FACTA receipts, restaurant coupons and “annihilating” damages

by Walter Olson on April 25, 2008

Entrepreneurial lawyers have launched a thriving industry of class actions demanding statutory damages of $100-$1000 per violation (times the number of customers) from businesses that continue printing too much credit card information on receipts despite a federal law requiring them to stop that practice, the Fair and Accurate Credit Transaction Act (FACTA). Kings Family Restaurants, a Western Pennsylvania chain, has agreed to distribute coupons, as well as very non-couponic attorney’s fees, in one such case (WSJ law blog, Apr. 25). “Coffee Bean Tea & Leaf, a Los Angeles-based coffee-shop chain, agreed to give customers free drinks and pay customer lawyers $110,000.” On the other hand, judges have not always gone along with demands for class certification: “Costco, the largest U.S. warehouse-club chain, might have to pay as much as $17 billion without having harmed anyone, U.S. District Judge A. Howard Matz said in January, refusing to certify a class action. That’s 15 times the Issaquah, Washington-based company’s 2007 profit.” (Cynthia Cotts, “Costco, Kinko’s Battle Trial Lawyers Over Credit-Card Receipts”, Bloomberg, Apr. 5). One tactic, used in suits against U-Haul and In-N-Out Burger, is to limit the scope of the class action to a few stores or locations, on the theory that a court that might not let a class action with “annihilating” damages go forward might yet approve one inflicting a nonfatal though large shark-bite. (Matthew Hirsch, “Plaintiffs Attorneys Think Globally, Act Locally in Financial Privacy Cases”, The Recorder, Aug. 27, 2007). Among the 300+ defendants in receipt suits is 1-800-FLOWERS, whose attorney David E. Block expresses outrage:

“In 22 years, I have never had a plaintiff sit across the table from me and say, ‘I have no damages. My identity hasn’t been stolen. I’m just bringing this lawsuit because I can,'” said Block of the Miami office of Jackson Lewis. “There’s something inherently wrong with a lawsuit where the plaintiff has no injury.”

(Tresa Baldas, “Landslide of Suits Over Data on Receipts”, National Law Journal, Apr. 7). “Receipts” needn’t actually be printed out in a shop or public place to trigger the act; those that flash on a customer’s home computer screen count too. (WSJ law blog, Apr. 8). Our earlier coverage: May 10 and Oct. 31, 2007, and Apr. 4 of this year.

{ 2 comments }

1 Frank Perdicaro 04.28.08 at 2:11 pm

Around 10 years ago I responded to one of those class action credit card summons. Of the half million people sent a notice, about 50 responded. Exactly one person showed up in court to represent the class — me. 7th floor of the court building in Santa Ana, California. As far as I know, it was the first big one, the Micro Center case.

The judge was disgusted with the whole event, where there was no damage, but there was a lawsuit. So was I, and the judge let me say some really insulting things to the plaintiffs — lawyers all of them.

So if you get bound into a class, be sure to show up. The judge will probably let you express your opinion — especially if it is like his opinion.

2 David 05.05.08 at 10:24 am

There is no reason for refusing to certify these classes, other than to circumvent the will of Congress to impose a stautory penalty for “wilfull” violations. Other courts have rightly held that the due process (anihilation defense) argument should not be considered until and unless an award is entered.

The critical thing to remember here is that the defendants will pay only nominal damages for negligent violations of FACTA. True, they will have to pay the plaintiffs’ attorneys’ fees, but I guarantee they will be a damn sight less than what the defense lawyers will charge once they finish churning the case. Unfair? I don’t think so, if that’s what it takes to get merchants to follow a law that has been on the books for 3 years now, and while VISA, MC and everyone else has been hammering on them to comply with a clear legal duty.

Finally, as to this “no harm” argument, that’s simply bogus. Sure, an expiration date is not enough, in an of itself, to permit someone to make unauthorized charges — it’s simply one piece of the puzzle. But the same can be said for your PIN number. Anyone who buys the “no harm” argument, please reply and post your bank account PIN. What harm could there be in that?

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