The opinion from the Philadelphia Court of Common Pleas reinforces lack of standing as a defense for companies facing data breach–related class actions.

On March 25, the Philadelphia Court of Common Pleas provided companies sued following a data breach with another arrow in the quiver of defenses to such lawsuits. In Baum v. Keystone Mercy Health Plan, No. 3876, 1250 EDA 2015 (Phila. C.P. March 25, 2015), plaintiff Avrum Baum brought suit on behalf of his special-needs minor daughter and all others similarly situated, alleging that defendants Keystone Mercy Health Plan and AmeriHealth Mercy Health Plan were negligent, were negligent per se and violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 Pa.C.S. § 201-1, et seq., after their employees lost a USB flash drive containing personal health information and other confidential, personal information of more than 200,000 individuals.

Background

The plaintiff sought to certify a class of individuals who were alleged to have suffered an invasion of privacy or whose privacy was violated or compromised as a result of the defendants’ loss of the USB flash drive. Initially, on July 25, 2013, the court denied the plaintiff’s motion for class certification as to all claims. In denying certification for the negligence claims, the court found that the plaintiff could not show commonality because there was no evidence that the plaintiff or any members of the purported class were at risk of identity theft because the personal health information on the flash drive could not be linked to individuals by name. The court found there was “no demonstration of a harm that will unify that universe of individuals as a ‘cohesive’ class.” In denying class certification on the UTPCPL claim, the court found the plaintiff could not meet his burden to show that the case’s common issues of law or fact predominated over the “insurmountable difficulties” posed by the requirement that individual class members must present proof of reliance on their UTPCPL claims. Because questions of fact existed as to each class member’s reliance, the court denied certification on the basis that the plaintiff could not establish typicality.

On appeal, the Superior Court of Pennsylvania upheld the denial of class certification on the negligence claims, but remanded the matter back to the Court of Common Pleas to consider whether a class could be certified based on the plaintiff’s UTPCPL claim under the statute’s “catch all” provision. That provision prohibits one from “[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” 73 Pa.C.S. § 201-2(4)(xxi). The Superior Court found that the plaintiff had alleged both fraudulent and deceptive conduct and that a plaintiff need not show reliance to recover for deceptive conduct under the UTPCPL.

Court of Common Pleas Decision

Following remand, Judge Mary D. Colins focused her class certification analysis on the elements of typicality and adequacy of representation. The plaintiff argued that typicality was satisfied because the defendants engaged in deceptive conduct by making uniform promises and failing to fulfill a legal obligation to all class members to protect their personal health and other confidential information. On this basis, the plaintiff alleged his daughter’s claims were typical of the UTPCPL claims of all others in the class.

Judge Colins rejected this argument, finding there was no evidence in the record to support a claim of “confusion and misunderstanding” because there was no indication that the plaintiff lost anything that the defendants had promised to protect. The court noted that the defendants promised to protect “any information we have that would allow someone to identify you and learn something about your health.” The court found, based on testimony from the plaintiff’s expert, that none of the information on the flash drive could be linked to the plaintiff’s daughter’s identity. In this regard, the court noted that lost information on the flash drive included her member ID number and health screening information, but not her Social Security number, name or address. According to Judge Colins, “[the plaintiff’s daughter] did not ‘lose’ her own personal data and she did not ‘lose’ privacy. In effect, she ‘lost’ nothing.” Judge Colins found that the plaintiff could not claim to represent the proposed class, who did lose protected data, because the information could not be tied to an individual if discovered.

Judge Colins also questioned whether the plaintiff could satisfy the adequacy of representation element in light of the fact that he lacked standing to bring the lawsuit. Judge Colins noted that the UTPCPL requires a plaintiff to be a “purchaser” or a “lessee” and to have suffered damages from purchasing or leasing the goods or services. 73 Pa.C.S. § 201-9.2. However, the plaintiff’s insurance was paid for by the state through the Medicaid program, and there was no evidence that the plaintiff had purchased, leased or gave any consideration for the policy covering his daughter. The plaintiff argued that he could demonstrate standing despite a lack of privity between himself and the defendants, but the court rejected this argument because the plain language of the UTPCPL required a purchase or lease of a good or service.

In addition to the plaintiff’s failure to demonstrate he was a purchaser, Judge Colins found there was no evidence that the plaintiff suffered an ascertainable loss to support a UTPCPL claim and demonstrate adequacy of representation. Judge Colins found no calculable value for the lost data, and she rejected the plaintiff’s contention that his personal expense in bringing the lawsuit was an ascertainable loss within the meaning of the UTPCPL. The record also contained no evidence that any of the plaintiff’s daughter’s personal information or the information of any of the 283,000 individuals on the flash drive had been subject to unauthorized access since its loss in 2010.

Ultimately, the court’s found that the plaintiff could not satisfy typicality or adequacy of representation and, therefore, class treatment of the UTPCPL claim was inappropriate.

Pepper Points

This decision recognizes that standing is still a major weapon to be used by companies that are subject to lawsuits arising from a data breach. In addition to being used at the motion-to-dismiss stage, the Baum opinion recognizes that lack of standing can be asserted at the certification stage to defeat class certification when the purported class representative cannot demonstrate that he or she suffered injury or harm.