Don't Make A Federal Case Out Of It: High Court Should Grant Review In No-Injury Class Action

Mar 5 2014, 1:24pm CST | by

Don't Make A Federal Case Out Of It: High Court Should Grant Review In No-Injury Class Action
Photo Credit: Forbes Business

The U.S. Supreme Court this week has a chance to strike a blow for judicial modesty and at the same time call a halt to a disturbing trend being pushed by the plaintiffs’ bar:  class-action lawsuits in which no one was injured but that seek millions of dollars in “damages.”  The Court is being asked, in the case of First National Bank of Wahoo v. Charvat, to consider whether federal courts possess jurisdiction to hear such no-injury lawsuits.  The Court should accept the invitation and announce that attorneys will no longer be permitted to flout Article III of the U.S. Constitution, which limits the filing of federal lawsuits to those who have actually suffered an injury.

The case involves two small Nebraska banks that, like most banks, charge a small fee to non-customers who use their ATM machines.  Federal law requires banks to provide notice that they charge such a fee.  The two Nebraska banks did provide notice (on the very first screen seen by ATM users), and no one has come forward to claim that he or she used one of the ATMs without being aware that a fee would be incurred.

Here’s the wrinkle: at the time this lawsuit arose, federal regulations (since repealed) also required a second form of notice—on a small placard physically attached to the ATM.  Some of the ATMs maintained by the First National Bank of Wahoo and the Mutual First Federal Credit Union did not display the placard.  Jarek Charvat, an enterprising young man working with a local plaintiffs’ law firm, knew about the ATM fees and observed that the banks were not in full compliance with the federal placard regulation.  So he went from bank branch to bank branch, making ATM withdrawals and deliberately incurring a $2.00 fee at each stop.

Mr. Charvat’s ensuing multi-million-dollar lawsuit, alleging that the banks violated the federal disclosure regulation, has now reached the Supreme Court.  He admits that he has not been injured in any real sense because he voluntarily incurred the small transaction fees, of which he had advance notice.  He notes, however, that a federal statute, the Electronic Fund Transfer Act (EFTA), provides that each violation of the fee-notice requirement renders an ATM operator liable to an individual plaintiff in “an amount not less than $100.”  Charvat and his attorneys seek to represent a class consisting of all those who were charged a fee at any of the ATMs from which Charvat withdrew funds.  If one adds all those $100 statutory damages claims together, that turns out to be a potential bonanza for Charvat’s attorneys. A federal district court dismissed the lawsuit, concluding that Charvat lacked “standing” to file a lawsuit because he had suffered no injury.  The federal appeals court in St. Louis reversed, finding that Congress had created the necessary standing by providing a $100 bounty to those who sue for such violations.  The Supreme Court is scheduled to consider at its upcoming conference this Friday whether to review the appeals court’s decision.

Lawsuits of the sort filed by uninjured plaintiffs like Mr. Charvat are becoming too common.  They are proliferating despite the Supreme Court’s repeated pronouncements that Article III of the Constitution prohibits lawsuits by individuals who have not suffered an “injury in fact.”  The Court needs to address the injury-in-fact requirement in the specific context of this case: is a desire to collect bounties of the sort established by EFTA sufficient to create the necessary “injury in fact?”

The Court was poised to decide this very issue two years ago, when it agreed to hear First American Corp. v. Edwards.  But after briefing was complete and the Court had heard oral arguments, it dismissed the case as “improvidently granted.”  Although the Court provided no further explanation, many have speculated that it ordered dismissal after facts arose suggesting that the plaintiffs in that case arguably had suffered a real injury.

No similar problems are lurking in the Charvat case.  It is undisputed that Mr. Charvat entered into his ATM transactions with his eyes wide open.  He admits that he was fully aware of the two banks’ fee policies and that he voluntarily agreed to pay the fees before making his ATM withdrawals.  Accordingly, his only “injuries” are his unhappiness that someone else was violating federal law and his desire to claim the bounty that Congress created for the benefit of successful EFTA claimants.  Many commentators—including Chief Justice John Roberts in a law review article he published before assuming the bench—have opined that the Framers, when they imposed Article III limitations on federal court jurisdiction, intended to prevent suits in which the plaintiff’s claimed injuries are of the sort claimed by Mr. Charvat.

Unfortunately, no-injury lawsuits are a growing problem.  More than a dozen federal statutes include bounty provisions similar to the EFTA provision at issue here.  As the Washington Legal Foundation pointed out in its brief urging the Supreme Court to hear the Charvat case, the appeals court’s rationale would empower Congress to grant roving commissions entitling private individuals to file suit for virtually any violation of federal law.  That is not the role envisioned for federal courts by the Framers of the Constitution.  Rather, they envisioned federal courts as a forum in which parties can seek redress of actual injuries.  In the absence of an identifiable victim who has suffered an actual out-of-pocket loss, it is for the Executive Branch—not the courts—to enforce federal law.

Source: Forbes Business


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

Russia calls for free trade zone between EU and EEU
Moscow, Nov 23 (IANS) Russia has said that it is in favour of a free trade zone between the European Union (EU) and the Eurasian Economic Union (EEU).
Global entrepreneurship summit boost for SMEs
Marrakech, Nov 22 (IANS) Nine agreements were signed between the Moroccan General Confederation of Enterprises (CGEM) and several small and medium enterprises (SMEs) as well as between major Moroccan banks and start-ups at the 5th Global Entrepreneurship Summit (GES 2014) held in Morocco.
NASA's flying saucer among 'Best of What's New'
Washington, Nov 22 (IANS) NASA's Low-Density Supersonic Decelerator (LDSD), a spacecraft that aims to facilitate the safe landing of future Mars missions, has earned a place in the the Popular Science magazine's "Best Of What's New" list.
Indian helping to light up Gambia (Diaspora Feature)
Banjul (Gambia), Nov 22 (IANS) Like many Indians who are proving to be philanthropists around Africa, Ram Mohan has set up a social business called Comafrique Intelizon Initiative and has embarked on the replacement of candles in villages in the Gambia with solar lights from India.

Latest from the Network

UN slams terrorist attack in Kenya
United Nations, Nov 23 (IANS) UN Secretary-General Ban Ki-moon condemned the terrorist attack on a bus in northern Kenya that left at least 28 people dead. "The secretary-general condemned the attack Saturday on a...
Read more on Politics Balla
Two dead as 6.3 magnitude earthquake hits China
Bejing, Nov 23 (IANS) At least two people were killed and around 54 injured when a 6.3 magnitude earthquake on the Richter scale hit China, media reported. The earthquake hit south-west China's Sichuan province,...
Read more on Politics Balla
6.7 magnitude earthquake hits Japan
Tokyo, Nov 23 (IANS) Over 50 people were injured and about 10 houses collapsed after a 6.7-magnitude quake on the Richter scale hit Japan, media reported Sunday. The quake hit Nagano City and Hakuba village in Japan...
Read more on Politics Balla
Messi sets new scoring record as Barca thrash Sevilla
Madrid, Nov 23 (IANS) Leo Messi made La Liga history when he scored a hat-trick which gave FC Barcelona a 5-1 win at home to Sevilla. Messi's goals, on Saturday night came thanks to a magnificent 21st minute free kick...
Read more on Sport Balla
English Premier League standings
London, Nov 23 (IANS) Following are the English Premier League standings after Saturday's matches (tabulated under games played, won, drawn, lost, goals for, goals against, points), according to Xinhua. Chelsea...
Read more on Sport Balla
'Western actions during Ukraine crisis contradictory to democracy'
Moscow, Nov 23 (IANS) Western countries' actions during the Ukraine crisis were contrary to democratic principles, said Russian Foreign Minister Sergei Lavrov . "Our Western partners played an 'all-or-nothing' game in...
Read more on Politics Balla
Release of army general expected: Colombian president
Bogota, Nov 23 (IANS) Colombian President Juan Manuel Santos said that he expected to secure the release of five hostages next week, including an army general, whose capture by the FARC rebels led the government to...
Read more on Politics Balla
Brook dating model James Crabtree?
London, Nov 23 (IANS) Actress-model Kelly Brook seems to have moved on from her on and off relationship with actor David McIntosh. Brook is reportedly dating a male model James Crabtree. The pair went on a romantic...
Read more on Celebrity Balla
Russia calls for free trade zone between EU and EEU
Moscow, Nov 23 (IANS) Russia has said that it is in favour of a free trade zone between the European Union (EU) and the Eurasian Economic Union (EEU). This was reiterated by Russian Foreign Minister Sergei Lavrov...
Read more on Politics Balla
Messi scores hat trick, becomes all-time highest scorer in La Liga
Madrid, Nov 23 (IANS) FC Barcelona superstar Lionel Messi scored a hat trick in a 5-1 triumph against Sevilla at the Camp Nou Saturday, to become the all-time highest scorer in La Liga history. Messi scored his first...
Read more on Sport Balla