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Katz v. Metropolitan Transportation Authority

United States District Court, E.D. New York

December 29, 2017

YAAKOV KATZ, Plaintiff,
v.
METROPOLITAN TRANSPORTATION AUTHORITY, Defendant.

          MEMORANDUM & ORDER

          KIYO A. MATSUMOTO, United States District Judge Eastern District of New York

         In an amended complaint, plaintiff Yaakov Katz (the “plaintiff”), on behalf of himself and a putative class, alleges violations of the Fair and Accurate Credit Transactions Act (“FACTA”) by the Metropolitan Transit Authority (the “defendant”), a New York public benefit corporation, which plaintiff asserts owns and/or operates transportation facilities throughout the New York region, including, in pertinent part, the Verrazano Narrows-Bridge and the Bronx-Whitestone Bridge. (Plaintiff's Amended Complaint (“Compl.” or the “complaint”), ECF No. 15, at ¶¶ 1, 10.) Plaintiff asserts that defendant violated FACTA by issuing credit card transaction receipts that displayed improperly truncated credit card numbers. (See id. at ¶¶ 1-4.)

         Before the court is defendant's motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, and for lack of subject matter jurisdiction, presumably under Rule 12(b)(1), based on plaintiff's lack of standing under Article III of the United States Constitution. For the reasons that follow, the complaint is dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure.

         BACKGROUND

         The following allegations from the complaint are taken as true for the purposes of a motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); see also Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (citations omitted) (discussing treatment of material factual allegations in complaint for purposes of Rule 12(b)(1) analysis), aff'd on other grounds, 561 U.S. 247 (2010). On August 12, 2015, plaintiff paid a toll using his Visa credit card on the Verrazano-Narrows Bridge, and on January 25, 2017, plaintiff paid a toll using his Visa credit card on the Bronx-Whitestone Bridge. (Compl. at ¶¶ 18-19.) After plaintiff paid for each toll with his Visa credit card, he received an electronically printed receipt. (Id.) Due to the manner in which defendant programmed its computer systems, both of these receipts (the “Toll Receipts”) displayed the first six digits of plaintiff's Visa credit card number. (Id. at ¶ 20, 22.)

         While not expressly stated in the complaint, subsequent briefing by plaintiff clarifies that the first six digits, which plaintiff asserts are prohibited, and the last four digits, which plaintiff asserts are permitted, of plaintiff's credit card number were printed on the Toll Receipts. (E.g., Plaintiff's Motion of Points and Authorities in Opposition to Motion to Dismiss the Amended Complaint (“Pl. Opp.” or the “opposition”), ECF No. 19, at 15 and n.3.) Additionally, all other credit card transaction receipts generated by the same computer system in the seventeen-month period between the first Toll Receipt and the second Toll Receipt displayed the first six digits of the toll payer's credit card number. (Compl. at ¶¶ 21-22.)

         Plaintiff contends that, at all relevant times, defendant, directly or through a subsidiary, was responsible for operating, and collecting tolls on, the Verrazano-Narrows and Bronx-Whitestone Bridges. (Compl. at ¶ 10.) Defendant disputes this allegation and contends that a distinct entity, the Triborough Bridge and Tunnel Authority, is responsible for the maintenance and operation of the Verrazano-Narrows and Bronx-Whitestone Bridges.[1] (See Memorandum of Law in Support of Defendant Metropolitan Transportation Authority's Motion to Dismiss (“Mot.” or the “motion”), ECF No. 21-1, at 13-15.)

         LEGAL STANDARD

         I. Motion to Dismiss

          In its Notice of Motion, (ECF No. 21), defendant moves to dismiss under Rule 12(b)(6), under which a plaintiff's complaint must be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Additionally, defendant's Notice of Motion seeks dismissal for lack of subject matter jurisdiction.[2] (ECF No. 21). “A case is properly dismissed . . . under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing Fed.R.Civ.P. 12(b)(1)).

         A Rule 12(b)(1) challenge to subject matter jurisdiction may be facial, that is, based solely on the pleadings, in which case the court must determine whether the pleadings “allege facts that affirmatively and plausibly suggest that [the plaintiff] has standing to sue.” Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011); accord Carter v. HealthPort Techs., LLC, 822 F.3d 47, 56 (2d Cir. 2016). A Rule 12(b)(1) motion may also be fact-based and rely on evidence beyond the pleadings, in which case a plaintiff must present controverting evidence unless the evidence is “immaterial because it does not contradict plausible allegations that are themselves sufficient to show standing.” Carter, 822 F.3d at 57. A plaintiff must establish subject matter jurisdiction by a preponderance of the evidence. Makarova, 201 F.3d at 110.

         In applying Rule 12(b)(1), “‘the court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff, ' but ‘jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.'” Morrison, 547 F.3d at 170 (quoting Natural Res. Def. Council v. Johnson, 461 F.3d 164, 171 (2d Cir. 2006) and APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003)). Additionally, the court “may consider affidavits and other materials beyond the pleadings to resolve the jurisdictional issue, but . . . may not rely on conclusory or hearsay statements contained in the affidavits.” J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004) (citing Zappia Middle E. Const. Co. Ltd. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000) and Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir.1986)).[3]

         II. Standing

         Under Article III of the Constitution, the plaintiff must establish standing to sue in order for a federal court to adjudicate a suit. See Spokeo Inc. v. Robins, 136 S.Ct. 1540, 1546-1548 (2016); accord Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992). “[T]he ‘irreducible constitutional minimum' of standing consists of three elements. The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, 136 S.Ct. at 1547 (internal citations omitted) (quoting and citing Lujan, 504 U.S. at 560-61).

         To establish the first standing element, injury in fact, “a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Id. at 1548 (quoting Lujan, 504 U.S. at 560).

         An injury is “particularized” when it affects the plaintiff in a “personal and individual way, ” Lujan, 504 U.S. at 560 n.1, and is “concrete” when it “actually exist[s]” in that it is “‘real' and not ‘abstract.'” Spokeo, 136 S.Ct. at 1548 (citations omitted).

         In the Second Circuit, a plaintiff suing on a “bare procedural violation of [a statute] . . . must satisfy a two-part test for such an allegation to constitute a concrete harm.” Katz v. Donna Karan Co., 872 F.3d 114, 119 (2d Cir. 2017). First, the plaintiff must show “that ‘Congress conferred the procedural right to protect a plaintiff's concrete interests' as to the harm in question.” Id. (quoting Strubel v. Comenity Bank, 842 F.3d 181, 190 (2d Cir. 2016)). Second, the plaintiff must show “that ‘the procedural violation presents a risk of real harm to that concrete interest.'” Id. (quoting Strubel, 842 F.3d at 190). If a plaintiff suing on a bare procedural violation cannot satisfy this test, he or she cannot establish injury in fact, and the court has no jurisdiction because the plaintiff has no standing.

         III. Applicable Statutory Law

         FACTA provides, in pertinent part and subject to a limitation that is inapplicable here, that “[n]o 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 receipt provided to the cardholder at the point of sale or transaction.” 15 U.S.C. § 1681c(g)(1). In other words, FACTA generally imposes a requirement that merchants truncate or redact all but the last five digits of a credit card number when they issue receipts for credit card transactions (the “Truncation Requirement”). The parties do not dispute that FACTA's Truncation Requirement was in force at the time the Toll Receipts were issued.

         DISCUSSION

          I. Katz v. Donna Karan

          After the close of briefing on defendant's motion to dismiss, the Second Circuit issued its opinion in Katz v. Donna Karan Co., 872 F.3d 114 (2d Cir. 2017). In that case, as here, the plaintiff sued under FACTA after making two payments by credit card to the defendants[4] and, in each instance, receiving a printed receipt that displayed the first six and last four digits of his credit card number. Donna Karan, 872 F.3d at 116. Also as here, the plaintiff asserted that this failure to comply with FACTA's Truncation Requirement “raise[d] a material risk of harm of identity theft” such that he “suffered a concrete injury sufficient to establish Article III standing.” Id.

         At the motion to dismiss stage in Donna Karan, the district court concluded that FACTA's Truncation Requirement “is a means to the end goal of identity theft prevention, ” and not a substantive right. Katz v. Donna Karan Int'l, Inc., No. 14-CV-740 (PAC), 2017 WL 2191605, at *4 (S.D.N.Y. May 17, 2017), aff'd and remanded sub nom. Katz v. Donna Karan Co., L.L.C., 872 F.3d 114 (2d Cir. 2017). Accordingly, to establish constitutional standing and subject matter jurisdiction, a plaintiff suing on a violation of the Truncation Requirement must establish that the violation presents a material risk of harm to the interest of identity theft prevention. Id.

         A. District Court Decision

         The district court in Donna Karan found that the first six digits of a credit card number, also known as the “issuer identification number” or “IIN, ” identify the institution that issued the card and disclose no personal information about the cardholder. Id. at *1 (citing Bin List & Bin Ranges: List of Issuer Identification Numbers, Bin Database-Industry Standard Fraud Prevention, https://www.bindb.com/bin-list.html); accord Donna Karan, 872 F.3d at 116. Because FACTA does not prohibit identifying a card's issuer on a transaction receipt, the district court concluded that failure to redact the first six digits of a credit card number was, standing alone, insufficient to establish a material risk of harm to the interest of identity theft protection. Donna Karan, 2017 WL 2191605 at *5-6 (citations omitted). The district court also noted that the plaintiff had “not allege[d] any facts showing that he experienced the Congressionally-proscribed harm: identity theft, ” id. at *5, and rejected the plaintiff's argument that FACTA gives rise to a privacy right in the information required to be truncated. Id. at *6. Accordingly, the district court found that the plaintiff had not demonstrated a risk of injury sufficient to establish standing. Id.

         B. Second Circuit Decision

         The Second Circuit affirmed the district court's determination that the plaintiff had not established subject matter jurisdiction. In setting forth the applicable legal standards, the Second Circuit characterized the printing of the first six digits of a credit card number on a receipt as a “procedural” violation of FACTA and stated that the interest implicated by FACTA and the Truncation Requirement is the prevention of identity theft. Donna Karan, 872 F.3d at 120. The Second Circuit then applied a “clear error” standard of review to the district court's finding that printing the first six digits of a credit card number does not create a material risk of harm sufficient to confer Article III standing. Id.

         After discussing the district court's analysis of the significance and importance of the first six digits of a credit card number, id. at 116, the Second Circuit found that the district court did not clearly err “as to the specific material facts in dispute.” Id. at 120. The Second Circuit accordingly affirmed the district court's finding that “the bare procedural violation in question did not raise a material risk of harm of ...


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