LINDER v. THRIFTY OIL CO (1997)

This is an appeal from an order denying a plaintiff's motion to certify a plaintiff class.   We affirm.

FACTS

In an action filed for herself and on behalf of others “similarly situated,” Rochelle C. Linder alleges that certain practices of Thrifty Oil Co. violated two provisions of the Song-Beverly Credit Card Act of 1971 (Civ.Code, § 1747 et seq.).¹  According to Linder's second amended complaint, Thrifty “impose[s] a surcharge on cardholders who elect[ ] to use a credit card in lieu of payment by cash, check or similar means;  and[,] as to some of said credit cardholders[, Thrifty] utilize[s] preprinted credit card forms which, on their face or otherwise, seek personal identification information concerning purchasers making use of credit cards.” ²  Linder seeks an injunction barring “unfair business practices” and prohibiting surcharges, money damages in the amount of the surcharges, treble damages and civil penalties.

After Thrifty answered, Linder filed a motion to certify her case as a class action on behalf of Thrifty's Southern California customers who, “as credit card cardholders after May 8, 1992, used credit cards at Thrifty ․ service stations for the purchase of motor vehicle fuel in lieu of making payment by cash and in said transactions paid a higher price (generally some four ․ cents per gallon more) than had they paid cash at such service stations․   Included among such persons are also those credit card cardholders whose purchases were conducted where Thrifty ․ utilized credit card transaction forms in the sale which on their face contain preprinted space specifically designated for filling in the telephone number of the credit card cardholder.”   According to Linder's motion, the main class includes all persons who used credit cards and paid a surcharge, with a sub-class or a separate class comprised of those members who were also “subjected to [the] unlawful use of prohibited credit card transaction forms.”   Thrifty opposed the certification motion.

The certification motion was denied, and Linder appeals from that order.³

DISCUSSION

A.

 Trial courts have great discretion with regard to class certification (Petherbridge v. Altadena Fed. Sav. & Loan Assn. (1974) 37 Cal.App.3d 193, 199-200, 112 Cal.Rptr. 144) and we will not disturb an order denying certification where the plaintiff has failed to establish (1) the existence of an ascertainable class and (2) a well-defined community of interest among the class members.  (Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470, 174 Cal.Rptr. 515, 629 P.2d 23;  Code Civ. Proc., § 382.)   To establish the required “community of interest,” the plaintiff must show (1) predominant common questions of law or fact;  (2) class representatives with claims typical of the class;  and (3) class representatives who can adequately represent the class. (§ 1781, subd. (b)(2-4);  Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470, 174 Cal.Rptr. 515, 629 P.2d 23.)   Stated differently, a trial court's determination that the plaintiff has failed to establish the requisite ascertainable class or the requisite community of interest terminates the inquiry against the plaintiff.

In this case, the trial court found inadequate the plaintiff's showing of a community of interest.   This was the basis of its order:

“The Court first observes that a class community interest does not exist.   Civil Code Section 1748.1 provides that a retailer may give a discount for cash as long as it is available to each customer.   Here, each station posted its prices both cash and credit.   The customer would then be free to choose which form of payment he or she preferred.   The plaintiff cannot under this circumstance establish the community as a matter of law.

“Secondly, the Court does not feel that members of the class would receive any substantial benefit.   The damages, if any, would be small, perhaps not enough to support the required mailings to and from the class.   The price differential between cash and credit is four cents a gallon.   Thus, a purchaser of twenty gallons of gas would receive only eighty cents, barely enough to pay for two mailings.

“The Court based upon the aforestated does not feel that there is a community of interest or a substantial benefit to members of the proposed class.”

B.

Linder contends the trial court “apparently prejudged the issue of liability as to one of the several causes of action” and, on this basis, incorrectly concluded there was no community of interest.   The way Linder sees it, the trial court was not permitted to consider the merits of her case in deciding the merits of her certification motion.   We disagree.

Dean Witter Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 259 Cal.Rptr. 789 discusses California's general support of class actions but reminds us that our Supreme Court has long been aware of the accompanying dangers of injustice and of the limited scope within which these suits serve beneficial purposes.  (Id. at p. 772, 259 Cal.Rptr. 789.)   For these reasons, the Supreme Court has “consistently admonished trial courts to carefully weigh respective benefits and burdens and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts․   It has also urged that the same procedures facilitating proper class actions be used to prevent class suits where they prove non-beneficial.”  (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459, 115 Cal.Rptr. 797, 525 P.2d 701.)   To this end, the requirement that the class mechanism confer “substantial benefits” has been read to include a requirement that a class action is “superior to other available methods for the fair and efficient adjudication of the controversy” within the meaning of rule 23(b)(3) of the Federal Rules of Civil Procedure.  (Dean Witter Reynolds, Inc. v. Superior Court, supra, 211 Cal.App.3d at p. 773, 259 Cal.Rptr. 789.)

 To determine whether the class mechanism confers a substantial benefit and whether it is superior to other forms of adjudication, the court must necessarily consider the merits of the plaintiff's claim, and Linder offers no authority to support her assertion to the contrary.   Indeed, the only case she cites, Lazar v. Hertz Corp. (1983) 143 Cal.App.3d 128, 191 Cal.Rptr. 849, is inapposite.   In Lazar, the record lent itself “to inferences, speculations and observations as to potential problems in discovery, trial, individual damages of class members, difficulties in computation of individual overcharges, complexities of the refueling charge procedures, variances in prevailing gasoline prices as to times and places and reliance by individual members on the alleged Hertz' representations.”  (Id. at p. 140, 191 Cal.Rptr. 849.)   It was on that record the court held that problems “so speculated upon are not fatal to class certification.”  (Ibid.)

 Here, the trial court looked only at the legal issue presented by the pleadings and it based its analysis on the statute relied upon by Linder-which suggests that, as a matter of law, Linder cannot prevail on her surcharge claim.   Indeed, Linder does not suggest the trial court relied on any evidence that was not properly before it, nor does she suggest that the trial court engaged in speculation or resolved disputed facts.   As Linder concedes regarding the surcharge issue, the statute includes an exception.   Thus, although subdivision (a) of section 1748.1 prohibits a retailer from imposing a surcharge on a “cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means,” the same subdivision of the same statute permits a retailer to “offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.”   Linder's position is that Thrifty must offer the same discount at each and every one of its gas stations, without regard to location.   Thrifty's position is that each retail station must be viewed separately and that, so long as the same discount is offered to all prospective buyers at the station where it is offered, it is immaterial that other stations may not offer any discount at all.

Since there are no cases interpreting section 1748.1 (in this context or at all), the trial court necessarily had to consider the merits of Linder's claim to determine whether she had a sufficient chance of prevailing that would justify the expense and other problems associated with a class action.   The trial court considered it unlikely that Linder will prevail and so do we. (§ 1748.1, subd. (e) [“It is the intent of the Legislature to promote the effective operation of the free market and protect consumers from deceptive price increases for goods and services by prohibiting credit card surcharges and encouraging the availability of discounts by those retailers who wish to offer a lower price for goods and services purchased by some form of payment other than credit card”].) ⁴

 In any event, there is yet another reason why Linder's surcharge claim, even if legally correct, would not confer “substantial benefits” on the class she seeks to represent.  (Dean Witter Reynolds, Inc. v. Superior Court, supra, 211 Cal.App.3d at p. 773, 259 Cal.Rptr. 789.)   The class proposed by Linder includes credit card customers who have purchased products from Thrifty during a three-year period.   Since Thrifty has the original credit card slips for this period in its possession, the cardholders could be identified through their account numbers and the class members could be ascertained and given personal notice.   That this can be done does not mean it can be done easily or cheaply.   To the contrary, Thrifty would have to create a database of card numbers, identify the issuing bank as to each card, and subpoena from the banks the personal information necessary to give the required notice.   Assuming the banks all complied, Thrifty would then have to provide notice by first class mail-not only upon certification of the class, but at each time notice would thereafter be necessary.  (Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 811-812, 105 S.Ct. 2965, 2974-2975, 86 L.Ed.2d 628;  Eisen v. Carlisle & Jacquelin (1974) 417 U.S. 156, 173-176, 94 S.Ct. 2140, 2150-2152, 40 L.Ed.2d 732 [where names and addresses of 2,250,000 class members were easily ascertainable, individual notice had to be given].)  Although we do not know the cost, we are satisfied that it would be substantial.

Conversely, the benefit would be slight.   According to Thrifty's figures, if all the transactions during the three-year period averaged out to a group of customers, each of whom twice purchased gas from a Thrifty gas station, the average gross recovery would be 64 cents-twice the assumed eight-gallon purchase times Linder's four-cent per gallon price difference between cash and credit.   Assuming Thrifty's figures are low and that each class member would receive twice or even three times that amount, the costs would still exceed the average class member's total possible recovery.   As the Supreme Court made clear in Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385-386, 134 Cal.Rptr. 393, 556 P.2d 755, we must carefully weigh the respective benefits and burdens of certification and allow maintenance of a class action only where substantial benefits accrue both to the litigants and the courts.   Where, as here, the potential recovery to the individual is small and substantial time and expense would be consumed in pursuing the class action, the purported class member is unlikely to receive any appreciable benefit and class certification is inappropriate.

In this case, the burdens far outweigh the benefits.  (See also Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 660, 22 Cal.Rptr.2d 419 [denying class certification where the benefits to individual consumers would be “minimal or nonexistent”];  Stilson v. Reader's Digest Assn., Inc. (1972) 28 Cal.App.3d 270, 274, 104 Cal.Rptr. 581 [denying class certification where nominal damages to the plaintiffs would impose a heavy penalty on the defendants while hardly serving the interest of any plaintiff];  In re Hotel Telephone Charges (9th Cir.1974) 500 F.2d 86, 91-92.)   Accordingly, the existence of common questions of law or fact or of an adequate class representative are irrelevant.

C.

 Linder contends that independent of the surcharge class, the trial court should have certified her “sub-class” comprised of those customers subjected to the credit card forms requesting personal information.   The way she sees it, the amount of “any civil penalty as to the unlawful use of credit card forms ․ could easily be established in an amount which would exceed the cost” of the postage required for notice to the claimants.   Again, we disagree.

The only alleged wrongdoing is the charge that Thrifty improperly used a form that included a line for a customer to write in his telephone number.   Assuming this could be proved and further assuming the use of the form was something other than a bona fide error (§ 1747.8, subd. (e)), the statutory penalty would be $250 for the first violation and $1,000 for each subsequent violation. (§ 1747.8, subd. (e).)  If the class is certified and the claim proved, and if the trial court thereafter considered Linder as one violation and the class as a whole as a second violation-for a total penalty of $1,250-Linder's cost-benefit analysis would fail.   If, instead, the trial court imposed a $1,000 penalty for every member of the class, that could very well bankrupt Thrifty by the imposition of penalties far exceeding anything the Legislature could have had in mind when it enacted section 1747.8.

Section 1747.8 is modeled on a similar provision in the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and is to be interpreted in conformance with the federal act. (§ 1747.01.)   The argument advanced by Linder in this action was soundly rejected by the federal courts when this approach was tried under the federal law, and we reject it now for the same reasons.   As the court explained in Ratner v. Chemical Bank New York Trust Company (S.D.N.Y.1972) 54 F.R.D. 412, the plaintiff who has been subjected to a form calling for prohibited information has not been damaged in any real economic sense, and certainly not in any amount approaching the $100 statutory penalty.  (Id. at p. 413.)   In Ratner, the class, if certified, would have consisted of about 130,000 cardholders, so that the penalty would have been about $13 million.  (Id. at p. 416.)

The Ratner court refused to certify the class because a class action was not the superior method for adjudicating the controversy because the penalties would be wholly out of proportion to the alleged wrongdoing:  “the proposed recovery of $100 each for some 130,000 class members would be a horrendous, possibly annihilating punishment, unrelated to any damage to the purported class or to any benefit to defendant, for what is at most a technical and debatable violation of the Truth in Lending Act.”  (Ratner v. Chemical Bank New York Trust Company, supra, 54 F.R.D. at p. 416.)   We agree with Ratner.  (See also Shields v. First National Bank of Arizona (D.Ariz.1972) 56 F.R.D. 442, 446;  Brame v. Ray Bills Finance Corp. (N.D.N.Y.1979) 85 F.R.D. 568, 573-574;  but see Kenro, Inc. v. Fax Daily, Inc. (S.D.Ind.1997) 962 F.Supp. 1162, 1166, fn. 2.)

In short, the trial court's order denying certification was correct.⁵

DISPOSITION

The order denying certification is affirmed.   The parties are to pay their own costs of appeal.

FOOTNOTES

1.   Unless otherwise stated, all section references are to the Civil Code.

2.   Subdivision (a) of section 1748.1 prohibits surcharges for the use of credit cards but permits a retailer to “offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.”   Linder alleges that Thrifty does not come within this provision because Thrifty does not offer a price reduction at all of its retail locations.   It is undisputed that not all of Thrifty's gas stations offer a discount but, at all that do, the discount is offered to everyone.   Linder's allegations about Thrifty's credit card forms is based on subdivision (a)(3) of section 1747.8, which prohibits the use of a credit card form containing “preprinted spaces specifically designated for filling in any personal identification information of the cardholder.”   Under subdivision (b) of section 1747.8, “personal identification information” includes telephone numbers.

3.   An order denying class certification is appealable.   (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470, 174 Cal.Rptr. 515, 629 P.2d 23;  Stephen v. Enterprise Rent-A-Car (1991) 235 Cal.App.3d 806, 811, 1 Cal.Rptr.2d 130.)

4.   We express no view on Linder's ability to pursue this case on her own behalf, and our comments are meant to apply only to her desire to pursue the case as a class action, which makes the probability of success a relevant factor.

5.   Thrifty's motion to present additional evidence on appeal is denied as moot.

MIRIAM A. VOGEL, Associate Justice.

ORTEGA, Acting P.J., and DUNN, J.,* concur.