Chicago Business Litigation Lawyer Blog

While many people grumble about paying the exorbitant ATM fees that are being charged these days, few people know that there may be legal recourse. Until recently, the Electric Funds Transfer Act required ATMs charging a fee to provide two notices to customers: one notice in a sticker on the ATM, and another notice on the screen during the transaction. The Act has since been amended so that only the onscreen notification is required. However, during the time that both notices were required, Kore of Indiana Enterprise allegedly failed to provide one of these notices on two ATMs that they owned.

Kore owned ATMs in two bars in Indianapolis, which are allegedly popular with college students. Kore allegedly failed to post a notice that it charges a fee for each use of the ATMs. David Hughes sued Kore on behalf of himself and everyone who had used the ATMs during the time that the Electric Funds Transfer Act required two notices of an ATM fee. The lower court denied his motion for certification for class status, and Hughes appealed.

A plaintiff in an individual suit of this kind is entitled to actual damages or to statutory damages of anywhere from $100 to $1000. In the case of a class action lawsuit, the amount of damages is left to the discretion of the judge but cannot exceed $500,000 or 1 percent of the defendant’s worth, whichever is smaller. If the plaintiffs are successful, it is also the judge’s responsibility to award “a reasonable attorney’s fee” which the defendant would also pay.

In this class action lawsuit, the limit to the damages would be $10,000, since that is 1 percent of Kore’s worth. In the time period that this case covers, there were more than 2800 transactions at the two ATMs. The damages for a class action would this be at most $3.57 per transaction. If each class member only engaged in one transaction, that would leave 2800 class members who are each entitled to no more than $3.57.

The district judge decertified the class for two reasons, the first reason being that the class members would do better to bring individual suits, since they are entitled to at least $100 in an individual lawsuit. The $100 to $1000 range for statutory damages appears to be per suit rather than per transaction. However, individual lawsuits of this kind are unlikely to make it to court since $100 is such a small reward to sue for.

The judge’s second reason for decertifying the class was that the requirement of providing notice to class members could not be satisfied since the ATMs do not store user names. They track each transmission with a 10-digit identification number. The first six digits identify the user’s bank while the last four identify the user. To attach names to these numbers would require subpoenaing each bank that is identified. Since these ATMs were used largely by college students, this could involve subpoenaing hundreds of banks from students’ home towns.

Since distributing $3.57 to each class member would provide no real relief to the plaintiffs, the best solution, according to the appellate court, may be a “cy pres” decree. This is when the money the plaintiffs are awarded in a case goes to a charity whose work coincides with the interest of the class. In this case, the money could be given to a foundation that deals with consumer protection. Such a foundation could do much more with $10,000 than each class member could do with $3.57. Another purpose of a cy pres is to prevent the defendant who violated a statute or otherwise engaged in wrongdoing from getting away without punishment when distribution of the award to the class members is unlikely.

The US Court of Appeals for the Seventh Circuit reversed the lower court’s decision refusing to certify the class and remanded the case for further proceedings.

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Arbitration provisions are appearing in more and more contracts lately, in everything from employment contracts to consumer contracts. With increasing frequency, companies are looking to block employees and consumers access to the courts, in the event that they have a complaint against the company.

In a recent class action lawsuit, Ganley Chevrolet and Ganley Automotive Stores, tried to force a consumer class action lawsuit against them into arbitration. The courts, on the other hand, have agreed that the dealership group’s sales agreement was “incomplete and misleading” and therefore unenforceable.

The dispute began in March 2001 when Jeffrey and Stacy Felix purchased a 2000 Chevy Blazer. Ganley allegedly told the Felixes that they were approved for 0.0% financing but that the offer would expire that evening. They agreed and traded in their van as part of the deal. Ganley allegedly insisted that they take the new car home with them. A few days later though. Ganley told the couple that the bank would approve only 1.9% financing, which they accepted. After having the car for more than a month, the Felixes were told that the bank had decided not to approve the 1.9% financing but that Ganley had found another bank which would give them a loan with a 9.44% financing rate. The Felixes refused to sign a new agreement at such a high rate. They kept the vehicle though, and have been putting money in escrow to purchase it.

Meanwhile, they filed a lawsuit against Ganley Chevrolet and Ganley Automotive Stores alleging “bait and switch tactics.” This is a practice in which a dealer will offer goods at one low price to get the customer interested, then suddenly raise the price at the last minute. It is also a violation of the Ohio Consumer Sales and Practices Act. The lawsuit further alleges misrepresentation and emotional distress. It includes individual claims as well as class action claims and challenges the validity of the arbitration provision in the sales agreement.

The lower court judge found the arbitration provision to be “ambiguous and misleading” and therefore rejected Ganley’s request for arbitration and approved class action status on behalf of all consumers whose sales agreement with any Ganley store had the same provision from June 1999 until the company changed the provision in 2007. The judge also awarded $200 in damages to each of the “thousands of members” of the certified class.

Ganley appealed the decision and the case went to the Ohio Court of Appeals which upheld the class certification in a 2-1 decision. The court found that class action status in this case was appropriate under the consumer protection law. The one dissenting judge agreed that, Ganley’s use of the arbitration provision might be an “unfair or deceptive practice” that would justify individual lawsuits in court. However, he argued that the plaintiffs failed to meet the requirements for class action status and such was his reason for dissent.

In order to qualify for class action status, the plaintiffs must meet certain criteria. These criteria include: 1) an identifiable class must exist, and its definition must be clear; 2) the named plaintiff representatives must be members of the class; 3) the class must be large enough to make joining all of the members practicable; 4) the class must have in common questions of law or fact; 5) the claims or defenses of the representatives must be typical of the claims or defenses of the class; and 6) the representative parties must fairly and adequately protect the interests of the class.

Ganley argues that the trial court should not have certified the class because the class definition and time period are too broad and ambiguous. Ganley also argued that the commonality, predominance, and typicality prerequisites to class certification had not been met. The Court of Appeals disagreed and upheld the lower court’s ruling.

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