On The Case

Tossing FACTA class action, en banc 11th Circuit says courts, not Congress, decide when risk is real

(Reuters) - The en banc 11th U.S. Circuit Court of Appeals ruled Wednesday in Muransky v. Godiva that a shopper who alleged the chocolatier violated the Fair and Accurate Credit Transactions Act by including too many digits of his credit card number on his receipt did not meet constitutional requirements to sue.

The en banc court, in an opinion by Judge Britt Grant, tossed David Muransky’s class action, even though he and Godiva settled the case in 2016 for $6.2 million.

Muransky contended that when Congress passed FACTA in 2003, it intended, among other things, to reduce the risk of identity theft by barring retailers from reproducing more than five digits of customers’ credit card numbers on their receipts. Under that theory, he asserted, Godiva inflicted a concrete injury on him and other shoppers because its violation of the statute exposed consumers to what Congress deemed an increased risk. That’s enough, Muransky argued, to meet constitutional standing requirements.

The 11th Circuit, however, said the U.S. Supreme Court’s decision in 2016’s Spokeo v. Robins (136 S.Ct. 1540) establishes that Congress alone cannot confer Article III standing on plaintiffs. “What Muransky asks is for us to abandon our judicial role by merging the ordinary steps in the analysis — concluding that because the statute protects a concrete interest, any violation automatically threatens that interest and thus supports standing,” wrote Judge Grant, in a decision notable for its colloquial tone. “Although that approach would simplify our job, it is inconsistent with Spokeo and with what the Constitution demands of us.”

Muransky counsel Michael Hilicki of Keogh Law did not respond to my email about the 11th Circuit decision. The 11th Circuit ruling seems to leave open the possibility that Muransky can file a new complaint with more specific allegations about his risk of identity theft, but for now, the $6.2 million settlement – which was to have included $2.1 million in attorneys’ fees and a $10,000 service award for Muransky – is off. (Godiva, represented by Bowman & Brooke and Benesch, Friedlander, Coplan & Aronoff, told the 11th Circuit that the settlement agreement precluded the company from taking a position on Muransky’s standing.)

The 11th Circuit decision is a win for class member Eric Isaacson, who objected to the settlement, and his counsel, Mitchell Reich of Hogan Lovells. (Isaacson is himself an appellate lawyer who specializes in representing class action objectors but Reich argued his case before the 11th Circuit.) “Courts have an independent obligation to determine if a plaintiff has standing,” Reich said. When it comes to FACTA, he said, it’s not clear that Congress even intended to imply that the risk of identity theft was a concrete injury that established plaintiffs’ constitutional right to sue. But even if that was Congress’ intent, Reich said, the 11th Circuit en banc decision makes clear that “the plaintiff has some burden to show actual risk.”

The 11th Circuit’s reasoning aligns with that of the 3rd Circuit in 2019’s Kamal v. J. Crew (918 F.3d 102), which also held that a FACTA plaintiff “must plausibly aver” that a store’s printing of extra credit card digits on his receipt “presents a material risk of concrete, particularized harm.” The en banc 11th Circuit also cited 2nd, 7th and 9th Circuit decisions dismissing FACTA class action on standing grounds. Only the D.C. Circuit, the 11th Circuit said, has found otherwise in the wake of Spokeo – and that case involved a receipt reproducing the customer’s entire credit card number and expiration date.

Godiva and Muransky struck their $6.2 million settlement before the Supreme Court issued its Spokeo ruling. Judge Grant said that both sides told lower courts that their deal reflected uncertainty about the impact of the looming Supreme Court decision, since Muransky’s complaint alleged only a statutory violation of FACTA.

By the time of the fairness hearing on the proposed settlement in the fall of 2016, the Supreme Court had said in Spokeo that mere statutory violations do not confer standing. Isaacson raised an objection to the Godiva deal on standing grounds. The settlement was nevertheless approved by the trial court.

In a 2019 decision (922 F.3d 1175) affirming approval of the settlement, a three-judge 11th Circuit panel said Muransky met constitutional standing requirements by alleging the concrete injury of an increased risk of identity theft. The panel specifically highlighted the role of Congress in legislating against consumer injuries. By enacting FACTA, lawmakers “judged the risk of identity theft Dr. Muransky suffered to be sufficiently concrete to confer standing,” the panel said. “And where Congress elevates the risk of harm to a concrete interest to the status of a concrete injury, the risk need be no more than an ‘identifiable trifle’ to be concrete.”

Two of the judges on the original 11th Circuit panel – Judges Beverly Martin and Adalberto Jordan – wrote lengthy dissents from Wednesday’s en banc ruling. (The third judge on the panel was D.C. Circuit Judge Douglas Ginsburg, sitting by designation. He was not part of the 11th Circuit’s en banc reconsideration.) 11th Circuit Judge Charles Wilson also wrote a dissent from the en banc decision.

“Not all statutory violations result in a concrete injury,” Judge Martin said in her dissent. “The Supreme Court told us so in Spokeo. Today, the majority extends this principle from Spokeo to conclude that courts may ignore the judgment of Congress when assessing whether a party has met the concreteness requirement of Article III.”

The 11th Circuit en banc majority, however, concluded that the Supreme Court’s Spokeo decision means courts can look at Congress’ intent when it comes to standing – but that the inquiry does not end there. “Spokeo cautioned that ‘Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right,’” Judge Grant wrote. “So although a congressional judgment may be ‘instructive and important’ to this court’s analysis, we need to come to our own conclusion.”

Isaacson counsel Reich told me the 11th Circuit’s decision will not affect other post-Spokeo rulings in which the appeals court concluded that plaintiffs asserting statutory violations met Article III standing requirements. The en banc court mentioned, for instance, 2017’s Perry v. Cable News Network (854 F.3d 1336), in which the 11th Circuit found that a violation of the Video Privacy Protection Act could constitute a concrete injury because it was analogous to the common law tort of invasion of privacy; and 2017’s Pedro v. Equifax (868 F.3d 1275), which drew parallels between a violation of the Fair Credit Reporting Act and the tort of defamation.

“There are still lots of ways for plaintiffs to show a real injury or risk of injury,” Reich said. “This ruling does not disturb that.”