Judge Tosses Neiman Marcus Data Breach Class Action Lawsuit

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On Tuesday, The Neiman Marcus Group LLC was successful in its bid to dismiss a class action lawsuit alleging that the company’s negligence allowed hackers access to 350,000 of its customers’ credit cards.

In January of this year, lead plaintiffs Hilary Remijas, Melissa Frank, Debbie Farnoush and Joanne Kao filed a class action lawsuit against the retailer, claiming that Neiman Marcus failed to take reasonable precautions to protect customer data and, as a result, put Neiman Marcus customers at risk of identity theft.

The plaintiffs claimed that they were informed by Neiman Marcus of a potential data breach affecting their credit cards in January of 2014, but that Neiman Marcus learned of the breach in mid-December and waited nearly a month to disclose the data breach, putting customers at risk for identity theft and fraud during that time. The plaintiffs alleged negligence, breach of implied contract, unjust enrichment, unfair and deceptive business practices, invasion of privacy and violation of several state data breach acts in their Neiman Marcus class action lawsuit.

Neiman Marcus filed a motion to dismiss the class action lawsuit, arguing that the proposed Class would not suffer an injury traceable to Neiman Marcus because they would be reimbursed for any fraudulent charges incurred because of the data breach. U.S. District Judge James B. Zagel agreed with Neiman Marcus in Tuesday’s order. Judge Zagel pointed out that only 2.5 percent of the proposed class of 350,000 customers had been affected by the data breach and said, “To assert on this basis that either set of customers is also at a certainly impending risk of identity theft is, in my view, a leap too far.” Judge Zagel also determined that the plaintiffs did not demonstrate the precise cost to them to minigate the risk of future fraud and identity theft.

Finally, Judge Zagel denied the plaintiffs’ allegations that Neiman Marcus was unjustly enriched by their decision to shop at its stores because, the plaintiffs argued, they thought they were paying extra for data security systems Neiman Marcus was not actually providing. “The argument is creative, but unpersuasive,” said Judge Zagel in his order.

“[T]he deficiency complained of is extrinsic to the product being purchased,” Judge Zagel wrote. “To illustrate the problem this creates: suppose a retail store does not allocate a sufficient portion of its revenues to providing adequate in-store security. A customer who is assaulted in the parking lot after patronizing the store may well have a negligence claim against the store owner. But could he or she really argue that she overpaid for the products that she purchased? Or even more to the point: even if no physical injury actually befell the customer, under Plaintiffs’ theory, the customer still suffered financial injury because he or she paid a premium for adequate store security, and the store security was not in fact adequate.”

The plaintiffs are represented by Tina Wolfson, Robert Ahdoot and Theodore W. Maya of Ahdoot & Wolfson PC; John A. Yanchunis of Morgan & Morgan Complex Litigation Group; Joseph J. Siprut of Siprut PC; W. Lew Garrison Jr. of Heninger Garrison Davis LLC; Lionel Z. Glancy and Brian P. Murray of Glancy Binkow & Goldberg LLP; Abbas Kazerounian ofKazerouni Law Group APC; Joshua B. Swigart of Hyde & Swigart; and Paul C. Whalen of Law Offices of Paul C. Whalen.

The Neiman Marcus Data Breach Class Action Lawsuit is Donna Clark v. Neiman Marcus Group LLC, Case No. 1:14-cv-0236, in the U.S. District Court for the Northern District of Georgia.

UPDATE: On July 20, 2015, the Seventh Circuit ruled that the proposed class had, in fact, suffered injuries, including cost of credit monitoring services and replacement card fees. The Neiman Marcus data breach class action lawsuit was then revived by plaintiff Hilary Remijas.

UPDATE 2: On Jan. 13, 2016, Neiman Marcus lost a bid to toss the refiled class action lawsuit.

UPDATE 3: On March 17, 2017, Neiman Marcus agreed to pay $1.6 million to end a data breach class action lawsuit that alleged the credit card data of 350,000 shoppers was compromised.

UPDATE 4: On June 21, 2017, an Illinois federal judge preliminarily approved a $1.6 million class action settlement that will resolve allegations Neiman Marcus failed to safeguard customers’ credit card data, which was exposed in a 2013 data breach.

UPDATE 5: The Neiman Marcus Data Breach Class Action Settlement is now open. Click here to file a claim.

UPDATE 6: October 2019, a new, updated website has been established for a $1.6 million Neiman Marcus data breach class action settlement after the initial settlement terms were rejected.

UPDATE 7: On Nov. 15, 2019, a $1.6 million Neiman Marcus data breach class action settlement was initially approved after rejecting a previous version.