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McConnell v. Georgia Department of Labor

Court of Appeals of Georgia, Fourth Division

May 11, 2018

MCCONNELL et al.
v.
GEORGIA DEPARTMENT OF LABOR.

          ELLINGTON, P. J., MERCIER, J., and SENIOR APPELLATE JUDGE PHIPPS

          Ellington, Presiding Judge.

         Thomas McConnell filed this class action against the Georgia Department of Labor, alleging several tort claims in connection with the Department's disclosure of personal information of McConnell and the proposed class members. After a hearing, the Superior Court of Cobb County granted the Department's motion to dismiss McConnell's complaint for failure to state a claim upon which relief can be granted. McConnell appealed, and, in McConnell v. Ga. Dept. of Labor, 337 Ga.App. 457 (787 S.E.2d 794) (2016), we affirmed. The Supreme Court of Georgia granted a writ of certiorari to consider, inter alia, whether this Court erred "in not addressing the trial court's holding that McConnell's tort claims were barred by sovereign immunity, which is a jurisdictional issue, before addressing the merits of those claims."[1] The Supreme Court held that we did err in this manner, vacated our decision, and remanded with direction that we "make the threshold determination of whether the trial court erred in its holding that McConnell's claims are barred by sovereign immunity." McConnell v. Ga. Dept. of Labor, _ Ga. _ (805 S.E.2d 79) (2017). For the reasons explained below in Division 1, we conclude that the trial court did err in so holding and reverse the judgment in relevant part. Because the trial court did not err in dismissing McConnell's complaint on the basis that it fails to state a claim upon which relief can be granted, as explained below in Divisions 2 through 4, we affirm the judgment in part in this regard.

         In his complaint, McConnell alleges that a Department employee, while acting within the scope of his official duties or employment, sent an email to approximately 1, 000 Georgians who had applied for unemployment benefits or other services administered by the Department. The email included a spreadsheet that listed the name, social security number, home phone number, email address, and age of over 4, 000 Georgians who had registered for Department services, including McConnell.[2]McConnell alleges that the employee's conduct constituted the torts of negligently disclosing "personal information" as defined under Georgia law, breach of fiduciary duty, and invasion of privacy (public disclosure of private facts). McConnell seeks economic damages, specifically, out-of-pocket costs related to credit monitoring and identity protection services and damages resulting from the adverse impact to his credit score from the closing of accounts. In addition, he seeks damages for the "fear, upset, anxiety and injury to peace and happiness related to the disclosure of [his] personal identifying information, as the disclosure of personal identifying information had provided all the raw material necessary to facilitate the theft of [his identity] and unauthorized charges upon [his] credit or bank accounts." He does not allege that an act of identity theft has yet occurred.

         1. McConnell contends that the trial court erred in holding that the state has not waived its sovereign immunity pursuant to the Georgia Tort Claims Act, OCGA §§ 50-21-20 through 50-21-37, for the type of losses that he alleges in his claims.[3]

         With regard to tort claims against the state, the General Assembly adopted the Act for the express purpose of "balanc[ing] strict application of the doctrine of sovereign immunity, " which, in its breadth, [4] "may produce inherently unfair and inequitable results, against the need for limited exposure of the state treasury to tort liability." (Citation and punctuation omitted.) Bd. of Regents of Univ. Sys. of Ga. v. Myers, 295 Ga. 843, 845 (764 S.E.2d 543) (2014).[5] Under the Act, the state waives its sovereign immunity with respect to actions brought in Georgia courts "for the torts of state officers and employees while acting within the scope of their official duties or employment and shall be liable for such torts in the same manner as a private individual or entity would be liable under like circumstances[, ]" subject to exceptions and limitations set forth in the Act. OCGA § 50-21-23 (a). A "claim" under the Act is defined as "any demand against the State of Georgia for money only on account of loss caused by the tort of any state officer or employee committed while acting within the scope of his or her official duties or employment." OCGA § 50-21-22 (1). OCGA § 50-21-22 (3) provides: "'Loss' means personal injury; disease; death; damage to tangible property, including lost wages and economic loss to the person who suffered the injury, disease, or death; pain and suffering; mental anguish; and any other element of actual damages recoverable in actions for negligence."

         "Because sovereign immunity is not an affirmative defense, but rather a privilege that is subject to waiver by the State, the party seeking to benefit from that waiver has the burden of establishing the waiver of sovereign immunity." (Citations and footnote omitted.) Williams v. Ga. Dept. of Corrections, 338 Ga.App. 719, 720 (1) (791 S.E.2d 606) (2016). "We review de novo a trial court's denial of a motion to dismiss based on sovereign immunity grounds, which is a matter of law." (Citation and punctuation omitted.) Ga. Dept. of Transp. v. King, 341 Ga.App. 102, 103 (798 S.E.2d 492) (2017).

         (a) Economic damages/financial harm. With regard to McConnell's alleged economic damages, the Department argues that sovereign immunity is waived under the Act only for a "loss" as that term is defined in the Act and that McConnell has not suffered such a loss. Specifically, the Department argues, based on the definition of "loss" in OCGA § 50-21-22 (3), that the Act "expressly limits the recovery of economic damages to a plaintiff who has also suffered a personal injury, disease, death." Because McConnell alleges that he suffered economic damages as a result of the Department's email disclosure, but does not allege that the email disclosure "caused him to suffer a disease, death, or injury to his person[, ]" the Department contends, McConnell cannot recover economic losses under the Act.

         The Department's strained reading of OCGA § 50-21-22 (3) cannot be supported because the subsection, after giving specific examples of injuries that are actionable, expansively adds "any other element of actual damages recoverable in actions for negligence." In Dept. of Transp. v. Montgomery Tank Lines, Inc., 276 Ga. 105 (575 S.E.2d 487) (2003), the Supreme Court of Georgia considered the effect of that "broad last clause in § 50-21-22 (3)" and rejected the agency's proposed narrow reading. Id. at 107-108 (1). The Supreme Court found that, notwithstanding that the losses specifically listed (personal injury; disease; death; damage to tangible property; pain and suffering; and mental anguish) are all so-called "first-party losses, " the "term of enlargement" (that is, the phrase "any other element of actual damages recoverable in actions for negligence") is "specific and unambiguous and requires a broader meaning than that attributed to it" by the agency. Id. at 107 (1). The Supreme Court explained: "[c]learly, an action for contribution and indemnification is an action for negligence, and the damages that the contribution plaintiffs seek to recover are unquestionably an element of actual damages[.]" Id. at 107 (1). The Supreme Court found that the concluding phrase of the "loss" definition means that sovereign immunity is not waived only for a person who directly suffers the personal injury, disease, death, or other loss but is broad enough to include claims for contribution and indemnification. Id. at 108 (1). Furthermore, the Supreme Court concluded, the fact that the waiver of sovereign immunity is subject to specific "exceptions" set forth in OCGA § 50-21-24, and that contribution and indemnity actions are not listed as exceptions, "further buttresses the conclusion that such actions against the State are not categorically precluded by the [Act]." Id.

         Similarly, we conclude in this case that the catch-all phrase, "any other element of actual damages recoverable in actions for negligence, " requires a broader meaning than that attributed to it by the Department. See Dept. of Transp. v. Montgomery Tank Lines, Inc., 276 Ga. at 107-108 (1). The General Assembly certainly could have modified "any other element of actual damages recoverable in actions for negligence" with "sustained by a person who suffered injury, disease, or death" if it had intended to limit the final phrase in this way.[6] Based on the express terms of OCGA § 50-21-22 (3) and the cases cited herein, we conclude that losses under the Act may include economic losses suffered by a plaintiff who has not also suffered a personal injury, disease, or death.

         In a related vein, the Department contends that any time, effort, and money that McConnell allegedly spent monitoring his credit is not an actual injury that is recoverable in negligence cases. Acknowledging that Georgia courts have not addressed whether obtaining credit monitoring services after the disclosure of confidential information constitutes a cognizable injury, the Department contends that courts in other jurisdictions have rejected such claims. In addition, the Department contends that McConnell cannot recover for an increased risk of future identity theft because such risk does not constitute an element of actual damages that is recoverable under Georgia law.[7] Because McConnell alleged damages resulting in part from the adverse impact to his credit score from the closing of accounts, we cannot say that he seeks compensation only for credit-monitoring expenses or the risk of future economic damages from identity theft. Whether McConnell can prove that he has suffered financial harm as a result of the adverse impact to his credit score from the closing of accounts is not a question to be resolved at this threshold. See Upper Oconee Basin Water Auth. v. Jackson County, 305 Ga.App. 409, 412 (1) (699 S.E.2d 605) (2010) ("A motion to dismiss asserting sovereign immunity is based upon the trial court's lack of subject matter jurisdiction, rather than the merits of the plaintiff's claim.") (citation and punctuation omitted); Dept. of Transp. v. Dupree, 256 Ga.App. 668, 671 (1) (570 S.E.2d 1) (2002) (accord).[8]

         (b) Mental anguish. With regard to McConnell's claims for damages for his continuing fear and anxiety of potential identity theft in the future, the Department invokes Georgia's so-called "impact rule, " arguing that "[t]he 'impact rule' states that '[i]n a claim concerning negligent conduct, a recovery for emotional distress is allowed only where there is some impact on the plaintiff, and that impact must be a physical injury[, ]'" quoting Ryckeley v. Callaway, 261 Ga. 828 (412 S.E.2d 826 (1992). To the extent the Department suggests that the impact rule applies to any claim concerning negligent conduct, this is incorrect. To the contrary, the impact rule applies specifically to claims for negligent infliction of emotional distress. See Coon v. Medical Center, Inc., 300 Ga. 722, 734 (4) (797 S.E.2d 828) (2017); Bruscato v. O'Brien, 307 Ga.App. 452, 457 (1) (705 S.E.2d 275) (2010), aff'd, 289 Ga. 739, 715 S.E.2d 120 (2011); Clarke v. Freeman, 302 Ga.App. 831, 836 (1) (692 S.E.2d 80) (2010); Charles R. Adams, Ga. Law of Torts § 29:2 (b) (updated December 2017). The Department has not shown that Georgia law requires proof that a plaintiff suffered a physical impact and a physical injury in order to recover for the claims McConnell alleges - negligent disclosure of personal information, invasion of privacy, and breach of fiduciary duty - even where the alleged damages include emotional harm.

         Having found no merit in any of the Department's arguments, as explained above, we conclude that McConnell carried his burden of showing that the trial court had subject matter jurisdiction over his claims for negligently disclosing personal information, breach of fiduciary duty, and invasion of privacy, which are tort claims that are not excepted from the waiver of sovereign immunity for tort claims pursuant to the Act, [9] and which are based on the conduct of state officers and employees while acting within the scope of their official duties or employment. Accordingly, the trial court erred in granting the Department's motion to dismiss McConnell's claims on the basis of the bar of sovereign immunity. The judgment is therefore reversed in relevant part. McCoy v. Ga. Dept. of Admin. Svcs., 326 Ga.App. 853, 858 (755 S.E.2d 362) (2014); Williamson v. Dept. of Human Resources, 258 Ga.App. 113, 116 (1) (572 S.E.2d 678) (2002); McCrary Engineering Corp. v. City of Bowdon, 170 Ga.App. 462, 466 (1) (317 S.E.2d 308) (1984).

         Because the threshold issue of sovereign immunity is decided in favor of the trial court having had subject matter jurisdiction, we must again consider the merits of McConnell's claims.

         2. McConnell contends that the trial court erred in ruling that he failed to state a claim for negligent disclosure of personal information, based, inter alia, on its determination that as a matter of law "there is no legal duty [under Georgia law] to safeguard personal information."

[A] motion to dismiss for failure to state a claim upon which relief may be granted should not be sustained unless (1) the allegations of the complaint disclose with certainty that the claimant would not be entitled to relief under any state of provable facts asserted in support thereof; and (2) the movant establishes that the claimant could not possibly introduce evidence within the framework of the complaint sufficient to warrant a grant of the relief sought. If, within the framework of the complaint, evidence may be introduced which will sustain a grant of the relief sought by the claimant, the complaint is sufficient and a motion to dismiss should be denied. In deciding a motion to dismiss, all pleadings are to be construed most favorably to the party who filed them, and all doubts regarding such pleadings must be resolved in the filing party's favor. On appeal, a trial court's ruling on a motion to dismiss for failure to state a claim for which relief may be granted is reviewed de novo.

(Citation and punctuation omitted.) RES-GA McDonough, LLC v. Taylor English Duma LLP, _ Ga. _ (Case No. S17A1125, decided October 30, 2017).

In order to have a viable negligence action, a plaintiff must satisfy the elements of the tort, namely, the existence of a duty on the part of the defendant, a breach of that duty, causation of the alleged injury, and damages resulting from the alleged breach of the duty. The legal duty is the obligation to conform to a standard of conduct under the law for the protection of others against unreasonable risks of harm. This legal obligation to the complaining party must be found, the observance of which would have averted or avoided the injury or damage; the innocence of the plaintiff is immaterial to the existence of the legal duty on the part of the defendant in that the plaintiff will not be entitled to recover unless the defendant did something that it should not have done, i.e., an action, or failed to do something that it should have done, i.e., an omission, pursuant to the duty owed the plaintiff under the law. The duty can arise either from a valid legislative enactment, that is, by statute, or be imposed by a common law principle recognized in the caselaw. The existence of a legal duty is a question of law for the court.

(Citations and punctuation omitted.) Rasnick v. Krishna Hospital, Inc., 289 Ga. 565, 566-567 (713 S.E.2d 835) (2011).[10]

         McConnell contends that a common law duty exists to safeguard and protect the personal information of another and argues that OCGA §§ 10-1-393.8 and 10-1-910 help establish the duty of care to be exercised by those who collect or hold personal information. In OCGA §§ 10-1-910, the General Assembly set out legislative findings underlying the Georgia Personal Identity Protection Act, OCGA §§ 10-1-910 through 10-1-915 (the "GPIPA"), enacted in 2005.[11] In the GPIPA, the General Assembly found, inter alia, that "[t]he privacy and financial security of individuals is increasingly at risk, due to the ever more widespread collection of personal information by both the private and public sectors[, ]" that '[i]dentity theft is one of the fastest growing crimes committed in this state[, ]" and that "[i]dentity theft is costly to the marketplace and to consumers[.]" OCGA ยง 10-1-910 (1), (6). Because "[v]ictims of identity theft must act quickly to minimize the damage[, ] . . . expeditious notification of unauthorized acquisition and possible misuse of a person's personal ...


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