Data Breach Lawsuit Survives Motion to Dismiss

by Bracewell LLP

Bracewell LLP

In an April 13, 2017 decision in Walters v. Kimpton Hotel,1 a California federal judge rejected the bid of hotel chain Kimpton Hotel and Restaurant Group, LLC to dismiss a proposed class action arising from a data breach last year.  Judge Vince Chhabria found that the named plaintiff sufficiently alleged imminent harm to establish standing notwithstanding the absence of allegations that his personal information had been misused.

Background of the Lawsuit
In August 2016, Kimpton Hotel disclosed that malware had been installed on its servers from February 16, 2016 to July 7, 2016, and mailed notification letters to those guests who used their payment cards at a front desk during that period.  Plaintiff Lee Walters was a guest at a Kimpton Hotel on May 29, 2016.  Walters alleged that, following his stay at the hotel, his payment card information was stolen.  Walters further alleged that, after learning of the breach, he expended time and effort to monitor his credit, and that he faced increased risk of identity theft due to the server breach.

The Decision
Judge Chhabria found that a plaintiff does not need to “actually suffer the misuse of his data or an unauthorized charge before he has an injury for standing purposes,” and that Walters’ allegations of imminent harm were sufficient to confer standing to survive Kimpton’s motion to dismiss.  Judge Chhabria adopted the standing approach applied by the Sixth and Seventh Circuits in Galaria v. Nationwide Mut. Ins. Co. and Lewert v. P.F. Chang’s China Bistro.2

In Galaria, the Sixth Circuit held that allegations of a continuing, increased risk of fraud and identify theft were more than just speculative allegations of injury, emphasizing that there is “no need for speculation where Plaintiffs allege that their data has already been stolen and is now in the hands of ill-intentioned criminals.”3 Similarly, in P.F. Chang’s, the Seventh Circuit explained that “it is plausible to infer a substantial risk of harm from the data breach, because a primary incentive for hackers is sooner or later to make fraudulent charges or assume those consumers’ identities.”4

Additionally, Walters’ allegations of purchasing credit-monitoring services and other out-of-pocket expenses were actual damages sufficient to allow claims of breach of implied contract, negligence, and a violation of California’s unfair competition law to survive.  The breach of implied contract claim was based on allegations that Kimpton’s privacy policy, which states that the company is committed to protecting customer personal data, created an enforceable promise to customers in that it was a voluntary duty and constituted valid consideration. 

It is important to note that a court at the motion to dismiss stage must accept allegations of imminent harm as true, and it is far from clear whether Walters will be able to prove injury-in-fact going forward.  Even so, this decision is yet another reminder that companies can no longer assume that consumer-initiated lawsuits will be dismissed where no customer information has yet been misused, and they must prepare for legal attacks from all sides – regulators, shareholders, and consumers – even as they work to resolve the fallout from a cyberattack.  A great starting point for all companies is a simple and straightforward incident response plan that anticipates the inevitable cyber breach.  Such a plan can provide a framework for integrating a response amongst the company’s management, IT, legal, external communications, and outside experts, such as legal counsel and cyber forensic investigators.

A copy of the decision is available here.


Walters v. Kimpton Hotel & Rest. Grp., LLC, No. 16-CV-05387-VC, 2017 WL 1398660 (N.D. Cal. Apr. 13, 2017).

2 Galaria v. Nationwide Mut. Ins. Co., 663 F. App'x 384 (6th Cir. 2016); Lewert v. P.F. Chang's China Bistro, Inc., 819 F.3d 963 (7th Cir. 2016).  While not cited by the judge, the Ninth Circuit also recognizes that, following the theft of unencrypted personal data, an increased risk of identity theft constitutes harm.  See Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010).

3 Galaria, at 388.

4 P.F. Chang’s, at 967 (internal citations omitted).

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.

© Bracewell LLP | Attorney Advertising

Written by:

Bracewell LLP

Bracewell LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.