The 11th Circuit recently weighed in on the hottest issue in data breach litigation, whether a demonstration of actual harm is required to have standing to sue. Joining several other circuit courts, the 11th Circuit in Tsao v. Captiva MVP Rest. Partners, concluded that the plaintiff had failed to allege either that the data breach placed him in a “substantial risk” of future identity theft or that identity theft was “certainly impending”.

The matter in Tsao stemmed from a data breach at a restaurant chain of which the plaintiff frequented. In May of 2017, a hacker exploited the restaurant chain’s point of sale system and gained access to customers’ personal data – the credit and debit card information – through an outside vendor’s remote connection tool. However, due to the nature of the breach the restaurant chain stated that it was not possible to determine the identity or exact number of credit card numbers or names that were accessed or acquired during the cyber-attack.

Within two weeks of the restaurant chain’s announcement of the breach, plaintiff filed a class action complaint on behalf of himself and other customers potentially impacted by the breach, alleging a variety of injuries due to the data breach, including “theft of their personal financial information,” “unauthorized charges on their debit and credit card accounts,” and “ascertainable losses in the form of the loss of cash back or other benefits.”  The plaintiff asserted that he and the class members “have been placed at an imminent, immediate, and continuing increased risk of harm from identity theft and identity fraud, requiring them to take the time which they otherwise would have dedicated to other life demands such as work and effort to mitigate the actual and potential impact of the Data Breach on their lives.”

Standing to sue in a data breach class action lawsuit largely turns on whether plaintiffs establish that they have suffered an “injury-in-fact” resulting from the data breach. Plaintiffs in data breach class actions are often not able to demonstrate that they have suffered financial or other actual damages resulting from a breach of their personal information. Instead, plaintiffs will allege that a heightened “risk of future harm” such as identity theft or fraudulent charges is enough to establish an “injury-in-fact”.

Federal circuits court over the past few years have struggled with the question whether plaintiffs in a data breach class action can establish standing if they only allege a heightened “risk of future harm”.  For example, the 3rd6th, 7th,  9th  and D.C. circuits have generally found standing, while the 1st2nd4th5th, and 8th circuits have generally found no standing where a plaintiff only alleges a heightened “risk of future harm”. This circuit court split is in large part to due to lack of clarity following the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins which held that even if a statute has been violated, plaintiffs must demonstrate that an “injury-in-fact” has occurred that is both concrete and particularized, but which failed to clarify whether a “risk of future harm” qualifies as such an injury.

In reaching its decision, the 11th Circuit relied heavily on the 8th Circuit’s analysis of the issue of standing to sue, in In re SuperVal, Inc. where the court found no standing based on an “increased risk of future identity theft” theory, even when a named plaintiff alleged actual misuse of personal information. Citing a U.S. Government Accountability Office Report on the likelihood of identity theft in the event of a data breach (“GAO Report”), the 8th Circuit reasoned that the hackers in the data breach at issue were not alleged to have stolen social security numbers, birth dates, or driver’s license numbers, and thus, according to the GAO report, the risk of identity theft was “little to no[ne].”

Similarly, the 11th Circuit reasoned in Tsao, that based on the GAO Report, since only credit and debit card information had potentially been breached in the data breach at issue, no “substantial risk” of identity theft existed. Moreover, the 11th Circuit emphasized that the plaintiff offered only vague, conclusory allegations that members of the class have suffered any actual misuse of their personal data—here, “unauthorized charges.”

“Without specific evidence of some misuse of class members’ data, a named plaintiff’s burden to plausibly plead factual allegations sufficient to show that the threatened harm of future identity theft was “certainly impending”—or that there was a “substantial risk” of such harm—will be difficult to meet”, the 11th Circuit stated.

Finally, the 11th Circuit Court noted that the plaintiff had immediately cancelled his credit cards following disclosure of the breach, “effectively eliminating the risk of credit card fraud in the future.”

Takeaway

The lack of clarity on this issue has made it difficult for businesses to assess the likelihood of litigation and its associated costs in the wake of a data breach.  It is crucial for businesses to assess their breach readiness and develop an incident or breach response plan that takes into consideration the possibility of litigation.

For more on standing in data breach litigation, check out some of our helpful resources:

 

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Photo of Jason C. Gavejian Jason C. Gavejian

Jason C. Gavejian is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. and a Certified Information Privacy Professional (CIPP/US) with the International Association of Privacy Professionals.

As a Certified Information Privacy Professional (CIPP/US), Mr. Gavejian focuses on the matrix…

Jason C. Gavejian is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. and a Certified Information Privacy Professional (CIPP/US) with the International Association of Privacy Professionals.

As a Certified Information Privacy Professional (CIPP/US), Mr. Gavejian focuses on the matrix of laws governing privacy, security, and management of data. Mr. Gavejian is Co-Editor of, and a regular contributor to, the firm’s Workplace Privacy, Data Management & Security Report blog.

Mr. Gavejian’s work in the area of privacy and data security includes counseling international, national, and regional companies on the vast array of privacy and security mandates, preventive measures, policies, procedures, and best practices. This includes, but is not limited to, the privacy and security requirements under state, federal, and international law (e.g., HIPAA/HITECH, GDPR, California Consumer Privacy Act (CCPA), FTC Act, ECPA, SCA, GLBA etc.). Mr. Gavejian helps companies in all industries to assess information risk and security as part of the development and implementation of comprehensive data security safeguards including written information security programs (WISP). Additionally, Mr. Gavejian assists companies in analyzing issues related to: electronic communications, social media, electronic signatures (ESIGN/UETA), monitoring and recording (GPS, video, audio, etc.), biometrics, and bring your own device (BYOD) and company owned personally enabled device (COPE) programs, including policies and procedures to address same. He regularly advises clients on compliance issues under the Telephone Consumer Protection Act (TCPA) and has represented clients in suits, including class actions, brought in various jurisdictions throughout the country under the TCPA.

Mr. Gavejian represents companies with respect to inquiries from the HHS/OCR, state attorneys general, and other agencies alleging wrongful disclosure of personal/protected information. Mr. Gavejian negotiates vendor agreements and other data privacy and security agreements, including business associate agreements. His work in the area of privacy and data security includes counseling and coaching clients through the process of investigating and responding to breaches of the personally identifiable information (PII) or protected health information (PHI) they maintain about consumers, customers, employees, patients, and others, while also assisting clients in implementing policies, practices, and procedures to prevent future data incidents.

Mr. Gavejian represents management exclusively in all aspects of employment litigation, including restrictive covenants, class-actions, harassment, retaliation, discrimination, and wage and hour claims in both federal and state courts. Mr. Gavejian regularly appears before administrative agencies, including the Equal Employment Opportunity Commission (EEOC), the Office for Civil Rights (OCR), the New Jersey Division of Civil Rights, and the New Jersey Department of Labor. Mr. Gavejian’s practice also focuses on advising/counseling employers regarding daily workplace issues.

Mr. Gavejian’s litigation experience, coupled with his privacy practice, provides him with a unique view of many workplace issues and the impact privacy, data security, and social media may play in actual or threatened lawsuits.

Mr. Gavejian regularly provides training to both executives and employees and regularly speaks on current privacy, data security, monitoring, recording, BYOD/COPE, biometrics (BIPA), social media, TCPA, and information management issues. His views on these topics have been discussed in multiple publications, including the Washington Post, Chicago Tribune, San Francisco Chronicle (SFGATE), National Law Review, Bloomberg BNA, Inc.com, @Law Magazine, Risk and Insurance Magazine, LXBN TV, Business Insurance Magazine, and HR.BLR.com.

Mr. Gavejian is the Co-Chair of Jackson Lewis’ Hispanic Attorney Resource Group, a group committed to increasing the firm’s visibility among Hispanic-American and other minority attorneys, as well as mentoring the firm’s attorneys to assist in their training and development. Mr. Gavejian also previously served on the National Leadership Committee of the Hispanic National Bar Association (HNBA) and regularly volunteers his time for pro bono matters.

Prior to joining Jackson Lewis, Mr. Gavejian served as a judicial law clerk for the Honorable Richard J. Donohue on the Superior Court of New Jersey, Bergen County.