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Attorneys Slam 'Bailout Plan' for Businesses
Miami attorney calls Congress' retroactive bill an 'extremely rare and inherently unfair' measure
Daily Business Review
May 29, 2008
Arthur Cullen, owner of the Coral Gables, Fla., restaurant Havana Harry's, felt his livelihood threatened when he was served with a lawsuit in April. A customer accused him of illegally including credit or debit card expiration dates on customer receipts.
"This is extortion. I felt like I was out on the street corner and an attorney put a gun to my head and was picking my pocket," Cullen said.
"I feared the next step would be they would come after my records and try to make some sort of class action lawsuit by sending a letter to all those who ate at my restaurant. I don't make that kind of money that I can sustain five, six, seven of these lawsuits."
Cullen's business was open to litigation under the Fair and Accurate Credit Transactions Act of 2003, which prohibits printing expiration dates and all but the five last digits of charge card numbers.
The expense can be hefty for a business if found liable: $100 to $1,000 per violation.
Congress came to his rescue this month. Lawmakers passed a retroactive bill by U.S. Rep. Tim Mahoney, D-Palm Beach Gardens, that means printing expirations dates on receipts does not amount to a willful violation of the law from Dec. 4, 2004, and the passing of the law on May 20. To pursue lawsuits, plaintiffs attorneys would have to show their clients were victims of identity fraud due to the printing of the expiration date.
The bill passed the U.S. House and Senate unanimously.
"The cases are over. Congress says you don't have a cause of action anymore. There's nothing we can do," said Miami attorney Matthew Sarelson, who has filed a dozen FACTA lawsuits. He said six of the lawsuits are now over due to the legislation. "It's a bailout plan, plain and simple, and it's worded in such a way that it doesn't change what the law says," he said.
But, Sarelson added, the new law only affects pending lawsuits -- not future ones.
"This is an act of amnesty. If you've been sued, you are off the hook, but going forward, you must still truncate," Sarelson said. "It is extremely rare and inherently unfair for Congress to pass legislation that is retrospective only." "There is no question it (the legislation) has made it more difficult," said attorney Roniel Rodriguez of Aventura, who has spearheaded FACTA lawsuits in Florida with attorney Anthony Lopez of Cibran Elaiek & Lopez in Miami.
About half of the approximately 60 lawsuits they filed focus on expiration dates, Rodriguez said. The new Credit and Debit Receipt Clarification Act amending FACTA doesn't affect the lawsuits on charge card numbers. "I understand the intent of Congress, but I'm not sure it's going to impact our lawsuit all that much," Lopez said. "I've received a lot of violating receipts that had merely expiration dates and didn't file those."
Lopez said he and Rodriguez want to focus on the more egregious receipts that printed full card numbers and sometimes the expiration dates as well.
Even with the new legislation, businesses that print expiration dates are still in violation of FACTA and Florida law, the attorneys maintain.
"Under the new law in itself, there would be no grounds for dismissal," Rodriguez said. "The most they could do and say is that it's not willful. That doesn't mean they haven't violated the law, and it doesn't mean they didn't expose the customer to identity theft."
Stephen M. Bander of Bander and Associates in Miami, who brought the lawsuit against Havana Harry's, said lawmakers opened the door to lawsuits by individuals. He is still looking at the effect of the bill on pending lawsuits. Lawyers filing FACTA lawsuits say their main goal is to get defendants to correct their actions by dropping crucial personal information that could lead to identity theft. The steep statutory penalties may seem draconian but are meant to force businesses to comply.
"I honestly believe some businesses don't realize how easy it is for people to steal identity," Rodriguez said.
Thieves simply dive in a trash container behind a restaurant or sort through trash to get receipts with credit card numbers. While an expiration date alone may not be enough to steal an identity, it can lead to some consumers being targeted.
"Once they have an expiration date, it's like a filter. They can start limiting their search," Lopez said.
Mahoney said the litigation involving expiration dates targeted honest businesses who were trying to comply with FACTA. His office said about 500 lawsuits have been filed nationwide."
With a tough economy in Florida and across America, the last thing businesses need are multimillion-dollar lawsuits that could force them into bankruptcy, leading to even more lost jobs," Mahoney said when the bill passed the Senate. "The legislation I created will protect consumers while ensuring that the law is not abused."
U.S. Sen. Charles Shumer, 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."
The amendment "stops destructive lawsuits against companies that made a harmless error in the past," he said.
The bill, along with several others, await President Bush's signature, possibly as early as next week.
Cullen said he hopes the president signs the bill soon so he can put an end to his own litigation. He said his bank told him it was OK to include expiration dates on receipts.
His attorney, Gordon Charles Watt of Coral Gables, said frivolous FACTA lawsuits lead to a public distrust of lawyers and encourage tort reform, hurting legitimate plaintiffs.
"Something like this could put a small businessman out of business. Everyone is struggling," Watt said. "I've had clients in the past who feel they are being abused by these types of lawsuits."
Richard Simeone of Coral Gables, in-house counsel for Atlanta-based Hooters, whose restaurant in Miami's Coconut Grove is being targeted by one of lawsuits brought by Rodriguez and Lopez, called the legislation "a step in the right direction."
"It limits the exposure," Simeone said. "I've never heard of anyone able to steal credit card information by putting expiration dates on the receipts."
