Third Circuit Court of Appeals to Rule on Key “Standing” Issue in Data Breach Cases

Written by: Sam Crochet, Esq.

Two class actions currently pending in the Third Circuit Court of Appeals, In re Horizon Healthcare Services Inc. Data Breach Litigation and Storm v. Paytime, will impact appellate courts’ future evaluations of “standing.” In Horizon Healthcare, the theft of laptops compromised the information of 839,000 individuals. The Plaintiffs alleged the imminent risk of harm from identity theft led to their spending time/resources to mitigate potential financial loss. Leaning on Third Circuit precedent, the District Court granted the Defendant’s Motion to Dismiss, reasoning the Plaintiff’s future injuries were not “certainly impending” as they stemmed from hypothetical future conduct of the third party users. In Paytime, an employer’s payroll service suffered a security breach, after which the Plaintiffs alleged injuries due to the expense of time/money to protect themselves from ID theft and the ongoing risk of monetary loss due to fraudulent transactions. Again, citing a prior Third Circuit decision, the District Court granted the Defendant’s Motion to Dismiss, explaining standing requires actual misuse of data or a specific allegation as to how an injury is certainly impending.

The pending Third Circuit Court’s rulings in these two cases may cause a split among appellate courts because of recent highly publicized decisions by the Seventh Circuit, where it was held plaintiffs’ mere increased probability of future harm did confer standing. We will closely monitor whether the Third Circuit uses a more lenient standing analysis or sides with the “certainly impending” standard implemented in past cases.