First Circuit Allows HigherEd Student Data Breach Claims
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ppIn a recent blog post we explained how Webb v Injured Workers Pharmacy LLC has become a touchstone for courts analyzing Article III standing in data breach class actions citing Shea v American International College as a recent example This post explores the Shea decision in greater depthppOn September 5 2025 Judge Angel Kelley of the US District Court for the District of Massachusetts issued a mixed ruling on a motion to dismiss in Shea v American International College The decision reflects the developing contours of data breach litigation in this jurisdiction particularly with respect to standing the economic loss doctrine and the viability of implied contract and invasion of privacy claimsppThe case arises out of a late2023 data breach at American International College AIC during which attack hackers allegedly exfiltrated over 5000 gigabytes of unencrypted data containing the personal information of more than 11000 current and former students over nineteen days AIC discovered the activity engaged a forensic firm and mailed breach notices in May 2024ppPlaintiff Kelly Shea a former student brought a putative class action asserting negligence breach of implied contract unjust enrichment invasion of privacy under GL c 214 1B Chapter 93A and declaratory judgment AIC moved to dismiss across the board arguing lack of Article III standing and failure to state a claimppThe Court rejected AICs threshold standing challenge Plaintiff alleged that hackers exfiltrated her Social Security number and other identifiers which were later trafficked on the dark web and that a fraudulent health insurance claim was subsequently submitted in her name She also alleged mitigation costs and emotional distress including anxiety and sleep loss The court held that these allegations taken together went beyond speculative future risk and established concrete injury traceability and redressability relying on Webb and distinguishing cases where plaintiffs pled only an increased risk of future harmppThe negligence claim survived in part The court held that AIC owed a duty to employ reasonable safeguards as an institution that collects and stores sensitive PII as a condition of enrollment Allegations of substandard cybersecurity practicesunencrypted storage weak access controls missing MFA inadequate training and defensesplausibly stated a breach of that duty Causation was adequately pled given the alleged sequence from breach to misuse and resulting mitigation efforts and emotional distress While the economic loss doctrine generally bars recovery for purely economic harms plaintiffs emotional distress plausibly qualified as personal injury at the pleading stage allowing the negligence claim to proceed with limitations on purely economic mitigation damages not tied to that injuryppThe Court denied dismissal of the unjust enrichment claim Although plaintiff did not identify a specific data security fee she plausibly alleged that tuition and fees conferred a benefit reasonably expected to include the cost of adequate data security AIC allegedly retained that benefit while failing to provide reasonable protections The court found these allegations analogous to In re Shields Health Care Grp Inc where plaintiffs expectation that service payments included data protection was sufficient to state a claim At the pleading stage and pled in the alternative to contract claims plaintiffs allegations were sufficientppThe court allowed the declaratory judgment claim to proceed finding a live controversy given alleged ongoing risks from data that remains in circulation on the dark web and in AICs possession along with continuing mitigation efforts Discretionary relief may be revisited on a fuller recordppThe impliedcontract theory failed because the complaint did not allege facts showing mutual assent to specific datasecurity obligations General references to privacy policies and institutional practices without allegations of affirmative acceptance or conduct evidencing agreement were insufficient to establish an impliedinfact contract The invasion of privacy claim under GL c 214 1B was also dismissed with the court reiterating that the statute requires intentional conduct not negligent failure to prevent thirdparty access Plaintiff voluntarily dismissed her Chapter 93A claim for failure to serve the statutory demand letterppThe Shea decision underscores that a claim based on fraudulent misuse tied to stolen PII combined with mitigation efforts and distress distinguishes actionable injury from speculative risk The First Circuits decision in Webb continues to shape standing analysis allegations of both misuse and mitigation suffice while speculative risk alone does not The case also serves as a reminder that the economic loss doctrine is not absolute The doctrine remains a key defense in negligence claims based on data breaches but courts may permit claims to proceed if plaintiffs allege concrete emotional distress even when damages are purely financial For these reasons defendants should scrutinize and challenge conclusory distress allegationsppAnother takeaway privacy policies alone rarely create implied contracts Institutions should nonetheless avoid language that implies contractual obligations absent clear assent Unjust enrichment claims remain viable when the nature of the relationship supports a reasonable expectation that fees fund data security Institutions should build a clear record on what payments actually cover For risk management document security controls enforce MFA and encryption train personnel and expedite breach notifications to reduce exposure related to both standing and merits These measures also address forwardlooking relief as declaratory or injunctive claims may survive if plaintiffs allege ongoing risk Robust incident response and remediation undercut these claimsppAs data breach class actions continue to proliferate Shea reflects the evolving landscape in the First Circuit The decisions reasoning highlights how courts in the District of Massachusetts are parsing the boundaries between actionable injury recoverable damages and claims that will not survive Rule 12 scrutinypp
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ppIn a recent blog post we explained how Webb v Injured Workers Pharmacy LLC has become a touchstone for courts analyzing Article III standing in data breach class actions citing Shea v American International College as a recent example This post explores the Shea decision in greater depthppOn September 5 2025 Judge Angel Kelley of the US District Court for the District of Massachusetts issued a mixed ruling on a motion to dismiss in Shea v American International College The decision reflects the developing contours of data breach litigation in this jurisdiction particularly with respect to standing the economic loss doctrine and the viability of implied contract and invasion of privacy claimsppThe case arises out of a late2023 data breach at American International College AIC during which attack hackers allegedly exfiltrated over 5000 gigabytes of unencrypted data containing the personal information of more than 11000 current and former students over nineteen days AIC discovered the activity engaged a forensic firm and mailed breach notices in May 2024ppPlaintiff Kelly Shea a former student brought a putative class action asserting negligence breach of implied contract unjust enrichment invasion of privacy under GL c 214 1B Chapter 93A and declaratory judgment AIC moved to dismiss across the board arguing lack of Article III standing and failure to state a claimppThe Court rejected AICs threshold standing challenge Plaintiff alleged that hackers exfiltrated her Social Security number and other identifiers which were later trafficked on the dark web and that a fraudulent health insurance claim was subsequently submitted in her name She also alleged mitigation costs and emotional distress including anxiety and sleep loss The court held that these allegations taken together went beyond speculative future risk and established concrete injury traceability and redressability relying on Webb and distinguishing cases where plaintiffs pled only an increased risk of future harmppThe negligence claim survived in part The court held that AIC owed a duty to employ reasonable safeguards as an institution that collects and stores sensitive PII as a condition of enrollment Allegations of substandard cybersecurity practicesunencrypted storage weak access controls missing MFA inadequate training and defensesplausibly stated a breach of that duty Causation was adequately pled given the alleged sequence from breach to misuse and resulting mitigation efforts and emotional distress While the economic loss doctrine generally bars recovery for purely economic harms plaintiffs emotional distress plausibly qualified as personal injury at the pleading stage allowing the negligence claim to proceed with limitations on purely economic mitigation damages not tied to that injuryppThe Court denied dismissal of the unjust enrichment claim Although plaintiff did not identify a specific data security fee she plausibly alleged that tuition and fees conferred a benefit reasonably expected to include the cost of adequate data security AIC allegedly retained that benefit while failing to provide reasonable protections The court found these allegations analogous to In re Shields Health Care Grp Inc where plaintiffs expectation that service payments included data protection was sufficient to state a claim At the pleading stage and pled in the alternative to contract claims plaintiffs allegations were sufficientppThe court allowed the declaratory judgment claim to proceed finding a live controversy given alleged ongoing risks from data that remains in circulation on the dark web and in AICs possession along with continuing mitigation efforts Discretionary relief may be revisited on a fuller recordppThe impliedcontract theory failed because the complaint did not allege facts showing mutual assent to specific datasecurity obligations General references to privacy policies and institutional practices without allegations of affirmative acceptance or conduct evidencing agreement were insufficient to establish an impliedinfact contract The invasion of privacy claim under GL c 214 1B was also dismissed with the court reiterating that the statute requires intentional conduct not negligent failure to prevent thirdparty access Plaintiff voluntarily dismissed her Chapter 93A claim for failure to serve the statutory demand letterppThe Shea decision underscores that a claim based on fraudulent misuse tied to stolen PII combined with mitigation efforts and distress distinguishes actionable injury from speculative risk The First Circuits decision in Webb continues to shape standing analysis allegations of both misuse and mitigation suffice while speculative risk alone does not The case also serves as a reminder that the economic loss doctrine is not absolute The doctrine remains a key defense in negligence claims based on data breaches but courts may permit claims to proceed if plaintiffs allege concrete emotional distress even when damages are purely financial For these reasons defendants should scrutinize and challenge conclusory distress allegationsppAnother takeaway privacy policies alone rarely create implied contracts Institutions should nonetheless avoid language that implies contractual obligations absent clear assent Unjust enrichment claims remain viable when the nature of the relationship supports a reasonable expectation that fees fund data security Institutions should build a clear record on what payments actually cover For risk management document security controls enforce MFA and encryption train personnel and expedite breach notifications to reduce exposure related to both standing and merits These measures also address forwardlooking relief as declaratory or injunctive claims may survive if plaintiffs allege ongoing risk Robust incident response and remediation undercut these claimsppAs data breach class actions continue to proliferate Shea reflects the evolving landscape in the First Circuit The decisions reasoning highlights how courts in the District of Massachusetts are parsing the boundaries between actionable injury recoverable damages and claims that will not survive Rule 12 scrutinypp
ppMore Upcoming Eventspp ppSign Up for any or all of our 25 Newsletterspp ppYou are responsible for reading understanding and agreeing to the National Law Reviews NLRs and the National Law Forum LLCs Terms of Use and Privacy Policy before using the National Law Review website The National Law Review is a freetouse nologin database of legal and business articles The content and links on wwwNatLawReviewcom are intended for general information purposes only Any legal analysis legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice No attorneyclient or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms attorneys or other professionals or organizations who include content on the National Law Review website If you require legal or professional advice kindly contact an attorney or other suitable professional advisor ppSome states have laws and ethical rules regarding solicitation and advertisement practices by attorneys andor other professionals The National Law Review is not a law firm nor is wwwNatLawReviewcom intended to be a referral service for attorneys andor other professionals The NLR does not wish nor does it intend to solicit the business of anyone or to refer anyone to an attorney or other professional NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us ppUnder certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements Attorney Advertising Notice Prior results do not guarantee a similar outcome Statement in compliance with Texas Rules of Professional Conduct Unless otherwise noted attorneys are not certified by the Texas Board of Legal Specialization nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional CredentialsppThe National Law Review National Law Forum LLC 2070 Green Bay Rd Suite 178 Highland Park IL 60035 Telephone 708 3573317 or tollfree 877 3573317 If you would like to contact us via email please click hereppCopyright 2025 National Law Forum LLCp
