Are Credit Card Receipt Class Actions

[WSJ_law_blog]

Ever worry, when you pay with a credit card, that the retailer is putting too much info on the receipt? What if you leave a your on the restaurant table and it contains the last four digits of the credit card number and the expiration date? Are you in danger of having your identity ripped off?

Perhaps not, but that doesn’t mean you can’t sue! Under a 16-month-old federal law, known as the Fair and Accurate Credit Transaction Act, or FACTA, consumers can sue companies for putting too much credit card information on Internet and store receipts, thus increasing the likelihood of identity theft. And here’s the kicker: plaintiffs need only prove a willful, technical violation — not actual harm — to be entitled to statutory damages of between $100 and $1,000 per violation.

It may not sound like big bucks. But, since the law went into effect, defense counsel say more than 300 class actions have been filed against a number of companies, including Toys “R” Us, IKEA and 1-800-Flowers.com. For some companies, that could add up to billions. For defendants, the lone upside is that companies can argue against class certification by invoking the “annihilation defense” — the theory that potential damages could annihilate the business. Here are stories from Bloomberg and the NLJ, and one from April of last year by the Journal’s own Robin Sidel.

The issue is currently before the 9th Circuit in Soualian v. International Coffee & Teas, a case in which the lower court denied certification, partly due to the potentially disastrous consequences. But in another case before the 7th Circuit, Murray v. GMAC, the court has struck down the annihilation argument, leading to several FACTA class action certifications.

“For plaintiffs, this is a gotcha-type statute,” said Peter Cummins, an attorney at Frost Brown Todd, to the NLJ. Cummins is defending a national restaurant chain in a FACTA lawsuit in Pennsylvania. Just think about the defendants involved, Cummins said: “You have airport newsstands, parking garages, national restaurant chains, national retailers — think about the number of debit card and credit card transactions … .That can be astronomical.” What’s driving the litigation, Cummins believes, is its simplicity. All plaintiffs need is a receipt, without the need to prove harm.

Still, the law might be having its intended effect. “The minute we file these cases, every one of the defendants has changed their practices,” said plaintiffs lawyer Greg Hafif to Bloomberg. “Every consumer out there is now protected from identity theft.”

Hey, LB’ers, Do these FACTA violations reflect a real danger of identity theft, or have they unnecessarily (and, perhaps, unfairly) exposed corporate America to financial annihilation?