Divided En Banc Court Dismisses FACTA Claims for Lack of Article III Standing

In Muransky v. Godiva Chocolatier, Inc., 2020 WL 6305084 (11th Cir. Oct. 28, 2020), a divided en banc court vacated the district court’s order approving a class-action settlement and directed that the case be dismissed because the plaintiff lacked standing sufficient to establish subject-matter jurisdiction.

Muransky filed a putative class action against Godiva, alleging that the chocolatier had willfully violated the Fair and Accurate Credit Transactions Act (“FACTA”) by including on customers’ receipts more than the last five digits of their credit card numbers.  The inclusion of additional digits, Muransky claimed, exposed class members “to an elevated risk of identity theft.”  The parties ultimately agreed to settle the action on a classwide basis and moved for preliminary approval of the proposed settlement.  The settlement featured a $6.3 million settlement fund, from which attorneys’ fees, costs, and class members would be paid. 

Following notice to class members, five class members objected to the settlement on various grounds.  At the fairness hearing, one of the objectors raised a new objection:  that Muransky lacked Article III standing.  The district court overruled the objections, including the one about lack of standing, and approved the settlement. 

The objectors appealed, and a panel of the Eleventh Circuit affirmed, 922 F.3d 1175 (11th Cir. 2019).  An objector filed a petition for rehearing en banc, which the court granted.  A divided en banc court held that Muransky’s allegations were insufficient to establish his standing to bring the FACTA claim.

Judge Britt Grant, writing for the majority, framed the critical question as a matter of separation of power:  “whether the judiciary must assume that whenever Congress creates a legal entitlement, any violation of that entitlement causes a concrete injury.”  The majority’s answer to that question was no.  A plaintiff can plead (and then establish) standing in two ways, the court explained:  by showing that a statutory violation directly caused a harm, tangible or otherwise, or by showing that the violation “created a ‘risk of real harm.’”  Spokeo establishes that the risk of future harm must be “material.”  And “[w]hatever ‘material’ may mean, conceivable and trifling are not on the list.”  “A conclusory statement that a statutory violation caused an injury is not enough,” the court continued, “so neither is a conclusory statement that a statutory violation caused a risk of injury.”

Muransky’s complaint disclaimed any recovery for “personal injury,” but he argued that the appearance of too many digits on his credit card receipt nevertheless constituted a sufficiently concrete harm.  First, he argued that he had a “substantive right” to receive a properly truncated receipt, such that his failure to receive such a receipt itself constituted an injury.  But “[n]othing in FACTA suggests some kind of intrinsic worth in a compliant receipt,” the court said, “nor can we see any.”  Second, Muransky argued that the time he spent safeguarding the receipt constituted a sufficiently concrete injury.  The court rejected that argument, too, observing that Muransky’s complaint included no allegation about affording the Godiva receipt any special treatment—and that even if Muransky had made such an allegation, guarding against a insufficiently-concrete risk of harm could not create standing; “plaintiffs ‘cannot manufacture standing merely by inflicting harm on themselves.’” (quoting Clapper v. Amnesty Int’l USA, 568 U.S. 398, 416 (2013).)  Third, citing Spokeo, Muransky argued that his claim bore “a ‘close relationship’ to a traditionally redressable harm,” namely the tort of breach of confidence.  The court disagreed, noting that breach of confidence requires a confidential relationship and disclosure to a third party, neither of which was present in Muransky’s case.  

The court also rejected Muransky’s argument that his complaint sufficiently alleged a material risk of future harm.  FACTA itself, Muransky argued, demonstrates Congress’s determination that printing more than the permitted number of digits on a receipt creates a real risk of identity theft.  The court rejected that argument, viewing it as an invitation “to abandon our judicial role”:  “Although the judgment of Congress is an ‘instructive and important’ tool to identify Article III injuries, we cannot accept Muransky’s argument that once Congress has spoken, the courts have no further role.”  Muransky’s conclusory allegation that he faced an elevated risk of identity theft, the court added, “is simply not enough.”

Noting that its conclusion that Muransky had failed sufficiently to allege standing was in accord with decisions from the Second, Third, and Ninth Circuits, the court vacated the district court’s order approving the settlement.  The court also directed that the case be dismissed without prejudice, noting that Muransky had been on notice throughout the case that his standing was in question, but never requested leave to amend his complaint.

Three judges wrote dissenting opinions.  Judge Wilson concluded that “Muransky plausibly alleged that Godiva’s FACTA violation elevated his risk of identity theft the moment the receipt was printed,” because “FACTA protects his concrete interest in using his credit or debit card without incurring a heightened risk of identity theft.”  He added that the majority’s contrary conclusion “all but ensures that consumers in the Eleventh Circuit must now allege, support, and prove that they suffered actual identity theft (or at least soon will) because of a defendant’s FACTA violation in order to avail themselves of the law’s protections.”

Judge Martin, who had written the panel opinion in the case, wrote that the majority’s opinion “ignore[d] the judgment of Congress,” which, in her view “established the point of intolerable risk at more than the last five digits being displayed on a receipt.”  “[T]here is nothing incompatible with the court satisfying itself of an injury’s concreteness, and considering the judgment of Congress at the same time,” she added.  Judge Martin also disagreed with the majority as to the relevance of the tort of breach of confidence, finding sufficient commonality between that tort and Muransky’s claim to confirm his standing.

Judge Jordan joined the other two dissents.  He also wrote separately, objecting to the majority’s dismissal of the action on the ground that it unfairly deprived Muransky of an opportunity to amend his complaint.  Judge Jordan also expressed the view that standing should be viewed in the context of a distinction between public and private rights.  English and American courts, he wrote, historically “heard suits involving private rights,” like the FACTA-created rights at issue, “regardless of whether the plaintiff suffered actual damage[.]”

Posted by Valerie Sanders.

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