May 14, 2009
PCI DSS: Judge Dismisses Hannaford Lawsuits
U.S. District Court Judge D. Brock Hornby on Tuesday (May 12) became the latest jurist to rule in favor of data-breached retailers, telling Hannaford consumers that because they were compensated by their banks, they have no basis to sue civilly here.
“There is no way to value and recompense the time and effort that consumers spent in reconstituting their bill-paying arrangements or talking to bank representatives to explain what charges were fraudulent. Those are the ordinary frustrations and inconveniences that everyone confronts in daily life with or without fraud or negligence.
The class-action-lawsuit-wannabe stems from last year’s data breach at the grocery chain, which exposed 4.2 million credit and debit cards and led to 1,800 reported cases of fraud. Similar to rulings from cases fellow data-breach retail victim TJX, Hornby said he couldn’t allow almost any of the defendants to continue with the case because the consumers hadn’t suffered out-of-pocket financial losses.
In an ironic sense, this all stems from the card brands’ zero liability programs. Those programs guarantee that consumers will have all fraud losses wiped clean. (The one defendant who can continue is a consumer whose fraud loss costs—for reasons unknown—were not covered by her bank.) It’s ironic because the programs to created to make consumers feel safer about their payment security. Today, that program is preventing consumers from successfully suing retailers that mishandle their data, which in turn makes it more difficult for retailers to justify spending more than the minimum on data security. Oh, what a tangled Web we weave when we batch download to receive. (Sorry.)
In his decision (full text copy available), Hornby rejected all but one of the claims brought by 21 plaintiffs against the Maine-based operator of more than 200 stores in New England, New York and Florida.
Hornby seemed to empathize with consumers who are increasingly anxious about criminals getting hold of their private financial data. “Recurrent reports about breaches of electronic data systems—of governmental agencies, the nation’s utility grid, merchants or other institutions—have generated increased apprehension, as consumers learn that the convenient card-based alternatives to cash turn out to have their own risks,” Hornby wrote. “This is not the first lawsuit over who bears the risk of electronic data theft, and it certainly will not be the last.”
However, the judge refused to offer an opinion as to whether the Maine Legislature or Congress needs to pass laws providing for increased consumer protection. “Such a decision involves complex arguments regarding the adequacy of current consumer protection, efficient risk allocation, the economics of doing business, and the efficacy of lawsuits as a way to resolve such issues,” Hornby wrote in his 39-page decision. “Nor do I determine whether the Maine Law Court should develop Maine common law to address these issues differently. I merely conclude that under current Maine law, consumers whose payment data are stolen can recover against the merchant only if the merchant’s negligence caused a direct loss to the consumer’s account.”
The plaintiffs argued they were owed money beyond the funds lost when Hannaford’s payment system was breached between Dec. 7, 2007 and March 10, 2008. Hackers stole private debit card and credit card information, “including debit card and credit card numbers, expiration dates, security codes, PIN numbers and other information,” and used the data to make about fraudulent charges on victims’ cards, according to the lawsuit. The plaintiffs sought money from Hannaford as compensation for emotional distress, lost rewards points, time spent dealing with the situation and other hassles.
But Hornby said there was no legal basis for those requests. “Maine law requires that there be a way to attach a monetary value to a claimed loss. These fail that requirement. The same is true for a consumer’s temporary lack of access to funds or credit, the annoyance of a canceled hotel reservation, and the embarrassment or annoyance of obtaining a family loan.”Posted by staff at May 14, 2009 08:29 AM