On October 28, 2020, the Eleventh Circuit Court of Appeals issued a split (7-3) en banc decision applying Spokeo principles to a claim that a vendor issued a receipt that included more digits from the plaintiff’s credit card than allowed by federal law. The en banc court ruled that the plaintiff did not establish Article III standing.

As I reported two years ago after the panel’s decision, the basic background is as follows. This class action lawsuit alleged violations of the Fair and Accurate Credit Transactions Act, commonly known as FACTA. Dr. Muransky filed his class action against Godiva Chocolatier, Inc. for allegedly violating FACTA by giving him a receipt that showed his credit card number’s first six and last four digits (FACTA prohibits merchants from printing “more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.”)

In part due to uncertainties regarding Spokeo, the case settled. In particular, the en banc court explained this dynamic as follows:

“So why are the litigants in an awkward spot? As they admitted in the district court, Spokeo was on the horizon during settlement talks, but had not yet been decided; it formed an ominous backdrop for their negotiations. Both parties had an interest in settling before that case was decided, because the Supreme Court’s decision was likely to shift the bargaining calculus dramatically. So they settled. And having reached a deal in the shadow of Spokeo, neither side was ready to start all over after it was decided.”

Dr. Muransky moved for preliminary approval, explaining that the parties agreed to a settlement fund of $6.3 million from which all fees, costs, and class members would be paid and that no settlement funds would revert to Godiva. Dr. Muransky indicated he intended to apply for an incentive award of up to $10,000 and that class counsel would move for an award of attorneys’ fees of up to one-third of the settlement fund, which would be $2.1 million. The district court preliminarily approved the settlement.

Only 15 class members opted out of the class that encompassed 318,000 class members (approximately 47,000 people submitted claims). Five class members, including James Price and Eric Isaacson, objected to the settlement. In their objections, Price and Isaacson said they are members of the settlement class and that they timely submitted claim forms. Notwithstanding their objections, in September 2016 the district court approved the settlement. The objectors appealed.

The Eleventh Circuit panel affirmed the district court’s approval of a class settlement, an award of attorneys’ fees to class counsel, and the provision of an incentive award for the class representative. The panel affirmed in the face of objections to the class representative’s Article III standing, the notice pursuant to Rule 23(h), the award of attorneys’ fees, and the incentive award to the class representative.

En banc review was granted and the panel decision was vacated. The en banc court ordered further briefing as follows:

“For the purpose of the upcoming en banc rehearing in the above referenced case, the Court desires for counsel to focus their briefs on the following issue: Does Dr. Muransky have Article III standing to bring this lawsuit?”

Dr. Muransky (and Objector Price) argued that Article III’s standing requirements were satisfied. Objector Isaacson argued they were not. Godiva filed a brief that stated the following: “As a result of the underlying settlement agreement in this case, Godiva does not believe it can answer the question presented. Nevertheless, should this Court disagree or otherwise require Godiva to respond to the question presented, it will be prepared to do so.”

The United States Chamber of Commerce and others filed amicus briefs. The Chamber’s brief emphasized that “Plaintiff’s lawyers have weaponized FACTA by aggregating statutory damages to bring class actions threatening to ‘bankrupt[] entire businesses over somewhat technical violations’ even ‘where no plaintiff has suffered any actual harm from identity theft.’” And that “[b]usinesses like Godiva, faced with hundreds of millions of dollars (or more) in potential FACTA statutory damages, are often forced to settle for millions of dollars. These in terrorem settlements depend on lax enforcement of Article III standing.” The Chamber noted that it knew “of no instances of identity theft caused by a receipt displaying the first six and last four digits of a credit card number.”

The en banc majority, in an opinion authored by Circuit Judge Britt Grant, ruled that, “[p]erhaps before Spokeo there was an argument that Muransky’s claim could have survived as pleaded, but now his allegation—consisting of nothing more than a ‘bare procedural violation, divorced from any concrete harm’—is too thin to survive.” The en banc majority added that, “[t]he conclusion we reach here—that Muransky has alleged neither a harm nor a material risk of harm—is in accord with the majority of other circuits to consider this same question. The Second, Third, and Ninth Circuits have each considered FACTA violations involving partially truncated credit-card numbers. All three concluded that the violation created neither a harm nor a material risk of harm.”

The en banc majority took pains to emphasize that agreed class action settlements cannot circumvent or eviscerate Article III standing principles, explaining that

“…even if the parties wish to bargain around Spokeo, we cannot indulge them. Federal 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. Having shut his eyes and closed his ears to the requirements of Spokeo while his claims were still at the district court, the named plaintiff now tries to say that those claims surely show concrete injury under Spokeo in any event. He has done his best to argue that the statutory violation he alleged carries with it both harm and risk of harm—and does so every time. But the emperor still has no clothes; the bare procedural violation the plaintiff alleges is just as bare as it ever was. Because the plaintiff alleged only a statutory violation, and not a concrete injury, he has no standing. That means we cannot evaluate the fairness of the parties’ settlement, and we vacate the district court’s order approving it.”

The Eleventh Circuit remanded with instructions to dismiss the lawsuit without prejudice.

Judges Charles Wilson, Beverly Martin, and Aldaberto Jordan each filed a dissenting opinion.

Judge Wilson expressed the view that, “[b]ecause Muransky plausibly alleged that Godiva’s FACTA violation elevated his risk of identity theft the moment the receipt was printed, he has shown that the violation harmed a concrete interest that FACTA protects” and “[t]hat is enough to satisfy standing at this phase of the case.”

Judge Martin separately opined that “Congress established the point of intolerable risk at more than the last five digits being displayed on a receipt.” She dissented “[b]ecause Congress’s judgment is deserving of deference under these circumstances, and because congressional judgment supports a finding of concreteness.” Judge Martin further stated that “Spokeo also tells us we may find concrete injury where a statutory violation bears a close relationship to a type of harm that has traditionally been actionable at common law.” With that in mind, she viewed Dr. Muransky’s FACTA violation as bearing a close relationship to a common law breach of confidence tort.

Judge Jordan joined those two dissents, but offered two additional bases for his dissent.  First, he favored giving Dr. Muransky “an opportunity to satisfy the majority’s newly articulated Article III standard” on remand. Second, he endorsed an approach to judging Article III standing cases that looks at “the invasions or violations of private legal rights.” He explained this as follows:

“The better way to understand standing here is not through the lens of injury-in-fact, but under the rights-based model that Justice Thomas and others have outlined. That framework is grounded in the traditional distinction between public and private rights, which early American jurists understood well, and which perseveres in other areas of law. Properly rooted in history and tradition, this rights-based framework harmonizes modern standing doctrine with Article III. It also offers a straightforward and consistent method for resolving difficult standing questions, such as the one presented here, which have been unnecessarily complicated by a narrow focus on the injury-in-fact requirement.”

He concluded that, “[u]nder this rights-based framework, Dr. Muransky easily alleged the invasion of a private legal right.”

Muransky v. Godiva Chocolatier, Inc., Nos. 16-16486; 16-16783, 2020 WL 6305084 (11th Cir. Oct. 28, 2020) (en banc).