Opinion ID: 175979
Heading Depth: 4
Heading Rank: 2

Heading: Statutory Analysis of FACTA

Text: Unfortunately, neither FACTA nor the Clarification Act addresses the availability of class actions. Where a statute is silent on the availability of class relief, the Supreme Court has instructed that we presume it to be available in all civil actions brought in federal court. Califano, 442 U.S. at 700, 99 S.Ct. 2545. Accordingly, as neither FACTA nor the Clarification Act contain a direct expression to the contrary, we must presume that Congress intended class relief to be available. That, of course, does not mean that a court necessarily must allow a plaintiff to seek class relief. Rather, it means that a court cannot deny class certification where plaintiffs have otherwise met the requirements of Rule 23. We therefore must decide whether a plaintiff satisfies Rule 23's requirements where certification of a class would threaten to impose liability disproportionate to the harm caused. As we have explained, the touchstone of this determination is whether denying class certification on this ground is consistent with congressional intent. We conclude that it is not. We begin, as always, with the plain language of the statute. See United States v. Mohrbacher, 182 F.3d 1041, 1048 (9th Cir. 1999). The express terms of the statute provide that upon proving a willful violation, [6] a plaintiff may recover any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000. 15 U.S.C. § 1681n(a). Importantly, the statute does not place a cap on these damages in the case of class actions, does not indicate any threshold at which courts are free to award less than the minimum statutory damages, and does not limit the number of individuals that can be certified in a class or the number of individual actions that can be brought against a single merchant. Although the congressional record is silent about why Congress provided for statutory damages in these amounts, [7] we presume that the statutory damages serve a compensatory function. See L.A. News Serv. v. Reuters Television Int'l., Ltd., 149 F.3d 987, 996 (9th Cir.1998) (noting that awards of statutory damages can serve compensatory, punitive and/or deterrent purposes). That Congress provided a consumer the option of recovering either actual or statutory damages, but not both, supports the presumption that they serve the same purpose. We further note that Congress provided for punitive damages in addition to any actual or statutory damages, see 15 U.S.C. § 1681n(a)(2), which further suggests that the statutory damages provision has a compensatory, not punitive, purpose. See Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 1312 (11th Cir.2009) (concluding that, because FACTA provides separately for punitive damages, the statutory damages provision is not punitive). The need for statutory damages to compensate victims is plain. The actual harm that a willful violation of FACTA will inflict on a consumer will often be small or difficult to prove. As the Seventh Circuit similarly noted in Murray, under the FCRA individual losses, if any, are likely to be smalla modest concern about privacy, a slight chance that information would leak out and lead to identity theft. That actual loss is small and hard to quantify is why statutes such as the Fair Credit Reporting Act provide for modest damages without proof of injury. 434 F.3d at 953. In addition to that compensatory function, FACTA's actual and statutory damages provisions also effectuate the Act's deterrent purpose. See L.A. News Serv., 149 F.3d at 996 (noting that statutory damages help sanction and vindicate the statutory policy of discouraging infringement (internal quotation marks omitted)). In fashioning FACTA, Congress aimed to restrict the amount of information available to identity thieves. 149 Cong. Rec. 26,891 (2003) (statement of Sen. Shelby). Allowing consumers to recover statutory damages furthers this purpose by deterring businesses from willfully making consumer financial data available, even where no actual harm results. The factors that a court considers when assessing the superiority of a class action under Rule 23(b)(3) must be consistent with these dual purposes of FACTA's statutory damages remedy. Cf. Kline, 508 F.2d at 235 (concluding that class certification would be inconsistent with Congress's intent to limit punitive damages to an amount only three times the harm an individual defendant caused). Congress expressly created a statutory damages scheme that intended to compensate individuals for actual or potential damages resulting from FACTA violations, without requiring individuals to prove actual harm. Thus, irrespective of whether Bateman and all the potential class members can demonstrate actual harm resulting from a willful violation, they are entitled to statutory damages. There is no language in the statute, nor any indication in the legislative history, that Congress provided for judicial discretion to depart from the $100 to $1000 range where a district judge finds that damages are disproportionate to harm. Further, we cannot surmise a principled basis for determining when damages are and are not proportionate to actual harm. Indeed, one might plausibly argue that a $1000 award, or even a $100 award, for a single violation of FACTA, without any allegation of harm, is not proportionate. But the plain text of the statute makes absolutely clear that, in Congress's judgment, the $100 to $1000 range is proportionate and appropriately compensates the consumer. That proportionality does not change as more plaintiffs seek relief; indeed, the size of AMC's potential liability expands at exactly the same rate as the class size. In the absence of any showing that courts have the discretion to modify this remedial scheme, we agree with the Seventh Circuit that it is not appropriate to use procedural devices to undermine laws of which a judge disapproves. Murray, 434 F.3d at 954. To the extent that statutory damages also serve a deterrent purpose, a court undermines that purpose in denying class certification on the basis of the proportionality of actual harm and statutory liability. Congress, in its legislative judgment, specified the range of damages that it considered sufficient to have a deterrent effect. Despite Congress's awareness of the availability of class actions, it set no cap on the total amount of aggregate damages, no limit on the size of a class, and no limit on the number of individual suits that could be brought against a merchant. Allowing denial of class certification because of the sheer number of violations and amount of potential statutory damages would allow the largest violators of FACTA to escape the pressure of defending class actions and, in all likelihood, to escape liability for most violations. In other words, whatever risk of overdeterrence class certification poses, refusing to certify a class on these grounds poses the risk of significant underdeterrence. To deny class certification based on the potential amount of damages as compared to the extent of harm presumes that Congress left it to the courts to evaluate the relative amount of liability necessary to serve the statute's compensatory and deterrent purposes. Despite the absence of anything in the text or legislative history of the statute explicitly delegating such authority, AMC suggests it can be interred from language in the Clarification Act. Specifically, AMC points to the following language in the Clarification Act's Findings section: (4) Almost immediately after the deadline for compliance [with FACTA] passed, hundreds of lawsuits were filed alleging that the failure to remove the expiration date was a willful violation of the Fair Credit Reporting Act even where the account number was properly truncated. (5) None of these lawsuits contained an allegation of harm to any consumer's identity. (6) Experts in the field agree that proper truncation of the card number, by itself as required by the amendment made by the Fair and Accurate Credit Transactions Act, regardless of the inclusion of the expiration date, prevents a potential fraudster from perpetrating identity theft or credit card fraud. (7) Despite repeatedly being denied class certification, the continued appealing and filing of these lawsuits represents a significant burden on the hundreds of companies that have been sued and could well raise prices to consumers without corresponding consumer protection benefit. Clarification Act § 2(a)(3),122 Stat. at 1565-66 (emphasis added). According to AMC, these findings evidence Congress's approval of court rulings that denied class certification on the ground that damages would be disproportionate to actual harm. We disagree. While some courts had denied class certification under FACTA on superiority grounds at the time the Clarification Act was enacted in June 2008, other courts had granted certification despite superiority arguments like AMC's. See, e.g., Redmon v. Uncle Julio's of Ill., Inc., 249 F.R.D. 290 (N.D.Ill. Mar.7, 2008); Reynoso v. S. Cnty. Concepts, No. SACV07-373-JVS (RCx), 2007 WL 4592119 (C.D.Cal. Oct.15, 2007). Because we must presume that Congress is aware of past judicial interpretations and practices when it legislates, In re Egebjerg, 574 F.3d 1045, 1050 (9th Cir.2009), we must presume Congress was aware of this split among district courts as to whether these types of actions should be certified. In the midst of this disagreement, Congress stepped in to amend FACTA, and yet did nothing to limit the availability of class relief or the amount of aggregate damages. Had Congress been sufficiently concerned about disproportionate damages as a result of class actions, it would have limited class availability or aggregate damages. Yet Congress did nothing of the sort and instead merely imposed a retroactive immunity for a sub-class of merchants who misunderstood FACTA's requirements. Where Congress in the past has been confronted with concerns over disproportionate, potentially enormous statutory damage awards, it has acted decisively to make its intent clear. Responding to the problem identified in Ratner, Congress amended TILA's civil liability provision in 1974. Act of Oct. 28, 1974, Pub.L. No. 93-495, § 408(a), 88 Stat. 1500, 1518. As evidenced by the Report of the Senate Banking Committee, Congress was aware of the potentially enormous liability facing defendants where TILA claims were pursued as class actions. In relevant part, that report stated: A problem has arisen in applying minimum liability provisions in class action suits involving millions of consumers. If each member of the class is entitled to a minimum award of $100, a creditor's liability can be enormous. ... The purpose of the civil penalties section under Truth in Lending was to provide creditors with a meaningful incentive to comply with the law without relying upon an extensive new bureaucracy. However, the Committee feels this objective can be achieved without subjecting creditors to enormous penalties for violations which do not involve actual damages and may be of a technical nature. Putting a reasonable limit on a creditor's maximum class action liability would seem to be in the best interests of both creditors and consumers. S.Rep. No. 93-278, at 14 (1973). Accordingly, Congress added a provision to TILA limiting aggregate statutory damages. Act of Oct. 28, 1974 § 408(a), 88 Stat. at 1518 (codified as amended at 15 U.S.C. § 1640(a)(2)(B)) (capping class action damage awards at $500,000 or one percent of the defendant's net worth). Congress has similarly capped class action awards under other statutes. See 15 U.S.C. § 1692k(a)(2)(B) (setting the same limit under Fair Debt Collection Practices Act). Yet here, faced with precisely the same issue, Congress chose to remain silent and not to impose any limits on aggregate relief. We therefore are not convinced that this passing reference to denial of class certification is sufficient to overcome the plain text of the statute and congressional silence on the issue of class relief, both of which strongly suggest that the proportionality of the damages is an irrelevant consideration in effectuating FACTA's compensatory and deterrence purposes. We also note an additional problem with AMC's position. AMC would have us leave it to the discretion of district courts to decide whether a potential award would be so disproportionate to the actual harm that a class action would not be the superior method of adjudication. Yet such unguided discretion results in decidedly non-uniform decisions about class certification. For example, in Price v. Lucky Strike Entm't, 2007 WL 4812281, a district court refused to certify a class of approximately 33,000 plaintiffs seeking damages under FACTA, none of whom had alleged any actual harm. Meanwhile, a different district court in the same district certified a class of approximately 32,000 individuals seeking statutory damages under FACTA who also had alleged no harm, concluding that the magnitude of the potential damage award does not affect the superiority of a class action for adjudication of this dispute. See Medrano v. WCG Holdings, Inc., No. SACV 07-0506 JVS (RNBx), 2007 WL 4592113, at  (C.D.Cal. Oct. 15, 2007). We cannot ascribe to Congress an intent to allow FACTA's deterrent and compensatory impact to vary according to the discretionary policy judgments of district judges. We therefore hold that the district court abused its discretion in considering the proportionality of the potential liability to the actual harm alleged in its Rule 23(b)(3) superiority analysis.