Creative Hospitality Ventures, Inc. v. United States Liab. Ins. Co., ___ F. Supp. 2d ___, 2009 WL 2993739 (S.D. Fla. 2009)
Judge Magistrate Rosenbaum recommended grant of the motion to dismiss by the insurer.
The underlying suit, alleged by a customer against a restaurant operated by Creative, sued it for violations of the Fair and Accurate Transaction Act (“FACTA”), 15 U.S.C. § 1681c(g).
The issue was printing more than five digits of a credit card for a patron of a retail establishment at a restaurant. The class action suit sought recovery of damages for alleged violations. At issue was the Second Amended Class Action Complaint.
Looking, under Florida law, solely at the allegations of the complaint, the court noted that the pertinent complaint invokes neither Section 1681n nor Section 1681o, but only 1681c(g). The following questions of law are common to the putative class:
(i) Whether the Merchant accepts credit cards or debit cards for the transaction of business;
(ii) Whether the Merchant violated FACTA by printing more than the last five digits of the credit card . . .
(iii) Whether the Merchant's sole means of recording the payment card's account number or expiration date is by handwriting . . .
(iv) Whether the Merchant willfully failed to comply with the requirements imposed by FACTA.
Id. at *8.
The allegations of the Chavoustie and Turner complaints were both analyzed.
The pertinent personal and advertising injury coverage was “e. Oral or written publication, in any manner, of material that violates a person's right of privacy.”
The insurers argued that sharing the payment card receipt with the payment card holder alone did not violate any privacy rights under Florida law. The court noted:
In considering the breadth of the phrase, “publication, in any manner,” the Court finds it difficult to conceive of a more inclusive description of the categories of “publication” to be covered by an insurance policy, particularly in light of Florida's insurance policy construction canon requiring courts to interpret coverage clauses “in the broadest possible manner to [e]ffect the greatest extent of coverage,” Westmoreland, 704 So.2d at 179 (Fla. 4th Dist.Ct.App.1997) (citing Hudson v. Prudential Prop. & Cas. Ins. Co., 450 So.2d 565, 568 (Fla.2d Dist.Ct.App.1984); and putting insurers on notice that “ ‘when an insurer fails to define a term in a policy, ... the insurer cannot take the position that there should be a “narrow, restrictive interpretation of the coverage provided.” ’ ” State Farm Fire and Cas. Co. v. CTC Development Corp., 720 So.2d 1072, 1076 (Fla.1998) (citations omitted). Had Defendants wished to restrict the definition of “publication” to be narrowed to the meaning of that term under Florida defamation law or to be otherwise qualified, Defendants bore the burden of articulating that limitation.
Id. at *11 (citations omitted).
In line with this analytic approach, plaintiffs’ provision to a payment card holder of a receipt bearing that payment card holder’s expiration date and more than five digits of that payment card holder’s account number could constitute a publication. Id. at *11.
At most there were two plausible interpretations of the term “publication” and that should be preferred which would interpret against the insurer who drafted it. Id. at *13.
The insurers argued that there was no injury but only the potential to cause injury by creating a greater exposure to identity theft.
The court responded:
These contentions miss the mark. Plaintiffs argue that the policies' definition of “personal and advertising injury” . . . encompasses the injury alleged by Chavoustie and Turner in their complaints. “Personal and advertising injury” contemplates a different type of injury than “bodily injury,” “property damage,” “advertising injury,” or “personal injury,” to the extent that any of those terms may be defined by the applicable insurance policies.
Id. at *13.
The legislative history elucidates that the truncation provisions of the FACTA arose from a desire to prevent identity theft that can occur when a card holder’s private financial information, such as the card holder’s complete credit card number, is exposed on electronically printed payment card receipts. Id. at *15.
The alleged conduct in the Chavoustie and Turner actions implicated an injurious act, publication, and potential violation of the right of privacy. It reasoned:
In Chavoustie, the plaintiffs claimed that E.T. “failed to protect [the Chavoustie plaintiffs] against identity theft and credit and debit card fraud by printing more than the last five digits of the card number and/or the expiration date on the consumer receipts it provided to [the Chavoustie plaintiffs].” . . . They further alleged that as a result of E.T.'s alleged failure to truncate on electronically printed payment card receipts, the Chavoustie plaintiffs were “aggrieved by [E.T.'s] ... fail[ure] to comply with the requirements of FACTA.”
Id. at *16.
The statutory character of the damage awards was of no moment since both actual and statutory damages were remedies. The court reasoned:
As the Eleventh Circuit has rejected the argument that statutory damages under Section 1681n amount to punitive damages, this Court respectfully declines to accept USLI's invitation to conclude otherwise.
Id. at *18.
Looking to the “knowing violation of the rights of another” exclusion, the court did not aver that Creative reviewed or otherwise actually became aware of the information contained in the materials alleged to have been provided to Creative, thus requiring knowledge of the information. Id. at *21.
The exclusion for TCPA, CAN-SPAM and other statutory violations did not embrace this particular form of privacy invasion. The court reasoned:
[T]he FACTA seeks to protect the secrecy privacy interest in that it attempts to protect private financial information from becoming known to others. Therefore, the seclusion privacy interest, or the right to avoid intrusions into a private domain, which the TCPA and CAN-SPAM are intended to address, represents a different kind of privacy interest than the secrecy privacy interest at stake in the FACTA.
Id. at *24.
Thus, the court concluded that plaintiff E.T. stated a cause of action against defendant Essex but concluded that Creative had not stated a viable cause of action against defendant USLI. The court reached the distinct conclusion regarding USLI because it found the exclusion for TCPA, CAN-SPAM and other statutory violations implicated as to its policy. It noted:
Because the FACTA is a statute that limits the information that such an electronically printed receipt provided to the card holder may include, and, indeed, prohibits the inclusion of certain information, the FACTA qualifies as a statute that “prohibits and limits the ... communicating or distribution of material or information,” within the ordinary meaning of the terms of this exclusion. As a result, USLI is under neither a duty to defend nor to indemnify Creative with regard to the Turner litigation.
Id. at *22.
