FACTA Class Action Defense Cases-Soualian v. International Coffee & Tea: California Federal Court Denies Plaintiff’s Motion To Certify Class Action In Fair And Accurate Credit Transactions Act (FACTA) Suit

Jun 18, 2007 | By: Michael J. Hassen

Putative Class Action Alleging FACTA Violation for Inclusion of Credit Card Expiration Date on Customer Receipts did not Warrant Class Action Treatment Because Rule 23(b)(3) Superiority Requirement not Satisfied California Federal Court Holds, Particularly as Defendant’s Act in Correcting the Violation Immediately on Receipt of Plaintiff’s Complaint Established its Good Faith and “Nullified Any Deterrence Benefit”

Plaintiff filed a putative class action against International Coffee & Tea alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA) because it provided customers with credit card receipts that included the last five digits of the credit card and the card’s expiration date. Soualian v. International Coffee & Tea, LLC, Slip Opn., at 1 (C.D. Cal. June 11, 2007). Plaintiff filed a motion to certify the litigation as a class action; defense attorneys objected that Rule 23(b)(3)’ superiority test had not been met. Id. The district court agreed and refused to permit the litigation to proceed as a class action.

FACTA provides that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number of the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” 15 U.S.C. § 1681c(g)(1). Plaintiff’s putative class action sought to represent “the class of individuals who made purchases at Defendant’s stores…and who received receipts on which Defendant printed more than the last five digits of the person’s credit card or debit card number, or on which Defendant printed the expiration date of the person’s credit or debit card.” Soualian, at 1. The district court outlined the elements required for class certification under Rule 23(a), but focused its analysis on whether Rule 23(b)(3) had been satisfied, id.

The court summarized the defense argument at page 3 as follows: “Defendant opposes class certification on the grounds that a class action is not the superior method for the fair and efficient adjudication of the controversy. Because of the potential for a large statutory damage award, out of proportion with any harm suffered by the plaintiff, Defendant argues that the Court should deny class certification. Defendant also claims that superiority is not met because of the serious difficulty in managing and notifying all of the class members.”

In analyzing the defense argument, the district court relied upon a recent Central District of California district court opinion denying class certification in Spikings v. Cost Plus, Inc., Case No. CV 06-8125-JFW (C.D. Cal. May 25, 2007). Spikings relied upon Ninth Circuit authority that class certification may be denied “where the defendant’s liability would ‘constitute horrendous, possibly annihilating punishment unrelated to any damage to the purported class.’” Soualian, at 3 (citation omitted). Spikings also based its decision on the receipt of evidence “that the inclusion of the expiration date on a credit card or debit card receipt was virtually impossible to result in identity theft and any other actual harm, the lack of any actual harm suffered by members of the potential class, and…the disastrous consequences to Defendant’s business and the thousands of Defendant’s employees that would be left without a job if the class was certified in the case,” Soualian, at 3 n.5.

Soualian explained at page 3 that class certification may be denied “because of the disproportionality of the damages award in relation to the harm actually suffered by the class.” The court found that the facts in this case paralleled those in Spikings, particularly in that plaintiff “alleges no actual damages, such as identity theft” and in that plaintiff introduced no evidence that any of defendant’s customers had been injured by the technical FACTA violation at issue. Id., at 4-5. A “willful violation” could result in statutory damages of upwards of $48 million, which bears no relation to any injury caused by the violation, id., at 5. Moreover, defendant rectified the violation as soon as it learned of it, id.By immediately remedying their misconduct upon receiving Plaintiff’s Complaint, Defendants demonstrated good faith and nullified any deterrence benefit that might have been derived from a class action.Id. (italics added). Accordingly, the district court concluded that the superiority test of Rule 23(b)(3) had not been satisfied and refused to certify the lawsuit as a class action. Id., at 5-6.

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