Clapper Again Stymies Data Breach Class Action

by BakerHostetler

The U.S. Supreme Court’s decision in Clapper v. Amnesty International USA again has been relied on by a federal district court to hold that the “mere loss of data” in a data breach case does not constitute an injury sufficient to confer standing. In re: Science Applications International Corp. (SAIC) Backup Tape Data Theft Litigation, U.S. District Court for the District of Columbia, Misc. Action No. 12-347 (JEB) MDL 2360 (May 9, 2014).

In SAIC, tapes containing personal and medical information for 4.7 million members of the U.S. military and their families, along with the car’s stereo and GPS, were stolen from the parked car of an SAIC employee. SAIC is an information technology company that was handling data for TRICARE, a government agency that provides insurance coverage and health care to active-duty service members and their families. The breach victims sued TRICARE and SAIC, among others, asserting 20 causes of action, including increased risk of identity theft; expenses related to mitigating the risk of identity theft, loss of privacy; loss of value of personal and medical information; loss of value of insurance premiums; SAIC’s failure to meet the requisite standard for data security; the lost right to truthful information; statutory or liquidated damages; and, for at least one plaintiff, actual identity theft. The court granted the Defendants’ motions to dismiss the claims of almost all of the Plaintiffs on the ground that they lacked standing.

The court noted that the case “presents thorny standing issues regarding when, exactly, the loss or theft of something as abstract as data becomes a concrete injury.” The Plaintiffs claimed that they are 9.5 times more likely than the average person to become victims of identity theft, and that their increased risk of harm is sufficient to confer standing. Citing Clapper, the court disagreed, stating that the “degree by with the risk of harm has increased is irrelevant — instead, the question is whether the harm is certainly impending.”

To illustrate that the likelihood of harm to any individual Plaintiff was “entirely speculative,” the court set forth the following chain of events that would have to occur for an injury to take place:

First, the thief would have to recognize the tapes for what they were, instead of merely a minor addition to the GPS and stereo haul. Data tapes, after all, are not something that an average computer user often encounters. The reader, for example, may not even be aware that some companies still use tapes — as opposed to hard drives, servers, or even CDs — to back up their data. . . . Then the criminal would have to find a tape reader and attach it to her computer. Next, she would need to acquire software to upload the data from the tapes onto a computer — otherwise, tapes have to be slowly spooled through like cassettes for data to be read. After that, portions of the data that are encrypted would have to be deciphered. . . . Once the data was fully unencrypted, the crook would then need to acquire a familiarity with TRICARE’s database format, which might require another round of special software. Finally, the larcenist would have to either misuse a particular Plaintiff’s name and social security number (out of 4.7 million TRICARE customers) or sell that Plaintiff’s data to a willing buyer who would then abuse it. . . .

At this point, we do not know who [the thief] was, how much she knows about computers, or what she has done with the tapes. The tapes could be uploaded onto her computer and fully deciphered, or they could be lying in a landfill. . . . (citations and emphasis omitted).

In addition, the court ruled that costs incurred to prevent future injury did not create standing, even though it was not unreasonable to make those expenditures. Consequently, the court ruled that the vast majority of plaintiffs lacked standing.

The court also rejected the invasion of privacy claim of most Plaintiffs because they did not alleged that their personal information had been viewed or exposed in a way that would facilitate easy, imminent access. The Plaintiffs’ claim for reduced value of personal and medical information claim also failed since they did not contend that they themselves intended to sell that information on the cyber black market. Plaintiffs’ claim for reduced value of their insurance premiums was dismissed because they did not allege facts that show that the market value of their insurance coverage, including security services, was somehow less than what they paid.

The Plaintiffs’ claims based on alleged legal violations were also found to be deficient: “Standing. . . does not merely require a showing that the law has been violated, or that a statute will reward litigants in general upon a showing of a violation. Rather, standing demands some form of injury — some showing that the legal violation harmed you in particular, and that you are therefore an appropriate advocate in the federal courts.” The court also dismissed the Plaintiffs’ claim based on deprivation of their “right to truthful information about the security of their PII/PHI,” holding that no independent harm has flowed from that so-called deprivation.

Although the court held that two Plaintiffs had adequately alleged harm that was plausibly linked to the breach, the court refused to presume that the remaining Plaintiffs’ data likewise would be misused. The car break-in was a “low tech, garden-variety” theft and “hardly a black-ops caper,” unlike the sophisticated and malicious intrusions at issue in some other cases.

As we’ve previously reported, standing has been found lacking in almost every post-Clapper data breach case where there were no allegations of misuse of the plaintiffs’ data. The SAIC court’s recitation of the steps that the data thief would have to take to access and misuse the stolen data clearly illustrates the speculative nature of most data breach injury claims.


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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