The Neiman Marcus Group LLC Urges Seventh Circuit To Deny Appeal

by King & Spalding
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Neiman Marcus Group LLC (“Neiman Marcus”) filed its response to plaintiffs’ appeal of the Illinois federal district court’s decision dismissing plaintiffs’ purported class action claims. Plaintiffs alleged that Neiman Marcus negligently failed to protect the credit card information of 350,000 customers as a result of the 2013 breach of Neiman Marcus’s systems. Neiman Marcus argues that U.S. District Judge James B. Zagel correctly dismissed the case in his September 16, 2014 decision on the basis that the four plaintiffs lacked Article III standing.

The four plaintiffs – Neiman Marcus customers Hilary Remijas, Melissa Frank, Debbie Farnoush, and Joanne Kao – claimed that Neiman Marcus’s security breach exposed them to a greater risk of fraudulent charges and an increased risk of identity theft and that Neiman Marcus did not provide timely notice of the breach to consumers after it was discovered. They alleged that the company skimped on security measures that could have prevented or mitigated the security breach. Their first amended complaint asserted claims of negligence, breach of implied contract, unjust enrichment, unfair and deceptive business practices, invasion of privacy, and violation of several state data breach statutes.

In response to Neiman Marcus’s motion to dismiss for lack of Article III standing, which requires an injury in fact that is concrete and particularized and either actual or imminent, plaintiffs alleged four categories of alleged injury, including (i) an increased risk of future fraudulent credit card charges and an increased risk of identity theft; (ii) present injuries, including the loss of time and money associated with resolving fraudulent charges and protecting against the risk of future identity theft; (iii) financial loss from having purchased products that they would not have purchased had they known of Neiman Marcus’s security issues; and (iv) loss of control over the value of their private information. The court rejected plaintiffs’ attempt to show injury in fact on the basis that none of the alleged injuries were concrete, especially in light of the fact that the plaintiffs had not alleged that any of the fraudulent charges went unreimbursed.

In its brief, Neiman Marcus urged the U.S. Court of Appeals for the Seventh Circuit to affirm Judge Zagel’s dismissal on the basis that the plaintiffs “have not met their burden to establish an injury that is both concrete and actual or imminent, not to mention an injury that is traceable to Neiman Marcus,” contending that the district court “was thus correct to dismiss the [first amended complaint] for lack of Article III standing.” Neiman Marcus also argued that even though some affected customers had fraudulent credit card charges, the breach was limited to payment card data and not more sensitive personal information like social security numbers. The brief argues that plaintiffs did not face “imminent” danger of identity theft because payment card data is routinely disclosed in other contexts. Plaintiffs’ reply brief is due December 19.

For a copy of the Neiman Marcus appeal brief, please click here.

Reporter, Sarah E. Statz, Atlanta, GA, +1 404 572 2813, sstatz@kslaw.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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