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The U.S. District Court for the Northern District of California March 5 dismissed without prejudice a putative class action against LinkedIn Corp. over its alleged failure to use industry standard protocols to safeguard sensitive user information, finding that the plaintiffs lacked standing.
The court said that lawsuits over “insufficient performance or how a product functions” require plaintiffs to allege “something more” than that they overpaid for the product. He said that in this case, such a harm might be the “theft of their personally identifiable information.”
The Northern District of California consolidated in August four putative class action lawsuits regarding the alleged data breach (11 PVLR 1388, 9/10/12).
A first amended complaint was filed in November 2012 in the consolidated lawsuit with Szpyrka and Khalilah Gilmore-Wright as named plaintiffs. Szpyrka said she paid $26.95 monthly for a premium LinkedIn account, and Gilmore-Wright reported paying a monthly $99.95 fee. The putative class would have included any premium LinkedIn users who paid for a premium account prior to June 7, 2012.
The plaintiffs' complaint argued LinkedIn did not use industry standard protocols when storing passwords. The complaint said the company should have repeatedly “hashed” and “salted” the passwords.
“Hashing,” the complaint said, inputs a password into a “cryptographic hash function” that converts the data “into an unreadable, encrypted format.” It added that “salting” refers to assigning random values to a password “before the text undergoes the hashing process.”
The court noted that the plaintiffs' theory of economic harm in the case had provided standing in food mislabeling cases. For example, the court said in Chavez v. Blue Sky Natural Beverage Co., 340 F. App'x 359 (9th Cir. 2009), the U.S. Court of Appeals for the Ninth Circuit ruled a plaintiff had standing when he alleged he would not have purchased a product if he had known its actual geographic origins.
“[W]hen a member purchases a premium account upgrade, the bargain is not for a particular level of security, but actually for the advanced networking tools and capabilities to facilitate enhanced usage of LinkedIn's services,” the court said.
A third issue, the court said, was that the case primarily brought breach-of-contract claims against LinkedIn. The plaintiffs' allegations that they did not receive the full security protections they had bargained for could not be the “resulting damages” required for a breach-of-contract claim, the court held.
A final manner in which the lawsuit was distinguishable was that courts usually require “something more” in cases where plaintiffs allege a wrong was suffered because of a product's insufficient performance or how it functioned. The court said in this case, it might be the theft of plaintiffs' personally identifiable information.
It therefore dismissed the complaint but provided the plaintiffs with leave to amend.
Jay Edelson, Ari J. Scharg, Christopher L. Dore, and Rafey S. Balabanian, of Edelson McGuire LLC's Chicago office; Sean P. Reis, of Edelson's Rancho Santa Margarita, Calif., office; Laurence D. King and Linda M. Fong, of Kaplan Fox & Kilsheimer LLP's San Francisco office; Joseph J. Siprut, of Siprut PC's Chicago office; Todd C. Atkins, of Siprut's San Diego office; and David C. Parisi and Suzanne L. Havens Beckman, of Parisi & Havens LLP, in Sherman Oaks, Calif., represented the class plaintiffs. Michael G. Rhodes, Matthew D. Brown, and Whitty Somvichian, of Cooley LLP, in San Francisco, represented LinkedIn.
Full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/In_re_LinkedIn_User_Privacy_Litigation_Docket_No_512cv03088_ND_Ca.
Full text of the plaintiffs' first amended complaint is available at http://www.bloomberglaw.com/public/document/In_re_LinkedIn_User_Privacy_Litigation_Docket_No_512cv03088_ND_Ca/1.
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