'No harm, no foul,' the Fifth reverses $8.5 million judgment

Steve Gonzalez Oct. 17, 2006, 7:24am

The Fifth District Appellate Court has reversed an $8.5 million Madison County class action judgment awarded to the Alton law firm of Smith, Mendenhall, Emons & Selby.

"Because the plaintiff has proven no damages, the plaintiff's Illinois and Minnesota statutory consumer fraud claims must fail, and the order of the circuit court of Madison County, which is not supported by the evidence, must be reversed," wrote presiding Justice Stephen Spomer in the majority opinion released Wednesday.

In February 1999, the firm filed a complaint against West Publishing Corporation alleging breach of contract, common law fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act and Minnesota's consumer fraud statute.

They claimed West Publishing defrauded them and other members of the class by adding, on a pro rata basis, a $6 per CD-ROM shipping-and-handling charge to the monthly billing statements sent to the firm pursuant to a subscription agreement.

The firm claimed West failed to identify the added charge and in contravention of West's previous practice of not charging customers for shipping and handling.

They further alleged the $6 per CD-ROM shipping-and-handling charge exceeded the actual cost of "transportation and handling" and that they had suffered damages as a result of the discrepancy between the amount charged for shipping and handling and the actual cost of shipping and handling.

In December 1999, Madison County Associate Judge Lewis E. Mallott certified the class and held a bench trial in September 2004.

Prior to the trial, two other law firms, who were once also class representatives, withdrew from the class action suit leaving Smith, Mendenhall, Emons & Selby as the only class representative.

According to court documents, during trial, Doug Mendenhall testified that any time his law firm purchased a product, he did a cost-benefit analysis, and if he believed the cost was reasonable and the product useful to the firm in its practice, he would continue to purchase the product or would refrain from canceling the product.

Mendenhall further testified that he recognized West's price increase, conducted a cost-benefit analysis, and chose to continue receiving the CD-ROMs.

He also conceded that his firm's agreement with West Publishing allowed them to raise the price of the CD-ROMs "at any time for any reason without notice" and that at the time in question he could have cancelled the CD-ROM service "at any time for any reason without notice."

Spomer borrowed a famous sports analogy in his written opinion.

"The National Basketball Association has an unwritten rule that is applicable to this case: 'no harm, no foul,'" he wrote.

"Mendenhall did not testify that his firm had been damaged in any way by continuing to receive and pay for the CD-ROMs, nor did he testify that the firm was not receiving the benefit of the bargain it had struck with the defendants at all times or was out of pocket any money by having paid the price requested," Spomer wrote.

"To the contrary, Mendenhall testified that the firm continued to subscribe to the CD-ROMs after Mendenhall had completed his cost-benefit analysis, evidence that the firm had not suffered any damages," he wrote.

"In light of Mendenhall's testimony and the lack of any other evidence substantiating actual damages to the plaintiff, the plaintiff's assertion, unsupported by citation to any testimony adduced at the trial or to any legal authority in contradiction of the aforementioned legal principles regarding the assessment of damages under the Illinois and Minnesota consumer fraud statutes, that the plaintiff was damaged in the amount of monies paid "in excess of the actual cost of transportation" is disingenuous and unpersuasive.

"Because we have already determined that the trial court's order must be reversed, we need not address the many other problematic aspects of the order, although we note that even if we were to find that the plaintiff had been damaged in some way, we would have grave reservations about the measure of damages apportioned by the trial court, because that measure is not supported by the evidence presented by the parties.

"To reach the astronomical sum of damages assessed in this case, $8,545,459, the court adopted, inter alia, the position that the "actual charge" for transportation and handling in this case "did not exceed" $1.10 per CD-ROM shipped, an assessment again taken virtually verbatim from the plaintiff's proposed order," Spomer writes.

The late Terrence Hopkins concurred with Spomer.

Justice Melissa Chapman dissented writing, "The majority finds no harm because they reason that the defendants could have increased the price of the CD-ROMs legitimately anyway under the subscription agreement to a price that would have included the amount the plaintiff claims the defendants improperly charged for shipping and handling."

"The majority believes that the plaintiff therefore still got the benefit of the bargain," Chapman wrote. "This analysis is flawed."

"I believe that there was ample evidence to support the trial court's finding that the defendants' actions amounted to an overcharge.

"I further believe that the plaintiff put on credible evidence of the overcharge damages.

"The judgment was not therefore manifestly against the weight of the evidence, and it should have been upheld."

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