Lone Star National Bank, N.A. v. Heartland Payment Systems, Inc.
2013 U.S. App. LEXIS 18283
| 5th Cir. | 2013Background
- Hackers breached Heartland’s data systems, compromising customers’ card information of Issuer Banks.
- Issuer Banks incurred costs replacing compromised cards and reimbursing fraudulent charges.
- Issuer Banks lack a written contract with Heartland; they plead negligence and third‑party beneficiary contract claims.
- District court dismissed all claims, including negligence, and held economic loss doctrine barred the negligence claim.
- Parties dispute governing law for the economic loss doctrine (Texas vs New Jersey); district court applied New Jersey rules to analyze foreseeability and duty.
- Court reverses and remands to determine New Jersey‑law economic loss doctrine applicability and duty in light of record deficiencies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether New Jersey economic loss doctrine bars the negligence claim. | Issuer Banks argue NJ law allows tort recovery for identifiable plaintiffs. | Heartland contends the doctrine bars purely economic losses within a contractual framework. | NJ doctrine does not bar at this stage; identifiable class foreseen, duty may exist. |
| Whether the Issuer Banks constitute an identifiable class for foreseeability duty under People Express. | Issuer Banks show foreseeability of economic harm to an identifiable class. | Heartland disputes that Issuer Banks form an identifiable class with payable remedies. | Identifiable class exists; duty may arise to prevent economic damages. |
| Whether contractual remedies with Visa/MasterCard limit or preempt tort claims. | Remedies under networks may not preclude independent tort duty. | Remedies may be exclusive or reflect negotiated risk allocation. | Not decided at this stage; remand for record on contract remedies. |
| What governing law applies for the economic loss doctrine and duty analysis. | NJ law should govern the economic loss analysis. | Texas law or mixed issues could apply, depending on forum. | Court applies NJ law for economic loss doctrine analysis at this stage. |
Key Cases Cited
- People Express Airlines, Inc. v. Consolidated Rail Corp., 100 N.J. 246 (N.J. 1985) (establishes identifiable class and duty to foresee economic loss)
- Carter Lincoln-Mercury, Inc., Leasing Div. v. EMAR Grp., Inc., 135 N.J. 182 (N.J. 1994) (no bar to tort claim where identifiable class foresees damages)
- Spring Motors Distribs., Inc. v. Ford Motor Co., 98 N.J. 555 (N.J. 1985) (economic loss doctrine limits purely economic losses to contractual remedies)
- Travelers Indem. Co. v. Dammann & Co., 594 F.3d 238 (3d Cir. 2010) (predicts NJ Supreme Court approach; contract better for risk allocation in commercial disputes)