Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_14-cv-04912/USCOURTS-cand-5_14-cv-04912-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1681 Fair Credit Reporting Act

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Case No.: 5:14-cv-04912-EJD

ORDER GRANTING MOTION TO DISMISS

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

PAUL M. STELMACHERS, individually 

and on behalf of similarly situated persons,

Plaintiff,

v.

VERIFONE SYSTEMS, INC.,

Defendant.

Case No. 5:14-cv-04912-EJD 

ORDER GRANTING MOTION TO 

DISMISS

Re: Dkt. No. 19

Plaintiff Paul M. Stelmachers filed the instant class action suit against Defendant VeriFone 

Systems, Inc. (“VeriFone”), alleging violations of the Fair and Accurate Credit Transactions Act 

of 2003 (“FACTA”) amendment to the Fair Credit Reporting Act (“FCRA”). Presently before the 

court is VeriFone’s Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). See

Mot., Dkt. No. 19. 

Federal jurisdiction arises pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1681p. The court 

found this matter suitable for decision without oral argument pursuant to Civil Local Rule 7–1(b) 

and previously vacated the associated hearing. Having carefully considered the parties’ pleadings, 

the court grants VeriFone’s motion for the reasons explained below. 

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff alleges that on June 3, 2014, he took a taxi cab ride in Las Vegas, Nevada, and 

used his credit card for payment. Compl., Dkt. No. 1 at ¶¶ 20-21. To receive the payment, 

VeriFone’s product was used in the taxi cab. Id. at ¶ 23. Plaintiff then allegedly received a 

computer-generated receipt displaying more than the last five digits of Plaintiff’s credit card 

number. Id. 

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Case No.: 5:14-cv-04912-EJD

ORDER GRANTING MOTION TO DISMISS

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Plaintiff commenced the instant class action suit in November 2014, asserting the violation 

of FACTA. See Dkt. No. 1. VeriFone filed its Motion to Dismiss in January 2015. Plaintiff filed 

his opposition brief in March 2015, and VeriFone subsequently filed its reply brief. See Opp’n, 

Dkt. No. 22; Reply, Dkt. No. 27. 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 

specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which 

it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A 

complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim 

upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is 

appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support 

a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th 

Cir. 2008). Moreover, the factual allegations “must be enough to raise a right to relief above the 

speculative level” such that the claim “is plausible on its face.” Twombly, 550 U.S. at 555, 570. 

When deciding whether to grant a motion to dismiss, the court generally “may not consider 

any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 

1542, 1555 n.19 (9th Cir. 1990). However, the court may consider material submitted as part of 

the complaint or relied upon in the complaint, and may also consider material subject to judicial 

notice. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). 

In addition, the court must generally accept as true all “well-pleaded factual allegations.” 

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The court must also construe the alleged facts in the 

light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1988). 

However, courts “are not bound to accept as true a legal conclusion couched as a factual 

allegation.” Iqbal, 556 U.S. at 678. Nor must the court accept as true “allegations that contradict 

matters properly subject to judicial notice or by exhibit” or “allegations that are merely 

conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. 

Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

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III. DISCUSSION

In its motion, VeriFone sets forth three arguments: (1) FACTA does not prohibit 

merchants from printing the first digit of a credit card number; (2) Plaintiff cannot plausibly allege 

that VeriFone willfully violated FACTA, and thus cannot seek statutory damages; and (3) Plaintiff 

sued the wrong party because FACTA does not apply to point-of-sale system providers like 

VeriFone. The court will only address VeriFone’s third argument because it is dispositive of the 

entire motion. 

Congress passed FACTA in 2003 as an amendment to the FCRA, in part to combat 

identity theft. Simonoff v. Expedia, Inc., 643 F.3d 1202, 1204 (9th Cir. 2011). FACTA provides 

in relevant part: 

Truncation of credit card and debit card numbers:

[N]o person that accepts credit cards or debit cards for the 

transaction of business shall print 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. 

15 U.S.C. § 1681c(g)(1). Here, the parties dispute whether VeriFone is considered a “person that 

accepts credit cards or debit cards for the transaction of business.” VeriFone contends that while 

its product was used to process the taxi cab payment, the statute does not apply to VeriFone as the 

point-of-sale manufacturer; instead, it applies to the taxi company that transacted the business. 

Mot. at 8. In response, Plaintiff argues the statute applies to VeriFone because through its 

product, VeriFone is a “person that accepts credit cards.” Opp’n at 15. He contends that FACTA

does not explicitly apply only to merchants, but to a broad definition of “persons.” Id. 

When engaging in statutory interpretation, the court begins “by looking at the language of 

the statute to determine whether it has a plain meaning.” U.S. ex rel. Hartpence v. Kinetic 

Concepts, Inc., 792 F.3d 1121, 1128 (9th Cir. 2015). In examining the language of FACTA, it is 

unclear whether the term “person” applies only to merchants or to manufacturers of point-of-sale 

systems. Both interpretations are possible since a merchant physically accepts a credit card for 

payment, and a manufacturer electronically accepts the credit card to process payment. Therefore, 

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the statute on its face provides no clear guidance. 

Since FACTA’s reference to “person” is ambiguous, the court will now consider the 

legislative history and other extrinsic material. See id. Congress enacted § 1681c(g)(1) on 

December 4, 2003, as part of the FACTA amendment. See FACTA, Pub. L. No. 108-159, § 113, 

117 Stat. 1952 (2003). A congressional report dated September 4, 2003, states that FACTA 

“provides consumers with the tools they need to fight identity theft and to ensure the accuracy of 

their credit reports while establishing permanent national credit reporting standards by removing 

the sunset from the expiring national consumer protection standards.” H.R. Rep. No. 108-263, at 

22 (2003). The report sets forth the purpose of FACTA and provides that “merchants will be 

required to truncate credit and debit card information.” Id. Moreover, at least two documents 

refer specifically to merchants. First, the Federal Trade Commission (“FTC”) issued a press 

release on December 15, 2003, stating that FACTA “requires merchants to truncate account 

numbers on credit or debit card receipts to prevent identity thieves from accessing account 

information from discarded or stolen receipts.” Press Release, FTC, FTC Committed to Fighting 

Identity Theft (Dec. 15, 2003), 2003 WL 22943394. Second, the FTC issued a report on July 1, 

2011, stating that FACTA “required merchants to truncate account numbers on electronic 

credit/debit card receipts.” FTC, 40 Years of Experience with the Fair Credit Reporting Act, at 2 

(July 1, 2011), 2011 WL 3020575. In sum, FACTA’s legislative history and extrinsic material

show that Congress intended § 1681c(g)(1) to apply to merchants. 

Having determined that the FACTA statute applies to merchants, Plaintiff must adequately 

plead that VeriFone is a merchant. According to the Merriam-Webster Dictionary, a “merchant” 

is “a buyer and seller of commodities for profit.” Plaintiff alleges that “Defendant is a ‘person that 

accepts credit cards or debit cards for the transaction of business’ within the meaning of FACTA.” 

Compl. at ¶ 18. Plaintiff alleges he “used his credit card to pay for the cab,” “[t]he credit card 

used by [him] in the taxi cab ride was a VISA credit card,” and “Defendant’s product was used to 

receive payment by Plaintiff in the taxi cab.” Id. at ¶¶ 21-23. He further alleges that he “received 

from the Defendant a computer-generated receipt displaying more than the last five (5) digits of 

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ORDER GRANTING MOTION TO DISMISS

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Plaintiff’s credit card number.” Id. at ¶ 24. Moreover, Plaintiff alleges that “Defendant produces 

and manages machines that accept credit cards or debit cards in the course of transacting business 

with persons such as Plaintiff and the other class members,” and alleges that “[i]n transacting such 

business, Defendant’s machines electronically print receipts for credit and debit card transactions.” 

Id. at ¶ 36. 

While the court must construe the alleged facts in the light most favorable to Plaintiff, 

courts are not bound to accept a legal conclusion. In this instance, Plaintiff merely concludes that 

VeriFone is a “person” under the FACTA statute, but does not provide factual allegations as to 

how VeriFone served as a merchant during the transaction at issue. See Blantz v. Cal. Dep’t of 

Corr. & Rehab., 727 F.3d 917, 927 (9th Cir. 2013) (noting that “conclusory allegations are 

insufficient on their own to defeat a motion to dismiss”). Instead, it appears VeriFone only 

manufactured the machine that processed Plaintiff’s credit card payment.

Therefore, as currently pled, Plaintiff’s allegations are insufficient to proceed with his 

claim. As such, VeriFone’s motion is granted. 

IV. CONCLUSION

Based on the foregoing, VeriFone’s Motion to Dismiss is GRANTED. Plaintiffs’ entire 

complaint is DISMISSED WITH LEAVE TO AMEND. Any amended complaint addressing the 

deficiencies identified herein must be filed on or before December 30, 2015.

The court schedules this case for a Case Management Conference at 10:00 a.m. on 

February 18, 2016. The parties shall file a Joint Case Management Conference Statement on or 

before February 11, 2016. 

IT IS SO ORDERED.

Dated: December 7, 2015 

______________________________________

EDWARD J. DAVILA

United States District Judge

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