11th Circuit Rules on Article III Standing in FACTA Cases

On October 3, 2018, the 11th Circuit Court of Appeals issued a significant decision in a class action case regarding a plaintiff’s standing to sue for alleged violations of the Fair and Accurate Credit Transactions Act (“FACTA”). See Muransky v. Godiva Chocolatier, Inc., No. 16-16486, 2018 U.S. App. LEXIS 27980 (11th Cir. Oct. 3, 2018).

FACTA is a 2003 amendment to the Fair Credit Reporting Act (“FCRA”). As described in Muranski, FACTA “‘is aimed at protecting consumers from identity theft.’”[i] Among other things, FACTA added to the FCRA a provision entitled “Truncation of credit card and debit card numbers.” See 15 U.S.C. § 1681c(g). This provision states as follows: “Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” See id.

In Muransky, the named plaintiff, Dr. David S. Muransky – suing on behalf of a putative class – alleged that Godiva Chocolatier, Inc. (“Godiva”) violated § 1681c(g) by giving him a receipt that showed the first six and last four digits of his credit card number. Dr. Muransky and Godiva subsequently reached a class settlement, and sought the District Court’s approval of the settlement. Certain putative class members objected to the proposed settlement, contending that Dr. Muransky lacked standing to sue because he had not suffered a concrete injury. The District Court approved the settlement, and the objectors appealed that decision to the 11th Circuit.

The 11th Circuit affirmed the District Court’s decision, focusing on the Supreme Court’s landmark decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). In Spokeo, the plaintiff alleged that the defendant, a “people search engine,” violated the FCRA by providing inaccurate information about him in response to a search. The issue before the Supreme Court in Spokeo was whether the plaintiff had Article III standing to sue.

The injury-in-fact requirement for standing requires a plaintiff to allege an injury that is both concrete and particularized.[ii] The Supreme Court held that “Article III standing requires a concrete injury even in the context of a statutory violation.”[iii] The Supreme Court noted that “[a] violation of one of the FCRA’s procedural requirements may result in no harm.”[iv] Therefore, under the FCRA, a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”[v] The Supreme Court remanded the case with instructions for the Court to consider whether the plaintiff had satisfied that Article III standard. On remand, the Ninth Circuit found that the plaintiff’s alleged injuries were sufficiently concrete for the purposes of Article III.[vi]

In Muransky, the 11th Circuit held that, for two reasons, Dr. Muransky’s claim satisfied the Article III standard set forth in Spokeo. First, the 11th Circuit found that Dr. Muransky’s claim had a close relationship to certain causes of action previously recognized at common law. In particular, “Godiva’s disclosure of Dr. Muransky’s credit card number is similar to the common law tort of breach of confidence.”[vii] And, “[t]he willful violation of FACTA’s card-truncation duty also resembles a modern version of a claim for breach of an implied bailment agreement,” because Godiva in effect was “a bailee of Dr. Muransky’s credit card information.”[viii] The 11th Circuit concluded that, because of this resemblance between FACTA and certain traditional common-law claims, it was reasonable to infer that Congress “conceived of the harm as happening when the merchant provides a customer with an untruncated receipt.”[ix]

Second, the 11th Circuit found that Dr. Muransky’s complaint sufficiently pled a specific, concrete injury. As the 11th Circuit explained: “When merchants breach their truncation duty, customers like Dr. Muransky must use their time (and wallet space) to safely dispose of or keep the untruncated receipt so as to avoid someone finding their credit card number on their receipt.”[x] Thus, the 11th Circuit found that Dr. Muransky had Article III standing to sue.

The 11th Circuit recognized that, following Spokeo, certain other federal circuits had found that Article III standing was lacking in cases involving printed receipts that displayed the customer’s credit card expiration date but that otherwise properly truncated the customer’s credit card number.[xi] However, the 11th Circuit interpreted such decisions as standing only for the limited proposition that “Congress does not consider an untruncated expiration date alone to be harmful.”[xii] Therefore, such decisions were inapplicable to Dr. Muransky’s complaint.

Lastly, the 11th Circuit distinguished the 2nd Circuit’s decision in Katz v. Donna Karan Co., 872 F.3d 114, 116 (2d Cir. 2017). In Katz – as summarized by the 11th Circuit – “the district court found no risk of harm to the consumer because the publication of the first six digits of a credit card number did not create a material risk of injury.”[xiii] The 2nd Circuit affirmed that decision. As noted by the 11th Circuit, “many district courts have incorporated the fact findings from Katz into [a] legal analysis that FACTA violations do not create a concrete injury.”[xiv]

But the 11th Circuit found that, for two reasons, Katz did not undermine Dr. Muransky’s claim. First, Katz “did not consider whether the FACTA violation was comparable to a breach of confidence tort or the breach of an implied bailment agreement.”[xv] Second, the 11th Circuit found that the 2nd Circuit’s intent in Katz was not to create “a bright-line, no-standing rule.”[xvi] The Katz opinion, as read by the 11th Circuit, was about the unique facts of that particular case. The 11th Circuit noted that “the Katz plaintiff may have done a poor job at proving standing as a factual matter and therefore findings against him should not preclude standing for others.”[xvii]

In concluding the Article III standing requirement was satisfied, the Muransky Court found that the complaint alleged two concrete injuries: one based on the statutory violation and its relationship to common law causes of action, and another based on Godiva giving Dr. Muransky an untruncated receipt.[xviii]

[i] Muransky, 2018 U.S. App. LEXIS 27980, at *11.

[ii] Spokeo,136 S.Ct. at 1549.

[iii] Id. at 1549.

[iv] Id. at 1550.

[v] Id.

[vi] Robins v. Spokeo, Inc., 867 F.3d 1108, 1118 (9th Cir. 2017)

[vii] Muransky, 2018 U.S. App. LEXIS 27980, at *13.

[viii] Id. at *15.

[ix] Id. at *16.

[x] Id. at **18-19.

[xi] See, e.g., Bassett v. ABM Parking Servs., Inc., 883 F.3d 776 (9th Cir. 2018); Crupar-Weinmann v. Paris Baguette Am., Inc., 861 F.3d 76 (2d Cir. 2017); Meyers v. Nicolet Rest. of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016).

[xii] Muransky, 2018 U.S. App. LEXIS 27980, at *20.

[xiii] Id. at *22.

[xiv] Id. at *23.

[xv] Id. at *22.

[xvi] Id. at *23.

[xvii] Id.

[xviii] Id. at *26.

Divya Gupta

Divya Gupta

Divya Gupta is a commercial litigator Partner with one of the nation’s most knowledgeable Telephone Consumer Protection Act (TCPA) defense-teams. She is experienced in handling complex cases in state and federal courts, both in-house and as outside counsel. Divya is particularly skilled in defending banks, finance companies, and other lenders in both individual and class action TCPA cases. Divya also has experience advising major financial institutions on TCPA compliance matter and regarding the applicability of the TCPA to new and emerging products and services. Likewise, she is further adept in handling matters involving the Fair Credit Reporting Act (FCRA).

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