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Keeping the Data-Breach Headlines In Perspective

By John Hutchins
October 02, 2015

From the Sony Pictures settlement, to the Ashley Madison debacle, data breaches are making big headlines of late. And when it comes to one case in particular ' the data breach at luxury retailer Neiman Marcus (Remijas v. Neiman Marcus, No. 14-3122 (7th Cir. July 20, 2015)) ' some would-be experts are spinning a misleading, black-and-white storyline. As you may remember, the 2013 data breach exposed the credit card data of 350,000 Neiman Marcus customers. This led to fraudulent charges occurring in 9,200 of those customer accounts. In short order, a class-action lawsuit followed in which customers sought $5 million in damages. While a district court dismissed the case ' in part because customers had been reimbursed for the false charges in question ' the U.S. appeals court reversed that dismissal in late July.

This ruling, according to the pundits, represented a tipping point toward victims of cyber fraud, and one that, as they saw it, may lead to a wave of successful class-action lawsuits filed across the country. To be sure, data breaches are a significant problem and certainly represent a liability risk. However, let's take a closer look at the precise meaning and context of the Neiman Marcus ruling. Do the pundits truly appreciate the procedural context in which the court reviewed the case? Are they accounting for the most important part of any class-action lawsuit ' class certification?

In the Neiman case, after all, the primary issue under consideration was standing. The district court had granted the defendant's motion to dismiss, based on the well-worn argument that the plaintiffs' alleged injuries were not sufficiently “concrete” to establish standing, citing the U.S. Supreme Court's 2013 case, Clapper v. Amnesty International, 638 F. 3d 118 (Feb. 26, 2013). Clapper held that, in order to establish Article III standing, plaintiffs must allege they are at imminent risk of suffering a concrete injury. The Seventh Circuit disagreed with the district court, but not with the Supreme Court's ruling in Clapper, and remanded the case for further proceedings.

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