Allegations in Class Action Complaint that Defendant had been “Repeatedly Informed” of FACTA’s Requirements but Failed to Timely Comply Sufficient to Establish “Willful” Violation of FACTA so as Defeat Rule 12(b)(6) Motion to Dismiss Pennsylvania Federal Court Holds
Plaintiff filed a class action against Lifetime Brands for violating the federal Fair and Accurate Credit Transactions Act (FACTA). Ehrheart v. Lifetime Brands, Inc., 498 F.Supp. 753, 754 (E.D. Pa. 2007). The class action complaint alleged that defendant “willfully” failed to redact credit card information from electronically printed customer receipts, id. Defense attorneys moved to dismiss the class action for failure to state a claim, arguing that plaintiff had not pleaded injury in fact and that defendant had not acted willfully, id. The district court disagreed with the defense and denied the motion, holding that the class action complaint adequately pleaded claims under FACTA.
Recognizing that it was entitled to consider exhibits to the class action complaint in ruling upon the defense Rule 12(b)(6) motion, and that it need not accept as true “bald allegations” or “legal conclusions,” Ehrheart, at 755, the district court first held that a claim under FACTA does not require proof of identity theft. The class action alleged that defendant gave plaintiff credit or debit card receipts that violated FACTA because they contained more than the last five digits of card and/.or the expiration date of her credit card. Id. That is all that is required: “FACTA does not require that a plaintiff have suffered actual monetary damages in order to sue for violation of the Act” but, rather, provides for statutory damages irrespective of whether any actual injury is suffered. Id., at 755-56. Accordingly, the court rejected defense arguments challenging the class action complaint for failure to allege actual injury.
The federal court also rejected defense arguments concerning whether a “willful” violation of FACTA had been alleged. In light of Safeco Ins. Co. of America v. Burr, __ U.S. __, 127 S.Ct. 2201 (2007), a “willful” violation under the Fair Credit Reporting Act (FCRA), of which FACTA is a part, requires either intentional misconduct or reckless disregard. Ehrheart, at 756. The class action complaint “alleges that Defendant knew of, or should have know of FACTA’s requirements concerning the truncating of credit card numbers on electronically printed credit and debit card receipts and the prohibition on printing expiration dates because…VISA, MasterCard…and other entities have all informed Defendant of the requirements of FACTA and Defendant’s need to comply with FACTA.” Id. The district court explained at page 756 that because the class action alleges that defendant was “repeatedly informed about FACTA’s requirements” but failed to comply, the complaint “sufficiently alleges” that the violation was “either knowing or reckless” within the meaning of FACTA. Id. The court therefore denied the defense motion to dismiss the class action complaint.
NOTE: The district court also denied a defense motion for reconsideration that argued plaintiff lacked standing and that its earlier ruling to the contrary was a clear error of law. Ehrheart, at 756-57. Defense attorneys argued that Article III standing did not exist because plaintiff did not suffer any actual injury; but court disagreed because FACTA creates the requisite actual or threatened injury by prohibiting printing of the described credit/debit card information and providing for statutory damages in the event of such a violation. Id., at 757-58.