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By Perry Cooper
CareFirst Inc. will have to face class claims stemming from a 2015 data breach that compromised information about 1.1 million consumers after a federal appeals court revived the suit Aug. 1 ( Attias v. CareFirst, Inc. , 2017 BL 266435, D.C. Cir., No. 16-7108, 8/1/17 ).
The patients plausibly allege they face a substantial risk of identity theft due to the health insurer’s negligence in the data breach, Judge Thomas Beall Griffith wrote for the U.S. Court of Appeals for the District of Columbia Circuit.
Federal courts continue to struggle with how to interpret the U.S. Supreme Court’s holding in Spokeo Inc. v. Robins that plaintiffs must allege a harm that is “actual or imminent” rather than speculative. The issue is particularly challenging for the courts in data breach cases where hackers may not yet have used stolen data.
The D.C. Circuit’s ruling “that Spokeo did not create a higher bar for victims of data theft than exists for others who bring negligence cases is important,” counsel for the plaintiffs, Christopher T. Nace of Paulson & Nace PLLC in Washington, told Bloomberg BNA in an email.
“Today’s opinion affirms that our courts will provide a venue for victims of data breach to have their cases heard and resolved,” Nace said.
The ruling is “an important victory for victims of data breach and identity theft,” Alan Butler, senior counsel at the Electronic Privacy Information Center in Washington, told Bloomberg BNA in an email. EPIC filed an amicus brief in support of the patients.
“The court recognized that victims can seek redress based on a company’s failure to protect their personal information, and need not wait until after they have suffered identity theft,” Butler said. “The exposure of personal information, itself, is a legal injury sufficient to confer standing.”
The D.C. Circuit joined the Seventh Circuit, which said in Remijas v. Neiman Marcus Grp. that presumably the purpose of a hack is to eventually make fraudulent charges or assume the consumers’ identities.
Counsel for CareFirst and its amicus the U.S. Chamber of Commerce didn’t respond to requests for comment.
The lower court dismissed the suit, finding that the stolen data didn’t contain customer Social Security or credit card numbers, which the hackers would need to steal their identities.
“But that conclusion rested on an incorrect premise,” the appeals court said. The lower court should have only examined the complaint to see if the plaintiffs alleged enough of an injury to pursue their case.
Instead it bought CareFirst’s argument that credit card and Social Security numbers weren’t included in the hacked data, the appeals court said.
“CareFirst does not seriously dispute that plaintiffs would face a substantial risk of identity theft if their Social Security and credit card numbers were accessed by a network intruder, and, drawing on experience and common sense, we agree,” the court said.
Even if Social Security numbers were never exposed to the data thief, the complaint makes plausible allegations that the customers face a substantial risk of “medical identity theft,” the D.C. Circuit said.
Judges David S. Tatel and Patricia Ann Millett joined the opinion.
Paulson & Nace PLLC and Nidel & Nace PLLC represented the patients.
Eversheds Sutherland LLP represented the insurer.
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