| Of Interest

A&B Abstract:

The Eleventh Circuit’s recent decision in Muransky v. Godiva Chocolatier, Inc., No. 16-16486 (11th Cir. Oct 28, 2020) marks a shift in the court’s position regarding what a consumer plaintiff must allege in order to demonstrate Article III standing under Spokeo, Inc. v. Robins. Although a three-judge panel of the court previously held that a procedural violation of the Fair and Accurate Credit Transactions Act was sufficient to confer Article III standing, a split en banc Eleventh Circuit recently found that a plaintiff must allege more than a “bare procedural violation, divorced from any concrete harm.” Through its ruling, the Eleventh Circuit is now aligned with the Second, Third, Seventh, and Ninth Circuits in requiring concrete harm as a necessary prerequisite for Article III standing.

Discussion:

In a 7 to 3 decision, the Eleventh Circuit vacated a previous ruling affirming a $6.3 million settlement between Godiva Chocolatier and a class represented by Dr. David Muransky on the ground that Muransky lacked Article III standing under Spokeo, Inc. v. Robins to sue Godiva for a violation of FACTA.

Muransky brought suit alleging that a Godiva cashier gave him a receipt showing his credit card’s first six and last four digits—too many digits under FACTA. FACTA prohibits retailers from printing “more than the last 5 digits of the credit card number or the expiration date” on the consumer’s receipt. Retailers can face a statutory penalty of between $100 and $1,000 for each receipt featuring more than the permitted five digits, with the size of the penalty dependent on whether consumers can prove the retailer was willfully negligent.

Muransky claimed that Godiva’s failure to fully truncate his credit card digits led to an increased risk of identify theft. Godiva ultimately agreed to pay $6.3 million to settle the suit. During the approval process, a class member objected to the settlement on the basis that Muransky lacked Article III standing because he failed to allege a “concrete injury” and the alleged FACTA violation—an increased risk of harm—did not present a “material risk” of harm. After the district court approved the settlement, the objector appealed. A three-judge panel of the Eleventh Circuit subsequently upheld the settlement after finding that an increased risk of identity theft was enough to bring FACTA claims.

In a ruling last week, the full court reconsidered the standing issue and changed course. The Eleventh Circuit held that Muransky did not have standing under FACTA to either settle with Godiva or pursue a class action because he had not suffered any harm when Godiva printed 10 of his credit card digits. The Eleventh Circuit began by rejecting Muransky’s argument that a bare procedural violation of FACTA—the printing of 10 digits on his credit card receipt—was enough to confer Article III standing. Instead, the Supreme Court’s Spokeo decision requires a plaintiff to also allege concrete harm, something Muransky failed to do.

The Eleventh Circuit then addressed Muransky’s argument that Godiva’s FACTA violation exposed Muransky and the class members to an elevated risk of identity theft. According to the court, Muransky’s “naked assertion” that he faced an increased risk of identity theft is the “kind of conclusory allegation” that is simply not enough to demonstrate concrete harm and therefore not enough to confer Article III standing.

Three of the judges—two of whom made up the original Eleventh Circuit panel that affirmed the settlement—dissented from the majority. Judge Wilson believed that Muransky had plausibly alleged that Godiva’s FACTA violation elevated his risk of identity theft—something that was sufficient to demonstrate concrete harm. Judge Martin dissented on the ground that the Supreme Court’s Spokeo decision held that “not all statutory violations result in concrete injury.” According to Judge Martin, “a plaintiff need not allege anything more than a violation of the statute itself” and therefore she believed that Muransky “was not required to allege any additional harm beyond the statutory violation alleged in his complaint.” Judge Jordan also dissented, agreeing with the points made by both Judge Wilson and Judge Martin.

The majority’s holding is consistent with prior decisions from the Second Circuit (Crupar-Weinmann v. Paris Baguette Am., Inc., 861 F.3d 76 (2d Cir. 2017)), Third Circuit (Kamal v. J. Crew Group, Inc., 918, F.3d 102 (3d Cir. 2019), Seventh Circuit (Meyers v. Nicolet Restaurant of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016)), and Ninth Circuit (Bassett v. ABM Parking Services, Inc., 883 F.3d 776 (9th Cir. 2018)). Each of those cases involved a violation of the FACTA truncation requirement involving the printing of the credit card expiration date on the receipt. In each case, the court held that the plaintiff lacked standing to sue.

Following the Eleventh Circuit’s ruling, the D.C. Circuit is currently the only federal appeals court to have concluded that a bare procedural violation of FACTA’s truncation requirement is sufficient to confer Article III standing. But, as the Eleventh Circuit recognized, that conclusion was based “on significantly different facts.” In Jeffries v. Volume Services of America, 2019 WL 2750856 (D.C. Cir. July 2, 2019), the retailer printed all 16 digits of the plaintiff’s credit card number and the expiration date of the card on the receipt. The D.C. Circuit held that the “egregious” FACTA violation of printing all 16 digits and the expiration date created a real risk of harm to the plaintiff because it created “the nightmare scenario FACTA was enacted to prevent” and provided “sufficient information for a criminal to defraud her.”

Takeaways:

The decision in Muransky solidifies the existing circuit court precedent holding that plaintiffs asserting FACTA claims will lack Article III standing if they allege nothing more than the simple procedural harm without any actual concrete harm. The prior decision in Muransky provided plaintiffs with some authority for allowing a class action to proceed based on just the procedural violation, but that decision is no longer good law.

Therefore, in order to bring FACTA class actions, plaintiffs will need to allege facts sufficient to show something more than an increased risk of harm. Given the nature of the underlying violation, it will remain difficult for plaintiffs to allege some identifiable harm as a result of the FACTA violation.

A&B Abstract:

Recent cases by the Eleventh Circuit and the D.C. Circuit deepen the divide among the courts on the standing of consumers to sue for violations of the Fair and Accurate Credit Transactions Act (“FACTA”). In Muransky v. Godiva Chocolatier, Inc., 922 F.3d 1175 (11th Cir. 2019) and Jeffries v. Volume Services of America, 2019 WL 2750856 (D.C. Cir. July 2, 2019), the courts of appeal have held that the consumer plaintiff had Article III standing under the Supreme Court’s decision in Spokeo, Inc. v. Robins to sue retailers for violation of FACTA’s truncation requirement. FACTA prohibits retailers from printing “more than the last 5 digits of the credit card number or the expiration date” on the consumer’s receipt. Prior decisions from the Second, Third, Seventh and Ninth Circuits held that the consumer plaintiff lacked standing to sue the retailer for a violation of FACTA’s truncation requirement absent a resulting tangible injury.

Discussion:

In Muransky, the Eleventh Circuit recently vacated and reissued an earlier ruling holding that a plaintiff had standing under Spokeo to pursue a putative class action for violation of FACTA’s truncation requirement. In Muransky, the retailer printed a receipt with the plaintiff’s first six and last four digits of his credit card. After a short period of discovery, the parties settled the case for $6.3 million. During the approval process, a class member objected to the settlement on the basis that the plaintiff suffered no harm, and class members who had their identities stolen would have their claims barred. After the district court approved the settlement, the objector appealed.

On appeal, in addition to the objector’s challenge, an amicus brief was filed on behalf of the National Retail Federation, the U.S. Chamber of Commerce, and the International Franchise Association. These groups argued that plaintiff’s lawyers had “weaponized” FACTA in recent years to force defendants to settle class actions “despite the absence of any actual harm or risk of harm.” The groups noted recent, significant FACTA class action settlements in the Eleventh Circuit ranging from $2.5 million to $30.9 million.

The Eleventh Circuit affirmed the district court’s approval of the settlement, and rejected the challenge to the plaintiff’s standing. The court recognized that prior courts in the Second, Third, Seventh and Ninth Circuits had held that consumers lacked standing to pursue lawsuits for violation of FACTA’s truncation requirement, absent some tangible injury. In Kamal v. J. Crew Group, Inc., 918, F.3d 102 (3d Cir. 2019), the Third Circuit affirmed the dismissal of the consumer’s putative class action. The Third Circuit held that printing the first six and last four digits of the credit card, without any additional degree of risk, was “a bare procedural violation” that does not create Article III standing.

The decision in Kamal was consistent with prior decisions from the Second Circuit (Crupar-Weinmann v. Paris Baguette Am., Inc., 861 F.3d 76 (2d Cir. 2017)), Seventh Circuit (Meyers v. Nicolet Restaurant of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016)), and Ninth Circuit (Bassett v. ABM Parking Services, Inc., 883 F.3d 776 (9th Cir. 2018)). Each of those cases involved a violation of the FACTA truncation requirement involving the printing of the credit card expiration date on the receipt. In each case, the court held that the plaintiff lacked standing to sue.

Even more recently, in Jeffries, the D.C. Circuit followed the reasoning of the Eleventh Circuit in Muransky to reverse the district court’s dismissal of a consumer’s putative class action for violation of FACTA’s truncation requirement on standing grounds. In that case, the retailer had printed all 16 digits of the plaintiff’s credit card number and the expiration date of the card on the receipt. These facts were important because the D.C. Circuit recognized that “not every violation of FACTA’s truncation requirement creates a risk of identity theft” sufficient to constitute a concrete injury in fact. The court specifically cited with approval the expiration date cases from the Second, Seventh and Ninth Circuits, noting that the mere technical violation of printing the expiration date did not create a risk of identity theft triggering a concrete injury in fact. However, the D.C. Circuit held that the “egregious” FACTA violation of printing all 16 digits and the expiration date created a real risk of harm to the plaintiff because it provided all of the information necessary for a criminal to defraud the plaintiff.

Takeaways:

First, the procedural posture of Muransky and the “egregious” facts in Jeffries may have helped lead to their respective results.

In Muransky, the retailer did not challenge the plaintiff’s standing in the district court. Rather, the standing challenge came from an objector to the settlement of the putative class action. Thousands of class members had already made claims in the settlement, and the court was likely disinclined to unwind such a settlement due to a single objector. Regardless, Muransky is nonetheless the law in the Eleventh Circuit, and district courts will be bound to follow it. Muransky will only increase the already significant number of FACTA class actions brought in that jurisdiction.

In Jeffries, the retailer had printed all 16 digits of the plaintiff’s credit card number and the expiration date of the card on the receipt. In finding standing, the D.C. Circuit noted the “egregious” nature of the FACTA violation. Therefore, less “egregious” violations of FACTA can be distinguished from Jeffries, such that the D.C. Circuit may not necessarily become a safe haven for FACTA lawsuits.

Second, the divide among the courts of appeal continues to justify the Supreme Court clarifying the scope of Spokeo.