Federal Employees’ Lawsuit Reinstated for Data Breach of Personal Information

WASHINGTON – Federal employees will get their day in court after the D.C. Circuit Court of Appeals ruled last week that their lawsuit over an Office of Personnel Management data breach can be reinstated.

A trial court dismissed the lawsuit accusing OPM of negligence for allowing hackers in 2014 to breach the agency’s computer network, exposing sensitive information of 21.5 million people. The hack was believed to have been espionage by China.

The hacked information included Social Security numbers, birth dates, addresses and fingerprint records of employees and applicants to the federal government. OPM is the government’s main human resources agency.

A court in 2017 consolidated the ensuing lawsuits into two claims by the National Treasury Employees Union and the American Federation of Government Employees, who claim violations of the Privacy Act and the constitutional rights of their members.

A federal district court judge in Washington then said the labor unions lacked standing to sue and could not overcome the government’s immunity from liability.

However, the D.C. Circuit Court of Appeals disagreed, saying the evidence already showed some of the plaintiffs were subjected to fraud because of the data breach. It included identity theft, such as credit cards being opened and fraudulent tax returns in the victims’ names, according to the lawsuit.

Other victims are at a higher risk of identity theft, meaning they have enough of an injury to prove they have a good reason for a lawsuit, the appellate court ruled.

“There is no question that the OPM hackers … now have in their possession all the information needed to steal [plaintiffs’] identities,” the court’s ruling says. “It hardly takes a criminal mastermind to imagine how such information could be used to commit identity theft.”

The “plaintiffs have plausibly alleged a substantial risk of future identity theft that is fairly traceable to OPM’s … cybersecurity failings and likely redressable, at least in part, by damages,” the appellate court’s ruling says.

The appeals court added that the district court erred by finding the Privacy Act gives the government immunity from lawsuits despite the fact OPM was warned about data breaches before the 2014 attack.

Part of the evidence for negligence was based on past OPM inspector general reports that found failings in the agency’s computer security. The court said security remains lax.

“The complaint’s plausible allegations that OPM decided to continue operating in the face of those repeated and forceful warnings, without implementing even the basic steps needed to minimize the risk of a significant data breach, is precisely the type of willful failure to establish appropriate safeguards that makes out a claim under the Privacy Act,” the ruling says.

Also named as a defendant in the lawsuit was KeyPoint Government Solutions, a contractor that assisted with background checks and security clearance investigations on government employees and applicants.

The contractor had access to OPM’s computer databases. The hackers used KeyPoint’s credentials to breach the databases.

The appeals court also criticized the lower court for relying on information from Defense Department officials who speculated the Chinese government sponsored the computer breach.

The lower court reasoned that foreign government espionage was not likely to create a risk of identity thieves stealing money through bogus tax returns or credit card purchases.

The appellate court again disagreed, writing, “As an initial matter, the district court should not have relied, even in part, on its own surmise that the Chinese government perpetrated these attacks.”

The case is AFGE, NTEU v. Office of Personnel Management, U.S. Ct. App. for D.C., No. 17-5217, June 21, 2019.