Kaufman v. American Express Travel Related Services Co.

877 F.3d 276
CourtCourt of Appeals for the Seventh Circuit
DecidedDecember 7, 2017
Docket16-1691
StatusPublished
Cited by28 cases

This text of 877 F.3d 276 (Kaufman v. American Express Travel Related Services Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kaufman v. American Express Travel Related Services Co., 877 F.3d 276 (7th Cir. 2017).

Opinion

MANION, Circuit Judge.

Saul Kaufman, as lead plaintiff in a class action, sued American Express Travel Related Services Company, Inc. (“Amex”), alleging claims for breach of contract, unjust enrichment, and statutory fraud related . to Amex’s .general-use, prepaid- gift cards. Just over two years after Kaufman filed the class action, Kaufman (on behalf of the class) and Amex sought approval from the district court of a settlement agreement that would resolve the action. Almost seven years later, after multiple amended motions for. approval and three rounds of notice to the class, the district court granted final approval of the settlement. J.G. Goodman and Carla Santsche (“Intervenors”), who had intervened in the class action, appeal the approval of the settlement. While we recognize this settlement is not without issues, we conclude the district court did not abuse its discretion in approving it.

I. Background

The protracted history of this case began on February 14, 2007, when Kaufman filed a class-action lawsuit in the Superior Court of Cook County, Illinois, against Amex. The claims arose out of Amex’s sale of general-use, prepaid gift cards. A customer could buy a gift card by paying the amount to be loaded on the card (e,g., $25, $50, or $100) and a purchase fee of less than $5. The packaging in which the gift cards came declared they were “good all over the place.”

Kaufman alleges, however, that these gift cards .were not worth their stated value (e.g., a $25 card was. not .actually worth $25) and that they were not “good all over the place.” This is because merchants were ill-equipped to process , “split-tender” transactions, which -occurred when a gift-card holder attempted to use his gift card to purchase an item that cost more than the value remaining on his card, necessitating the use of two forms of tender. The inability to process those sorts of transactions led to rejected cards and languishing balances, as gift-card holders could not use the relatively small amounts remaining on their cards. .

Those balances did not have to .languish for long, though, because after twelve months Amex automatically began charging a $2 ■ “monthly service fee” against balances on the cards. If a holder wanted to recover the balance of his..card from Amex, he could request a check, but only if he paid a $10 check-issuance fee. Because of these, service and check-issuance fees, which resulted in remaining funds on the cards going to Amex,. Kaufman alleged Amex had purposely designed its gift-card program to make it difficult for people to exhaust the balances on their cards, thus lowering their value.

On March 27, 2007, Amex removed ;the class action to the District Court for. the Northern District of Illinois pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). Once in federal court, Amex moved to compel arbitration, citing the arbitration provision in the “American Express Gift Card. Cardholder Agreement” that was included with the gift cards. For cards purchased from stores, this agreement was only accessible -after purchasing the gift card and opening its packaging.

The district court denied the motion, concluding the provision was not part of the contract between Amex and Kaufnian. Amex appealed that decision to this court. Shortly thereafter, Amex and Kaufman engaged in settlement negotiations through this court’s Mediation Program. As a result of those negotiations, the parties sought a limited remand of Amex’s appeal for the purpose of presenting their settlement to the district court for approval. On February 4, 2009, we granted that request.

After remand, the Intervenors sought entry into the action. 1 Intervenor Goodman was the lead plaintiff in a class action in the Eastern District of New York that made similar complaints against Amex arising from issues with split-tender transactions and Amex’s fee policies. In the briefs filed in this appeal, the Intervenors explain that intervenor Santsche’s interest in this case arises from her alleged purchase of a $100 gift card that had no value when she attempted to use it. On July 15, 2009, the district court granted the motion to intervene.

Two days before the grant of that motion, Kaufman, joined by a new co-plaintiff, Kimberly Stegich, individually and on behalf of all others similarly situated (“Plaintiffs”), filed an amended class-action complaint and a motion for preliminary approval of a settlement of the action. But before the district court addressed that motion, the Plaintiffs amended it. According to the amended motion, the settlement called for a $3,000,000 fund. From that fund, class members could receive, in exchange for their release of all claims related to Amex’s gift cards, the following payments: (1) up to $20 in reimbursement for monthly fees actually paid due to refused split-tender transactions; (2) up to $8 for monthly fees paid; (3) up to $5 in reimbursement of any check-issuance fee paid; and (4) up to $5 in reimbursement for monthly fees paid simply by attesting to the fact that the fees were paid. 2 If any of the $3,000,000 remained after paying claims, up to $200,000 would go to a charitable organization as cy pres. If more than that remained, up to $650,000 would go to Amex as reimbursement for the costs of notice and administration. If still more remained, that too would go to the cy pres.

In addition to payments from the fund, class members could also take part in two supplemental programs: (1) the “Balance Refund Program,” which allowed class members with less than $25 remaining on their gift cards to request a refund of their balance without paying the check-issuance fee; and (2) the “Purchase Fee and Shipping/Handling Fee Waiver” program, through which class members could purchase a new $100 Amex gift card without paying the purchase fee or shipping and handling fee (a savings of approximately $10).

The district court entered its order on the Plaintiffs’ motion on December 22, 2009. After concluding that the class was certifiable pursuant to Federal Rule of Civil Procedure 23, the court certified the class for settlement purposes, defining the class as

All purchasers, recipients, holders and users of any and all gift cards issued by American Express from January 1, 2002 through the date of preliminary approval of the settlement, including, without limitation, gift cards sold at physical retail locations, via the Internet, or through mall cobranded programs. Notwithstanding the foregoing, ‘Be My Guest’ dining cards are not included within the settlement.

Kaufman v. Am. Express Travel Related Servs. Co., 264 F.R.D. 438, 444 (N.D. Ill. 2009).

Despite certifying the class, the court denied preliminary approval of the settlement.

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Bluebook (online)
877 F.3d 276, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kaufman-v-american-express-travel-related-services-co-ca7-2017.