Tuesday, September 28, 2010
Ninth Circuit Allows Class Action Against AMC Theatres to Proceed
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday revived a class action against the AMC theatre chain for alleged violations of the Fair and Accurate Credit Transactions Act.
AMC’s good faith effort to comply with the act after Michael Bateman’s lawsuit was filed and its potential liability—up to $290 million—did not justify denial of class certification on superiority grounds, the panel said.
Bateman filed a complaint against AMC in 2007, asserting violation of FACTA provisions requiring that credit and debit card receipts issued to consumers not reflect the expiration date or more than the last five digits of the card number.
He sought to certify a class of individuals who received receipts from some of AMC’s automated box offices that included the first four and the last four digits of the credit or debit card tendered for payment between Dec. 4, 2006, and Jan. 29, 2007.
An AMC internal review conducted after the lawsuit was filed revealed that more than 290,000 receipts had been printed in violation of FACTA during the relevant period.
Bateman did not any actual harm caused by the violations, but FACTA incorporates the Fair Credit Reporting Act’s statutory damages provision, which allows a consumer to recover damages between $100 and $1,000 for each willful violation of the act.
U.S. District Judge Florence-Marie Cooper, now deceased, denied Bateman’s motion, finding the potential for liability “enormous and completely out of proportion to any harm suffered” by the class members and that certification would not further the purpose and policy of FACTA.
But Judge Richard A. Paez explained in his opinion for the appellate panel that the statutory damages scheme was “intended to compensate individuals for actual or potential damages resulting from FACTA violations,” and “the plain text of the statute makes absolutely clear that, in Congress’s judgment, the $100 to $1000 range is proportionate and appropriately compensates the consumer.”
Paez added that the size of the putative class would not affect the proportionality of relief because the amount potential liability “expands at exactly the same rate as the class size.”
Since FACTA does not place a cap on damages in the case of class actions, does not indicate any threshold at which courts are free to award less than the minimum statutory damages, and does not limit the number of individuals that can be certified in a class or the number of individual actions that can be brought against a single merchant, Paez reasoned that Congress had not provided for judicial discretion to depart from the $100 to $1000 range where a district judge finds that damages are disproportionate to harm.
The jurist further posited that the $100 to $1000 figured represented the range of damages the Legislature considered sufficient to have a deterrent effect and that “[a]llowing denial of class certification because of the sheer number of violations and amount of potential statutory damages would allow the largest violators of FACTA to escape the pressure of defending class actions and, in all likelihood, to escape liability for most violations.”
Paez suggested that certification in this case “would preserve, if not amplify, the deterrent effect of FACTA,” since AMC’s compliance with FACTA after the complaint was filed was likely “promoted, at least in part, by the specter of a substantial damages award.”
He added that Cooper’s denial of certification based on AMC’s later modification of its machines to comply with the act “would communicate to other potential violators that, as long as they comply with FACTA after a complaint is filed, they may avoid liability for widespread violations,” undermining the statute’s deterrent effect, and was also an abuse of discretion since Congress did not include any safe harbor or otherwise limit damages for good faith compliance after an alleged violation.
Paez, however cautioned that yesterday’s decision would not foreclose the possibility that a showing of “ruinous liability” would warrant denial of class certification or that the district court could reduce the amount of damages awarded if Bateman prevails at trial.
Senior Ninth Circuit Judge Betty B. Fletcher and Senior U.S. District Judge Donald E. Walter of the Western District of Louisiana, sitting by designation, joined in the opinion.
The attorneys on appeal in Bateman v. American Multi-Cinema, Inc., 09-55108, were Gregory N. Karasik of Spiro Moss LLP on behalf of Bateman and Robert H. Platt of Manatt, Phelps & Phillips LLP for AMC.
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