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11th Circuit Deepens Circuit Split on Standing: Holds FACTA Violation Creates Concrete Injury Based on Inherent Risk of Real Harm

Last month, the U.S. Court of Appeals for the 11th Circuit issued an opinion in Muransky v. Godiva Chocolatier, Inc., which, sua sponte, vacated and reissued its earlier ruling in the same case: that consumers have standing to pursue claims for violation of the Fair and Accurate Credit Transactions Act’s (FACTA) “truncation” rule. That rule prohibits merchants from printing “more than the last 5 digits of the credit card number or the expiration date” on a receipt. While the court did not expressly state its reasons for vacating its original opinion—issued in October 2018, in a split from the Second, Seventh, and Ninth Circuits—it noted that “the major change” appears in its Article III standing analysis—which is, of course, the basis of its holding. In particular, the court addressed the Third Circuit’s recent decision in Kamal v. J. Crew Group, Inc., which reached the opposite conclusion on the same issue and criticized the 11th Circuit’s original decision. In its new decision, the 11th Circuit attempts to address these issues through an amended standing analysis, which largely conflates the various standing principles and leaves an unclear picture of the 11th Circuit’s view of standing in light of the U.S. Supreme Court’s decision in Spokeo Inc. v. Robins.

In the underlying action, plaintiff David Muransky filed a lawsuit on behalf of himself and a putative class of consumers who, like him, made purchases at a Godiva store and received receipts showing the first six digits of their credit card numbers. The appeal arose from a class member’s objection to the parties’ class settlement, which was lodged on the basis that, inter alia, Muransky “ha[d] not alleged a concrete injury in fact that confers Article III standing under the Supreme Court's decision in Spokeo.” The 11th Circuit affirmed the trial court’s approval of the settlement, holding that a truncation violation gives rise to a concrete and tangible injury under Article III. The court based its holding on Spokeo’s “close relationship” analysis, finding that both “history and the judgment of Congress” indicate that by enacting FACTA with a private cause of action, Congress intended to recognize truncation violations—which it found to be analogous to the common law tort of breach of confidence—as “concrete injuries.” Alternatively, the court held that consumers need only allege a de minimis harm (what one court has termed “an identifiable trifle”) to establish standing based on mere procedural violations, which Muransky satisfied by alleging he incurred an “additional burden” when he was forced to use his “time (and wallet space) to safely dispose of or keep the untruncated receipt.”

The Third Circuit recently reached the opposite conclusion when it held that a truncation violation with no resulting tangible injury does not confer Article III standing, absent specific allegations showing that the violation created a “risk of real harm.” While the Third Circuit did not identify any bright line test for finding a sufficient “risk of real harm,” it provided examples of allegations that would likely suffice—including actual “third-party access” or inclusion of “enough information to likely enable identity theft.” The court made clear, however, that the plaintiff’s reliance on a “highly speculative chain of future events” was not sufficient. It also noted that the 11th Circuit’s earlier ruling in Muransky had not reached the “risk of harm” analysis, and rejected the 11th Circuit’s “close relationship” findings, reasoning that FACTA did not have a sufficiently close relationship because it lacked any third-party disclosure requirement. It was similarly critical of the 11th Circuit’s deference to the “judgment of Congress” when it rejected the plaintiff’s argument that Congress—in enacting FACTA—had determined “that all conduct prohibited by [the statute] creates a sufficient risk of identity theft.” Rather, the Third Circuit found that Congress had intended that FACTA protect consumers “from any actual harm to their credit or identity … while simultaneously limiting abusive lawsuits that do not protect consumers,” citing the Credit and Debit Card Receipt Clarification Act (emphasis added).

The 11th Circuit’s amended opinion, issued roughly six weeks after the Third Circuit’s ruling, confirms its original conclusion on standing, but—in an apparent response to the Third Circuit’s criticism—shifts its analysis to the “heightened risk of identity theft” created by the alleged truncation violation. The court essentially adopts the argument rejected by the Third Circuit, holding that “the heightened risk of identity theft” is an “actual” injury that occurred “the moment Godiva printed too many digits of [Muransky’s] credit card number.” Likewise, the court rejects the Third Circuit’s reliance on the Clarification Act, which the 11th Circuit interprets as applying only to FACTA’s expiration date requirement. Rather, the 11th Circuit found that by enacting FACTA, Congress intended to create a consumer right to expect that his or her credit card information would remain private. The court likewise points to the text of the statute as providing the level of risk required under Article III, noting that Congress “[drew] the line at the risk that comes of printing the untruncated card number.”

In its attempts to refute the Third Circuit’s reasoning, the 11th Circuit conflates the standards applied to determine whether (1) a procedural right has been elevated to the status of a concrete interest, and (2) a violation of a mere procedural right, enacted to protect a concrete interest, creates a risk of real harm to the underlying interest. This is evident in the 11th Circuit’s continued reliance on the “close relationship” analysis, which it incorporates into the risk-of-harm analysis, noting that the risk that resulted from “printing more than the statute allows … has a sufficiently close relationship to breach of confidence to satisfy Spokeo.”

The court also erroneously applies tangible-injury principles to the analysis, and again adopts the position that consumers can easily establish standing by alleging an actual, but de minimis injury, that is nothing more “than an identifiable trifle.” This, however, ignores Spokeo’s instruction that the alleged risk of harm must be both material and related to the interest the relevant statute was enacted to protect. Indeed, the case cited for this proposition (which includes the “identifiable trifle” language) involved an alleged violation of the Equal Protection Clause of the 14th Amendment, and not a procedural violation of a consumer protection statute.

In sum, the 11th Circuit’s reissued decision deepens the circuit split that has developed since Spokeo. More importantly, the decision contributes to the growing confusion—both among and within the Federal Courts of Appeals—regarding the appropriate standing analysis under Article III of the Constitution. Further Supreme Court clarification will be necessary to provide guidance to both courts and litigants.

Copyright © by Ballard Spahr LLP

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About this Author

Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Fanaselle, Attorney, Real Estate, debt Collections
Attorney

Daniel C. Fanaselle focuses his practice on consumer finance litigation, with particular experience in mortgage-related litigation. Mr. Fanaselle regularly represents lenders and servicers in contested foreclosure, collection, and credit card-related litigation, as well as affirmative lawsuits brought by consumers in state and federal court.

Mr. Fanaselle has experience representing clients in cases involving claims and defenses under the Fair Debt Collections Practices Act, Real Estate Settlement Procedures Act, Truth in Lending Act, Telephone Consumer Protection Act, Pennsylvania Unfair Trade Practices and Consumer Protection Law, Pennsylvania Fair Credit Extension and Uniformity Act, New Jersey Consumer Fraud Act, Maryland Consumer Debt Collection Act, Maryland Consumer Protection Act, and various related state and federal laws.

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Temple University Beasley School of Law (J.D. 2011)

Dickinson College (B.A. 2008, cum laude)

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