In a recent decision, the United States District Court for the Northern District of Illinois (the "Court") held that the Fair and Accurate Credit Transactions Act ("FACT Act" or the "Act") does not violate the Due Process Clause of the Fifth Amendment or the Equal Protection Clause of the Fourteenth Amendment. Irvine v. 233 Skydeck, LLC, No. 08-C-4939 (N.D.Ill. 2009). As a result, the Court permitted consumers to proceed with a class action against 233 Skydeck, LLC ("Skydeck") -- the operator of a tourist attraction in the Sears Tower called the "Skydeck".
According to the complaint, a consumer paid for admission to the Skydeck with a credit card and received a computer-generated receipt, which contained his card expiration date. The consumer filed a class action lawsuit against Skydeck for violating the FACT Act. In his complaint, the consumer does not allege that he incurred any actual damages, but seeks statutory damages, punitive damages and attorneys’ fees under the Act.
The Act states that "no 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). The Act expressly exempts from this requirement those "transactions in which the sole means of recording a credit or debit card account number is by handwriting or by an imprint or copy of the card." 15 U.S.C. § 1681c(g)(2). The Act provides for statutory damages between $100 and $1,000 or actual damages, as well as punitive damages and attorneys’ fees. 15 U.S.C. § 1681n.
In Irvine, Skydeck filed a motion to dismiss and alleged that the FACT Act is unconstitutional for the following reasons: (1) the Act violates due process because the range of statutory damages allowed for a willful violation is impermissibly vague and, combined with punitive damages, would permit "excessive" damages; (2) the Act violated due process because it permits punitive damages, in addition to statutory damages, which constitutes "double punishment"; and (3) the Act violates the Equal Protection Clause because it does not apply to handwritten or imprinted credit card receipts.
First, the Court stated that, in a commercial context, a statute must only be "sufficiently clear to be understood by an ordinary person operating a profit-driven business." As such, the Court found that the range of statutory damages was not vague because a reasonable jury would be able to determine the proper amount of damages within the statutory range for a violation of the Act. The Court rejected Skydeck’s argument that the imposition of statutory damages and punitive damages would be so disproportionate to any actual damages that it would violate due process.
Second, the Court held that an award of statutory damages and punitive damages would not constitute "double punishment" in violation of due process. The Court stated that Skydeck’s reliance on the double jeopardy clause of the Fifth Amendment was misplaced because that clause protects only against the imposition of multiple criminal punishments for the same offense. The Court found that because the consumer does not (and cannot) argue that the Act’s damages’ provisions constitute criminal punishment, the double jeopardy clause does not apply.
Third, the Court rejected Skydeck’s argument that the Act violated the Equal Protection Clause based on the fact that its prohibitions do not apply to merchants who issue imprinted or handwritten credit card receipts. The Court stated that, where a challenged statute does not involve a suspect class or a fundamental right, a court will find that a statutory classification is valid if it bears a rational relation to a legitimate governmental purpose. The Court determined that the appropriate test is whether "the classification rests on grounds wholly irrelevant to the achievement of the [s]tate’s objective" and "[a] statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it." In Irvine, the Court stated that it is highly unlikely that a merchant would issue only a single non-compliant receipt when using an electronic printing system. On the other hand, the Court found that with respect to handwritten or imprinted receipts, it is possible that a merchant may occasionally forget to omit certain information. The Court found that the potential harm caused by an electronic printing system that issues a large number of non-compliant receipts would outweigh the harm caused by an occasional non-compliant handwritten or imprinted receipt. As a result, the Court found that the Act’s exemption of handwritten and imprinted receipts bears a rational relation to the government’s legitimate purpose of preventing identity theft, and thus, does not violate the Equal Protection Clause.
The Court denied Skydeck’s motion to dismiss and allowed the consumer class action to proceed against Skydeck. A copy of the Court's decision can be found at Irvine v. 233 Skydeck, LLC, 597 F. Supp. 2d 799 (2009).