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Bateman v. American Multi-Cinema

September 27, 2010

MICHAEL BATEMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
AMERICAN MULTI-CINEMA, INC., DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Central District of California Florence-Marie Cooper, District Judge, Presiding D.C. No. 2:07-cv-00171-FMC-AJW

The opinion of the court was delivered by: Paez, Circuit Judge

FOR PUBLICATION

Argued and Submitted May 4, 2010 -- Pasadena, California

Before: Betty B. Fletcher and Richard A. Paez, Circuit Judges, and Donald E. Walter, Senior District Judge.*fn1

OPINION

In this Fair and Accurate Credit Transactions Act ("FACTA") case, Plaintiff-Appellant Michael Bateman appeals the district court's denial of class certification. Bateman sued American Multi-Cinema, Inc., ("AMC") on behalf of a class of similarly situated individuals, alleging that AMC violated FACTA by printing more than the last five digits of consumers' credit or debit card numbers on electronically printed receipts in December 2006 and January 2007. See 15 U.S.C. § 1681c(g) (2005). On behalf of himself and other consumers who received such receipts, Bateman sought to recover statutory damages ranging from $100 to $1,000 for each willful violation of FACTA. The district court denied class certification under Federal Rule of Civil Procedure 23(b)(3) ("Rule 23(b)(3)"), finding that a class action was not the superior method of litigating the case because AMC had made a good faith effort to comply with FACTA after this lawsuit was filed and the magnitude of AMC's potential liability-$29 million to $290 million-was enormous and out of proportion to any harm suffered by the class. See Bateman v. Am. Multi-Cinema, Inc., 252 F.R.D 647, 648, 650-51 (C.D. Cal. 2008) (order). Bateman appeals, arguing that the district court abused its discretion in denying class certification. We agree that none of these three grounds-the disproportionality between the potential liability and the actual harm suffered, the enormity of the potential damages, or AMC's good faith compliance-justified the denial of class certification on superiority grounds and that the district court abused its discretion in relying on them. We therefore reverse the denial of class certification and remand for further proceedings.

I.

In 2007, Bateman filed a complaint against AMC, on behalf of himself and those individuals similarly situated, alleging violations of FACTA. Bateman alleged that from December 2006 to January 2007, AMC issued credit and debit card receipts from some of its automated box offices that included both the first four and the last four digits of the credit card, a violation of FACTA. To protect against identity theft, FACTA requires, in relevant part, 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. See 15 U.S.C. § 1681c(g)(1). FACTA incorporates the Fair Credit Reporting Act's ("FCRA") statutory damages provision, which allows a consumer to recover damages between $100 and $1,000 for each willful*fn2 violation of FACTA without having to prove actual damages. See id. § 1681n. In the complaint, Bateman did not allege any actual harm to his identity resulting from the claimed violations.

After conducting discovery, Bateman filed a motion for class certification under Rule 23(b)(3). Bateman sought to certify a class of individuals who, between December 4, 2006, and January 29, 2007, had used a credit card or debit card to purchase a movie ticket from an automated box office at an AMC theater and who received a receipt that included the first four and last four digits of the person's credit/debit card number. 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.

The district court denied Bateman's motion for class certification without prejudice, concluding that Bateman had failed to demonstrate that a class action would be superior to other available methods of adjudicating his claim, as required under Rule 23(b)(3). In particular, the district court denied certification because, in its opinion, class treatment could result in enormous liability completely out of proportion to any harm suffered by the plaintiff. The district court further concluded that class certification was not appropriate because AMC demonstrated good faith by complying with FACTA within a few weeks of the filing of Bateman's complaint.*fn3

After denying Bateman's motion to certify, the district court approved the parties' stipulation to stay the case pending the outcome of an appeal in a different case raising an issue identical to the one presented here. See Soualian v. Int'l Coffee & Tea, LLC, No. CV 07-0502-RGK (JCx), 2008 WL 410618 (C.D. Cal. Feb. 9, 2008). That case, however, settled while the appeal was pending. In the meantime, Congress amended FACTA to address prevalent misunderstandings about FACTA's requirements and to provide businesses some measure of protection from lawsuits resulting from those misunderstandings. See Credit and Debit Card Receipt Clarification Act of 2007, Pub. L. No. 110-241, 122 Stat. 1565 (2008) ("Clarification Act"). The district court subsequently instructed the parties to file supplemental briefing on the appropriateness of class certification in light of that amendment. After considering the supplemental briefs, the district court denied with prejudice Bateman's renewed motion for class certification for largely the same reasons as before, although the court additionally noted that, because Bateman had alleged no actual harm, class certification would not further the purpose and policy of FACTA. See Bateman, 252 F.R.D at 650. Pursuant to Federal Rule of Civil Procedure 23(f), Bateman petitioned this court for permission to appeal the denial of class certification. We granted his request.

II.

Under Federal Rule of Civil Procedure 23, "[a] class action may be maintained if two conditions are met: The suit must satisfy the criteria set forth in subdivision (a) (i.e., numerosity, commonality, typicality, and adequacy of representation), and it also must fit into one of the three categories described in subdivision (b)." Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S.Ct. 1431, 1437 (2010) (internal quotation marks omitted). Subdivision (b)(3), at issue in this appeal, is satisfied if "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

The decision to grant or deny class certification is within the trial court's discretion. Yamamoto v. Omiya, 564 F.2d 1319, 1325 (9th Cir. 1977). District courts are "in the best position to consider the most fair and efficient procedure for conducting any given litigation," Doniger v. Pac. N.W. Bell, Inc., 564 F.2d 1304, 1309 (9th Cir. 1977), and so must be given "wide discretion" to evaluate superiority, Lerwill v. In-flight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978). We thus review for abuse of discretion a district court's order denying a motion for class certification. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). A district court abuses its discretion when it makes an error of law. Yokoyama v. Midland Nat'l Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010). Additionally, in the context of class certification, "[a]buse exists in three circumstances:

(1) reliance on an improper factor, (2) omission of a substantial factor, or (3) a clear error of judgment in weighing the correct mix of factors." In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 957 (9th Cir. 2009).

III.

The district court refused to certify the class because it concluded that the proposed class failed to meet Rule 23(b)(3)'s superiority requirement. See Bateman, 252 F.R.D. at 650-51. At the heart of its ruling, the district court determined that class treatment would render the magnitude of the defendant's potential liability "enormous and completely out of proportion to any harm suffered by Plaintiff." Id. at 651. In its first order denying class certification without prejudice, the court also considered significant AMC's good faith efforts to bring its machines into compliance with FACTA shortly after the lawsuit was filed. We conclude that none of these three grounds -the disproportionality between the potential liability and the actual harm suffered, the enormity of the potential damages, or AMC's good faith-justified the denial of class certification and hold that the district court abused its discretion in relying on them.

A. Proportionality Between Liability and Actual Harm

The district court denied class certification in part because it concluded that AMC's liability would be "completely out of proportion to any harm suffered by Plaintiff." Id. at 651. We therefore must consider whether Rule 23(b) permits consideration of such a factor when deciding whether to certify a class in a FACTA case. We hold that it does not.

[1] Rule 23 provides little, if any, guidance on this question.*fn4

The rule provides a non-exhaustive list of factors relevant to the superiority inquiry:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;

(C) the desirability or undesirability of concentrating the litigation of the claims in ...


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