WINTER, Circuit Judge:
For herself and a class that she represented, Polly Ann Barber sued Kimbrell's, Inc. (Kimbrell's), which operates a furniture store in Charlotte, North Carolina, and Furniture Distributors, Inc., Kimbrell's corporate parent, alleging that both defendants were liable for statutory damages under the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., for violations of certain disclosure requirements set forth in the Federal Reserve Board's Truth in Lending Regulations (Regulation Z), 12 C.F.R. Part 226. The district court certified a class consisting of plaintiff and persons who, between July 16, 1973 and May 3, 1974, entered into add-on credit transactions at Kimbrell's downtown Charlotte furniture store. It ruled that Kimbrell's and its corporate parent were liable under the Act to plaintiff and the members of the class and, proceeding non-jury, it assessed statutory damages in the amount of $100,000 plus costs and attorneys' fees. Barber v. Kimbrell's, Inc., 424 F.Supp. 42 (W.D.N.C.1976).
We affirm the district court's determination of liability against both defendants but reverse and remand for a redetermination of damages. We conclude that the district court improperly computed the maximum class recovery allowable by statute and erred in not submitting the damages question to a jury. Moreover, we conclude that the district court should have made findings to support its award of attorneys' fees. We therefore vacate the judgment as to the penalty and attorneys' fees and remand the case for further proceedings.
On July 16, 1973, plaintiff entered into a retail installment contract with Kimbrell's, Inc. for the purchase of various items of household furniture totalling $592.70. Because she already owed Kimbrell's $65.00 from a previous credit purchase, the July 16th agreement consolidated both the old and new balance and required repayment of the combined debt in twelve equal monthly installments. The written contract reflecting this agreement purported to disclose credit information as to both the new and combined transactions.
On May 3, 1974, plaintiff filed this action, alleging that Kimbrell's, Inc. had violated § 121 of the Truth in Lending Act, 15 U.S.C. § 1631,
The case was heard on June 7, 1976, on cross-motions for summary judgment. Concluding that the defendants, as a matter of law, had violated certain of the disclosure requirements set forth in Regulation Z, 424 F.Supp. at 47-50, the district court granted plaintiff's motion for summary
Kimbrell's concedes liability as to one violation of Regulation Z. It admits that the use of the term "Total Time Balance" in its disclosure document
Section 1640 imposes civil liability on any "creditor" who fails to comply with the disclosure provisions of the Act. Section 1602(f) defines a creditor as one "who regularly extend[s] or arrange[s] for the extension of credit . . . ." There is no doubt that Kimbrell's, the corporate entity with which plaintiff dealt, is a creditor within the meaning of § 1602(f). Furniture Distributors contends, however, that it neither extends nor arranges for the extension of credit on a regular basis and that, therefore, it cannot be held to be a statutory creditor. The district court rejected this argument, 424 F.Supp. at 46, and we agree.
Section 226.2(h)(2), Regulation Z, provides that a person is an "arranger of credit" if he "[h]as knowledge of the credit . . . terms and participates in the preparation of the contract documents required in connection with the extension of credit . . . ." The district court found that the "officers and directors of . . . Furniture Distributors, Inc. participated in the development and preparation of the standard contract form . . . and distributed the form for use in Kimbrell's, Inc. and each of the other forty-seven retail stores in the Kimbrell's chain." Further, the district court found that "Furniture Distributors, Inc. has knowledge of the credit terms for all the consumer credit sales by its subsidiaries in that each consummated contract is sent to [Furniture Distributors] for review." 424 F.Supp. at 46. From our review of the record, we cannot say that these two findings are clearly erroneous, F.R.Civ.P. 52(a), and they place Furniture Distributors squarely within the definition of "arranger," 12 C.F.R. § 226.2(h)(2), and, hence, within the statutory definition of creditor, 15 U.S.C. § 1602(f). See Zale Corp. and Corrigan-Republic, Inc.
In addition to finding defendants in violation of § 226.8(b)(3), Regulation Z, as both now concede, the district court found multiple and substantial violations of § 226.6(a) (disclosures not made in meaningful sequence) and § 226.6(c) (misleading or incorrect additional information). 424 F.Supp. at 48-50.
Of course, F.R.Civ.P. 56(c) provides that summary judgment is appropriate only where there is "no genuine issue as to any material fact . . . ." The questions of whether additional information is presented in a misleading or confusing manner, § 226.6(c), and whether the sequence of disclosed information is meaningful, § 226.6(a), are not usually susceptible to summary judgment, because the adequacy or inadequacy of defendants' disclosure under these provisions, depending as it does on the perceptions of a "reasonable" consumer, presents a factual issue about which there is ofttimes a dispute. The questions are similar to that of materiality in federal securities litigation, the resolution of which depends upon the perceptions of a "reasonable" investor, where summary judgment is normally inappropriate. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976).
Nonetheless, even as to a question of materiality in federal securities litigation, summary judgment will lie in an appropriate case. Quoting from an earlier decision in this circuit, Mr. Justice Marshall, speaking for the Court in TSC Industries, wrote: "Only if the established omissions are `so obviously important to an investor, that reasonable minds cannot differ on the question of materiality' is the ultimate issue of materiality appropriately resolved `as a matter of law' by summary judgment. Johns Hopkins University v. Hutton, 422 F.2d 1124, 1129 (CA 4 1970)." 426 U.S. at 450, 96 S.Ct. at 2133. In Johns Hopkins, we held that, under the facts of that case, reasonable minds would not differ as to the materiality of the facts misrepresented and withheld and that the disposition of the case by way of summary judgment was therefore appropriate. 422 F.2d at 1129. Likewise, in the instant case, we conclude that reasonable minds would be in agreement that defendants' disclosure statement was confusing and misleading in the respects documented in the district court opinion. We, therefore, agree with the district court that defendants violated the disclosure
We consider next the appropriate damages to be awarded plaintiff class. Section 1640(a), which creates a private right of action against any creditor who fails to disclose the information required by the Act or Regulation Z, authorizes both actual and statutory damages.
In determining the maximum recovery in a class action under the Act, we look to the purposes of the Act and the history of its various enforcement provisions. These, we think, provide the answer to the issue we must decide.
The Truth in Lending Act was enacted by Congress to serve two purposes: (1) to promote the full disclosure of credit terms in consumer credit transactions, and (2) to prescribe a uniform method for stating these terms better to enable the consumer to compare "the various credit terms available to him and avoid the uninformed use of credit." 15 U.S.C. § 1601. As enacted in 1968, the Act provided for both administrative enforcement, 15 U.S.C. § 1607, and enforcement by private litigation, 15 U.S.C. § 1640. As an incentive to private enforcement, the Act allowed a successful plaintiff to recover statutory damages of twice the amount of the finance charge imposed in the transaction (but not less than $100 nor more than $1,000), plus reasonable attorneys' fees and court costs. Pub.L. No. 90-321, Title I, § 130(a), 82 Stat. 157 (1968).
While the private enforcement scheme envisioned by the original Act worked well enough in individual suits, it soon became evident that the scheme was not equally well-suited to class actions. Since a class recovery consisted of simply an aggregation of individual statutory damages, with each class member being entitled to a minimum recovery of $100, courts soon recognized that a recovery of statutory damages by a large plaintiff class had the potential of visiting financial disaster upon a defendant creditor.
To strike an appropriate balance between the advantages of the class action as a vehicle of private enforcement and the need of creditors to avoid financial ruin, Congress in 1974 amended § 1640 as it related to class recoveries of statutory damages. S.Rep. No. 278, 93rd Cong., 1st Sess., 14-15; Note, Class Actions Under the Truth in Lending Act, 83 Yale L.J. 1410, 1428-32 (1974). The amendment (1) eliminated any minimum recovery requirement as to individual class members, (2) placed a ceiling on the total class recovery so that a creditor's total liability for statutory damages would be no more than "the lesser of $100,000 or 1 per centum of the net worth of the creditor," and (3) made the award of statutory damages in the class context discretionary rather than a matter of right as it had been before the amendment and as it continued to be with regard to individual actions. Pub.L. No. 93-495, § 408(a), 88 Stat. 1518 (1974).
We think that the district court upset the balance struck by Congress in the 1974 amendment when it fixed the maximum recovery allowable under § 1640(a)(2)(B) at $100,000. The class certified by the district court consisted of all persons purchasing furniture from Kimbrell's downtown Charlotte store under an add-on credit arrangement. Yet, in determining the maximum liability of defendants under § 1640(a)(2)(B), the district court looked not just to the assets allocable to this one store, but to the total net worth of defendant Furniture Distributors, which included the combined assets of all of its subsidiaries as well as assets it held independently of these subsidiaries. Finding 1% of this total net worth to be well in excess of $100,000, the district court concluded that § 1640(a)(2)(B) limited defendants' liability to $100,000. We are of the opinion that, given the perimeter of the class certified, the district court erred in looking beyond those assets of defendants properly allocable to the store at which plaintiff dealt.
Our conclusion is reinforced by this additional consideration. Under established class-action doctrine, a judgment rendered in favor of a Rule 23(b)(3) class binds all class members receiving notice and not requesting exclusion. F.R.Civ.P. 23(c)(3). In the instant case, once summary judgment establishing defendants' liability under the Act was entered, all members of plaintiff class were thereafter barred from securing
Included in Kimbrell's answer to Barber's complaint was a demand that the claims asserted against it be tried by a jury. This demand was twice renewed—once when Kimbrell's filed its answer to Barber's amended complaint seeking class certification and again when Furniture Distributors filed its answer. The record does not disclose that defendants' demands were later retracted nor their right to a jury trial waived.
Finding the demand both timely made and still pendent, we conclude that on remand the damage award under § 1640(a)(2)(B) must be determined by a jury. We think that Curtis v. Loether, 415 U.S. 189, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974), requires this result.
Curtis arose in a context not unlike the one before us here. Plaintiff had filed a private enforcement action under Title VIII of the Civil Rights Act of 1968, 42 U.S.C. § 3601 et seq., alleging racial discrimination in housing, for which she prayed both compensatory and punitive damages as authorized by 42 U.S.C. § 3612. Defendant made a timely demand for a jury trial which was denied by the district court. After a trial on the merits, at which the court found that defendant had engaged in unlawful racial discrimination in housing, plaintiff was awarded $250 in punitive damages, there being no actual damages proved. The Seventh Circuit reversed the district court on the jury trial issue and the Supreme Court affirmed in a unanimous decision.
Finding the "legislative history on the jury trial question . . . sparse, and . . . ambiguous, "415 U.S. at 191, 94 S.Ct. at 1007, the Court nevertheless held that there was a constitutional right to a
Applying these two tests, the Court in Curtis concluded that a jury trial, if demanded, was constitutionally required in Title VIII cases.
Curtis thus requires a holding that private civil actions brought to redress violations of the disclosure provisions of the Truth in Lending Act likewise entail a constitutional right to a jury trial upon demand. Accord Mosley v. National Finance Co., 440 F.Supp. 621 (M.D.N.C.1977).
First, we conclude that "a damages action under the statute sounds basically in tort . . .." Curtis v. Loether, supra, 415 U.S. at 195, 94 S.Ct. at 1009. A duty to disclose is closely akin to the traditional tort duty not to misrepresent or deceive. Under traditional tort principles, a creditor has the affirmative duty not to engage in fraud by intentionally disclosing false information for the purpose of misleading the person seeking credit. The statutory duty to disclose, imposed by 15 U.S.C. § 1631, merely enlarges the creditor's duty beyond that imposed by common law. Now he has the affirmative duty not only to be accurate in what he does disclose but also to make a full disclosure of information deemed relevant and material by the Federal Reserve Board. To use the Court's language in Curtis, the Truth in Lending Act "merely defines a new legal duty, and authorizes the courts to compensate a plaintiff for the injury caused by the defendant's wrongful breach." 415 U.S. at 195, 94 S.Ct. at 1009.
Second, the relief sought by plaintiff in the instant action, statutory damages under § 1640(a)(2)(B), is nothing more than a prayer for statutorily-authorized punitive damages. As the Court pointed out in Curtis, punitive damages are within the "traditional form of relief offered in the courts of law." 415 U.S. at 196, 94 S.Ct. at 1009.
IV. Attorneys' Fees
Section 1640(a)(3) permits a successful plaintiff to recover, in addition to damages, "the costs of the action, together with a reasonable attorney's fee as determined by the court." In the instant case, the district court awarded plaintiff $25,000 in attorneys' fees "which [sum] the court [found] to be . . . reasonable . . . under the circumstances," notwithstanding that the sum was greater than that requested. 424 F.Supp. at 52. While at this juncture we do not question the appropriateness of this award, we must nonetheless reverse and remand for detailed findings in support of this award.
It is well established that the allowance of attorneys' fees "`is within the judicial discretion of the trial judge, who has close and intimate knowledge of the efforts expended and the value of the services rendered. And an appellate court is not warranted in overturning the trial court's judgment unless under all of the facts and circumstances it is clearly wrong.'" Lea v. Cone Mills Corp., 467 F.2d 277, 279 (4 Cir. 1972), quoting United States v. Anglin & Stevenson, 145 F.2d 622, 630 (10 Cir. 1944), cert. denied, 324 U.S. 844, 65 S.Ct. 678, 89 L.Ed. 1405. Yet, as this statement clearly implies, appellate review, while necessarily limited in scope, is nonetheless available to insure that the trial court's discretion has not been abused. We cannot afford effective appellate review unless we have before us the district court's reasons for finding a particular award appropriate.
A number of circuits, following the lead of the Fifth Circuit in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (1974), have announced that their district courts are to consider and make detailed findings with regard to twelve factors relevant to the determination of reasonable attorneys' fees.
Because such findings were not made by the district court in the instant case, we vacate the award of attorneys' fees and remand the issue for a new award with finding to support the amount awarded. In making a new award, the district court
AFFIRMED IN PART; REVERSED IN PART.
ALBERT V. BRYAN, Senior Circuit Judge dissenting:
Defendants' contract, save in a lone technical, immaterial instance, has been mistakenly convicted of violations of the Truth in Lending Act. This judgment cannot stand: (1) because of entire want of proof to support it, and (2) for impermissible procedure in its award. With sincere deference to my panelists, I can read no such liability in the document other than the just-mentioned insubstantial exception.
I. NO VIOLATION PROVED
To determine its guilt or innocence, the contract's characteristics, on which plaintiff poses her case, must be tested within the frame of the Act as the Congress had declared it:
"It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing . . .." 15 U.S.C. § 1601.
In none of the plaintiff's counts against the defendants is there even an intimation of untruth of any kind. There is no hint of concealment, fraud, deceit, arithmetical error or any inadequacy. Thus at least the Congressional aim and purpose here has not been thwarted. Indeed, the indictment is simply to the `layout' and detail of the statement of account in the printed contract. A casual reading reveals the contract to be clear and readily understandable, as is confirmed by the following annotated verbatim copy of its items:
[Captioned "Purchase Money Security Agreement", the first notation is of the goods sold. Thereafter are two vertical parallel columns, the one to the right, beginning thereunder as follows:] "Selling Price":
569.90"Sales Tax" 22.80"CASH PRICE" 592.70"FINANCE CHARGE" 40.54"DEFERRED PAYMENT PRICE" 633.24"TOTAL TIME BALANCE" 396.00Number of payments 12
[This last figure—"Total Time Balance 396.00—is further broken down in the parallel column immediately to the left of the foregoing figures. There entered is a previous balance of $65.00 of an old account, from which is deducted a "Finance Charge Discount" of $1.46, apparently as unearned by the defendant. The left column further explained the account as follows:]
"Previous (old) Balance"
65.00"FINANCE CHARGE DISCOUNT" 1.46"Net (old) Balance" 63.54"Cash Price New Purchase" 592.70[See above] "Total" 656.24"Cash Down Payment" 302.24"Total Down Payment" 302.24"Unpaid Balance of Cash Price" 354.00"Account Financed" 354.00"Less Unearned Finance Charge "TOTAL FINANCE CHARGE" 42.00of 1.46" [See 40.54 above] "DEFERRED PAYMENT PRICE" 698.24ANNUAL PERCENTAGE RATE 21.25%
The Technical Violation
As heretofore noted, in one item of the contract statement, there was a failure to follow the exact phraseology of the Regulation. The defendants at once candidly conceded this at trial, i. e., that the item of $396.00 (the last in the first column above) should have been labeled "total of payments" instead of "Total Time Balance". This is the sole departure, no more than a misnomer.
Incidentally, it is significant that the contract term was a more informative label than the Regulation provided. The figure was the final and net amount still owing under the contract—$396.00. The Regulation directed that this item give "the number, amount and due dates or periods of payments scheduled to repay the indebtedness and . . . the sum of such payments". Obviously, it was not to be the "total of payments", suggesting those already made, but rather those "scheduled" to be made, of which the defendants' designation of "Total Time Balance" is thus more explicit.
At this juncture it is pertinent to distinguish the omission here from those penalized in Mourning v. Family Publications Service, Inc., 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973). In Mourning neither the total purchase price, nor the amount unpaid after the initial payment, nor any reference to a finance charge—all obviously of the essence of such an agreement—was shown. Quite the contrary is manifested instantly. The contract gives precisely and separately both the cash price and the Deferred Payment Price not only of the new account, but of the old and new combined, and thereafter the Total Time Balance. Likewise the Total Finance Charge is stated for both accounts and the reduction of it for the new balance due. The same distinction exists between the present and those contracts faulted in McGowan v. King, Inc., 569 F.2d 845 (5 Cir. 1978) and in Walker v. College Toyota, 399 F.Supp. 778 (W.D.Va.1974) aff. 519 F.2d 447 (4 Cir. 1975) relying on Mourning and affirmed on same ground.
The totally mechanical and insensitive application of the Act now pursued by the majority finds no precedent in Supreme Court or Circuit decision. Surely at some point this pedantic construction becomes unrealistic and so it has here.
In my view that defendants' contract comfortably fits into the charter of the Truth in Lending Act, that is, "to protect the consumer against inaccurate and unfair credit billing". 15 U.S.C. § 1601. In fine, the action should have been dismissed because of plaintiff's failure to prove defendants in violation of the statute.
II. SUMMARY JUDGMENT IMPERMISSIBLE
At all events summary judgment should not have been granted. Jury questions remained throughout for resolution. Even if the Court believed the plaintiff had made out a case sufficient to defeat defendants' motion for summary judgment, the defendants' demand for a jury was still virulent. Nevertheless, the Court proceeded alone to decide determinative factual issues.
First, the Court rules that the "information [as to the indebtedness] cannot be derived by reading straight down" the columns on the contract, forcing the reader to "switch back and forth between the two
To sustain these summary conclusions, it is necessary for this Court to say that there was "no genuine issue" as to any "material fact", in regard to the contract's sufficiency under the Truth in Lending Act. FRCP 56. In short, to affirm we must say that no conflict of fact exists between the parties as to the explicitness of the contract.
Again, I have not been cited to, nor do I find, a Supreme Court or a Circuit case denying a trial by jury on disputed fact issues of liability under the Act.
I would urge that the judgment of liability now on appeal be reversed, with final summary judgment for the defendants on their motion, or failing this disposition, that the case be remanded to the District Court for trial with a jury on the evidence as to liability as well as on damages.
Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part of part D of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—
In determining the amount of award in any class action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance by the creditor, the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor's failure of compliance was intentional.
Generally, a class-action suit for money damages is maintained, if at all, under subdivision (b)(3) of Rule 23.
These include: (1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorney's opportunity costs in pressing the instant litigation; (5) the customary fee for like work; (6) the attorney's expectations at the outset of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorneys' fees awards in similar cases.