Since December 2006, a handful of plaintiffs’ class action firms in California have filed over 50 nationwide class actions in federal court against a broad spectrum of retailers alleging violations of the Fair and Accurate Credit Transactions Act ("FACTA"). FACTA added sections to the federal Fair Credit Reporting Act ("FCRA," at 15 U.S.C. § 1681 et seq.) as of December 4, 2003. The lawsuits specifically allege "willful noncompliance" (15 U.S.C. § 1681n) for claimed violations of 15 U.S.C. § 1681c(g), the so-called "truncation" provision of FACTA. The timing of these suits coincides with the second and final phased-in effective date of FACTA’s truncation provision; i.e., a December 4, 2006 effective date for receipts electronically printed by cash registers and similar point-of-sale machines placed into service before January 1, 2005. Most of these suits have been filed in the United States District Court for the Central District of California (Los Angeles). Pillsbury Winthrop Shaw Pittman LLP currently represents several of the recently-sued FACTA defendants.
Section 1681c(g) of FACTA prohibits businesses that accept credit or debit cards from including "more than the last 5 digits of the card number or the expiration date" on electronically printed receipts provided to the customer at the point of sale or transaction. According to the complaints, each electronically printed receipt containing more than the last five digits of a credit or debit card number or a card's expiration date violates § 1681c(g). Plaintiffs repeat boilerplate conclusions that the conduct was knowing and willful, and seek statutory damages of $100 (minimum) to $1,000 (maximum) for each violation alleged, plus punitive damages and attorneys’ fees. (Plaintiffs do not allege negligence (15 U.S.C. § 1681o), nor do they seek actual damages.)
Thus, a noncomplying retailer who generated, for example, one million electronically printed point-of-sale receipts during the most recent holiday season could, at least under plaintiffs’ theory, be subject to an award of what courts have described as "annihilating" statutory damages ranging from $100 million to $1 billion, plus punitive damages and attorney’s fees. Notably, FCRA does not cap the aggregate of statutory damages that can be awarded in a consumer class action. By contrast, similarly technical federal legislation such as the Truth-in-Lending Act (15 U.S.C. § 1601 et seq.) caps class action statutory damages awards at $500,000.
One of the key legal issues in these FACTA actions is whether a defendant’s conduct constitutes willful noncompliance. Conduct that only arises to the level of negligence does not entitle a FCRA plaintiff to statutory or punitive damages. On January 16, 2007, the United States Supreme Court heard oral argument in Safeco v. Burr/GEICO v. Edo (consolidated) (on appeal from the Ninth Circuit) on the meaning of "willful noncompliance" under FCRA. The Ninth Circuit stands alone in its interpretation that "willful noncompliance" under 15 U.S.C. § 1681n can be established by a showing of "reckless disregard" for FCRA. Other circuits hold that "willfulness" requires a showing that the defendant had actual knowledge of and intentionally violated FCRA. The Supreme Court is expected to issue its opinion in the Safeco/GEICO matter before the conclusion of its current term (around June 30, 2007). In the meantime, federal district courts located within the Ninth Circuit are likely to continue to be the venue of choice for FACTA plaintiffs.
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