Evan Schuman's StorefrontBacktalk

A federal judge ruled on March 5 that LinkedIn (NYSE: LNKD) is not obligated to compensate a pair of its customers who had sued following a LinkedIn data breach last year. Of particular interest to retailers is the customers’ argument that the social networking site had promised to protect customer data “with industry standard protocols and technology.” They then argued that the breach itself somehow proved such security was not delivered. The judge didn’t buy it.

No security system is perfect, so the existence of a break-in—on its own—doesn’t prove that security procedures were not followed nor that they were not appropriate.

The case—heard in U.S. District Court for the Northern District of California in San Jose—raised several other arguments for customers seeking compensation for the breach, and the court shot them all down. To start the proceedings, the customers had to make a case for how they lost money as a result of the breach, given that it appears none of their personal information was ever used by the thieves.

The LinkedIn breach involved a June 6, 2012, public posting of about 6.5 million LinkedIn user passwords, along with a suggestion from the thieves that they also had grabbed E-mail addresses. (It wasn’t a far-fetched claim. If the thieves were able to access passwords, it’s likely E-mail addresses would have been easily accessible, too.) After the breach, LinkedIn announced a security upgrade, from storing customers’ passwords hashed to using both salting and hashing.

The essence of the customers’ argument of inadequate security was this upgrade, suggesting that the need for an upgrade demonstrated the inadequacy of the earlier effort.

But the harder case is the financial loss. To argue a loss, the plaintiffs said they wanted to be reimbursed for the dollars spent on upgraded LinkedIn accounts. The decision from U.S. District Court Judge Edward J. Davila summarized the customers’ position on why they were owed money.

“They did not receive the full benefit of their bargain for the paid premium memberships. Plaintiffs allege that in consideration of their payments, LinkedIn promised to secure their personal information ‘with industry standard protocols and technology.’ They also contend that they would not have otherwise purchased the premium memberships had they known that LinkedIn would not protect their information in the manner it had allegedly promised. The 2012 hacking incident, they argue, shows that they did not receive the promised security for which they paid—thus amounting to economic harm.”

The court found against this claim because LinkedIn makes the same security promises to all users, regardless of their level of membership.

“Plaintiffs contend that in exchange for the fees they paid for the premium membership account, LinkedIn promised, among other things, to provide them with a particular level of security to protect their data. However, the User Agreement and Privacy Policy are the same for the premium membership as they are for the non-paying basic membership. Any alleged promise LinkedIn made to paying premium account holders regarding security protocols was also made to non-paying members,” the court ruled. “Thus, when a member purchases a premium account upgrade, the bargain is not for a particular level of security, but actually for the advanced networking tools and capabilities to facilitate enhanced usage of LinkedIn’s services. The (customers do) not sufficiently demonstrate that included in Plaintiffs’ bargain for premium membership was the promise of a particular (or greater) level of security that was not part of the free membership.”

In an unusual twist, the court also ruled against the customers because they didn’t prove—or even claim—they had actually read the privacy policy. Unless they had submitted that they had read it, how could they have been deceived by it?