Editor’s Note: This post is a joint submission with BakerHostetler’s Class Action Lawsuit Defense blog.
On July 11, 2013, the U.S. District Court for the Central District of California dismissed a majority of the claims brought against Blizzard Entertainment, Inc. after a data breach suffered by Blizzard in 2012. In granting the motion for judgment on the pleadings, the decision highlights the continued difficulties faced by plaintiffs asserting claims against an entity that experiences a security breach.
To support their negligence per se claim, the plaintiffs alleged that Blizzard failed to inform its Battle.net players of the breach in a timely manner which allegedly prevented plaintiffs from taking steps to protect their personal information. However, the factual allegations asserted by plaintiff did not state that any of their “personal information” as defined by the breach notification statute was taken nor did plaintiffs allege what information would be accessed if the hackers had gained access to their Battle.net accounts. Therefore, the negligence per se claim was dismissed.
For the negligence and breach of contract claims, the Court held that plaintiffs failed to allege adequate harm. The Court noted that the plaintiffs did not allege that they were the victims of identity theft. The Court rejected plaintiffs’ argument that the increased risk of further harm was sufficient to support their claims. In addition, the Court found that the economic loss doctrine barred recovery for the decreased value of the video games purchased by plaintiffs. As a result of the plaintiffs’ failure to alleged sufficient harm, any alleged harm suffered by the plaintiffs as the result of the breach was speculative. Therefore, the negligence and breach of contract claims could not survive.
Finally, the Court dismissed plaintiffs’ bailment claim. Plaintiffs alleged that the duty of bailment arose when plaintiffs provided their personal information with Blizzard in order to create a Battle.net account. The Court dismissed the bailment claim, noting that no court has held that personal information is chattel that can be bailed.
The Court permitted the claims under the CFA to move forward, but on narrow grounds. The plaintiffs claimed that Blizzard violated the CFA by omitting or misrepresenting the quality of its security measures. Specifically, plaintiffs alleged that Blizzard violated the CFA by failing to inform account holders that the purchase of the Authenticator is required for account safety. The Court found that Blizzard did not fraudulently misrepresent the security of plaintiffs’ personal information. In addition, Blizzard’s failure to disclose to account holders that they would be required to enter private information before playing games did not violate the CFA. However, because Blizzard could provide no explanation to the Court for why it failed to advise account holders that the purchase of the Authenticator at the point of sale would result in account safety, the Court permitted the CFA claim to go forward.
The Blizzard opinion follows a growing line of federal and state court cases dismissing negligence claims based on data breaches for lack of injury, particularly in cases like Blizzard, where the plaintiffs could not allege identity theft. In addition, the Blizzard decision shows the difficulty faced by plaintiffs in alleging common-law claims where plaintiffs and defendants have a contractual relationship.