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Godiva FACTA Case Alters 11th Circ. View On Standing

Law360

Publication
November 12, 2020

In April of 2019, a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit issued a decision in Muransky v. Godiva Chocolatier Inc. that was widely viewed as swinging open the doors of courts in the circuit to plaintiffs seeking damages for bare procedural violations of consumer protection statutes.[1]


Last month, on Oct. 28, the full Eleventh Circuit sitting en banc reversed the panel's prior decision.

The court's decision in Godiva dramatically altered the circuit's plaintiff-friendly view of standing.[2] In fact, Godiva is the latest in a string of appellate decisions to interpret the standing requirements set forth in the U.S. Supreme Court's 2016 decision in Spokeo Inc. v. Robins and brings the Eleventh Circuit in line with many of its sister circuits.[3]

The Supreme Court held in Spokeo that pleading a bare statutory violation is not enough to establish standing under Article III of the U.S. Constitution. Justice Samuel Alito, writing for the court, found that in order to establish standing a plaintiff must suffer a concrete injury resulting from the alleged statutory violation.

The court emphasized that, while Congress has the authority to create a right to sue for a statutory violation, Congress "cannot erase Article III's standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing."[4]

The court confirmed that concrete harms may be tangible or intangible. And Justice Alito outlined broad considerations for determining when an intangible injury is concrete, observing that "both history and the judgment of Congress play important roles," and that "the risk of real harm" can satisfy the requirement of concreteness.[5]

He explained 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."[6]

While not setting clear parameters for what amounted to a concrete injury, the court provided examples of cases in which intangible injuries are concrete enough for standing. The examples included infringement on free speech or free exercise of religion and informational injury due to failure to follow statutory disclosure requirements.

However, the court noted that certain bare statutory violations do not actually cause anyone real, or concrete, harm — e.g., a consumer report misidentifying a person's ZIP code.

Upon remand of Spokeo, the U.S. Court of Appeals for the Ninth Circuit once again held that the plaintiff had standing. This time, the Ninth Circuit determined that inaccuracies concerning "age, marital status, educational background and employment history" presented a material risk of harm to the plaintiff because this is "the type [of information] that may be important to employers or others making use of a consumer report."[7]

Spokeo petitioned the Supreme Court for certiorari, arguing that "the limited guidance afforded by this Court's opinion in Spokeo has resulted in disagreement and confusion among the lower courts over Congress' role in the Article III standing inquiry and whether a claimed intangible harm resulting from a statutory violation is sufficiently concrete." The Supreme Court, however, declined to revisit Spokeo.

Nevertheless, the defendant's prediction about the questions left open by Spokeo proved to be correct. Disagreement and confusion ensued over the meaning of "concrete harm" — leading to a flood of litigation and the spilling of ink of federal district and appellate courts seeking to define just what constitutes a harm that is sufficiently concrete to rise above the level of a bare statutory violation.

Godiva is the latest circuit court case to wrestle with the concrete injury riddle. In Godiva, the class representative alleged a statutory violation of the Fair and Accurate Credit Transactions Act's so-called truncation rule. FACTA prohibits merchants from printing "more than the last [five] digits of the credit card number" on a receipt and provides for up to $1,000 in damages for each statutory violation.

The statutory damages provision makes FACTA violations particularly appealing for class action treatment because it does not require showing the amount of actual damages to each class member. This was evident in Godiva. David Muransky's complaint was clear — he alleged a bare violation of FACTA and expressly disclaimed any request for personal injuries.[8]

While Spokeo was pending before the Supreme Court, the class and Godiva reached a settlement.[9] The parties resolved the case because both sides recognized the enormous risk posed by an adverse ruling from the Supreme Court.

The Supreme Court's ruling on Spokeo was issued after the parties reached an agreement but before the district court finally approved the settlement.[10] Several objectors asked the district court to reject the settlement.[11] It was during the objection process where — for the first time — one of the objectors raised the issue of whether Muransky had standing under Spokeo.[12]

The district court judge and a three-judge panel of the Eleventh Circuit held that the printing of 10 numbers on a credit card receipt constituted a concrete harm. In initially affirming the district court decision, the Eleventh Circuit adopted a categorical rule: "[I]f Congress adopts procedures designed to minimize the risk of harm to a concrete interest, then a violation of that procedure that causes even a marginal increase in the risk of harm to the interest is sufficient to constitute a concrete injury."[13]

The new Godiva decision overrules that unequivocal pronouncement. Rather than blindly deferring to Congress, the Eleventh Circuit's en banc decision confirms 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."[14]

Indeed, the Eleventh Circuit held, Muransky's claim that "he was provided with an electronically printed receipt" that "displayed the last four digits of his credit card as well as the first six digits of his account number" — a technical violation of FACTA — does not, by itself, constitute concrete harm. Specifically, the court determined that it "makes little sense to suggest that receipt of a noncompliant receipt itself is a concrete injury" and Muransky did not allege any other harm, so he did not have Article III standing.[15]

The Godiva decision places the Eleventh Circuit in the company of the U.S. Courts of Appeals for the Second,[16] Third[17] and Eighth[18] Circuits, all of which have found that an improperly truncated receipt cannot, without more, confer Article III standing on a plaintiff, despite the statutory violation.

In its en banc decision, the court notes that the only circuit court to conclude that a bare violation of FACTA's receipt requirements could support standing involved "significantly different facts." In Jeffries v. Volume Services America Inc.,[19] the U.S. Court of Appeals for the D.C. Circuit concluded that a plaintiff alleged concrete harm where a merchant printed the entire credit card number, as well as the expiration date, on a customer's receipt, creating "the nightmare scenario FACTA was enacted to prevent." By contrast, the Eleventh Circuit states, "[t]hat factual scenario is different than the violation Muransky complains about, and we do not consider it here."[20]

Three judges dissent from the majority opinion, showcasing the uncertainty that may still pervade the judiciary about Congress' precise authority in determining Article III standing in the wake of Spokeo, and, perhaps, providing a preview of the debate among the Supreme Court justices, should the court choose to address the concrete injury issue in a future case.

U.S. Circuit Judge Charles Wilson's dissent highlights the fact that the plaintiffs had an elevated risk of identity theft the moment the receipt was printed. Judge Wilson thus concludes that the plaintiffs demonstrated that the violation harmed a concrete interest that FACTA protects which is "enough to satisfy standing at this phase of the case."[21]

In doing so, Judge Wilson emphasizes that Congress' intent to protect consumers from an increased risk of identity theft before it occurs, regardless of whether that harm ever comes to pass, and that intent should serve as guidance enough to allow for standing.[22]

U.S. Circuit Judge Beverly Martin's dissent focuses on her belief that Congress is entitled to deference in determining what falls within the bounds of a concrete injury. Specifically, Judge Martin opines that "[a] violation of the truncation requirement is not a concrete harm merely because Congress gave litigants the right to sue. It is a concrete harm, however, because congressional factfinding in the FACTA context lends significant support to the idea that a failure to adhere to the digit truncation requirement results in a material risk of harm."[23]

Finally, U.S. Circuit Judge Adalberto Jordan argues in his dissent that the proper procedural course of action would be to remand the case to provide Muransky with an opportunity to replead or proffer additional facts after Spokeo came down. Substantively, Judge Jordan agrees with Judges Wilson and Martin that Muransky suffered a violation of a "private, congressionally created right," which is sufficient to establish standing.

Judge Jordan further finds that, construing all reasonable inferences in plaintiff's favor, "it is fair to conclude that a receipt displaying the ten digits of a credit card number made it more likely that identity thieves (concentrated in his area) could obtain that information and use it to steal his identity."[24]

The dissents carry a common theme: Each questions the majority's decision to abrogate Congress' judgment in enacting FACTA with the court's own assessment of the "real" injury at issue. According to the dissenters, this is not what the Supreme Court had in mind when issuing its decision in Spokeo — and indeed, the question of Congress' role in the Article III standing inquiry was the precise point of tension highlighted by Spokeo in its petition for certiorari following remand.

So, where are courts in the Eleventh Circuit situated post-Godiva? The simple observation is that plaintiffs must allege and prove something more than a bare statutory violation to have standing in the circuit. However, the result will have a far greater impact on the prosecution of class actions.

Now, even when a named plaintiff is able to articulate a concrete harm, courts are likely to require proof that each class member suffered an individualized, concrete harm. This will make it substantially more difficult to achieve class certification for violations of FACTA and other similar statutes, which will inevitably lead to less enforcement of the statutes within the Eleventh Circuit.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

*This article was republished with permission from Law360 

[1] Muransky v. Godiva Chocolatier, Inc. , 922 F.3d 1175 (11th Cir.), reh'g en banc granted, opinion vacated, 939 F.3d 1278 (11th Cir. 2019).

[2] Muransky v. Godiva Chocolatier, Inc., No. 16-16486, 2020 WL 6305084 (11th Cir. Oct. 28, 2020).

[3] 136 S. Ct. 1540 (2016).

[4] Id. at 1548.

[5] Id.

[6] Id. at 1549.

[7] Robins v. Spokeo, Inc. , 867 F.3d 1108, 1117 (9th Cir. 2017).

[8] Muransky, 2020 WL 6305084 at *12.

[9] Id. at *1.

[10] Id.

[11] Id. at *3.

[12] Id.

[13] Muransky v. Godiva, 922 F.3d at 1188.

[14] Muransky, 2020 WL 6305084 at *1.

[15] Id. at *8.

[16] Katz v. Donna Karan Co. , LLC, 872 F.3d 114, 120 (2d Cir. 2017).

[17] Kamal v. J. Crew Grp., Inc. , 918 F.3d 102, 114 (3d Cir. 2019) ("the lesson of Spokeo is that we must confirm a concrete injury or material risk exists even when Congress confers a right of action").

[18] Golan v. FreeEats.com, Inc. , 930 F.3d 950, 957–58 (8th Cir. 2019) ("Article III standing requires a concrete injury even in the context of a statutory violation.").

[19] 928 F.3d 1059, 1066 (D.C. Cir. 2019).

[20] Muransky, 2020 WL 6305084 at *13.

[21] Id. at *15.

[22] Id.

[23] Id. at *28.

[24] Id. at *39.

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