MARLENE GREEN-COOPER, individually and on behalf of all others similarly situated, et al., Plaintiffs, ERIC STEINMETZ, individually and on behalf of all others similarly situated, MICHAEL FRANKLIN, individually and on behalf of all others similarly situated, SHENIKA THEUS, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, versus BRINKER INTERNATIONAL, INC., Defendant-Appellant.
No. 21-13146
United States Court of Appeals For the Eleventh Circuit
07/11/2023
[PUBLISH]
Appeal from the United States District Court for the Middle District of Florida
D.C. Docket No. 3:18-cv-00686-TJC-MCR
Before WILSON, BRANCH, and TJOFLAT, Circuit Judges.
TJOFLAT, Circuit Judge:
Brinker International, Inc. (“Brinker“), the owner of Chili‘s restaurants, faced a cyber-attack in which customers’ credit and debit cards were compromised. Chili‘s customers have brought a class action because their information was accessed (and in some cases used) and disseminated by cybercriminals. Below, the District Court certified the class, and Brinker appeals that decision. We vacate in part and remand for further proceedings.
I.
Between March and April 2018, hackers targeted the Chili‘s restaurant systems and stole both customer card data and personally identifiable information.1 Plaintiffs explain that hackers then took that data and posted it on Joker Stash, an online marketplace
There are three named plaintiffs in this case: Shenika Theus, Michael Franklin, and Eric Steinmetz.2 Theus is a Texas resident who used her card at Chili‘s in Texas on or about March 31, 2018. She experienced five unauthorized charges on the card she had used at Chili‘s and canceled the card as a result, disputing the charges that were not hers. She now spends time monitoring her account to make sure there is no further misuse.
Franklin is a California resident who made two Chili‘s purchases in the relevant timeframe, one on or about March 17, 2018, and one on or about April 22, 2018. Franklin experienced two unauthorized charges on his account, so he canceled that credit card, spoke for hours on the phone with bank representatives, and went to the Chili‘s locations he had visited to collect receipts for his transactions.3 His bank canceled the affected card.
Steinmetz is a Nevada resident who used his credit card at a Nevada Chili‘s on or about April 2, 2018. Steinmetz called the Chili‘s national office, the local Chili‘s chain, credit reporting agencies, and his bank as a result of the data breach. He canceled the card he used at Chili‘s but never experienced fraudulent charges.
Pertinent to this appeal,4 these three plaintiffs moved to certify two classes under
- All persons residing in the United States who made a credit or debit card purchase at any affected Chili‘s location during the period of the Data Breach (the “Nationwide Class“).
- All persons residing in California who made a credit or debit card purchase at any affected Chili‘s
location during the period of the Data Breach (the “California Statewide Class“).
The District Court then certified the nationwide class for the negligence claim as follows:
All persons residing in the United States who made a credit or debit card purchase at any affected Chili‘s location during the period of the Data Breach (March and April 2018) who: (1) had their data accessed by cybercriminals and, (2) incurred reasonable expenses or time spent in mitigation of the consequences of the Data Breach (the “Nationwide Class“).
The District Court also certified a separate California class under the state unfair competition laws:
All persons residing in California who made a credit or debit card purchase at any affected Chili‘s location during the period of the Data Breach (March and April 2018) who: (1) had their data accessed by cybercriminals and, (2) incurred reasonable expenses or time spent in mitigation of the consequences of the Data Breach (the “California Statewide Class“).
We then permitted Brinker to appeal these class certifications pursuant to
II.
We review a district court‘s certification of a class under
Class certification under
At the same time, “[m]erits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied,” so a district court does not have a free-ranging “authority to conduct a preliminary inquiry into the merits of a suit” at the class certification stage “unless it is necessary to determine the propriety of certification.” Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 466, 133 S. Ct. 1184, 1195 (2013) (internal quotation marks and citations omitted).
III.
On appeal, Brinker mounts three arguments: 1) the District Court‘s class certification order violates our precedent on Article III standing for class actions; 2) the District Court improvidently granted certification because the class will eventually require individualized mini-trials on class members’ injuries; and 3) the District Court erred by finding that a common damages methodology existed for the class. We will address each in turn.
IV.
A.
We start from the basic principle that at the class certification stage only the named plaintiffs need have standing.6 Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1264 (11th Cir. 2019). Article III standing requires that 1) the plaintiff has experienced an injury that is concrete and particularized and actual or imminent, 2) the defendant‘s conduct is the cause of the plaintiff‘s injury, and 3) a
We begin with the concrete injury analysis. For purposes of the concrete injury analysis under Article III, we have recognized three kinds of harm: 1) tangible harms, like “physical or monetary harms“; 2) intangible harms, like “injuries with a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts“;7 and, finally, 3) a “material risk of future harm” when a plaintiff is seeking injunctive relief. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2204, 2210 (2021). And the Supreme Court most recently clarified in TransUnion that a mere risk of future harm, without more, does not give rise to Article III standing for recovery of damages, even if it might give rise to Article III standing for purposes of injunctive relief. Id. at 2210. We will take each of the named plaintiff‘s standing analysis in turn.
While each plaintiff puts forth a variety of allegations of harm in an effort to establish Article III standing, we need only
We said in Tsao that a plaintiff whose personal information is subject to a data breach can establish a concrete injury for purposes of Article III standing if, as a result of the breach, he experiences “misuse” of his data in some way. See Tsao v. Captiva MVP Rest. Partners, LLC, 986 F.3d 1332, 1343 (11th Cir. 2021). We typically require misuse of the data cybercriminals acquire from a data breach because such misuse constitutes both a “present” injury and a “substantial risk” of harm in the future. Id. at 1343, 1344 (“[W]ithout specific evidence of some misuse of class members’ data, a named plaintiff‘s burden to plausibly plead factual allegations sufficient to show that the threatened harm of future identity theft was ‘certainly impending‘—or that there was a ‘substantial risk’ of such harm—will be difficult to meet.” (emphasis in original and citation omitted)).
All three plaintiffs maintain that their credit card and personal information was “exposed for theft and sale on the dark web.” That allegation is critical. The fact that hackers took credit card data and corresponding personal information from the Chili‘s restaurant systems and affirmatively posted that information for sale on Joker Stash is the misuse for standing purposes that we said was missing in Tsao.8 And it establishes both a present injury—
credit card data and personal information floating around on the dark web—and a substantial risk of future injury—future misuse of personal information associated with the hacked credit card. We hold that this is a concrete injury that is sufficient to establish Article III standing.9
Although all three plaintiffs adequately allege a concrete injury sufficient for Article III standing, Franklin and Steinmetz‘s allegations face a fatal causation issue, even at this stage of litigation.10
The Third Amended Complaint alleged that Franklin visited two Chili‘s restaurants during March and April of 2018; one in Carson, California, and one in Lakewood, California. The at-risk timeframe for the Chili‘s in Carson was subsequently determined to be March 30, 2018, to April 22, 2018. Franklin visited the Carson Chili‘s on March 17, 2018—well outside the affected period. The District Court correctly concluded that “Franklin‘s first transaction would not qualify him for the class without additional evidence, as he dined several days outside the affected time range.”
The at-risk timeframe for the Chili‘s in Lakewood was March 22, 2018, to April 21, 2018. Franklin visited the Lakewood Chili‘s on April 22, 2018—a day shy of the affected period. Falling outside the affected period poses a traceability problem for Franklin‘s allegations. Without any allegation that he dined at a Chili‘s during the time that that Chili‘s was compromised in the data breach, Franklin fails to allege that his injury was “fairly . . . trace[able] to the challenged action of the defendant.” Lujan, 504 U.S. at 560, 112 S. Ct. at 2136 (alterations in original) (internal quotation marks and citation omitted).11
The Third Amended Complaint also alleged that Steinmetz dined at the North Las Vegas Chili‘s on April 4, 2018. The at-risk time frame for the North Las Vegas Chili‘s was subsequently determined to be April 4, 2018, to April 21, 2018. Therefore, if Steinmetz‘s alleged dining date is true, he falls within the affected period. The record, however, shows that the allegation was slightly—but importantly—off the mark. Steinmetz stated in response to an interrogatory and in his deposition that he dined at the North Las Vegas Chili‘s on April 2, 2018.12
Much like with Franklin, therefore, Steinmetz does not have standing because the date he dined at Chili‘s is right outside of the affected date range for that Chili‘s. The proof required for a plaintiff to establish standing varies depending on the stage of litigation.
Where, as here, the facts developed in discovery firmly contradict the allegation in the complaint, the District Court cannot rely on the complaint‘s factual allegation. Plaintiffs make no argument and provide no additional facts to cast doubt on Steinmetz‘s discovery admissions that he dined at Chili‘s outside of the at-risk time period. He therefore cannot fairly trace any alleged injury to Brinker‘s challenged action. See Lujan, 504 U.S. at 560, 112 S. Ct. at 2136.
C.
Having determined that one named plaintiff has standing, we turn to the class definitions because
Turning to the class definitions the District Court certified, we have the following:
All persons residing in the United States who made a credit or debit card purchase at any affected Chili‘s location during the period of the Data Breach (March and April 2018) who: (1) had their data accessed by cybercriminals and, (2) incurred reasonable expenses or time spent in mitigation of the consequences of the Data Breach (the “Nationwide Class“).
. . .
All persons residing in California who made a credit or debit card purchase at any affected Chili‘s location during the period of the Data Breach (March and April 2018) who: (1) had their data accessed by cybercriminals and, (2) incurred reasonable expenses or time spent in mitigation of the consequences of the Data Breach (the “California Statewide Class“).
The District Court explained that its class definitions “avoid later predominance issues regarding standing and the inclusion of
While the District Court‘s interpretation of the class definitions surely meets the standing analysis we have outlined above for named plaintiff Theus, we note that the phrase in the class definitions “accessed by cybercriminals” is broader than the two delineated categories the District Court gave, which were limited to cases of fraudulent charges or posting of credit card information on the dark web. Therefore, we think it wise to remand this case to give the District Court the opportunity to clarify its predominance finding. It may either refine the class definitions to only include those two categories and then conduct a more thorough predominance analysis,13 or the District Court may instead conduct a
predominance analysis anew under
On remand, the District Court should also determine the viability of the California class afresh. As discussed supra part IV.B, Franklin does not have standing to bring the alleged causes of action against Brinker, including the causes of action based in California state law. Without a named plaintiff with standing to bring the California claims, the California class cannot survive.
V.
With standing sorted out, we are left with Brinker‘s final claim that individualized damages claims will predominate over
At the class certification stage, all that the named plaintiffs had to prove was that a reliable damages methodology existed, not the actual damages plaintiffs sustained. Plaintiffs must demonstrate that a “model purporting to serve as evidence of damages in this class action . . . measure[s] only those damages attributable to that theory.” Comcast, 569 U.S. at 35, 133 S. Ct. at 1433. And “[t]he first step in a damages study is the translation of the legal theory of
VACATED IN PART AND REMANDED.
I write separately to address two issues discussed in the Majority Opinion: standing and damages. First, while I agree with the Majority that Shenika Theus is the only named Plaintiff with standing, I disagree with the Majority‘s concrete injury analysis. Second, I dissent from the Majority‘s approval of Plaintiffs’ damages methodology. I address each of these issues in turn.
I. STANDING
Beginning with standing, the Majority and I agree on several points. First, I agree that two of the three named Plaintiffs do not have standing. See Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1264 (11th Cir. 2019) (explaining that only named plaintiffs need to demonstrate standing at the class certification stage). Specifically, I agree that Michael Franklin and Eric Steinmetz lack standing because they failed to establish that their alleged injuries were “fairly . . . trace[able] to the challenged action of the defendant.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (quotation omitted). Second, with respect to Shenika Theus, the remaining named Plaintiff, I agree that Theus can establish standing—but I arrive at that conclusion for different reasons than the Majority articulates. Accordingly, my standing discussion proceeds in two parts. I first explain why I part ways with the Majority‘s approach and then address why Theus nonetheless establishes a concrete injury.
A.
To begin, I turn to my disagreement with the Majority‘s concrete injury analysis, which rests on two erroneous conclusions about what Plaintiffs have alleged in their third amended consolidated class action complaint (“TAC“) (the operative complaint in this case). The Majority‘s first conclusion rests on an allegation that is simply not contained in the TAC, and the Majority‘s second conclusion rests on an allegation that, when viewed in light of all the TAC‘s allegations, does not establish a concrete injury.
The Majority first concludes that Plaintiffs have alleged that the “hackers took [their] data and posted it on Joker Stash” (an online marketplace for stolen payment data).1 Plaintiffs’ TAC, however, contains no such allegation. Instead, Plaintiffs’ allegations concern only the risk of “potential fraud and identity theft” based on “expos[ure]” of Plaintiffs’ data due to the data breach—i.e., the risk of future harm. Accordingly, I respectfully disagree with the Majority‘s conclusion that the named Plaintiffs have alleged that their credit card information was posted on the dark web.
As to its second conclusion, the Majority points to Plaintiffs’ TAC allegation that their personal information was “exposed for theft and sale on the dark web” as “critical” to establishing a concrete injury. Because Plaintiffs’ allegations about mere “exposure” to the theft and sale of their information simply point to an increased risk of identity theft and risk of future harm, however, I disagree that this concern establishes a concrete injury. I address the TAC,2 the motion for class certification, and the class certification hearing in turn.3
Starting with the TAC, Plaintiffs’ allegations concern only the risk of future harm. Plaintiffs describe their injury as “imminent and certainly impending” (i.e., futuristic) and fraud and identity theft as “potential” (i.e., a mere risk). And allegations relating to the risk of future harm are insufficient to establish a concrete injury under Article III. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2210-11 (2021) (explaining that mere risk of future harm without more does not give rise to Article III standing for recovery of damages); Tsao v. Captiva MVP Rest. Partners, LLC, 986 F.3d 1332, 1339 (11th Cir. 2021) (“[A] plaintiff alleging a threat of harm does not have Article III standing . . . .“); Muransky v. Godiva Chocolatier, Inc., 979 F.3d 917, 927-28 (11th Cir. 2020). Indeed, we have
The motion for class certification and the class certification hearing do not help Plaintiffs in establishing a concrete injury either. Plaintiffs’ motion for class certification largely echoes the TAC‘s allegations, stating that “Plaintiffs experienced the . . . harm of having their Customer Data exposed to fraudulent use” and that the “evidence will establish that [Brinker‘s] conduct exposed [their customer data] to unauthorized third parties.” The motion makes no reference to Joker Stash—or any other site on the dark web—and states only once in passing that Plaintiffs’ customer data “ha[d] been exposed and found for sale on the dark web,” without any allegation of which of the Plaintiffs’ data was exposed or where such data was “found.” But, as I explain below, this passing statement does not pass muster in light of Plaintiffs’ admissions at the class certification hearing.
During the hearing on class certification, Plaintiffs stated that they had “uncontroverted evidence that the data that was taken from Brinker‘s system was posted for sale and sold on the dark web.” According to Plaintiffs, at least 4.5 million cards were affected by the data breach and, according to documents they obtained from Fiserv (Brinker‘s processor), those 4.5 million cards—i.e., one hundred percent of the cards used at Brinker‘s locations during the affected time period—were posted on Joker Stash. Despite these assertions at the hearing, however, when the district court asked Plaintiffs’ counsel whether she knew if any of the three named Plaintiffs’ cards were actually on the dark web, Plaintiffs’ counsel responded: “[W]e do not know that at this point.” Accordingly, by counsel‘s own admission, the record fails to support the conclusion that the named Plaintiffs’ credit card information was either posted or sold on the dark web as a result of the data breach. To the contrary, Plaintiffs admitted that they did not know if their credit card information was on the dark web.
In sum, considering Plaintiffs’ admission that they do not know whether their data was posted or sold on the dark web, I cannot join the Majority‘s concrete injury analysis—which rests on conclusions that are simply unsupported by the record. See Lujan, 504 U.S. at 561 (explaining that the proof required for standing varies “with the manner and degree of evidence required at the successive stages of the litigation“); Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982) (explaining that “it may be necessary for the
B.
Although I disagree with the Majority‘s concrete injury analysis, I nonetheless agree that Theus has suffered a concrete injury (and therefore has standing) for a different reason: she has established financial harm. In her deposition, Theus explained that her transactions at Chili‘s, which occurred during the restaurant‘s at-risk time frame,4 caused her to incur unauthorized charges on her account that led to an overdraft fee and a bank-imposed card replacement fee. These unreimbursed, out-of-pocket expenses that Theus incurred are the type of “pocketbook injur[ies] [that are] . . . prototypical form[s] of injury in fact.” Collins v. Yellen, 141 S. Ct. 1761, 1779 (2021); TransUnion, 141 S. Ct. at 2204 (explaining that “traditional tangible harms, such as . . . monetary harms” are “obvious” harms that “readily qualify as concrete injuries under Article III“). Accordingly, I conclude—for different reasons than the Majority—that Theus has alleged a concrete harm sufficient for standing.
II. Damages Methodology
I now turn to the damages issue and conclude that the district court erred by accepting the damages methodology offered by
In support of their motion for class certification, Plaintiffs offered an expert declaration to explain their damages methodology. Plaintiffs’ expert set forth a “damages methodology applicable on a class-wide basis” by calculating four “damages elements“: (1) the value of any lost opportunity to accrue rewards points; (2) the value of stolen payment card data; (3) the value of cardholder time; and (4) out-of-pocket damages.
The district court rejected Brinker‘s argument that the expert‘s methodology was overinclusive and not accurately tailored to the facts. It explained that “[u]nder [the expert‘s] damages methodology, all class members would receive a standard dollar amount for lost opportunities to accrue rewards points (whether or not they used a rewards card), the value of cardholder time (whether or not they spent time addressing the breach), and out-of-pocket damages (whether or not they incurred any out-of-pocket damages).” The court continued: “[Plaintiffs’ expert] employs an averages method to compute damages, reasoning that the delta between class members’ damages is minimal[,] irrespective of the type of card used or time spent.” It explained that “[a]s with any averages calculation, over or under inclusivity is going to be a risk,” and noted that “the Supreme Court” in Tyson Foods “has approved the use of averages methods to calculate damages.” The district
Applying
Most data breaches are very similar to one another, such that a jury may find that a relative average reduction in damages for every class member that has been subjected to other data breaches is appropriate. As discussed above, the Supreme Court has approved the use of averages methods to calculate damages, see Tyson Foods, 577 U.S. [at] 459-61, and the same rationale could apply here.
Nevertheless, the district court caveated that “if it becomes obvious at any time that the calculation of damages (including accounting for multiple data breaches) will be overly burdensome or individualized, the [c]ourt has the option to decertify the class.”
Brinker argues that the district court erred by concluding that Plaintiffs’ “proposed damages methodology permissibly eliminated individualized issues.” Brinker contends that because it is “entitled to scrutinize each individual claim at trial by referring to
To certify a class under
At the class-certification stage, “a model purporting to serve as evidence of damages . . . must measure only those damages attributable to” plaintiffs’ theory of liability in the case. Comcast Corp. v. Behrend, 569 U.S. 27, 35 (2013). “And for purposes of
Here, the district court approved a damages methodology that awards to all class members a standard dollar amount “for lost opportunities to accrue rewards points (whether or not they used a rewards card), the value of cardholder time (whether or not they spent any time addressing the breach), and out-of-pocket damages (whether or not they incurred any out-of-pocket damages).” In short, this methodology impermissibly permits plaintiffs to receive an award based on damages that they did not suffer—i.e., an award that a plaintiff could not establish in an individual action. Tyson Foods, 577 U.S. at 458.
The Majority defends the use of representative evidence by asserting that each “customer fitting within the class definitions experienced a similar injury,” but this assertion cannot be true. As the district court acknowledged, Plaintiffs’ damages methodology could allow a plaintiff to be compensated for opportunities to accrue rewards points, the value of their time spent addressing the breach, and out-of-pocket damages, even though the plaintiff
The district court acknowledged that “[a]s with any averages calculation, over or under inclusivity is going to be a risk,” but cited Tyson Foods to say that “the Supreme Court has approved the use of averages methods to calculate damages.” But Tyson Foods is inapposite to the facts of this case.
In Tyson Foods, the Supreme Court approved the use of “representative evidence” to prove that the amount of time employees spent “donning and doffing” their gear at a chicken plant, when added to their regular work hours, “amounted to more than 40 hours in a given week” in order to be entitled to recovery under the
The justifications for using representative evidence that were present in Tyson Foods are simply not present here. In this case, the questions relevant to the damages inquiry include whether a given class member possessed a rewards card, spent time addressing a data breach, and suffered out-of-pocket losses. Unlike Tyson Foods, the evidence for the answers to those questions is not inaccessible or controlled by Brinker. To the contrary, that evidence would be known and controlled by the plaintiffs or is at least readily available through individualized examination. And unlike Tyson Foods, here, the use of damages averages would deprive Brinker of its ability to litigate individual defenses where a class members’ individual damages are discoverable.
Considering that, under Plaintiffs’ averages methodology, a plaintiff could be compensated for a harm he did not suffer and that Tyson Foods does not justify the use of averages under the facts of this case, I am left to conclude that the district court erred by accepting Plaintiffs’ damages methodology when certifying Plaintiffs’
*
In sum, while I agree with the Majority‘s bottom line that Theus is the only named Plaintiff with standing, I disagree with the Majority‘s concrete injury analysis, and I conclude that Theus suffered an injury by establishing financial harm. Additionally, I dissent from the Majority‘s approval of Plaintiffs’ damages methodology.
Notes
The expert stated that data breaches typically yield damages attributable to this category somewhere in the ballpark of $38 per plaintiff.such items as penalties paid by cardholders in connection with not being able to use their cards to pay bills on time, gasoline to go back to the retail establishment where the breach occurred or to the cardholder‘s bank or local police station, postage and stationary, overnight replacement card shipping fees, bank charges to replace cards (while unusual this cost does occur on occasion), ATM fees to get access to cash, and hiring a third party to assist cardholder recovery and security efforts.