The U.S. Court of Appeals for the Sixth Circuit recently affirmed dismissal of a consumer's claims that a retail food store violated the federal Fair and Accurate Credit Transactions Act of 2003's (FACTA) "truncation requirement" by printing more digits of the consumer's credit card than permissible by statute.
In so ruling, the Sixth Circuit held that the alleged violation did not establish an increased risk of identity theft, and thus, did not satisfy Article III's injury in fact requirement to establish standing for her FACTA claim, agreeing with the majority of the other federal appellate courts on this issue.
A copy of the opinion is available at: Link to Opinion
A consumer ("Consumer") made a purchase at a fast-food restaurant location operated by a franchisee that owns over 130 locations of the prominent burger chain, where she allegedly received an electronically printed receipt containing the first six and last four digits of her card number.
As you may recall, FACTA was enacted in 2003 as an amendment to the Fair Credit Reporting Act aimed to prevent identity theft, and provides that "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 sale or transaction." 15 U.S.C. § 1681c(g)(1) (the "truncation requirement").
The Consumer filed a putative class action complaint against the restaurant and its related corporate entities ("Restaurant") on behalf of all similarly situated customers who received allegedly noncompliant receipts from the Restaurant within two years of the suit's filing date, alleging violations of FACTA's truncation requirement.
The trial court dismissed the complaint without prejudice on the basis that the court lacked subject matter jurisdiction over the Consumer's claims because she failed to demonstrate any harm to her identity based upon the Restaurant's technical violation of FACTA, and that allegations of hypothetical future injury were insufficiently concrete to confer standing under Article III. The instant appeal followed.
On appeal, the Sixth Circuit noted that, to satisfy Article III standing requirements, a plaintiff must show (1) she suffered an injury in fact, (2) caused by defendants, that (3) is redressable by a judicial decision (Spokeo v. Robins, 136 S. Ct. 1540, 1547 (2016)). The appellate court further noted that the injury-in-fact requirement is not automatically satisfied by a statutory violation (Id. at 1549), but requires a "concrete injury even in the context of a statutory violation." Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1620–21 (2020) (quoting Spokeo, 136 S. Ct. at 1549).
Here, the Consumer contended that she suffered a concrete injury based on a congressional grant of a statutory right and remedy. The Sixth Circuit acknowledged that the "the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact . . . [and] a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified" (Spokeo, 136 S. Ct. at 1549).
However, the Sixth Circuit rejected the Consumer's claim that the risk of identity theft here constituted a concrete injury, as consistent with the findings of other circuits presented with identical facts (disclosure of the first six and last four digits of the consumer's credit card). See Muransky, v. Godiva Chocolatier, Inc., 979 F.3d 917, 928-29 (11th Cir. 2020) (en banc); Katz v. Donna Karan Co., LLC, 872 F.3d 114, 116 (2d Cir. 2017); Noble v. Nevada Checker Cab Corp., 726 F. App'x 582, 583 (9th Cir. 2018) (first and last four digits); see also Kamal v. J. Crew Grp., Inc., 918 F.3d 102, 113 (3d Cir. 2019) (Clarification Act enacted after FACTA, which limited liability for printing the expiration date, "also expresses Congress's judgment that not all procedural violations of FACTA will amount to concrete harm").
The Consumer further claimed that the increased-risk-of-injury constituted real harm, arguing that FACTA creates a concrete interest "vest[ing] consumers with an interest in using their credit and debit cards without facing an increased risk of identity theft." See Jeffries v. Volume Servs. Am., Inc., 928 F.3d 1059, 1064 (D.C. Cir. 2019). In Jeffries, the D.C. Circuit held that the plaintiff in Jeffries did suffer an injury in fact because the receipt which contained all sixteen digits and the expiration date "contained enough information to defraud [the plaintiff]." Id. at 1067.
The Sixth Circuit reasoned that the Jeffries found standing because the complaint alleged sufficient fats to establish that a violation of the statute actually caused harm or risk of harm, but that no such risk existed here, because the Consumer's complaint failed to aver how "whether the challenged violation of [the plaintiff's] statutory right harmed or created a 'risk of real harm' to the concrete interests protected by FACTA." Id. at 1065.
Moreover, the Consumer here did not allege that the receipt was lost, stolen, or seen by a third set of eyes, and while forcing her to safeguard her receipt can be a legitimate injury, such a hypothetical future harm is not a concrete injury. Muransky, 979 F.3d at 931 (internal quotation omitted).
Lastly, the Sixth Circuit considered the Consumer's arguments that the intangible harm caused by the purported FACTA violation was analogous to common law torts of breach of confidence and invasion of privacy. As the Supreme Court of the United States stated in Spokeo, "it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts." 136 S. Ct. at 1549.
The Jeffries court concluded that a FACTA violation resembles a common law breach of confidence because the truncation requirement establishes a similar relationship of trust between consumer and merchant by requiring the merchant to safeguard a customer's card information (Jeffries at 1064–65), but other circuit courts have found no resemblance.
The Third Circuit in Kamal rejected the analogy because there was no allegation of disclosure of the consumer's information to a third party (Kamal, 918 F.3d at 114) while the Eleventh Circuit found any analogy lacking based on the absence of disclosure to a third party and lack of a confidential relationship that typically exists between a consumer and retailer. (Muransky at 932).
Noting that the receipt was not disclosed to a third party causing injury or increased risk of harm, the Sixth Circuit agreed with the Third and Eleventh Circuit's view rejecting the Consumer's breach of confidence analogy, as well as her invasion of privacy analogy on the same basis.
Because the Consumer failed to satisfy Article III's injury in fact requirement, the trial court's dismissal of her FACTA claim was affirmed.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Admitted to practice law in Illinois
Alabama | California | Florida | Georgia | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Tennessee | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
The Consumer Financial Services Blog™