Breaking and exclusive: FACTA held unconstitutional

We’ve previously written about the problems of the Fair and Accurate Credit Transactions Act (FACTA), which imposes astronomical statutory damages on vendors whose credit card receipts fail to comply with ambiguous technical requirements. Today’s Daily Business Review recounts the tale of a small-business owner whose restaurant was hit with one of these suits, and how Congress has unanimously passed legislation, over some trial-lawyer objections, to shut down previous suits, though the bill far from solves the litigation problem from popping up again, and trial lawyers vow to continue pressing the suits. “U.S. Sen. Charles Schumer, D-New York, who sponsored the Senate bill, said, ‘Congress never intended for the law to be used to drive companies out of business with expensive legal cases that don’t involve any harm to consumers.'”

Meanwhile, Judge William M. Acker, Jr., of the Northern District of Alabama, had a series of summary judgment motions in four FACTA cases before him. He rejected the idea that class certification was inherently improper when the resulting statutory damages would bankrupt the defendant (an issue I discussed in my Liability Outlook on the subject), but held that the $100-$1000 statutory damages, without a showing of harm, were necessarily punitive in nature, and thus constitutionally impermissible under State Farm v. Campbell:

FACTA makes no distinction between the possibility of awarding punitive damages after actual damages have been proven, and after no actual damage whatsoever has been sustained, much less proven. The imposition of punitive damages without any actual damages whatsoever, is a stranger to the Supreme Court which recently said in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 426, 123 S.Ct. 1513, 1524 (2003):

[C]ourts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered. (emphasis supplied).

To impose punitive damages without the suffering of any harm is inherently disproportionate. Nominal damages can, of course, represent or substitute for actual damages. Nominal damages may or may not open the door to an award of proportionate punitive damages, but an award of damages that are by statute expressly not compensatory in nature, cannot open that door.

A second ground for the decision, that the phrase “not less than $100 and not more than $1,000″ is unconstitutionally void for vagueness, seems a considerably weaker argument, though one sympathizes with Judge Acker’s concern that the results of such language before a jury will be arbitrary because different juries faced with the same facts will come to different and equally reasonable conclusions. Still “$100-$1000” is considerably less arbitrary than, say, non-economic damages. The decision is Grimes v. Raves Motion Pictures Birmingham, LLC, __ F.Supp. 2d ___, No. 07-AR-1397-S (N.D. Ala. May 28, 2008). The decision, if upheld on inevitable appeal to the Eleventh Circuit, has implications for a number of consumer fraud statutes.


  • You gotta love the language in the order.

  • […] fellow at the American Enterprise Institute who spoke to the Birmingham News about the recent Judge Acker decision and FACTA amendments sounds like an interesting fellow who has thought about some of the same issues I have, even if he […]

  • […] year, Overlawyered was the first to report that Judge William Acker in the Northern District of Alabama had held the Fair and Accurate Credit […]