United States: Risk Of Harm Standing In Data Breach Cases – Latest Developments

Is an increased risk of harm sufficient to establish standing in a data breach case? Most courts have avoided an absolute answer, instead weighing the characteristics of the data breach. A recent New York case illustrates the difficulties courts have had with the question, while the Supreme Court considers an opportunity to clarify the answer.

Fero v. Excellus Health Plan

Just weeks ago, the U.S. District Court for the Western District of New York took a U-turn on risk of harm standing. In Fero v. Excellus Health Plan, Inc., the court granted a motion for reconsideration and then denied defendants' motion to dismiss, which it had previously granted for lack of standing.1

Fero involves a healthcare provider, Excellus Health Plan. Plaintiffs allege that hackers gained access in 2013 to Excellus's computer systems and accessed names, birth dates, social security numbers, mailing addresses, phone numbers, and other medical insurance information.2 Excellus moved to dismiss for lack of standing.3 On February 22, 2017, the court concluded that certain plaintiffs "who did not allege that they had suffered any misuse of their personally identifiable information" failed to "allege an injury-in-fact based on the alleged harm of increased risk of identity theft."4 The court thus granted the motion to dismiss as to those specific plaintiffs.5

Those plaintiffs then moved for reconsideration of the decision as to their claims and cited the Second Circuit's recent decision in Whalen v. Michaels Stores, Inc., as an intervening change in controlling law that supported reconsideration.6 In Whalen, the Second Circuit had affirmed an order of the district court which found that a plaintiff failed to allege a cognizable injury resulting from the exposure of her credit card information after a data breach at a Michaels store.7 The Second Circuit agreed that the plaintiff failed to establish the "threat of future fraud" because her credit card was promptly cancelled and no other personally identifying information was allegedly stolen.8 The Fero court concluded that the "implication" of the Second Circuit's language was that "had [the plaintiff] alleged the theft of personally identifying information, she would have had standing based on a threat of future fraud."9 While concluding that Whalen "strongly implie[d]" that the Second Circuit would have found standing, it also reasoned that Whalen did not amount to a "change of controlling law" that would justify reconsideration under Rule 60(b).10 Instead the court concluded that reconsideration of its dismissal order was warranted, in an exercise of its discretion, to avoid "manifest injustice."11

In the end, the Fero court reasoned that the Second Circuit would deem the theft of personally identifying information, such as social security numbers or birth dates, sufficient to confer standing on a risk of harm theory.12

Whether this is an accurate prediction of how the Second Circuit would calibrate risk of harm standing is, of course, speculative, but the Fero court is not alone in finding the question a challenging one. At the time of this writing, the Sixth, Seventh, Ninth, and D.C. Circuits have found standing based on the increased risk of identity theft while the Third, Fourth, and Eighth Circuits have not.13 In most of these cases, however, the specific facts of each breach determine whether a risk of harm is real enough to confer standing. And the cases do not necessarily assess the facts in the same way. For example, some courts have taken into account costs incurred to avoid future harm,14 while others, including the Eighth Circuit, have ruled out this fact as a basis for establishing injury in fact.15

Attias v. CareFirst

On February 16, 2018, the Supreme Court will decide whether to grant cert in Attias v. CareFirst, another case concerning the question of risk of harm standing.16 If cert is granted, the Supreme Court will have the opportunity to provide clarity to litigants that seek to bring suit in the wake of data breaches that compromise their personal identifying information.

The Attias case stems from a 2014 data breach in which an unknown hacker gained access to CareFirst's, a health insurer, servers and stole names, birth dates, email addresses, and subscriber identification information for over one million policyholders.17 These policyholders brought a proposed class action against CareFirst in the D.C. District Court alleging that CareFirst violated state laws and legal duties by failing to protect their personal information and exposing them to the risk of identity theft.18

The District Court held in favor of CareFirst and dismissed the complaint for lack of standing.19 The court reasoned that the alleged injury was too speculative and that the mere fact that one's personal information was stolen in a data breach was insufficient to establish standing absent additional facts demonstrating a "sufficiently substantial risk of future harm."20

On appeal, the D.C. Circuit reversed and held that the plaintiffs had plausibly alleged a risk of future injury that was substantial enough to confer Article III standing.21 The D.C. Circuit explained that "the proper way to analyze an increased-risk-of-harm claim is to consider the ultimate alleged harm"—there, identity theft—"as the concrete and particularized injury and then to determine whether the increased risk of such harm makes injury to an individual citizen sufficiently 'imminent' for standing purposes."22 Following this reversal, CareFirst petitioned the Supreme Court for certiorari.

CareFirst argues in its cert petition that the D.C. Circuit erroneously held plaintiffs to a "plausibility standard" and incorrectly interpreted the Supreme Court's "substantial risks" standard and related standing jurisprudence.23 CareFirst also argues that the Court should grant cert to resolve the deepening circuit split over the issue.24

In opposition to the cert petition, Attias argues that a circuit split does not actually exist and that the differing outcomes in the circuit-level decisions can be explained by the substance of the underlying allegations in each case.25 By way of example, Attias highlights the Eighth Circuit's decision in SuperValu, which rejected standing based largely on the fact that no personally identifying information such as social security numbers, birth dates, or driver's license numbers was stolen in the data breach. 26 In contrast, Attias argues, the D.C. Circuit was faced with differing factual allegations and a far more extensive loss of personal identifying information. 27 According to Attias, the courts are simply applying the same law to different factual allegations and there is nothing the Supreme Court need resolve. 28 Attias also contends that the D.C. Circuit correctly applied settled Supreme Court precedent regarding "imminent" injury. 29

We will know soon whether the Supreme Court takes the opportunity to weigh in.

Footnotes

1. Fero v. Excellus Health Plan, Inc., 6:15-cv-065659, 2018 WL 507320 (W.D.N.Y. Jan. 19, 2018).

2. Id. at *2.

3. Id. at *3.

4. Id.

5. Id. at *4.

6. Fero, 2018 WL 507320 at *7.

7. Whalen v. Michaels Stores, Inc., 689 F. App'x 89 (2d Cir. 2017)

8. Id. at 90-91.

9. Fero, 2018 WL 507320 at *10.

10. Id. at *6.

11. Id. at *10.

12. Id. at *22.

13. Compare Galaria v. Nationwide Mut. Ins. Co., 663 F. App'x 384 (6th Cir. 2016) (finding standing based on increased risk of identity theft), and Lewert v. P.F. Chang's China Bistro, Inc., 819 F.3d 963 (7th Cir. 2016) (same), and Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010) (same), and Attias v. CareFirst, Inc., 865 F.3d 620 (D.C. Cir. 2017) (same), with Reilly v. Ceridian Corp., 664 F.3d 38 (3d Cir. 2011) (finding increased risk of identity theft insufficient for standing), and Beck v. McDonald, 848 F.3d 262 (4th Cir. 2017) (same), and In re SuperValu, Inc., 870 F.3d 763 (8th Cir. 2017) (same).

14. Galaria, 663 F. App'x at 388 ("Plaintiffs' allegations of a substantial risk of harm, coupled with reasonably incurred mitigation costs, are sufficient to establish a cognizable Article III injury at the pleading stage of the litigation.").

15. In re SuperValu, Inc., 870 F.3d at 771 ("Because plaintiffs have not alleged a substantial risk of future identity theft, the time they spent protecting themselves against this speculative threat cannot create an injury.").

16. Petition for Writ of Certiorari, CareFirst, Inc. v. Attias, No. 17-641, 2017 WL 5041488 (Oct. 30, 2017) (the "Petition").

17. Attias v. CareFirst, Inc., 199 F. Supp. 3d 193, 197 (D.D.C. 2016).

18. Id.

19. Id. at 202.

20. Id. at 201.

21. Attias, 865 F.3d 620.

22. Id. at 627 (quoting Public Citizen, Inc. v. Nat'l Highway Traffic Safety Admin., 489 F.3d 1279, 1298 (D.C. Cir. 2007)).

23. Petition, CareFirst, 2017 WL 5041488, at *10.

24. Id. at *10-15.

25. Brief in Opposition to Petition for Writ of Certiorari, CareFirst, Inc. v. Attias, No. 17-641 (U.S. Jan. 2, 2018).

26. Id. at 20-21.

27. Id. at 21.

28. Id. at 22-23.

29. Id. at 6-15.

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.

Authors
Events from this Firm
18 Jan 2019, Speaking Engagement, Washington, DC, United States

Come on down and watch our Champions compete on Celebrity Jeopardy!

30 Jan 2019, Webinar, Washington, DC, United States

Program: Partnership Representatives: New IRS Final Regulations

5 Feb 2019, Other, Washington, DC, United States

Nonprofits that are concerned about their own viability will also be thoughtful about planning for smooth transitions of leadership - as well as making sure their nonprofit is prepared for unexpected changes.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions