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Financial Services Law Insights and Observations

11th Circuit: Future identity theft risk does not confer standing

Courts Privacy/Cyber Risk & Data Security Data Breach Appellate Eleventh Circuit Standing State Issues

Courts

On February 4, the U.S. Court of Appeals for the Eleventh Circuit affirmed dismissal of a class action complaint, which raised several claims against a restaurant following a data breach that exposed customers’ financial information, for the named plaintiff’s lack of standing. According to the opinion, a restaurant chain suffered a data breach when hackers gained access to customers’ credit and debit card information through an outside vendor’s remote connection tool. The restaurant chain provided notice to customers that their information “‘may’ have been accessed.” A consumer, who made two purchases during the data breach period, cancelled the credit cards he used and filed a class action two weeks after the announcement of the breach, alleging the company was negligent in failing to safeguard the credit card data, and violated the Florida Unfair and Deceptive Trade Practices Act (FUDTPA), among others. The district court dismissed the action for lack of standing, concluding that the consumer failed to identify a “single specific, concrete injury in fact that he or anyone else [] suffered as a result of any misuse of customer credit card information.”

On appeal, the 11th Circuit affirmed the district court’s holding. The appellate court rejected the consumer’s theories of standing, which were predicated on (i) a threatened “future injury” of identity theft, and (ii) the consumer’s alleged suffering of “mitigation injuries” (i.e., lost time, lost rewards points, and loss of access to accounts). The appellate court explained that in data breach cases like this, to have Article III standing the consumer must show a “substantial risk” of harm or that harm (e.g., identity theft) is “certainly impending.” The appellate court noted that despite the consumer still carrying “some risk of future harm involving identify theft,” that risk “is not substantial and is, at best, speculative” because the consumer “immediately cancelled his credit cards following disclosure [of the breach], effectively eliminating the risk of credit card fraud in the future.” Moreover, according to the appellate court, the consumer did not sufficiently allege an actual, present injury, through “inflicting injuries on himself to avoid an insubstantial, non-imminent risk of identity theft.” The appellate court reasoned that “[t]o hold otherwise would allow an enterprising plaintiff to secure a lower standard for Article III standing simply by making an expenditure based on a nonparanoid fear.”

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