The En Banc 11th Circuit Clarifies “Risk of Identity Theft” StandingIn a decision that narrows the path to federal court for plaintiffs seeking statutory damages with no actual harm, the full 11th Circuit has held that a plaintiff must plead a concrete injury to bring a claim based on an increased risk of identity theft. The en banc decision in Muransky v. Godiva Chocolatier, Inc. reverses a previous panel decision that upheld a class action settlement involving claims under the Fair and Accurate Credit Transaction Act (FACTA). We discussed that decision on this blog last year.

As we noted in our discussion of the panel opinion in Muransky, the plaintiff claimed a garden-variety FACTA violation: He alleged that Godiva printed the first six and last four digits of his credit card on his receipt. The case mediated, and the parties reached a class-wide settlement that would create a $6.3 million settlement fund to pay around $235 to each class member who submitted a claim form – with $2.1 million to class counsel. About 15% of the class members who received notice made claims, and there were five objectors. The objectors primarily focused on the issue of attorneys’ fees and the class representative’s $10,000 incentive award for serving as class representative. One objector asserted that the class representative lacked standing. The district court overruled the objections and approved the settlement. Two objectors appealed. After two panel opinions upholding the settlement, the en banc 11th Circuit reversed, with Judge Britt Grant writing for the majority.

The opinion focused on the issue of how concrete an injury must be to confer standing, and specifically how federal statutory rights play into that constitutional analysis. The court distilled the question into a two-step inquiry:

[W]e consider two things when we evaluate whether concrete harm flows from an alleged statutory violation—and thus whether the plaintiff has standing. First, we ask if the violation itself caused harm, whether tangible or intangible, to the plaintiff. If so, that’s enough. If not, we ask whether the violation posed a material risk of harm to the plaintiff. If the answer to both questions is no, the plaintiff has failed to meet his burden of establishing standing.

Under this rubric, the court found that receiving a non-compliant receipt is not a sufficient injury in itself. Receiving a non-compliant receipt does not violate any substantive right in a way that yields a concrete injury, the court found. Instead, an improper receipt was a “bare procedural violation” that Spokeo found insufficient to confer standing. Similarly, the time and energy the plaintiff spent safeguarding his receipt did not confer standing because the plaintiff did not allege that he actually spent any time and energy safeguarding a receipt. Likewise, the court rejected the notion that receiving a receipt is akin to a breach of confidence.

Turning to the second prong of the concreteness analysis, the court found that the plaintiff faced no risk of harm that conferred standing. This analysis hinged on how much weight the 11th Circuit was willing to give to Congress’ determination that untruncated receipts increase the risk of identity theft. The court engaged in a close analysis of FACTA to determine that Congress did not deem every FACTA violation to pose an actionable risk, but it ultimately asserted that the question of what risks confer standing is judicial, not legislative:

What Muransky asks is for us to abandon our judicial role by merging the ordinary steps in the analysis—concluding that because the statute protects a concrete interest, any violation automatically threatens that interest and thus supports standing. Although that approach would simplify our job, it is inconsistent with Spokeo and with what the Constitution demands of us.

[E]ven if Congress had explicitly stated in the text of the statute that every FACTA violation poses a material risk of harm, that alone would not carry the day. Although the judgment of Congress is an “instructive and important” tool to identify Article III injuries, we cannot accept Muransky’s argument that once Congress has spoken, the courts have no further role.

To determine whether the plaintiff could demonstrate a sufficient risk of injury, the court looked to the operative factual allegations and found them wanting.

There are three dissents, and they are too extensive to treat here. The dissents span 113 pages between them­­ –– against the majority’s 35 –– and they touch on the distinction between public and private rights, the procedural implications of the majority’s decision, separation of powers, and numerous other issues.

So what does Muransky mean?

Another blow to FACTA claims

As we have previously noted, FACTA claims have struggled after Spokeo, and Muransky further closes the door on such claims in the 11th Circuit. Pleading an actionable claim will require demonstrating a concrete injury or a material risk of injury, and that is a difficult task when most FACTA violations consist of nothing more than a cardholder receiving a receipt. Almost every FACTA plaintiff has a receipt to prove the injury, but the plaintiff’s possession of the receipt means that the plaintiff’s identity has almost certainly not been damaged by the receipt.

Another Hurdle for Federal Jurisdiction for Federal Statutory Claims

While we do not think Muransky restates the Eleventh Circuit’s standing test, it will certainly be cited against claims arising under other federal statutes that allow statutory damages in the absence of actual damages.

Another Hurdle for Certifying Classes

This is the most important point. Presumably, a FACTA plaintiff, or any plaintiff asserting a claim based on a risk of identity theft, will now go above and beyond to articulate a personal concrete injury with enough specificity to satisfy Muransky. But every personal fact asserted in support of the named plaintiff’s injury becomes an individualized fact that defendants can use in resisting class certification. If a plaintiff’s identity was stolen, representing a class of uninjured class members may be impossible. Plaintiffs who took particular steps to protect their identities or who suffered particular concern for the security of their identities may not be typical of a class who did not take those steps or share those concerns. A plaintiff who is too generalized in alleging harm gets kicked out of federal court. A plaintiff who is too specific in alleging harm may make class certification unlikely. Like Calvin from the old cartoon Calvin and Hobbes, alleging enough but not too much will be a challenge.

Another Hurdle in Data Breach Claims

We will be watching closely to see how courts treat Muransky outside of the context of federal statutory claims. Most consumer identity-theft cases assert negligence claims, but a common basis for standing is an allegation that the plaintiff and the class faced an increased risk of identity theft. This pleading pattern mirrors what the 11th Circuit addressed in Muransky, but without the overlay of Congressional findings.

Another Reason to Address Known Problems Up Front

The 11th Circuit attached great significance to the parties’ attempt to hustle their settlement through final approval before the anticipated release of the Supreme Court Spokeo opinion. That decision backfired on the plaintiff.  The 11th Circuit was not above sarcasm in pointing out what it called a “particularly acute” lack of unfairness:

We do not think it is too much to ask that litigants who are aware that their allegations may not satisfy constitutional standing requirements take the time to firm up those allegations—if it is possible to do so—before an en banc circuit court confirms their suspicions of inadequacy. This is not a case where a surprise standing issue was thrust upon an unaware plaintiff.

And, because the 11th Circuit dismissed the case without prejudice, the defendant faces the possibility of a new lawsuit. When settling, both parties share an interest in making sure jurisdiction exists and is adequately reflected in the record.

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One global thought in closing. A treasured mentor taught me that judges will do the right thing within the law, and I think that rule applies here. The 11th Circuit summarized the event at the center of this case as “Muransky has alleged that a cashier handed him a receipt containing some of his own credit card information printed on it.” That event does not demand a remedy at a gut level, much less does it seem to justify awarding millions in damages and fees. FACTA is a draconian statute that imposes liability far beyond what seems reasonable. After all, what is it about that sixth credit card number that suddenly makes identity theft a risk? The 11th Circuit’s tacit view that FACTA is unfair comes through in Muransky. The court’s skepticism of Congress’ findings should be seen in parallel with its skepticism of FACTA as a whole. And the opinion repeatedly denigrates the parties’ attempt to consummate their settlement before the Spokeo decision. Parties would do well to remember these gut-level equities.

CARES Act Doesn’t Entitle Accountants to Fees for Helping Borrowers Get PPP LoansThe Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was expanded by the Paycheck Protection & Health Care Enhancement Act, provides more than $650 billion in loans for small businesses affected by the coronavirus pandemic. It includes fees for banks that make PPP loans to borrowers. But four recent cases (of more than 50 pending nationally) hold that the CARES Act does not require the banks to share those fees with accounting firms or other “agents” who helped clients apply for the loans.

Because the CARES Act and its regulations are part of the Small Business Administration’s pre-existing loan program, accountants and other agents should use the SBA’s Form 159 Fee Disclosure and Compensation Agreement if they want to be paid for their efforts to help consumers get PPP loans. The SBA regulations limit the fees that can be paid to an agent, and the CARES Act adds more limitations: For example, if agents are paid, they must be paid by the lender, not the borrower, and fees are capped at lower percentages than for normal SBA loans.

These recent cases — from federal district courts in Florida, New York, and Texas — dismiss putative class action claims by accountants for declaratory relief under the CARES Act, as well as related state law claims for conversion, unjust enrichment, implied contract, and the like (see Juan Antonio Sanchez, PC v. Bank of South Texas, 2020 WL 6060868 (S.D. Tex. Oct. 14, 2020); Steven L. Steward & Associates, P.A. v. Truist Bank, 2020 WL 5939150 (M.D. Fla. Oct. 6, 2020);  Johnson v. JPMorgan Chase Bank, N.A., 2020 WL 5608683 (S.D. N.Y. Sept. 21, 2020), appeal filed sub nom. Quinn v. JPMorgan Chase Bank, N.A. (2d Cir. Oct. 13, 2020); and Sport & Wheat, CPA, PA v. ServisFirst Bank, Inc., 2020 WL 4882416 (N.D. Fla. Aug. 17, 2020), appeal filed (11th Cir. Sept. 10, 2020)). The Judicial Panel on Multidistrict Litigation recently rejected a request to transfer more than 50 similar cases into a single consolidated proceeding (see In re Paycheck Protection Program (PPP) Agent Fees Litig., MDL No. 2950 (J.P.M.L. Aug. 5, 2020)).

Juan Antonio Sanchez, PC puts it this way: “Evidently, Plaintiff [an accounting firm that helped clients apply for PPP loans] believed that it could serve as applicants’ agent, kick its feet up and wait for the banks to issue PPP loans to successful applicants, and only then notify [the banks] of its agency role and demand payment. The Court holds that that approach is not how the PPP works, and it contradicts a common-sense interpretation of the relevant statutes and regulations” (2020 WL 6060868, at *6 & n.120 (emphasis in original; internal quotation marks and citation omitted)).

At least two of these cases have been appealed, so it’s conceivable that federal appeals courts will view the controversy differently. But in the meantime, as the cases agree, the “common-sense” approach is for the lender, borrower, and agent to use Form 159 to document an agreement, in advance, about how the agent will be compensated for its help.

For any questions you may have regarding the CARES Act or Paycheck Protection Program loans, contact Margaret Cupples or Elizabeth Boone.

11th Circuit Forbids Incentive PaymentsYou need to read Johnson v. NPAS Solutions, LLC. This recent decision from the 11th Circuit fundamentally changes the rules of obtaining approval for class action settlements.

Johnson’s introduction emphasizes that the 11th Circuit is shaking up the way class actions are settled and that the court knows it: “The class-action settlement that underlies this appeal is just like so many others that have come before it. And in a way, that’s exactly the problem. We find that, in approving the settlement here, the district court repeated several errors that, while clear to us, have become commonplace in everyday class-action practice.” In the pages that follow, the 2-to-1 majority opinion categorically forbids class-representative incentive payments, establishes a mandatory sequence for fee petitions, and reinforces standards regarding the approving court’s findings and conclusions.

Johnson looks like an ordinary TCPA class settlement. After the complaint, some motion practice, and a little discovery, the parties proposed a nationwide class settlement offering just under $1.5 million to about 180,000 class members on a claims-made basis. Fewer than 10,000 class members submitted claims, but the claims rate was a respectable 5.3%. The settlement provided a $6,000 incentive award to the class representative. Class counsel were to receive 30% of the settlement fund available to the class, but, critically, their fee petition was not due until after the objection deadline passed. Nobody opted out, but there was one objector. The district court overruled her objections, and she appealed. The 11th Circuit went with her on three issues (we address them in order, but the second is the most important).


The 11th Circuit interpreted Federal Rule of Civil Procedure 23(h) to require class counsel to submit the fee petition before any objection to fees is due. It is not enough, the court ruled, that the class notice included details about what the fee petition would ultimately request. The objectors have the right to object to the petition itself. In this regard, the court noted that a degree of adversity sneaks between the class and the lawyers representing it, as the lawyers’ interest to maximize fees conflicts with the class’ interest to maximize recovery to the class.

While the court set a bright-line rule requiring fee petitions to come before an objection deadline, it found that the district court’s failure to sequence the deadlines in this manner resulted in harmless error. The objector relied on the notice to substantiate her objection, and the ultimate fee petition aligned with the notice. Moreover, the objector appeared at the final approval hearing to challenge the substance of the fee petition. She made no new arguments at the hearing and made no new arguments on appeal. Thus, the error was harmless.

No More Class Representative Incentive Payments

If you had “Court of Appeals prohibits class representative incentive payments by relying on Supreme Court cases from 1882 and 1885” on your 2020 bingo card, come forward and collect your prize. The 11th Circuit has apparently categorically barred them for over 100 years.

The cases on which it relied are Trustees v. Greenough, 105 U.S. 527 (1882) and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885). They establish a general rule that a plaintiff who successfully litigates to create a common fund for the benefit of the plaintiff and others can recover an attorney’s fee from the fund — but may not recover any kind of personal salary.

While these Supreme Court cases are not class-action cases, they are cases where one plaintiff’s work benefits others beyond the named plaintiff, which the 11th Circuit found was close enough to be controlling. It held that the prohibition on salaries for successful plaintiffs barred incentive payments for class representatives, which served much the same purpose: “Incentive awards are intended not only to compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty).” The court found incentive awards to be “part salary and part[ ] bounty;” but “[w]hether [the] incentive award constitutes a salary, a bounty, or both, we think it clear that Supreme Court precedent prohibits it.”

The court had no qualms about barring these common payments, noting “so far as we can tell, the [ubiquity of incentive payments] is a product of inertia and inattention, not adherence to law.”

Required Findings

Lastly, the 11th Circuit reiterated the long-standing requirements that district courts make detailed findings when addressing such matters as the fairness and adequacy of a settlement, the approval of fees, and the disposition of objections. It is not enough merely to dispose of the issues. The 11th Circuit requires a record that substantiates the reasons for the district court’s decision to exercise its discretion to approve a settlement or fee petition.

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So, What’s Next?

  • Initially, we would expect a petition for en banc rehearing and a flurry of amicus briefs, followed by a petition for certiorari, and maybe a push to have Congress or the Rules Committee authorize incentive awards of some level.
  • Practitioners should update their checklists and forms, as the old timetable for the sequence of events may no longer pass muster, and that 10-year-old standard proposed order may be too bare-bones to make the findings that are required.
  • Further litigation about incentive awards also seems likely. In Johnson, the incentive award came from the common fund and thus reduced the relief available to the class (even if only a little bit). Whether parties may provide an incentive payment that does not come from the common fund remains to be seen. Some federal statutes, for instance, include statutory incentive payments for class representatives.

Johnson signals that the skepticism about class actions that has featured prominently in Supreme Court jurisprudence since Wal-Mart v. Dukes has come to the 11th Circuit. The court could have easily characterized the practice of incentive awards as “long-standing precedent” or “established practice,” but it selected a pejorative term instead: “inertia.” And that inertia came from, in the court’s view, “inattention” to the controlling standards. The skepticism of Johnson invites parties to be bold in calling for the reassessment of all aspects of class-action practice that are not drawn directly from the text of Rule 23 or controlling cases interpreting it.

Lastly, Johnson sidesteps an issue we have watched closely: the interaction between Rule 23 and the Due Process Clause. Most of the Federal Rules of Civil Procedure soar high above any due-process concerns. It is hard to imagine, for instance, a litigant claiming that the Constitution forbids changing the presumptive time limit for depositions to six hours instead of seven or requires a particular form for motions for summary judgment. But Rule 23 is different. Because it allows courts to adjudicate the rights of absent parties, Rule 23 swoops much closer to the Constitutional ground. One can easily imagine that changing the rules for adequacy or class notice could violate due process. Here, the objector argued that the district court’s decision to set her objection deadline before the fee petition violated the Due Process Clause even if it did not violate Rule 23(h). The 11th Circuit responded by noting that Rule 23(h) was not quite sitting on rock bottom yet, as the notice required by that rule is more than what the Due Process Clause requires. But the issue remains an intriguing one for litigants to consider raising.