class Certification

In July, 2012, Plaintiff filed his motion for class certification [ECF Doc. 59] and

memorandum in support [ECF Doc. 61]. Defendant did not respond to the motion, so it was

unopposed. On August 17, 2012, the court granted the motion for class certification. [Doc. 65].

The district court certified the class defined as:

.

All consumers who initiated an electronic funds transfer at any of Defendants’two ATMs located at: (1) 814 Broad Ripple Avenue, Indianapolis, IN 46220,

6 See Burns v. First American Bank, 2006 WL 3754820, *6 (N.D. Ill. Dec. 19, 2006).7 Burns, 2006 WL 3754820, *6 ("Section 1693b(d)(3) prohibits an ATM operator from charging a fee unless it provides notice of its fee on the machine and on the screen, period, no mention of a necessary scienter.")8 See 15 U.S.C. § 1693m(a).9 See Burns, 2006 WL 3754820.10 See 15 U.S.C. § 1693m(a)(2)(B).11 Id.


7

inside Average Joe’s; and (2) 826 Broad Ripple Avenue, Indianapolis, IN 46220, inside Rocker Lobster General Store; and were assessed a fee for withdrawing cash from any of the two ATMs, on or after the date of one year prior (September 30, 2010) to the date this action was filed (September 30, 2011), through the dateDefendants posted a compliant notice on the ATMs on September 30, 2011 (the"Class Period").

On June 10, 2013, the district issued an order directing Plaintiff to submit a report

concerning class notice [ECF Doc. 118]. On June 26, 2013, Plaintiff submitted a report

explaining that direct notice to the class is not practicable and recommending use of publication,

internet and posted notice in accordance with other similar class actions [ECF Doc. 119]. On

July 10, 2013, the district court issued the Order decertifying the class [ECF Doc. 120].

III. QUESTIONS PRESENTED

1. Did the district court err in concluding in that the availability of individual

statutory damages under the EFTA renders individual lawsuits superior to class treatment of the

hundreds or thousands of potential claims?

2. Did the district court err in concluding that the class is unmanageable due to the

impracticality of providing direct, individual notice to class members?

3. Does the EFTA's reference to "consumer accounts" render identification of class

members so problematic that class actions under the EFTA are essentially foreclosed?

IV. RELIEF SOUGHT

Plaintiff respectfully requests this court grant permission to appeal pursuant to Federal

Rule of Civil Procedure 23(f) and Federal Rule of Appellate Procedure 5(a), set this appeal for

full briefing on the merits; and reverse the district court's July 10, 2013, Order decertifying the

class.


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V. REASONS WHY THE APPEAL SHOULD BE ALLOWED

A. The Basis for Appeal Under Rule of Civil Procedure 23(f)

Federal Rule of Civil Procedure 23(f) provides:

.

A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 14 days after the order is entered.

Under Rule 23(f), whether to permit an appeal lies within this Court's "unfettered discretion."

Committee Notes to 1998 Amendments to Rule 23. An order modifying a class certification

order is appealable under Rule 23(f).12

Interlocutory appeal is proper where a decision denying class certification may sound the

death knell of the litigation.13 An appeal may also be permitted to facilitate development of the

law.14 Here, this petition presents important questions that will affect numerous consumer class

actions. These issues include the nature and sufficiency of different forms of class notice and the

preclusive effect of the availability of individual damages and attorney's fees. The ruling is

contrary to Seventh Circuit precedent.15 The district court's ruling also conflicts with other

precedent in this Circuit.16 The decision even conflicts with an opinion from another district

court in the Southern District of Indiana rejecting a similar challenge to class treatment under the

Fair Credit Reporting Act ("FCRA").17

Similarly, the district court's ruling concerning the unmanageability of identifying

"consumer accounts" will foreclose many class actions under consumer protection statutes.

12 Matz v. Household Intern. Tax Reduction Inv. Plan, 687 F. 3d 824, 825 (7th Cir. 2012).13 See Blair v. Equifax Check Services, Inc., 181 F.3d 832, 834, (7th Cir. 1999).14 Id.15 See Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997) (holding that de minimus recovery for class members does not preclude class treatment). 16 See e.g. Carbajal v. Capital One¸ 219 F.R.D. 437, 444 (N.D. Ill. 2004) (holding that the availability of individual statutory damages does not preclude class treatment under analogous provisions of the FDCPA.)17 Walker v. Calusa Inv., LLC, 244 F.R.D. 502, 511 (S.D. Ind. 2007).


9

Consumer class actions are an important mechanism to encourage defendants to modify their

conduct to conform to the law.18 Congress specifically sought to encourage class actions under

the EFTA through its class action provision.19

B. The Court Erred by Finding Individual Lawsuits Superior to Class Treatment Due

Accepting the district court's rationale will

prohibit consumer class actions under analogous consumer protection statues where consumer

accounts or consumer status is a threshold issue. In sum, this case presents issues that beg

appellate clarification.

to the Availability of Individual Statutory Damages.

The district court erroneously applied the superiority test by finding that the potential

availability of individual statutory damages renders individual lawsuits superior to a class action.

This holding is in direct conflict with Seventh Circuit, Southern District of Indiana and other

precedent in this Circuit. The Seventh Circuit has noted that "[m]any laws that authorize

statutory damages also limit the aggregate award to any class."20 Such provisions recognize

congressional intent to permit class treatment and do not defeat class certification.21 The

conclusion that class relief is not superior because potential class relief will amount to less than

individualized relief is unfounded. The district court in Burns thoroughly considered and rejected

this argument.22 As noted above, the EFTA expressly provides for class actions, including

provisions concerning class awards. In fact, the EFTA encourages class actions.23 The modern

view is that class treatment of claims is proper despite the availability of statutory damages and

attorney's fees.24

18 6 NEWBERG ON CLASS ACTIONS § 21:1 (4th ed. 2013); see also Carbajal, 219 F.R.D. at 444.

Case law authorizes class actions under EFTA although class members are

19 See Johnson v. West Suburban Bank, 225 F.3d 366, 377 (3rd Cir. 2000).20 Murry v. GMAC Mortgage Corp., 434 F.3d 948, 953 (7th Cir. 2006).21 Id.22 Burns v. First American Bank, 2006 WL 3754820 (N.D. Ill. December 19, 2006).23 Johnson v. West Suburban Bank, 225 F.3d 366, 378 (3rd Cir. 2000).24 6 NEWBERG ON CLASS ACTIONS §21:15 (4th ed. 2013).


10

determined, after an evidentiary evaluation, to recover less than they would have, had they sued

individually, despite the "de minimus" argument.25

The court's speculation that class members would recover more in individual actions is

belied by the dearth of persons that have filed such suits against Defendant. The district court

contends that class treatment is not warranted because each individual class member could

recover $100 to $1,000.00 each in an individual suit. However, no such suits have been filed,

rendering this hypothetical argument illusory.26 As the Seventh Circuit has noted, this conclusion

mistakenly assumes that consumers are aware of their rights. 27 Courts have used common sense,

finding that the availability of $100 to $1,000.00 gives class members little incentive to litigate

individually.28

For example, in Carbajal the district court considered a similar challenge to certification

of a class under the Fair Debt Collection Practices Act ("FDCPA"). The district court rejected the

argument that the availability of $1,000.00 in statutory damages should preclude class treatment:

"The fact that particular plaintiffs could recover $1,000.00 in statutory damages if they sued individually does not alter this analysis, for the reality is that the choice is not between a class action and a multitude of individual actions, but rather between a class action and this particular action and maybe a handful more. The class members who might be inclined to shoot for the bigger amount will be clearly advised in the Court's notice to prospective class members that they can forego membership in the class and take on the risk and somewhat larger rewardsof individual litigation if they so choose. But to disallow a class action because of the hypothetical possibility of multiple individual actions would effectively sound the death knell of the use of the class action in the consumer law context.29

25 See Burns, 2006 WL 3654820, at *10.26 See Burns, 2006 WL 3754820 at *11 (noting that no individual actions were filed during the period of time the notice was missing). 27 See Mace, 109 F.3d at 344.28 See e.g., Osada v. Experian Information Solutions, Inc., 2012 WL 1050067 at *8 (N.D. Ill. March 28, 2012);Carbajal, 219 F.R.D. at 444; Walker, 244 F.R.D. at 511.29 219 F.R.D. at 444. (emphasis in original.)


11

Similarly, in another case from the Southern District of Indiana, the district court rejected

this same contention in a FCRA class action.30 In Walker, the district court found that the

unlikelihood of individual lawsuits supported the conclusion that a class action was superior,

notwithstanding the availability of individual statutory damages of $100 to $1,000.31 Here, the

district court inexplicably ignored this precedent and the Seventh Circuit's decision in Mace.32

Courts routinely reject this challenge to the superiority of class treatment, in part due to the right

of a class member to opt-out.33 A class member that can find a lawyer to pay a $400.00 filing

fee in a federal court with the prospect of $100 to $1,000.00 in damages, if successful, can

theoretically do so. Moreover, the EFTA specifically provides for class treatment. It is

nonsensical to hold that because a statute provides for some minimum recovery for individual

suits, that a class action is not available.34

C. The District Court Erred by Decertifying the Class Due to Impracticability of

To so hold would read the class provision out of the

EFTA and other similar consumer protection statues.

Individual Notice.

The district court erred in its conclusion that the class is unmanageable under Rule

23(b)(3)(D) due to the impracticability of providing individual notice to each class member.

Direct individual notice to class members is not required.35 When individual notice is infeasible,

notice by publication is an acceptable substitute.36

30 Walker, 244 F.R.D. at 511.

Here, three forms of notice were proposed:

notice by publication in local newspaper, publication on an internet website and posting of notice

on the offending ATMs. The proposed three way notice including publication, internet and

31 Id.32 See Mace, 109 F.3d at 344.33 See e.g. Armes v. Sogro, Inc., 2011 WL 1197537 at *5 (E.D. Wis. March 29, 2011); Osada, 2012 WL 1050067 at *8; See Carbajal, F.R.D. at 444.34 See Burns, 2006 WL 3654820, at *10; Mace 109 F.3d at 344.35 See Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 786 (7th Cir. 2004).36 Id.


12

posted notice on the ATMs satisfies due process and Rule 23.37 This is particularly true where

there are a large number of class members.38

Rule 23(c)(2)(B) expressly provides that notice directed to class members be the best

notice that is practicable under the circumstances. Rule 23 does not require individual notice to

all members, but rather to those who can be identified through reasonable effort. Here,

Defendant has no list of class members and their addresses. Rather, they are in the possession of

the various banks that issued class members' ATM cards and likely subject to privacy laws.

Moreover, given the relatively small damages available, it is not practical to spend tens of

thousands of dollars to subpoena and review their records. Here, Defendant contends that its net

worth limits class recovery to approximately $10,000.00. The Rule 23(c)(2) notice requirement

was fashioned to allow flexibility in deciding what constitutes adequate notice.39 In numerous

class actions brought under the EFTA, including four in the Southern District of Indiana, courts

have certified classes defined like the proposed class here, and have approved notice to class

members by means of publication, internet and posted notice on the ATMs.40

37 “So long as the method of providing the notices was ‘reasonably calculated, under all the circumstances,’ to inform the class members of the pendency of the class action, due process considerations have been satisfied.

In each case, the

Breslow v. Prudential-Bache Properties, 1994 WL 478611 at *2 (N.D. Ill. Sept. 1, 1994).38 3 NEWBERG ON CLASS ACTIONS § 8:4 (4th ed. 2013).39 3 NEWBERG ON CLASS ACTIONS, § 8:2 (4th ed. 2013).40 See e.g. Hull v. Owen County State Bank, No. 1:11-cv-1303-SEB-MJD (S.D. Ind., January 14, 2013); Young v. First Federal Savings & Loan, 1:11-cv-1242-MJD-JMS (S.D. Ind., November 16, 2012); Vitatoe v. Citizens State Bank of New Castle 1:11-cv-1312 WTL-DML (S.D. Ind., October 4, 2012); Couch v. Indians, Inc., No. 1:11-00963-MJD-WTL (S.D. Ind., June 25, 2012); Hart v. Guardian Credit Union, Cause No. 2:10-cv-00855 (M.D. Ala. June 16, 2011); Gaylor v. Comala Credit Union, Cause No. 2:10-cv-00725-MHT (M.D. Ala. November 17, 2011);Jackson v. JSC Federal Credit Union, No. H-10-2976, (S.D. Tex. January 13, 2011); Arthur v. Valwood Park Federal Credit Union, No. 3:10-cv-00952-B (N.D. Tex. March 3, 2011); Poechmann v. Alerus Financial, National Association, No. 10-cv-4186 (Minn. July 1, 2011); Barreto v. Center Bank, No. 10-cv-6554 (N.D. Ill. March 24, 2011); Escalante v. Travelex Currency Services, Inc. f/k/a Travelex America, Inc. d/b/a Travelex, No 09-C-2209(N.D. Ill. September 16, 2009); Arbelo v. L&M Produce, Inc. d/b/a Fresh Marketplace, an Illinois corporation, No. 09-C-3428 (N.D. Ill. December 21, 2009); Markoff v. Independent Bank, No. 09-12639 (E.D. Mich. January 18, 2011); Siragusa v. Advance Financial Federal Credit Union, No. 2:09-cv-328-TLS (N.D. Ind. March 16, 2010);Reich v. Unity One Credit Union, No 0:10-cv-00606-JJG (Minn. May 05, 2011); Barlo v. First Financial Bank, N.A., No. 2:10-cv-235 (N.D. Ind. March 18, 2011); Thomas v. Mid-Missouri Bank, No. 10-3139-CV-S-ODS (W.D. MO. December 9, 2010; Stone v. Marquette Bank, No 08-cv-6388 (N.D. Ill. June 10, 2009); Stone v. Corus Bank, N.A., No. 08-cv-1746 (N.D. Ill. April 9, 2009); Popovic v. USX Federal Credit Union, No. 09-cv-631 (W.D. Pa.


13

courts found these forms of notice collectively satisfied Rule 23 and due process. The Federal

Rules require the best practical notice, not perfect notice.41

The district court cast its decertification decision in terms of manageability.42

Respectfully, the impracticability of direct individual notice does not impact manageability of

the class. The purpose of notice at this stage of the litigation is simply to explain the case and

give class members the opportunity to opt-out.43

D. The Court Erred in Finding that the "Consumer Account" Definition per se

Here, proposed notice to the class satisfies Rule

23 and is not unmanageable by the court. In sum, the district court erred in decertifying the class

on this ground.

Precludes Class Treatment.

The district court erred in holding sua sponte and without any briefing on the issue, that

the necessity of identifying whether each class member used a "consumer" account renders a

class action unmanageable. Contrary to the Court's finding, the purpose for which class members'

accounts were established does not defeat class certification. Seventh Circuit precedent teaches

that the class definition need not be co-extensive with liability.44

February 17, 2010); Popovic v. Dollar Bank, No. 2:10-cv-00432-NBF (W.D. Pa. September 3, 2010) App; Polevoy v. Devon Bank, No. 08-C-4822 (N.D. Ill. February 3, 2009); Parker v. Suntrust Bank, No. 3;09 0706 (M.D. Tenn. December 21, 2009); Parker v. First-Citizens Bank & Trust Company, et al, No. 3;09-0588 (M.D. Tenn. October 1, 2009); Nolf v. Allegheny Valley Bank of Pittsburgh, No. 09-645 (W.D. Pa. October 16, 2009); Marsh v. ATM Capital Management, Inc., No. 07 C 5808 (N.D. Ill. July 21, 2008); Jackman v. Global Cash Access Holdings, Inc., No 09-cv-897-TFM (W.D. Pa. December 3, 2009); Howard v. The Canandaigua National Bank and Trust Company, No. 09-cv-6513 (November 3, 2010); Greiff v. First Commonwealth Bank, No. 10-1224 (W.D. Pa. March 3, 2011); Escalante v. Lincoln Park Savings Bank, No. 08-C-6152 (N.D. Ill. April 14, 2009); Dover v. GNC Community Federal Credit Union, No. 09-cv-810 (W.D. Pa. February 16, 2010); Dragotta v. Northwest Bancorp, Inc., d/b/a Northwest Savings Bank, No. 09-cv-632 (W.D. Pa. November 23, 2009); Buechler v. G.C.K., Inc., No. 1:10-cv-3188-ELH (Md. July 13, 2011); Bruner v. America United Bank & Trust Company, No. 08-C-124 (N.D. Ill. October 29, 2008); Arbelo v. Charter One Bank, No. 08- 1516 (N.D. Ill. June 16, 2009); Anthony v. Fifth Third Bank (Chicago), No. 08-C-4359 (N.D. Ill. April 28, 2009).

As long as the class definition

41 CE Design v. Beaty Constr., Inc., 2009 WL 192481 at *10 (N.D. Ill. Jan. 26, 2009) (“[t]he Federal Rules, however, require the best notice that is ‘practicable’ not perfect notice. The word ‘practicable’ implies that the plaintiff should be afforded some flexibility with respect to providing notice to unknown, potential class members.”) 42 See Order p. 12.43 See Shurland v. Bacci Café & Pizzeria on Ogden, Inc., 271 F.R.D. 139, 144 (N.D. Ill. 2011).44 Kohen v. Pacific Investment Management Company, LLC 571 F.3d 672, 677-78 (7th Cir. 2009).


14

is sufficiently narrow that many persons are not improperly included, the class definition is

acceptable.45

Notably, the EFTA specifically provides for class treatment of claims.

The remote possibility that some persons in the class may have withdrawn funds

from a business account (to purchase a drink at Average Joe's bar) is speculative and lacks any

evidentiary foundation.

46 Various other

consumer protection statues, such as the Truth In Lending Act ("TILA") and the FDCPA have

similar provisions applying protections to "personal" and not "business" transactions.47

Notwithstanding, courts routinely certify classes of consumers under these statutes, rejecting

arguments that determining the purpose of the transactions defeats predominance or

manageability.48 It is common sense that cash withdrawals at ATMs are predominately, if not

exclusively, from personal accounts. Business customers typically use credit cards to account

for transactions. In Sanchez, the district court rejected the contention that some variance in

whether a transaction was for personal, family or a household use precluded class certification of

a FDCPA claim.49 Similarly, in Wells, the district court rejected the argument that determining

whether class member's checks were written for business or personal purposes created

predominating individual issues.50 The court found that asking participating class members

ministerial individual questions did not defeat predominance of common questions.51

The fact that class actions are specifically provided for in the EFTA indicates that

Congress views the availability of the class action procedure as an integral part of the

45 Id.46 See 15 U.S.C. §1693m(a).47 See e.g., 15 U.S.C. §1603 (TILA) and 15 U.S.C. §1692a(5) (FDCPA).48 See e.g., Wells v. McDonough, 188 F.R.D. 277, 279-80 (N.D. Ill. 1999) (FDCPA); Sanchez v. Lowell Lebermann, Inc., 79 F.R.D 21, 24 (W.D. Tex. 1978); Hughes v. Cardinal Federal Savings & Loan Assoc., 97 F.R.D. 653, 655 (S.D. Ohio 1983) (TILA case certified notwithstanding commercial versus consumer borrower issue).49 Sanchez, 79 F.R.D. at 24.50 Wells, 188 F.R.D. at 279-80. 51 Id.


15

enforcement regime.52 A finding that a class cannot be certified here because some persons may

have withdrawn funds from business accounts would effectively preclude class treatment of any

EFTA claims. This would defeat congressional intent that aggrieved persons have a class remedy

under the EFTA. The EFTA is a remedial consumer protection statute and should be construed

liberally in favor of consumers.53

VI. CONCLUSION

For these reasons, Plaintiff respectfully requests that the Court grant this petition for

permission to appeal, set this appeal for full briefing on the merits and reverse the district court's

de-certification order.

52 See Barnett v. Experian Information Solutions, No. 2-cv-175, 2004 WL 4032909 at *5 (E. D. Tex., Sept. 30, 2004) (discussing similar provisions of the FDCPA and granting class certification).53 Clemmer v. Key Bank, N.A., 539 F.3d 349, 350, 353 (6th Cir. 2008).


16

Dated: July 24, 2013 Respectfully submitted,

TRAVIS & CALHOUN, P.C.

Eric G. Calhoun/s/ Eric G. Calhoun

Texas Bar No. 036388001000 Providence Towers East5001 Spring Valley RoadDallas, Texas 75244(972) 934-4100 Telephone(972) 934-4101 Facsimile

Ryan FrasherThe Frasher Law Firm, P.C. 155 East Market Street, Ste. 450Indianapolis, IN 46204(317) 634-5544 Telephone(317) 630-4824 Facsimile

ATTORNEYS FOR PLAINTIFF-PETITIONER

CERTIFICATE OF SERVICE

I hereby certify that a true and accurate copy of the foregoing was served on this 24th day of July, 2013 via electronic mail (email) to:

Tom [email protected]

Eric G. Calhoun/s/ Eric G. Calhoun

Travis & Calhoun, P.C.1000 Providence Towers East5001 Spring Valley RoadDallas, Texas 75244(972) 934-4100 Telephone(972) 934-4101 Facsimile


EXHIBIT A


1

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

DAVID HUGHES, individually and on behalf of all others similarly situated,

Plaintiff,

vs.

KORE OF INDIANA ENTERPRISE, INC., et al.,Defendants.

) ) ) ) ) ) ) )

1:11-cv-1329-JMS-MJD

ORDER DECERTIFYING CLASS

On June 10, 2013, the Court issued an Order directing Plaintiff David Hughes to submit a

report either detailing a plan for providing individual notice to class members or citing relevant

legal authority demonstrating that such notice should not be required. [Dkt. 118 at 2.] On June

26, 2013, the Court received Mr. Hughes’ response (the “Report”), wherein he takes the position

that individual notice to the class members is neither required nor feasible. [Dkt. 119 at 1-2.]

After considering Mr. Hughes’ Report, and for the reasons explained below, the Court finds that

it would be improper to maintain certification of this class and thereby vacates its previous Order

certifying the class. [Dkt. 65.]

I.BRIEF BACKGROUND

Mr. Hughes brought this class action under 15 U.S.C. § 1693, commonly known as the

Electronic Fund Transfer Act (the “EFTA”), against Defendants Kore of Indiana Enterprise, Inc.,

Kore Enterprises, Inc., and On Kore, LLC (collectively, “Kore”), alleging violations of the

EFTA’s notice requirements for Automated Teller Machines (“ATM”). On August 17, 2012, the

Court granted Mr. Hughes’ unopposed Motion for Class Certification and certified the class

under Rule 23(b)(3) of the Federal Rules of Civil Procedure. [Dkt. 65 at 1.] The Court’s

decision to grant certification was based in part on Mr. Hughes’ representations contained in the

Case 1:11-cv-01329-JMS-MJD Document 120 Filed 07/10/13 Page 1 of 14 PageID #: 835Case: 13-8018 Document: 1 Filed: 07/31/2013 Pages: 40

2

Memorandum in Support of Motion for Class Certification (“Certification Memorandum”).

[Dkt. 61.]

A few weeks before trial, the Court recognized sua sponte that Mr. Hughes never

provided notice to the members of the class. [Dkts. 113 at 1; 114.] That revelation required the

Court to continue the scheduled trial so that Mr. Hughes could propose what he believed to be

appropriate notice. [Dkt. 114.] Mr. Hughes proposes that notice be provided in three ways: 1)

notice posted on the ATM at issue; 2) notice published in the Indianapolis Star newspaper; and

3) notice on a website. [Dkt. 117 at 1.] In response to his proposal, the Court cited its role as the

“fiduciary of the class” and expressed concern that Mr. Hughes’ proposed methods of notice did

not conform with due process standards set forth by the United States Supreme Court. [Dkt. 118

at 1-2 (citing authority).] Mr. Hughes’ response, [dkt. 119], causes the Court to question whether

class certification is still appropriate.

II.STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 23(c)(1)(C), this Court retains the power to

modify or vacate a class certification at any time prior to judgment. Indeed, the Seventh Circuit

Court of Appeals has held that “a favorable class determination by the court is not cast in stone.

If the certification of the class is later deemed to be improvident, the court may decertify.”

Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, 657 F.2d 890, 896 (7th Cir.

1981); see Retired Chicago Police Ass’n v. City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993)

(acknowledging that “a district court has broad discretion to determine whether certification of a

class is appropriate”); see also Ellis v. Elgin Riverboat Resort, 217 F.R.D. 415, 419 (N.D. Ill.

2003) (“Because the court must decide whether to certify a class early in the proceedings, it

remains under a continuing obligation to review whether proceeding as a class action is


3

appropriate…. Thus, the court’s initial certification of a class is inherently tentative.”) (quotation

omitted).

To certify a class under Rule 23(b)(3), a court must find that a class action is “superior to

other available methods for fairly and efficiently adjudicating the controversy.” In adjudicating

alleged ATM notice violations under the EFTA, many of the courts that deny certification or

subsequently vacate it do so because a class action is not a superior method of litigating those

claims. See Mowry v. JP Morgan Chase Bank, N.A., 2007 WL 1772142 at *6 (N.D. Ill. 2007)

(explaining that in considering certification of a class brought under the EFTA, “the court should

also weigh the logistical concerns” and also agreeing that the case was “unmanageable as a class

action due to the difficulty of identifying and notifying the possible twenty million class

members”); see also Ballard v. Branch Banking & Trust Co., 284 F.R.D. 9, 16 (D.D.C. 2012)

(denying class certification based on “plaintiff’s concession that notice by publication is the only

practical means for finding class members and…the potential class recovery will be de

minimis”).

As a “fiduciary of the class,” a district court has a non-delegable duty “to order notice

unless the risk of prejudice to absent class members is nil and to review for adequacy the form of

notice proposed by class counsel.” Culver v. City of Milwaukee, 277 F.3d 908, 915 (7th Cir.

2002). In the seminal case of Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 (1974), the

United States Supreme Court directed notice to be sent by first-class mail to each member of an

approximately 2,250,000 member class, holding that:

[I]ndividual notice to identifiable class members is not a discretionary consideration to be waived in a particular case. It is, rather, an unambiguous requirement of Rule 23. As the Advisory Committee’s Note explained, the Rule was intended to ensure that the judgment, whether favorable or not, would bind all class members who did not request exclusion from the suit. Accordingly, each class member who can be identified through reasonable effort must be notified


4

that he may request exclusion from the action and thereby preserve his opportunity to press his claim separately or that he may remain in the class and perhaps participate in the management of the action. There is nothing in Rule 23 to suggest that the notice requirements can be tailored to fit the pocketbooks of particular plaintiffs.

Id.; see In re Nissan Motor Corp. Antitrust Litig., 552 F.2d 1088, 1097 (5th Cir. 1977) (holding

that “because constructive notice has long been recognized as a poor substitute for actual

notice…it is to be used only when circumstances make it impracticable to gain the names and

addresses of class members and notify them individually of the action’s pendency”).

The Seventh Circuit Court of Appeals has recognized that “[t]he class action is a valuable

economizing device, especially when there is a multiplicity of small claims, but it is also

pregnant with well-documented possibilities for abuse.” Greisz v. Household Bank, 176 F.3d

1012, 1013 (7th Cir. 1999). Indeed, the Seventh Circuit cautioned that

[t]he smaller the individual claim, the less incentive the claimant has to police the class lawyer’s conduct, and the greater the danger, therefore, that the lawyer will pursue the suit for his own benefit rather than for the benefit of the class. The lawyer for a plaintiff class has not only an impaired incentive to be the faithful agent of his (nominal) principal, but also the potential to do great harm both to the defendant because of the cost of defending against a class action and to the members of the class because of the preclusive effect of a judgment for the defendant on the rights of those class members who have not opted out of the class action.

Id. With this possibility for abuse in mind, the Court turns to its analysis regarding the continued

propriety of maintaining this litigation as a class action.

III. DISCUSSION

A. Manageability of Class Action

In his Report, Mr. Hughes contends that individual notice to the class members is not

necessary in this case and that notice by “publication, internet and posted notice on the ATM”

would be adequate. [Dkt. 119 at 1-2.] In support of this position, Mr. Hughes argues that


5

“individual notice is impracticable and could be prohibited by federal privacy laws.” [Id.] In his

recent Report, Mr. Hughes explains that a third-party, ATM Management, acted as the

“transaction processor/servicer” for the two relevant ATMs and reveals for the first time that:

ATM Management has provided third party discovery that provides a truncatedaccount number which discloses only the last four digits. This is called the personal account number (“PAN”) of the credit card or debit card account. The first six digits of a credit or debit card is the bank identification number (“BIN”). It is unknown whether ATM Management has the full account number or whether it can obtain the full account number because of privacy laws such as the G[ramm]-Leach Bliley Act.

[Id. at 2-3 (emphasis added).]

The Court notes that in Mr. Hughes’ Certification Memorandum, however, he declared

that the class could be identified by objective criteria: BINs and PANs, which he claimed were

stored in the ATMs’ computer data. [Dkt. 61 at 14.] Indeed, Mr. Hughes represented that

each transaction will have a unique identifying number for the claimant[’s] ATM card that will enable verification of class membership…. The verification of the claimant’s bank card numbers does not create an individual inquiry. Further, no individual decision making has to be made. Rather, such a matching procedure to the data maintained by Defendant is a ministerial task that does not impair class treatment.

[Id. at 15.] While Mr. Hughes did suggest that “it is likely that the names and addresses of the

individual class members will be difficult and costly to ascertain for purposes of direct notice,”

[id.], that statement contemplated potential hurdles associated with utilizing the BINs and PANs

to acquire identifying information from third-party financial institutions, not an overarching

uncertainty as to whether or not the BINs and PANs themselves were obtainable or whether a

particular transaction qualified under the EFTA. Indeed, at no point in his Certification

Memorandum did Mr. Hughes indicate that there would be any impediment to obtaining the

class members’ BINs or PANs. [Id.]


6

The Court is further troubled by Mr. Hughes’ new contention that “[e]ven if the full

account numbers could be obtained…there could be hundreds of banks to contact,” given that the

over 2,800 stipulated transactions took place in the “Broad Ripple area.” [Dkt. 119 at 3.] Mr.

Hughes argues that the location of the ATMs in Broad Ripple creates complications because

[a]s most residents of Indianapolis know, the Broad Ripple area where Defendants[’] ATMs are located is popular with college students. Indianapolis is home to Butler University, Indiana University-Purdue University (“IUPUI”) and several other universities with students from across the country. The banks that would need to be contacted would be from coast to coast.

[Id.] But this argument cuts both ways. If the class members are located throughout the United

States, as Mr. Hughes now contends, it seems unlikely that his primary methods of proposed

notice—placing notice on the physical ATMs in Indianapolis and publishing it in an Indianapolis

newspaper—would be reasonably calculated to provide sufficient notice to the class members.

For these reasons, in accordance with the Supreme Court’s decision in Eisen and its

progeny, the Court is not convinced that the requirement to provide individual notice to

identifiable class members may be abandoned simply because doing so would require

considerable financial resources and effort. 417 U.S. at 176. Additionally, Federal Rule of Civil

Procedure 23(b)(3)(D) provides that in determining whether a class action is superior to other

available methods of fairly and efficiently adjudicating the matter, the Court should consider,

among other things, “the likely difficulties in managing a class action.” Given Mr. Hughes’ new

representations regarding the feasibility of identifying, locating, and notifying the class members,

the Court determines that this action has become unmanageable as a class action, which weighs

in favor of decertification.


7

B. Superiority of Class Action

Federal Rule of Civil Procedure 23(b)(3) provides that the Court must conclude that a

class action is superior to other available methods for fairly and efficiently adjudicating the

controversy. The Supreme Court has held that this requirement was added

to cover cases in which a class action would achieve economies of time, effort, and expense, and promote...uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results..., [which] invites a close look at the case before it is accepted as a class action.

Amchem Products, Inc. v. Windsor, 521 U.S. 591, 615 (1997) (internal quotations omitted). The

Seventh Circuit Court of Appeals has not opined on the superiority of class actions alleging

ATM notice violations under the EFTA. Because of the dearth of relevant binding precedent, the

Court turns to the opinions of sister district courts for guidance.

1) Analogous District Court Cases

In Nadeau v. Wells Fargo, 2011 WL 1633131 (D. Minn. 2011), the district court strongly

criticized the purported superiority of class actions in dealing with ATM notice violations under

the EFTA. “The fact that common issues predominate, however, does not mean that a class

action is the superior method of adjudicating the controversy. This case is simply not

appropriate for class treatment, even though the technical prerequisites would seem to indicate

that it is.” Id. at *4. In expressing disagreement with the proposition that “only a class action

can vindicate consumer’s rights,” the district court in Nadeau opined:

Nadeau notes that no other putative Plaintiff has come forward to file an individual lawsuit, even though this ATM displayed no fee notice for approximately one year. Instead of leaping to the conclusion that consumers are unable to protect their own rights because of the small amounts of money at issue, perhaps a better explanation is that no consumer other than Nadeau considers themselves injured in any way…. The availability of statutory damages and attorney’s fees and costs should alleviate some of Nadeau’s concern about her fellow consumers. People who are aggrieved by Wells Fargo’s failure to have the


8

required notice on this ATM have the same incentive to bring a lawsuit as Nadeau herself. Moreover, statutory damages in individually brought actions may be higher than anything available in a class action. Although the statute provides for a “ceiling” of $500,000 in class action statutory damages, there is no minimum recovery as provided in individual actions. A court may determine that statutory damages, in the face of the evidence of on-screen agreement to the fee and the extremely small amount of any actual damages, are de minimis. A de minimisrecovery is not possible in an individual action, in which the consumer is guaranteed at least $100, and up to $1,000.

Id. at *4-5 (citation omitted).

Similarly, in Ballard v. Branch Banking and Trust Co., 284 F.R.D. 9, 10 (D.D.C. 2012),

the plaintiff brought a class action against the operator of an ATM located in Washington, D.C.,

alleging that the ATM operator had violated the EFTA by failing to provide a fee notice on the

outside of one of its ATM. One of the arguments the ATM operator raised in opposition to class

certification was that the class definition was overinclusive and, thus, failed to satisfy the Rule

23 requirements of commonality, typicality, and predominance. Id. at *12. This argument was

based on the narrow application of the EFTA to “consumer accounts,” which are defined as

“demand deposit, savings deposit, or other asset account[s]…established primarily for personal,

family, or household purposes….” Id.; 15 U.S.C. § 1693a. Although the plaintiff subsequently

agreed to revise the class definition in accordance with the statute, the district court found the

need to properly screen each purported class member problematic to class certification. Ballard,

284 F.R.D. at *12.

The district court in Ballard also observed that the ATM operator’s challenge to class

certification was more properly framed as a “challenge to the superiority of a class action as a

vehicle for litigation.” Id. at *13. The district court cited Rule 23(b)(3)(D), which requires a

district court to consider the “likely difficulties in managing a class action” when assessing

whether class certification is appropriate. Id. Ballard concluded that


9

[t]o adjudicate this case, it is absolutely essential to communicate with the individuals who used the ATM. In order to determine if an ATM-user is a “consumer” and therefore within the putative class, the Court must make certain limited individualized inquiries of each class member. If this cannot be done, the Court will not know if the ATM-user was a “consumer” and therefore cannot ascertain the size of the class. In addition, without this information, it cannot determine statutory damages.

284 F.R.D. at *13-14. Because the ATM in question was located “in the middle of downtown

Washington, D.C.,” the district court recognized that the users presumably consisted of “tourists

and visitors from all over the world.” Id. at *14. Ballard pointed out that the operator “would

have to contact each bank—of which there may be hundreds if not thousands—and each bank

would [then] have to search their own records to identify the particular ATM-user.” Id. Ballard

concluded that “[e]ven if this could be acceptable, each ATM-user would then have to be

contacted and questioned to determine whether the account was a ‘consumer’ account used for

personal purposes,” as opposed to business accounts or personal accounts used for business

purposes. Id.

Ultimately, Ballard found an even greater practical impediment to the certification of the

proposed class:

[T]hese notices provide a mechanism for class members to opt out, but do not require class members to actually participate in the suit. Even if the Court were to use an “opt-in” notice[1], there is no reason to believe that anyone would come forward, particularly as the payout to each class member is likely to be so miniscule. If ATM-users do not come forward to identify themselves as “consumer” account-holders, the suit cannot proceed because the Court will have no way of knowing which of the 2,000 transactions per month are attributable to “consumers.”

1 The Seventh Circuit does not recognize an alternative to the “opt-out” requirement for this type of class action. See Clark v. Universal Builders, Inc., 501 F.2d 324, 340 (7th Cir. 1974) (“[T]he requirement of an affirmative request for inclusion in the class is contrary to the express language of Rule 23(c)(2)(B) that ‘the notice shall advise each member that…the judgment, whether favorable or not, will include all members who do not request exclusion.’”).


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Id. at *14-15 (endnote omitted). Considering all of the surrounding circumstances, the district

court in Ballard ultimately denied certification of the proposed class. Id. at *16.

2) Mr. Hughes’ Action

In his Certification Memorandum, Mr. Hughes argued that a class action was the superior

method for adjudicating the controversy because “[g]iven that each potential plaintiff’s damages

will range from a hundred dollars or so to a few thousand dollars, it is fairly certain that

individual plaintiffs would lack the resources to pursue their claims.” [Dkt. 61 at 22.] Mr.

Hughes implies that individual plaintiffs would not otherwise bring lawsuits because doing so

would require an expenditure of attorney’s fees greater than what the plaintiff could potentially

recover in an individual suit under 15 U.S.C. § 1693m. [Id.] Mr. Hughes maintains these

positions in his Report, arguing that this “limited recovery is not a strong incentive to opt-out,

retain private counsel, and then file an individual EFTA lawsuit.” [Dkt. 119 at 4.]

The EFTA’s provisions regarding statutory damages are contained in 15 U.S.C.

§ 1693m(a) and provide, in relevant part:

(a) Individual or class action for damages; amount of award:

Except as otherwise provided by this section and section 1693h of this title, any person who fails to comply with any provision of this subchapter with respect to any consumer, except for an error resolved in accordance with section 1693f of this title, is liable to such consumer in an amount equal to the sum of—

(1) any actual damage sustained by such consumer as a result of such failure;

(2)(A) in the case of an individual action, an amount not less than $100 nor greater than $1,000; or

(B) in the case of a class action, such amount as the court may allow, except that:


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(i) as to each member of the class no minimum recovery shall be applicable, and

(ii) the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same person shall not be more than the lesser of $500,000 or 1 per centum of the net worth of the defendant; and

(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court.

Id. (emphases added).

As an initial matter, Mr. Hughes’ argument that a class action is superior because it

allows the class members to spread the costs of litigation “across the larger pool,” [dkt. 61 at 22],

ignores that the EFTA contains a fee-shifting provision for successful litigants regardless of

whether the matter is prosecuted individually or as a class action. 15 U.S.C. § 1693m(a)(3). In

fact, in light of the fee-shifting provision and the available statutory awards, utilizing a class

action to litigate the class members’ claims may actually be more detrimental than if the class

members were to bring individual lawsuits. Specifically, the statute provides that “as to each

member of the class no minimum recovery shall be applicable, and (ii) the total recovery under

this subparagraph in any class action…shall not be more than the lesser of $500,000 or 1 per

centum of the net worth of the defendant.” 15 U.S.C. § 1693m(a)(2)(B) (emphasis added).

Here, the parties have stipulated to $10,000.00 in recoverable statutory damages. [Dkt. 117-2.]

That means that if each of the “over 2,800 transactions” results in 2,800 class members, the

maximum amount each could recover would be approximately $3.57. [Dkt. 119 at 3.]

But as detailed above, in an individual action, a successful plaintiff is guaranteed an

amount not less than $100. 15 U.S.C. § 1693m(a)(2). Under these circumstances, maintaining

this matter as a class action could be detrimental to the class members’ recovery. See Matter of


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Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1299 (7th Cir. 1995) (“In most class actions—and

those the ones in which the rationale for the procedure is most compelling—individual suits are

infeasible because the claim of each class member is tiny relative to the expense of litigation.

That plainly is not the situation here.”).

Additionally, as the district courts in Nadeau and Ballard recognized, allowing an EFTA

claim to proceed as a class action presents numerous practical problems. For example, because

the statute only applies to “consumer” transactions, the Court would need to screen each

purported class member to confirm that he or she was a consumer as defined by the statute.

Moreover, without identifying each individual class member and establishing the true

composition of this “opt out” class, the Court has no way of determining how any awarded

statutory damages would be apportioned.

Again, Rule 23(b)(3) provides that the Court must conclude that a class action is superior

to other available methods for fairly and efficiently adjudicating the controversy. The likelihood

that the class members’ recovery would be significantly less than if they pursued individual

actions, in conjunction with the Court’s previous analysis regarding the infeasibility of sufficient

class notice, convinces the Court that maintaining this action as a class action is no longer the

superior method for adjudicating the controversy.

C. Decertification

In sum, Mr. Hughes’ new position that he is not in possession of information that would

lead to the identification of the individual class members with reasonable effort and that the class

members are likely located throughout the United States leads the Court to conclude that this

class has become unmanageable. Likewise, the practical problems presented by certification and

the undeniable disparity between an individual plaintiff’s potential recovery in these


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circumstances and a class member’s potential recovery if this remains a class action leads the

Court to conclude that proceeding as a class action is no longer the superior method of

adjudicating this controversy. Accordingly, the Court concludes that it is necessary to decertify

the previously certified class and adjudicate Mr. Hughes’ claims against Kore as an individual

action.

IV.CONCLUSION

For the reasons stated herein, the Court VACATES its previous Order granting Mr.

Hughes’ motion to certify this action as a class action, [dkt. 65], and herby DECERTIFIES this

action as a class action. The Court will adjudicate Mr. Hughes’ Complaint as an individual

action and requests that the Magistrate Judge hold a conference with the parties to determine

whether settlement is feasible and, if not, dates that the parties are available for trial.

Distribution via ECF only:

Eric G. CalhounTRAVIS, CALHOUN & CONLON PC [email protected]

Ryan R. FrasherRYAN FRASHER P.C. [email protected]

Kevin G. KerrHOEPPNER, WAGNER & EVANS LLP--Merrillville [email protected]

Thomas Edward Rosta

07/10/2013


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METZGER ROSTA LLP [email protected]

Michael Eugene Tolbert HOEPPNER, WAGNER & EVANS LLP--Merrillville [email protected]


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