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Key v. DSW Inc.

September 27, 2006


The opinion of the court was delivered by: Judge Gregory L. Frost

Magistrate Judge Terrence P. Kemp


The matter is before the Court for consideration of a Motion To Dismiss (Doc. # 6) filed by Defendant, DSW Inc. ("DSW"), a Memorandum In Opposition (Doc. # 10) filed by Plaintiff, Tracy L. Key, and a Reply Memorandum filed by Defendant. (Doc. # 11.) The Court finds the Defendant's motion well taken. In short, the Court finds that Plaintiff has failed to allege that she has suffered an injury-in-fact and therefore has not met the constitutional requirements for standing in federal court under Article III. Thus, the Court dismisses all the Plaintiff's claims for lack of standing.

I. Statement of the Issues

This case presents the following issues for the Court: (1) in a class action lawsuit, when a class has yet to be certified, is the standing requirement under Article III of the Constitution determined solely by the injury to the named plaintiff prior to and separately from that of the putative class; (2) in an identity theft context, is an increased risk of financial harm by an unknown third party at an unidentified point in the indefinite future too speculative to constitute a cognizable injury to confer standing; and (3) does a defendant concede that a plaintiff has alleged cognizable damages when it removes a case pursuant to the Class Act Fairness Act.

By dismissing all of Plaintiff's claims for lack of standing, the Court also finds that Plaintiff has not alleged cognizable damages sufficient to state a contract, negligence, conversion, or, breach of fiduciary duty claim. Therefore, it need not address whether Plaintiff has met the other material elements of each of her claims.

II. Background

Between November 2004 and March 2005, Defendant, DSW, collected and maintained credit card, debit card, and checking account numbers and other confidential personal financial information of approximately 1.5 million consumers who purchased merchandise at DSW retail outlets. (Doc. # 14 ¶ 1.) Because of DSW's alleged improper retention and failure to secure this information, on or about March 2005 unauthorized persons obtained access to and acquired the information of approximately 96,000 customers. Id.

As a result, Plaintiff's Amended Complaint alleges several tort and contract claims against DSW. (Doc. # 14 ¶¶ 47, 55, 60, 67, 78.) The introductory paragraph states that as a consequence of this disclosure, Plaintiff and the class have been subjected to "a substantially increased risk of identity theft, and have incurred the cost and inconvenience of, among other things, canceling credit cards, closing checking accounts, ordering new checks, obtaining credit reports and purchasing identity and/or credit monitoring." Id. ¶ 1. However, Plaintiff's negligence claim bifurcates the injury between the injury suffered by Plaintiff, and the injury suffered by the putative class members. Id. ¶ 47. Plaintiff's negligence claim states that: the class members [have been] incurring and suffering inconvenience and aggravation associated with closing accounts and opening new accounts, obtaining credit reports, and purchasing credit and/or identity monitoring ... [and the] Plaintiff and the class have been subjected to a substantial increase in their risk of identity theft and other related financial crimes." Id. ¶ 47 (emphasis added).

Moreover, with respect to Plaintiff's remaining claims, which include breach of contract, conversion and breach of fiduciary duty claims, Plaintiff alleges that Plaintiff and the class' damages amount only to "hav[ing] been subjected to a substantial increased risk of identity theft or other related financial crimes." Id. ¶¶ 56, 60, 67, 78. Plaintiff seeks injunctive relief, punitive damages, and attorneys' fees. Id. at 20-21. The parties have completed briefing on the motion, and the motion is now ripe for disposition.

III. Discussion

A. Standard of Review under Fed. R. Civ. P. 12(b)(6)

Defendant moves for dismissal of Plaintiff's Amended Complaint under Fed. R. Civ. P. 12(b)(6). Dismissal is warranted under this rule "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Trzebuckowski v. City of Cleveland, 319 F.3d 853, 855 (6th Cir. 2003) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). Therefore, the focus is not on whether a plaintiff will ultimately prevail, but rather on whether the claimant has offered "either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). A court considering a motion to dismiss under Rule 12(b)(6) for lack of standing "must accept all well-pleaded factual allegations of the complaint as true and construe the complaint in the light most favorable to the plaintiff." Inge v. Rock Fin. Corp., 281 F.3d ...

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