Tag: Neiman Marcus

Neiman Marcus Asks Full 7th Circuit to Consider Standing Ruling in Breach Suit

A Seventh Circuit panel that allowed a data breach suit against Neiman Marcus to proceed misapplied the Supreme Court’s precedents on standing and, “if allowed to stand, will impose wasteful litigation burdens on retailers and the federal courts,” the retailer argues in a petition filed yesterday asking the full Seventh Circuit to rehear the case.

Last month, a Seventh Circuit panel ruled that Neiman Marcus customers whose credit card information potentially was exposed in a 2013 breach of the retailer’s computer systems could proceed with their proposed class action lawsuit against the retailer. The panel found that the plaintiffs alleged sufficient “injuries associated with resolving fraudulent charges and protecting oneself against future identity theft” to establish their standing to sue in federal court, and that affected customers “should not have to wait until hackers commit identity theft or credit‐card fraud in order to give the class standing, because there is an ‘objectively reasonable likelihood’ that such an injury will occur.” The panel also found it “telling” that the retailer offered affected customers a year of free credit monitoring and identity-theft protection, and appeared to interpret this as a tacit acknowledgment that the risk to customers was more than “ephemeral.”

Neiman Marcus’s rehearing petition argues, among other things, that the panel’s reliance on the “objectively reasonable likelihood” standard for determining if a plaintiff has standing based on a potential future injury directly conflicts with a 2013 Supreme Court ruling, Clapper v. Amnesty International USA. In Clapper, the Supreme Court said plaintiffs seeking to establish standing based on a risk of future injury must show that the threatened injury is “certainly impending,” and the high court held that “the Second Circuit’s ‘objectively reasonable likelihood’ standard is inconsistent” with that requirement.

“By using an obviously wrong and overly lenient standard to determine whether the plaintiffs’ alleged future injuries provided standing, the panel committed a critical error,” Neiman Marcus’s petition argues.

In addition, Neiman Marcus argues that “there was no risk … that [plaintiffs] would be financially responsible for any fraudulent credit card charges,” and that breaches like that experienced by Neiman Marcus — which involved only payment card data and did not expose sensitive data such as Social Security numbers — “create no meaningful risk of identity theft.” Neiman Marcus’s petition also criticizes the panel for using the retailer’s offer of a year of free credit monitoring and identity-theft insurance to a broad group of customers — including customers whose data could not “conceivably” have been compromised in the breach — as evidence that the risk of injury to customers was sufficiently concrete. Such a holding “creates an unfortunate disincentive for companies to do so in the future,” Neiman Marcus wrote.

A rehearing is especially important in this case, the petition argues, because although the panel’s decision conflicts with rulings by the Third Circuit and “numerous district court decisions,” Neiman Marcus’s case is “the only appellate decision squarely considering a retail data breach in which only payment card data is stolen,” and thus “the opinion could well shape the law of standing in such cases for years to come.”

ARTICLE BY Michael Beder of Covington & Burling LLP

© 2015 Covington & Burling LLP

Micro Bargaining Units Coming To a Workplace Near You

Steptoe Johnson PLLC Law Firm

It is no secret that many employers take steps to try and keep their workplaces union-free.  One of the newer concerns for employers in that camp is the possibility that employees could form a “micro bargaining unit,” which is a unit of employees that make up only a small portion of the workforce. 

Act Now! to Preserve Your Collective Bargaining Rights!

In a 2011 case, Specialty Healthcare, the National Labor Relations Board (NLRB) established a new standard for determining appropriate bargaining units.  Specifically, the Board stated that, in evaluating a potential unit, it would focus on the community of interest among the petitioning employees.  According to the Board in that case, factors such as the extent of common supervision, interchange of employees, and geographic considerations should all be taken into account when evaluating a proposed unit.

Specialty Healthcare also placed a significant burden on employers trying to challenge smaller units.  The Board stated that, if an employer wished to argue that a unit should include additional employees, the employer needs to show that employees in a larger unit have an “overwhelming” community of interest with those in the proposed smaller unit.  That’s a higher burden than what has been applicable in the past, and not one easy to meet.

The effects of Specialty Healthcare were evident in a more recent Board decision.  In Macy’s Inc., the Board recently confirmed that 41 Macy’s cosmetic and fragrance department sales employees could form a bargaining unit.  Those 41 employees made up about one-third of the employees at that Macy’s store.  Macy’s argued that this unit was inappropriate because cosmetic and fragrance employees shared an overwhelming community of interest with the other sales employees, but the Board saw it differently.

The Board noted several factors that established the community of interest among the cosmetic and fragrance employees: they all worked in the same department, were supervised by the same manager, had limited contact with other sales employees, and were paid on the same commission-based based structure.  Additionally, the Board pointed out that Macy’s rarely transferred employees between the cosmetic and fragrance department and other store departments.

While the Macy’s, Inc. case was not a positive development for employers, the NLRB then rejected a proposed micro-unit about a week later in a different case at Bergdorf-Goodman, a Nieman Marcus subsidiary.  In that case, the Board found that salon shoes salespeople and contemporary shoe salespeople lacked a community of interest.  In so deciding, the Board noted that the proposed unit in that case was not created based on any administrative or operational lines established by the employer.  Additionally, the employees had different department managers, different floor managers, and different directors of sales.

While both of these cases dealt with the retail industry, the results are important to employers in any sector, since the Specialty Healthcare standard certainly can be applied to create micro-bargaining units in other industries.  In fact, employers can probably expect unions to try organizing smaller bargaining units within larger companies, particularly where efforts to organize larger groups have proved unsuccessful.  This strategy allows unions to select pro-union employee groups and increase their likelihood of winning an election.

If there’s one proactive takeaway from these cases, it’s that employers need to think in advance about how they can make themselves less vulnerable to micro-unit organizing.  For example, cross-training employees and having them work in different departments makes it less likely a union could demonstrate a community of interest among a small group of employees.  Of course, any steps taken to combat against micro-unit organizing also need to be evaluated for their operational feasibility.  In most cases, it’s probably best that employers contact experienced legal counsel to weigh the pros and cons involved.