Federal Appellate Panel Sends TJX Case Back To Court, Move Likely To Cost TJX Millions More

When a federal appellate panel ruled on Monday (March 30) that it was sending a small part of one of the civil lawsuits involving TJX's death breach back to the district court, it was a very narrow decision. But the act of sending it back and allowing for discovery to start again is likely to force TJX to spend millions more, according to attorneys watching the case. Perhaps even more importantly, the ruling is likely to slightly alter the risk-cost balance of retail security, putting just a little more pressure on chains to invest in their security operations. In a typical business case, "the discovery process in litigation is extremely expensive, astronomically expensive," said Terry Klein, an attorney with the Henshon Parker law firm in Boston. "If the decision changes anything, it changes how a business executive should think about what their exposure is when they are doing business in Massachusetts. They have a greater overall exposure today than they did yesterday morning. The risk calculation has changed because of the increased discovery process." It is true that discovery can be frightening for typical companies involved in class-action civil lawsuits, but for TJX, it can be positively terrifying. Throughout two trials, TJX showed itself to be far more worried about revealing thus-far-unreleased security details than monetary payments or almost anything else. Making matters even worse for TJX is that the judge who had handled the trial—U.S. District Court Judge William Young—is the same the judge who is handling the trial yet again. And Young, near the end of the trial, became very fed up with TJX efforts to keep documents secret. Indeed, the first trials were settled before much of the discovery process was completed. The prospect of opening up the document floodgates again with opposing counsel and a public-access-friendly judge is likely to be anything but comforting to TJX. In all fairness, Young ruled in favor of TJX on the vast majority of its procedural and technical motions, but not necessarily on secrecy matters. Although the case is merely going back to discovery, the cost of that continued discovery could cost TJX "conceivably millions of dollars in additional expenses," Klein said. That, coupled with TJX's intense fear of disclosure of more details about their security efforts, will likely push TJX to be more generous at the negotiating table with plaintiff attorneys, incentized to do almost anything rather than endure and risk more discovery. "This decision will encourage settlement," Klein said. The appellate panel ruled in favor of Young on most issues, but what is sending this case back is an argument about whether TJX had engaged in unfair or deceptive trade practices because it accepted credit cards and that implied that they were a safe and secure retailer that would protect the credit card data. Furthermore, the argument before the panel suggested that TJX's lack of security was "unfair" under the Federal Trade Commission Act, partially reinforced because the FTC acted against TJX. The panel found the FTC action argument persuasive. But the panel also got into an argument about what is needed to establish sufficient wrongdoing. TJX had argued that "either deliberate wrongdoing or personal benefit" was needed. The panel disagreed. (See the full text of the panel's decision.) "Perhaps policy might make this a desirable stopping point, given the vagueness of the unfairness standard and availability of a private damages remedy unchecked by agency prudence. But Massachusetts decisions do not say that deliberate wrongdoing or self-benefit are required. Seemingly systematic recklessness may suffice. Knowing so little about the extent of TJX's or Fifth Third's fault at the complaint stage, we think that, at best, TJX's argument is one that would have to await discovery and perhaps a summary judgment motion." The panel also ruled that having any location in Massachusetts is sufficient for jurisdiction, something TJX had challenged.