Credit Card Lawsuit Lawsuit News

October 4, 2012

Court: Can gov't be sued for credit card mistakes?

WASHINGTON (AP) - The Supreme Court on Tuesday pondered whether it should allow the federal government to face millions of dollars in class-action lawsuits for violating identity theft protection laws that ban the printing of credit card numbers and expiration dates on receipts.

Government lawyers argue that the United States is immune from being sued for money over violations of the Fair Credit Reporting Act. But a federal appeal court refused to throw out a class-action lawsuit from a Chicago lawyer who found part of his credit card number and the expiration date on his $350 receipt from a government website.

John Jacobs, the lawyer for James X. Bormes, argued in court that he could use either the FCRA or a second law, the Tucker Act, which allows the government to be sued in some circumstances, to negate the government's sovereign immunity.

"If you're right about this, the consequences are enormous," Justice Ruth Bader Ginsburg warned.

The federal government is the largest creditor, lender and employer in the United States, and government lawyers said in court papers that if Bormes' suit is allowed, the government could face "massive liability."

A federal judge in Illinois threw out Bormes' class-action lawsuit, saying that Congress did not explicitly waive the federal government's sovereign immunity in the FCRA. But the lawsuit was revived by the U.S. Court of Appeals for the Federal Circuit, which said the Tucker Act supplied the necessary waiver. Government lawyers argued that the appeals court should have not looked to a second law, when the FCRA clearly did not make the government liable for damages.

"The United States is governed by the substance of the (Fair) Credit Reporting Act," Ginsburg said. "The act applies to the government, but your point is that there's no sanction for noncompliance, even though the United States, a government system, is supposed to conform to the standards in the act?"

"Are we taking the position that even if substantive obligations run against the United States, there still wouldn't be a remedy, at least a remedy in damages against the United States? And the answer to that is yes," said Sri Srinivasan, who argued for the federal government. "But that's not at all atypical under this court's sovereign immunity jurisprudence, and it's not at all atypical for Congress to have fashioned a scheme that runs in that way."

But Congress must have known that the government could be affected, Jacobs said. "Knowing that the government is one of the largest issuers of credit card receipts, one would have to wonder why they would want to exclude the government in terms of protecting the public" with the Fair Credit Reporting Act, Jacobs said.

The FCRA prohibits the showing of more than the last five digits of a card number or the expiration date on a credit card or debit card receipt, and defines a person liable under the act as "any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency."

Bormes' court filing receipt from the government's website showed four digits of his credit card number and the expiration date.

Government lawyers say that since the law doesn't specifically say the U.S. government, it retains its immunity against lawsuits. But Jacobs argued that "any" clearly includes the United States government.

"The reason that this statute was passed was to protect consumers. The Congress was clear that if any government violates the statute, it has this liability," he said.

Justices will make a decision before the end of the term.

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