WASHINGTON (Reuters) – the Supreme court of The V. S. on Monday, a bid rejected by online shoe retailer Zappos to throw out a class-action lawsuit by customers who say that their personal information was stolen by hackers in 2012.
The justices denied the appeal of Zappos, a subsidiary of Amazon.com Inc, from a decision of a California-based federal court of appeal did that the lawsuit, which is a setback for the company and business groups to limit their liability in data breaches, an increasingly common problem in the internet age.
The case hinges on whether customers whose data has been stolen, you can sue the company that was hacked, even if that information was not used for criminal purposes such as identity theft or fraudulent charges.
Zappos said customers whose data is not used in these ways are not damaged to such a degree that the preservation of a federal lawsuit. But the customers said that after a break with their information can be misused at any time, even years later, and long before the fraud is discovered.
Hackers broke into Zappos’ computer systems in January 2012, gaining access to the servers that identifying information for 24 million customers, including names, contact details and partial credit card numbers.
People who purchased shoes and other items from Zappos submitted several proposed class-action lawsuits, saying Zappos used unsecure servers and not properly encrypt the data. Zappos says it acted quickly, so that the passwords be reset, preventing serious damage.
A federal judge in Nevada said that some victims who claimed the financial loss had the legal status to sue, but the rest can’t claim that such a concrete injury.
The 9th U.S. Circuit Court of Appeals reversed the ruling last year, the revival of the other claims, saying the “hackers accessed information that can be used to help commit identity fraud or identity theft.”
In addition to an actual injury, the court said customers can sue if they can demonstrate that there is a substantial risk of injury and that is upcoming.
Zappos called that standard “manifestly inadequate” and urged the Supreme Court to reverse the 9th Circuit.
Supported by the business groups, such as the U.S. Chamber of Commerce, Zappos said in a court filing that data breaches are a fact of life in an increasingly digital world and need the right a shield of retailers, employers and service providers from “extensive and costly litigation.”
Reporting by Andrew Chung; Editing by Bill Trott