Court Opinion

ID: 4028585
Source: CourtListenerOpinion
Date Created: 2016-08-25 20:00:33.060317+00
Date Added: 2024-06-11T13:31:22.027545
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                               _________________

                                     No. 15-3538
                                  _________________

     JOAN LONGENECKER-WELLS; KENNETH DODSON; GENEVIEVE REGAL;
              BENJAMIN HUFFNAGLE; NICHOLAS DANKOSKY,
                                  Appellants

                                            v.

BENECARD SERVICES INC, d/b/a Benecard PBF; BENECARD CENTRAL FILL OF
      PA, LLC; BENECARD MARKETING, LLC; NATIONAL VISION
            ADMINISTRATORS, LLC; CONTACT FILL, LLC
                         _________________

                    On Appeal from the United States District Court
                        for the Middle District of Pennsylvania
                               (D.C. No. 1-15-cv-00422)
                      District Judge: Hon. William W. Caldwell
                                 _________________

                     Submitted Under Third Circuit L.A.R. 34.1(a)
                                   July 11, 2016

           Before: FUENTES, SHWARTZ, and RESTREPO, Circuit Judges

                                (Filed: August 25, 2016 )
                                  _________________

                                      OPINION
                                  _________________


 Honorable Julio M. Fuentes assumed senior status on July 18, 2016.

  This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
FUENTES, Circuit Judge.

       Plaintiffs appeal the District Court’s judgment granting Benecard Services, Inc.’s

(“Benecard”) motion to dismiss. Because we agree that Plaintiffs’ negligence claim is

barred by Pennsylvania’s economic loss doctrine, and that their breach of implied

contract claim fails to pass muster under Federal Rule of Civil Procedure 12(b)(6), we

will affirm.

                                             I.1

       This case arises from an illegal data breach of Benecard’s computer system.

Benecard is a prescription benefit administration services company that provides mail

and specialty drug dispensing, managed vision services, and contact lens mail services to

public and private sector organizations. Plaintiffs are former employees and customer

members of Benecard who provided Benecard with their full names, dates of birth,

addresses, and social security numbers as a prerequisite to employment or use of

Benecard’s services. Benecard also maintained Plaintiffs’ personal financial information,

including W-2 tax forms.

       In early 2015, unknown third parties breached Benecard’s computer system and

gained access to Plaintiffs’ personal and confidential information. Plaintiffs suffered

financial harm when these unknown third parties used Plaintiffs’ information to file

fraudulent tax returns and the IRS issued tax refunds to the unknown third parties rather

than to Plaintiffs. Plaintiffs filed this putative class action diversity lawsuit on behalf of

1
 Because this appeal arises out of the District Court’s grant of a motion to dismiss, we
assume the facts alleged in Plaintiffs’ complaint are true. See Gould Elec. Inc. v. United
States, 220 F.3d 169, 178 (3d Cir. 2000).
                                              2
all former and current Benecard employees and customer members whose information

was compromised by the data breach. Plaintiffs brought claims for negligence and

breach of implied contract under Pennsylvania law.

       In granting Benecard’s motion to dismiss, the District Court held that

Pennsylvania’s economic loss doctrine barred Plaintiffs’ negligence claim, and that

Plaintiffs’ breach of implied contract claim failed to state a claim under Rule 12(b)(6).

This appeal followed.

                                            II.2

       A. Negligence

       Pennsylvania’s economic loss doctrine provides that “no cause of action exists for

negligence that results solely in economic damages unaccompanied by physical injury or

property damage.”3 This doctrine “is concerned with two main factors: foreseeability and

limitation of liability.”4 The District Court held that because Plaintiffs’ negligence claim

sounds only in economic loss resulting from the fraudulent tax returns filed with their

information, the economic loss doctrine bars their claim. We agree.

2
  The District Court had original jurisdiction under 28 U.S.C. § 1332(d)(2). We have
appellate jurisdiction under 28 U.S.C. § 1291. “We exercise plenary review over the
grant of a motion to dismiss.” Brown v. Card Serv. Ctr., 464 F.3d 450, 452 (3d Cir.
2006).
3
  Excavation Techs., Inc. v. Columbia Gas Co. of Pa., 985 A.2d 840, 841 n.3 (Pa. 2009)
(quoting Adams v. Copper Beach Townhome Communities, L.P., 816 A.2d 301, 305 (Pa.
Super. Ct. 2003)).
4
  Adams, 816 A.2d at 307.
                                             3
       Plaintiffs contend that the “contours of the economic loss doctrine have been

broadened and muddied” by virtually all courts that have considered the issue.5 They ask

us to “right the ship” by interpreting it as a bar only against negligence claims that flow

from a contract. 6 They argue that, pursuant to the Pennsylvania Supreme Court’s

interpretation of the doctrine in Bilt-Rite Contractors, Inc. v. The Architectural Studio,7

the doctrine applies “only in cases where the source of the duty plaintiff seeks to enforce

arises from a contract and, even then, only in instances where the harm suffered is limited

to economic loss arising from the interference with contractual expectation.” 8 They

maintain that because their negligence claim does not arise from a contractual duty, but

rather a common law duty grounded in public policy, the economic loss doctrine does not

bar their claim. We have rejected this argument before and, without contrary guidance

from the Pennsylvania Supreme Court, will do so again here.

       In Bilt-Rite, the Pennsylvania Supreme Court considered a negligence action

against an architectural firm that provided faulty building plans to a school with

knowledge that the plans would be used by prospective contractors. 9 The contractor,

relying on the faulty plans, spent more money than it had anticipated and sued the

architectural firm for negligent misrepresentation under Section 552 of the Restatement

(Second) of Torts. Section 552 imposes a duty of care on suppliers of professional

5
  Pl. Reply Br. 2.
6
  Id. at 1.
7
  866 A.2d 270 (Pa. 2005).
8
  Pl. Br. 12.
9
  Bilt-Rite, 866 A.2d at 272-73.
                                            4
information for use by others. 10     The Pennsylvania Supreme Court held that the

contractor could recover purely economic damages in this instance.11

      Plaintiffs read the Bilt-Rite court’s interpretation of the economic loss doctrine as a

bar to negligence claims only when the alleged duty owed to the plaintiff flows from a

contract or, pursuant to the exception the court carved out, when the harm resulted from

plaintiff’s reliance on the harm-causing party’s expert advice. We have rejected this

argument in this past. In Sovereign Bank v. BJ’s Wholesale Club, we explained that

“Bilt-Rite did not hold that the economic loss doctrine may not apply where the plaintiff

has no available contract remedy.”12 Rather, “the Bilt-Rite Court simply carved-out an

exception to allow a commercial plaintiff to seek recourse from an ‘expert supplier of

information’ with whom the plaintiff has no contractual relationship” when loss resulted

from reliance on the expert’s information.13 Indeed, the Pennsylvania Supreme Court

recently confirmed that the economic loss doctrine “generally precludes recovery in

negligence actions for injuries which are solely economic,” but does not apply to “claims

of negligent misrepresentation under § 552.”14 Likewise, in Azur v. Chase Bank, we

rejected the plaintiff’s argument that the economic loss doctrine was inapplicable to his

10
   Restatement (Second) of Torts § 552 (1977).
11
   Bilt-Rite, 866 A.2d at 288.
12
   533 F.3d 162, 180 (3d Cir. 2008).
13
   Id.
14
   Excavation Techs., 985 A.2d at 841.
                                             5
negligence claim because he had no contractual remedy. 15 As that court stated, “we

already rejected an identical argument in Sovereign Bank.”16

       With this case law as our guide, we decline to hold that Pennsylvania’s economic

loss doctrine is inapplicable here simply because Plaintiffs are not in contractual privity

with Benecard and thus have no contractual remedy. While we note that the case law on

Pennsylvania’s economic loss doctrine can be read in several different ways, we decline

to “right the ship” as Plaintiffs here suggest.       That task, if necessary, is for the

Pennsylvania Supreme Court, not this Court.

       B. Breach of Implied Contract

       Plaintiffs argue, in the alternative, that Benecard breached an implied contract by

failing to adequately safeguard Plaintiffs’ confidential information. The implied contract

allegedly arose when Plaintiffs entrusted Benecard with confidential information as a

condition of employment or doing business with the company.             We agree with the

District Court that under Rule 12(b)(6), these allegations do not sufficiently state a claim.

       An implied contract arises in the same manner as an express contract, except that

the parties’ intention, “instead of being expressed in words, is inferred from acts in the

light of the surrounding circumstances.” 17 That is, the agreement is inferred from the

conduct of the parties. Though intent can be gleaned from the parties’ “ordinary course

15
   601 F.3d 212, 223 (3d Cir. 2010).
16
   Id.
17
   Liss & Marion P.C. v. Recordex Acquisition Corp., 983 A.2d 652, 659 (Pa. 2009)
(quoting Elias v. Elias, 237 A.2d 215, 217 (Pa. 1968)).
                                              6
of dealing[s],”18 “naked assertions devoid of further factual enhancement” fail to state an

actionable claim.19

       Here, Plaintiffs have failed to plead any facts supporting their contention that an

implied contract arose between the parties other than that Benecard required Plaintiffs’

personal information as a prerequisite to employment. This requirement alone did not

create a contractual promise to safeguard that information, especially from third party

hackers. By way of contrast, in Enslin v. Coca-Cola Co., the plaintiff’s breach of implied

contract claim survived a motion to dismiss when he pled that Coca-Cola, “through

privacy policies, codes of conduct, company security practices, and other conduct,

implicitly promised to safeguard his [personal information] in exchange for his

employment.”20 Plaintiffs here do not plead any company-specific documents or policies

from which one could infer an implied contractual duty to protect Plaintiffs’ information.

Merely claiming that an implied contract arose “from the course of conduct” 21 between

Plaintiffs and Benecard is insufficient to defeat a motion to dismiss.

                                             III.

       For the foregoing reasons, we conclude that the District Court did not err in

granting Benecard’s motion to dismiss Plaintiffs’ negligence and breach of implied

contract claims. We will therefore affirm.

18
   Id. (quoting Ingrassia Const. Co. v. Walsh, 486 A.2d 478, 483 (Pa. Super. Ct. 1984)).
19
   Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).
20
   136 F. Supp. 3d 654, 675 (E.D. Pa. 2015).
21
   J.A. 39 ¶ 84.
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