Judge Sees Progress in Zappos Class Action

LAS VEGAS (CN) - Citing progress toward settlement, a federal judge denied Zappos' motions to dismiss and strike in a class action blaming it for a 2012 online breach of customer data.

"The parties report that they are making good progress toward settlement, and they have stipulated to stay the proceedings until January 2015 pending further mediation," U.S. District Judge Robert Jones wrote in an order on Thursday. "Therefore, the court, without expressing any position on the merits of the case, denies without prejudice defendant's motions."

Zappos claimed in its motion to dismiss that the "alleged data breach occurred in Nevada to data in possession of a Nevada company" and that the plaintiffs "have already conceded that Nevada law applies. Thus, non-Nevada statutory claims are barred by conflicts-of-law principles."

Zappos denied that it had unjustly enriched itself.

"As more and more time has passed since the incident occurred, it is ever clearer that the incident had no material adverse effect on any consumer. Although nearly two years have passed, it appears that no one suffered any out-of-pocket loss in the form of fraud, identity theft or unauthorized purchases as a result of the incident," Zappos said in the motion. "This lack of any impact from the incident is most likely because of the limited nature of the data potentially affected, because password data was not taken in a form usable by the thieves and because of Zappos' rapid action to reset customer passwords."

Zappos also asked the court to strike the class's claims for punitive damages and restitution, saying Nevada law allows punitive damages "only where it is proven by clear and convincing evidence that the defendant has been guilty of 'oppression, fraud or malice, express or implied.'"

Zappos claimed the class did not "allege the requisite elements of a punitive damages claim, much less a single fact evidencing any oppressive, fraudulent or malicious conduct by Zappos."

Zappos claimed the class is not owed any restitution, as its members were "indisputably recompensed when Zappos provided the goods purchased."

The class action arose from a January 2012 hacker attack on Zappo servers in Shepherdsville, Ky. Hackers obtained the names, phone numbers, account numbers, passwords, email addresses, billing and shipping addresses and last four digits of credit cards of millions of Zappos customers. On Jan. 16, 2012, Zappos sent emails to 24 million customers notifying them of the data breach.

Zappos, which was bought by Amazon.com in 2009, is represented by Robert McCoy and Raleigh C. Thompson.

The class, which sued on June 14, 2012, is represented by lead counsel Mark Gray.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit