United States Court of Appeals
For the First Circuit
Nos. 07-2828, 08-1075, 08-1076
IN RE: TJX COMPANIES RETAIL SECURITY BREACH LITIGATION.
__________
AMERIFIRST BANK and SELCO COMMUNITY CREDIT UNION,
Plaintiffs, Appellees/Cross-Appellants,
v.
TJX COMPANIES, INC., FIFTH THIRD BANK and FIFTH THIRD BANCORP,
Defendants, Appellants/Cross-Appellees.
ERRATUM
The opinion of this Court, issued on March 30, 2009, should be
amended as follows:
The following paragraphs replace the paragraphs starting with
the first full paragraph on page 13 of the prior decision through the
second full paragraph beginning on the same page and ending at the
top of page 14.
To bring conduct within the unfairness rubric of chapter 93A
does not require that it have been specifically condemned by the FTC
which has itself identified general factors to consider in
identifying unfairness. The SJC has held that
Relying on FTC interpretations . . . the
following are 'considerations to be used in
determining whether a practice is to be deemed
unfair': "(1) whether the practice . . . is
within at least the penumbra of some common-law,
statutory, or other established concept of
unfairness; (2) . . . is immoral, unethical,
oppressive, or unscrupulous; (3) . . . causes
substantial injury [to] . . . competitors or
other businessmen."1
Datacomm is itself an example of this approach. Id.; see also
Chapter 93A Rights & Remedies § 2.3.1 (Hon. Margot Botsford ed., MCLE
2d ed. 2007).
If the charges in the complaint are true (and obviously the
details matter), a court using these general FTC criteria might well
find in the present case inexcusable and protracted reckless conduct,
aggravated by failure to give prompt notice when lapses were
discovered internally, and causing very widespread and serious harm
to other companies and to innumerable consumers. And such conduct,
a court might conclude, is conduct unfair, oppressive and highly
injurious--and so in violation of chapter 93A under the FTC's
interpretation.
Further, we do not think irrelevant the host of FTC complaints
and consent decrees condemning as "unfair conduct" specific behavior
similar to that charged by plaintiffs. Whitinsville's broad language
occurred where the court itself concluded on the merits that the
conduct in question--a legal challenge in court--was reasonably
justified; and the decision may mean no more than that a consent
decree does not establish a per se violation. Whitinsville, 378
1
Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760,
778 (1986) (quoting PMP Assocs., Inc. v. Globe Newspaper Co., 366
Mass. 593, 596 (1975)). The FTC adopted the factors in a general
statement, 29 Fed. Reg. 8325, 8355 (1964), noted approvingly in FTC
v. Sperry & Hutchison Co., 405 U.S. 233, 244 (1972).
Mass. at 101. Further, Whitinsville is not the SJC's only or latest
word on the subject.
On the contrary, prior to Whitinsville the SJC had expressly
relied on an FTC consent decree in one case, Schubach v. Household
Finance Corp., 375 Mass. 133, 135 (1978), and FTC advisory opinions
in another, PMP, supra, 366 Mass. at 598-99; and, quite recently, the
SJC invoked a consent decree secured by the Federal Deposit Insurance
Corporation as providing relevant standards under chapter 93A
(although not to establish liability since consent decrees do not
usually determine facts):
The fact that the FDIC ordered Fremont to cease
and desist from the use of almost precisely the
loan features that are included in the judge's
list of presumptively unfair characteristics
indicates that the FDIC considered that under
established mortgage lending standards, the
marketing of loans with these features
constituted unsafe and unsound banking practice
with clearly harmful consequences for borrowers
Such unsafe and unsound conduct on the part of a
lender, insofar as it leads directly to injury
for consumers, qualifies as ‘unfair’ under G. L.
c. 93A, § 2.
Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 747-48 (2008).
Where, as here, a substantial body of FTC complaints and consent
decrees focus on a class of conduct, it is hard to see why a court
would choose flatly to ignore it. FTC precedent and factors serve to
offset the vagueness of chapter 93A; but they are ordinarily
instructive rather than conclusive. In all events, whether one
relies on the general FTC factors identified above or the more
precise precedents, the plaintiffs chapter 93A claim based on an FTCA
theory should not be dismissed on the complaint--unless derailed by
other counter-arguments to which we now turn.