The United States Court of Appeals for the Seventh Circuit reversed a lower court’s decertification of a class alleging violations of the Electronic Fund Transfer Act. Plaintiffs filed a class action alleging that defendants, ATM operators, violated the EFTA, by failing to post a notice on the ATMs that defendants charged a fee for use of the ATMs. Initially, the lower court certified a class of ATM users, but then granted defendants’ motion to decertify the class for two reasons: (1) the recovery available to borrowers would be greater in individual suits than a class action and (2) because the ATM did not store users’ names, class members could not be practicably notified without subpoenaing hundreds of banks. The EFTA provides a $100 minimum in statutory damages for individual suits, but caps recovery at 1% of defendant’s net worth for class actions. Because of defendants’ net worth, damages would be capped at $10,000 with the class of over 2,800 members—resulting in a limited award for class members.

Weighing two competing considerations—maximizing recovery for individual class members and maximizing deterrence of violations, the Seventh Circuit came down on the side of deterrence. The Seventh Circuit concluded while the statutory damages under the EFTA for individuals suits was greater than the 1% cap for class actions, it was still not enough to incentivize attorneys to take individual suits. While the potential limited recovery for plaintiffs in a class action "would provide no meaningful relief," such limited recovery should not drive the class certification decision—"the district court must be careful not to allow the litigation expenditure tail to wage the remedy dog." The Seventh Circuit suggested a cy pres award to a charity, which might provide some public benefit in furtherance of the aims of the EFTA, in lieu of the potential limited class award, which would neither meaningfully compensate plaintiffs nor incentivize meritorious suits. The Seventh Circuit also rejected the lower court’s concern for class notice. Notice by publication, according to the Seventh Circuit, could be sufficient, and would probably be the most effective means of providing notice, given that Rule 23 of the Federal Rules of Civil Procedure requires the "best notice that is practicable under the circumstances," and requires only "effort commensurate with the stakes."

Of note, the EFTA has since been amended to remove the requirement that ATM operators provide notice on the ATM of any fees charged for usage.

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