Whole Enchilada v. Travelers Prop. Cas. Co.
| Decision Date | 29 September 2008 |
| Docket Number | Civil Action No. 07-1533. |
| Citation | 581 F.Supp.2d 677 |
| Parties | WHOLE ENCHILADA, INC., Plaintiff, v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
George L. Stewart, Reed Smith, Pittsburgh, PA, for Plaintiff.
Alan S. Miller, Kelly A. Williams, Picadio, Sneath, Miller & Norton, Pittsburgh, PA, .Charles E. Spevacek, Meagher & Geer P.L.L.P., Minneapolis, MN, for Defendant.
This matter is before the Court on cross motions for summary judgment filed by the plaintiff and the defendant. Based on the foregoing, the defendant's motion [24] is GRANTED and the plaintiff's motion [8] is DENIED.
On November 9, 2007, the plaintiff, Whole Enchilada ("Whole Enchilada") filed a complaint in declaratory judgment against the defendant, Travelers Property Casualty Co. of America ("Travelers"), and for breach of contract based on Travelers' alleged duty to defend and indemnify Whole Enchilada in a class action suit brought against it for alleged violations of the Fair and Accurate Credit Transactions Act ("FACTA"). The Complaint seeks a declaration from this Court that Travelers has a duty to defend and indemnify under one or both of two insurance policies issued by Travelers to Whole Enchilada and damages for breach of contract. (Docket No. 1).
Whole Enchilada filed a Motion for Partial Summary Judgment and Memorandum of Law in Support as to Travelers' duty to defend on February 27, 2008. (Docket No. 8). On March 28, 2008, Travelers filed a Motion for Summary Judgment as to Travelers' duty to defend and indemnify the underlying litigation.1 Whole Enchilada filed a Reply Brief in Support of its Motion for Summary Judgment and in Opposition to Travelers' Cross Motion for Summary Judgment on April 28, 2008. (Docket No 32). Travelers likewise filed a Reply Brief in support of its Motion for Summary Judgment on May 13, 2008. (Docket No. 36). The Court notes that both parties chose to file motions for summary judgment prior to completing discovery. As the parties have now fully briefed the matter, the Court turns to the disposition of both motions for summary judgment.
At issue in this case is the defense and indemnification of the "Reed litigation." On March 19, 2007, Thomas A. Reed Jr. ("Reed"), on behalf of himself and all others similarly situated, filed a class action complaint against Whole Enchilada for alleged violations of FACTA at Reed, et al v. Whole Enchilada, Inc., Civil Action No. 07-cv-357. . A Second Amended Class Action Complaint ("Complaint") was filed on August 3, 2007. (Docket No. 12, Exh. B).
The Fair and Accurate Credit Transactions Act, 15 U.S.C. § 1681, was enacted on December 4, 2003 as an amendment to the Fair Credit Reporting Act, 15 U.S.C. § 1681. FACTA provides, in relevant part, for the truncation of credit and debit card numbers on customers' receipts as follows:
(1) In general. Except as otherwise provided in this subsection, 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 of the expiration date upon any receipt provided to the cardholder at the point of sale or transaction.
(2) Limitation. This subsection shall apply only to receipts that are electronically printed, and shall not apply to transactions in which the sole means of recording a credit card or debit card account number is by handwriting or by an imprint or copy of the card.
(3) Effective date This subsection shall become effective—
(A) 3 years after December 4, 2003, with respect to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that is in use before January 1, 2005; and
(B) 1 year after December 4, 2003, with respect to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that is first put into use on or after January 1, 2005.
15 U.S.C.A. § 1681c. The statute further attaches liability for willful non-compliance of the statute:
Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of—
(1) (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or ...
15 U.S.C.A. § 1681n.2 In signing the statute into law, President Bush commented:
. . . [T]his law will help prevent identity theft before it occurs, by requiring merchants to delete all but the last five digits of a credit card number on store receipts. Many restaurants and merchants have already adopted this practice. All will now do so.
"Remarks on the Signing of the Fair and Accurate Credit Transactions Act of 2003," http://www.presidency.ucsb.edu/ws/index. php?pid=62888. The purpose of the FACTA amendments is to protect consumers from the potential of identity theft. Id. ( ); (Docket No. 10 at ¶ 14; Docket No. 23 at ¶ 14).
The Reed Complaint specifically alleges that on March 14, 2007, after the effective date of the FACTA statute, Whole Enchilada provided Reed with an electronically printed receipt which included the expiration date of Reed's credit or debit card at its McKnight Road location in Pittsburgh. (Docket No. 12, Exh. B at 67). The Complaint contains the following allegations:
35. Truncation standards, including the standards reflected in the Visa Merchant Rules and in FACTA, permit the publication of the last four or five digits of customer account numbers on the receipt presented to customers at the point of sale. The publication of this minimal amount of account information is necessary to facilitate merchant account reconciliation, processing of returns, etc. In isolation, the publication of only the last four or five digits of a customer account number significantly limits the extent to which a potential identity thief can effectively use customer receipts disseminated at the point of sale to facilitate identity theft.
36. However, the publication of expiration dates on customer receipts disseminated at the point of sale, in addition to the last four or five digits of the customer account number, exponentially increases the possibility of identity theft, which is the obvious reason that Visa, and then Congress, requires the truncation of expiration dates.
(Docket No. 12, Exh. B. at ¶¶ 35, 36). The Complaint further specifically alleges that Whole Enchilada:
68. ... at the point of sale or transaction with members of the class, provided either: a) through the use of a machine that was first put into use on or after January 1, 2005, at any time after such date; or b) through any machine at any time after December 4, 2006, each member of the class with one or more electronically printed receipts on each of which [Whole Enchilada] printed, for each respective class members, more than the last five digits of such member's credit card or debit card number and/or printed the expiration date of such member's credit or debit card.
...
71. ... despite knowing and being repeatedly informed about FACTA and the importance of truncating credit card and debit card numbers and preventing the printing of expiration dates on receipts
...
74. . . . willfully violated FACTA in conscious disregard of the rights of [Reed] and the members of the class to an increased risk of identity theft and credit and/or debit card fraud.
(Docket No. 12 Exh. B at ¶¶ 68, 71-74). The Complaint sought, inter alia, statutory damages of, "not less than $100 and not more than $1000" for each violation, pursuant to the provisions of FACTA. Id. at ¶ 75.
A hearing was held before this Court regarding the proposed class action settlement agreement filed in the Reed litigation at C.A. No. 07-cv-357 on March 20, 2008. (See C.A. No. 07-cv-357, Docket No. 53). On March 21, 2008, this Court granted final approval of the class action settlement agreement filed on December 27, 2007 and a judgment was entered thereon. (See C.A. No. 07-cv-357, Docket No. 40 Exh. 2; Docket Nos. 49-50; See also Docket No. 12, Exh. 1).
In July 2005, Travelers issued Big Burrito Holding Company a commercial general liability insurance policy, bearing Policy No. Y-630-7883B69A-TIL-05. (Docket No. 12, Exh. C). The 2005 policy was effective for the policy period of July 1, 2005 to July 1, 2006. Id. Big Burrito Holding Company is the parent corporation for Whole Enchilada. (Docket No. 25 at ¶ 10; Docket No. 10 at ¶ 1).
Likewise, in July 2006, Travelers issued a commercial general liability insurance policy, bearing Policy No. 630-7883B69A-TIL-06. (Docket No. 12, Exh. D). The 2006 policy was effective for the policy period of July 1, 2006 to July 1, 2007. Id. Whole Enchilada is a named insured under both the 2005 and 2006 policies. (Docket No. 12, Exhs. C, D). Both policies were issued using a standard Commercial Liability Coverage Form, number CG 00 01 10 01, which was drafted by Insurance Services Organization ("ISO").3 (Docket No. 23 at ¶ 5; Docket No. 12, Exhs. C, D). Both the 2005 and 2006 policies include a WEB XTEND endorsement numbered CG DZ 34 1103 and CG DZ 01 05, respectively. Id.4 There is a dispute between the parties as to the potentially applicable policy provisions. (Docket No. 10 at ¶ 6; Docket No....
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