United States: Third Circuit Holds Procedural FACTA Violation Insufficient To Establish Standing

Last Updated: March 25 2019
Article by Hanley Chew and Tyler G. Newby

The U.S. Court of Appeals for the Third Circuit added its voice to the chorus of circuit courts of appeal that have held that alleged procedural violations of the Fair and Accurate Credit Transactions Act (FACTA), such as the inclusion of a credit card's full expiration date or a few additional digits from the card on a receipt, were, on their own, insufficient to satisfy the concrete injury requirement necessary for Article III standing. Other than the Eleventh Circuit, every circuit court to have confronted similar factual allegations in FACTA cases has found that they fail to establish standing.

The Fair and Accurate Credit Transactions Act

The FACTA was a 2003 amendment to the Fair Credit Reporting Act (FCRA) and provides that "no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction." Willful noncompliance with FACTA entitles consumers to "any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000."

Following the enactment of FACTA, Congress passed the Credit and Debit Card Receipt Clarification Act in 2008 because many merchants erroneously believed that FACTA only required credit card truncation, resulting in "hundreds of lawsuits" alleging willful failure to remove the expiration date but no actual harm. The clarification act provided a safe harbor for merchants who printed expiration dates on receipts between 2004 and 2008 but otherwise complied with FACTA during that period.

Background

In 2014, Ahmed Kamal visited three J. Crew retail stores and made purchases with his credit card at each of the stores. After each purchase, Kamal received a receipt which displayed the first six digits of his credit card number as well as the last four digits. Other than the cashier, no one saw his receipts. Kamal filed a putative class action, alleging that J. Crew had willfully violated FACTA by including the first six digits of his credit card number on his receipts.

In his complaint, Kamal alleged that he had suffered two harms from the FACTA violation: the printing of the prohibited information itself and the increased risk of identity theft caused by such printing. The district court dismissed the complaint with prejudice, finding that the printing of the information on the receipt was not itself a concrete injury. In addition, the district court stated that it could not "reasonably infer that printing the first six and last four digits of [Kamal's] credit card materially increased the risk of future harm." In doing so, it examined the intervening events that would have had to occur for Kamal's identity to be stolen and found this chain of future events too speculative to constitute a concrete injury.

Third Circuit Decision

The Third Circuit affirmed the district court's dismissal (but without prejudice), finding that Kamal had failed to allege facts demonstrating a concrete injury in Kamal v. J. Crew Group (March 8, 2019).

Citing Spokeo v. Robins (2016), the Third Circuit explained that "Article III standing requires a concrete injury even in the context of a statutory violation" and to determine whether an intangible injury constituted an injury in fact, courts needed to look at the "judgment of Congress" and at history. Because Congress was "well positioned to identify intangible harms that meet minimum Article III requirements," its judgment was "instructive and important." The historical inquiry examined "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." However, "Congress cannot statutorily manufacture Article III standing in the case of a 'bare procedural violation, divorced from any concrete harm.'"

The Third Circuit examined its prior standing decisions in other statutory violation cases and noted that in each case, it found standing because the alleged violation represented the "very harm that Congress sought to prevent." In In re Horizon Healthcare Services Inc. Data Breach Litigation, the alleged unauthorized dissemination of personal information was the "very injury the FRCA was intended to prevent." InSusinno v. Work Out World the nuisance and invasion of privacy from a prerecorded commercial call in violation of the Telephone Consumer Protection Act was just harm that Congress had elevated to a "legally cognizable injury." While, in St. Pierre v. Retrieval-Masters Creditors Bureau, the unauthorized disclosure of a debtor account number and the invasion of privacy was a "core concern [of Congress in] animating the [Fair Debt Collection Practices Act]." Finally, in Long v. Southeastern Pennsylvania Transportation Authority, the taking of an adverse employment action without providing the required consumer report to the plaintiff in violation of FRCA was "the very harm that Congress sought to prevent."

Turning to Kamal's allegations of harm, the Third Circuit held that neither Congressional intent nor history supported the conclusion that a FACTA violation by itself met Article III's standing requirements. The court found that, in enacting the clarification act, "Congress's action to limiting FACTA liability to those claims implicating actual harm accords with [its] understanding of Article III." In addition, the Third Circuit found that "Kamal's injury does not have the requisite 'close relationship' with [privacy and breach of confidence] actions because he does not allege disclosure of his information to a third party."

The Third Circuit noted that its decision was consistent with decisions from the Second, Seventh and Ninth Circuits. In Katz v. The Donna Karan, the Second Circuit held plaintiffs who alleged that they received receipts with the first six digits of their credit card number along with the final four digits in violation of FACTA did not have standing because they had not alleged a concrete injury. Similarly, in Meyers v. Nicolet Restaurant of De Pere and Bassett v. ABM Parking Services, the Seventh and Ninth Circuits held that plaintiffs who alleged that they received receipts with their credit card expiration dates in violation of FACTA had no standing because they had failed to establish an injury in fact.

The Third Circuit acknowledged Muransky v. Godiva Chocolatier, the only decision where a circuit court has found standing based solely on a FACTA violation, but distinguished Muransky from the present case. In Muransky, the Eleventh Circuit held that printing the first six digits of a credit card number on a receipt "create[d] a concrete injury" because the alleged FACTA violation was similar to a common law breach of confidence action. The Third Circuit declined to adopt the reasoning of the Eleventh Circuit, concluding that an improperly truncated credit card on a receipt was not analogous to a common law breach of confidence absent a third-party disclosure.

Takeaways

Kamal further reinforces the limitations on Article III standing imposed by Spokeo in statutory violation cases and gives defendants in FACTA cases additional ammunition to challenge complaints that are premised solely on a procedural violation of the statute without allegations of actual injury. Joining with the Second, Seventh and Ninth Circuits, Kamal narrows standing to bring cases based solely upon technical violations of FACTA. The Eleventh Circuit is the only outlier to the general trend that a FACTA violation without any actual harm is insufficient to establish standing. Therefore, unless they can allege "potential real-world harm" caused by a procedural FACTA violation, plaintiffs in the Second, Third, Seventh and Ninth Circuits will find it much more difficult to survive a motion to dismiss based on lack of standing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
22 Oct 2019, Other, New York, United States

DLaw will be hosting a two-day summit on Disruptive Innovations in Legal Services providing a meaningful exploration of digital technology for the legal services professionals from specific emerging tools to new business models to creative client acquisition and retention strategies.

29 Oct 2019, Webinar, California, United States

In the digitized world of the twenty-first century, it is more important than ever for every organization to know as much as possible about the information it creates, stores, received and maintains.

14 Nov 2019, Other, California, United States

LinkedIn, Facebook, YouTube, Twitter, and other social networking sites offer lawyers myriad avenues for communicating with each other and the public about a host of issues.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions