Stelmachers v. VeriFone Systems, Inc.
Filing
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ORDER granting 36 Motion to Dismiss. Any amended complaint must be filed on or before 12/7/2016. Signed by Judge Edward J. Davila on 11/21/2016. (ejdlc1S, COURT STAFF) (Filed on 11/21/2016)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
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PAUL M. STELMACHERS, individually
and on behalf of a class of similarly-situated
persons,
Plaintiff,
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Case No. 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS
Re: Dkt. No. 36
v.
United States District Court
Northern District of California
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VERIFONE SYSTEMS, INC.,
Defendant.
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The Fair and Accurate Credit Transactions Act of 2003 (“FACTA”), an amendment to the
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Fair Credit Reporting Act of 1970 (“FCRA”), 15 U.S.C. § 1681 et seq., prohibits persons
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accepting credit and debit cards from printing more than the last five digits of the card number on
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any receipt provided to the cardholder at the point of sale or transaction. 15 U.S.C. § 1681c(g). In
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this putative class action, Plaintiff Paul M. Stelmachers (“Plaintiff”) contends in a First Amended
Complaint (“FAC”) that Defendant Verifone Sytems, Inc. (“Verifone”) violated FACTA by doing
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just that. Dkt. No. 35.
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Federal jurisdiction arises pursuant to 28 U.S.C. § 1331. Presently before the court is
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Verifone’s motion to dismiss the FAC, which Plaintiff opposes. Dkt. Nos. 36, 37. Also before the
court is the issue of Plaintiff’s standing, which the court raised sua sponte in a request for
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supplemental briefing. Dkt. No. 44.
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Having carefully considered the parties’ pleadings, the court has determined that Plaintiff
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failed to establish Article III standing with the allegations in the FAC. Consequently, Verifone’s
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motion to dismiss will be functionally granted and the FAC dismissed based on the following
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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discussion.
I.
BACKGROUND
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According to the FAC, Verifone “produces machines that accept credit cards and debit
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cards in the course of transacting business . . . .” FAC, at ¶ 36. These machines electronically
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print receipts documenting the transactions. Id. Verifone also manages the machines after they
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have been sold and programs its machines to produce receipts only to the specifications of
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Verifone. Id. at ¶¶ 37, 38.
On June 3, 2014, Plaintiff took a taxi cab ride in Las Vegas and used his credit card to pay
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for the cab. Id. at ¶¶ 20, 21. Verifone’s product was used to receive Plaintiff’s payment. Id. at ¶
23. Once the payment was processed, Plaintiff “received” a “computer-generated receipt
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United States District Court
Northern District of California
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displaying more than the last five (5) digits of Plaintiff’s credit card number.” Id. at ¶ 24.
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Plaintiff asserts the receipt violated § 1681c(g) of FACTA, and seeks to represent a class
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of individuals who received electronically printed receipts from Verifone which displayed more
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than the last five digits of the purchaser’s credit or debit card number. The court dismissed
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Plaintiff’s original complaint on December 7, 2015. Dkt. No. 34. He filed the FAC on December
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30, 2015. This motion followed.
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II.
LEGAL STANDARD
Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient
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specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which
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it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted).
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The factual allegations “must be enough to raise a right to relief above the speculative level” such
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that the claim “is plausible on its face.” Id. at 556-57. A complaint that falls short of the Rule
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8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R.
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Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a
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cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v.
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Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).
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When deciding whether to grant a motion to dismiss, the court must generally accept as
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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true all “well-pleaded factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). The court
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must also construe the alleged facts in the light most favorable to the plaintiff. Love v. United
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States, 915 F.2d 1242, 1245 (9th Cir. 1988). However, “courts are not bound to accept as true a
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legal conclusion couched as a factual allegation.” Iqbal 556 U.S. at 678.
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Also, the court generally does not consider any material beyond the pleadings for a Rule
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12(b)(6) analysis. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19
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(9th Cir. 1990). Exceptions to this rule include material submitted as part of the complaint or
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relied upon in the complaint, and material subject to judicial notice. See Lee v. City of Los
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Angeles, 250 F.3d 668, 688-69 (9th Cir. 2001).
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United States District Court
Northern District of California
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III.
DISCUSSION
Though Verifone challenges the FAC for failure to state a claim, the sufficiency of the
FAC actually turns on a more fundamental issue: Article III standing.
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A.
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The constitutional standing doctrine “functions to ensure, among other things, that the
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scarce resources of the federal courts are devoted to those disputes in which the parties have a
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concrete stake.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 191
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(2000). This “case or controversy” requirement is jurisdictional and cannot be waived. City of
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Los Angeles v. Cnty. of Kern, 581 F.3d 841, 845 (9th Cir. 2009). “[F]ederal courts are required
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sua sponte to examine jurisdictional issues such as standing.” B.C. v. Plumas Unified Sch. Dist.,
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192 F.3d 1260, 1264 (9th Cir. 1999). The party asserting federal jurisdiction must carry the
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burden of establishing standing under Article III. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332,
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341 (2006).
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General Principles of Standing
Generally, the inquiry critical to determining the existence of standing under Article III of
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the Constitution is “‘whether the litigant is entitled to have the court decide the merits of the
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dispute or of particular issues.’” Allen v. Wright, 468 U.S. 737, 750-51 (1984) (quoting Warth v.
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Seldin, 422 U.S. 490, 498 (1975)). Three basic elements must be satisfied: (1) an “injury in fact,”
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which is neither conjectural or hypothetical, (2) causation, such that a causal connection between
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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the alleged injury and offensive conduct is established, and (3) redressability, or a likelihood that
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the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555,
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560-61 (1992). A plaintiff must at the pleading stage “clearly . . . allege facts” demonstrating each
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of these elements. Warth, 422 U.S. at 518.
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Furthermore, “[i]n a class action, standing is satisfied if at least one named plaintiff meets
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the requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). “The
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plaintiff class bears the burden of showing that the Article III standing requirements are met.” Id.
B.
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Subsequent to the filing of the FAC, the United States Supreme Court decided Spokeo, Inc.
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v. Robins, 136 S. Ct. 1540 (2016). In Spokeo, the plaintiff alleged he became aware the defendant
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United States District Court
Northern District of California
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maintained in its database and produced upon inquiry incorrect personal details concerning the
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plaintiff. He filed a class action complaint asserting the defendant had willfully failed to comply
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with several requirements of the FCRA. Finding that the plaintiff had not properly pled an injury
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in fact, the district court dismissed the complaint for lack of standing. But the Ninth Circuit Court
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of Appeals reversed. The Ninth Circuit held the plaintiff alleged violations of his own statutory
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rights under the FCRA, and that these alleged violations were sufficient to satisfy Article III’s
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injury in fact requirement.
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Spokeo, Inc. v. Robins
On certiorari, the Supreme Court found the Ninth Circuit’s analysis incomplete. The Court
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emphasized that, “[t]o establish injury in fact, a plaintiff must show that he or she suffered ‘an
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invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or
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imminent, not conjectural or hypothetical.’” 136 S. Ct. at 1548. The Court also explained that an
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injury is “concrete” for Article III standing if it is de facto such that “it must actually exist;” it
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must be “‘real,’ and not ‘abstract.’” Id. According to the Court, the Ninth Circuit addressed only
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whether the plaintiff’s alleged injury was particularized, but had neglected to analyze whether the
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plaintiff’s alleged injury was also concrete. Id. The Court vacated the Ninth Circuit’s judgment
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and remanded for reconsideration. Id. at 1550.
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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C.
Application to the FAC
In light of Spokeo, the court requested the parties provide additional briefing explaining
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whether, and if so, how, the Court’s holding applies to the factual allegations in the FAC. In his
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brief, Plaintiff argues the FAC’s allegations satisfy the standard for concreteness outlined in
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Spokeo because: (1) Verifone’s alleged violation of FACTA’s credit card truncation requirement
“opens Plaintiff up to the risk of identity theft,” (2) the risk of identity theft has “long been a basis
for lawsuit in American courts,” and (3) Congress and the Federal Trade Commission identified
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the intangible, but concrete harm of increased risk of identity theft when it enacted FACTA. Dkt.
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No. 46. For its part, Verifone argues Plaintiff has not satisfied the injury in fact requirement
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because he merely alleges a statutory violation. To that end, Verifone contends that missing from
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the FAC are factual allegations establishing an injury that actually exists or is “certainly
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United States District Court
Northern District of California
impending,” as such phrase has been defined by the Supreme Court. See Clapper v. Amnesty Int’l
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USA, 133 S. Ct. 1138, 1147 (2013) (holding that an injury is not “certainly impending” for Article
III standing if it will not materialize absent a “speculative chain of possibilities”); see also Munns
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v. Kerry, 782 F.3d 402, 409 (9th Cir. 2015) (“Rather than requiring literal certainty, the Court has
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sometimes framed the [certainly impending] injury requirement as a ‘substantial risk’ that the
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harm will occur.”).
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Considering the FAC in light of the applicable Article III authority, it is apparent that
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Plaintiff’s allegations are deficient. Indeed, the FAC neither establishes an injury that is concrete
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under the teachings of Spokeo nor one that is “certainly impending.” Though the court recognizes
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an injury need not be tangible to also be concrete, and that Congress can define intangible harms
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as concrete through statutorily-defined rights (Spokeo, 136 S. Ct. at 1549), it “does not mean that
a plaintiff automatically satisfies the injury-in-fact requirement ” by alleging the violation of a
statute. Id. To the contrary, “Article III standing requires a concrete injury even in the context of
a statutory violation.” Id. In other words, allegations of “a bare procedural violation, divorced
from any concrete harm” do not satisfy Article III’s injury in fact requirement. Id. The plaintiff
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must identify a real risk, not one that is merely possible or speculative, for the alleged statutory
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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harm to qualify as concrete and “certainly impending.” Id.; Clapper, 133 S. Ct. at 1147.
Here, Plaintiff alleges he took a taxi cab ride, paid for the ride with a credit card, and
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“received” a computer-generated receipt displaying more than the last five digits of his credit card
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number. FAC, at ¶ 24. He also alleges that Verifone’s practice of publishing more than the last
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five numbers on the receipt violated his right to privacy and subjected him to the possibility of
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identity theft by Verifone’s employees or others. Id. at ¶¶ 4, 6, 12.
These few alleged facts1 make out only a bare procedural violation of FACTA. While it is
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true that under certain conditions an increased risk of identity theft can constitute a concrete,
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“certainly impending” harm, those conditions have not been alleged in this case. See, e.g.,
Krottner v. Starbucks Corp., 628 F.3d 1139, (holding the plaintiffs had alleged a credible threat of
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United States District Court
Northern District of California
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real and immediate harm due to the increased risk of identity theft stemming from a stolen laptop
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containing unencrypted personal data). Instead, Plaintiff alleges he, and no one else, received the
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receipt containing more than the last five digits of his credit card number.2 Thus, unless a litany of
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speculative events come about,3 the risk that Plaintiff will be subjected to the type of “low tech”
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identity theft identified in the FAC is too attenuated to constitute a qualifying injury in fact for
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standing, even if Plaintiff successfully alleged a violation of FACTA. See Krottner, 628 F.3d at
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1143 (“Were Plaintiffs-Appellants’ allegations more conjectural or hypothetical - for example, if
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no laptop had been stolen, and Plaintiffs had sued based on the risk that it would be stolen at some
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point in the future - we would find the threat far less credible.”). And to be sure, unless Plaintiff
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establishes a basis for his own standing to assert a FACTA claim against Verifone, this class
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The FAC does contain a significant amount of legal discussion and several legal conclusions,
however.
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This fact is confirmed by the copy of the receipt Plaintiff was able to attach to the FAC as
Exhibit “A.”
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For example, Plaintiff could discard the receipt (despite knowing its contents) so that it can be
found by a “dumpster diver,” or the receipt could be stolen from Plaintiff and then used by a
“carder,” or the taxi cab driver could have made a surreptitious copy or memorized the numbers
on the receipt with a nefarious motive, or rogue employees who may or may not have access to
Verifone’s database could somehow obtain Plaintiff’s credit card information.
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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action cannot proceed. Bates, 511 F.3d at 985.
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Accordingly, the court concludes that Plaintiff has not sufficiently alleged standing under
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Article III. The FAC will therefore be dismissed on that ground, but with leave to amend so that
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Plaintiff may be provided the opportunity to clarify his standing allegations in consideration of the
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foregoing discussion, if at all possible. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000)
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(“[W]e have repeatedly held that ‘a district court should grant leave to amend even if no request to
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amend the pleading was made, unless it determines that the pleading could not possibly be cured
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by the allegation of other facts.’”). In light of this conclusion, the court declines to address the
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other arguments raised by Verifone in its motion to dismiss. Bates, 511 F.3d at 985 (explaining
that standing “is a threshold matter central to . . . subject matter jurisdiction” that must be
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United States District Court
Northern District of California
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“satisfied before proceeding to the merits”).
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IV.
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ORDER
Based on the foregoing, the motion to dismiss (Dkt. No. 36) is GRANTED, and the FAC is
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DISMISSED WITH LEAVE TO AMEND. Any amended complaint must be filed on or before
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December 7, 2016.
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Plaintiff is advised that, although leave to amend has been permitted, he may not add new
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claims or new parties to this action without first obtaining Verifone’s consent or leave of court
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pursuant to Federal Rule of Civil Procedure 15.
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IT IS SO ORDERED.
Dated: November 21, 2016
______________________________________
EDWARD J. DAVILA
United States District Judge
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Case No.: 5:14-cv-04912-EJD
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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