Procedural FACTA Violation Failed To Satisfy Article III’s Standing Requirement

by King & Spalding
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In Stelmachers v. Verifone, the United States District Court for the Northern District of California dismissed a Fair and Accurate Credit Transaction Act (“FACTA”) complaint because the plaintiff failed to satisfy Article III’s injury-in-fact requirement. The plaintiff—Paul M. Stelmachers—rode in a taxi and used his credit card to pay for the ride. The defendant—Verifone Systems, Inc.—created the machine that processed the plaintiff’s payment. After the payment went through, the machine printed a receipt that displayed more than the last five digits of the plaintiff’s credit card number.

The plaintiff filed a complaint against Verifone. He alleged that the receipt violated § 1681c(g) of FACTA, which prohibits printing more than the last five digits of a credit card number on a receipt. After dismissing the plaintiff’s original complaint, the Court also dismissed the plaintiff’s first amended complaint because it failed to plead a basis for standing. The plaintiff filed a second amended complaint, which Verifone moved to dismiss based on its argument that the plaintiff lacked standing because he had not sufficiently pled that he had suffered an injury-in-fact.

In his effort to satisfy Article III’s injury-in-fact requirement, plaintiff alleged that the non-compliant receipt had caused him to:  (1) experience an “unnecessary fear and risk of identity theft;” (2)  feel a “duty to consistently check his credit card statements, so as to make certain that identity thieves did not take advantage” of the statutory violation; and (3)  feel an “obligation to check other receipts printed on Verifone devices to determine their FACTA compliance.” Finally, the plaintiff alleged he had felt burdened because his credit card information might have been revealed to Verifone’s employees.

Applying Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) and Clapper v. Amnesty Int’l USA, 568 U.S. 398 (2013), the Court determined that the plaintiff’s second amended complaint—like his first amended complaint—failed to “plausibly identif[y] a concrete, certainly impending injury resulting from the non-compliant receipt.”  First, according to the Court:  “Identity theft does not become certainly impending through a procedural violation of FACTA; additional facts must be alleged.” Second, the Court held that the supposed “burden of vigilance” harm failed because the actual harm the plaintiff sought to avoid by being vigilant—identity theft—was “merely a possible” but unlikely “future injury based on the allegations.” The Court emphasized that (1) the plaintiff had discovered the violation immediately; (2) no one but the plaintiff had ever seen the receipt; and (3) the plaintiff still possessed the receipt. Additionally, according to the Court, the “[p]laintiff . . . [could not] ‘manufacture’ standing by inflicting a burden on himself out of a fear of future identity theft that [wa]s nothing more than a remote prospect.” Finally, the Court determined that “FACTA was not enacted to protect . . . private [consumer] information from credit card processors.” Rather, it was enacted to decrease the amount of theft-worthy information on receipts. Therefore, the risk that Verifone’s employees saw the plaintiff’s credit card information did not constitute an injury-in-fact.

Accordingly, the Court (1) concluded that the plaintiff lacked Article III standing; and (2)  dismissed the plaintiff’s second amended complaint without leave to amend, given his three failed attempts to adequately plead an injury-in-fact.

A copy of the Stelmachers v. Verifone decision is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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