Eleventh Circuit Rejects Constitutional Challenge to FACTA Amendments

The Eleventh Circuit reversed the district court's dismissal of an action under the FACTA amendments to the FCRA, holding that the statutory damages provisions imposed by the FACTA amendments are not unconstitutionally vague and excessive. Harris v. Mexican Specialty Foods, Inc., 2009 U.S. App. LEXIS 7681 (11th Cir., April 9, 2009).

The case arose out of a putative class action on behalf of consumers. The class representatives alleged that the defendants-merchants violated the law by printing the expiration dates and more than the last 5 digits of credit card numbers on receipts, practices that the FACTA amendments outlawed. Among other things, the class representatives sought statutory damages, which range from $100 to $1,000 per violation.

The key holding of the opinion was that the FACTA amendments passed the “facial vagueness” test – the statute, on its face, is not impermissibly vague. The core argument in favor of unconstitutional vagueness was that the FACTA amendments, by providing a range of statutory damages from $100 to $1,000 per violation without any standards of where in this range to fix damages, made the statute so vague that a potential defendant would have no way of knowing the potential consequences of a violation. The Eleventh Circuit rejected this argument, in part citing other federal statutes that contained ranges of statutory damages higher than imposed by the FACTA amendments.

The court also rejected an argument that the statute was impermissibly excessive, chiefly because the district court had reached this conclusion by equating the statutory damages provision to a punitive damages provision. The Eleventh Circuit rejected this approach and held that the statute was not excessive.

The court held that an “as-applied” vagueness challenge was not ripe because the factual record was not fully developed. The district court had granted summary judgment, and the Eleventh Circuit reasoned that a trial would be required to develop the factual record fully enough to render a decision on the “as-applied” challenge.

The practical effects of this ruling are probably minimal. Most merchants have long since changed their practices to comply with the FACTA amendments. However, the opinion contains some fairly strong dicta in support of statutes that regulate economic activity. Overall, the opinion will likely make challenges to regulatory statutes that much more difficult.

As for potential of review by the Supreme Corut, nothing thus far indicates that this case would distinguish itself from the thousands of cases for which certiorari is denied each year.