Batra v. Rls Supermarkets, LlcBrief/Memorandum in SupportN.D. Tex.December 15, 2016IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION SUMEET BATRA, on behalf of himself and all others similarly situated, Plaintiff, v. RLS SUPERMARKETS, LLC, Defendant. § § § § § § § § Case No. 3:16-cv-02874-B DEFENDANT’S MEMORANDUM IN SUPPORT OF MOTION TO DISMISS Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 1 of 21 PageID 44 ii TABLE OF CONTENTS I. Introduction ......................................................................................................................... 1 II. Legal Standards ................................................................................................................... 2 III. Argument and Authorities................................................................................................... 4 A. Plaintiff Lacks Article III Standing to Sue ............................................................. 4 (1) Plaintiff’s Alleged Injury is Not Concrete .................................................. 4 (2) Plaintiff’s Alleged Injury is Conjectural and Hypothetical, Not Actual or Imminent ..................................................................................................... 6 B. The Complaint Fails to Plausibly Allege a “Willful” Violation of FACTA ......... 12 IV. Prayer ................................................................................................................................ 15 Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 2 of 21 PageID 45 iii TABLE OF AUTHORITIES Cases Ashcroft v. Iqbal, 556 U.S. 662 (2009) .......................................................................................................... 3, 4, 13 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .................................................................................................................... 3 Chambliss v. Carefirst, Inc, No. 15-2288, 2016 WL 3055299 (D. Md. May 27, 2016) .......................................................... 9 Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138 (2013) ....................................................................................................... passim Crupar-Weinmann v. Paris Baguette Am., Inc., No. 13-7013, 2014 WL 2990110 (S.D.N.Y. June 30, 2014) .............................................. 13, 14 Cruper-Weinmann v. Paris Baguette Am., Inc., 653 F. App’x. 81 (2d Cir. 2016) ............................................................................................... 14 De La Paz v. Coy, 786 F.3d 367 (5th Cir. 2015) ...................................................................................................... 5 Diedrich v. Ocwen Loan Servicing, LLC, 839 F.3d 583 (7th Cir. 2016) ...................................................................................................... 2 Fullwood v. Wolfgang’s Steakhouse, Inc., No. 13-7174, 2014 WL 6076733 (S.D.N.Y. Nov. 14, 2014) .............................................. 13, 14 Galaria v. Nationwide Mut. Ins. Co., F. App’x, No. 15-3386, 2016 WL 4728027, (6th Cir. Sept. 12, 2016) ................................... 10 Gardner v. Appleton Baseball Club, Inc., No. 09-705, 2010 WL 1368663 (E.D. Wis. Mar. 31, 2010) ..................................................... 14 Green v. eBay Inc. No. 14-1688, 2015 WL 2066531 (E.D. La. May 4, 2015) ......................................................... 9 Howard v. Hooters, No. 07-3399, 2008 U.S. Dist. LEXIS 30776 (S.D. Tex. 2008) ................................................ 14 In re Barnes & Noble Pin Pad Litig., Case No. 12-cv-8617, 2013 WL 4759588, (N.D. Ill. Sep. 3, 2013) ........................................... 9 In re Sci. Applications Int’l Corp. (SAIC) Backup Tape Data Theft Litig., 45 F. Supp. 3d 14 (D.D.C. 2014) ................................................................................................ 9 In re: Cmty. Health Sys., Inc., No. 15-222, 2016 WL 4732630 (N.D. Ala. Sept. 12, 2016) ....................................................... 9 Katz v. Donna Karan Intern., Inc., No. 14-740, 2015 WL 405506 (S.D.N.Y. Jan. 30, 2015) ......................................................... 14 Khan v. Children’s Nat’l Health Sys., No. 15-2125, 2016 WL 2946165 (D. Md. May 19, 2016) ........................................................ 10 Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 3 of 21 PageID 46 iv Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010) ............................................................................................ 10, 11 Lee v. Verizon Commc’ns. Inc., 837 F.3d 523 (5th Cir. 2016) ...................................................................................................... 5 Lee, Planned Parenthood of Gulf Coast, Inc. v. Gee, 837 F.3d 477 (5th Cir. 2016) ...................................................................................................... 5 Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) ............................................................................................................ 2, 4, 8 Peters v. St. Joseph Servs. Corp., 74 F. Supp. 3d 847 (S.D. Tex. 2015) ........................................................................................ 11 Prestage Farms, Inc. v. Bd. of Sup’rs of Noxubee Cnty., Miss., 205 F.3d 265 (5th Cir. 2000) .................................................................................................. 6, 8 Raines v. Byrd, 521 U.S. 811 (1997) .................................................................................................................... 3 Redman v. RadioShack Corp. 768 F.3d at 638 ......................................................................................................................... 13 Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir. 2014) ...................................................................................................... 1 Reilly v. Ceridian Corp, 664 F.3d 38 (3d Cir. 2011) ..................................................................................................... 8, 9 Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015) .................................................................................................... 10 Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) ........................................................................................................ 12, 14, 15 Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26 (1976) ...................................................................................................................... 3 Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) ....................................................................................................... passim Stelmachers v. Verifone Sys., Inc., No. 14-04912, 2016 WL 6835084 (N.D. Cal. Nov. 21, 2016) ........................................... 11, 12 Storm v. Paytime, Inc., 90 F. Supp. 3d 359 (M.D. Pa. 2015) ........................................................................................... 9 Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334 (2014) ................................................................................................................ 2 Texas v. United States, 787 F.3d 733 (5th Cir. 2015) ...................................................................................................... 4 Vidoni v. Acadia Corp., No. 11- 00448, 2012 WL 1565128 (D. Me. Apr. 27, 2012) ..................................................... 14 Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 4 of 21 PageID 47 v Warth v. Seldin, 422 U.S 490 (1975) ..................................................................................................................... 3 Warth v. Seldin, 422 U.S. 490 (1975) ................................................................................................................ 3, 5 Whitmore v. Arkansas, 495 U.S. 149 (1990) .................................................................................................................... 6 Zaun v. Tuttle, Inc., No. 10-2191, 2011 WL 1741912 (D. Minn. May 4, 2011) ...................................................... 13 Statutes 15 U.S.C. § 1681n(a) ............................................................................................................ 1, 2, 15 50 U.S.C. § 1881a ........................................................................................................................... 6 Credit Card and Debit Card Receipt Clarification Act of 2007, Pub. L. No. 110-241 § 2(a), 122 Stat 1565, 1565 (2008) ..................................................... 5, 12 Other Authorities BLACK’S LAW DICTIONARY 479 (9th ed. 2009) .............................................................................. 4 Rules Federal Rule of Civil Procedure 12(b) .................................................................................. 1, 2, 15 Federal Rule of Civil Procedure 8(a)(2) ......................................................................................... 4 Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 5 of 21 PageID 48 Defendant’s Memorandum in Support of Motion to Dismiss-Page 1 Defendant RLS Supermarkets, LLC (“RLS”) files its memorandum in support of its motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6), and states as follows: I. Introduction Plaintiff Sumeet Batra (“Plaintiff”) alleges that RLS willfully violated the Fair and Accurate Credit Transactions Act (“FACTA”) by “printing the expiration date of the card, the last four digits of the card number, and the brand of the card . . . on receipts.” (Compl. ¶¶ 1, 3.) Plaintiff’s claims should be dismissed for two reasons: First, Plaintiff lacks standing to sue under Article III of the United States Constitution, and consequently this Court lacks jurisdiction. Second, the damages Plaintiff seeks are available only for a “willful” violation of FACTA, see 15 U.S.C. § 1681n(a), and Plaintiff has failed to plausibly allege that RLS’s alleged violation of FACTA was willful. The Complaint includes numerous references to the purposes of FACTA, such as “[t]he idea behind [the statute] is that, should the cardholder happen to lose the receipt of a transaction, the less information the receipt contains the less likely is an identity thief who happens to come upon the receipt to be able to figure out the cardholder’s full account information.” (Compl. ¶¶ 4-6 (quoting Redman v. RadioShack Corp., 768 F.3d 622, 626 (7th Cir. 2014)).) But Congress has expressly found that the inclusion of a card’s expiration date poses no additional danger so long as the card number is truncated. And Plaintiff does not allege that fraud or any other harm has befallen him due to the alleged receipt printed by RLS. Indeed, he pointedly does not allege that the information printed on his receipt issued by RLS has been misused in any way, and he does not seek actual damages under FACTA. He has not alleged facts sufficient to establish his standing to sue: his alleged injury-“expos[ure ] to at least an increased risk of identity theft and Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 6 of 21 PageID 49 Defendant’s Memorandum in Support of Motion to Dismiss-Page 2 credit and or debit card fraud” (Compl. ¶ 45)-is not an injury in fact sufficient to confer Article III standing. Plaintiff seeks statutory damages under 15 U.S.C. § 1681n(a), which are available only where the defendant’s violation of FACTA was “willful.”1 He alleges no facts plausibly showing that RLS was aware that printing the expiration date on a receipt that included only a truncated credit card number violates FACTA. As such, the Complaint fails to state a claim for willful violation of FACTA. This case should be dismissed for lack of subject-matter jurisdiction and for failure to state a claim on which relief could be granted. See FED. R. CIV. P. 12(b)(1), (6). II. Legal Standards Federal courts lack jurisdiction to adjudicate claims for which the plaintiff lacks standing to sue. “The doctrine of standing gives meaning” to the Constitution’s jurisdictional limits on federal courts “by ‘identify[ing] those disputes which are appropriately resolved through the judicial process.’” Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). It is the plaintiff’s burden to establish the three elements of constitutional standing: “[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (quoting Defs. of Wildlife, 504 U.S. at 560). 1 15 U.S.C. Section 1681n(a) allows a plaintiff to recover any “actual damages” suffered as a result of a willful violation of FACTA or statutory damages “of not less than $100 and not more than $1,000,” as well as punitive damages and attorney’s fees. Actual damages may be recovered under Section 1681o even if the violation was negligent (and not “willful”), but a finding of willfulness is required for recovery of the statutory damages. The “concrete injury” element of standing can be satisfied by actual damages suffered by the plaintiff, but here Plaintiff alleges no actual damages. See, e.g., Diedrich v. Ocwen Loan Servicing, LLC, 839 F.3d 583, 589 (7th Cir. 2016) (explaining that where the plaintiff had alleged actual damages suffered as a result of the defendant’s violation of the Real Estate Settlement Procedures Act, “the injury requirement for standing overlaps with the injury requirement under the statute”). Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 7 of 21 PageID 50 Defendant’s Memorandum in Support of Motion to Dismiss-Page 3 “Where, as here, a case is at the pleading stage, the plaintiff must ‘clearly . . . allege facts demonstrating’ each element” of Article III standing. Id. (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)). It is well settled that Congress cannot “erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.” Id. at 1548-49 (quoting Raines v. Byrd, 521 U.S. 811, 820 (1997)). A plaintiff seeking to represent a class must likewise show that he has personally been injured. See Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976) (quoting Warth v. Seldin, 422 U.S 490, 502 (1975)) (explaining that “even named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent’”). Even if the court has jurisdiction, the claim must be dismissed if the complaint does not contain “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citation and quotation marks omitted); see Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility requires factual allegations that “allow for a reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 679. First, the court is to “identif[y] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679. A pleading that “offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Id. at 678 (quoting Twombly, 550 U.S. at 570). Second, the court reviews the “well-pleaded factual allegations” to determine whether they plausibly give rise to any entitlement to relief. Id. at 679. Where the “well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 8 of 21 PageID 51 Defendant’s Memorandum in Support of Motion to Dismiss-Page 4 alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’” Id. (quoting FED. R. CIV. P. 8(a)(2)). III. Argument and Authorities Plaintiff’s Complaint (Doc. 1) should be dismissed with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). Plaintiff lacks Article III standing because his only alleged injury-“expos[ure ] to at least an increased risk of identity theft and credit and or debit card fraud” (Compl. ¶ 45)-is (1) not concrete and (2) not actual or imminent. As such, this Court lacks jurisdiction and Plaintiff’s claim must be dismissed. Moreover, Plaintiff has failed to state a claim on which relief can be granted because he fails to allege facts plausibly showing that Defendant acted “willfully,” as required to recover the statutory damages Plaintiff seeks. A. Plaintiff Lacks Article III Standing to Sue At the pleading stage, the plaintiff must establish his Article III standing by “show[ing] that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, 136 S. Ct. at 1548 (quoting Defs. of Wildlife, 504 U.S. at 560). (1) Plaintiff’s Alleged Injury is Not Concrete That Congress has created a private cause of action for violations of FACTA-even in the absence of actual damages-is insufficient to create Article III standing. “Article III standing requires a concrete injury even in the context of a statutory violation.” Spokeo, 136 S. Ct. at 1549. “A ‘concrete’ injury must be ‘de facto’; that is, it must actually exist.” Id. at 1548 (citing, inter alia, BLACK’S LAW DICTIONARY 479 (9th ed. 2009)). The Supreme Court has explained that the adjective “concrete” denotes an injury that is “‘real,’ and not ‘abstract.’” Id. at 1548 (internal citations omitted); see also Texas v. United States, 787 F.3d 733, 750 (5th Cir. 2015) (explaining that standing does not exist where the plaintiff has “suffered no real injury”). As the Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 9 of 21 PageID 52 Defendant’s Memorandum in Support of Motion to Dismiss-Page 5 Fifth Circuit recently explained, “the deprivation of a right created by statute must be accompanied by ‘some concrete interest that is affected by the deprivation.’” Lee v. Verizon Commc’ns. Inc., 837 F.3d 523, 529 (5th Cir. 2016) (quoting Spokeo, 136 S. Ct. at 1549). In Spokeo, the Court indicated that a statutory violation cannot give rise to standing unless the violation could “cause harm or present any material risk of harm.” 136 S. Ct. at 1550 (explaining that the technical statutory violation of providing an incorrect zip code when required to report such information accurately would not likely “work any concrete harm”).2 Congress itself has recognized that the very risk of harm alleged by Plaintiff-“exposing [him] to at least an increased risk of identity theft and credit and or debit card fraud” (Compl. ¶ 45)-does not exist. Plaintiff has suffered no concrete injury: “[e]xperts in the field agree that proper truncation of the card number, by itself[,] . . . regardless of the inclusion of the expiration date, prevents a potential fraudster from perpetrating identity theft or credit card fraud.” Credit Card and Debit Card Receipt Clarification Act of 2007, Pub. L. No. 110-241 § 2(a), 122 Stat 1565, 1565 (2008). In other words, as found by Congress, RLS’s alleged conduct (including an expiration date while truncating the credit card number on a receipt (see Compl. ¶¶ 3, 31-32), poses no additional risk of identity theft or fraud because the truncation of the card number is 2 In Spokeo, the Court explained that “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation.” 136 S. Ct. at 1549. In another decision decided after Spokeo, Planned Parenthood of Gulf Coast, Inc. v. Gee, 837 F.3d 477 (5th Cir. 2016), the Fifth Circuit cited Warth v. Seldin, 422 U.S. 490, 514 (1975), in dicta for the proposition that “a violation of a statutory right, even standing alone, is sufficient to satisfy the injury requirement.” Planned Parenthood, 837 F.3d at 487. The Fifth Circuit’s dicta is best read to implicitly recognize the guidance given in Spokeo: “a violation of a statutory right” must nevertheless constitute a concrete injury. In the event the Fifth Circuit’s Planned Parenthood opinion can be read as inconsistent with Spokeo, any inconsistency is in dicta and subject to the rule that “‘a question not raised by counsel or discussed in the opinion of the court’ has not ‘been decided,’” De La Paz v. Coy, 786 F.3d 367, 373 (5th Cir. 2015) (quoting United States v. Mitchell, 271 U.S. 9, 14 (1926)), because the case was fully briefed before the Supreme Court’s Spokeo opinion issued and the question of “concreteness” under the Court’s guidance in Spokeo was not raised. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 10 of 21 PageID 53 Defendant’s Memorandum in Support of Motion to Dismiss-Page 6 sufficient. Plaintiff has alleged no injury that is “real, and not abstract.” Spokeo, 136 S. Ct. at 1548 (quotation marks omitted). The Supreme Court observed in Spokeo that the “judgment of Congress” plays an “important role[ ]” in the “determin[ation] whether an intangible harm constitutes injury in fact.” Id.at 1549. Here, Congress’s judgment is that Plaintiff’s alleged increased risk of identity theft or fraud does not exist. (2) Plaintiff’s Alleged Injury is Conjectural and Hypothetical, Not Actual or Imminent To satisfy Article III’s injury-in-fact requirement, the harm alleged must also be “actual or imminent;” in other words, if no harm has yet occurred, it must be “certainly impending.” Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138, 1147 (2013). The Supreme Court has made clear that “‘allegations of possible future injury’ are not sufficient.” Id. (citing Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)). When the “claimed anticipated injury” is nothing but an “uncertain potentiality,” the plaintiff lacks standing. Prestage Farms, Inc. v. Bd. of Sup’rs of Noxubee Cnty., Miss., 205 F.3d 265, 268 (5th Cir. 2000). In Clapper, several U.S.-based organizations challenged the constitutionality of a provision of the Foreign Intelligence Surveillance Act of 1978 (“FISA”), 50 U.S.C. § 1881a, that “allows the Attorney General and the Director of National Intelligence to acquire foreign intelligence information by jointly authorizing the surveillance of individuals who are not ‘United States persons.’” 133 S. Ct. at 1142. The plaintiffs challenged the law, arguing that they were injured because there was a risk their private conversations with foreign nationals (not United States persons) could be subject to surveillance by the government and that the provision therefore violated their rights under the United States Constitution. Id. at 1147-48. The Court concluded that the plaintiffs lacked Article III standing because the alleged “threatened injury” rested on a “highly attenuated chain of possibilities”: Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 11 of 21 PageID 54 Defendant’s Memorandum in Support of Motion to Dismiss-Page 7 (1) the Government will decide to target the communications of non-U.S. persons with whom they communicate; (2) in doing so, the Government will choose to invoke its authority under § 1881a rather than utilizing another method of surveillance; (3) the Article III judges who serve on the Foreign Intelligence Surveillance Court will conclude that the Government’s proposed surveillance procedures satisfy § 1881a’s many safeguards and are consistent with the Fourth Amendment; (4) the Government will succeed in intercepting the communications of respondents’ contacts; and (5) respondents will be parties to the particular communications that the Government intercepts. Id. at 1148. Because these numerous (potential) causal links were speculative and subject to many contingencies, the Court concluded that no imminent injury was alleged. Id. Importantly, the Clapper Court also voiced its “reluctance to endorse standing theories that rest on speculation about the decisions of independent actors.” Id. at 1150. As additional reason to reject the plaintiff organizations’ theory of standing, the Court explained that the risk alleged depended on decisions of the FISA Court-which must approve surveillance requests- and not solely on the government’s actions in seeking surveillance. Id. Plaintiff lacks standing here because the Complaint does not allege any injury that is “certainly impending.” Plaintiff’s only alleged injury is “expos[ure] . . . to at least an increased risk of identity theft and credit and or debit card fraud.” (Compl. ¶ 45.) In order for identity theft or credit/debit card fraud to occur based on information printed on a receipt, numerous additional, contingent events would have to take place: (1) Plaintiff himself would have to lose possession of the receipt; (2) the receipt would have to fall into the hands of a potential thief or fraudster; (3) the thief or fraudster would need to have knowledge of how to use the information contained in the receipt to steal or defraud; and (4) the thief or fraudster would need to commit a crime by committing fraud or identity theft using the information in some way that harms Plaintiff. Crucially, Plaintiff does not allege that any of these events has taken place: he does not allege that he has so much as lost possession of a receipt issued by RLS, that such a receipt has come Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 12 of 21 PageID 55 Defendant’s Memorandum in Support of Motion to Dismiss-Page 8 into the possession of anyone else (much less a thief or fraudster), that someone in possession of such a receipt has the knowledge necessary to use the information or has formed an intent to do so, or that such person has indeed committed a crime by committing fraud or identity theft using the information to harm him. This “speculative chain of possibilities does not establish that injury based on [increased risk of identity theft or fraud] is certainly impending.” Clapper, 133 S. Ct. at 1150; see also Prestage Farms, 205 F.3d at 268 (plaintiffs lacked standing where their claimed injury “depend[ed] on the occurrence of a number of uncertain events”). Moreover, all of these contingencies depend on the decisions of independent actors, not RLS: a receipt issued by RLS can only be used to commit identity theft or fraud if a thief or fraudster obtains it and commits a crime by using it successfully. Where an independent actor’s actions and choices must intervene before the threatened harm can occur, that harm is not imminent. See Clapper, 133 S. Ct. at 1150 & n.5 (quoting, inter alia, Defs. of Wildlife, 504 U.S. at 562) (“Plaintiffs cannot rely on speculation about ‘the unfettered choices made by independent actors not before the court.’”). Article III standing based on an increased risk of identity theft or fraud frequently has been litigated in the context of data-breach incidents. The principle in this case is similar, though not identical, to Reilly v. Ceridian Corp, 664 F.3d 38 (3d Cir. 2011), in which the court concluded that plaintiffs whose personal information may have been accessed by hackers lacked Article III standing. Id. at 40. The plaintiffs alleged that hackers who had breached a payroll processing company’s firewall may have obtained information such as their full names, social security numbers, dates of birth, and bank account information. Id. The court concluded that they had failed to allege injury in fact. In Reilly, the plaintiffs’ theory of standing relied on “speculation that the hacker”: Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 13 of 21 PageID 56 Defendant’s Memorandum in Support of Motion to Dismiss-Page 9 (1) read, copied, and understood their personal information; (2) intends to commit future criminal acts by misusing the information; and (3) is able to use such information to the detriment of Appellants by making unauthorized transactions in Appellants’ names. Unless and until these conjectures come true, Appellants have not suffered any injury; there has been no misuse of the information, and thus, no harm. Id. at 42. Numerous courts have agreed that allegations of an increased risk of identity theft or fraud, in the absence of allegations of actual misuse or access by someone with intent to misuse the information, are insufficient to confer standing because the injury alleged is not “certainly impending.”3 Here, Plaintiff’s harm is even more conjectural than the harm alleged in Reilly and other data breach cases-in data breach cases, unlike this one, the plaintiffs can allege that someone has gained unauthorized access to their personal information. Plaintiff in this case does not do the same. Plaintiff does not allege that anyone (much less anyone with wrongful intent to commit a crime by engaging in identity theft or fraud) has gained access to a receipt issued to him by RLS. The courts that have found standing based on a risk of identity theft or fraud require more than a conjectural possibility that sensitive information could have been exposed. Where a 3 See, e.g., In re: Cmty. Health Sys., Inc., No. 15-222, 2016 WL 4732630, at *10 (N.D. Ala. Sept. 12, 2016) (holding that “allegations that Plaintiffs have an ‘increased risk’ of becoming victims of identity theft crimes, fraud and abuse . . . where that risk is not accompanied by misuse of the stolen data” are insufficient to confer Article III standing); Chambliss v. Carefirst, Inc, No. 15-2288, 2016 WL 3055299, at *4 (D. Md. May 27, 2016) (recognizing that “most courts to consider the issue ‘have agreed that the mere loss of data-without any evidence that it has been either viewed or misused-does not constitute an injury sufficient to confer standing’” and holding that plaintiffs lacked standing); Green v. eBay Inc. No. 14-1688, 2015 WL 2066531, at *4-6 (E.D. La. May 4, 2015) (plaintiff who alleged his personal information stored by online marketplace eBay had been accessed failed to allege an injury in fact); Storm v. Paytime, Inc., 90 F. Supp. 3d 359, 366 (M.D. Pa. 2015) (finding no standing where plaintiffs whose personal information was subject to a data breach “only alleged the data was accessed by an unknown third party”); In re Sci. Applications Int’l Corp. (SAIC) Backup Tape Data Theft Litig., 45 F. Supp. 3d 14, 25 (D.D.C. 2014) (plaintiffs who alleged no more than an increased risk of identity theft due to theft of data tapes containing their personal information had not alleged an imminent injury); In re Barnes & Noble Pin Pad Litig., Case No. 12-cv-8617, 2013 WL 4759588, at *3 (N.D. Ill. Sep. 3, 2013) (“The Plaintiffs’ claim of actual injury in the form of increased risk of identity theft is insufficient to establish standing.”). Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 14 of 21 PageID 57 Defendant’s Memorandum in Support of Motion to Dismiss-Page 10 plaintiff’s personal data actually has been stolen or there is evidence of actual fraud or identity theft, some courts of appeals have found injury in fact, reasoning that an intentional theft of personal and financial information indicates that the thief or hacker intends to use the information, making harm sufficiently imminent. See Galaria v. Nationwide Mut. Ins. Co., --- F. App’x ---, No. 15-3386, 2016 WL 4728027, at *3-4 (6th Cir. Sept. 12, 2016); Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 694-95 (7th Cir. 2015); Krottner v. Starbucks Corp., 628 F.3d 1139, 1143 (9th Cir. 2010). As one court has recognized, such cases are distinguishable from Reilly on their facts, not on the legal principle applied: “[i]n Krottner and Remijas, the allegations included either actual examples of the use of the fruits of the data breach for identity theft, even if involving victims other than the named plaintiffs, or a clear indication that the data breach was for the purpose of using the plaintiffs’ personal data to engage in identity fraud. By contrast, in Reilly, neither of these factors was present.” Khan v. Children’s Nat’l Health Sys., No. 15-2125, 2016 WL 2946165, at *4-5 (D. Md. May 19, 2016). Wrongful intent was also alleged in Galaria, where hackers “broke into Nationwide’s computer network and stole the personal information of Plaintiffs and 1.1 million others.” 2016 WL 4728027, at *4-5.4 Mere exposure of information to others is not enough (and Plaintiff here has not even alleged that the receipt was exposed to others). The hypothetical and speculative nature of any future risk of identity theft or fraud caused by exposure of financial information has been explained as follows: 4 Moreover, in Galaria, the Sixth Circuit relied on allegations of “a substantial risk of harm, coupled with reasonably incurred mitigation costs” to confer standing, see 2016 WL 4728027, at *3, a type of injury that the Supreme Court has indicated cannot save a theory of standing that relies on an “attenuated chain of inferences.” Clapper, 133 S. Ct. at 1150 n.5. Even assuming the “substantial risk” standard is good law, Plaintiff here has alleged no reasonably incurred mitigation costs or any risk of harm that is substantial, and not attenuated. Plaintiff would lack standing under the “substantial risk” theory of standing as well. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 15 of 21 PageID 58 Defendant’s Memorandum in Support of Motion to Dismiss-Page 11 [A plaintiff] might be able to demonstrate [that] harm [will occur] if third parties become aware of her exposed information and reveal their interest in it; if they form an intent to misuse her information; and if they take steps to acquire and actually use her information to her detriment. The misuse of her information could take any number of forms, at any point in time. The risk of future harm is, no doubt, indefinite. It may even be impossible to determine whether the misused information was obtained from exposure caused by the Data Breach or from some other source. Peters v. St. Joseph Servs. Corp., 74 F. Supp. 3d 847, 854 (S.D. Tex. 2015). Here, an additional contingency must be added to the beginning of the list of “ifs”: “[Plaintiff] might be able to demonstrate harm” if his credit card expiration date is exposed . . .” Peters, 74 F. Supp. 3d at 854. In Krottner, the Ninth Circuit found injury in fact where a laptop containing unencrypted personal information-including the plaintiffs’ social security numbers and financial information-had been stolen, while explaining that “if no laptop had been stolen” the risk of identity theft would be too conjectural to supporting standing. 628 F.3d at 1143.5 That is the case here: Plaintiff’s receipt has not been stolen. His theory of injury relies on a “highly attenuated chain of possibilities” and is consequently insufficient to establish standing. Clapper, 133 S. Ct. at 1147. * * * In dismissing the Complaint for lack of jurisdiction, this Court would not be the first to recognize that, under Spokeo, allegations of an increased risk of identity theft or fraud resulting from a procedural violation of FACTA are insufficient to establish Article III standing. In Stelmachers v. Verifone Sys., Inc., No. 14-04912, 2016 WL 6835084 (N.D. Cal. Nov. 21, 2016), the court concluded that a plaintiff who had received a receipt containing more than just the last 5 Notably, Krottner was decided before the Supreme Court’s decision in Clapper clarified the requirements of standing based on “imminent” future harm, and consequently is persuasive only insofar as it is consistent with Clapper. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 16 of 21 PageID 59 Defendant’s Memorandum in Support of Motion to Dismiss-Page 12 five digits of his credit card number-a FACTA violation-had failed to adequately allege injury in fact. Id. at *4. The Stelmachers court recognized that a plaintiff who fails to allege that anyone other than himself “received the receipt” has not alleged an injury in fact because the risk of identity theft is “too attenuated to constitute a qualifying injury in fact.” Id. Plaintiff’s alleged injury here is even more attenuated and less real than the harm alleged in Stelmachers, given that the inclusion of an expiration date does not pose any additional risk of fraud. Plaintiff has not alleged an injury in fact. B. The Complaint Fails to Plausibly Allege a “Willful” Violation of FACTA To plead willfulness, the plaintiff must plead facts sufficient to show a violation that was knowing or reckless. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007). The Supreme Court has made clear that a defendant “does not act in reckless disregard of [FACTA] unless the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” Id. at 60. FACTA’s requirements are far from obvious: even Congress has recognized that the provision at issue is not clear, and that many merchants, while attempting to comply with FACTA by truncating the card number, nevertheless failed to understand that the expiration date should be removed as well. See Pub. L. No. 110-241 § 2(c), 122 Stat 1565 (finding that “[m]any merchants understood that this requirement would be satisfied by truncating the account number down to the last 5 digits based in part on the language of the provision as well as the publicity in the aftermath of the passage of the law”). As such, allegations that the defendant was aware of FACTA are not enough to show a willful violation; willfulness requires a showing of knowledge that the defendant’s conduct violated FACTA, not just that the defendant knew of FACTA’s existence. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 17 of 21 PageID 60 Defendant’s Memorandum in Support of Motion to Dismiss-Page 13 “[A] willful violation does not require merely that a defendant know of FACTA’s requirements and violate them, but also that the defendant have knowledge of or recklessness as to the fact that its behavior violates the statute.” Fullwood v. Wolfgang’s Steakhouse, Inc., No. 13-7174, 2014 WL 6076733, at *3 (S.D.N.Y. Nov. 14, 2014); see also Crupar-Weinmann v. Paris Baguette Am., Inc., No. 13-7013, 2014 WL 2990110, at *4 (S.D.N.Y. June 30, 2014), reconsideration denied, 41 F. Supp. 3d 411, vacated and remanded in light of Spokeo, 653 F. App’x. 81 (2d Cir. 2016).6 As such, to survive a motion to dismiss, the plaintiff must allege something more than knowledge of FACTA and its requirements. For example, in Zaun v. Tuttle, Inc., No. 10-2191, 2011 WL 1741912, at *2 (D. Minn. May 4, 2011), the defendants had been told by a point-of-sale contractor that its systems needed to be updated to comply with the law, and the defendant instead “disregarded those warnings and cancelled its service contract.” Id. at *2. And in Redman v. RadioShack Corp., “[t]he company had been found in an earlier lawsuit to have left the expiration date on receipts in violation of a parallel state statute, and apparently failed to take adequate precautions against repeating the violation.” 768 F.3d at 638. The Complaint is devoid of any particular facts indicating that RLS was aware that printing a credit card’s expiration date, even while truncating the card number, violated FACTA. The Complaint’s factual allegations are no more than allegations that RLS knew or should have known of FACTA’s requirements. (Importantly, the bare and conclusory allegation that RLS “knew of” FACTA (Compl. ¶ 34) is not entitled to the presumption of truth afforded to well- pleaded allegations. Iqbal, 556 U.S. at 678-79.) Plaintiff alleges that RLS was told about FACTA through communications published by credit card companies, banks, and the Federal Trade Commission (Compl. ¶¶ 34-38) and that RLS’s machines nevertheless were configured 6 The Second Circuit vacated and remanded the case in light of Spokeo to give the plaintiffs the opportunity to replead their claims to sufficiently allege standing; it did not reach the issue of willfulness. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 18 of 21 PageID 61 Defendant’s Memorandum in Support of Motion to Dismiss-Page 14 “such that they would print . . . receipts that displayed the card’s expiration date on each customer’s receipt” (Compl. ¶ 39). None of these allegations plausibly show that RLS was aware that the alleged impermissible information contained on its receipts-the expiration date- violated FACTA or that it acted with knowledge or reckless disregard for its obligations. See Fullwood, 2014 WL 6076733, at *6 (concluding that “the Plaintiff must also allege that there was something more than a negligent violation, i.e. a voluntary, deliberate, or intentional violation”) (internal citation omitted). Indeed, it is clear from the face of the Complaint that RLS partially complied with FACTA by printing only the last four digits of credit card numbers on its receipts. (Compl. ¶ 32.) These allegations therefore support the inference that RLS attempted to comply with FACTA and the alleged failure to redact the expiration date was inadvertent. The fact that the RLS- printed receipt truncated the credit card account number renders Plaintiff’s theory of willfulness implausible. As one court has explained: The fact that the account number was properly truncated shows that the Defendant attempted to comply with FACTA, and given the fact that no additional protection of the consumer is achieved by deleting the expiration date, it can hardly be said that its action “entail[ed] an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Gardner v. Appleton Baseball Club, Inc., No. 09-705, 2010 WL 1368663, at *6 (E.D. Wis. Mar. 31, 2010) (quoting Safeco, 551 U.S. at 68); see also Katz v. Donna Karan Intern., Inc., No. 14- 740, 2015 WL 405506, at *2 (S.D.N.Y. Jan. 30, 2015), vacated and remanded in light of Spokeo sub nom. Cruper-Weinmann v. Paris Baguette Am., Inc., 653 F. App’x. 81 (2d Cir. 2016); Fullwood, 2014 WL 6076733, at *7; Crupar-Weinmann, 2014 WL 2990110, at *4; Howard v. Hooters, No. 07-3399, 2008 U.S. Dist. LEXIS 30776, at *3 (S.D. Tex. 2008); cf. Vidoni v. Acadia Corp., No. 11- 00448, 2012 WL 1565128, at *4 (D. Me. Apr. 27, 2012) (“The only Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 19 of 21 PageID 62 Defendant’s Memorandum in Support of Motion to Dismiss-Page 15 reasonable inference from the Defendant’s failure to implement FACTA at one of its locations and not others is that the Defendant’s failure was inadvertent.”). Plaintiff’s claim to statutory damages under 15 U.S.C. § 1681n(a) should be dismissed because the Complaint does not plausibly allege a “knowing or reckless” violation of FACTA’s receipt-redaction requirements. Safeco, 551 U.S. at 57. Accordingly, Plaintiff has failed to state a claim on which relief could be granted. IV. Prayer Plaintiff lacks standing under Article III of the United States Constitution because he has not alleged an injury in fact-his alleged injury is neither concrete nor actual or imminent. The Complaint (Doc. 1) should be dismissed for lack of subject-matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Moreover, for the reasons stated above, the Complaint fails to state a claim on which relief could be granted because it fails to plausibly allege a “willful” violation of FACTA. The Complaint should likewise be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). RLS therefore respectfully requests that the Court dismiss this case with prejudice. Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 20 of 21 PageID 63 Defendant’s Memorandum in Support of Motion to Dismiss-Page 16 Respectfully submitted, /s/ Jason S. Lewis Jason S. Lewis Texas Bar No. 24007551 lewisjs@gtlaw.com Lori S. Nugent Texas Bar No. 240941143 nugentl@gtlaw.com Natalie D. Thompson Texas Bar No. 24088529 thompsonna@gtlaw.com GREENBERG TRAURIG, LLP 2200 Ross Avenue, Suite 5200 Dallas, Texas 75201 (214) 665-3660 - office (214) 665-5960 - facsimile ATTORNEYS FOR RLS SUPERMARKETS, LLC CERTIFICATE OF SERVICE I certify that I served the foregoing brief on all counsel of record via the court’s CM/ECF system on December 15, 2016. /s/ Jason S. Lewis Jason S. Lewis Case 3:16-cv-02874-B Document 14 Filed 12/15/16 Page 21 of 21 PageID 64