FACTA Litigation Update: Fair Credit Reporting Act Class Actions Seek Staggering Damages Awards

Since December 2006, plaintiffs' class action firms in California and elsewhere have filed over 200 nationwide class actions in federal court against a broad spectrum of retailers and restaurants alleging violations of the Fair and Accurate Credit Transactions Act ("FACTA"). In addition to California federal courts, FACTA cases have been filed recently in federal courts in Pennsylvania, Illinois, New Jersey, Nevada, Maryland and Kansas. FACTA added sections to the federal Fair Credit Reporting Act ("FCRA," at 15 U.S.C. ß 1681 et seq.) as of December 4, 2003. The lawsuits specifically allege "willful noncompliance" (15 U.S.C. ß 1681n) for claimed violations of 15 U.S.C. ß 1681c(g), the so-called "truncation" provision of FACTA. The timing of these suits coincides with the second and final phased-in effective date of FACTA's truncation provision; i.e., a December 4, 2006 effective date for receipts electronically printed by cash registers and similar point-of-sale machines placed into service before January 1, 2005. Most of these suitsóapproximately 130óhave been filed in the United States District Courts for the Central District of California (Los Angeles) and the Northern District of California (San Francisco). Pillsbury Winthrop Shaw Pittman LLP currently represents several defendants in FACTA cases filed in California and Pennsylvania.

Section 1681c(g) of FACTA prohibits businesses that accept credit or debit cards from including "more than the last 5 digits of the card number or the expiration date" on electronically printed receipts provided to the customer at the point of sale or transaction. According to the complaints, each electronically printed receipt containing more than the last five digits of a credit or debit card number or a card's expiration date violates ß 1681c(g). Plaintiffs repeat boilerplate conclusions that the conduct was knowing and willful, and seek statutory damages of $100 (minimum) to $1,000 (maximum) for each violation alleged, plus punitive damages and attorneys' fees. (Plaintiffs do not allege negligence (15 U.S.C. ß 1681o), nor do they seek actual damages.)

Thus, a noncomplying retailer who generated, for example, one million electronically printed point-of-sale receipts during the most recent holiday season could, at least under plaintiffs' theory, be subject to an award of what courts have described as "annihilating" statutory damages ranging from $100 million to $1 billion, plus punitive damages and...