United States District Court, W.D. Washington, Seattle
ORDER ON DEFENDANT'S MOTION TO DISMISS
L. ROBART UNITED STATES DISTRICT JUDGE.
the court is Defendant Eddie Bauer, LLC's (“Eddie
Bauer”) motion to dismiss (2d MTD (Dkt. # 40))
Plaintiff Veridian Credit Union's
(“Veridian”) first amended putative class action
complaint (FAC (Dkt. # 36)). The court has considered Eddie
Bauer's motion, Veridian's response (Resp. (Dkt. #
53)), Eddie Bauer's reply (Reply (Dkt. # 57)), the
relevant portions of the record, and the applicable law.
Being fully advised,  the court GRANTS in part and DENIES in
part Eddie Bauer's motion.
alleges the following pertinent facts in its first amended
Eddie Bauer is headquartered in Washington but operates
approximately 370 stores throughout the United States. (FAC
¶ 12.) Eddie Bauer accepts credit and debit cards for
payment from customers at it point-of-sale
(“POS”) registers. (Id. ¶ 17.) In
January 2016, hackers accessed Eddie Bauer's POS systems
and installed malicious software (or “malware”)
that infected every Eddie Bauer store in the United States
and Canada (“the Data Breach”). (Id.
¶ 29.) Through this malware, hackers stole credit and
debit card data from Eddie Bauer's systems and sold it to
other individuals who made fraudulent transactions on those
payment cards. (Id. ¶¶ 7, 25, 29, 32,
Veridan is an Iowa-chartered credit union with its principal
place of business in Iowa. (FAC ¶ 11.) Veridian issued
payment cards compromised in the Data Breach and alleges that
it suffered significant property damage to the unique data
included on the payment cards (including the ruination of the
payment card itself) and financial losses in connection with
covering its customers' losses due to the Data Breach and
in reissuing credit and debit cards to its customers.
(Id. ¶¶ 8, 22, 96-98, 135.) Veridian
alleges that the Data Breach and Veridian's injury were
the foreseeable results of Eddie Bauer's inadequate data
security measures, which Eddie Bauer knew were insufficient
to protect against recognized threats, and Eddie Bauer's
refusal to implement industry-standard security measures due
to the cost of such measures. (Id. ¶¶
Veridian filed a putative class action complaint against
Eddie Bauer on March 7, 2017. (Compl. (Dkt. # 1).) Eddie
Bauer filed a motion to dismiss on April 21, 2017. (MTD (Dkt.
# 28).) On June 5, 2017, instead of responding to Eddie
Bauer's motion directly, Veridian filed a first amended
putative class action complaint. (See FAC.) On June
15, 2017, Eddie Bauer filed a motion to dismiss
Veridian's first amended complaint. (See 2d
In its first amended complaint, Veridian alleges claims
against Eddie Bauer for (1) negligence (FAC ¶¶
119-28), (2) negligence per se (id.
¶¶ 129-35), (3) declaratory and injunctive relief
(id. ¶¶ 136-43), (4) violation of RCW
19.255.020 (FAC ¶¶ 144-51), and (5) violation of
Washington's Consumer Protection Act (“CPA”),
RCW ch. 19.86 (FAC ¶¶ 152-65). Veridian alleges
that Washington law applies to its claims. (Id.
Bauer, however, asserts that Iowa law applies. (2d MTD at
also brings its first amended complaint as a putative class
action. (Id. ¶¶ 99-111.) Specifically,
Veridian brings its action “individually and on behalf
of all other financial institutions similarly situated”
under Federal Rule of Civil Procedure 23. (Id.
¶ 99.) Veridian defines its putative class as:
All Financial Institutions - including, but not limited to,
banks and credit unions - in the United States (including its
Territories and the District of Columbia) that issue payment
cards, including credit and debit cards, or perform,
facilitate, or support card issuing services, whose customers
made purchases from Eddie Bauer stores from January 1, 2016
to the present (the “Class”).
court now considers Eddie Bauer's motion to dismiss.
Rule of Civil Procedure 12(b)(6) provides for dismissal of a
complaint for “failure to state a claim upon which
relief can be granted.” Fed.R.Civ.P. 12(b)(6). Although
“detailed factual allegations” are not required,
a complaint must include “more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In
other words, a complaint must have sufficient factual
allegations to “state a claim to relief that is
plausible on its face.” Id. (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
claim is facially plausible “when the pleaded factual
content allows the court to draw the reasonable inference
that the defendant is liable for the misconduct
alleged.” Id. Under Rule 12(b)(6), dismissal
can be based on “the lack of a cognizable legal theory
or the absence of sufficient facts alleged under a cognizable
legal theory.” Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990).
considering a motion to dismiss under Rule 12(b)(6), the
court construes the complaint in the light most favorable to
the nonmoving party. Livid Holdings Ltd. v. Salomon Smith
Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The
court must therefore accept all well-pleaded facts as true
and draw all reasonable inferences in the plaintiff's
favor. Wyler Summit P'ship v. Turner Broad. Sys.,
Inc., 135 F.3d 658, 661 (9th Cir. 1998).
Choice of Law
court first addresses which jurisdiction's law applies to
Veriidan's claims. Veridian asserts that Washington law
governs its claims (FAC ¶¶ 112-18; Resp. at 6-8),
while Eddie Bauer argues for the application of Iowa law (2d
MTD at 5-9).
“federal court sitting in diversity ordinarily must
follow the choice-of-law rules of the State in which it
sits.” Atl. Marine Constr. Co. v. U.S. Dist. Court
for W. Dist. of Tex., --- U.S. ---, 134 S.Ct. 568, 582
(2013) (citing Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 494-96 (1941)). “This applies to actions
brought under the Class Action Fairness Act
[(“CAFA”), 28 U.S.C. § 1332(d)(2), ] as
well, since CAFA is based upon diversity jurisdiction.”
In re Facebook Biometric Info. Privacy Litig., 185
F.Supp.3d 1155, 1167-68 (N.D. Cal. 2016) (quoting In re
NVIDIA GPU Litig., No. C 08-04312, 2009 WL 4020104, at
*5 (N.D. Cal. Nov. 19, 2009)). Here, Veridian asserts that
the court has original jurisdiction based on CAFA. (FAC
¶ 13.) Accordingly, the court follows the choice-of-law
rules of Washington.
employs a two-step approach to choice of law questions. Under
Washington's choice-of-law rules, the court first
determines whether an actual conflict exists between
Washington and other applicable state law. See Burnside
v. Simpson Paper Co., 864 P.2d 937, 941 (Wash. 1994). In
the absence of a conflict, Washington law applies. See
id.; DP Aviation v. Smiths Indus. Aerospace &
Def. Sys. Ltd., 268 F.3d 829, 845 (9th Cir. 2001)
(applying Washington law where no conflict was shown). If an
actual conflict exists, the court then determines the forum
that has the “most significant relationship” to
the action to determine the applicable law. See Johnson
v. Spider Staging Corp., 555 P.2d 997, 1000-01 (Wash.
An Actual Conflict
‘actual conflict' exists ‘between the laws or
interests of Washington and the laws or interests of another
state' when the . . . states' laws could produce
different outcomes on the same legal issue.” Kelley
v. Microsoft Corp., 251 F.R.D. 544, 550 (W.D. Wash.
2008) (quoting Erwin v. Cotter Health Ctrs., 167
P.3d 1112, 1120 (Wash. 2007)). Veridian asserts in a summary
fashion that only a false conflict exists between the laws or
interests of Washington and those of Iowa. (See
Resp. at 7.) However, as discussed below, the court is
persuaded by Eddie Bauer's detailed analysis that an
actual conflict exists. (See 2d MTD at 4-5.) The
court discusses each of Veridian's claims in turn.
court first considers Veridian's negligence claim. (FAC
¶¶ 119-28.) In Iowa, “[a]s a general
proposition, the economic loss rule bars recovery in
negligence when the plaintiff has suffered only economic
loss.” Annett Holdings, Inc. v. Kum & Go,
L.C., 801 N.W.2d 499, 503 (Iowa 2011) (citing Neb.
Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345
N.W.2d 124, 126 (Iowa 1984)). Indeed, in Iowa, “[t]he
well-established general rule is that a plaintiff who has
suffered only economic loss due to another's negligence
has not been injured in a manner which is legally cognizable
or compensable.” Id. Further, in Iowa, the
economic loss rule “is by no means limited to the
situation where the plaintiff and the defendant are in direct
contractual privity.” Id. at 504.
Washington Supreme Court, however, no longer applies the
economic loss rule but rather the “independent duty
doctrine.” See Affiliated FM Ins. Co. v. LTK
Consulting Servs., Inc., 243 P.3d 521, 526 (Wash. 2010).
In Washington, “”[t]he independent duty doctrine
. . . maintain[s] the boundary between torts and contract in
the place of the economic loss rule.” Donatelli v.
D.R. Strong Consulting Eng'rs, Inc., 312 P.3d 620,
623 (Wash. 2013) (internal quotation marks omitted) (citing
Elcon Constr., Inc. v. E. Wash. Univ., 273 P.3d 965,
969 (Wash. 2012)). For example, under Washington's
independent duty doctrine, a plaintiff can bring a tort claim
for conduct arising out of a contractual relationship if the
defendant owed him or her a duty of care independent of the
contract. Eastwood v. Horse Harbor Found., Inc., 241
P.3d 1256, 1262 (Wash. 2010).
addition, unlike Iowa, the independent duty doctrine is not a
rule of general application in Washington. Elcon
Constr., 273 P.3d at 969. The Washington Supreme Court
has taken “great pains to limit” the doctrine and
to “clarify that it does not bar tort remedies except
in fairly unusual circumstances.” Reading Hosp. v.
Anglepoint Grp., Inc., No. C15-0251-JCC, 2015 WL
13145347 at *3 (W.D. Wash. May 26, 2015). Indeed, the
Washington Supreme Court has applied the doctrine only
“to a narrow class of cases, primarily limiting its
application to claims arising out of construction on real
property and real property sales, ” Elcon
Constr., 273 P.3d at 969, and specifically directs that
the doctrine should not apply “‘unless and until
[the Washington Supreme Court] has . . . decided otherwise,
'” id. at 969-70 (quoting
Eastwood, 241 P.3d at 1276). Due to the marked
distinctions between the economic loss rule in Iowa and the
independent duty doctrine in Washington, as well as the scope
of the application of these rules in each state, the court
concludes that there is an actual conflict between the law or
interests of Iowa and Washington with respect to
Veridian's negligence claim.
Negligence Per Se
asserts a separate claim for negligence per se. (FAC
¶¶ 129-35.) Under Iowa law, the violation of a
statute may give rise to a claim for negligence per
se. See // Winger v. CM Holdings, LLC,
881 N.W.2d 433, 448 (Iowa 2016) (quoting Wiersgalla v.
Garrett, 486 N.W.2d 290, 292 (Iowa 1992)) (“[I]f a
statute or regulation . . . provides a rule of conduct
specifically designed for the safety and protection of a
certain class of persons, and a person within that class
receives injuries as a proximate result of a violation of the
statute or regulation, the injuries would be actionable, as .
. . negligence per se.”) (internal quotation
marks and citations omitted). In Washington, however, the
violation of a statute or the breach of a statutory duty is
not considered negligence per se, but may be
considered by the trier of fact only as evidence of
negligence. RCW 5.40.050. Thus, assuming Veridian can
establish that Eddie Bauer violated a statute that fell
within Iowa's negligence per se rule, it might
be able to pursue such a claim under Iowa law, but not under
Washington law. Thus, an actual conflict exists between the
law of Iowa and Washington on this claim.
Declaratory and Injunctive Relief
also asserts a claim for declaratory and injunctive relief.
(FAC ¶¶ 136-43.) Iowa law recognizes that an
“injunction may be obtained as an independent remedy by
an action in equity, or as an auxiliary remedy in any
action.” Iowa R. Civ. P. 1.1501. Indeed, “[u]nder
Iowa law, a request for permanent injunctive relief alone can
serve as the underlying claim for a request for a temporary
injunction in an equitable action.” Johnson v.
Moody, No. 416CV00449RGESBJ, 2016 WL 8839427, at *4
(S.D. Iowa Nov. 14, 2016); see also Lewis Invs., Inc. v.
City of Iowa City, 703 N.W.2d 180, 184 (Iowa 2005)
(stating that “the plaintiff's underlying claim is
an equitable action for permanent injunctive relief”).
In contrast to Iowa's law, Washington does not recognize
a standalone claim for injunctive relief, but rather views an
injunction as a form of relief available for some causes of
action. See, e.g., Hockley v. Hargitt, 510
P.2d 1123, 1132 (Wash. 1973) (distinguishing between a cause
of action based on the CPA and the forms of relief that are
potentially available, including damages and an injunction);
see also Robinson v. Wells Fargo Bank Nat'l
Ass'n, No. C17-0061JLR, 2017 WL 2311662, at *5 (W.D.
Wash. May 25, 2017) (“Injunctive relief is available
only if ...