Costco Looks to Knock Out FACTA Receipt Class Action

Costco argued in its motion that the document upon which the credit card number was printed – a longer document provided to the plaintiff by a customer service supervisor – was not actually a “point-of-sale” receipt within the meaning of FACTA, taking it outside the scope of the law. This case presents an interesting issue for companies as they seek to avoid costly and time-consuming litigation under FACTA.

Background on the Dispute

Earlier this year, plaintiff Emiguela Paci went to Costco to buy groceries. After checking out, she realized that she forgot an item and proceeded to make a second purchase. When asked to present her receipts at the exit in order to verify her purchases, Paci realized that she had lost one of her two receipts. She was directed to a Costco supervisor, who printed off a document titled “Journal Report Detail Results,” a two-page itemized document, to serve as confirmation of her purchases. Notably, the journal report contained the first six digits of Paci’s credit card number.

Just days after her trip to Costco, Paci filed a class action complaint in federal district court, on behalf of herself and similarly situated individuals, claiming that Costco’s journal reports violate FACTA. Under FACTA, which was enacted in 2006 in an effort to combat identity theft, merchants may not print the expiration date or more than the last five digits from a consumer’s credit card “upon any receipt provided at the point of the sale or transaction.” Referring to it as a “replacement receipt,” Paci alleged that the journal report printed by the Costco supervisor ran afoul of FACTA’s card number truncation requirement by including more than the last five digits of her credit card number.

Further, Paci alleged that Costco willfully violated the law, claiming that Costco was aware of the truncation requirement because it had been previously sued for violating the provision. Establishing that a violation was willful is of critical importance to FACTA plaintiffs. While any FACTA violation entitles plaintiffs to actual damages and attorneys’ fees, the law provides for statutory damages between $100 and $1,000 for each violation, as well as punitive damages, where the violation was willful. In addition, a plaintiff claiming statutory damages need not prove that any actual harm resulted from the FACTA violation.

Costco’s Recent Motion

Costco recently moved to dismiss the class action complaint, claiming that FACTA does not apply to the journal report bearing Paci’s credit card information. The company noted that the truncation requirement applies only to a receipt “provided to the cardholder at the point of sale or transaction.” Costco claimed that because the journal entry was printed off by a Costco supervisor – rather than provided at the cash register where Paci purchased her items – it fell outside the scope of the truncation requirement. In so arguing, Costco pointed to a case in which the Seventh Circuit held that an electronically-delivered order confirmation bearing FACTA-prohibited information did not violate the law because it was not provided at “the point of sale or transaction.”

Even if the journal report did fall within the scope of the truncation requirement, Costco argued, Paci could not establish that Costco willfully violated the provision. The company argued that its decision to print more than the last five digits of customers’ credit card numbers on the journal reports was based upon an interpretation of FACTA that – even if incorrect – was nonetheless “objectively reasonable.” According to the company, because Paci suffered no actual harm and cannot not prove a willful violation, she is entitled to no remedy under the law, requiring dismissal of the suit.

In response, Paci has amended her complaint, seeking to address the alleged deficiencies raised by Costco’s motion. In the amended complaint, Paci stressed that the machine on which the journal entry was printed is “part of Costco’s point of sale system and is itself a point of sale terminal,” in an apparent attempt to overcome Costco’s claim that the receipt was not printed at the “point of sale or transaction” and, thus, falls outside the truncation provisions’ scope. The court’s decision will answer an interesting question on the evolving issue of FACTA liability.       

The Takeaway

This case is a reminder to retailers to remain diligent about compliance with FACTA’s truncation requirements. Because of the damages available for a willful violation, the law is a popular class action vehicle among the plaintiff bar, which – as this case shows – will creatively allege FACTA violations in unexpected scenarios. Regardless of the court’s decision on Costco’s motion to dismiss, retailers are advised to exercise considerable caution in the handling – and especially printing – of consumers’ personal or financially sensitive information.