We all learned in law school that the Supreme Court of the United States can trump (pardon the pun) the actions of Congress by ruling a statute unconstitutional. In fact, that is one of the primary jobs of the Supreme Court as an essential part of our system of checks and balances. But, can the Supreme Court essentially render nugatory an Act of Congress that is not under Constitutional Challenge? That seems to be the effect lower courts are affording the Court’s 2016 decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), at least when it comes to claims under the Fair and Accurate Credit Transactions Act (“FACTA”). FACTA prohibits retailers from printing “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 sale or transaction.” 15 U.S.C. § 1681c(g)(1). In the event of such a violation, a consumer may bring a private cause of action and recover statutory damages of $100 to $1,000 per violation.
FACTA was enacted by Congress in 2003 as an amendment to the Fair Credit Reporting Act (“FCRA”) to provide consumers with another layer of protection from identity theft. If a receipt with a complete credit card number fell into the wrong hands, then those “wrong hands” were off to the races with bogus charges. Early class action suits under FACTA brought about huge settlements culminating in the March 23, 2017 preliminary approval of the record-breaking $30.9 million settlement with Doct0r’s Associates, Inc. which does business as the omnipresent Subway sandwich shops (the “Subway Settlement”). The Final Settlement Approval Hearing for the Subway Settlement is currently scheduled for May 18, 2018. However, prior to the court’s preliminary approval of the Subway Settlement, the Supreme Court had issued its decision in Spokeo.
To revisit briefly, Spokeo also involved claims under FCRA – although not the FACTA amendment – which authorized a statutory recovery of damages. The Court found that the injury-in-fact element necessary to confer standing to bring suit under Article III of the Constitution requires injury that is “concrete and particularized and actual or imminent, not conjectural or hypothetical.” The Court of Appeals for the Ninth Circuit had found that the plaintiff had established particularized harm by suffering a FCRA violation; the Supreme Court reversed and remanded the case to make a determination on the “concreteness” prong of this injury. Many criticized the decision for not taking a position on the ultimate outcome of the standing for the putative class. The Court provided some direction, stating that “intangible injuries can nevertheless be concrete,” but also suggested that a “bare procedural violation,” without some actual harm will not satisfy standing. Although Dist. Judge Cecilia Altonaga did not discuss Spokeo in the Preliminary Approval of the Subway Settlement, and ostensibly did not view Spokeo as an obstacle to approving the Subway Settlement, other courts, even prior to approval of the Subway Settlement, had begun to dismiss FACTA putative class actions when there was only an allegation of a technical violation without a demonstration of increased risk of identity theft. See, Cruper Weinmann v. Paris Baguette Am., Inc., 235 F. Supp. 3d 570 (S.D.N.Y. 2017).
Perhaps the defendant’s consent to the settlement was viewed as sufficient to believe that standing was already conferred in the Subway Settlement. But, that did not stop Dist. Judge Robert Scola, Jr. – Judge Altonaga’s colleague on the Southern District of Florida bench – from dismissing a settled FACTA class action for lack of standing. Kirchein v. Pet Supermarket, Inc., No. 16-60090, 2018 U.S. Dist. LEXIS 21750 (S.D. Fla. Feb. 8, 2018). In Kirchein, a class plaintiff alleged that Pet Supermarket violated FACTA by printing the first six and the last four numbers of his credit card on his receipt. Defendant agreed to pay $580,000 to settle the class claims, and Judge Scola preliminarily approved the settlement on August 22, 2016. Approximately a year later, Judge Scola dismissed a different FACTA complaint relying primarily on Spokeo because the plaintiff alleged only that the defendant printed the first six and the last four digits of his card on his receipt and did not allege that any disclosure of his private information had actually occurred. Gesten v. Burger King Corp., No. 17-22541, 2017 U.S. Dist. LEXIS 158173 (S.D. Fla. September 27, 2017). Accordingly, while the Kirchein class counsel was encountering difficulties identifying and locating the settlement class members, Judge Scola asked for briefing on the issue of standing under Spokeo. Class counsel cleverly argued that the Court did have standing, despite Spokeo’s effect on FACTA cases, because it did have standing to enforce the terms of the parties’ settlement; but, this did not square with Judge Scola. Judge Scola could not get past the mandate that once a court determines that it has no jurisdiction, its sole remaining task is to dismiss the case, and the bare procedural violations of FACTA, without more, did not confer standing to acquire jurisdiction.
Other courts are also now riding the Spokeo train to jettison FACTA cases where there is only a minor or technical violation of the limited disclosure number. On March 9, 2018, the Court of Appeals for the Ninth Circuit upheld a Nevada district court’s dismissal of a proposed FACTA class action in which the allegations in the Second Amended Complaint stated only that the defendant taxi companies printed the first digit and the last four digits on the rider’s receipt. Noble v. Nev. Checker Cab Corp., Case No. 16-16573, 2018 U.S. App. LEXIS 5963 (9th Cir. March 9, 2018). The Noble Court relied heavily upon its decision just weeks before, in which the court ruled that the plaintiff alleging a FACTA violation lacked standing under Spokeo because he alleged only that the printed receipt included the plaintiff’s credit card expiration date. Bassett v. ABM Parking Servs., Inc., No. 16-35933, 2018 U.S. App. LEXIS 4097 (9th Cir. Feb. 21, 2018). The court found Article III standing lacking because the plaintiff “did not allege that another copy of the receipt existed, that his receipt was lost or stolen, that he was the victim of identity theft, or even that another person apart from his lawyers viewed the receipt. Id. at *6. Nor did plaintiff “allege that any risk of harm is real, ‘not conjectural or hypothetical,’ given that he could shred the offending receipt along with any remaining risk of disclosure.” Id. (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). The Spokeo Court used the same “conjectural” and “hypothetical” language.
So the impact of all this, and whether it will disturb the record-breaking Subway Settlement at the Final Approval Hearing in May, is difficult to grasp. Congress sees fit to pass a statute that mandates certain conduct and has no constitutional basis for repeal. The statute provides consumer protection and confers automatic damages to be awarded against the offender solely to redress the potential risk of identity theft and force better compliance by retailers. FACTA does not require a plaintiff to allege anything more than the improper printing to recover for the violation. But, unless the plaintiff can allege some other concrete injury she has sustained, she has a right with no remedy. There is no standing for the plaintiff to seek redress from the courts that are responsible for applying the laws as written. Instead, these courts seem to be using Spokeo to engraft additional language onto what Congress wrote in FACTA. Whether FACTA will lose its ability to compel compliance by retailers also remains in jeopardy.