David HUGHES, individually and on behalf of all others similarly situated, Plaintiff-Petitioner, v. KORE OF INDIANA ENTERPRISE, INC., et al., Defendants-Respondents.
No. 13-8018.
United States Court of Appeals, Seventh Circuit.
Submitted Aug. 8, 2013. Decided Sept. 10, 2013.
731 F.3d 672
Before POSNER, MANION, and WOOD, Circuit Judges.
C. Mandatory Minimum Sentence Enhancement
Hernandez‘s final argument is that his Fifth and Sixth Amendment rights were violated when the district court found facts that increased the amount of cocaine Hernandez was responsible for from 500 grams to 150 kilograms. As Hernandez failed to assert this claim in the district court, our review is limited to plain error. United States v. Johnson, 680 F.3d 966, 973 (7th Cir.2012) (internal citations omitted).
Hernandez pleaded guilty to conspiring with his codefendants, and knowingly and intentionally possessing with intent to distribute 500 grams or more of cocaine, in violation of
In this case, there is no indication in the record that the district court judge thought he had to impose a higher mandatory minimum sentence as a result of finding Hernandez responsible for a larger amount of cocaine than his charging document attributed to him. Hernandez‘s PSR said the mandatory minimum he faced was five years and the district court judge repeated that fact multiple times during Hernandez‘s sentencing hearing. Even though the district court found Hernandez responsible for 150 kilograms or more of cocaine for Sentencing Guidelines calculation purposes, that finding did not affect the statutory mandatory minimum that he faced, which is governed by the charging document. As Guidelines ranges are only advisory, the Fifth and Sixth Amendment requirements do not apply. See, e.g., U.S. v. Abdulahi, 523 F.3d 757, 760-61 (7th Cir.2008); U.S. v. Thomas, 446 F.3d 1348, 1355 (11th Cir.2006); U.S. v. De la Torre, 327 F.3d 605, 611 (7th Cir.2003). We see no Alleyne error here, and accordingly decline to remand for resentencing.
III. CONCLUSION
For the foregoing reasons, we AFFIRM.
Thomas E. Rosta, Attorney, Metzger Rosta, Noblesville, IN, for Defendants-Respondents.
POSNER, Circuit Judge.
The plaintiff in this class action suit seeks leave to appeal from the district judge‘s decertification of the class.
The defendants, affiliated companies that we‘ll treat as one and call Kore, owned ATMs in two bars in Indianapolis said to be popular with college students. The suit charges Kore with failing to post a notice on the ATMs that Kore charges a fee for their use. Such an omission violates, or rather violated, a provision of the Electronic Funds Transfer Act,
A plaintiff in an individual suit who proves a violation of the Act is entitled to his actual damages, if any, or to statutory damages of at least $100 but not more than $1000.
The parties stipulated that the limit to damages in this class action suit would be $10,000, that being 1 percent of Kore‘s net worth. The stipulation further states that there were more than 2800 transactions involving the two ATMs during the period covered by the suit (a year beginning on September 30, 2010). We‘re not told how many more, so let‘s assume the total was 2800, which would make the damages $3.57 per transaction at most (given the $10,000 class limit). The transaction fee was $3, and that would be the ceiling on a plaintiff‘s actual damages per transaction. Those damages might well be zero, if the
The record doesn‘t indicate the distribution of transactions among class members. If each of them engaged in only one transaction and the class therefore has 2800 members, each would be entitled at most to just $3.57 (10,000 ÷ 2800) if the suit was successful. (Whether total damages in a class action under the Electronic Funds Transfer Act can exceed actual damages is unclear from the Act‘s wording. See
The district judge decertified the class on two independent grounds. One was that the class members would do better bringing individual suits, since if an individual suit were successful the plaintiff would be entitled to at least $100 in damages. Although some class members may have made a great many transactions on the ATMs, it appears that the $100 to $1000 range for statutory damages is per suit rather than per transaction. For the statute states that liability “in the case of an individual action [is] an amount not less than $100 nor greater than $1,000.”
The smaller the stakes to each victim of unlawful conduct, the greater the economies of class action treatment and the likelier that the class members will receive some money rather than (without a class action) probably nothing, given the difficulty of interesting a lawyer in handling a suit for such modest statutory damages as provided for in the Electronic Funds Transfer Act. But in this case the amount of damages that each class member can expect to recover is probably too small even to warrant the bother, slight as it may be, of submitting a proof of claim in the class action proceeding.
Since distribution of damages to the class members would provide no meaningful relief, the best solution may be what is called (with some imprecision) a “cy pres” decree. Such a decree awards to a charity the money that would otherwise go to the members of the class as damages, if distribution to the class members is infeasible. Mace v. Van Ru Credit Corp., 109 F.3d 338, 345 (7th Cir.1997); Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir.2012); Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990); 3 William B. Rubenstein, et al., Newberg on Class Actions § 10:17 (5th ed.2013). (For criticism, see Martin H. Redish, Peter Julian & Samantha Zyontz, “Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative and Empirical Analysis,” 62 Fla. L. Rev. 617 (2010).) Payment of $10,000 to a charity whose mission coincided with, or at least overlapped, the interest of the class (such as a foundation concerned with consumer protection) would amplify the effect of the modest damages in protecting consumers. A foundation that receives $10,000 can use the money to do something to minimize violations of the Electronic Funds Transfer Act; as a practical matter, class members each given $3.57 cannot.
As explained in Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 784 (7th Cir. 2004), “cy pres” is the name of a doctrine of trust law that allows the funds in a charitable trust, if they can no longer be devoted to the purpose for which the trust was created, to be diverted to a related purpose; and so when the polio vaccine was developed the March of Dimes Foundation was permitted to redirect its resources from combating polio to combating other childhood diseases. The trust doctrine is based on the idea that the settlor would have preferred a modest alteration in the terms of the trust to having the corpus revert to his residuary legatees because the trust‘s original aim could no longer be achieved. In a class action the reason for a remedy modeled on cy pres is to prevent the defendant from walking away from the litigation scot-free because of the infeasibility of distributing the proceeds of the settlement (or of the judgment, in the rare case in which a class action not dismissed pretrial goes to trial rather than being settled) to the class members. When there‘s not even an indirect benefit to the class from the defendant‘s payment of damages, the “cy pres” remedy (misnamed, but the alternative term found in some cases—“fluid recovery“—is misleading too) is purely punitive. But we said in Mirfasihi that the punitive character of the remedy would not invalidate it. Id. at 784-85. Other courts, disagreeing, require the charity or other recipient to have an interest parallel to that of the class. E.g., In re Lupron Marketing & Sales Practices Litigation, 677 F.3d 21, 33 (1st Cir.2012); Nachshin v. AOL, LLC, 663 F.3d 1034, 1038-39 (9th Cir. 2011). No matter; it should be possible in this case to find a charity concerned with consumer protection issues of the general character presented by the case.
The judge‘s second ground for decertification was that the requirement of notice to class members could not be satisfied. ATMs do not store users’ names. Instead they keep track of each transaction by assigning a 10-digit identification number to it. The first six digits identify the user‘s bank; the last four identify the user. To attach names to those last four digits would require subpoenaing each bank identified by the first six. Since Kore‘s two ATMs were in college bars, obtaining the identity of all the users might require subpoenaing hundreds of banks (the hometown banks of the students, by now mostly ex-students, who are the class members).
Rule 23(c)(2)(B) of the civil rules requires (for a class action under
The notice proposed by class counsel consists of sticker notices on Kore‘s two ATMs and publication of a notice in the principal Indianapolis newspaper and on a website. That is adequate in the circumstances. We are mindful that notice by publication involves a risk that a class member will fail to receive the notice and as a result lose his right to opt out of the class action—a right that can be valuable if his individual claim is sizable. But there is no indication that any member of the class in this case has a damages claim large enough to induce him to opt out and bring an individual suit for damages. And notice posted conspicuously in both bars in which Kore‘s ATMs were located may be the best way to reach the bars’ regulars (though many of them will have graduated from college and left Indianapolis) and they are the patrons most likely to have made repeated use of the ATMs and thus to have a potential interest in opting out. See Holtzman v. Turza, 2013 WL 4506176, at *5-6, 728 F.3d 682, 688-90 (7th Cir. Aug. 26, 2013); Travelers Property Casualty v. Good, 689 F.3d 714, 717-20 (7th Cir.2012); Klier v. Elf Atochem North America, Inc., 658 F.3d 468, 474-75 and n. 15 (5th Cir.2011). But even someone who had made 100 transactions on a Kore ATM during the year embraced by the complaint could obtain actual damages of only $300.
The district court added a further twist to the issue of notice by pointing out that the provision of the Electronic Funds Transfer Act that Kore is alleged to have violated is applicable only to consumer users of ATMs,
A deeper question is whether a class action should be permitted when the stakes, both individual and aggregate, in a class action are so small—so likely to be swamped by the expense of litigation—as they are in this case. But we don‘t think smallness should be a bar. This is obvious when what is small is not the aggregate but the individual claim; indeed that‘s the type of case in which class action treatment is most needful. See, e.g., Mace v. Van Ru Credit Corp., supra, 109 F.3d at 344-45. But even when as in this case the aggregate claim—the sum of all the class members’ claims—is meager, such treatment will often be appropriate. A class action, like litigation in general, has a deterrent as well as a compensatory objective. See, e.g., 1 Rubenstein, et al., supra, §§ 1:7-8. “[S]ociety may gain from the deterrent effect of financial awards. The practical alternative to class litigation is punitive damages, not a fusillade of small-stakes claims.” Murray v. GMAC Mortgage Corp., 434 F.3d 948, 953 (7th Cir. 2006). The deterrent objective of the Electronic Funds Transfer Act is apparent in the provision of statutory damages, since if only actual damages could be awarded, the providers of ATM services such as Kore might have little incentive to comply with the law.
The compensatory function of the class action has no significance in this case. But
But the district court must be careful not to allow the litigation expenditure tail to wag the remedy dog. In re Baby Products Antitrust Litigation, 708 F.3d 163, 179 (3d Cir.2013). (A reason, remember, to allow notice by publication in this case.) The court must be alert to prevent class counsel from milking a small case for huge fees, lest the threat of an award of such fees induce a small defendant, such as Kore, to throw in the towel, agreeing to a settlement favorable to the class even if the defendant has an excellent defense. “When the potential liability created by a lawsuit is very great, even though the probability that the plaintiff will succeed in establishing liability is slight, the defendant will be under pressure to settle rather than to bet the company, even if the betting odds are good.” Kohen v. Pacific Investment Mgmt. Co., 571 F.3d 672, 678 (7th Cir.2009).
With the maximum statutory damages $100 to $1000 per individual plaintiff (and the actual share of each class member much less because of their likely number) and the ATM user fee (the maximum actual damages per transaction) only $3, the cy pres remedy may be the only one that makes sense, though that is just our guess given the early stage of the litigation. Ordinarily of course class action damages go to the class. But in a case like this, the award of damages to the class members would have no greater deterrent effect than the cy pres remedy, would do less for consumer protection than if the money is given to a consumer protection charity, and would impose a significant administrative expense that handing the $10,000 over to a single institution would avoid.
A time-saving alternative might be a class action with the stated purpose, at the outset of the suit, of a collective award to a specific charity. We are not aware of such a case, but mention the possibility of it for future reference.
The order decertifying the class is reversed and the case remanded for further proceedings consistent with this opinion. We hold only that the judge‘s opinion decertifying the class does not provide adequate grounds for her ruling. There may be such grounds. And our extended discussion of how to distribute damages was not meant to imply that Kore must be liable in this case. For all we know, it has good defenses.
REVERSED AND REMANDED.
UNITED STATES of America, Plaintiff-Appellee, v. Andre WILLIAMS, Defendant-Appellant.
No. 12-3864.
United States Court of Appeals, Seventh Circuit.
Argued April 23, 2013. Decided Sept. 24, 2013.