Court Allows Invasion of Privacy Claim Against Tax Service Provider for Throwing Away Tax Returns in Public Dumpster

Author: José Mauro

Vicki J. Pinero sued Jackson Hewitt Tax Service Inc. (“Jackson Hewitt”) for not complying with its own privacy policy and dumping her tax returns in a public dumpster, together with the returns of 100 other Jackson Hewitt customers. Pinero asserted seven causes of action against Jackson Hewitt, including fraud, breach of contract, negligence, invasion of privacy, as well as violation of Louisiana laws related to database security and unfair trade practices. A federal district court in Louisiana recently dismissed all of Pinero’s claims except invasion of privacy.

In 2006, Vicki J. Pinero hired Jackson Hewitt to prepare and file her state and federal tax returns. Before providing her personal information, she signed Jackson Hewitt’s privacy policy, which indicated that Jackson Hewitt had policies and procedures in place to protect the private information of its customers. Two years later, an individual found Pinero’s tax returns, and the returns of 100 other Jackson Hewitt customers, in a public dumpster. The person who found the documents contacted a local television news station, which, in turn, contacted Pinero to interview her and return the documents.

Pinero sued Jackson Hewitt in federal district court in Louisiana for fraud, breach of contract, negligence, invasion of privacy, and violation of state laws relating to database security and unfair trade practices. Jackson Hewitt brought a motion to dismiss all of Pinero’s claims. The court dismissed all of the claims except invasion of privacy.

The court dismissed Pinero’s negligence claim because her damages were merely speculative. Pinero presented no evidence that any third party actually accessed her personal information and stole her identity. The court found that the mere possibility that identity theft could occur did not constitute actual injury sufficient to maintain a claim for negligence.

Similarly, Pinero had no actual damages under her breach of contract claim. Louisiana state law allows recovery for emotional damages when the contract at issue was intended to gratify a non-pecuniary interest or when the defendants intended to cause emotional harm by breaching the contract. The court held that a contract for tax services cannot be characterized as one relating to non-pecuniary interests, and held that an allegation of bad faith does not equate with an intention to cause emotional harm. Therefore, the court dismissed Pinero’s claim for breach of contract.

While the court found that Pinero did allege recognizable damages under her fraudulent inducement claim, the court dismissed the claim because Pinero did not meet the heightened pleading standard required to state a valid fraud claim. Although the promises made under the privacy policy were not performed, Pinero did not allege how or why Jackson Hewitt’s statements regarding its privacy policy were misleading. The court found that fraudulent intent cannot be inferred from the mere fact that a promise was unfulfilled.

The court did, however, allow Pinero’s invasion of privacy claim to survive the motion to dismiss. The court found that Pinero presented sufficient allegations to state a valid claim that there was an unreasonable public disclosure of her personal information.

Pinero also requested class certification on behalf of other Jackson Hewitt customers that were similarly situated. The court declined to rule on the motion for class certification because a ruling would be premature.

Opinion: http://spamnotes.com/files/31236-29497/Pinero_Order.pdf