United States District Court, D. Colorado
SELCO COMMUNITY CREDIT UNION, MIDWEST AMERICA FEDERAL CREDIT UNION, VERIDIAN CREDIT UNION, and KEMBA FINANCIAL CREDIT UNION, on behalf of themselves and a class of similarly situated financial institutions, Plaintiffs,
NOODLES & COMPANY, Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO
Brooke Jackson United States District Judge.
Noodles & Company moves to dismiss plaintiffs'
amended consolidated complaint. ECF No. 34. The motion is
granted. Accordingly, plaintiffs' renewed motion for
appointment of interim class counsel, ECF No. 47, is moot.
early 2016 hundreds of Noodles & Company restaurants
suffered a cyberattack targeting customers' credit and
debit card information. Plaintiffs are four credit unions
whose cardholders' information might have been
compromised by the data breach. Plaintiffs allege that
because of the breach they have had to cancel and reissue
affected cards, close and reopen the corresponding accounts,
respond to cardholders' inquiries about the breach,
monitor accounts for fraudulent charges, investigate such
charges, and refund cardholders for any unauthorized charges
that went through. Plaintiffs also claim to have lost revenue
due to their cardholders' decrease in credit and debit
card usage after the breach was publicized.
September 2016 plaintiff SELCO Community Credit Union filed
suit against Noodles & Company for its alleged failure to
prevent the data breach. ECF No. 1. Two months later this
case was consolidated with two other actions, ECF No. 23, and
on November 30, 2016 plaintiffs filed an amended consolidated
class action complaint, ECF No. 27. This complaint seeks to
bring an action for negligence, negligence per se, and
declaratory relief for the plaintiffs individually and on
behalf of all other similarly situated financial
institutions. Plaintiffs have filed a motion for appointment
of interim class counsel, ECF No. 28, and they recently
renewed this motion, ECF No. 47.
January 17, 2017 Noodles & Company filed a motion to
dismiss. ECF No. 34. The motion has been fully briefed. ECF
Nos. 36, 43.
survive a 12(b)(6) motion to dismiss, the complaint must
contain “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). While the Court must
accept the well-pleaded allegations of the complaint as true
and construe them in the light most favorable to the
plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210
(10th Cir. 2002), purely conclusory allegations are not
entitled to be presumed true, Ashcroft v. Iqbal, 556
U.S. 662, 681 (2009). However, so long as the plaintiff
offers sufficient factual allegations such that the right to
relief is raised above the speculative level, he has met the
threshold pleading standard. See Twombly, 550 U.S.
at 556. “The court's function on a Rule 12(b)(6)
motion is not to weigh potential evidence that the parties
might present at trial, but to assess whether the
plaintiff's complaint alone is legally sufficient to
state a claim for which relief may be granted.”
Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir.
& Company primarily argues that the economic loss rule
bars plaintiffs' claims. The economic loss rule generally
forbids recovery in tort for pure financial losses caused by
a defendant's negligence in its performance of a
contractual duty. Noodles & Company asserts that
plaintiffs' alleged economic injuries are not cognizable
under a negligence theory because its duty of care was
specified by the network of interrelated contracts among the
company, its bank, the bank card associations, and
before reviewing the merits of this argument, the Court must
consider which state's tort law applies to this dispute.
Noodles & Company contends that a choice of law analysis
would select the laws of plaintiffs' home states, and
that the economic loss rules of these states (as well as
Colorado) uniformly bar plaintiffs' claims. In response,
plaintiffs argue that the analysis would actually favor
applying Colorado law and, in any event, that there is no
conflict between the laws of Colorado and plaintiffs'
home states because each state would recognize their claims.
more than one body of law may apply to a claim, the Court
“need not choose which body of law to apply unless
there is an outcome determinative conflict between the
potentially applicable bodies of law.” Iskowitz v.
Cessna Aircraft Co., No. 07-CV-00968-REB-CBS, 2010 WL
3075476, at *1 (D. Colo. Aug. 5, 2010); see also
Restatement (Second) of Conflict of Laws § 145 cmt. i
(1971) (“When certain contacts involving a tort are
located in two or more states with identical local law rules
on the issue in question, the case will be treated for
choice-of-law purposes as if these contacts were grouped in a
single state.”). If there is no such conflict there is
no choice of law issue, and the forum state's law
each state's economic loss rule has its own nuances, the
relevant states all have a core standard in common. Every
state at issue here-Colorado, Oregon, Ohio, Indiana, and
Iowa-has adopted the economic loss rule. See Town of Alma
v. AZCO Const., Inc., 10 P.3d 1256, 1264 (Colo. 2000);
Abraham v. T. Henry Const., Inc., 249 P.3d 534, 540
(Or. 2011); Corporex Dev. & Constr. Mgt., Inc. v.
Shook, Inc., 835 N.E.2d 701, 704 (Ohio 2005);
Indianapolis-Marion Cnty. Pub. Library v. Charlier Clark
& Linard, P.C., 929 N.E.2d 722, 736 (Ind. 2010);
Annett Holdings, Inc. v. Kum & Go, L.C., 801
N.W.2d 499, 504 (Iowa 2011).
plaintiffs point out, each of these states also has an
exception allowing for recovery of economic losses due to the
breach of a duty arising independently of any contractually
created duties. See Town of Alma, 10 P.3d at 1264
(holding that Colorado's economic loss rule applies
“absent an independent duty of care under tort
law”); Abraham, 249 P.3d at 540 (noting that
Oregon's economic loss rule applies unless the tortfeasor
is subject to “a standard of care that is independent
of the terms of the contract, ” such as when a statute
or special relationship provides for a heightened duty of
care); Pavlovich v. Nat'l City Bank, 435 F.3d
560, 569 (6th Cir. 2006) (“Ohio law prevents the
recovery of purely economic losses in a negligence action . .
. where recovery of such damages is not based upon a tort
duty independent of contractually created duties.”);
Indianapolis-Marion Cnty. Pub. Library, 929 N.E.2d
at 736 (anticipating exceptions to Indiana's economic
loss rule for breach of independent duties of care including
“lawyer malpractice, breach of a duty of care owed to a
plaintiff by a fiduciary, [and] breach of a duty to settle
owed by a liability insurer to the insured”);
Annett Holdings, 801 N.W.2d at 504, 506 n.3 (noting
that the independent duty inquiry “rephrases the
question, but does not answer it, ” yet recognizing
such exceptions from the economic loss rule under Iowa law
for “claims of professional negligence against
attorneys and accountants” and “when the duty of
care arises out of a principal-agent relationship”).
all of the relevant states have comparable independent duty
exceptions to the economic loss rule, there is no
outcome-determinative conflict of law here. Accordingly,
Colorado law controls this dispute, though the outcome of
this case would necessarily be the same if the laws of
plaintiffs' home states applied instead.
merits, Noodles & Company argues that the duties of care
it allegedly breached stem not from an independent duty, but
from the series of contracts governing plaintiffs'
payment-card networks. When a customer swipes a credit or
debit card at Noodles & Company the merchant routes the
payment request through a payment-card network governed by a
bank card association, the largest of which are Visa and
MasterCard. The transaction is sent electronically to the
customer's “issuing bank, ” the financial
institution that issued the payment card. (SELCO Community
Credit Union and the other plaintiffs are issuing banks.)
After the issuing bank authorizes the transaction Noodles
& Company notifies its “acquiring bank, ” the
financial institution that processes credit and debit card
payments for the merchant. The ...