On January 16, 2014, Troutman Sanders secured a victory for client Paris Baguette America, Inc. when District Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York dismissed with prejudice a putative class action alleging that Paris Baguette willfully violated the Fair and Accurate Credit Transaction Act by printing the expiration date of customers' credit and debit cards on their receipts.
The Court held that the named plaintiff failed to allege facts that could plausibly allege that Paris Baguette "knowingly" or "recklessly" violated FACTA. Specifically, the allegation by Plaintiff that defendant "change[d] ... the credit and debit card receipts to remove all but the last three digits of the card number" did not plausibly suggest that plaintiff acted "knowingly or recklessly" but rather "render[ed] implausible the claim that defendant was attempting to willfully evade FACTA's restrictions." Judge Rakoff's decision in Paris Baguette is currently on appeal before the Second Circuit.
The Paris Baguette decision has created a welcome precedent for defendants accused of violating FACTA, which allows for recovery of statutory damages of $100 to $1,000 per violation, plus punitive damages. For example, on January 30, 2015, Judge Paul A. Crotty of the U.S. District Court for the Southern District of New York rejected a putative class action against Donna Karan International, Inc. ("DKNY") over whether it willfully violated FACTA by printing 10 digits of customers' credit and debit card information on receipts. The lead plaintiff, New York resident Yehuda Katz, sued DKNY and two subsidiaries in February 2014, two days after he used his credit card at the company's Soho location. He had allegedly received a receipt that listed the first six digits and the final four digits of his card.
FACTA's truncation requirement says that only the final four digits can be printed and that the expiration date be eliminated in its entirety. The court dismissed the amended complaint with prejudice after ruling that Plaintiff's allegation that DKNY was aware of FACTA was insufficient to establish that the alleged violations were willful and reckless.
The DKNY Court's decision relied on the Paris Baguette ruling. In its motion to dismiss, DKNY argued that plaintiff "can reach a jury with nothing more than a partially redacted receipt and general notice within the community of retailers. That is not what FACTA provides." The court agreed, and ruled that the plaintiff's logic would render related pleading standards meaningless by eroding the difference between negligence and recklessness. The court also accepted DKNY's argument that the plaintiff lacked standing because he had "confessed" that he did not suffer any harm. "Plaintiff's claim is rendered further implausible by the complaint's failure to reconcile defendants' partial compliance – redacting credit card expiration dates and all digits unique to the cardholder – with its alleged willful noncompliance," the DKNY court stated in its opinion. "Plaintiff has not alleged any actual damages," and "based on the facts alleged in the complaint, it is not possible that plaintiff was harmed."
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