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First Choice Federal Credit Union v. The Wendy's Co.

United States District Court, W.D. Pennsylvania

May 9, 2018

FIRST CHOICE FEDERAL CREDIT UNION, CREDIT UNION NATIONAL ASSOCIATION, MICHIGAN CREDIT UNION LEAGUE, WRIGHT-PATT CREDIT UNION, ENVISTA CREDIT UNION, GREENVILLE HERITAGE FEDERAL CREDIT UNION, FINANCIAL HORIZONS CREDIT UNION, INDIANA CREDIT UNION LEAGUE, GEORGIA CREDIT UNION AFFILIATES, FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver for First NBC Bank, GREATER CINCINNATI CREDIT UNION, ALIGN CREDIT UNION, CENTRUE BANK, NUSENDA CREDIT UNION, NORTH JERSEY FEDERAL CREDIT UNION, ALCOA COMMUNITY FEDERAL CREDIT UNION, OHIO CREDIT UNION LEAGUE, KEMBA FINANCIAL CREDIT UNION, THE SEYMOUR BANK, ASSOCIATED CREDIT UNION, NAVIGATOR CREDIT UNION, and MEMBERS CHOICE CREDIT UNION, Plaintiffs,
v.
THE WENDY'S COMPANY, WENDY'S RESTAURANTS, LLC, and WENDY'S INTERNATIONAL, LLC, Consolidated Defendants. VERIDIAN CREDIT UNION on behalf of itself and all others similarly situated, TECH CREDIT UNION on behalf of itself and all others similarly situated, SOUTH FLORIDA EDUCATIONAL FEDERAL CREDIT UNION, PREFERRED CREDIT UNION on behalf of themselves and all others similarly situated, and AOD FEDERAL CREDIT UNION on behalf of itself and all others similarly situated, Consolidated Plaintiffs,

          Honorable Nora Barry Fischer, United States District Judge

          REPORT AND RECOMMENDATION

          MAUREEN P. KELLY, CHIEF UNITED STATES MAGISTRATE JUDGE

         I. RECOMMENDATION

         Before the Court is Plaintiffs' Motion for Application of Ohio Law, ECF No. 131, in this class action stemming from a data breach. For the reasons that follow, it is respectfully recommended that the Motion for Application of Ohio Law be granted in part and denied in part.

         II. REPORT

         A. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiffs[1] initiated this class action on behalf of a putative class of financial institutions that “suffered, and continue to suffer, financial losses as a direct result of Wendy's conscious failure to take adequate and reasonable measures to protect its point-of-sale and computer system.” ECF No. 32 ¶ 1. Defendants are comprised of The Wendy's Company, Wendy's Restaurants, LLC and Wendy's International, LLC (collectively, “Defendants” or “Wendy's”). Id. ¶¶ 43-45.

         In the Complaint, Plaintiffs make the following factual allegations. Plaintiffs are issuers of credit and debit cards to customers. Id. ¶ 55. When such customers use their cards to make purchases at Wendy's restaurants, Wendy's stores customer payment card data in its computer systems. Id. ¶ 58. Beginning in or about October 2015, computer hackers used the credentials of third-party vendors to install malware through which they were able to steal the payment card data of Wendy's customers from at least 1, 000 restaurants. Id. ¶ 62. Wendy's had knowledge of a data breach in December 2015. Id. ¶ 63. By January 2016, unauthorized charges to Wendy's customers' card were underway. Id. ¶ 64.

         Plaintiffs First Choice Federal Credit Union, AOD Federal Credit Union, Tech Credit Union, Veridian Credit Union, South Florida Educational Federal Credit Union, Preferred Credit Union, Alcoa Community Federal Credit Union, Associated Credit Union, Envista Credit Union, Federal Deposit Insurance Corporation, Receiver for First NBC Bank, [2] Navigator Credit Union, The Seymour Bank, Financial Horizons Credit Union, Nusenda Credit Union, Greater Cincinnati Credit Union, KEMBA Financial Credit Union, Wright-Patt Credit Union, and Members Choice Credit Union, on behalf of themselves and all others similarly situated, comprise a sub-group designated in the Complaint as the “FI Plaintiffs.” Id. ¶¶ 13-35.

         Plaintiffs Credit Union National Association, Georgia Credit Union Affiliates, Indiana Credit Union League, Michigan Credit Union League and Ohio Credit Union League, associations that represent the interests of their member credit unions, comprise a sub-group of Plaintiffs designated in the Complaint as “Association Plaintiffs.” Id. ¶¶ 36-42.

         Plaintiffs filed the operative Consolidated Amended Class Action Complaint (“the Complaint”) on July 22, 2016. ECF No. 32. In the sixty-five-page Complaint, Plaintiffs raise claims of negligence, negligence per se, violation of the Ohio Deceptive Trade Practices Act as well as seeking declaratory and injunctive relief. Id.

         Defendants filed a Motion to Dismiss on August 22, 2016. ECF No. 53. Ultimately, that Motion to Dismiss was denied and the choice-of-law dispute raised therein was deferred to a later stage of the litigation. ECF No. 88.

         FI Plaintiffs filed the instant Motion for Application of Ohio Law and supporting documents on January 19, 2018, and January 23, 2018. ECF Nos. 131-134. Defendants filed a Response in Opposition to the Motion for Application for Ohio Law and supporting documents on February 19, 2018, and February 20, 2018. ECF Nos. 139-140. FI Plaintiffs filed a Reply Brief on March 21, 2018. ECF No. 141. On April 11, 2018, Defendants filed a Sur-Reply. ECF No. 145. The Motion for Application of Ohio Law is now ripe for consideration.

         B. LEGAL PRINCIPLES

         To determine whether Ohio law should be applied to the claims raised in the instant case, the Court must apply the choice of law rules of Pennsylvania, this Court's forum state. See Auto-Owners Ins. Co. v. Stevens & Ricci, Inc., 835 F.3d 388, 403 (3d Cir. 2016).

         As this Court has recently explained:

"Pennsylvania applies the more flexible, 'interests/contacts' methodology to contract choice-of-law questions." Hammersmith [v. TIG Ins. Co.], 480 F.3d [220] at 226-27 [(3d Cir. 2007)](footnote omitted). Under this approach, courts must analyze the policies and interests underlying the particular issue before it, and "apply the law of the forum with the 'most interest in the problem, ' rather than the law of the place of injury." Id. at 227 (quoting Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796, 805-06 (Pa. 1964)).
The first step in a choice-of-law analysis involves the identification of the jurisdictions whose laws might apply. Hammersmith, 480 F.3d at 230. … Next, the court must examine the substance of the identified states' laws, and look for actual, relevant differences between them. Pacific Employers [Ins. Co. v. Global Reinsurance Corp. of Am.], 693 F.3d [417] at 432 [(3d Cir. 2012)] (citing Hammersmith, 480 F.3d at 230). In conducting this examination:
If [the] two jurisdictions' laws are the same, then there is no conflict at all, and a choice of law analysis is unnecessary."[Hammersmith, 480 F.3d at 230]. (emphasis in original). If there are actual, relevant differences between the laws, then we "examine the governmental policies underlying each law, and classify the conflict as a 'true, ' 'false, ' or an 'unprovided-for' situation." Id. "A deeper [choice of law] analysis is necessary only if both jurisdictions' interests would be impaired by the application of the other's laws (i.e., there is a true conflict)." Id.

Id. at 432 (internal quotation marks, footnote, and citations omitted) (emphasis in original). The court of appeals further explained:

If a true conflict exists, the Court must then determine which state has the "greater interest in the application of its law." Cipolla [v. Shaposka], 267 A.2d [854] at 856 [(Pa. 1970)]. In Melville, we described the Griffith methodology as a combination of the "approaches of both [the] Restatement II [of Conflicts of Law] (contacts establishing significant relationships) and 'interests analysis' (qualitative appraisal of the relevant States' policies with respect to the controversy)." 584 F.2d at 1311. This analysis requires more than a "mere counting of contacts." Cipolla, 267 A.2d at 856. "Rather, we must weigh the contacts on a qualitative scale according to their relation to the policies and interests underlying the [particular] issue." Shields v. Consol. Rail Corp., 810 F.2d 397, 400 (3d Cir.1987).
Hammersmith, 480 F.3d at 231 (footnote omitted) (emphasis in original).

Axiall Corp. v. Descote S.A.S., Civ. A. No. 15-250, 2018 U.S. Dist. LEXIS 15303, at *32-34 (W.D. Pa. Jan. 30, 2018).

         Further, the choice of law analysis is issue-specific. Berg Chilling Sys. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). In a single case, different states' laws may apply to different ...


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