Shurland v. Bacci Cafe & Pizzeria on Ogden, Inc.
Filing
203
MEMORANDUM Opinion and Order Signed by the Honorable Rebecca R. Pallmeyer on 8/30/2011: Mailed notice (etv, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CHRISTOPHER D. SHURLAND,
individually and as the
representative of the certified class,
Plaintiff,
v.
BACCI CAFÉ & PIZZERIA ON
OGDEN, INC.,
Defendants.
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No. 08 C 2259
Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
In August 2007, Plaintiff Christopher D. Shurland ate at Defendant Bacci Café & Pizzeria
on Ogden, Inc. (“Bacci”), and received from Bacci a credit card receipt that displayed all of the digits
of his credit card number, and its expiration date. Shurland filed this action on behalf of himself
a3nd a class of customers, alleging a violation of the Fair and Accurate Credit Transactions Act,
(“FACTA”), which prohibits businesses from printing non-truncated credit card numbers on the
receipts issued to customers. 15 U.S.C. § 1681c(g). Shurland now moves for summary judgment
against Bacci and an award of statutory damages for 6,359 willful violations of FACTA. 15 U.S.C.
§ 1681n(a)(1)(A).
For a willful violation of the relevant provisions of FACTA, the statute provides for actual
damages or statutory damages of between $100 and $1,000 per occurrence. Plaintiff Shurland
argues that because Bacci received a billing statement from its third-party credit card processor
alerting it to FACTA’s truncation requirement, and because that third party also contacted Bacci to
advise of the truncation requirement, Bacci’s violation of FACTA was willful. Bacci asserts that it
was not aware of the FACTA truncation requirement, and notes that it had received a replacement
credit card terminal shortly before FACTA went into effect and believed that machine was compliant
with all applicable laws. Accordingly, Bacci denies that its conduct was willful. For the reasons
explained herein, Plaintiff’s motion for summary judgment is denied.
BACKGROUND
Defendant Bacci is an Illinois corporation located in Berwyn, Illinois. (Pl.’s 56.1(a) ¶ 2.) This
case concerns Bacci’s compliance with the FACTA truncation regulations that went into effect on
December 5, 2006. The following facts are uncontested: On August 11, 2007, Plaintiff Christopher
D. Shurland received a receipt displaying his entire credit card number and its expiration date.
(Pl.’s 56.1(a) ¶ 31.) At some point during October 2007, an unidentified patron of Bacci complained
to one of Bacci’s employees that there were too many numbers printed on that customer’s credit
card receipt. (Id. ¶ 32.) After receiving this complaint, another Bacci employee contacted Bacci’s
credit card processor for assistance, but was unable to get the truncation function to work properly.
(Id. ¶ 33.) Defendant thereafter truncated the numbers manually by crossing them out until it
acquired a new credit card machine and processing service. (Id. ¶ 34.) Between the Act’s effective
date and October 30, 2007, when Defendant stopped issuing non-truncated receipts, Defendant
issued 6,359 receipts that violated the truncation requirement of FACTA. Shurland v. Bacci Café
& Pizzeria on Ogden, Inc., 271 F.R.D. 139, 142 (N.D. Ill. 2010).
The issue in this motion for summary judgment is whether these violations were willful.
Assessment of this question requires consideration of events that preceded the FACTA violations,
and circumstances relating to Defendant’s knowledge or recklessness (or lack thereof) concerning
FACTA’s requirements. Vincent DiDiana and his wife, Chiara DiDiana, purchased Bacci Café &
Pizzeria on Ogden in 1998. (Pl.’s 56.1(a) ¶ 5.) In 2004, Vincent DiDiana purchased another
restaurant in Melrose Park, known as Bacci Pizzeria of Melrose Park. (Id. ¶ 6.) That Melrose Park
restaurant had two credit card processing machines, and DiDiana transferred one of those, a
Hypercom T7P, to the Berwyn location. (Id. ¶¶ 7-9.) The Hypercom T7P was the sole credit card
processing machine Defendant used at the Berwyn restaurant from May 2004 until mid-July 2006.
(Id. ¶ 10; Def.’s Resp. ¶ 10.) Before using it, Bacci staff contacted National Translink Corp., a
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credit card processing company, to activate processing services. (Id. ¶¶ 12, 14.) Plaintiff notes that
the “Merchant Processing Agreement” that Bacci entered into on May 11, 2004 contained the
following provision:
1.15 MERCHANT warrants and agrees that MERCHANT shall fully comply with all
federal, state, and local laws, rules and regulations as amended from time to time,
including the Federal Truth-in-Lending Act and Regulation Z of the Board of
Governors of the Federal Reserve System.
(Id. ¶¶ 15, 16.) Defendant admits that it entered into a Merchant Processing Agreement with
Provident Bank and Translink, but Chiara DiDiana, who completed the application, testified that she
recognized only “her signatures and the handwriting for the date, phone number, hours of the day,
and her Social Security number.” (Def.’s Resp. ¶ 15.) Chiara DiDiana testified that she “did not
recall the other handwriting on the application.” In addition, Defendant points out that the provision
in the Merchant Processing Agreement cited by Plaintiff appears in a “very small [font] and on the
back-side of the Merchant Processing Application.” (Id. ¶ 16.)
Pursuant to its agreement with Bacci, Translink provided Bacci with technical and customer
service support and coordinated programming of the credit card processing terminal and credit card
approvals. (Pl.’s 56.1(a) ¶¶ 17, 18.) Translink sent monthly billing statements reflecting its clients’
credit card transactions to each address in its database, which included Bacci’s address. (Id. ¶¶ 19,
21.) Included in the March 2005 statement was a notice that read:
IMPORTANT NOTICE: To be in compliance with state, federal, and
Visa/MasterCard regulations all merchants must have their customer receipt print
only the last 4 digits of the credit card number. If your receipt does not “truncate”
the credit card number call 1-877-677-7201 as soon as possible.
(Id. ¶ 20.) Defendant notes that this entire notice took up only one quarter-inch of text on the
monthly statement from Translink. (Def.’s Resp. ¶ 20.) When Chiara DiDiana received those billing
statements she would “look and see how much money [Translink] was taking out and that’s it.” (Id.
¶ 23.) Thus, according to Bacci, Chiara did “not really” review that March 2005 billing statement,
did not recall seeing the notice regarding truncation, and did not know that the law imposed this
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restriction. (Id. ¶¶ 19, 20.) In any event, Bacci asserts, “[i]t has not been established that Bacci
received the March 2005 billing statement” and Translink “could not verify that every customer
received this notice.” (Id. ¶¶ 21, 22.)
As additional evidence that Bacci was indeed aware of the FACTA requirements, Plaintiff
asserts that in 2006, Translink compiled a list of approximately 200 customers that it believed might
have “truncation issues” and called all of the customers on that list, which included Defendant.
(Pl.’s 56.1(a) ¶ 24, citing Deposition of Translink employee Douglas Porch, Pl.’s Ex. E at 90-92; List
of Customers with Truncation Issues, Pl.’s Am Ex. E at 62; Deposition of Translink Executive Vice
President James Tracy, Pl.’s Ex. D at 32.) Defendant “denies that there is undisputed evidence that
National Translink called all of those customers, including Bacci.” (Def.’s Resp. ¶ 24.) Defendant
notes that the list upon which the calls were based “does not show any notation of contact, and
Bacci’s name is not crossed off.” (Id.) A portion of this list is included with Plaintiff’s exhibits, and
while many names on the list appear to be crossed off, it is indeed difficult to determine whether
Bacci’s name is among those crossed off, or what other notations that appear on the list may mean.
(Pl.’s Am. Ex. E at 62.) The individual responsible for making these calls conceded that there were
people he was unable to reach and that “he has no specific recollections of having had any
conversations with Bacci regarding truncating of credit card numbers.” (Def.’s Resp. ¶ 24.)
Translink personnel also contacted customers who used the same Hypercom terminal
model that Bacci used, to ask whether they were properly truncating the credit card information, and
give them a telephone number if they needed help in doing so. (Pl.’s 56.1(a) ¶ 25.) (It is unclear
whether the list of Hypercom customers contacted by Translink is the same as the list of customers
with “truncation issues” contacted by Translink. Plaintiff does not reference an actual list of
Hypercom customers in its fact statement, while Defendant references the same list discussed
previously. (Pl.’s 56.1(a) ¶ 25; Def.’s Resp. ¶ 25.)) No one from Translink has verified actual
contact with Bacci, Defendant points out, nor does the single list of these companies that appears
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in the record bear any notation reflecting that Bacci had been contacted. (Def.’s Resp. ¶ 25.)
Plaintiff asserts that in April 2006, Translink employee Douglas Porch made notations reflecting
contact with Defendant about the truncation requirement, but Defendant contends that these notes
only demonstrate Porch’s contact with the processing center, Card Systems, arranging for the
download of truncation software to Bacci. (Pl.’s 56.1(a) ¶ 26; Def.’s Resp. ¶ 26.) Plaintiff contends
that additional handwritten notes dated July 13, 2006 refer to truncation issues with Defendant, but
Defendant claims that these notes too reflect contact with Card Systems, not with Bacci. (Pl.’s
56.1(a) ¶ 28; Def.’s Resp. ¶ 28.) The court is unable, from its own review of the handwritten notes,
to determine whether Porch made contact with Bacci itself, with Card Systems, or with another
party. (Pl.’s Am. Ex. D at 49-50.)
In addition to its response to Plaintiff’s statement of material facts, Bacci has submitted
statements of additional facts, as permitted under Local Rule 56.1(b)(3)(C). Because Plaintiff has
not replied to these, they are deemed admitted. L.R. 56.1. According to this additional material,
Chiara DiDiana, the co-owner of Defendant’s restaurant, only “pay[s] the bills,” and does not have
other responsibilities. (Def.’s Supp. ¶ 35.) She did complete the application for a credit card
processing machine from Translink, but Bacci asserts that she “only filled in a few portions of the
application.” (Id. ¶ 36.) Chiara DiDiana testified that she never spoke with anyone from Translink
regarding truncation issues, and Defendant claims that “no representative or employee of Bacci
recalled receiving any notification of the need to truncate credit card numbers on customer credit
card receipts.” (Id. ¶¶ 39-41.)
Bacci’s owners do not belong to any business associations, do not read any business
journals or other commercial journals, and had not read anything provided by Visa or Mastercard
concerning truncation. (Id. ¶ 43.) On July 14, 2006, Defendant asserts, someone at Bacci
(Defendant has not provided details) complained to Translink that its credit card processing terminal
had “sticky buttons,” and Translink sent Defendant a replacement terminal that it had programmed.
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(Id. ¶¶ 52, 53.) Before sending out a new credit card terminal, also on July 14, 2006, Translink
coordinated with Card Systems (identified in this record only as the “processing center”) to program
the terminal with files that included “truncation information.” (Id. ¶ 53.) Vincent DiDiana “believed
that the replacement credit card terminal would have met all of the requirements found in all laws,
rules and regulations governing the use of credit card terminals.” (Id. ¶ 55.)
The court has previously issued several opinions in this case, and previously denied
Defendant’s motion for summary judgment in its favor on the issue of whether the FACTA violation
was willful. Shurland v. Bacci Café & Pizzeria on Ogden Inc., 259 F.R.D. 151, 157 (N.D. Ill. 2009).
The court noted that “Plaintiff has presented evidence in the form of deposition testimony and
business records sufficient to support a reasonable inference that Defendant received notice of
FACTA’s truncation requirements both in its monthly billing statement and via phone calls from
National Translink employees.”
Id.
The court concluded, as a result, that “Plaintiff has
demonstrated genuine issues of material fact as to when Defendant obtained knowledge of
FACTA’s truncation requirements and whether it acted willfully in disregarding those requirements.”
Id. Plaintiff now asks the court to go one step further, and find that there are no disputes of fact and
that Defendant’s 6,359 FACTA violations were willful.
DISCUSSION
Summary judgment will be granted “if the movant shows there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).
The court must draw all reasonable inferences and construe all facts in favor of the nonmoving
party. Bourke v. Conger, 639 F.3d 344, 346-47 (7th Cir. 2011). In deciding a motion for summary
judgment, “a court may not make credibility determinations, weigh the evidence, or decide which
inferences to draw from the facts.” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).
FACTA provides 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
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receipt provided to the cardholder at the point of sale or transaction.” 15 U.S.C. § 1681c(g). The
penalty for “[a]ny person who willfully fails to comply” with the truncation requirement of FACTA is
an award of “damages of not less that $100 and not more than $1,000.”
15 U.S.C.
§ 1681n(a)(1)(A). By contrast, if the conduct is not willful, Plaintiff is entitled to actual damages
only. 15 U.S.C. § 1681o. In examining § 1681n(a), the Supreme Court concluded that willfulness
in this context “cover[s] not only knowing violations of [the] standard, but reckless ones as well.”
Safeco Ins. Co. v. Burr, 551 U.S. 47, 57 (2007). The court went on to explain that while “the term
recklessness is not self-defining, the common law has generally understood it in the sphere of civil
liability as conduct violating an objective standard: action entailing an unjustifiably high risk of harm
that is either known or so obvious that it should be known.” Id. at 68 (citations and quotations
omitted). Thus, recklessness for FACTA purposes is “something more than negligence but less
than knowledge of the law’s requirements.” Kubas v. Standard Parking Corp., 594 F. Supp. 2d
1029, 1032 (N.D. Ill. 2009) (quoting Murray v. New Cingular Wireless Services, Inc., 523 F.3d 719,
726 (7th Cir. 2008)).
In seeking summary judgment on this issue, Plaintiff acknowledges that “the issue of
wilfulness is generally a question of fact for the jury.” (Pl.’s Br. at 10.) Plaintiff urges that summary
judgment is nevertheless appropriate here because in this case, unlike others, there is “undisputed
evidence that the Defendant received actual written notice of FACTA’s truncation requirement . . . .”
(Id.) Plaintiff refers specifically to the evidence that Defendant “failed to review its monthly
statements,” “failed to apprise its employees of their legal obligations,” and “failed to take any other
measures to ensure compliance with the requirements of FACTA.” (Id. at 11.)
The parties agree that no FACTA class action alleging a willful failure to truncate credit card
numbers has been decided in favor of a plaintiff at the summary judgment stage. In Hammer v.
JP’s Southwestern Foods, L.L.C., 739 F. Supp. 2d 1155 (W.D. Mo. 2010), the court denied
summary judgment in favor of plaintiff where the defendant had received nine notices from its credit
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card processing company similar to the ones at issue here. Id. at 1166-68. Defendant in that case
had also received notice from customers that it was in violation of FACTA prior to May 15, 2007,
but did not come into compliance until December 5, 2007, and had, at some point prior to August
2007, asked for a quote from its computer vendor of the cost to fix the truncation issue. Id. The
court nevertheless denied summary judgment, noting that questions of material fact existed as to
whether defendant’s owner was aware of the FACTA requirements. Id. As Plaintiff here points out,
that case hinged, in part, on whether defendant could be liable for the failure of a third party who
received and paid the invoices containing the notices for defendant, but the court did not say that
it would have found willfulness if that third party’s knowledge were imputed to defendant. Id.
In Cowley v. Burger King Corp., 2008 U.S. Dist. LEXIS 87852, No. 07-21772-CIVMORENO/TORRES (S.D. Fla. May 23, 2008), a restaurant patron sued Burger King for violating
FACTA. When Burger King ran a systemwide software update of its credit card processing
terminals, it discovered that 76 out of 2,879 were offline during the installation process of software
designed to implement the FACTA requirements, and therefore kept printing expiration dates on
receipts in violation of FACTA. Id. at *4. Plaintiff later used a credit card at one of the Burger King
locations whose terminals was offline and received a receipt that did not comply with FACTA. In
considering plaintiff’s motion for summary judgment in that case, the court noted that Burger King
was aware of FACTA’s requirements, yet still provided the plaintiff with a receipt that violated those
requirements. Id. at *11. The court nonetheless denied summary judgment. No court has found
willfulness as a matter of law in the FACTA context, the court observed; “[t]he absence of such
authority compellingly shows that whether or not Defendant knowingly and intentionally violated the
statute is for the jury to decide, even in a case where, as here, there may be strong evidence from
which the jury could reach that conclusion.” Id. at *14. The court was unwilling to conclude that
Burger King had knowledge that its terminals were printing receipts that violated FACTA, and also
declined to find Burger King’s actions reckless, noting that “[a] reasonable jury could certainly find
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that Defendant’s actions were merely negligent, as opposed to reckless.” Id. at *17.
Similarly, in Soualian v. International Coffee & Tea, LLC, 2008 WL 410618, No. CV 07-0502RGK (JCx) (C.D. Cal. Feb. 9, 2008), the court examined whether defendant, a retail coffee chain,
should be granted summary judgment on the issue of whether it willfully violated FACTA. The
record demonstrated that defendant had entered into a contract with Fifth Third Bank, its credit card
processor, similar to the one that Defendant Bacci signed in this case. Specifically, defendant
agreed to comply with all the rules issued by credit card companies; to comply with all laws and
regulations; and to review all reports and invoices from Fifth Third Bank. Id. at *1. In 2005, Visa
issued rules stating that only the last four digits of a credit card number should be printed on a
customer’s receipt, but did not explain that this was pursuant to federal law. Id. In October 2006,
defendant received a monthly billing statement that included the following:
ALERT! Current laws prohibit printing the expiration date or more than the last four
digits of a card number on a printed customer receipt, which may result in statutory
fines or penalties. Please review the receipts you provide to your customers for
compliance. Call 800-278-6888 or your RM with any questions.
Id. In addition, one of defendant’s officials had handwritten “okay” on the same page as that notice.
Id. The court concluded that this evidence, which is similar to the evidence offered in this case, was
“weak” support for a finding of a willful FACTA violation on defendant’s part, albeit sufficient to raise
a triable issue of fact. Id. at *4.
Certainly, Hammer, Cowley, and Soualian, are not dispositive. All three cases, however,
do involve situations where the defendants unquestionably knew about the requirements of FACTA
yet failed to comply with the statute. In all three cases, and in all other cases to have considered
the issue, the courts concluded that the issue of willfulness must go before a jury.
The undisputed facts here demonstrate that Defendant entered into a Merchant Processing
Agreement in May 2004 that required it to comply with all laws and regulations. In addition, the
March 2005 statement apparently sent from Translink to Bacci included a notice explaining the
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requirements of FACTA. Bacci’s name also appears on a list of clients that Translink intended to
call regarding FACTA compliance, and the record shows that Translink did place calls to those
businesses. In July 2006, Defendant received a new credit card processing terminal from Translink
to replace one that had “sticky buttons.” On the other hand, Defendant disputes that any of its
representatives actually read the notice on the credit card statement, and contends that none of its
employees ever spoke to anyone at Translink regarding FACTA compliance. Defendant also claims
that it believed whatever terminal it received from Translink would be compliant with all applicable
laws.
Plaintiff contends that Defendant’s lack of knowledge or failure to read notes is sufficient by
itself to establish willfulness. The cases Plaintiff cites for the proposition that a party cannot “avoid
responsibility for its actions or inactions by failing or refusing to read notices, contract provisions
and the like” (Pl.’s Br. at 9), are readily distinguishable, however. For example, in Paper Express,
Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753 (7th Cir. 1992), the Seventh Circuit concluded
that a contract’s terms were binding despite being written in German, because “[m]ere ignorance
will not relieve a party of her obligations . . . .” Id. at 757. That case, however, was examining
whether the terms of a signed contract were binding, and did not even discuss any willfulness or
recklessness standard. Similarly, Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286 (7th
Cir. 1989), in which the court concluded that poor eyesight and a rush to catch a plane did not
excuse a contract’s forum selection clause, did not discuss the standard applicable to this case.
Id. at 1292. Ho v. Donovan, 569 F.3d 677 (7th Cir. 2009), and several other cases cited by Plaintiff
address the appropriate form of notice under the due process clause—also not at issue here.
Plaintiff submits no cases discussing a willfulness or reckless standard that support its contention
Defendant should be liable regardless of its understanding of the law.
To the contrary, the FACTA case law suggests that a defendant’s understanding of the law
is indeed relevant. In Claffey v. River Oaks Hyundai, Inc., 494 F. Supp. 2d 976 (N.D. Ill. 2007),
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Judge Kennelly explained, albeit in the context of a Fair Credit Reporting Act claim, that “the
‘objective’ standard for recklessness that the [Safeco ] Court adopted does not render irrelevant
evidence of the party’s actual understanding of the law. . . . Evidence of a party’s actions and
intentions is unquestionably relevant in determining whether that standard is met in a particular
case.” Id. at 978-79. But, of course, on summary judgment “a court may not make credibility
determinations, weigh the evidence, or decide which inferences to draw from the facts.” Payne,
337 F.3d at 770. That is exactly what is required in this case—a factual determination as to
whether Defendant’s actions were merely negligent, or were reckless or otherwise willful. That
determination must be made by a jury. Plaintiff’s motion for summary judgment is therefore denied.
CONCLUSION
Plaintiff’s motion for summary judgment [181] is denied.
ENTER:
Dated: August 30, 2011
_________________________________________
REBECCA R. PALLMEYER
United States District Judge
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