In an opinion authored by Judge Richard Posner, the Seventh Circuit Court of Appeals has reversed a district court order decertifying a class in a case involving compliance with a federal law, since amended, that required automatic teller machine (ATM) owners to notify users by sticker and on-screen information that a fee is charged when they use the ATM. Hughes v. Kore of Ind. Enter., Inc., No. 13-8018 (7th Cir., decided September 10, 2013).

The case involved ATMs in two Indianapolis bars "said to be popular with college students." A putative class claimed that the owner violated the law’s sticker requirement, which is no longer part of the law. The parties stipulated to some 2,800 ATM transactions during the class period and total damages of $10,000—or 1 percent of the defendant’s net worth—which would provide a recovery of no more than the $3 transaction fee per class member.

The district court decertified the class on the grounds that (i) class members would be better off bringing individual suits, because under the statute, an individual can recover at least $100 and up to $1,000; and (ii) the requirement of class-member notice could not be satisfied without issuing subpoenas to every bank involved in the transactions, given that ATMs do not store users’ names but assign digital identification numbers to the transactions identifying each user’s bank.

Asserting that individual actions were unlikely to be filed due to the reluctance of attorneys to represent someone seeking $100 in damages, Judge Posner noted that these small claims are best pursued as class actions. Still, acknowledging that most class claimants would not submit proof of a claim to recover damages that are so small, the judge suggested that the best resolution in such cases would be a cy pres payment to a charity with a mission relating in some way to the interest of the class. In this regard, he said, "In a class action the reasons for a remedy modeled on cy pres is to prevent the defendant from walking away from the litigation scot-free because of the infeasibility of distributing the proceeds of the settlement to the class members." As to class notice, the court found that the publication notice proposed by the parties—in the bars, on a Website and in the principal Indianapolis newspaper—would be seen by some class members.

The court decided to reach the "deeper question," that is, "whether a class action should be permitted when the stakes, both individual and aggregate in a class action are so small—so likely to be swamped by the expense of litigation—as they are in this case. But we don’t think smallness should be a bar." According to the court, the class action device and the law have a deterrent as well as a compensatory objective. "[A] judgment would remind [the defendant] to take greater care in the future to comply with federal law, however irksome compliance may seem." Remanding the matter for further proceedings, the court said, "A time-saving alternative might be a class action with the stated purpose, at the outset of the suit, of a collective award to a specific charity. We are not aware of such a case, but mention the possibility of it for future reference."