BOSTON – The state Supreme Court upheld a lower court ruling dismissing a suit by CUMIS Insurance Society and 130 credit unions claiming they were owed recompense in the 2004 credit card breach at BJ Wholesale Club.
The BJ’s case is important because it has set several precedents for liability claims in credit card breaches, and also because it turned out the breach was caused by the same hackers who eventually would steal data on millions of accounts at TJX Cos., DSW Shoes, Barnes & Noble, Sports Authority, OfficeMax, Boston Market and Forever 21.
The Massachusetts high court agreed with the lower court that the credit unions, and thus CUMIS, were third parties to the contract with BJ’s and therefore were not covered under the cards processing agreement. The state court upheld the lower court’s dismissal of negligence claims, explaining that the economic loss doctrine, as applied in Massachusetts, prohibits tort recovery in the absence of physical harm or property damage.
The court also upheld the dismissal on summary judgment of fraud and negligent misrepresentation claims. Both claims were predicated on the allegation that in accepting credit cards for transactions, the defendants were representing that they were in compliance with regulations established by the card brands (Visa and MasterCard), and that the credit unions relied on those representations. The court decided that the plaintiffs could not show that such alleged reliance had been justifiable.
CUMIS is a wholly owned subsidiary of CUNA Mutual Group.
