Third Circuit affirms dismissal of data breach class action filed against prescription services company

By Jessica Karmasek | Sep 13, 2016

PHILADELPHIA (Legal Newsline) - A class action lawsuit brought against a prescription benefit administrative services company has been dismissed in its entirety.

The U.S. Court of Appeals for the Third Circuit, with its Aug. 25 ruling, effectively quashed the lawsuit filed by a group of former Benecard Services Inc. employees. The company provides mail and specialty drug dispensing, managed vision services, and contact lens mail order services to public and private sector organizations.

“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,’” Circuit Judge Julio M. Fuentes explained in the seven-page opinion.

“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.”

Joan Longenecker-Wells, Kenneth Dodson, Genevieve Regal, Benjamin Huffnagle and Nicholas Dankosky originally filed their class action in the U.S. District Court for the Middle District of Pennsylvania in February 2015.

The defendants also included Benecard Central Fill of PA, Benecard Marketing, National Vision Administrators, and Contact Fill.

The plaintiffs, alleging breach of trust and identity fraud, sued their former employer for damages allegedly caused by a data security breach.

According to their complaint, each of the five plaintiffs provided Benecard with personal information -- i.e. names, birth dates, Social Security numbers -- via tax forms and other paperwork as part of the hiring process.

Then, in early 2015, unknown third parties breached Benecard’s computer system and gained access to the plaintiffs’ personal information.

The third parties allegedly used the employees’ information to file fraudulent tax returns. The IRS issued tax refunds to the unknown parties instead of the plaintiffs.

The former employees argued Benecard failed to protect their privacy and violated administrative guidelines and industry standards, and caused the plaintiffs financial injuries for the 2014 tax year.

The plaintiffs were hoping to recover compensatory damages in excess of $5 million, attorney fees and court costs.

The Third Circuit, in affirming the district court, shot down the former employees’ theory that Benecard breached an implied contract by failing to safeguard their information.

“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,” Fuentes wrote.

“This requirement alone did not create a contractual promise to safeguard that information, especially from third party hackers.”

The Third Circuit concluded that the district court did not err in granting Benecard’s motion to dismiss.

From Legal Newsline: Reach Jessica Karmasek by email at

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