On December 4, 2003, Congress enacted the Fair and Accurate Credit Transactions Act (“FACTA”), which amended the Fair Credit Reporting Act (“FCRA”) to impose new obligations on merchants. FACTA requires merchants to truncate all but the last five digits of credit and debit card account numbers and prohibits the printing of card expiration dates on electronically printed customer receipts. 15 U.S.C. § 1681c(g)(1)
The plaintiffs’ class action bar promptly filed a slew of purported class actions against merchants large and small alleging FACTA violations. While the wave of lawsuits started in California, there are now more than 300 FACTA class action complaints pending in at least seventeen states. Significantly, plaintiffs have not alleged any actual damages in these cases. Instead, the plaintiffs consistently seek to take advantage of the FCRA provisions which allow consumers to recover statutory damages of between $100 and $1,000 for each “willful” violation. Given the substantial volume of transactions at issue, the potential exposure on these claims could be enormous even though no actual injuries have been alleged.
Online merchants should be aware the plaintiffs’ class action bar may now be shifting its focus in their direction, and at least two courts have given the green light to bring such claims. In both Vasquez-Torres v. Stubhub, Inc. and Harris v. Wal-Mart Stores, Inc., the courts have ruled that claims alleging violations of this provision of FACTA survive a motion to dismiss.1 Similar lawsuits were also filed against Expedia, Inc. and Apple Computer, Inc.2
In the Stubhub case, the defendant, which sells event tickets through its website, sent purchasers purchase confirmation information on web pages that included the expiration date of the purchasers’ credit or debit card. The plaintiff filed a claim against Stubhub alleging that, by including the expiration date on the purchase confirmation Webpage, Stubhub violated Section 1681c(g)(1) of FACTA.
Stubhub filed a motion to dismiss, arguing that the plaintiff failed to state a claim because Stubhub did not “print” a receipt. Stubhub further argued that transmitting online purchasing information to the customer that included the expiration date did not amount to a violation of FACTA, which states that “no person that accepts credit 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 sale or transaction.” (emphasis added). For most merchants, FACTA became effective on December 4, 2006.
The California district court rejected Stubhub’s argument and denied the motion to dismiss. The court noted that neither the FCRA nor FACTA define the term “print” and held that the statute “must be construed to give the term its ordinary meaning.” The court reasoned that the common definition of “print” includes anything that makes an impression and that this definition includes images on a computer screen. The court further supported its decision by referring to the intent of Congress in enacting FACTA: Congress intended to prevent identity theft. The court reasoned that Congress “likely intended to prevent identify theft in all its forms, including common online identity theft, and did not intend to limit safeguards to a narrow subset of paper-printed receipts.”
In Wal-Mart, the court came to the same conclusion as in Stubhub. The plaintiff, William Harris, filed a claim against Wal-Mart under FACTA claiming a computer-generated receipt he received from Wal-Mart displayed the expiration date of his credit card after he completed an online transaction on the company’s web site. Wal-Mart filed a motion to dismiss arguing that it did not “print” the receipt in question within the meaning of the statute explaining that the information was displayed on a computer screen and not printed on paper.
The Illinois district court denied the motion to dismiss, holding that the plaintiff’s “factual allegations clearly raise the right to relief above a speculative level; and his claim is, therefore, sufficiently plead.” The court did note, however, that a well pleaded complaint may withstand a motion to dismiss even if recovery under the allegations is remote.
As a result of the decisions in these cases, online retailers should review their purchase process and the information displayed to customers during and at the completion of the purchase. While the courts may ultimately deny recovery to the plaintiffs and the classes they represent, companies will want to avoid the expense and potential liability associated with these cases – and more are almost certainly on their way.