DAMAGES-ECONOMIC LOSS DOCTRINE-EMPLOYEE SENSITIVE PERSONAL INFORMATION STORED BY EMPLOYER ON INTERNET ACCESSIBLE COMPUTER SYSTEM

November 28th, 2018 by Rieders Travis in Miscellaneous

Dittman v. UPMC, 2018 Pa. LEXIS 6051 (Pa. S.Ct. November 21, 2018) Baer, J.  We granted discretionary review in this matter to determine whether an employer has a legal duty to use reasonable care to safeguard its employees’ sensitive personal information that the employer stores on an internet-accessible computer system. We also examine the scope of Pennsylvania’s economic loss doctrine, specifically whether it permits recovery in negligence for purely pecuniary damages. For the reasons discussed below, we hold that an employer has a legal duty to exercise reasonable care to safeguard its employees’ sensitive personal information stored by the employer on an internet-accessible computer system. We further hold that, under Pennsylvania’s economic loss doctrine, recovery for purely pecuniary damages is permissible under a negligence theory provided that the plaintiff can establish the defendant’s breach of a legal duty arising under common law that is independent of any duty assumed pursuant to contract. As the Superior Court came to the opposite conclusions, we now vacate its judgment.

We conclude that the lower courts erred in finding that UPMC did not owe a duty to Employees to exercise reasonable care in collecting and storing their personal and financial information on its computer systems. This conclusion notwithstanding, Employees’ claim cannot proceed if we nonetheless hold that it is barred by the economic loss doctrine.

Purely “economic loss” may be recoverable under a variety of tort theories. The question, thus, is not whether the damages are physical or economic. Rather, the question of whether the plaintiff may maintain an action in tort for purely economic loss turns on the determination of the source of the duty plaintiff claims the defendant owed. A breach of a duty which arises under the provisions of a contract between the parties must be redressed under contract, and a tort action will not lie. A breach of duty arising independently of any contract duties between the parties, however, may support a tort action.

Here, there is a claim under § 552 of the Restatement of Torts which does not require privity.  The Economic Loss Doctrine is inapplicable to negligent representation claims under § 552.

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