Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
Dec. 28 — Because the plaintiffs failed to demonstrate actual injuries, arts and crafts retail chain Michaels Stores Inc. Dec. 28 dodged a federal court putative class action over a data breach that compromised approximately 2.6 million payment cards.
Dismissing the suit without prejudice, Judge Joanna Seybert of the U.S. District Court for the Eastern District of New York said that plaintiff Mary Jane Whalen failed to assert any injuries that are “certainly impending” or based on a “substantial risk that the harm will occur”—a standard for Article III standing established by the U.S. Supreme Court in Clapper v. Amnesty Int'l USA.
On Jan. 25, 2014, Michaels notified its customers of possible fraudulent activity on some U.S. payment cards, and three months later, it confirmed the security breach. Specifically, Michaels said that hackers retrieved payment card information from the company's systems. However, the company said that there was no evidence that the hackers obtained any personally identifiable information, including names, addresses or personal identification numbers.
According to the plaintiff, following the data breach, her credit card was “physically presented for payment” in Ecuador. However, the complaint didn't allege that the attempted charges were approved or that the plaintiff suffered financial losses. Nonetheless, the plaintiff alleged that she suffered damages arising out of “costs associated with identity theft” as well as the increased risk of identity theft. However, the plaintiff conceded that fraudulent use of her credit card may not be apparent “for years.”
In July 2014, a federal court in Illinois rejected a similar class claim, finding that an elevated risk of identity theft without evidence of specific monetary damages was insufficient to support statutory or common law claims.
Moving to dismiss the complaint, Michaels argued that Whalen lacks Article III standing because she failed to allege any actual damages or any “certainly impending” future injuries. The court agreed.
In a class action, the court said, plaintiffs must show that they “personally have been injured, not that injury has been suffered by other, unidentified members of the class.” Further, in Clapper, the Supreme Court said that plaintiffs lacked if the alleged injury was “highly speculative” and based on “a highly attenuated chain of possibilities.”
Here, the plaintiff has alleged that her credit card was “physically presented for payment,” but didn't allege that she was required to pay the charges made in Ecuador. Even if the pending charges were accepted, the court said, the plaintiff wouldn't have suffered any injury due to the “zero-fraud-liability policy” of major credit card companies, including the plaintiff's card issuer.
As the plaintiff admitted, fraudulent use of the payment cards may not be apparent “for years,” the court said, concluding that the Whalen failed to allege an injury that is “certainly impending” or based on “substantial risk that the harm will occur.”
The court also distinguished the facts in this case from those in Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015). In Remijas, 9,200 of the 350,000 customers affected by a hacker data breach experienced fraudulent charges following the breach, allowing for a finding of a likely threat of harm. By contrast, the court said, Whalen's complaint failed to allege any out-of-pocket losses.
Siprut PC; Glancy Binkow & Goldberg LLP; and Lite Depalma Greenberg LLC represented the plaintiffs. Sidley Austin LLP represented Michaels.
To contact the reporter on this story: Jimmy H. Koo in Washington at email@example.com
To contact the editor responsible for this story: Donald G. Aplin at firstname.lastname@example.org
Full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/Whalen_v_Michael_Stores_Inc_Docket_No_214cv07006_EDNY_Dec_02_2014.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)