The Credit and Debit Card Receipt Clarification Act was signed into law on June 3, 2008 in response to a wave of class action litigation alleging that numerous retailers violated the Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA) by printing expiration dates on receipts issued to consumers. Because this conduct generally does not cause any actual damages, the plaintiffs allege that the retailers willfully violated the FCRA, which entitles each plaintiff to statutory damages of between $100 and $1,000 per violation. The Act substantially limits the litigation by providing that, as a matter of law, the mere act of printing an expiration date on a receipt does not demonstrate willful noncompliance, so long as the receipt was printed before the Act took effect. The Act applies retroactively to any pending claims that had not “become final” at the time the Act took effect.
A district court in Pennsylvania recently vacated its preliminary approval of a class action settlement reached in a credit card truncation class action case, finding that the Act eliminated the claims upon which the settlement was based. Ehrheart v. Verizon, 07-cv- 1165, 2008 U.S. Dist. LEXIS 47224 (W.D. Penn. 2008). The parties in Ehrheart reached a class wide settlement of the litigation following court-ordered mediation. A written settlement agreement was signed and was preliminarily approved by the court. After the Act was signed into law, and before the court had given final approval to the settlement agreement, Verizon moved to vacate the preliminary class settlement, arguing that the Act eliminated plaintiff’s claims before the case had “become final” through final approval.
The court agreed with Verizon and concluded that because the class settlement was not final and plaintiffs’ claims were eliminated by the Act, the preliminary class settlement approval should be vacated. The court held that it “cannot proceed under Federal Rule of Civil Procedure 23 in such a manner as to find that the proposed settlement is ‘fair, adequate and reasonable’ when the statutory basis for the claims has been eliminated.” Ehrheart, 2008 U.S. Dist. LEXIS 47224, * 5. The court went on to hold that the Act applied to the case, despite the existence of a signed settlement agreement, because the case did not “become final” until final approval, stating that “Yet settlement is not final. The Court in a class action case has an independent duty to scrutinize proposed class action settlements. I must ensure that the settlement is fair, adequate and reasonable. I have not yet discharged this duty.” Id. at *6.
Plaintiff’s motion for reconsideration was denied. Given that preliminary approval of the settlement agreement has been vacated, and the court’s determination that plaintiff’s claims were eliminated by the Act, Verizon has now moved for judgment on the pleadings.