Evan Schuman's StorefrontBacktalk

The judge acknowledged there will be people, not only the plaintiffs, who believe he needed to be more pro-active and break new legal ground by forcing the retailer to add to the compensated customers’ compensation. “For those wanting a definitive answer to this question of who should bear the risk of data theft in electronic payment systems, my ruling will be unsatisfactory,” the judge wrote. “In this case, the answer depends wholly on state law, and the state law is still undeveloped. My role as a federal judge is simply to apply state law, not extend it, retract it, or modify it through broad strokes so as to accommodate the complex financial arrangements and risks that the parties portray.”

However, he essentially said it makes no sense to seek compensation for losses that have been reimbursed. “My answer to the liability question between customer and grocer is this: Under Maine law as I understand it, when a merchant is negligent in handling a customer’s electronic payment data and that negligence causes an unreimbursed fraudulent charge or debit against a customer’s account, the merchant is liable for that loss,” Hornby wrote, noting that those cases might also come under the jurisdiction of Maine’s Unfair Trade Practices Act.

But if the retailer is not negligent “or if the negligence does not produce that completed direct financial loss and instead causes only collateral consequences—for example, the customer’s fear that a fraudulent transaction might happen in the future, the consumer’s expenditure of time and effort to protect the account, lost opportunities to earn reward points, or incidental expenses that the customer suffers in restoring the integrity of the previous account relationships—then the merchant is not liable.”

The plaintiffs had also asked the judge to find Hannaford liable for waiting more than three weeks before disclosing the breach. Again, the judge rejected their request. Although he acknowledged that Maine’s Notice of Risk to Personal Data Act says merchants that become aware of consumer data theft must tell the victims “as expediently as possible and without unreasonable delay,” he noted there are qualifications. The timeframe for public notification must be “consistent with the legitimate needs of law enforcement . . . or with measures necessary to determine the scope of the security breach and restore the reasonable integrity, security and confidentiality of the data in the system.” Hornby said the plaintiffs did not claim Hannaford violated that law and he pointed out the statute “does not recognize any private recovery for its breach.”

Refusing, again, to be pushed into making new law from the bench, Hornby wrote, “Although the statute does not ‘affect or prevent’ other remedies that may be available under state or federal law, its detailed standards certainly give me reason to be wary of creating any new state standards where the Maine Law Court has not already clearly provided a remedy.”

Only one plaintiff in the Hannford case was allowed to press on with a lawsuit. The allegations of that person, Pamela LaMotte, were not rejected by Hornby because the Colchester, Vt. Woman “asserts that there are fraudulent charges on her account that, to date, her card-issuing bank has refused to remove, and that she has had to pay them,” wrote the judge.

He pointed out that Hannaford argued he should not consider these charges to be a “cognizable injury” because, “under typical credit or debit card agreements, the issuing bank agrees to remove fraudulent charges.” Hornby sheds no light on why LaMotte’s bank, unlike all the other plaintiffs’ banks, hasn’t reimbursed her.

The judge said LaMotte may have a claim for recovery against her bank but, since she remains uncompensated, he could not dismiss her action against Hannaford. “If Hannaford’s negligence has caused fraudulent postings to Ms. LaMotte’s account that have not been corrected, her ability, if any, to sue her bank under her credit or debit card contract does not eliminate Hannaford’s potential liability to her. I see no Maine law that holds otherwise.”