Data breach claims against convenience store chain can proceed – Lexology


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On May 6, the U.S. District Court for the Eastern District of Pennsylvania ruled that a defendant nationwide convenience store chain must face certain claims filed by a group of financial institutions as a result of a 2019 data security incident that allegedly compromised consumers’ credit and debit card information. The financial institutions, in bringing claims for negligence, negligence per se, and declaratory and injunctive relief, asserted, among other things, that the defendant’s “deficient security measures and vulnerable point-of-sale systems led to a data breach that went undetected for almost nine months.” The court ruled that the negligence and declaratory and injunctive relief claims can proceed, but dismissed without prejudice the financial institution’s negligence per se claim so that it can be repleaded under a claim for general negligence. In allowing the negligence claim to survive, the court dismissed the defendant’s argument that the claim should be dismissed under the economic loss doctrine, which bars recovery in tort resulting from an alleged breach of duty under a contract between the parties. The court pointed out that the financial institutions’ claims are protected by a narrow exception to the economic loss doctrine under Pennsylvania law for breach of a common law duty “independent of any potential contractual relationship,” including “the duty to maintain and protect sensitive data with reasonable care.” The court wrote that “the [i]nstitutions have set forth a plausible negligence claim based on the argument that [the defendant] owed them an independent duty in light of” the Pennsylvania Supreme Court’s 2018 ruling in Dittman v. UPMC, which held that the duty “exists independently from any contractual obligations between the parties.” The court further stated that dismissing the declaratory and injunctive relief claims at this stage would curtail the court’s “broad equity powers to fashion the most complete relief possible.”

As previously covered by InfoBytes, in February, consolidated class members filed an unopposed motion for preliminary approval of a settlement agreement with the defendant, which would provide monetary relief to class members totaling up to $9 million, plus $3.2 million for attorneys’ fees and expenses and class representative service awards. The defendant would also be required take additional measures for a period of two years to prevent future unauthorized intrusions.

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