Turner v. Beneficial Corporation

Page 643

236 F.3d 643 (11th Cir. 2000)

JACQUELINE TURNER, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. BENEFICIAL CORPORATION, BENEFICIAL NATIONAL BANK, U.S.A., Defendants-Appellees.

No. 99-13381

D.C. Docket No. 95-01212-CV-A-N

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

December 21, 2000

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Middle District of Alabama

Before CARNES and BARKETT, Circuit Judges and POLLAK^*, District Judge.

BARKETT, Circuit Judge:

Jacqueline Turner brings this interlocutory appeal, pursuant to Federal Rule of Civil Procedure 23(f), from the denial of class certification in her suit alleging that defendant Beneficial Corporation ("Beneficial") committed violations of the Truth in Lending Act, 15 U.S.C. 1601 et seq. ("TILA"), and the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 et seq. ("RICO"), and also committed common law fraud in transactions related to its financing of Turner's purchase of a satellite dish.

BACKGROUND

This case arises out of Turner's purchase of a satellite dish system from Star Vision, Inc., prompted by a newspaper advertisement which indicated that monthly charges for service would be $39.95. The financing of the dish and the monthly service was to be provided through an agreement between Beneficial National Bank and Star Vision by way of an "Excel" credit card issued by Beneficial which could be used only to purchase goods and services from Star Vision. When the satellite system was delivered, the invoice reflected a monthly bill of $48.36, as did the Excel bill from Beneficial. With the Excel card, Turner had received TILA disclosure statements, but Turner alleges that these disclosures failed to reveal the true cost of financing the purchase of the satellite dish.¹

Although Turner concedes that she did not read Beneficial's disclosure statements at the time of receipt and therefore did not rely on them, she claims that she is entitled to damages for Beneficial's failure to provide disclosure statements that complied with the requirements of the law under TILA. Specifically, Turner's complaint charged that Beneficial's failure to provide her with the correct disclosure forms violated TILA (Count I) and the Racketeer Influenced and Corrupt Organizations Act ("RICO") (Count II) and constituted fraud by suppression (Count III). She sought certification of a nationwide class as to her TILA and RICO claims. She also sought certification of an Alabama subclass as to her fraud by suppression claim.

In Count I of her complaint, Turner sought both statutory and actual damages under TILA. The district court denied class certification on Turner's claim for statutory damages because Beneficial had already paid out the maximum allowable statutory damages in settlement of another suit arising out of the same TILA violation, and TILA bars any further class actions for statutory damages arising out of that same violation. See 15 U.S.C. 1640(a)(2)(B). The district court noted that Turner can still pursue statutory damages on her individual TILA claim. Turner filed a separate appeal from the denial of class certification on her claim for TILA statutory damages, but she has since moved to voluntarily dismiss that appeal.

As to Turner's claim for actual damages under TILA, Beneficial did not dispute Turner's claim that the disclosures were improper. Instead it pointed out that, because Turner did not read the disclosure statement, she had not relied upon it and thus could not have suffered actual injury as a result of Beneficial's TILA violation. The district court found that detrimental reliance is a necessary element not only of her damage claim under TILA but of her RICO and state fraud claims as well. Having determined that Turner could not prove reliance, the district court denied class certification on all three claims, and this appeal followed. We review class certification rulings for abuse of discretion. Armstrong v. Martin Marietta Corp., 138 F.3d 1374 (11th Cir. 1998) (en banc). We review de novo the district court's conclusions of law that informed its decision to deny class certification. DeKalb County School Dist. v. Schrenko, 109 F.3d 680, 687 (11th Cir. 1997).

DISCUSSION

A court can certify a class only when the requirements of Rule 23(a) and at least one of the alternative requirements of Rule 23(b) are satisfied. Jackson v. Motel 6 Mutipurpose, Inc., 13 F.3d 999, 1005 (11th Cir. 1997). Turner maintains that all of the requirements of Rule 23(a) are satisfied² and that the class also satisfies Rule 23(b)(3), which requires that questions of law or fact common to all members of the class predominate over questions pertaining to individual members. The district court refused to certify a class on any of her causes of action because it found that Turner could not satisfy the typicality and adequacy requirements of Rule 23(a)(3) & (4) because she could not prove detrimental reliance. Thus, the issue in this appeal is whether detrimental reliance is a required element of a claim for actual damages under TILA, for a RICO claim, and for a fraudulent suppression claim under Alabama law. We discuss each in turn.

1.The TILA Claim

The TILA provision directly relevant to this case is that governing actual damages:

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part . . . with respect to any person is liable to such person in an amount equal to . . .

(1) any actual damage sustained by such person as a result of the failure; . . . .

15 U.S.C. 1640(a)(1) (1998). This provision must be understood in the context of TILA's general regulatory scheme.

In addition to actual damages, TILA provides three ways of remedying violations of its provisions. First, TILA empowers the Federal Trade Commission as its overall enforcement agency, 15 U.S.C. 1607(c), and provides other federal agencies with enforcement authority over specific categories of lenders. 15 U.S.C. 1607(a). The enforcing agencies are authorized to "adjust the account of the person to whom credit was extended, to assure that such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower." 15 U.S.C. 1607(e)(1).³ Second, TILA imposes criminal liability on persons who willfully and knowingly violate the statute. 15 U.S.C. 1611. Finally, TILA creates a private cause of action for statutory damages, which may be assessed in addition to any actual damages awarded.

When TILA was originally enacted in 1968, it imposed no limit on statutory damages in class actions and required that each successful plaintiff be awarded a minimum of $100 in damages. Consumer Credit Protection Act of 1968, Title I, 206(a), Pub. L. No. 90-321, 82 Stat. 146 (May 29, 1968). Congress amended TILA's statutory damages provision in 1974 in order to "strike an appropriate balance between the advantages of the class action as a vehicle of private enforcement and the need of creditors to avoid financial ruin." Barber v. Kimbrell's, Inc., 577 F.2d 216, 223 (4th Cir. 1978). Congress further capped defendants' liability for statutory damages by providing that the ceiling on statutory damages in a class action applies to all class actions arising out of the same TILA violation. Truth in Lending Simplification and Reform Act of 1980, Pub. L. No. 96-221 615(a)(1), 94 Stat. 132 (March 31, 1980). In the case of a class action, statutory damages are now limited to:

such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and 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 creditor shall not be more than the lesser of $500,000 or 1 per centum of the net worth of the creditor; . . . .

15 U.S.C. 1640(a)(2)(B).⁴ Congress placed this ceiling on a defendant's statutory liability in any class action so that courts would no longer have to "choose between denying class actions altogether or permitting multi-million dollar recoveries against defendants for minor or technical violations." McCoy v. Salem Mortgage Co., 74 F.R.D. 8, 10 (E.D. Mich. 1976).

While limiting statutory damages, Congress also amended TILA in 1974 to permit private litigants, both as individuals and in class actions, to sue for actual damages sustained "as a result" of the TILA violation. 15 U.S.C. 1640(a)(1). While statutory and regulatory damages provide at least a partial remedy for all material TILA violations, actual damages insure that consumers who have suffered actual harm due to a lender's faulty disclosures can be fully compensated, even if the total amount of their harm exceeds the statutory ceiling on TILA damages. In this case we take it that the statutory ceiling has already been reached, and the sole issue presented is whether a plaintiff must show detrimental reliance on a faulty TILA disclosure in order to be eligible for an award of actual damages. There is a conflict among various courts on this issue. Most courts that have addressed the issue have held that reliance is an element in a TILA claim for actual damages. See, e.g., Perrone v. General Motors Acceptance Corp., 232 F.3d 433, 436-40 (5th Cir. Nov. 2, 2000); Stout v. J.D. Byrider, 228 F.3d 709, 718 (6th Cir. Sept. 8, 2000); Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915, 917 (8th Cir. 2000); Bizier v. Globe Financial Services, Inc., 624 F.2d 1, 4 (1st Cir. 1981) (dicta); Hoffman v. Grossinger Motor Corp., 1999 WL 184179, *4 (N.D. Ill. 1999); Brister v. All Star Chevrolet, 986 F.Supp. 1003, 1008 (E.D. La. 1998); McCoy, 74 F.R.D. at 12-13. This Circuit is aligned with the minority of courts that have reached the opposite...