Travelers Property Casualty Company of America v. Ther Kansas City Landsmen, L.L.C.

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-11006
________________________
D.C. Docket No. 1:11-cv-04401-WSD
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA,
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Plaintiffs - Counter
Defendants - Appellees,
versus
THE KANSAS CITY LANDSMEN, L.L.C.,
d.b.a. Budget Rent a Car,
A BETTERWAY RENT-A-CAR, INC.,
Defendants - Counter
Claimants - Appellants.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(January 12, 2015)
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Before WILSON, ROSENBAUM, and BLACK, Circuit Judges.
ROSENBAUM, Circuit Judge:
In this case, we address whether the appellee insurers owe a duty to defend
their appellant insureds against a lawsuit alleging that the insureds willfully
violated 15 U.S.C. § 1681c(g)(1), a provision of the Fair and Accurate Credit
Transaction Act (“FACTA”) that prohibits “print[ing] more than the last five digits
of the [credit][ 1] card number or the expiration date upon any receipt provided to
the cardholder . . . .” The answer to this inquiry depends on whether the
underlying lawsuit against the insureds arguably alleges two things: (1) that the
insureds acted with an intent that could be characterized as “willful” though not
“knowing” and (2) that the insureds provided non-truncated receipts of credit-card
account owners to people other than the owners of the credit cards used to conduct
the transactions.
We find that the answer to the first question is “yes,” so if our review
stopped here, we would reverse the district court’s entry of a declaratory judgment
stating that the insurers have no duty to defend the insureds. But we must also
address the second issue, which turns on whether § 1681c(g)(1), the statute that the
insureds are alleged to have violated, prohibits vendors from providing non-
1
The term “credit card” as used in this opinion includes “debit cards” as well. For the
sake of simplicity, however, we refer to credit cards only.
2
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truncated credit-card receipts to their customers for credit-card accounts that their
customers do not own. If the answer to this question is “yes,” the insurance
companies have a duty to defend, but if it is “no,” they do not.
This question appears to be one of first impression, and we think that it
would likely benefit from briefing focused directly on it. In addition, the Federal
Trade Commission, which is charged with administering the Fair Credit Reporting
Act, which FACTA amended, may wish to be heard on the issue. For these
reasons, we reverse the judgment of the district court ruling that the insurance
companies had no duty to defend the insureds, and we remand for the district court
to determine whether § 1681c(g)(1) prohibits vendors from providing their non-
credit-card-account-holding customers with non-conforming receipts of their
credit-card-account-holding customers.
I.
A. The Underlying Lawsuit Against the Insureds
In the District Court for the Western District of Missouri, Case No. 4:11-cv-
01020 (the “Galloway Action”), Robert Galloway filed a putative class-action
lawsuit against Defendants-Appellants, The Kansas City Landsmen, LLC, d/b/a
Budget Rent A Car (“KC Landsmen”), and A Betterway Rent-a-Car, Inc.
(“Betterway”) (collectively, the “Car Rental Companies”), in the pending case. In
the Galloway Action, Galloway alleged that the Car Rental Companies had
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violated the provision of FACTA that provides, in relevant part, “[N]o person that
accepts credit cards or debit cards for the transaction of business shall print more
than the last five digits of the card number or the expiration date upon any receipt
provided to the cardholder at the point of the sale or transaction.”
Specifically, the Galloway Action alleged that the Car Rental Companies
had printed credit-card receipts that included more than the last five digits of the
card number as well as the card’s expiration date and accordingly had “failed to
protect [Galloway] and others similarly situated against identity theft and credit
card and debit card fraud . . . .” Galloway sought statutory and punitive damages
on behalf of himself and the class that he proposed to represent, under 15 U.S.C. §
1681n(a), which imposes liability on “[a]ny person who willfully fails to comply
with any requirement” of FACTA. 2
B. The Pending Case
In the appeal now before us, Plaintiffs-Appellees Travelers Property
Casualty Company of America (“Travelers”), and St. Paul Fire and Marine
Insurance Company (“St. Paul”) (collectively, “Insurance Companies”) filed suit in
the Northern District of Georgia for a declaratory judgment that they were not
obligated to defend or indemnify their insureds, the Car Rental Companies, in the
2
Section 1681o allows a plaintiff to prove and recover actual damages for negligent
violations of FACTA. See 15 U.S.C. § 1681o. In the Galloway Action, however, Galloway
limited his and the proposed class’s claims to “willful” violations.
4
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underlying Galloway Action. The Car Rental Companies counterclaimed for
breach of contract and bad faith arising from the Insurance Companies’ failure to
defend or indemnify them. Because the parties’ claims turn on whether the
insurance-policy agreements made between the Insurance Companies and the Car
Rental Companies provide coverage for the Car Rental Companies’ alleged
FACTA violations in the Galloway Action, we review the applicable parts of the
insurance policies that govern.
1. The Insurance Policies
Travelers issued four primary commercial general-liability insurance
policies to Betterway (the “Travelers Policies”).3 St. Paul also issued four excess
commercial general-liability insurance policies to Betterway (the “St. Paul
Policies”) (together with the Travelers Policies, the “Policies”). 4 Appellant KC
Landsmen is a named insured on all of the Policies. As relevant to this appeal, the
Travelers Policies are identical to one another, as are the St. Paul Policies.
The Travelers Policies insure the Car Rental Companies for damages arising
from various injuries, including “personal injury” suffered by third parties.
Coverage B of the commercial general-liability part of the Travelers Policies was
3
The Travelers Policies covered consecutive one-year terms. The first policy’s coverage
began on May 1, 2008, and the last policy’s coverage terminated on May 1, 2012.
4
Like the Travelers Policies, the St. Paul Policies covered consecutive one-year terms
and contained the same start and end dates as their Travelers counterparts. See supra note 3.
5
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amended by a “WEB XTEND LIABILITY” Endorsement to provide insurance
coverage for “personal injury” stemming from the insured’s business:
COVERAGE B. PERSONAL AND ADVERTISING
INJURY LIABILITY (SECTION I – COVERAGES) is
deleted in its entirety and replaced by the following:
COVERAGE B. PERSONAL INJURY,
ADVERTISING INJURY AND WEB SITE INJURY
LIABILITY
1. Insuring Agreement.
a. We will pay those sums that the insured
becomes legally obligated to pay as damages
because of “personal injury,” “advertising
injury” or “web site injury” to which this
insurance applies . . .
****
b. This insurance applies to:
(1) “Personal injury” caused by an
offense arising out of your business,
excluding advertising, publishing,
broadcasting or telecasting done by or
for you;
The Web Endorsement defines “personal injury,” in turn, as follows:
“Personal injury” means injury, other than “bodily
injury,” arising out of one or more of the following
offenses:
****
e. Oral, written or electronic publication of material
that appropriates a person’s likeness, unreasonably
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places a person in a false light or gives
unreasonable publicity to a person’s private life. 5
But the Travelers Policies also contain provisions that exclude from
coverage “personal injury” knowingly inflicted by the insured:
This insurance does not apply to:
a. Knowing Violation of Rights of Another
“Personal . . . injury” caused by or at the
direction of the insured with the knowledge
that the act would violate the rights of
another and would inflict “personal injury” .
...
Like the Travelers Policies, the St. Paul Policies also cover “personal
injury”:
1. Coverage
A. We will pay on behalf of:
1. the Insured all sums in excess of the Retained Limit
that the Insured becomes legally obligated to pay
damages by reason of liability imposed by law; or
2. the Named Insured all sums in excess of the Retained
Limit that the Named Insured becomes legally
5
The district court noted that “[t]he parties appear to dispute whether ‘personal injury’
coverage exists under the main body of the Travelers Policies or under an endorsement to the
Travelers Policies. Both the main body and the endorsement contain the same Knowing
Violation Exclusion. . . . [T]he Court finds that the parties’ dispute over the source of ‘personal
injury’ coverage is not material to Plaintiffs’ Motion for Summary Judgment.” We agree with
the district court.
The significant difference between the two policies pertains to the way in which they
define “personal injury.” In relevant part, the main body of the policies defines it as follows:
“Oral or written publication, in any manner, that violates a person’s right of privacy.”
(Emphasis added to highlight the differences). The resolution of this issue has no bearing on the
outcome of this case, so we do not analyze which version controls.
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obligated to pay as damages assumed by the Named
Insured under an Insured Contract;
because of:
****
2. Personal Injury or Advertising Injury that is
caused by an Occurrence committed during the
Policy Period
The St. Paul Policies define “personal injury,” in relevant part, as follows:
Q. Personal Injury means injury . . . caused by . . .:
****
5. oral, written or electronic publication of material that
violates a person’s right of privacy.
Also like the Travelers Policies, the St. Paul Policies exclude coverage of
“personal injury” knowingly caused by the insured:
This insurance does not apply to:
...
J. Known Violation of Rights
Personal Injury or Advertising Injury caused by
or committed at the direction of the Insured, or by
an offense committed at the direction of the
Insured, with knowledge that the rights of another
would be violated and that Personal Injury or
Advertising Injury would result.
2. The District Court’s Opinion and Order
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The Insurance Companies moved for summary judgment, and the district
court granted the Insurance Companies’ motion on all claims before it, finding that
the claims in the Galloway Action alleged only knowing violations of FACTA,
which were excluded from coverage under the Policies. In reaching this
conclusion, the district court rejected the Car Rental Companies’ argument that
they could be found liable under the Galloway Action for reckless violations of
FACTA—conduct that would not be excluded from coverage under the policies.
Because the district court determined that the insureds were excluded from
coverage under the knowing-conduct exclusions to the Policies, the district court
did not consider whether the insureds enjoyed coverage in the first place for
issuing non-conforming credit-card receipts to customers who did not own the
credit-card accounts for which the receipts were issued.
II.
We review a district court’s grant of summary judgment de novo, drawing
all inferences in the light most favorable to the non-moving party. Rich v. Sec'y,
Fla. Dep't of Corr., 716 F.3d 525, 530 (11th Cir. 2013). Summary judgment is
proper where no genuine dispute exists as to any material fact, and the movant is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Contract
interpretation, including of insurance-related agreements, raises a question of law
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and is subject to de novo review. Am Cas. Co. of Reading, Pa. v. Etowah Bank,
288 F.3d 1282, 1285 (11th Cir. 2002).
III.
When jurisdiction is based on diversity, such as in this case, the forum
state’s choice-of-law rules govern which state’s substantive law applies. Klaxon
Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020 (1941). Here, Georgia
was the forum state.
Georgia’s choice-of-law rules, in turn, dictate that insurance contracts are
interpreted under the laws of the place where the contract is made. Avemco Ins.
Co. v. Rollins, 380 F. Supp. 869, 872 (N.D. Ga.), aff'd mem., 500 F.2d 1182 (5th
Cir. 1974).6 Georgia law also provides that a contract is made at the place where it
is delivered. Id.; see Casey Enterprises, Inc. v. Am. Hardware Mut. Ins. Co., 655
F.2d 598, 602 (5th Cir. Unit B 1981) (“Under Georgia law the place of the delivery
of the insurance contract controls.”). 7 The insurance contracts in this case were
delivered in Georgia, so, as both parties agree, Georgia substantive law controls.
Under Georgia law governing the interpretation of insurance contracts, “an
insurer’s duty to defend is broader than its duty to indemnify.” Shafe v. Am. States
Ins. Co., 653 S.E.2d 870, 873 (Ga. Ct. App. 2007). “Although an insurer need not
6
Opinions of the Fifth Circuit issued prior to October 1, 1981, are binding precedent in
the Eleventh Circuit. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981).
7
Opinions of the Fifth Circuit Unit B are binding precedent in the Eleventh Circuit. Stein
v. Reynolds Sec., Inc., 667 F.2d 33, 34 (11th Cir. 1982).
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indemnify an insured for a liability the insured incurs outside the terms of the
insurance contract, an insurer must provide a defense against any complaint that, if
successful, might potentially or arguably fall within the policy’s coverage.” Elan
Pharm. Research Corp. v. Emp’rs Ins. of Wausau, 144 F.3d 1372, 1375 (11th Cir.
1998). Therefore, “[e]ven if some of [the] allegations ultimately [a]re not found to
be covered by the policy,” the insurer still has a duty to defend the entire action if
any of the claims might be. Nationwide Mut. Fire Ins. Co. v. Somers, 591 S.E.2d
430, 434 (Ga. Ct. App. 2003).
To determine whether a claim against an insured falls within the insured’s
coverage, triggering the insurer’s duty to defend, we must compare the allegations
of the underlying complaint against the provisions of the policy. See id. at 433. If
the complaint against the insured does not assert any claim that could fall within
the policy’s coverage provisions, the insurer is justified in refusing to defend. See
id. “[D]oubt as to [the] liability and [the] insurer’s duty to defend should be
resolved in favor of the insured.” Penn-Am. Ins. Co. v. Disabled Am. Veterans,
Inc., 490 S.E.2d 374, 376 (Ga. 1997) (citation and quotation marks omitted).
Normally, we might conduct our analysis by first determining whether the
alleged conduct was covered under the coverage provisions of any insurance
policy, and, if so, then evaluating whether any exclusion provisions of the
applicable policy precluded coverage. In this matter, however, the district court
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believed a policy exclusion to be applicable, so it had no reason to consider
whether the conduct alleged in the Galloway Action fit within the coverage
provisions of the Policies. Neither would we, if we agreed with the district court
that the exclusion provisions preclude coverage of the claims in the Galloway
Action. We therefore begin our analysis by addressing the exclusion provisions.
A. The Exclusion Provisions
An insurer has no duty to defend when the allegations in an underlying
complaint are excluded by a specific policy provision. See, e.g., City of Atlanta v.
St. Paul Fire & Marine Ins. Co., 498 S.E.2d 782, 784 (Ga. Ct. App. 1998); Cont’l
Graphic Servs., Inc. v. Cont’l Cas. Co., 681 F.2d 743, 745 (11th Cir. 1982)
(applying Georgia law). An insurer can rely solely on the allegations contained
within the complaint to establish that a policy exclusion precludes coverage. First
Specialty Ins. Corp. v. Flowers, 644 S.E.2d 453, 455 (Ga. Ct. App. 2007) (citation
omitted).
Here, Galloway’s underlying putative class-action lawsuit sought to impose
liability on the Car Rental Companies for committing “willful” FACTA violations
under § 1681n. The Supreme Court has held that “willfulness,” as defined in §
1681n, encompasses not only “knowing” violations, but also those committed in
“reckless disregard” of the statute’s requirements. See Safeco Ins. Co. v. Burr, 551
U.S. 47, 71, 127 S. Ct. 2201, 2216 (2007).
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In this case, the distinction between the two levels of “willful” intent is
especially important: as the parties agree, “knowing” violations are excluded from
coverage, but violations committed with “reckless disregard” are not. The district
court concluded that the Galloway complaint asserted “willful” FACTA violations
under the “knowing” level of intent only, so the district court determined that the
Policies precluded coverage under their knowing-conduct exclusions. We
respectfully disagree.
In reaching its conclusion that the Galloway Action charged only “knowing”
“willful” violations, the district relied on the following four paragraphs of the
Galloway complaint:
57. At the time of the FACTA violations identified in
this Complaint and before, Defendants knew of their
obligations under FACTA . . . .
60. Despite knowledge of FACTA’s requirements . . . ,
Defendants continued to willfully disregard
FACTA’s requirements . . . .
63. Defendants knew of and failed to comply with their
legal duty [under FACTA] . . . .
65. Notwithstanding all of the publicity and the
Defendants’ knowledge of the statute’s
requirements, they willfully failed to comply with
FACTA . . . .
The “knowledge” allegations in these paragraphs, though, go only to the Car
Rental Companies’ alleged knowledge of FACTA’s requirements, not their
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knowledge of any alleged violations of its requirements. 8 But Section 1681n, the
section on which the Galloway Action is premised, concerns itself with the
defendant’s mental state as it relates to alleged non-compliance—i.e., violations—
only, not with the defendant’s mental state with regard to the statute’s
requirements. See 15 U.S.C. § 1681n (“Civil liability for willful noncompliance.
(a) In general[:] Any person who willfully fails to comply with any [FACTA]
requirement . . . is liable . . . .”) (emphasis added).
Paragraph 65 of the Galloway complaint perhaps best exemplifies the
distinction that the Galloway complaint makes between the Car Rental Companies’
mental state with regard to FACTA’s requirements and their mental state as it
relates to any alleged violations that they may have committed. It reads,
“Notwithstanding . . . the Defendants’ knowledge of the statute’s requirements,
they willfully failed to comply with FACTA . . . ,” meaning that they both knew of
FACTA’s requirements and that they failed to comply with them either knowingly
or with reckless disregard. Even the Insurance Companies’ motion for summary
judgment acknowledges that “[the underlying complaint] alleges that Defendants’
violations were willful and that the willful violations entitled the class to recover . .
8
And even the allegations related to the Car Rental Companies’ knowledge of FACTA’s
requirements, read in the context of the other allegations of the complaint, assert only that the
Car Rental Companies had notice of FACTA’s requirements, not that they had subjective
knowledge of FACTA’s requirements. But notice does not necessarily equate with actual
knowledge.
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. damages . . . .” Conspicuously absent from the complaint is any allegation that
the violations were knowing.
Nor does any other aspect of the Galloway complaint necessarily limit its
allegations against the Car Rental Companies to violations of § 1681n conducted
knowingly, as opposed to those committed with reckless disregard. It matters not
that the Galloway complaint does not use the phrase “reckless disregard”
specifically because the Galloway complaint alleges that the Car Rental
Companies acted “willfully” when they violated § 1681c(g)(1). Under Safeco, this
means that the Galloway plaintiffs can succeed on their claims if they show that
the Car Rental Companies acted either “knowingly” or with “reckless disregard.”
See 551 U.S. at 71, 127 S. Ct. at 2216. Indeed, if, under the Galloway complaint,
the Galloway plaintiffs asked for a jury instruction explaining that where “willful”
violations are alleged, they can be proven by evidence of either knowledge or
reckless disregard, they would likely be entitled to such an instruction, provided
that they had presented evidence of reckless disregard. In any case, we can find
nothing in the Galloway complaint that would foreclose the Galloway plaintiffs
from being able to proceed and, given the necessary evidence, prevail at trial on
the theory that the Car Rental Companies violated § 1681c(g)(1) with reckless
disregard.
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For these reasons and because Georgia law dictates that “an insurer must
provide a defense against any complaint that, if successful, might potentially or
arguably fall within the policy’s coverage,” Elan Pharm. Research Corp., 144
F.3d at 1375 (emphasis added), the knowing-conduct exclusion does not relieve the
Insurance Companies of their obligation to provide a defense to the Galloway
Action if the Policies otherwise provide coverage.
B. The Coverage Provisions
Because the exclusion provisions do not eliminate the possibility that the
Insurance Companies must provide a defense to the Car Rental Companies in the
Galloway Action, we are faced with the question of whether the Policies provide
coverage for the conduct alleged in the Galloway complaint. As we have noted,
the district court did not have the opportunity to address this question, so we must
decide whether to consider it for the first time now.
“It is the general rule . . . that a federal appellate court does not consider an
issue not passed upon below.” Singleton v. Wulff, 428 U.S. 106, 120, 96 S. Ct.
2868, 2877 (1976). While an appellate court enjoys discretion to address issues
not ruled on by the district court, an appellate court should exercise that discretion
only where the circumstances warrant such review. Id. at 121, 96 S. Ct. at 2877.
The Supreme Court has not set forth an exhaustive list of circumstances that might
justify initial consideration of an issue at the appellate-court level, but it has
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identified two such situations: “where the proper resolution is beyond any doubt”
and “where injustice might otherwise result.” Id. (citations and internal quotation
marks omitted). Here, neither applies.
First, the proper resolution is not “beyond any doubt.” The Galloway Action
alleges that the Car Rental Companies willfully provided non-conforming credit-
card receipts to their customers in violation of § 1681c(g)(1). Both the Insurance
Companies and the Car Rental Companies agree that the Policies do not cover the
Car Rental Companies’ provision of violative credit-card receipts to the credit-card
account owner. This is because although the Policies cover “personal injury”
resulting from “publication of material” that gives “unreasonable publicity to a
person’s private life” and “publication of material that violates a person’s right to
privacy,” the parties agree that the term “publication” contemplates dissemination
to at least someone other than the person who provided the card information at
issue to the Car Rental Companies.9 Since the Car Rental Companies do not
suggest that the term “publication” is ambiguous or that it could reasonably be
construed as including a vendor’s provision of a violative receipt to only the
paying cardholder, see W. Pac. Mut. Ins. Co. v. Davies, 601 S.E.2d 363, 368-69
(Ga. Ct. App. 2004), we need not and do not consider whether the term
9
The Car Rental Companies accept that the definition of “publication” includes
dissemination to the public, despite the fact that they maintain that the Travelers General
Commercial Liability Policies control (as opposed to the Web Endorsement), which provides for
personal injuries caused by “publication, in any manner.”
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“publication” as used in the Policies in this case can include the return of a
violative receipt to the paying cardholder.
But the Car Rental Companies assert that, under their business model, they
accept payment at the time of rental from the person producing the credit card and
provide credit-card receipts to the individual returning the rental car, who may not
be the same as the person who paid for the rental of the vehicle in the first place—
and who may not be an owner of the credit-card account used to pay for the rental.
Regardless of whether the person returning the rental car owns the credit-card
account for which the Rental Car Company provides a receipt, the Car Rental
Companies claim that they consider the person returning the car to be a customer
and further argue that they could be held liable under the Galloway Action for
engaging in such conduct. As the Car Rental Companies view their Policies, the
Policies provide coverage for any conduct involving providing non-conforming
receipts to people other than the credit-card account owners. Whether that is
correct turns on two questions: whether § 1681c(g)(1) prohibits vendors from
providing non-truncated credit-card receipts to their customers for credit-card
accounts that their customers do not own, and, if so, whether the Galloway
complaint can arguably be read to encompass such violations.
Section 1681c(g)(1) prohibits “print[ing] more than the last five digits of the
[credit] card number or the expiration date upon any receipt provided to the
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cardholder . . . .” 15 U.S.C. § 1681c(g)(1). “[O]ur authority to interpret statutory
language is constrained by the plain meaning of the statutory language in the
context of the entire statute, as assisted by the canons of statutory construction.”
Edison v. Douberly, 604 F.3d 1307, 1310 (11th Cir. 2010). Within this framework,
we start our analysis by evaluating whether the statutory language is clear and
unambiguous. CBS Inc. v. PrimeTime 24 Joint Venture, 245 F.3d 1217, 1222 (11th
Cir. 2001). If so, we also end our analysis there. Id. But we have recognized one
exception to this procedure: “courts may reach results inconsistent with the plain
meaning of a statute if giving the words of a statute their plain and ordinary
meaning produces a result that is not just unwise but is clearly absurd.” Id. at 1228
(citation and quotation marks omitted). The circumstances in which this exception
applies, however, are “rare[]” and “exacting.” Id.
Here, at first blush, the statutory language appears to be clear and
unambiguous: § 1681c(g)(1) prohibits “print[ing] more than the last five digits of
the [credit] card number or the expiration date upon any receipt provided to the
cardholder . . . .” (emphasis added). “Cardholder,” however, is not defined in 15
U.S.C. § 1681a, which sets forth the definitions and rules of construction
pertaining to § 1681c(g)(1). Section 1681a(r) does define the term “credit card,”
though, as having “the same meaning as in section 1602 of this title.” 15 U.S.C. §
1681a(r)(2). And surveying the other definitions in § 1602, we observe that §
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1602(n) defines the term “cardholder” to mean “any person to whom a credit card
is issued or any person who has agreed with the card issuer to pay obligations
arising from the issuance of a credit card to another person.” So some might
suggest that we should apply this same definition to the word “cardholder” in §
1681c(g)(1).
But, under the clear language of § 1602, the definitions set forth in that
section “are applicable for the purposes of [Subchapter I of Chapter 41 of Title
15].” 15 U.S.C. § 1602. Section 1681c(g)(1) does not fall under Subchapter I;
instead, it appears under Subchapter III. While we “may consider Congress’s use
of a particular term elsewhere in the statute to determine its proper meaning within
the context of the statutory scheme,” Shotz v. City of Plantation, Fla., 344 F.3d
1161, 1168 (11th Cir. 2003) (citation and quotation marks omitted), the fact that
Congress imported the definition of “credit card” from § 1602 for purposes of
construing Subchapter III but did not also incorporate the definition of
“cardholder” found at § 1602 for purposes of interpreting Subchapter III may
suggest that Congress made a deliberate decision not to employ § 1602’s definition
of “cardholder” for purposes of construing § 1681c(g)(1). Indeed, we have also
recognized that “[w]here Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate inclusion or exclusion.”
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Shotz v. City of Plantation, 344 F.3d 1161, 1168 (11th Cir. 2003) (citations and
internal quotation marks omitted).
Moreover, the other definitions found at § 1681a(r), which do apply to the
terms appearing in the provisions within Subchapter III, are not the same as the
definitions for the same terms that also are defined in Section 1602. Compare,
e.g., 15 U.S.C. § 1681a(r)(1) with 15 U.S.C. § 1602(o) (defining “card issuer”
differently); compare 15 U.S.C. § 1681a(r)(5) (incorporating by reference
definitions of “credit” and “creditor” contained at 15 U.S.C. § 1691a with 15
U.S.C. § 1602(f), (g) (setting forth its own definitions of the terms “credit” and
“creditor,” respectively). In fact, some definitions under § 1681a(r) expressly
incorporate definitions from statutory provisions other than § 1602, even though §
1602 also defines the same terms. See 15 U.S.C. § 1681a(r)(5) (incorporating by
reference definitions of “credit” and “creditor” contained at 15 U.S.C. § 1691a).
So presuming that the definition of “cardholder” from § 1602(n) applies for
purposes of construing § 1681c(g)(1) may be presuming too much.
But, then, what does “cardholder” mean? If, as the Insurance Companies
suggest, the word refers strictly to the person in whose name the credit or debit
account is owned, that would mean that FACTA renders a vendor liable for giving
the account holder a copy of a receipt with his or her own account number on it,
but it allows a vendor to escape with impunity for providing the same non-
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truncated receipt to anyone other than the person whose account the receipt is for. 10
Some might suggest that such an interpretation would create plainly absurd results,
see CBS Inc., 245 F.3d at 1228, that fly in the face of FACTA’s stated purpose of
“prevent[ing] identity theft,” Pub. L. No. 108-159, 117 Stat. 1952, particularly
because FACTA has been described as a remedial statute that should be construed
broadly. See Long v. Tommy Hilfiger U.S.A., Inc., 671 F.3d 371, 375-76 (3d Cir.
2012); Simonoff v. Expedia, Inc., 643 F.3d 1202, 1210 (9th Cir. 2011). On the
other hand, some might disagree that the results are absurd, since “Congress is not
required to address every aspect of a problem whenever it decides to act.” United
States v. Nat’l Treasury Emps. Union, 513 U.S. 454, 484, 115 S. Ct. 1003, 1021-22
(1995) (O’Connor, J., concurring in part and dissenting in part).
In any case, we do not conclude that whether § 1681c(g)(1) prohibits
vendors from providing non-conforming receipts of credit-card account owners to
persons other than the account owners is clear “beyond any doubt.” Under these
circumstances, we think that consideration of this issue would benefit from the
parties’ and the district court’s focused attention in the first instance. As this
appears to be an issue of first impression, the Federal Trade Commission, which is
the agency charged with administering the Fair Credit Reporting Act, which
FACTA amended, may also wish to seek to intervene in the district-court
10
No other provision of FACTA appears to create express liability for a vendor who
provides someone other than a credit-account owner with a non-conforming credit-card receipt.
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proceedings under Rule 24(b)(2)(A), Fed. R. Civ. P., and weigh in with its
understanding of § 1681c(g)(1).
Nor can we resolve this case without reaching the issue of whether §
1681c(g)(1) can impose liability on a vendor for providing a non-conforming
credit-card receipt to a person who does not own the account for which the receipt
was provided. As the Galloway complaint is written, it alleges that the Car Rental
Companies “violated 15 U.S.C. § 1681c(g)(1) . . . .” It does not necessarily limit
its claim to reaching only the providing of non-conforming credit-card receipts to
the owners of the accounts for which the receipts are issued. To the contrary, the
complaint describes the “publication of more than five digits of a credit card or
debit card number on customer receipts disseminated at the point of sale” as
violative of § 1681c(g)(1), and the parties have already agreed that, at least for
purposes of construing the terms of the Policies, the term “publication” necessarily
refers to dissemination of the receipt to only someone other than the account
owner.
In addition, the complaint proposes a class of “all persons who used . . . [a]
debit or credit card . . . at any of Defendant’s rental locations where Defendant
provided an electronically printed receipt at the point of sale or transaction that
violated FACTA’s truncation requirements of that person’s credit or debit card . . .
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.” This language at least arguably makes the Galloway claim as broad as §
1681c(g)(1) allows.
Similarly, the complaint alleges the following relevant common questions of
fact and law: “[w]hether [the Car Rental Companies] had a practice of providing
customers with a sales or transaction receipt which failed to comply with the
truncation requirement,” and “[w]hether [the Car Rental Companies] thereby
violated FACTA.” (Emphasis added). Under these allegations, it is at least
arguable that the Car Rental Companies could be held liable for providing non-
account owners with non-truncated credit-card receipts when they returned rental
cars, if § 1681c(g)(1) prohibits such conduct. That is all Georgia law requires for
an insurer’s duty to defend to be triggered. See Elan Pharm. Research Corp., 144
F.3d at 1375. For this reason, the outcome of this case rests entirely on whether §
1681c(g)(1) can impose liability on a vendor for issuing a non-conforming credit-
card receipt to someone who is not the owner of the account for which the receipt
was issued.
Turning to the second reason for an appellate court to consider an issue for
the first time on appeal—if injustice might otherwise result—neither party has
identified any injustice that might result from our remand of this action to the
district court for consideration of the issue in the first instance. Nor is any injustice
apparent to us. We similarly find no other reason to vary from the usual rule of
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allowing the district court to address the issue before we do. We therefore remand
this matter to the district court for further consideration.
IV.
For the foregoing reasons, we reverse the judgment of the district court
declaring that the Insurance Companies have no duty to defend the Car Rental
Companies, and we remand for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
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WILSON, Circuit Judge, concurring in the result:
We are called upon to determine whether the class action complaint filed in
the Galloway Action alleges only knowing violations of the Fair and Accurate
Credit Transactions Act (FACTA) 1 or also alleges violations in reckless disregard
of those requirements. See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57, 127 S.
Ct. 2201, 2208–09 (2007) (holding that a “willful” violation under 15 U.S.C. §
1681n includes both knowing and reckless violations). While I concur in the
Majority’s conclusion, I write separately to elucidate the finding that the Galloway
complaint alleges “willfulness” in terms of both knowledge and recklessness,
rather than in terms of only knowledge. This being the sole issue on appeal, I
would remand on this issue alone, leaving it to the district court to consider, in the
first instance, the Insurance Companies’ alternative argument that the Policies do
not provide coverage for the conduct alleged in the Galloway complaint.
The Galloway complaint asserts a single cause of action under § 1681n,
which imposes civil liability on “[a]ny person who willfully fails to comply with
any requirement imposed under [FACTA] with respect to any consumer.” To
establish a “willful” violation under § 1681n, the class action plaintiffs must show
either that the Car Rental Companies knowingly violated FACTA or that they
acted in reckless disregard of FACTA’s requirements. See Safeco, 551 U.S. at 57,
1
See Fair and Accurate Credit Transactions Act, Pub. L. No. 108–159, 117 Stat. 1952
(2003) (codified at 15 U.S.C. § 1681c(g)).
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127 S. Ct. at 2208; see also Harris v. Mexican Specialty Foods, Inc., 564 F.3d
1301, 1310 (11th Cir. 2009).
Generally speaking, recklessness entails “an unjustifiably high risk of harm
that is either known or so obvious that it should be known.” Safeco, 551 U.S. at
68–69, 127 S. Ct. at 2215 (internal quotation marks omitted) (discussing common
law and Restatement definitions of “recklessness”). In the context of § 1681n, this
means that,
[t]o prove a reckless violation, a consumer must establish that the
action of the agency “is not only a violation under a reasonable
reading of the statute’s terms, but shows that the company ran a risk
of violating the law substantially greater than the risk associated with
a reading that was merely careless.”
Levine v. World Fin. Network Nat’l Bank, 554 F.3d 1314, 1318 (11th Cir. 2009)
(quoting Safeco, 551 U.S. at 69, 127 S. Ct. at 2215).2 In other words, a violation of
FACTA is not reckless when the violating action is “in accord with an objectively
reasonable interpretation of the Act.” Levine, 554 F.3d at 1319.
Both Safeco and Levine suggest that recklessness is something more than
negligence or mere carelessness. See, e.g., Safeco, 551 U.S. at 69, 127 S. Ct. at
2215 (noting, but not pinpointing, a division between negligence and recklessness).
2
To further illuminate the standard, Levine provides that, to establish reckless disregard
under § 1681n, “[a]n interpretation that favors the agency must be ‘objectively unreasonable’
under either the text of the Act or ‘guidance from the courts of appeals or the Federal Trade
Commission that might have warned [the agency] away from the view it took.’” Levine, 554
F.3d at 1318 (second alteration in original).
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We have previously suggested that “recklessness is closer to a lesser form of
intent” as opposed to “merely a greater degree of ordinary negligence.” See
McDonald v. Alan Bush Brokerage Co., 863 F.2d 809, 814 n.10 (11th Cir. 1989)
(internal quotation marks omitted). This distinction is bolstered by the existence of
a separate section applicable to negligent violations of FACTA. See 15 U.S.C. §
1681o. Practically, then, both knowing and reckless violations of FACTA first
require some knowledge of FACTA’s requirements. Thus, the class action
plaintiffs’ allegations that the Car Rental Companies had knowledge of FACTA’s
requirements prior to any violation thereof can be read to allege willfulness in
terms of either knowledge or recklessness and not in terms of knowledge alone.
While the exact theory of liability (i.e., knowing violation or reckless
disregard) is unknown at present, the class action plaintiffs have stated a claim that
“might potentially or arguably fall within the policy’s coverage,” Elan Pharm.
Research Corp. v. Emp’rs Ins. of Wausau, 144 F.3d 1372, 1375 (11th Cir. 1998),
by alleging nothing more than the Car Rental Companies’ knowledge of FACTA’s
requirements and their “willful failure” to follow and “willful disregard” of those
requirements, see Levine v. World Fin. Network Nat’l Bank, 437 F.3d 1118, 1123–
24 (11th Cir. 2006) (reasoning allegation of “a willful violation” and claim for
damages states prima facie claim under § 1681n). The nature of the Car Rental
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Companies’ knowledge will prove determinative, but we are not, at this stage,
concerned with the certainty of their success.
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