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Shurland v. Bacci Café & Pizzeria on Ogden Inc.

August 19, 2009


The opinion of the court was delivered by: Judge Pallmeyer


On August 11, 2007, Bacci Café & Pizzeria on Odgen, Inc. ("Bacci" or "Defendant") issued to Plaintiff Christopher D. Shurland ("Shurland" or "Plaintiff") a credit card receipt displaying Shurland's entire credit card number and expiration date. In so doing, Bacci violated the Fair and Accurate Transactions Act of 2003 ("FACTA"), an amendment to the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681c(g). 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 receipt provided to the cardholder at the point of sale or transaction." Id. A willful failure to comply with the Act permits the recovery of actual or statutory damages "not less than $100 and not more than $1000." 15 U.S.C. § 1681n(a). Plaintiff seeks to represent a class of more than 6,000 consumers to whom Bacci allegedly issued receipts that violate FACTA.

Plaintiff commenced this suit in the Circuit Court of Cook County, Chancery Division, on March 21, 2008, and on April 21, 2008, Bacci timely removed to federal court. On February 22, 2009, Bacci lodged a third-party complaint for breach of contract and contribution against National Translink Corp. ("National Translink"), the company that supplied Bacci with its credit card processing machine. Three motions are pending before the court: Shurland has moved for class certification; Bacci has moved for summary judgment, arguing that Plaintiff cannot show that Bacci's violations were willful; and National Translink has moved to dismiss Bacci's contribution claim. For the reasons set forth below, Plaintiff's motion for class certification is granted, Bacci's motion for summary judgment is denied, and National Translink's motion to dismiss is granted.


On August 11, 2007, Plaintiff dined at Bacci Café & Pizzeria in Berwyn, Illinois, and received a cash register receipt displaying his entire credit card number and expiration date. (Def. 56.1 ¶ 7.) As of December 4, 2006, issuing a receipt that displays a customer's entire credit card number and expiration date violates FACTA and may subject the issuer to statutory damages if the violation was willful. (Def. 56.1 ¶¶ 6-7; 15 U.S.C. §§ 1681c(g), 1681n(a).

On the day Plaintiff ate at Bacci, the restaurant processed customers' credit card payments using a single credit card processing terminal it had purchased from National Translink, an independent sales organization that sells credit card processing services and terminals to small business owners. (Def. 56.1 ¶ 9; Tracy Dep. 6:21-24, Ex. E to Pl. Mem. in Support of Class Cert.) Bacci obtained its first terminal from National Translink in May 2004. To set up the terminal for use, Bacci filled out a bank application supplied by National Translink, and National Translink used the information in the application to obtain approval for Bacci's machine from a processing center. (Def. 56.1 ¶¶ 10-11.) As part of the service it provided for its merchant clients (including Bacci), Translink coordinates the processing center's programming of the client's terminal as well as the credit card approvals necessary to process transactions on the terminal. (Def. 56.1 ¶ 11.) Once Translink contacts the processing center with its client's information, the processing center transmits software to the client's machine. (Def. 56.1 ¶ 12.) Thereafter, National Translink provides additional service in the form of technical support and answering its clients' questions about the operation of the terminal. (Def. 56.1 ¶ 13.) Under the terms of Bacci's contract with National Translink, Bacci was also a member of National Translink's "Merchant Club," which entitled Bacci to service on its machine or, if necessary, a replacement terminal in exchange for a set fee. (Def 56.1 ¶ 15.)

There is a dispute among the parties whether Defendant had notice of FACTA's credit card receipt truncation requirements, which went into effect in December 2006. Defendant claims that it first received notice of the truncation requirements in October 2007, when a customer notified a Bacci employee that she had received a receipt displaying her entire credit card number and expiration date. (Def. 56.1 ¶¶ 33-34.) After learning of the truncation problem, Bacci claims it contacted National Translink to obtain service on its terminal. Bacci was unable to program the terminal to truncate properly without National Translink's assistance, and, "starting immediately after the customer noticed the problem," Bacci began truncating customer receipts "by manually crossing out the numbers" until National Translink could service the terminal. (Def. 56.1 ¶ 34.)

Plaintiff has offered testimony from National Translink representatives and employees suggesting that Bacci received notice of FACTA requirements prior to October 2007. In early 2005, National Translink included a notice in its clients' monthly billing statements advising its clients that their terminals must be "properly programmed" to truncate credit card numbers appearing on receipts. (Def. 56.1 ¶ 16; Tracy Dep. 28-29, 90, Ex. D to Def. 56.1.) James Tracy, the vice president of National Translink, testified that National Translink's practice was to send this notice to all of its clients. (Pl. 56.1 ¶¶ 2-4; Tracy Dep. 28:6-12, Ex. E to Pl. Mot. to Certify Class.) Mr. Tracy could not confirm that National Translink had in fact sent Bacci a notification because all statements involving Visa and Mastercard transactions must by law be destroyed after two years. (Def. 56.1 Resp. ¶¶ 3-4.) Mr. Tracy did testify, however, that the notice would have been sent to "every billing address in our system at that time." (Pl. 56.1 ¶ 4.)

In 2006, National Translink also placed Defendant on a list of approximately 200 clients it believed might not be in compliance with truncation requirements due to their specific terminal model. (Def. 56.1 ¶ 18.) National Translink customer representatives Douglas Porch and Noel Carey had the responsibility of contacting the businesses identified on the list. (Pl. 56.1 ¶ 9.) Mr. Porch testified that he attempted to contact customers regarding FACTA requirements, and made a note on his list if he received no response. (Pl. 56.1 ¶ 14.) When Mr. Porch reached one of Translink's clients, he informed the client of the FACTA requirements and then, depending on the terminal model, either transferred the client to National Translink's technical support for further assistance or gave the client a separate number for a service center in California for consultation about a replacement machine. (Pl. 56.1 ¶¶ 11-14; Porch Dep. 47-49, Ex. F to Pl. Mem. to Certify Class.) Mr. Porch had no personal recollection of speaking with any Bacci representative. (Def. 5.1 Resp. ¶¶ 16-17.) Mr. Porch did, however, identify a document called an MCMTER*fn1 report for Bacci Café and Pizzeria, which specified the type and model of machine owned by Bacci (a "Hypercom T7P") and included Bacci's contact information. (Pl. 56.1 ¶ 17; Porch Dep. 56, Ex. E to Def. 56.1.) Mr. Porch testified that he recognized his own handwritten note on the MCMTER indicating that on April 28, 2006, he faxed the MCMTER to Arizona CardSystems, a technical support center in Arizona that had the software necessary to update Bacci's terminal. (Pl. 56.1 17; Porch Dep. 63-64.) The handwritten note reads, "4/28/06, Friday 10:55 a.m. Please truncate. Thanks, Doug. Only last four credit card numbers to show." (Porch Dep. 62:20-23.) Although Mr. Porch could not specifically recall speaking to anybody at Bacci before sending the fax, he testified that he would not have sent the fax to Arizona CardSystems unless he had first contacted the customer about FACTA's truncation requirement. (Def. 56.1 Resp. ¶ 19; Pl. 56.1 ¶ 19.)

Noel Carey, a National Translink employee since 1999, also testified about the process of notifying National Translink's clients regarding FACTA's truncation requirements. (Pl. 56.1 ¶ 20.) Mr. Carey worked as a customer service representative during 2006 and 2007 and, like Mr. Porch, received a list of clients, including Bacci, whose machines might be operating in violation of FACTA. (Pl. 56.1 ¶¶ 20-21; Def. Resp. ¶ 21-22.) Using Bacci's MCMTER form, Mr. Carey identified Bacci as a customer that used a single credit card processing terminal and did not use a secondary processing company. (Pl. 56.1 ¶¶ 29, 31-34.) Mr. Carey testified that he was instructed to call any client that fit this description and used the Hypercom T7P terminal, the one Bacci used. (Pl. 56.1 ¶ 30.) Like Mr. Porch, Mr. Carey could not specifically recall speaking with anyone at Bacci, but he testified that the information in the MCMTER would have prompted him to call Bacci to verify its model of terminal and to determine whether its terminal truncated credit card numbers to the last four digits on customer receipts. (Pl. 56.1 ¶¶ 34-35.)

On July 14, 2006, in response to complaints from Bacci of "sticky buttons" on its terminal, National Translink agreed to ship Bacci a replacement terminal. Before the terminal shipped, Translink's technical support staff coordinated with Arizona CardSystems for the installation of information and program files onto the new terminal, including the installation of a truncation program. Vincent DiDiana, who, with his wife, owns Bacci's Berwyn, Illinois location, attested in a sworn affidavit that he "believed that the replacement credit card terminal would have met all the requirements found in all laws, rules and regulations governing the use of credit card terminals," but insisted in his deposition that he was unaware that truncation was a legal requirement prior to October 2007. (Vincent DiDiana Aff., ¶¶ 3-4, Ex. G to Def. 56.1; Vincent DiDiana Dep. 36, 28-42.) The replacement terminal was in use on August 11, 2007, when Plaintiff ate at Bacci and received a receipt displaying his full credit card number and expiration date.


I. Defendant's Motion For Summary Judgment

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Jackson v. Kotter, 541 F.3d 688, 697 (7th Cir. 2008). In determining whether issues of material fact exist, the court must evaluate admissible evidence in the light most favorable to the nonmoving party. Lee v. Young, 533 F.3d 505, 509 (7th Cir. 2008). The court will deny summary judgment if it appears a reasonable jury could find for the nonmoving party. Lawson v. CSX Transp., Inc., 245 F.3d 916, 922 (7th Cir. 2001).

Defendant does not dispute that it violated FACTA's truncation requirements. Defendant contends that summary judgment is nonetheless appropriate because Plaintiff has failed to present evidence that Defendant's violation was "willful" as a matter of law.

The Supreme Court has held that "willfulness" under FACTA includes both knowing and reckless conduct. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 56-57 (2007) ("[W]here willfulness is a statutory condition of civil liability, we have generally taken it to cover not only knowing violations of a standard, but reckless ones as well." (internal citations omitted)) In Safeco, the Court interpreted "recklessness" in keeping with the common law definition of action entailing "an unjustifiably high risk of harm that is either known or so obvious that it should be known." Id. at 68. The standard is an objective one, constituting "something more than negligence but less than knowledge of the law's requirements." Kubas v. Standard Parking Co., 594 F. Supp. 2d 1029, 1032 (N.D. Ill. 2009) (quoting Murray v. New Cingular Wireless Servs, Inc., 523 F.3d 719, 726 (7th Cir. 2008)).

Defendant contends that it could not have violated FACTA willfully because it lacked actual knowledge of the statute's provisions and because Plaintiff has failed to show evidence of recklessness. Defendant notes that no one at National Translink was able to confirm that Bacci in fact received notification of FACTA's requirements either in its billing statement or in later telephone communications with Translink representatives. Defendant also concludes that the very length of time it was in violation of FACTA defeats a finding of recklessness: Bacci received the replacement machine, which apparently never truncated properly, five months before FACTA became effective and more than year before issuing the receipt to Plaintiff on August 11, 2007.

The court finds Defendant's arguments unpersuasive. 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. Defendant is correct that none of the employees deposed could specifically recall speaking to anyone at Bacci. But Mr. Tracy, Mr. Porch, and Mr. Carey explained in detail the methods they used to notify hundreds of National Translink's clients of the need to truncate credit card receipts, and their documentation and contemporaneous handwritten notes of this process support the inference that National Translink did in fact contact Bacci regarding the new truncation requirements. Based on these records and the deponents' corroborating testimony, a reasonable jury could conclude that Bacci received notice and either knowingly or recklessly disregarded it. That Bacci received a second, noncompliant, credit card terminal after these alleged contacts likewise does not defeat the reasonable and permissible inference that it continued to ignore the requirements after receiving a second machine that clearly was not in compliance. Mr. DiDiama's attested belief that the new terminal would meet all necessary legal requirements does not resolve the factual issue of whether he was aware of FACTA's requirements ...

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