PHOENIX (Legal Newsline) - An Arizona woman is free to pursue a class action over a data breach at a medical center after a state appeals court said a federal judge’s dismissal of the case with prejudice, meaning it can’t be refiled in federal court, doesn’t mean it can’t proceed in state court instead.
Ruling on a narrow technical question of the law, the Arizona Court of Appeals said that when a case is dismissed for lack of jurisdiction there is no “claims preclusion” because there hasn’t been a judgment on the merits of the claim at issue.
A federal judge dismissed Carol Dearing’s lawsuit against Magellan Health in April 2020 for lack of standing, finding she didn’t present evidence she personally was harmed by the breach and the court lacked subject matter jurisdiction under Article III of the U.S. Constitution. The U.S. Supreme Court this year ruled in TransUnion v. Ramirez, another data breach case, that the “case or controversy” limitation under Article III means plaintiffs must have suffered a concrete injury to sue in federal court.
Dearing refiled her case in Maricopa County Court in October 2020, this time adding allegations unauthorized accounts were opened in her name because of the data breach. Magellan moved to dismiss the case, saying it was precluded. The state court rejected Magellan’s request, and the appeals court upheld that decision.
The fact the federal case was dismissed “with prejudice” only means the plaintiff can’t file another lawsuit over the same claims in federal court, the appeals court ruled. The appeals court rejected Magellan’s argument that “with prejudice” is shorthand for a judgment on the merits, ruling that “because the district court decided no issues other than its own jurisdiction, the dismissal order did not trigger issue preclusion with respect to the state-court action.”
Finally, the court observed that the federal court cited Article III, which places constitutional limits on the ability of federal courts to hear cases. There are no such restrictions on state courts, the appeals court noted.