                            In the
 United States Court of Appeals
               For the Seventh Circuit
                        ____________

Nos. 04-8008, 04-8009
LYNNE A. CARNEGIE, on behalf of herself
and all others similarly situated,
                                                Plaintiff-Appellee,
                               v.


HOUSEHOLD INTERNATIONAL, INC., et al.,
                                          Defendants-Appellants.

                        ____________
                Petitions for Permission to Appeal
              an Order Granting Class Certification.
              No. 98 C 2178—Elaine E. Bucklo, Judge.
                        ____________
       SUBMITTED MAY 15, 2004—DECIDED JULY 16, 2004
                        ____________



  Before CUDAHY, POSNER, and ROVNER, Circuit Judges.
  POSNER, Circuit Judge. We have consolidated for decision
petitions, by two groups of defendants in a consumer-
finance class action litigation, for leave to appeal an order
by the district court certifying a plaintiff class. Fed. R. Civ.
P. 23(f) authorizes us to entertain such interlocutory ap-
peals. The rule does not state criteria for the exercise of this
discretionary authority. But the case law teaches that the
2                                        Nos. 04-8008, 04-8009

more novel the issue presented by the appeal and so the less
likely that the district court’s resolution of it will stand, the
more important the resolution of the issue is either to the
particular litigation or to the general development of class
action law, and the more likely the prompt resolution of the
issue is to expedite the litigation and prevent a coercive
settlement, the stronger the case for allowing the appeal.
E.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1016 (7th
Cir. 2002); Blair v. Equifax Check Services, Inc., 181 F.3d 832,
834-35 (7th Cir. 1999); Newton v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 259 F.3d 154, 164 (3d Cir. 2001); Prado-Steiman
v. Bush, 221 F.3d 1266, 1278 (11th Cir. 2000); Waste Manage-
ment Holdings, Inc. v. Mowbray, 208 F.3d 288, 294 (1st Cir.
2000). The issues that the petitions ask us to consider, in the
setting of a class of millions, concern, first, the procedures
and criteria for converting a settlement class into a litigation
class when having initially been approved the settlement is
later disapproved, and, second, the bearing of the doctrine
of judicial estoppel on class action litigation. These are novel
issues whose prompt resolution is important to the develop-
ment of the law of class actions as well as to the resolution
of the present case. The petitions to appeal are therefore
granted. The merits of the appeals have been fully briefed
and we can therefore proceed to decide them without
requiring further briefing.
   The litigation arose out of refund anticipation loans made
jointly by the defendants, who for simplicity we’ll refer to as
“the bank” and “the tax preparer.” When the tax preparer
files a refund claim with the Internal Revenue Service on
behalf of one of its customers, the customer can expect to
receive the refund within a few weeks unless the IRS
decides to investigate the return. Even a few weeks is too
long for the most necessitous taxpayers, and so the bank
will lend the customer the amount of the refund for the
period between the filing of the claim and the receipt of the
Nos. 04-8008, 04-8009                                        3

refund. The annual interest rate on such a “refund anticipa-
tion loan” (RAL) will often exceed 100 percent. Although
the bank is the lender, the tax preparer arranges the loan. It
is contended that the customer is told neither that the bank
pays the tax preparer a fee for having generated the loan nor
that the tax preparer receives an ownership interest in the
loan.
  Beginning in 1990 a number of class-action suits were
brought against the defendants on behalf of a total of 17
million refund-anticipation borrowers, charging violations
of various state and federal laws, including RICO. The basic
claim is that the defendants lead the borrowers to believe
that the tax preparer is their fiduciary, much as if they had
hired a lawyer or an accountant to prepare their income tax
returns, as affluent people do, whereas, unbeknownst to
them, the tax preparer is engaged in self-dealing. This
conduct is alleged to constitute a scheme to defraud in
violation of the federal mail- and wire-fraud statutes. Vio-
lations of those statutes are “predicate offenses” that can
form the basis of a RICO charge.
  In 1999 the named plaintiff in one of the suits entered into
a settlement agreement with the bank and the tax preparer.
This was to be a “global” settlement: the members of all the
classes would divide up a $25 million fund put up by the
defendants in exchange for the release of all claims arising
out of the RALs. The district judge approved the settlement
and enjoined (with one exception) the other RAL class
actions, Zawikowski v. Beneficial National Bank, No. 98 C 2178,
2000 WL 1051879 (N.D. Ill. July 28, 2000), but we reversed,
Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir.
2002), on the ground that the district judge had failed to
scrutinize the fairness of the settlement adequately. We
were concerned that the settlement might have been the
product of collusion between the defendants, eager to
4                                       Nos. 04-8008, 04-8009

minimize their liability, and the class lawyers, eager to
maximize their fees.
  The district judge to whom the case was reassigned on
remand concluded that the settlement had indeed been un-
fair and disapproved it. 260 F. Supp. 2d 680 (N.D. Ill. 2003).
There was no appeal. The proceedings continued in the
district court, with both the named plaintiff and the class
counsel replaced. Although no class had formally been
certified in the earlier proceedings, rather than require the
new plaintiff to move for certification the judge asked the
defendants for their objections to certification, and they
responded. She agreed with some of the objections, rejected
others, and, in effect, certified the same class that had been
contemplated by the rejected settlement, which is to say all
RAL borrowers (with a few exceptions) whose claims
weren’t barred by the statute of limitations. But she limited
the certification to prosecution of just the RICO claim, plus
one breach of contract claim involving the law of only one
state.
  The defendants object mainly to the procedure the judge
employed and to the brevity with which she pronounced
the class manageable despite its vast size. In the previous
round of this protracted litigation the defendants had urged
the district court to accept the giant class as appropriate for
a global settlement, had prevailed in their urging, and so are
now precluded by the doctrine of judicial estoppel, see, e.g.,
New Hampshire v. Maine, 532 U.S. 742 (2001), from challeng-
ing its adequacy, at least as a settlement class (the signifi-
cance of this qualification will appear in due course). It is
true that we reversed the district court’s approval of the
settlement, but a reversal need not affect the application of
judicial estoppel. In re Cassidy, 892 F.2d 637, 641 (7th Cir.
1990); Hall v. GE Plastic Pacific PTE Ltd., 327 F.3d 391, 398-99
(5th Cir. 2003); U.S. Philips Corp. v. Sears Roebuck & Co., 55
Nos. 04-8008, 04-8009                                           5

F.3d 592, 597 (Fed. Cir. 1995); cf. 18B Charles Alan Wright,
Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 4477 (2d ed. 2002). The reason lies in the purpose
of the doctrine. The canonical statement of that purpose is
that it is “to protect the integrity of the judicial process.”
E.g., New Hampshire v. Maine, supra, 532 U.S. at 749-50;
United States v. Christian, 342 F.3d 744, 747 (7th Cir. 2003).
But we have been a little more precise. We have said that “a
party who prevails on one ground in a lawsuit cannot turn
around and in another lawsuit repudiate the ground. If
repudiation were permitted, the incentive to commit perjury
and engage in other litigation fraud would be greater. A
party envisaging a succession of suits in which a change in
position would be advantageous would have an incentive
to falsify the evidence in one of the cases, since it would be
difficult otherwise to maintain inconsistent positions.”
McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir.
1998) (citations omitted). In other words, “the purpose of
the doctrine . . . is to reduce fraud in the legal process by
forcing a modicum of consistency on a repeating litigant.”
Ladd v. ITT Corp., 148 F.3d 753, 756 (7th Cir. 1998); see also
Bethesda Lutheran Homes & Services, Inc. v. Born, 238 F.3d 853,
858 (7th Cir. 2001).
   The antifraud policy that animates the doctrine is fully
engaged when a party obtains a judgment on a ground that
it later repudiates, even if his opponent, the loser in that first
case, is able, obviously at some expense to itself but also
placing a demand on judicial resources, to get the judgment
reversed. Anyway the defendants benefited from the
temporary approval of the settlement, which they used to
enjoin other RAL litigation against them; and having reaped
a benefit from their pertinacious defense of the class treat-
ment of the case for purposes of settlement they cannot now
be permitted to seek a further benefit from reversing their
position.
6                                      Nos. 04-8008, 04-8009

  It is true that we went on to say in McNamara that “the
doctrine of judicial estoppel requires . . . that the party
sought to be estopped have obtained a favorable judgment
or settlement on the basis of a legal or factual contention
that he wants to repudiate in the current litigation. Other-
wise it would be inconsistent with the rule that permits
inconsistent pleadings.” 138 F.3d at 1225. But the defendants
did obtain a judgment. The fact that it was reversed on
appeal has nothing to do with a party’s right to explore
inconsistent alternative positions in the early stages of a
lawsuit.
  The defendants are correct, however, that a class might be
suitable for settlement but not for litigation. The class might
be unmanageable if the case were actually tried yet manage-
able as a settlement class because the settlement might
eliminate all the thorny issues that the court would have to
resolve if the parties fought out the case. Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 620 (1997). But although the
district judge might have said more about manageability,
the defendants have said nothing against it except that there
are millions of class members. That is no argument at all.
The more claimants there are, the more likely a class action
is to yield substantial economies in litigation. It would
hardly be an improvement to have in lieu of this single class
action 17 million suits each seeking damages of $15 to $30.
The rejected settlement capped damages at these amounts
for single and multiple RALs respectively, and while the
amounts may be too low they are indicative of the modest
stakes of the individual class members. The realistic alterna-
tive to a class action is not 17 million individual suits, but
zero individual suits, as only a lunatic or a fanatic sues for
$30. But a class action has to be unwieldy indeed before it
can be pronounced an inferior alternative—no matter how
massive the fraud or other wrongdoing that will go unpun-
ished if class treatment is denied—to no litigation at all.
Nos. 04-8008, 04-8009                                         7

   Often, and possibly in this case as well, there is a big
difference from the standpoint of manageability between
the liability and remedy phases of a class action. The num-
ber of class members need have no bearing on the bur-
densomeness of litigating a violation of RICO. Whether
particular members of the class were defrauded and if so
what their damages were are another matter, and it may be
that if and when the defendants are determined to have
violated the law separate proceedings of some character will
be required to determine the entitlements of the individual
class members to relief. Fed. R. Civ. P. 23(c)(4)(A); Allen v.
International Truck & Engine Corp., 358 F.3d 469 (7th Cir.
2004); Bell Atlantic Corp. v. AT&T Corp., 339 F.3d 294, 307 n.
16 (5th Cir. 2003); In re Visa Check/MasterMoney Antitrust
Litigation, 280 F.3d 124, 141 (2d Cir. 2001); Robinson v. Metro-
North Commuter R.R., 267 F.3d 147, 168-69 (2d Cir. 2001).
That prospect need not defeat class treatment of the question
whether the defendants violated RICO. Once that question
is answered, if it is answered in favor of the class, a global
settlement along the lines originally negotiated (though
presumably with different dollar figures) will be a natural
and appropriate sequel. And if there is no settlement, that
won’t be the end of the world. Rule 23 allows district courts
to devise imaginative solutions to problems created by the
presence in a class action litigation of individual damages
issues. Those solutions include “(1) bifurcating liability and
damage trials with the same or different juries; (2) appoint-
ing a magistrate judge or special master to preside over
individual damages proceedings; (3) decertifying the class
after the liability trial and providing notice to class members
concerning how they may proceed to prove damages; (4)
creating subclasses; or (5) altering or amending the class.”
In re Visa Check/MasterMoney Antitrust Litigation, supra, 280
F.3d at 141.
8                                        Nos. 04-8008, 04-8009

  We did note in our previous decision an unremarked
conflict of interest between those class members who took
out one or two refund anticipation loans and those who
took out more than two and would thus, because of the $30
cap that we just mentioned, receive no compensation for the
additional harm that they suffered. 288 F.3d at 282. But we
went on to say that “in light of the modesty of the stakes
even of class members who had multiple refund anticipa-
tion loans and the expense of subdividing the class (and
how many subdivisions would be necessary to reflect the
full range of damages?), we are not disposed to regard this
particular defect in the settlement as fatal.”
  The defendants argue that by requiring them to present
their objections to class certification rather than requiring
the plaintiff to move for certification, the district judge
improperly altered the burden of proof on the question
whether the class should be certified. Not so. Although the
plaintiff class had not formally been certified in the earlier
proceedings, that was indeed a formal defect—a technical
oversight that was surprising but from a practical stand-
point inconsequential. The case had been settled as a class
action, notices had been sent, objections had been consid-
ered and rejected—all on the assumption that a class had
been certified. This was de facto certification, albeit of a
settlement class only, and that was enough, we think, to
empower Judge Bucklo, in the exercise of her discretion to
manage litigation before her in an efficient and expeditious
manner, to require the defendants to list their objections to
the certification of a litigation class, especially since she was
explicit that the burden of persuasion on the validity of the
objections would remain on the plaintiffs. They carried the
burden easily. Remember that the defendants themselves
had argued that the class was appropriate for settlement
purposes. That did not conclude the question whether it was
appropriate for litigation if the settlement fell through, as
Nos. 04-8008, 04-8009                                        9

we have explained and as the district judge recognized. But
it was some indication that there were issues appropriate for
determination on a class basis.
   The defendants argue that the named plaintiff has not
been shown to be an adequate representative of the class,
but the district judge thought otherwise on sufficient
grounds. The defendants also argue that class certification
is barred by collateral estoppel, and this argument requires
a fuller discussion.
  In re Bridgestone/Firestone, Inc., Tires Products Liability
Litigation, 333 F.3d 763 (7th Cir. 2003), holds that a judicial
finding that a class should not be certified is, at least in
some circumstances, entitled to collateral estoppel effect—
and in Buford v. H&R Block, Inc., 168 F.R.D. 340 (S.D. Ga.
1996), aff’d, 117 F.3d 1433 (11th Cir. 1997) (per curiam), a
federal district judge refused to certify a nationwide class
action charging, just as in this case, that our defendants’
practices with respect to RALs violated RICO. The judge
recognized that the question whether RICO was violated
was separate from the question whether the targets of the
violation had been injured by the violation. 18 U.S.C.
§ 1964(c); Holmes v. Securities Investor Protection Corp., 503
U.S. 258, 267-68 (1992). The predicate acts in the RICO claim
are violations of the mail- and wire-fraud statutes, and these
statutes are violated by a “scheme or artifice to defraud,” 18
U.S.C. §§ 1341, 1343, whether or not the scheme succeeds
and therefore causes injury. E.g., United States v. Tadros, 310
F.3d 999, 1006 (7th Cir. 2002); United States v. Coffman, 94
F.3d 330, 333-34 (7th Cir. 1996); United States v. Daniel, 329
F.3d 480, 486 (6th Cir. 2003). The separation of liability and
injury issues is illustrated by the suggestion in Moore v.
PaineWebber, Inc., 306 F.3d 1247, 1255-56 (2d Cir. 2002), that
in a suit charging “uniform misrepresentations” the question
whether they were indeed misrepresentations would be
10                                       Nos. 04-8008, 04-8009

appropriate for class treatment, with the question of reli-
ance, and damages suffered, by individual class members
left for satellite proceedings. See also In re Prudential Ins. Co.
of America Sales Practices Litigation, 148 F.3d 283 (3d Cir.
1998).
  The judge in Buford thought, however, that the issue of
violation would be swamped by issues concerning whether
the borrowers had been deceived—had relied on the fraud,
and thus had been injured, whether directly, as in American
Chiropractic Ass’n, Inc. v. Trigon Healthcare Inc., 367 F.3d 212,
233 (4th Cir. 2004); Bank of China v. NBM LLC, 359 F.3d 171,
178 (2d Cir. 2004); Byrne v. Nezhat, 261 F.3d 1075, 1109-10
(11th Cir. 2001), and Summit Properties Inc. v. Hoechst
Celanese Corp., 214 F.3d 556 (5th Cir. 2000), or perhaps, as in
Systems Management, Inc. v. Loiselle, 303 F.3d 100, 104 (1st
Cir. 2002), indirectly. Those issues would have to be re-
solved separately for each class member. In deciding that
therefore the case was inappropriate for class treatment, the
judge was applying the presumption against class action
certification in RICO cases that has been articulated by the
Fifth Circuit in Sandwich Chef of Texas, Inc. v. Reliance Nat’l
Indemnity Ins. Co., 319 F.3d 205, 219 (5th Cir. 2003). We are
dubious about such a presumption. The question whether
RICO was violated can be separated from the question
whether particular intended victims were injured, and thus
can—or so a district court could determine without being
thought to have abused its discretion—be resolved in a
single proceeding with the issue of injury parceled out to
satellite proceedings, as is frequently done in class action
tort litigation, see, e.g., Exxon Co. v. Sofec, Inc., 54 F.3d 570,
575-76 (9th Cir. 1995); In re Bendectin Litigation, 857 F.2d 290,
308-13 (6th Cir. 1988), of which the RAL class litigation is a
species.
  The adequacy of the judge’s reasoning in Buford is not
important, however, if, as the defendants contend, his ruling
Nos. 04-8008, 04-8009                                       11

is entitled to collateral estoppel effect. But they overread
Bridgestone/Firestone to hold that any ruling denying class
certification is binding in future litigation. Our decision was
more nuanced. See 333 F.3d at 767-69. For example, we
pointed out that the binding effect of such a ruling would
depend on whether the class members who would be
affected by it had been adequately protected by the class
representatives and class counsel in the proceeding in which
the ruling was made. The judge in Buford discussed the
issue of adequacy at some length, however, 168 F.R.D. at
352-55, and we are not disposed to reexamine his ruling. But
it is too late for the defendants to plead collateral estoppel
when, though knowing of the Buford decision, which was
issued in 1996 and affirmed the following year, they insisted
until last year, when the district court on remand from our
decision threw out the settlement, that class treatment of the
RICO claim was entirely appropriate. Until then they
desperately wanted the RICO claim included in the class
settlement so that they wouldn’t have to face it in any other
RAL suits. They prevailed in the present litigation, until the
settlement was finally rejected, by arguing that Buford was
wrong. They are estopped to argue now that it was right.
And anyway collateral estoppel is an affirmative defense
that is forfeited if not raised in timely manner, and it was
not raised in a timely manner in this case.
  The defendants tell us that anything that makes it easier
for a settlement class to molt into a litigation class will
discourage the settlement of class actions. They say that
defendants have settled class actions “in the past secure in
the knowledge that if the settlement agreement should
unravel, they would be restored to the pre-certification
position and remain free to defend against any future ef-
fort to certify a class for litigation purposes.” But the
defendants in this case were perfectly free to defend against
certification; they just didn’t put up a persuasive defense.
12                                      Nos. 04-8008, 04-8009

Anyway their argument is unrealistic. The pressures for
settlement of class actions are enormous and will not be
lessened significantly by our upholding the class certifica-
tion.
  We are mindful that no district judge has as yet explicitly
addressed whether the other criteria for class certification,
besides adequacy of representation of the class, have been
met in this case. Those criteria are whether “(1) the class is
so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3)
the claims or defenses of the representative parties are
typical of the claims or defenses of the class.” Fed. R. Civ. P.
23(a). There is no need for a remand on these questions,
however. Criteria (1) and (2) have been met; and the
satisfaction of (3) is implicit in Judge Bucklo’s rejection of
the defendants’ contention that to handle their dispute with
the class members in the class action format would be
unmanageable. There has been substantial compliance with
the requirements of the rule, and no more is required,
Shvartsman v. Apfel, 138 F.3d 1196, 1201 (7th Cir. 1998);
Berger v. Iron Workers Reinforced Rodmen Local 201, 843 F.2d
1395, 1401 (D.C. Cir. 1988), especially in a case in which the
defendants were enthusiastic proponents of class treatment
until their opportunistic change of heart.
                                                    AFFIRMED.
A true Copy:
        Teste:

                           _____________________________
                            Clerk of the United States Court of
                              Appeals for the Seventh Circuit


                     USCA-02-C-0072—7-16-04
