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.
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.”
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.