ROSENTHAL

v.

LONGCHAMP CORAL GABLES LLC

It is also

ADJUDGED that the motion to dismiss is DENIED to the extent it seeks the Court declare FACTA unconstitutional.

I. BACKGROUND

Plaintiff is bringing suit under Section 113 of the Fair and Accurate Credit Transactions Act (“FACTA”), which is codified at 15 U.S.C. § 1681e(g), which makes it illegal for a merchant to print more that the last five digits of the card number or the expiration date on the receipt provided to a cardholder at the point of sale. Congress enacted this legislation in an effort to combat identity theft by reducing the chance that a consumer would be injured by unnecessary, yet sensitive information, included on a credit card receipt.

See Grabein v. 1-800-Flowers.com, Inc.,

2008 WL 343179, *3 (S.D.Fla. Jan. 29, 2008).

Plaintiffs one-count complaint alleges that Defendant violated FACTA when on June 9, 2008 it issued Plaintiff an electronically generated, point of sale receipt that contained Plaintiffs credit card expiration date. Plaintiff is seeking actual damages, statutory damages, punitive damages, and injunctive relief. Defendant has moved to dismiss arguing me Amended Complaint does not state a willful violation of the statute. Defendant also argues that¹⁵ U.S.C. § 1681n violates constitutional due process — the United States of America, an intervenor, has filed briefs supporting the constitutionality of the provision.

II. LEGAL ANALYSIS

FACTA is a subset of the statutes contained within the Fair Credit Reporting Act (“FCRA”), codified at 15 U.S.C. §§ 1681,

et seq.

Plaintiff is alleging a willful violation of the statute, which exposes the Defendant to actual, statutory, and punitive damages.¹⁵ U.S.C. § 1681n(a). At issue in the motion to dismiss is whether Plaintiffs allegations es

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tablish willfulness. The second issue in the motion to dismiss is the constitutionality of the provision.

A. Willfulness

The United States Supreme Court recently interpreted the term “willful” as used in section 1681n, expressly holding that section 1681n(a) encompasses not only knowing and intentional violations of the FCRA, but reckless ones as well.

Safeco Ins. Co. of Am. v. Burr, 551

U.S. 47, 127 S.Ct. 2201, 2216, 167 L.Ed.2d 1045 (2007) (“reckless disregard of a requirement of FCRA would qualify as a willful violation within the meaning of § 1681n(a)”) (decided two weeks after

Bell Atlantic Corp. v. Twombly,

550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007));

Rambarran v. Bank of Am., Corp.,

2007 WL 2774256, at *5 (S.D.Fla. Sept. 24, 2007). A defendant does not act in reckless disregard “unless the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.”

Safeco,

127 S.Ct. at 2215. Recklessness under the FCRA is “something more than negligence but less than knowledge of the law’s requirements.”

Murray v. New Cingular Wireless Servs., Inc.,

523 F. 3d 719, 726 (7th Cir.2008);

Kubas v. Standard Parking Corp.,

594 F. Supp. 2d 1029, 1032 (N.D.Ill.2009).

Defendant urges the Court that Plaintiffs allegations fail to meet the

Twombly

standard. The Court will analyze Plaintiffs allegations under Safeco’s recklessness standard and

Twombly.

Plaintiff alleges that Defendant printed her credit card expiration date on her receipt amidst many media reports indicating it was illegal for merchants to do so. Plaintiff does not allege that Defendant failed to investigate FACTA’s requirements or failed to take reasonable actions to comply with the law. Rather, to establish recklessness, Plaintiff relies on her allegations that FACTA’s requirements were well-publicized and that credit card companies incorporated FACTA’s requirements into their contracts with merchants.

While

Safeco

makes clear that a willful violation

can

merely be a reckless

one,

Defendant urges this Court to review subsequent legislation passed by Congress on the issue. In June 2008, Congress enacted the “Credit and Debt Card Receipt Clarification Act” (the “Clarification Act”). In the Clarification Act, Congress specifically found that FACTA lawsuits premised solely on the inclusion of the card’s expiration date on a sales receipt without any evidence of actual injury are “abusive” and lack “consumer benefit.”

See

(d) Clarification of Willful Noncompliance

For the purposes of this section, any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and June 3, 2008, but otherwise complied with the requirements of section 1681c(g) of this title for such receipt shall not be in willful noncompliance with section 1681c(g) of this title by reason of printing such expiration date on the receipt.

The alleged violation in this case took place on June 9, 2008, a few days after the Clarification Act’s safe harbor expired. For that reason, Defendant does not argue the safe harbor applies. Rather, Defendant relies on the Clarification Act to argue that even Congress recognized that many merchants believed that truncating the credit card number would be enough to comply with the act. Defendant argues it was one of those merchants and therefore,

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the mere allegation that Defendant failed to delete the expiration date cannot by itself establish a willful reckless violation of the statute.

In view of

Twombly, Safeco

and the Clarification Act, the Court finds Plaintiffs allegations insufficient to establish that Defendant acted recklessly. That the Defendant acted more than “negligently] but less than knowledge of the law’s requirements” is not established by the mere fact that FACTA’s requirements were well-publicized in the media and contained in Defendant’s credit card agreements. Accordingly, the Court dismisses the claim without prejudice with leave to amend.

B. Constitutionality

Also at issue in the motion to dismiss is FACTA’s constitutionality. Defendant relies on the reasoning in

Grimes v. Rave Motion Pictures Birmingham, LLC, 552

F. Supp. 2d 1302 (N.D.Ala.2008). In

Grimes,

Judge Acker found FACTA’s imposition of strict liability for willfully failing to truncate credit card numbers on receipts violated due process due to the vagueness of the damages provision. He also found that imposing strict liability violated the due process clause as applied because it was possible to award punitive damages in the absence of actual damages.

Id.

Since the

Grimes

decision, a number of courts have disagreed with Judge Acker and found the statute constitutional.

See Turner v. Creative Hospitality Ventures, Inc.,

588 F. Supp. 2d 1347 (S.D.Fla.2008);

Smith v. MSV Sales & Servs., LLC,

2008 WL 4921356 (S.D.Fla. Nov. 17, 2008);

Smith v. Casino Ice Cream, LLC,

2008 WL 4541013 (S.D.Fla. Oct. 9, 2008);

Soprych v. T.D. Dairy Queen, Inc.,

2009 WL 498535 (N.D.Ill. Feb. 26, 2009);

Irvine v. 233 Skydeck, LLC,

597 F. Supp. 2d 799 (N.D.Ill.2009);

Ashby v. Farmers Ins. Co. of Or.,

592 F. Supp. 2d 1307 (D.Or.2008).

In

Irvine,

the Court rejected the vagueness challenge to the statutory damages provision finding that a reasonable jury tasked with determining the proper amount of damages for a FACTA violation will be able to do so within the statutory range.

Irvine,

597 F. Supp. 2d at 803-04. The

Irvine

Court also found that a statute governing economic activity such as FAC-TA is held to a less stringent standard than criminal statutes “because businesses, which face economic demands to plan behavior carefully, can be expected to consult relevant legislation in advance of action.”

Id.,

597 F. Supp. 2d at 803 (quoting

Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc.,

455 U.S. 489, 498, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982)). The Court is persuaded by the reasoning contained in the

Irvine

decision and declines to find the statute unconstitutionally vague. A reasonable jury can certainly determine the proper amount of damages within the statutory range.

Defendant also challenges the constitutionality of FACTA as applied to it. In view of Plaintiffs failure to sustain actual damages, Defendant contends that an award of statutory and punitive damages would be a penalty so severe so as to violate due process. Courts have found that actual damages in FACTA cases are “small and hard to quantify and that is why statutes such as the Fair Credit Reporting Act provide for modest damages without proof of injury.”

Irvine,

597 F. Supp. 2d 799 (N.D.Ill.2009) (quoting

Murray v. GMAC Mortg. Corp.,

434 F. 3d 948, 953 (7th Cir.2006)). Again the Court is persuaded by the reasoning in

Irvine

and finds there is no due process violation.