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Galaria v. Nationwide Mutual Insurance Co.

United States District Court, S.D. Ohio, Eastern Division

December 13, 2017

Mohammad S. Galaria, individually and on behalf of all others similarly situated, Plaintiff,
v.
Nationwide Mutual Insurance Co., Defendant. Anthony Hancox, individually and on behalf of all others similarly situated, Plaintiff,
v.
Nationwide Mutual Insurance Co., Defendant.

          OPINION AND ORDER

          MICHAEL H. WATSON, JUDGE UNITED STATES DISTRICT COURT.

         These related putative class action lawsuits are before the Court on Plaintiffs Mohammad S. Galaria's ("Mr. Galaria") and Anthony Hancox's ("Mr. Hancox") (together, "Plaintiffs") objections to a Report and Recommendation ("R&R") issued by the Magistrate Judge on October 31, 2017, which recommended granting Defendant Nationwide Mutual Insurance Company's ("Nationwide") motion to dismiss Plaintiffs' bailment claim. ECF No. 97. For the following reasons, the Court OVERRULES Plaintiffs' objections, ADOPTS the R&R, and DISMISSES this action.

         I. BACKGROUND

         A. Procedural History

         The factual background of these cases has been set out in the Court's previous orders and will not be repeated in detail here. Briefly, Mr. Hancox and Mr. Galaria provided their personally identifiable information to Nationwide in the course of purchasing, or seeking to purchase, insurance products. This information included some combination of their social security numbers, driver's license numbers, birth dates, marital status, gender, occupation, and employers' names and addresses. On October 23, 2012, individuals hacked into a portion of Nationwide's computer network and stole this information. Mr. Hancox and Mr. Galaria allege that the data breach impacted a class of approximately 1.1 million people.

         By Opinion and Order dated February 10, 2014, ECF No. 40, the Court granted Nationwide's motion to dismiss. Specifically, the Court dismissed Plaintiffs' claim arising under 15 U.S.C. § 1681e of the Fair Credit Reporting Act ("FCRA") and their negligence and bailment claims all for lack of jurisdiction due to lack of standing. The Court dismissed their invasion of privacy claim for failure to state a claim. Plaintiffs moved to alter or amend the judgment under Federal Rule of Civil Procedure 59(e) and for leave to file an amended consolidated class action complaint. By Opinion and Order dated March 11, 2015, ECF No. 51, the Court denied both motions. Plaintiffs timely appealed.

         On September 12, 2016, ECF No. 53, the Court of Appeals reversed and remanded, concluding that Plaintiffs had standing to assert claims under the FCRA but leaving it to this Court to determine if they had stated a claim under that statute. Following the issuance of the mandate, Nationwide filed a second motion to dismiss, arguing that the complaint failed to state a claim under the FCRA (and that, in fact, this Court had already so held) and that Plaintiffs also failed to plead a viable claim under either negligence or bailment theories.

         Plaintiffs responded by moving to amend and consolidate their complaints. By Opinion and Order dated August 16, 2017, ECF No. 89, the Court consolidated the cases for all purposes, and, in the context of denying the motion for leave to amend, granted Nationwide's motion to dismiss Plaintiffs' FCRA and negligence claims. As a result, only Plaintiffs' bailment claim remained pending. Consequently, the Court directed Nationwide to re-file a motion to dismiss directed to that sole claim. By order of referral dated October 13, 2017, ECF No. 96, the Court referred the motion to dismiss to the Magistrate Judge.

         B. Report and Recommendation

         After consideration, Magistrate Judge Vascura recommended granting Nationwide's motion to dismiss Plaintiffs' bailment claim for two reasons: (1) Plaintiffs failed to allege a transfer of the data to Nationwide; and (2) Plaintiffs lacked an expectation that the information would be returned. First, the Magistrate Judge concluded that Plaintiffs had not relinquished control of their personally identifiable information when they applied for insurance because they had simultaneously retained control of the information. R&R 2, ECF No. 97. The Magistrate Judge recognized that various courts across the country have rejected bailment claims in the context of a security breach on the basis that no transfer of possession of the data occurred creating an expectation of return. She determined that any state law applicable here would yield the same result. Id. at 2-3. Magistrate Judge Vascura noted that Ohio law "requires a transfer of possession and custody of the bailed property" and that Kansas and Minnesota law also view the act of bailment as requiring the transfer of custody or control of the property. Id. at 3. Further, the Magistrate Judge specifically explained that, because Plaintiffs had failed to allege that they had transferred custody or control of their personal identifiers to Nationwide, there was no need to determine whether intangible property, including personally identifiable data, constitutes personal property for purposes of a bailment claim. Id. at 4.

         Second, Magistrate Judge Vascura recognized that Plaintiffs also had not alleged an expectation that Nationwide would return the data. She explained that, not only had Plaintiffs not made such an allegation, they could not, given that they had retained and used the same information throughout the time of the alleged bailment. For both of these reasons, Magistrate Judge Vascura concluded that Plaintiffs had not stated a bailment claim against Nationwide.

         The R&R notified the parties of their right to file objections within fourteen days pursuant to 28 U.S.C. § 636(b)(1). Plaintiffs filed timely objections and Nationwide filed a response. The Court addresses Plaintiffs' objections as follows.

         II. STANDARD OF REVIEW

         The Court will review de novo the portions of the R&R that have been properly objected to, pursuant to Federal Rule of Civil Procedure 72(b)(2). On de novo review, the Court "may accept, reject, or modify the recommended disposition; receive further evidence; or return the ...


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