Pennsylvania Court Dismisses Data Breach Claims

by Cozen O'Connor

In 2014, the University of Pittsburgh Medical Center’s computer system was hacked, resulting in the disclosure of sensitive personal information of current and former employees, including names, addresses, birthdates, social security numbers and banking account numbers. Allegedly, the stolen information was used to file fraudulent tax returns for as many as 800 employees. A class action was filed on behalf of current and former employees against the hospital and its payroll company.

On May 28, 2015, the Allegheny County Court of Common Pleas applied the economic loss doctrine to dismiss the class action. The Court in Dittman v. UPMC refused to adopt a duty of care that would require employers to protect the confidential information of its current and former employees. And it refused to find that there was an implied contract between the hospital and its employees that would require the hospital to protect its employees’ confidential information from data breaches.

The Court’s holding in UPMC decided one key point:  Pennsylvania companies whose computer systems are hacked will not be liable to the persons whose confidential information was compromised.

Plaintiffs claimed that “UPMC had a duty protect the private, highly sensitive, confidential and personal financial information [of is current and former employees].” The plaintiffs also alleged that, as a result of the breach, they incurred damages relating to fraudulently filed tax returns and “are at an increased and imminent risk of becoming victims of identity theft crimes, fraud and abuse.”

The hospital argued that the plaintiffs’ negligence claim was barred by the economic loss rule. Noting that the only losses that the UPMC employees sustained were economic, the trial court applied the economic loss doctrine and dismissed the plaintiffs’ negligence count. The Court wrote: “The Economic Loss Doctrine provides that no cause of action exists for negligence that results solely in economic damages unaccompanied by physical or property damage.”

No doubt realizing the futility of their negligence claim in light of the economic loss rule, the plaintiffs also urged the Court to impose a duty of care upon UPMC to protect the confidential information of its employees. Specifically, the plaintiffs proposed that the court create “a private negligence cause of action to recover actual damages, including damages for increased risks, upon a showing that the plaintiff’s confidential information was made available to third persons through a data breach.”

The Court refused, finding that “the public interest is not furthered by this proposed solution.” The Court then cited a laundry list of reasons to justify its refusal to adopt the new duty of care, including the lack of a safe harbor for entities storing confidential information, the inability of the state judicial system to handle the volume of potential lawsuits, the difficulty in establishing a minimum standard of care required, and the substantial resources that for-profit and non-profit entities would be required to spend in defending these lawsuits.

Another reason for the Court’s refusal to adopt a new duty of care was the Pennsylvania General Assembly’s recent consideration of the issue in connection with Pennsylvania’s Breach of Personal Information Notification Act. The legislative history shows that the General Assembly considered adopting an expansive civil liability provision as part of the Act, but the final bill contained only a notification requirement. In refusing to adopt the new duty urged by the UPMC employees, the Court observed, “It is not for the courts to alter the direction of the General Assembly because public policy is a matter for the Legislature.”

As definitive as the ruling in UPMC appears to be, there are two caveats. If the hacked company is “in the business of supplying information for economic gain,” then it may be liable to the people whose information is compromised. See Sovereign Bank v. BJ’s Wholesale Club, Inc., No. 06-3405 (filed July 16, 2008 by U.S. Third Circuit Court of Appeals). And there are many different iterations of the economic loss rule; a victim of a security breach could possibly sue a company whose system was compromised if the breach occurred in a state that has a more expansive rule. Other than that, however, Pennsylvania is one state that will shield companies from liability in data breach events resulting in economic loss.

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.

© Cozen O'Connor | Attorney Advertising

Written by:

Cozen O'Connor

Cozen O'Connor 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.