3rd Circuit Court of Appeals Rules that Spokeo Does Not Bar Data Breach Cases  

January 20, 2017

 

In a precedential ruling, a federal appeals court has revived a proposed data privacy class action against Horizon Healthcare Services, Inc., d/b/a Horizon Blue Cross Blue Shield of New Jersey that alleges defendant failed to secure sensitive personal information as required by federal statute. The complaint alleges that in early November, 2013, two laptop computers containing unencrypted medical and other personal information of more than 800,000 Horizon customers were stolen, putting the customers at actual serious risk of identity theft and loss of privacy.

The Third Circuit reversed an earlier ruling from the District of New Jersey dismissing the action, which held that even taking plaintiffs' allegations as true, the customers suffered no "cognizable injury." The District Court therefore dismissed on standing grounds, and did not address the substantive bases for defendant's motion to dismiss.

Judge Jordan, writing on behalf of a unanimous panel of the 3rd U.S. Circuit Court of Appeals, found that the lead plaintiffs adequately alleged injury-in-fact. Congress created a duty under federal law to protect certain sensitive information, and provided a private right of action to recover statutory damages for violations of the data protection mandate. The Court ruled that "the violation of a statute can cause an injury in fact and grant Article III standing." Defendant argued that the violation must be accompanied by a resulting harm in order to create standing, but the 3rd Circuit rejected this argument: "we have also accepted the argument, in some circumstances, that the breach of a statute is enough to cause a cognizable injury -- even without economic or other tangible harm."

Just as significantly, the Court held that the law of standing did not change in the wake of the Supreme Court's decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). Damages for a violation of an individual's privacy rights are traditionally recognized at common law even absent quantifiable monetary loss, and the Court also emphasized that the plaintiffs had standing even if Horizon's actions would not give rise to a separate cause of action under state law.

Kaplan Fox attorneys working on this matter are: Robert N. KaplanLaurence D. KingDavid A. Straite, and Matthew B. George.

A copy of the decision can be downloaded here. A summary of the opinion by Alison Frankel on Reuters' "On The Case" blog can be found here.

For more information about this case, contact: Laurence D. King.