In the past week, two different Illinois federal courts have given financial institutions and merchants a second chance to try to allege claims arising from data breaches that can withstand the rigors of a motion to dismiss under Federal Rule 12 (b) (6).

In Community Bank of Trenton et al. v. Schnuck Markets Inc., case number 3:15-cv-01125, in the U.S. District Court for the Southern District of Illinois, the Court distinguished this case (“Schnuck’s Market”) from other Seventh Circuit cases, namely Remijas v.Neiman Marcus Group, LLC,794 F.3d 688 (7th Cir. 2015) and Lewert v.P.F. Chang’s China Bistro, Inc.,819 F.3d. 963 (7th Cir. 2016), as well as, Irwin v. Jimmy Johns Franchise, LLC, 2016 WL 1355570 (C.D. Ill. 2016) and In re Barnes and Noble Pin Pad Litigation, 2013 WL 47595888 (N.D. Ill. 2013) noting that there is a “critical distinction” between claims brought by the financial institutions as opposed to by the merchant’s customers. The Court reasoned that there is a distinction between consumer actions identifying “tangible harms” such as fraudulent charges, fees, and costs incurred in theft monitoring services, and general allegations of harm. While the financial institutions alleged that they incurred “and will continue to incur costs to: cancel and reissue cards; close and reopen accounts; notify customers; and, investigate and monitor for fraud” the Court found those allegations of harm to be general.

With the exception of two claims under Illinois law (which were dismissed with prejudice), it was the “generalities” that led to the dismissal without prejudice of the remaining claims and not the merits of the purported claims. Thus, unlike many of the consumer data breach lawsuits, where the courts are asked to address whether the plaintiffs can establish Article III standing, it is important to note that the court in Schnuck Market did not address this issue. Thus, making Schnuck Market distinguishable from the recent Home Depot decision (In re Home Depot, Inc., Customer Data Security Breach Litigation, 2016 WL 2897520 (N.D. Ga. 2016)) where the court denied Home Depot’s motion to dismiss on Article III standing, as well as other grounds, as to the financial institutions’ claims. Home Depot is seeking an interlocutory appeal from that decision. It remains to be seen whether the financial institutions in Schnuck Market will be able to convince Judge Reagan to let them proceed with their claims against the merchant once they file their amended complaint. As such, this case warrants further monitoring to see how any future rulings compare with those in the Home Depot case. As it stands, the Schnuck Market decision serves as guide to financial institutions about how to plead their case if they want it to stand in federal court.

In Barnes & Noble Pin Pad Litigation, No. 1:12-cv-08617, the U.S. District Court for the Northern District of Illinois followed Remijas v. Neiman Marcus Group, 794 F.3d 688 (7th Cir. 2015) and found that Plaintiffs met their burden in pleading an injury in fact under Seventh Circuit precedent and denied defendant’s rule 12(b)(1) motion to dismiss. However, the district court granted defendant’s 12(b)(6) motion to dismiss, which is also consistent with Seventh Circuit precedent. In Lewert v.P.F. Chang’s China Bistro, Inc.,819 F.3d. 963 (7th Cir. 2016), the Seventh Circuit noted at oral argument on January 13, 2016, that “there is a big difference between whether there is Article III standing on the one side and whether a claim has been stated on the other side [and] the Neiman Marcus case makes that very clear. So maybe there is standing but you may just fail to state a claim on which relief can be granted.” In the P.F. Chang case, the Seventh Circuit did not address defendant’s rule 12(b)(6) motion because that issue was not raised on appeal.

Unlike a rule 12(b)(1) motion, which addresses a court’s subject matter jurisdiction, a rule 12(b)(6) motion is a factual challenge to a plaintiff’s claim. Also, under Iqbal, while the court should assume the truthfulness of a plaintiff’s factual allegations, in a rule 12(b)(6) motion the court need not accept plaintiff’s legal conclusions as true.

In a nutshell, the Barnes & Noble court rejected 4 of the 5 counts in the complaint based on the court’s finding that plaintiffs failed to plead “any economic damages whatsoever,” (i.e. injuries or actual damages), which the court deemed fatal to their cause of action. Notably, the court rejected plaintiffs’ arguments that overpayment for goods at Barnes & Nobles, or the loss of the value of Plaintiffs’ personally identifiable information (“PII”), represent actual recoverable economic damages to state a sufficient claim under 12(b)(6). The court also highlighted that Plaintiffs did not allege that they had lost money from unauthorized withdrawals or bank fees.

On the invasion of privacy claim, the court noted that plaintiffs failed to allege that there was a public disclosure within the meaning of the common law cause of action under Illinois law. In particular, the complaint did not contain allegations that the exposed PII was widely published (“in fact, even reading the Amended Complaint broadly, the only people who would have had access to the stolen PII would be the skimmers, and potentially whatever third parties to which they sold the PII.”)

Thus, the significance of this ruling is that it echoes what the Seventh Circuit echoed in the Neiman Marcus and P.F. Chang cases: while Plaintiffs may get around the standing hurdles, they many nonetheless fail to meet the rule 12(b)(6) pleading standards where they still face factual pleading challenges to their claims, particularly relating to sufficiently pleading economic damages.

Both Schnuck’s and Barnes & Noble warrant further monitoring to see whether the plaintiffs in those cases can file amended pleadings which can survive a dispositive motion to dismiss.