The Door May Be Open, but the Ride Isn't Free: Seventh Circuit Allows Data Breach Class Action to Survive Pleading Stage but Signals Tough Road Ahead for Plaintiffs

by K&L Gates LLP

K&L Gates LLP

In Dieffenbach v. Barnes & Noble, Inc. [1], the Seventh Circuit allowed a data breach class action to survive the pleadings stage, including a challenge to the plaintiffs’ standing. At the same time, the Court indicated that the plaintiffs may have a tough time proving their claims on the merits or establishing that class certification is warranted. That warning may put the brakes on this action as well as others brought on a similar theory of liability.

The Dieffenbach case arose out of an alleged 2012 breach of the defendant’s point of sale system. Hackers acquired customers’ names, credit and debit card numbers and expiration dates, and PINs [2]. In 2013, the district court dismissed the case for lack of standing [4]. Subsequently, the Seventh Circuit issued a pair of decisions in two other data breach class action cases, which held that “consumers who experience a theft of their data indeed have standing.” In light of these decisions, the district court reversed course on the standing question but nonetheless dismissed the plaintiffs’ claims for failure to adequately plead damages [5].

Although it expressed skepticism as to whether the plaintiffs could prove their case on the merits, the Seventh Circuit vacated the dismissal and held that when a plaintiff has adequately alleged standing, they have also adequately alleged damages if that is an element of their underlying claim [6]. The Court ruled that the plaintiffs had adequately alleged standing on three bases: “[1] because the data theft may have led them to pay money for credit-monitoring services, [2] because unauthorized withdrawals from their accounts cause a loss (the time value of money) even when banks later restore the principal, and [3] because the value of one’s own time needed to set things straight is a loss from an opportunity-cost perspective.” [7] The Seventh Circuit went on to hold that, as a general matter, “[t]hese injuries can justify money damages, just as they support standing” as “all th[e] complaint needed to do was allege generally that plaintiffs have been injured.” [8]

Turning to damages, the Court first examined whether one of the named plaintiffs had adequately alleged “lost money or property” sufficient to sustain her claim under California’s Unfair Competition Law (UCL) [9], based upon her allegations that “(1) her bank took three days to restore funds someone else had used to make a fraudulent purchase [and she could not use her account during that time]; (2) she had to spend time sorting things out with the police and her bank; … and [3] she did not receive the benefit of her bargain.” [10] Alleging “lost money or property” under the California law is not an insignificant hurdle, yet the Seventh Circuit held that the plaintiff’s first and second alleged injuries were sufficient, because being without her account for three days caused her to lose the “time value of [her] money” even if she eventually got it all back, and because “significant time and paper-work costs incurred … can qualify as economic losses.” [11] The Court’s holding under the California UCL, however, is arguably at odds with established California law that monetary damages are not recoverable under the UCL. Rather, the UCL limits plaintiffs’ remedies to restitution and injunctive relief [12].

As to the damages allegations under the Illinois Consumer Fraud and Deceptive Business Practices Act [13], the Court focused on the second plaintiff’s allegation that “the security breach … ‘was a decisive factor’ when she renewed a credit-monitoring service for $16.99 per month.” [14] The Court stated, in rather summary fashion, that “a monthly $17 out of pocket is a form of ‘actual damage’ [because] [i]t is real and measurable; Illinois does not require more.” [15]

Despite holding the door open to the plaintiffs at the pleadings stage, the Seventh Circuit made clear that its decision was narrow in scope. Specifically, the Court noted that its decision only “concerns injury,” and that it “ha[d] not considered whether [defendant] violated any of these [] state’s laws by failing to prevent villains from stealing plaintiffs’ names and account data.” [16] Further, the plaintiffs’ ability to prove their claims was likely to be difficult as “[n]one of the state laws expressly makes merchants liable for failure to crime-proof their point of sale systems,” and “plaintiffs must show that a culpable data breach caused the monthly payments.” [17] Indeed, the Seventh Circuit noted that the defendant here “was itself a victim,” and “[p]laintiffs may have a difficult task showing an entitlement to collect damages from a fellow victim of the data thieves.” [18] The Court also expressed doubt that the case could be certified because the “state laws and the potential damages are disparate.” [19]

At the end of the day, the Dieffenbach decision may prove to be less of a boon and more of a bust for plaintiffs in data breach class actions. Although it may provide a means to get into court and survive a motion to dismiss, the decision makes clear that obtaining a favorable outcome may be a “difficult task.” [20] We will continue to monitor and report on developments regarding data breach litigation in the Seventh Circuit and elsewhere [21].

[1] 887 F.3d 826 (7th Cir. 2018).
[2] Id. at *827-28.
[3] Id.
[4] Id. at 828 (citing Lewert v. P.F. Chang’s China Bistro, Inc., 819 F.3d 963 (7th Cir. 2016); Remijas v. Neiman Marcus Group, LLC, 794 F.3d 688 (7th Cir. 2015)).
[5] Id.
[6] Id. (“To say that the plaintiffs have standing is to say that they have alleged injury in fact, and if they have suffered an injury then damages are available (if [the defendant] violated the statutes on which the claims rest).”).
[7] Id.
[8] Id.
[9] Cal. Civ. Code §§ 17200, et seq.
[10] Dieffenbach, 887 F.3d at 828-29 (citing Cal. Civ. Code § 17204).
[11] Id. at 829 (further noting that “Losing the use of money for three days may be a trifle to some people (though to others it may be a calamity), but a trifling loss suffices under California law.”). Notably, the Court rejected another claimed injury—a purported “benefit-of-the-bargain” injury—under which the plaintiffs alleged that they did not receive the benefit of data security that they purportedly bargained for. Id. at 829-30.
[12] Graham v. Bank of Am., N.A., 226 Cal. App. 4th 594, 609-10, 172 Cal. Rptr. 3d 218, 231 (2014); see also Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1144, 63 P.3d 937, 943 (2003) (“A UCL action is equitable in nature; damages cannot be recovered.”).
[13] 815 ILCS 505/1, et seq.
[14] Id. at 829.
[15] Id. at 829-30. While the Illinois Appellate Court had expressly held that a person purchasing credit monitoring after the disclosure of personal information has not suffered “actual damages,” the Seventh Circuit refused to follow that precedent because “[w]e think it unlikely that the Supreme Court of Illinois would agree.” Id. (discussing Cooney v. Chicago Public Schools, 407 Ill. App. 3d 358, 365-66, 943 N.E.2d 23 (2010)).
[16] Id. at 830 (further noting that “[a]ll we hold today is that the complaint cannot be dismissed on the ground that the plaintiffs do not adequately allege compensable damages”).
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] For a summary of how other courts have treated standing theories advanced by class plaintiffs in data breach class actions, see our earlier articles at and

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.

© K&L Gates LLP | Attorney Advertising

Written by:

K&L Gates LLP

K&L Gates 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.