Lack of Plaintiff Article III Standing Proves Fatal to Eleventh Circuit in FACTA Class Action Settlement

In a 7-to-3 en banc decision, the Eleventh Circuit vacated a high-stakes $6.3 million class settlement on standing grounds. In James Price v. Godiva Chocolatier, Inc., et al, the court held that a named plaintiff lacked standing to bring a claim under the Fair and Accurate Credit Transactions Act (FACTA) on behalf of a proposed settlement class.

The plaintiff, Dr. David Muransky, filed a class action complaint against Godiva claiming a violation of FACTA, which prohibits “merchants from printing more than the last five digits of the card number (or the card’s expiration date) on receipts offered to customers.” After visiting a Godiva retail store in Florida, the plaintiff was handed a receipt that contained the first six and the last four digits of his credit card number–a technical violation of FACTA. The plaintiff claimed that the violation was “statutory in nature” and did “not intend[] to request any recovery for personal injury.” The plaintiff further framed the class’s harm from violations as “irreparable harm as a result of the defendant’s unlawful and wrongful conduct,” and that “Plaintiff and members of the class continue to be exposed to an elevated risk of identity theft.” The putative class was so large that Godiva could have faced statutory damages, punitive damages, and costs of more than $342 million. Godiva’s answer asserted that the plaintiff failed to allege any injury-in-fact and therefore lacked standing to bring claims pursuant to FACTA. Due to the then-pending decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), which would have had implications on the plaintiff’s Article III standing, the parties moved on to settlement discussions.

Godiva ultimately agreed to pay $6.3 million – a fraction of the original $342 million potential exposure. The District Court later conditionally certified the class and preliminarily approved the settlement. At the fairness hearing, a few class objectors argued that the District Court had an obligation to examine whether the plaintiff’s claim satisfied the requirements of Article III standing as described in Spokeo. Although the Supreme Court’s ruling on Spokeo was issued after the parties reached an agreement but before the District Court finally approved the settlement, the District Court did not address it in approving the settlement. The objectors then appealed on the ground that “the court lacked Article III jurisdiction to approve the settlement because [Plaintiff] had not suffered an injury in fact.”

The Eleventh Circuit initially affirmed the settlement’s approval, overruling Article III objections on the ground that Congress had permitted claims for bare statutory violations in FACTA. The Circuit then voted to reconsider that decision en banc.

In the split decision, the majority held that “[f]ederal courts retain our constitutional duty to evaluate whether a plaintiff has pleaded a concrete injury – even where Congress has said that a party may sue over a statutory violation.” The Circuit reasoned that there was not a strong enough nexus between the technical violation of FACTA – printing too many numbers on the receipt – and any direct injury or risk of harm. In examining the statute, the court noted that “[n]othing in FACTA suggests some kind of intrinsic worth in a compliant receipt, nor can we see any. So it makes little sense to suggest that receipt of a noncompliant receipt itself is a concrete injury.” The plaintiff attempted to frame his injury as a substantive right to “receive a properly truncated receipt,” which, he argued, created an automatic injury in fact, even in the absence of harm. The court declined to adopt this argument and referenced the Eighth Circuit’s recognition of Spokeo’s holding: “Article III standing requires a concrete injury even in the context of a statutory violation.” As the majority summarized, “[i]f his Godiva receipt would not offer any advantage to identity thieves, we could hardly say that he was injured because of the efforts he took to keep it out of their hands.” The majority found that “no information was disclosed, and no confidential relationship existed.” As a result, The plaintiff failed to allege any direct harm from the FACTA violation. Thus, the Circuit vacated the District Court’s order approving the $6.3 million settlement for lack of Article III standing. The case was remanded and directed to be dismissed without prejudice.

The dissenting opinions carried a common theme that the case had been prematurely dismissed because the plaintiff had plausibly alleged concrete harm given the inherent risk of identity theft associated with card numbers on a receipt.

This case serves as a cautionary reminder for parties seeking approval of class settlement that courts must conduct a “rigorous analysis” even where parties agree on settlement terms. While certain substantive legal and factual issues can be stipulated or left unaddressed in a proposed settlement, issues such as standing and jurisdiction cannot be ignored by courts.