United States: Q: Could You Be Dragged Into Court For A Company Data Breach? A: It Depends

This same time last year, many in the business community were eagerly anticipating the U.S. Supreme Court's ruling in Spokeo, Inc. v. Robins, which was to decide the standard that should be applied to determine whether plaintiffs have standing to sue companies for alleged wrongdoing. Because the outcome would likely impact data breach class action lawsuits, many attorneys who handle data breach litigation paid especially close attention to the case.  

Unfortunately, the Supreme Court, operating with only eight justices at the time, remanded the case back to the appeals court in May 2016, finding the lower court's analysis to be incomplete because of its failure to consider whether the plaintiffs' alleged injuries were both concrete and particularized. In the wake of this non-decision decision, lower courts across the country have been split on the issue of whether individuals are able to sue when their personal information is stolen in a data breach incident.

Spokeo And Standing

Spokeo, Inc. operates a "people search engine," that gathers information about individuals and generates background reports about them upon request. The plaintiff sued Spokeo after learning that one such report contained information about him that was inaccurate. He filed the suit as a class action, hoping that anyone else who fell victim to such errant reporting could join his claim.

The Supreme Court was asked to rule on whether the plaintiff and others who wished to join his claim had "standing" under Article III of the Constitution (the legal right to pursue a federal lawsuit), given the fact that the plaintiff did not allege – nor could he demonstrate – he sustained any actual harm, or "injury in fact," due to the incorrect report. Instead, he simply argued that Spokeo committed a technical violation of the Fair Credit Reporting Act, and therefore should be liable to him for damages.

The Court's ruling was considered a "punt" of the issue because it held that plaintiffs must show they suffered an "injury in fact" from the company's alleged wrongdoing to pursue a lawsuit, but then kicked the case back to the lower court to examine the issue anew. The Court emphasized plaintiffs needed to show they suffered a "concrete" injury, but not necessarily a "tangible" injury, stating that even an "intangible injury can nevertheless be concrete."

How Has This Ruling Affected Data Breach Claims?

This ruling seems to have led to more questions than answers, especially in the data breach arena, largely because the circumstances of a company data breach can vary widely. Some plaintiffs allege they lost money as a result of unauthorized use of their credit cards, while others simply allege being forced to spend time and money monitoring their credit because of the risk of a stolen identity is enough to justify a lawsuit. The primary discrepancy among the federal appellate circuits is whether plaintiffs can properly bring a court case based solely on the risk that hackers might misuse personally identifiable information.  

In September 2016, the 6th Circuit held in Galaria v. Nationwide Mutual Insurance Co. that theft of customers' personal data alone was enough to satisfy the "injury in fact" requirement because it placed them at a continuing and increasing risk of fraud and identity theft. Similarly, in an April 2016 case, the 7th Circuit determined it did not matter whether customer data was actually exposed or misused when it allowed a credit card breach case to proceed.

In contrast, the 3rd and 4th Circuit Courts have not conferred standing to plaintiffs in data breach cases, deeming the "chain of assumptions" required in determining whether an actual injury exists to be too tenuous. As one court described it, if the hacker read and understood the plaintiffs' personal information, and if the hacker intends to commit future criminal acts, and if the hacker is able to use such information to the plaintiffs' detriment, only then would there be an injury in fact. The court held that such a speculative chain of events was too shaky a foundation upon which to build a class action case.

In many cases, such as the February 2017 decision in Fero v. Excellus Health Plan, Inc. out of the Western District of New York, the court will determine that standing exists if customer data is stolen and misused, but will decline to do so if there is no allegation of actual misuse. Similarly, in Beck v. McDonald, the 4th Circuit determined standing existed when "the data thief intentionally targeted the personal information compromised in the data breaches," and the plaintiffs alleged "misuse or access of that personal information by the thief." The plaintiff in Beck made no such assertions, leading to a dismissal of the claim. A 7th Circuit Court case, Remijas v. Neiman Marcus Group, LLC, was particularly distinguishable; hackers stole credit card information from 350,000 customers and 9,200 of them experienced fraudulent charges, leading to a relatively easy decision from the court to permit the claim to proceed.

What Should You Do?

Now that the Supreme Court has a ninth justice, it's uncertain if and when it will reconsider the issue or resolve the circuit split on standing. The conflict is likely to persist until the Supreme Court revisits the issue and provides more concrete guidance. In the meantime, facing the uncertain landscape in the wake of Spokeo, you should continue to be vigilant and exercise care to maximize defenses and promptly respond to data breach incidents. 

There are many proactive steps you can take to protect your company: identify the personal, sensitive, and regulated data in your possession and limit access to only those who need it; dispose of unnecessary information; review security protocols and update them regularly (including maintaining current security software updates); encrypt data at rest and in transit whenever possible; provide training on how to handle and protect your company's data to employees who have access to sensitive information; and create an incident response plan to address data loss when it occurs. Additionally, to the extent you entrust sensitive data to third-party vendors, you should define security standards for them and take steps to ensure they are maintaining adequate security protocols.

You should also consider purchasing cybersecurity insurance to potentially reduce costs in the event of a data breach. If a breach occurs, notify your incident response team and work with your IT department or external security vendor to identify the source of the breach and prevent further loss of data. It is also wise to hire experienced counsel to guide you through the process of adhering to applicable data breach notification laws when notifying appropriate law enforcement agencies of the breach, and engage a public relations firm to assist with public and customer communications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.