May 17, 2017 (New York) – Federal Judge Paul Crotty has again dismissed a class action lawsuit filed against Proskauer client Donna Karan International. The court found that the plaintiff lacked Article III standing to pursue the claim. This outcome is a significant victory against the cottage industry of consumer class actions seeking millions of dollars in statutory damages based on mere procedural violations of federal statutes.
The plaintiff, on behalf of a proposed class of DKI retail store customers, alleged that DKI violated the Fair and Accurate Credit Reporting Act (FACTA) by printing more than the last five digits of the customer’s credit card number on his purchase receipts. FACTA was enacted to deter identity theft.
The dismissed claim sought statutory damages of $100 to $1,000 per errant receipt for each class member plus attorney’s fees, based on the allegation that the lapse was reckless (as opposed to negligent, which would only entitle the plaintiff to actual damages, of which none were alleged).
In January 2015, Judge Crotty had dismissed the case on the grounds that simply alleging that all merchants knew about FACTA’s truncation requirement was insufficient to establish that failing to truncate properly constituted recklessness. The court did not, at that time, reach DKI’s separate argument that the named plaintiff lacked Article III standing because the plaintiff had not suffered concrete injury.
After oral argument at the Second Circuit, the court remanded the case to the district court to consider standing, particularly in light of the Supreme Court’s recent decision in Spokeo v. Robbins. Spokeo held that violations of a procedural right granted by a statute, but without allegations of concrete injury, are not enough to confer standing.
On remand, Judge Crotty adopted DKI’s standing arguments in their entirety. In particular, he agreed that since no third party ever had access to the errant receipt (the plaintiff rushed it to the lawyer who filed the case two days after the purchase), the plaintiff had not suffered identity theft nor was at risk of it. The violation was, therefore, entirely procedural and did not meet Article III’s concrete injury requirement.
DKI is represented by partners Gregg Mashberg and Chuck Sims and associate David Munkittrick (Litigation), with advice from partner Kristen Mathews (Privacy and Cybersecurity).
Proskauer is also representing clients in nearly identical cases in Illinois and California.