NANCY R. MURRAY, Plаintiff-Petitioner, v. GMAC MORTGAGE CORPORATION, doing business as Ditech.com, Defendant-Respondent.
No. 05-8035
United States Court of Appeals For the Seventh Circuit
SUBMITTED DECEMBER 12, 2005—DECIDED JANUARY 17, 2006
Petition for Permission to Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 05 C 1229—Samuel Der-Yeghiayan, Judge.
EASTERBROOK, Circuit Judge. Shortly after her debts had been discharged in bankruptcy, Nancy Murray received a credit solicitation from GMAC Mortgage, which had learned her name and address by asking credit bureaus tо forward information about potential borrowers who met specified criteria. GMACM offered Murray a loan to be secured by a mortgage on her home. Deluged by offers, Murray showed them to a lawyer, who concluded that GMACM had violated the Fair Credit Reporting Act in two ways: first, GMACM had not made the “firm offer of credit” that
While waiting for the judge to decide whether the suit could proceed as a class action, the parties reached a tentative settlement—which the district judge refused to read, stating that this would be a waste of time because he had decided that Murray could not represent a class. See 2005 U.S. Dist. LEXIS 27254 (N.D. Ill. Nov. 8, 2005), reconsideration denied, 2005 U.S. Dist. LEXIS 28249 (Nov. 11, 2005). In an effort to save the availability of class-wide relief, Murray proposes an interlоcutory appeal, which we have discretion to allow. See
The district court gave four reasons for declining to certify a class: (1) Counsel did not try tо cut a deal for Murray personally. (2) The complaint seeks statutory but not compensatory damages. (3) Statutory damages, if awarded to a class, would be ruinously high. (4) Nancy Murray is a “professional plaintiff” unfit to represent a class. All but #4 evince hostility to all class litigation; if any one were adopted, consumer class actions under the Fair Credit Reporting Act would be impossible. None is a proper ground on which to deny class certification, however.
1. Let us start with the first. The district judge wrote: “Murray‘s interests are antagonistic to other class members’ interests because Murray may desire to settle her claim alone. Murray might be able to recover more funds individually with fewer complications if she settled individually.” Yet every plaintiff “may desire” to sеttle alone; if this were enough to preclude class treatment, there could be no class actions for damages under
Unfortunately, the terms of the tentative settlement suggest that Murray or hеr lawyers may have tried something worse, negotiating for payment while giving GMACM the benefit of a judgment that leaves the class empty-
This looks like the sort of settlement that we condemned in Blair v. Equifax Check Services, Inc., 181 F.3d 832 (7th Cir. 1999), and Crawford v. Equifax Payment Services, 201 F.3d 877 (7th Cir. 2000), two appeals arising from the same litigation. That suit had been settled for $2,000 to the named plaintiff, $5,500 to a legal-aid society that had not been injured by the defendant‘s conduct, and $78,000 in legal fees. We treated the dispropоrtion—$2,000 for one class member, nothing for the rest—as proof that the class device had been used to obtain leverage for one person‘s benefit. See also, e.g., Young v. Higbee Co., 324 U.S. 204, 211-14 (1945); Weiss v. Regal Collections, 385 F.3d 337, 343-45 (3d Cir. 2004); Chateau de Ville Products, Inc. v. Tams-Witmark Music Library, Inc., 586 F.2d 962, 965-67 (2d Cir. 1978). Here the proposed award is $3,000 to the representative while other class members are frozen out. The payment of $3,000 to Murray is three times the statutory maximum, while others don‘t get even the $100 that the Act specifies as the minimum. Oddly, this is the sort of tactic that the district judge chastised counsel for not employing on Murray‘s behalf.
Such a settlement is untenable. We don‘t mean by this that all class members must receive $100; risk that the class will lose should the suit go to judgment on the merits justifies a compromise that affords a lower award with certainty. See In re Mexico Money Transfer Litigation, 267 F.3d 743 (7th Cir. 2001). But if the reason other class
2. The district court‘s second reason—that Murray should have sought compensatory damages for herself and all class members rather than relying on the statutory-damages remedy—would make consumer class actions impossible. What each person‘s injury may be is a question that must be resolved one consumer at a time. Although compensatory damages may be awarded to redress negligence, while statutory damages require wilful conduct, introducing the “easier” negligence theory would preclude class treatment. Common questions no longer would predominate, and an effort to determine a million consumers’ individual losses would make the suit unmanageable. Yet individual losses, if any, are likеly to be small—a modest concern about privacy, a slight chance that information would leak out and lead to identity theft. That actual loss is small and hard to quantify is why statutes such as the Fair Credit Reporting Act provide for modest damages without proof of injury.
Refusing to certify a class because the plaintiff decides not to make the sort of person-specific arguments that render class treatment infeasible would throw away the benefits of consolidated treatment. Unless a district court finds that personal injuries are large in relation to statutory damages, a representative plaintiff must be allowed tо forego claims for compensatory damages in order to achieve class certification. When a few class members’ injuries prove to be substantial, they may opt out and litigate independently. See Jefferson v. Ingersoll International, Inc., 195 F.3d 894 (7th Cir. 1999). Only when all or almost all of the claims are likely to be large enough to justify individual litigation is it wise to reject class treatment altogether. Cf. In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995).
3. Having upbraided Murray for abandoning compensatory damages and thus seeking too little, the district judge also rebuked her for seeking too much. He wrote: “If Murray and the proposed class members were to prevail at trial, GMAC would face a potential liability in the billions of dollars for purely technical violations of the FCRA . . .
The reason that damages can be substantial, however, does not lie in an “abuse” of
Many laws that authorize statutory damages also limit the aggregate award to any class. For example, the Fair Dеbt Collection Practices Act says that total recovery may not exceed “the lesser of $500,000 or 1 per centum of the net worth of the debt collector“.
The district judge sought to curtail the aggregate damages for violations he deemed trivial. Yet it is not appropriate to use procedural devices to undermine laws of which a judge disapproves. See Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686 (1987); United States v. Albertini, 472 U.S. 675, 680 (1985); Jaskolski v. Daniels, 427 F.3d 456, 461-64 (7th Cir. 2005). Maybe suits such as this will lead Congress to amend the Fair Credit Reporting Act; maybe not. While a statute remains on the books, however, it must be enforced rather than subverted. An award that would be unconstitutionally excessive may be reduced, see State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), but constitutional limits are best applied after a class has been certified. Then a judge may evaluate the defendant‘s overall conduct and control its total exposure. Reducing recoveries by forcing everyone to litigate independently—so that constitutional bounds are not tested, because the statute cannot be enforced by more than a handful of victims—has little to recommend it.
A person who seeks out opportunities to sue could do so in ways that injure other class members. Consider the investor who buys one share in each of a thousand corporations, hoping that the price of one will plummet and lead to seсurities litigation. Such a person could be tempted to file suits designed to extract payoffs from the corporation even if the average investor will lose in the process. Congress has responded by insisting that the investors with the largest stakes be allowed to control securities litigation.
Murray did not acсept compensation to put herself in the way of injury—though “testers,” who do this in housing and employment litigation, usually are praised rather than vilified. See Havens Realty Corp. v. Coleman, 455 U.S. 363, 374-75 (1982); Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252 (1977). Murray just opened the mail as it arrived. She did not
5. GMACM asks us to affirm the district judge‘s оrder on an alternative ground. One of the contested questions is whether GMACM used credit information to make a “firm offer of credit,” which is one of the few permissible purposes for which this information may be secured without the consumer‘s consent. The statute defines “firm offer of credit” as “any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a [credit] report on the consumer, to meet the specific criteria used to select the consumer for the offer.”
According to GMACM, a court cannot know whether a “firm offer of credit” has been made without examining every recipient‘s circumstances, and the need to do this for 1.2 million people would make class treatment impractical. The statutory definition of “firm offer” does not ask about how consumers react, however; it asks what the
GMACM maintains that Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), changed the focus from the offeror to the recipient and in the process foreclosed any possibility of class litigation under the Fair Credit Reporting Act. We held in Cole that a sham offer used to pitch a product rather than extend credit does not meet the statutory definition. A business that obtains consumer credit information and then offers a $1 loan (at 100% daily interest) toward the purchase of a car has not made a “firm offer of credit” but has instead used credit histories to identify potential auto buyers. That objective is not allowed under the Fair Credit Reporting Act, we concluded in Cole.
To separate the use of credit data to sell products (forbidden) from the use of credit data to make firm offers of credit (allowed), we held, a court must determine whether the offer has value as an extension of credit alone. “A definition of ‘firm offer of credit’ that does not incorporate the concept of value to the consumer upsets the balance Congress carefully struck between a consumer‘s interest in privacy and the benefit of a firm offer of credit for all those chosen through the pre-screening process. From the consumer‘s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation.” Id. at 726-27. To understand “the consumer‘s perspective,” however, a court must hold 1.2 million hearings—or so GMACM contends.
GMACM offered the recipients first-mortgage loans, so that they could draw cash against the equity in their homes. Because the loan could not exceed the unencumbered portion of the property‘s market price, however, not all consumers would find the opportunity valuable. Some would not have enough equity to justify acceptance; others could conclude that the costs of refinancing (required so that GMACM could hold the senior mortgage) exceed the benefit from drawing additional credit.
In order to avoid class certification, GMACM has adopted a position that would make it impossible for any potential lender to know ex ante whether it is entitled to obtain credit information. Any recipient could appeаr, assert that the offer was worthless given his financial circumstances, and obtain damages if not an injunction. Such a rule would cripple the statutory regime by making offers of credit so risky that any prudent, law-abiding firm would have to withdraw from the business. To escape one suit, GMACM would hobble its own operations and those of all others who rely on the firm-offer proviso to the Fair Credit Reporting Act. That would disserve the interests of both lenders and consumers. Nothing in Cole requires an offer‘s value to be assessed ex post, and recipient by recipient. To decide whether GMACM has adhered to the statute, a court need only determine whether the four corners of the offer satisfy the statutory definition (as elaborated in Cole), and whether the terms are honored when consumers accept. These questions readily may be rеsolved for a class as a whole.
The decision of the district court is vacated, and the case is remanded for proceedings consistent with this opinion. Circuit Rule 36 will apply on remand. We strongly suggest that the Executive Committee of the Northern District assign all of the Murray family‘s suits under the
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Clerk of the United States Court of Appeals for the Seventh Circuit
USCA-02-C-0072—1-17-06