Evan Schuman's StorefrontBacktalk

A federal judge in Maine is promising to issue a decision imminently about whether a databreach class action lawsuit against Hannaford will be allowed to proceed. The arguments before U.S. District Court Judge D. Brock Hornby in the Hannaford case are almost identical to those put in front of another federal judge in late 2007 overseeing the TJX databreach. Although the first federal judge ruled in favor of TJX, a different federal judge could very easily go in a very different direction.

In both cases, the judge was overseeing the case of a major retailer and a very large databreach, presumably facilitated to varying degrees by IT errors or oversights by the retailer. The arguments boil down to this. The attorneys representing consumers suing Hannaford are arguing that Hannaford knew—or should have known—that its payment security procedures were inadequate and yet it still allowed consumers to use their cards at the chain’s stores.

“Hannaford was alerted to the Security Failure on February 27, 2008, but remained silent until March 17, 2008. Rather than lose sales, it allowed customers to continue making purchases by debit and credit card, knowing that its electronic payments system was not secure and that it was exposing these customers’ accounts
to fraud,” wrote lawyers for consumer plaintiffs. “Defendant asks this Court to bless a state of affairs in which consumers entrust their confidential debit and credit card account access information to merchants to pay for purchases at their peril, with no recourse against the merchant for the consequences to them of even negligent mishandling of their confidential information. Such an extreme position finds no support in the law as it has developed to date. It should not become the law governing electronic commerce in the 21st Century.”

The plaintiffs continued: “This misuse, and the measures taken to counter it, such as card cancellation, cause tangible and significant burdens to cardholders. The fact that card issuers may reimburse cardholders for fraudulent charges does not mean that merchants who solicit customers to entrust their confidential account access information to them in order to effect payments should be relieved from liability for the other real and tangible consequences of their failure to safeguard such information.”

Hannaford’s lawyers counter that none of the named consumer plaintiffs sustained any substantial harm, partly due to credit card zero liability programs. Therefore, they argue, there is no practical way for the court to make those consumers whole as they already were whole, from a financial perspective. The only damages alleged, Hannaford lawyers argued, were either theoretical or too small to merit court compensation.