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FACTA

Who benefits from the federal law that allows the filing of class actions against retailers and others who print too much information on credit card receipts? In a St. Louis federal case called Albright v. Bi-State Development Agency, as described by Ted Frank here, it’s $742.50 at most to class members, $2,500 each to two class representatives, and $190,000 in attorneys’ fees and expenses, down from a request by the lawyers of $400,000. Is that pretty much as expected these days? Earlier on FACTA here, here, etc.

Maryland Reporter on what an Eastern Shore banker told a forum arranged by the state’s tax authorities:

The CEO of Easton Bank and Trust, Mike Menzies, said the new standardized approach in how the banks count assets along with state regulation policies have a distinct impact on the loans they can lend to small businesses….

Menzies said that regulations associated with the federal Credit Card Card Act, the Fair and Accurate Credit Transactions Act and Dodd-Frank Act have have placed large burdens on banks, forcing them to devote more human resources toward regulatory compliance than is necessary.

“I would say that seven years ago, I would spend 20 to 25% of my time as CEO of a small company dealing with regulatory issues,” said Menzies. “I spend no less than 50 or 60 percent of my time today dealing with regulatory issues. It’s unbelievable.”

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March 19 roundup

by Walter Olson on March 19, 2010

  • Plaintiff in case alleging defective clown shoes “does not want any additional publicity” [N.Y. Post via Lowering the Bar]
  • Santa Fe’s anti-wireless activists [The New Mexican, earlier]
  • Law vs. vaccines, cont’d: “Judge Declines to Upset $22.5 Million Jury Award in Polio Case” [NYLJ]
  • Arizona high court launches probe of Maricopa County prosecutor Andrew Thomas [Coyote, earlier]
  • “Innumerable histronics” but no conspiracy: litigation over 1996 Filegate scandal fizzles out [Althouse]
  • More boosts in regulators’ budgets [Roger Clegg, NRO, OFCCP employment regulation at federal contractors; Koehler, FCPA Professor] Obama’s putting in regulatory hardliners at many agencies; a clue to his politics? [Bainbridge, Judis/TNR]
  • If only they’d confine themselves to suing the actual bad actors in FACTA (credit-card-slip) and junk-fax litigation [Bart T. Murphy, Chicago Business Ledger; my '06 take]
  • So may bullies ever fare: sanctions set against company that sued BoingBoing for libel ["MagicJack" case and more]

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I’m quoted in Sandra Pedicini’s report on the settlement (with $9 appetizer vouchers) of a lawsuit charging the Olive Garden restaurant chain with “printing the last six digits of customers’ credit-card numbers on receipts. The limit under the Fair and Accurate Credit Transactions Act is five.” Under FACTA, lawyers need not show that class members suffered actual damages from the violation; instead, they can claim statutorily prescribed damages, multiplied by the (usually large) number of customers involved. In most such cases, there are no reports of any identity theft because of the breaches: “It’s like reckless driving in which no one had an accident and except for the lawyers, no one even noticed the car speeding,” I’m quoted as saying. ["Olive Garden diners may be eligible for $9 voucher", May 19]

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Last year, Overlawyered was the first to report that Judge William Acker in the Northern District of Alabama had held the Fair and Accurate Credit Transactions Act (FACTA), which provides unlimited damages of $100-$1000 per violation for trivial technical violations of printing too many numbers on a credit card receipt, unconstitutional.  Other judges have refused to follow his lead, and last week the Eleventh Circuit reversed the decision, rejecting the facial challenge to the statute, but leaving open the possibility that the statute would be unconstitutional as applied in a particular case. (Harris v. Mexican Specialty Foods, No. 08-13510; h/t R.M.)

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October 15 roundup

by Walter Olson on October 15, 2008

  • Litigants’ “not about the money” assertions: Mark Obbie has further thoughts on reporters’ uncritical deployment of this cliche, and kind words for our archive of posts on the subject [LawBeat]
  • Lawyer on the other side of that much-circulated “I’m sorry” deposition-dispute letter has his say [Markland and Hanley via Turkewitz and Above the Law]
  • Local authority in England tells gardener to remove barbed wire from wall surrounding his allotment, thieves might get hurt on it and sue [Never Yet Melted, Steyn/NRO Corner]
  • Same-sex marriage in Connecticut through judicial fiat? Jonathan Rauch says no thanks [IGF]
  • Lawyers are back suing despite reform of FACTA, the credit-card-receipt “gotcha” law, but insurance might just dry up [Randy Maniloff at Point of Law]
  • “Racing to the trough” — auto lenders latest to ask bailout though original TARP rationale of liquidity fix seems remote [Naked Capitalism]
  • “To be a green-certified property (pretty important in crunchy Portland) there must be an absolute prohibition on smoking, including outdoor spaces.” [Katherine Mangu-Ward, Reason "Hit and Run"]
  • (Failed) claim in trademark case: “the term ‘electric’ is not commonly used by the general public to describe a source of power for watches” [TTAB via Ron Coleman]

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This “Ted Franklin” fellow at the American Enterprise Institute who spoke to the Birmingham News about the recent Judge Acker decision and FACTA amendments sounds like an interesting fellow who has thought about some of the same issues I have, even if he holds opinions diametrically opposed to mine about the need to cap damages in FACTA class actions.

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We’ve previously written about the problems of the Fair and Accurate Credit Transactions Act (FACTA), which imposes astronomical statutory damages on vendors whose credit card receipts fail to comply with ambiguous technical requirements. Today’s Daily Business Review recounts the tale of a small-business owner whose restaurant was hit with one of these suits, and how Congress has unanimously passed legislation, over some trial-lawyer objections, to shut down previous suits, though the bill far from solves the litigation problem from popping up again, and trial lawyers vow to continue pressing the suits. “U.S. Sen. Charles Schumer, D-New York, who sponsored the Senate bill, said, ‘Congress never intended for the law to be used to drive companies out of business with expensive legal cases that don’t involve any harm to consumers.'”

Meanwhile, Judge William M. Acker, Jr., of the Northern District of Alabama, had a series of summary judgment motions in four FACTA cases before him. He rejected the idea that class certification was inherently improper when the resulting statutory damages would bankrupt the defendant (an issue I discussed in my Liability Outlook on the subject), but held that the $100-$1000 statutory damages, without a showing of harm, were necessarily punitive in nature, and thus constitutionally impermissible under State Farm v. Campbell: [click to continue…]

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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.

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The National Law Journal gets around to discussing the problem of FACTA lawsuits in the April 7 issue; Overlawyered readers are well ahead of the curve. See also my Liability Outlook on the subject.

My latest Liability Outlook looks at the abusive litigation created by a statutory drafting oversight: a bill designed to protect against identity theft has instead become a mechanism for the entrepreneurial plaintiffs’ bar to attempt to bankrupt innocent businesses that haven’t harmed anyone.

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September 2007 Class Action Watch

by Ted Frank on September 25, 2007

In the latest issue of the Federalist Society’s Class Action Watch, Mark Behrens and Christopher Appel look at recent rulings from the New Jersey and Missouri Supreme Courts that reject lead paint public nuisance claims. James Beck looks at the American Law Institute’s “Principles” projects. Brian D. Boyle and Julia A. Berman look at fact-based scrutiny in securities and antitrust actions. Jessica D. Miller and Nina Ramos look at fluid recovery. Kenneth J. Reilly and Frank Cruz-Alvarez look at an Eleventh Circuit case that may have set a new standard for federal diversity jurisdiction. Last, but not least, there is a front-page article from me analyzing an omission in the Fair Credit Transactions Act (FACTA) that might provide a substantial windfall for the plaintiffs’ bar.

June 8 roundup

by Walter Olson on June 8, 2007

  • Litigation as foreign policy? Bill authorizing U.S. government to sue OPEC passes House, and is already contributing to friction with Russia [AP; Reuters; Steffy, Houston Chronicle; earlier here, here, and here]

  • Albany prosecutors charge boxing champion’s family with staging 23 car crashes, but a jury acquits [Obscure Store; Times-Union; North Country Gazette]

  • New at Point of Law: Bill Lerach may retire; Abe Lincoln’s legal practice; Philip Howard on getting weak cases thrown out; “Year of the Trial Lawyer” in Colorado; and much more;

  • Multiple partygoers bouncing on a trampoline not an “open and obvious” risk, says Ohio appeals court approving suit [Wilmington News-Journal]

  • Skadden and its allies were said to be representing Chinatown restaurant workers pro bono — then came the successful $1 million fee request, bigger than the damages themselves [NYLJ]

  • Who will cure the epidemic of public health meddling? [Sullum, Reason]

  • Turn those credit slips into gold, cont’d: lawsuits burgeon over retail receipts that print out too much data [NJLJ; earlier]

  • Lawprof Howard Wasserman has further discussion of the Josh Hancock case (Cardinals baseball player crashes while speeding, drunk and using cellphone) [Sports Law Blog; earlier]

  • “Women prisoners in a Swedish jail are demanding the ‘human right’ to wear bikinis so they can get a decent tan.” [Telegraph, U.K.]

  • Disbarred Miami lawyer Louis Robles, who prosecutors say stole at least $13 million from clients, detained as flight risk after mysterious “Ms. Wiki” informs [DBR; earlier at PoL]

  • Indiana courts reject motorist’s claim that Cingular should pay for crash because its customer was talking on cellphone while driving [three years ago on Overlawyered]

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The Chicago law firm of Edelman, Combs, Latturner & Goodwin, LLC has some wonderful news for you:

We are looking for electronically generated credit / debit card receipts which show either (a) the card expiration date or (b) any digits of the credit/ debit card number other than the last five.

In order to protect consumers against identity theft, an amendment to the Fair Credit Reporting Act with a final effective date of December 4, 2006 requires merchants who accept credit/ debit cards and issue electronic receipts to program their machines to not show either the expiration date or more than the last 5 digits of the credit/ debit card number. The expiration date is important because a thief can use it together with the last four or five digits of the number to reconstruct the entire card number.

It is a violation to show either the expiration date or more than the last 5 digits of the card number. (We have seen some receipts where 4 or 5 other digits are shown, and that is a violation.) It is not necessary that any identity theft have actually occurred. Damages for a willful violation are $100 to $1,000 per receipt. The class representative may be able to obtain some additional compensation.

We have a number of pending cases alleging this violation and are interested in other merchants who are violating the law.

The burgeoning volume of entrepreneurial litigation over insufficiently blinded credit slips is the subject of a recent Wall Street Journal article: see Robin Sidel, “Retailers Whose Slips Show Too Much Attract Lawsuits”, Apr. 28, reprinted Cattle Network, Apr. 28. For more about name partner Daniel Edelman, see Nov. 15, 1999 (infamous BancBoston settlement), Feb. 7, 2000, and Dec. 11, 2006. The Edelman firm’s website has a long listing of notable case involvements which boasts of its role in mortgage escrow class actions, but does not mention BancBoston.

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