Pinero v. Jackson Hewitt Tax Service Inc. et al

Filing 9

First AMENDED COMPLAINT with Jury Demand against all defendants filed by Vicki L. Pinero. (Attachments: # 1 Exhibit A.Part 1, # 2 Exhibit A.Part 2, # 3 Exhibit B, # 4 Exhibit C, # 5 Exhibit D, # 6 Exhibit E, # 7 Exhibit F.Part 1, # 8 Exhibit F.Part 2, # 9 Exhibit G, # 10 Exhibit H, # 11 Exhibit I.Part 1, # 12 Exhibit I.Part 2, # 13 Exhibit I.Part 3, # 14 Exhibit J.Part 1, # 15 Exhibit J.Part 2, # 16 Exhibit K.Part 1, # 17 Exhibit K.Part 2, # 18 Exhibit L, # 19 Exhibit M, # 20 Exhibit N, # 21 Exhibit O, # 22 Exhibit P, # 23 Exhibit Q)(Shartle, Bryan)

Pinero v. Jackson Hewitt Tax Service Inc. et al

Doc. 9

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA VICKI L. PINERO, individually and on ) behalf of all others similarly situated, ) ) Plaintiffs, ) ) v. ) ) JACKSON HEWITT TAX SERVICE ) INC.; JACKSON HEWITT INC.; and, ) CRESCENT CITY TAX SERVICE, ) INC. d/b/a JACKSON HEWITT TAX ) SERVICE, ) ) Defendants. ) Civil Action No. 08-03535 Sec. R JUDGE SARAH S. VANCE Mag. 3 MAGISTRATE KNOWLES, III JUDGE DANIEL E.

FIRST AMENDED CLASS ACTION COMPLAINT NOW INTO COURT, through undersigned counsel, comes plaintiff, Vicki L. Pinero ("Plaintiff"), who, on behalf of herself and all others similarly situated, files this First Amended Class Action Complaint against defendants, Jackson Hewitt Tax Service Inc. ("JHTSI"); Jackson Hewitt Inc. ("JHI"); and, Crescent City Tax Service, Inc. d/b/a Jackson Hewitt Tax Service ("CCTSI") (jointly referred to as "Defendants"). As of this filing, Defendants have not answered. Plaintiff respectfully shows:

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Dockets.Justia.com

INTRODUCTION 1. Defendants are part of the second largest tax preparation organization in the

world. JHTSI, the ultimate parent corporation, reported nearly $300 million in total revenue for 2007. As part of their lucrative bussiness, Defendants are provided the most sensitive financial and personal information about their customers, including, but not limited to, social security numbers, dates of birth, driver's license numbers, names and social security numbers for dependents, and annual income. Defendants' customers entrust Defendants with this highly confidential information with the expectation that the information will not be improperly disclosed or placed in the public domain. 2. Defendants represent that protecting the privacy of their customers'

financial and personal information is a "core value" and that they have state-of-the-art policies, practices, and procedures to prevent improper disclosures of such information. 3. Despite Defendants' representations, and numerous federal and state laws,

regulations, and rules requiring that Defendants safeguard and properly dispose of documents containing customer information, Defendants have a practice of throwing such documents in public dumpsters. These highly confidential documents are thrown away in original form--not shreded or altered in any way to protect from disclosure the information contained therein. These highly confidential documents are ready for the taking by any willing "dumpster diver" looking to commit identity theft or fraud. 4. This action seeks class-wide redress for Defendants' flagrant disregard of

the financial and personal welfare and privacy of their customers. Defendants' actions 2

violate numerous federal and state laws, regulations, and rules. Plaintiff and the putative class seek monetary, declaratory, and injunction relief to remedy Defendants' unlawful practices. PARTIES 5. 6. Plaintiff is a Louisiana citizen, residing in Metairie, Louisiana. Upon information and belief, JHTSI is the second largest tax preparation

company in the U.S. (behind H&R Block) with approximately 6,800 franchised and company-owned offices throughout the U.S. JHTSI represents that the company:

specializes in electronic filing (IRS e-file); provides full service, individual federal and state income tax preparation; and, facilitates related financial products. JHTSI is a public

company traded on the NYSE under the symbol "JTX." In its 2007 Annual Report, JHTSI reported $293.2 million in total revenue for the fiscal year 2007. See Exhibit A, JHTSI 2007 Annual Report. Upon information and belief, JHTSI is a Delaware corporation with its principle place of business in Parsippany, New Jersey. 7. Upon information and belief, JHI is a wholly owned subsidiary of JHTSI and

is responsible for franchising the Jackson Hewitt Tax Service brand. JHI is also the owner of Tax Services of America, Inc., a Delaware corporation, which operates the companyowned offices. Upon information and belief, JHI is a Virginia corporation with its principle place of business in Parsippany, New Jersey. 8. Upon information and belief, CCTSI is the franchise owner of approximately

37 Jackson Hewitt Tax Service locations in the greater New Orleans area, including the 3

location at 6601 Veterans Blvd., Metairie, LA 70003. Upon information and belief, Max M. Hirsch, Anne Hirsch, and Barbara Hirsch Troncoso are the owners and operators of CCTSI. JURISDICTION AND VENUE 9. This Court has jurisdiction over this action and Defendants pursuant to 28

U.S.C. §§ 1331 (federal question jurisdiction) and 1367 (supplemental jurisdiction). Further, this Court has jurisdiction over this action and Defendants pursuant to 28 U.S.C. § 1332 because there is diversity of citizenship between Plaintiff and at least 1 of the Defendants and the matter in controversy exceeds the sum or value of $5 million, exclusive of interest and cost. 10. Venue is proper in this Court per 28 U.S.C. § 1391 because a substantial

part of the events giving rise to Plaintiff's claims occurred in this judicial district. BACKGROUND 11. The Social Security Administration ("SSA") reports "[i]dentity theft is one of

the fastest growing crimes in America." Exhibit B, SSA Pamphlet, at p. 1. In an October 24, 2004 story, The New York Times reported that identity theft is a national "epidemic." See Exhibit C, 10/24/04 NYT Article. The Consumer Sentinel database, maintained by the Federal Trade Commission ("FTC"), indicates that the highest percentage of complaints received by the FTC since 2001 has concerned identity theft. 12. "Identity theft is the intentional use or possession or transfer or attempted use

with fraudulent intent by any person of any personal identifying information of another 4

person to obtain, possess, or transfer, whether contemporaneously or not, credit, money, goods, services, or any thing else of value without the authorization or consent of the other person." La. Rev. Stat. § 14:67.16(B). Identity theft usually leads to "identity fraud." The Economic Crime Institute ("ECI") notes: Identity fraud, which encompasses identity theft, is the use of false identifiers, false or fraudulent documents, or a stolen identity in the commission of a crime. It often emanates from a breeder document created from fictitious or stolen identifiers. The breeder document, such as a driver's license or birth certificate, is used to spawn other documents, resulting in the creation of a credible identity which allows a criminal or terrorist access to credit cards, employment, bank accounts, secure facilities, computer systems, and the like. Once a criminal or terrorist has an established identity, he can use it to facilitate a variety of economic crimes, drug trafficking, terrorism, and other crimes. Exhibit D, 10/28/03 ECI Report, at p. 4. In its 2006 report, the ECI reported that identity fraud continues to be a growing problem. See Exhibit E, 06/06 ECI Report, at pp. 3-5. 13. In November 2007, the FTC released its 2006 Identity Theft Survey Report.

See Exhibit F, 11/07 FTC Survey Report. The survey estimated that 8.3 million American consumers, or 3.7 % of the adult population, were the victims of identity theft in 2005. Id. at pp. 3-4. The report noted that, in most cases, the victims were not legally responsible for the cost of the fraudulent transaction because of various federal and state laws limiting the liability of consumers for fraudulent transactions by identity thieves. Id. at p. 6, fn. 5. Notwithstanding these consumer laws, however, the report found that many victims still incurred some cost associated with the theft of their identity. Id. at pp. 5-7. The report found many victims incurred out-of-pocket expenses of $40 to $5,000. Id. The report also found many victims spent hundreds, and sometimes thousands, of hours in attempting to 5

resolve the problems related to the identity theft. Id. The report determined that 56% of the victims did not know how their personal information was stolen, and 5% of the victims learned that their personal information was obtained or stolen from a company that had the information. Id. at pp. 30-31. The report noted that 37% of the victims experienced problems beyond the out-of-pocket expenses and the time they spent resolving the problem. Id. at pp. 41-42. These problems included: being harassed by debt collectors; being denied new credit; being unable to use existing credit cards; being unable to get loans; having their utilities cut off; being subject to a criminal investigation or civil suit; being arrested; and, having difficulties obtaining or accessing bank accounts. Id. The report concluded that many victims "said they were most affected by the emotional impact of the ID theft including the effects of stress on their lives and their health or the emotional toll resulting from the realization that they were vulnerable or had been betrayed." Id. at p. 53. 14. As reported by The New York Times in a December 21, 2003 article, entitled

Dumpster-Diving for Your Identity, "[i]t's a popular perception that most identity theft happens on the Internet, but . . . low-tech methods of getting people's personal information are far more effective." Exhibit G, 12/21/03 Identity Theft Article. The Federal Bureau of Investigation warns: An individual or business that fails to dispose properly of personal identification information, by shredding or mutilating, could find themselves susceptible to a "dumpster diver"--an individual who retrieves discarded material looking for anything of value. Dumpster divers obtain account numbers, addresses, and dates of birth from financial, medical, and personal records--all of which they can use to assume an identity. Exhibit H, FBI 08/00 Bulletin, at p. 9. 6

15.

With this backdrop, and due to the increasing cost associated with identity

theft and fraud, President George W. Bush issued Executive Order 13402 in 2006, establishing the President's Task Force on Identity Theft, which is charged with developing a comprehensive national strategy to combat identity theft. The President directed the task force to make recommendations on ways to improve the effectiveness and efficiency of the federal government's efforts in the areas of identity theft awareness, prevention, detection, and prosecution. 16. In 2007, the President's task force issued a report. See Exhibit I, Task Force

Report Vol. I. Not surprisingly, the task force noted that one of the "tools of the trade" for identity thieves is "dumpster diving." Id. at pp. 13-15. Reports issued by other independent sources, including the Center for Identity Management and Information Protection, have likewise confirmed that "dumpster diving" is a common "tool" used by identity thieves. See Exhibit J, CIMIP Report; see also Exhibit B, SSA Pamphlet, at p. 3 ("Identity thieves get your personal information by . . . [r]ummaging through your trash, the trash of businesses and public trash dumps for personal data[.]"). 17. As noted in the task force report, there is a voluminous amount of written

guidance readily available for businesses on how to safeguard the personal information of consumers. See Exhibit K, Task Force Report Vol. II, at pp. 19-26. Much of this written guidance has been available for several years. Much of this guidance is "common sense." 18. For example, the FTC has issued a guide for businesses, entitled Protecting

Personal Information. See Exhibit L, FTC Guide for Businesses. In its guide, the FTC 7

notes that 1 of the 5 "key principles" to a "sound data security plan" is proper disposal of documents containing confidential, financial or personal information. Id. at p. 3. The FTC notes that businesses handling such documents must ensure the documents are "unreadable" before throwing them away. Id. at pp. 20-21. Per the FTC, such documents must be burned, shredded, or pulverized to make sure that identity thieves cannot steal the documents from the trash. Id. 19. The FTC has also issued guidance to businesses on what they should do when

an "information compromise" has occurred creating the possibility for identity theft. See Exhibit M, FTC Info. Comp. Guide. 20. In a press release relating to a settlement of an FTC lawsuit against a

mortgage company that left loan documents with consumers' sensitive financial and personal information in and around an unsecured dumpster, FTC Chairman Deborah Platt Majoras stated, "Every business, whether large or small, must take reasonable and appropriate measures to protect sensitive consumer information, from acquisition to disposal." Exhibit N, FTC 12/18/07 Press Release. FACTS 21. In 2006, Plaintiff visisted the Jackson Hewitt office located at 6601

Veterans Blvd., Metairie, LA 70003 to have her 2005 federal and state tax returns prepared and e-filed. Upon information and belief, this Jackson Hewitt office is owned and managed by CCTSI.

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22.

During her visit, Plaintiff met with Kimberly Vazquez and provided highly

confidential, financial and private information about herself and her family, including, but not limited to, the following: social security number; date of birth; driver's license number; daughter's name, social security number, and date of birth; home address; home phone number; work phone number; annual income; employer name and address; and, occupation. Plaintiff also provided her W-2s. 23. During her visit, Plaintiff was given a copy of Jackson Hewitt's "Privacy

Policy." See Exhibit O, JH Privacy Policy. In pertinent part, the "Privacy Policy" states: At Jackson Hewitt®, protecting your privacy is a core value of our relationship with our customers. Please read this policy carefully. It gives you important information about how we* handle your personally identifiable information, which is nonpublic information about you that we obtain, use, or disclose to provide you with our services. .... Our Approach to Data Security We maintain policies and procedures designed to restrict access to nonpublic personal information about you to those persons who need to know that information to fulfill your request for products or services. These policies and procedures include physical, electronic, and procedural safeguards that comply with federal regulations to guard your information. 24. The "Privacy Policy" further states:

This privacy policy is being provided by Jackson Hewitt Tax Service Inc., and its subsidiaries and affiliates, and/or by our independently owned and operated third-party franchisees (collectively referred to as "Jackson Hewitt," "we," "us," or "our"), and applies to our current and former customers. 25. Defendants represent that confidential, financial and private information

learned or obtained during the preparation of an individual's tax return will not be placed in 9

the public domain for access by anyone. 26. When hiring Defendants to complete her 2005 tax returns, Plaintiff was told

by Defendants that her confidential, financial and private information would not be placed in the public domain for access by anyone. 27. The maintenance of strict confidentiality regarding Plaintiff's financial and

private information was a condition precedent to the hiring of Defendants to complete her tax returns. 28. Notwithstanding their representations regarding their "Privacy Policy," upon

information and belief, sometime in the early part of 2008, Defendants threw Plaintiff's original and signed 2005 federal and state tax returns and other confidential documents in a public dumpster located in Gretna, Louisiana. The tax returns were in original, readable form and were not burned, shredded, or pulverized, as required by federal and state law. 29. The documents were found by Wilhemina Walker. In addition to Plaintiff's

documents, Ms. Walker also found in the same dumpster the tax returns of over 100 other individuals, with some tax returns dating back to 2003, and numerous other Jackson Hewitt materials, including banners, brochures, office supplies, and employee instruction books. 30. After discovering the documents, Ms. Walker contacted WDSU, Channel 6,

which contacted Plaintiff and others to advise of the discovery. Richard Angelico, of WDSU 6 on Your Side, returned to Plaintiff her 2005 tax returns found in the Gretna dumpster. In May 2008, a report aired on Channel 6 regarding the discovery of the confidential tax returns. 10

31.

In response to the Channel 6 report, CCTSI issued the attached public

statement. See Exhibit P, CCTSI Public Statement. 32. Jackson Hewitt franchise owners, such as CCTSI, are required to sign a See Exhibit Q, JH

franchise agreement (the "JH Franchise Agreement") with JHI.

Franchise Agreement. In pertinent part, the JH Franchise Agreement provides: 12.3.1 You agree that the following are our trade secrets and confidential and proprietary information: the identities of the customers served by the Franchised Business, (including their names, addresses, phone numbers, social security numbers and financial and tax information), tax return copies (whether on disk, in a database, in any other computer data storage media, or on paper), . . . W-2s, 1099s, 8453s, . . . Financial Products applications and other Financial Products related documents, and any other documents related to services performed on behalf of customers . . . . You must maintain, both during and after the term of this Agreement, absolute confidentiality of such items. You may give this information to your employees only to the extent necessary for the operation of the Franchised Business in accordance with this Agreement. You may not use this information in any other business or in any other way not authorized by us in advance in writing. 12.3.2 . . . . You promise that you will not at any time, without our prior written approval, disclose, use, permit the use of, copy, duplicate, record, transfer, transmit or otherwise reproduce our . . . confidential or proprietary information, in any form or by any means, in whole or in part, or otherwise make it available to any unauthorized person, entity or source. Id. at ¶ 12.3, pp. 12-13 (emphasis added). 33. As a result of Defendants' unlawful actions or inactions, Plaintiff has

suffered, and continues to suffer, damages, including: fear; panic; anxiety; sleeplessness; nightmares; embarrassment; hassle; anger; loss time; loss of consortium; and other emotional and physical distress, all in an amount to be determined at trial. In addition to all general damages, Plaintiff seeks and is entitled to special damages related to: credit 11

monitoring; credit insurance; reimbursement for all out-of-pocket expenses related to notifying creditors of the improper disclosure; reimbursement for all out-of-pocket expenses related to identity theft; and other special damages. APPLICABLE LAW 34. There are numerous federal and state laws, regulations, and rules protecting

the private and confidential information of consumers, including the Gramm-Leach Bliley Act ("GLBA"), 15 U.S.C. § 6801, et seq.; the FTC's Privacy Rule, 16 C.F.R. § 313.1, et seq.; the FTC's Safeguards Rule, 16 C.F.R. § 314.1, et seq.; 26 U.S.C. § 6103 (confidentiality of tax returns); 26 U.S.C. § 6713 (disclosure or use of information by tax return preparers); 26 U.S.C. § 7216 (same); the Louisiana Database Security Breach Notification Law ("LA Security Breach Statute"), La. Rev. Stat. § 51:3071, et seq.; and, the Louisiana Unfair Trade Practices and Consumer Protection Law ("LA Unfair Trade Practices Statute"), La. Rev. Stat. § 51:1401, et seq. 35. The GLBA states "[i]t is the policy of the Congress that each financial

institution has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers' nonpublic personal information." 15 U.S.C. § 6801(a). 36. The FTC's Privacy Rule states that businesses "may not, directly or through

any affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party," unless the disclosure is permitted per one of the listed exceptions. 16 C.F.R. § 313.10(a)(1). None of the exceptions apply to the disclosures that occurred 12

here. 37. The FTC's Safeguards Rule states that businesses must "develop, implement,

and maintain a comprehensive information security program that is written in one or more readily accessible parts and contains administrative, technical, and physical safeguards that are . . . reasonably designed to . . . (1) [i]nsure the security and confidentiality of customer information; (2) [p]rotect against any anticipated threats or hazards to the security or integrity of such information; and (3) [p]rotect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer." 16 C.F.R. § 314.3. 38. Section 6713 provides:

(a) Imposition of penalty.--If any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns of tax imposed by chapter 1, or any person who for compensation prepares any such return for any other person, and who-- (1) discloses any information furnished to him for, or in connection with, the preparation of any such return, or (2) uses any such information for any purpose other than to prepare, or assist in preparing, any such return, shall pay a penalty of $250 for each such disclosure or use, but the total amount imposed under this subsection on such a person for any calendar year shall not exceed $10,000. 26 U.S.C. § 6713(a). 39. Section 7216 provides:

(a) General rule.--Any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns of the 13

tax imposed by chapter 1, or any person who for compensation prepares any such return for any other person, and who knowingly or recklessly-- (1) discloses any information furnished to him for, or in connection with, the preparation of any such return, or (2) uses any such information for any purpose other than to prepare, or assist in preparing, any such return, shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution. 26 U.S.C. § 7216(a). CLASS ALLEGATIONS 40. Upon information and belief, and notwithstanding the prevalence of

identity theft in today's society and the common practice of "dumpster diving" to obtain confidential, financial and personal informnation to commit identity fraud, Defendants' practice is to discard the tax returns of their customers in public dumpsters in violation of numerous federal and state laws, regulations, and rules. The putative class members have been injured and will continue to be injured by Defendants' conduct until this unlawful practice is stopped. CLASS DEFINITION 41. Pursuant to Fed. R. Civ. P. 23, Plaintiff brings this action on behalf of a

class of all other persons similarly situated. The class consists of all Louisiana residents who received tax preparation services through Defendants and whose tax return information, tax return, or other personal or financial information was disclosed, without consent, during the 10-year period prior to the filing of this complaint. 14

CLASS ISSUES 42. There are questions of law and fact common to each class member, which

predominate over issues peculiar to the class members. The principal common questions include: A. B. Whether Defendants violated 26 U.S.C. § 6103; Whether Defendants' improper tax return disclosures were willful, or the result of gross negligence, entitling the class members to punitive damages; C. Whether Defendants breached their contracts with the class members by disclosing the class members' confidential, financial and private information; D. Whether Defendants' contract breaches were in bad faith per La. Civ. Code art. 1997, entitling the class members to all foreseeable and unforeseeable damages related to the contract breaches; E. F. G. Whether Defendants' actions or inactions constitute negligence per se; Whether Defendants violated the LA Security Breach Statute; Whether the class members are entitled to damages under the LA Security Breach Statute; and H. Whether the class members are entitled to declaratory and/or injunctive relief. 43. Plaintiff's claims are typical of the claims of the class members. All are

based on the same factual and legal basis. 15

44.

Plaintiff will fairly and adequately protect the interest of all class members

in the prosecution of this action and in the administration of all matters related to the claims asserted. She is similarly situated with, and has suffered similar injuries as, the members of the class she seeks to represent. Plaintiff has retained counsel experienced in handling class action suits involving unfair business practices and consumer law. Neither Plaintiff, nor her counsel, has any antagonistic interest that would inhibit vigorously pursuing this action. 45. A class action is superior to any other available methods for the fair and

efficient adjudication of this controversy, particularly considering: A. The losses suffered by the class members are such that prosecution of individual actions is impractical or economically infeasible; B. The form of proof required is such that prosecution of individual actions is impractical or economically infeasible; C. In the absence of the class action device, Plaintiff and the class members will be left without a remedy for the wrongful acts alleged, and Defendants will be unjustly enriched; D. The prosecution of separate lawsuits by individual class members would create the risk of inconsistent adjudications with respect to individual class members, which would establish incompatible standards of conduct for the Defendants, making concentration of the litigation concerning this matter in this Court desirable; 16

E.

The claims of the representative plaintiff are typical of the claims of the class; and

F.

No unusual difficulties are likely to be encountered in the management of this action as a class action.

46.

The class is so numerous as to make it impractical to join all members of

the class as plaintiffs. Upon information and belief, there are more than 100 persons in the class. COUNT 1: UNAUTHORIZED DISCLOSURE OF TAX RETURNS 47. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 46 in support of this count. 48. Tax returns are confidential per 26 U.S.C. § 6103, which provides:

(a) General rule.--Returns and return information shall be confidential, and except as authorized by this title-- .... (3) no other person (or officer or employee thereof) who has or had access to returns or return information under . . . subsection (n) . . . shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section. For purposes of this subsection, the term "officer or employee" includes a former officer or employee. 26 U.S.C. § 6103(a). 49. Defendants: (n) Certain other persons.--Pursuant to regulations prescribed by the 17 Subsection (n) of 26 U.S.C. § 6103 relates to tax return preparers, such as

Secretary, returns and return information may be disclosed to any person, including any person described in section 7513(a), to the extent necessary in connection with the processing, storage, transmission, and reproduction of such returns and return information, the programming, maintenance, repair, testing, and procurement of equipment, and the providing of other services, for purposes of tax administration. 26 U.S.C. § 6103(n). 50. A private cause of action may be brought for violations of § 6103 per 26

U.S.C. § 7431, which provides: If any person who is not an officer or employee of the United States knowingly, or by reason of negligence, inspects or discloses any return or return information with respect to a taxpayer in violation of any provision of section 6103 or in violation of section 6104(c), such taxpayer may bring a civil action for damages against such person in a district court of the United States. 26 U.S.C. § 7431(a)(2). 51. The following damages are permitted in such an action:

(c) Damages.--In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the sum of-- (1) the greater of-- (A) $1,000 for each act of unauthorized inspection or disclosure of a return or return information with respect to which such defendant is found liable, or (B) the sum of-- (i) the actual damages sustained by the plaintiff as a result of such unauthorized inspection or disclosure, plus

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(ii) in the case of a willful inspection or disclosure or an inspection or disclosure which is the result of gross negligence, punitive damages, plus (2) the costs of the action, plus (3) in the case of a plaintiff which is described in section 7430(c)(4)(A)(ii), reasonable attorneys fees, except that if the defendant is the United States, reasonable attorneys fees may be awarded only if the plaintiff is the prevailing party (as determined under section 7430(c)(4)). 26 U.S.C. § 7431(c). 52. Defendants violated § 6103 by throwing the class members' tax returns in the

dumpster and thereby improperly disclosing said returns and the information contained therein to the public. Pursuant to § 7431, the class members have a civil cause of action against Defendants for the wrongful disclosure. 53. Pursuant to § 7431, Plaintiff, on behalf of the putative class, seeks statutory

damages, actual damages, punitive damages, costs, and attorneys' fees, all in an amount to be determined at trial, for Defendants' improper, unauthorized disclosure of the class members' tax returns. COUNT 2: FRAUD 54. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 53 in support of this count. 55. As described above, Defendants induced Plaintiff and the class members to

enter into a contract for tax preparation services based upon false representations regarding the companies' privacy policy and practices and policies regarding privacy and maintaining 19

the confidentiality of sensitive information and documents. 56. "A contract is an agreement by two or more parties whereby obligations are

created, modified, or extinguished." La. Civ. Code art. 1906. "Consent [to a contract] may be vitiated by error, fraud, or duress." La. Civ. Code art. 1948 (emphasis added). "Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction." La. Civ. Code art. 1953. 57. "The party against whom rescission is granted because of fraud is liable for

damages and attorney fees." La. Civ. Code art. 1958. 58. As a result of Defendants' fraudulent inducement, the class members are

entitled to return of all monies paid to Defendants, plus damages to be proven at trial and attorneys' fees. COUNT 3: BREACH OF CONTRACT 59. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 58 in support of this count. 60. As described above, Defendants made representations regarding their privacy

policy. Based upon these representations, the class members obtained tax preparation services through Jackson Hewitt. Defendants intentionally breached their agreements to the class members by failing to comply with their represented privacy policy and disclosing the class members' tax returns and other confidential, private and financial information. 61. Pursuant to La. Civ. Code art. 1997, "[a]n obligor in bad faith is liable for all 20

the damages, foreseeable or not, that are a direct consequence of his failure to perform." 62. La. Civ. Code art. 1998 provides:

Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is intended to gratify a nonpecuniary interest and, because of the circumstances surrounding the formation or the nonperformance of the contract, the obligor knew, or should have known, that his failure to perform would cause that kind of loss. Regardless of the nature of the contract, these damages may be recovered also when the obligor intended, through his failure, to aggrieve the feelings of the obligee. 63. As a result of Defendants' bad faith contract breaches, the class members

have suffered, and continue to suffer, damages in an amount to be determined at trial. Such damages include, but are not limited to, return of all fees paid to Defendants for their services and other compensatory damages. COUNT 4: NEGLIGENCE 64. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 63 in support of this count. 65. La. Civ. Code art. 2316 provides "[e]very person is responsible for the

damage he occasions not merely by his act, but by his negligence, his imprudence, or his want of skill." La. Civ. Code art. 2317 provides "[w]e are responsible, not only for the damage occasioned by our own act, but for that which is caused by the act of persons for whom we are answerable, or of the things which we have in our custody." 66. As described above, Defendants violated numerous federal and state laws,

regulations, and rules, including, but not limited to, the GLBA, the FTC's Privacy Rule, the 21

FTC's Safeguards Rule, 26 U.S.C. § 6713, 26 U.S.C. § 7216, by disclosing (or permitting to be disclosed) the class members' confidential, financial and private information. 67. Defendants' acts or inactions constitute negligence per se. Further,

Defendants' negligence should be inferred per the doctrine of res ipsa loquitur (the thing speaks for itself). 68. Defendants knew or should have known that the improper disclosure of the

class members' tax returns would cause the class members to suffer severe emotional distress. 69. As a result of Defendants' willful and wanton miscondunct, or gross

negligence, the class members have sufferred, and will continue to suffer, damages in an amount to be determined at trial. COUNT 5: INVASION OF PRIVACY 70. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 69 in support of this count. 71. In Louisiana, the courts recognize four categories of the invasion of privacy

tort: (1) misappropriation of a person's name or likeness; (2) intrusion upon physical solitude or seclusion; (3) placing a person in a false light before the public; and (4) unreasonable public disclosure of private facts. 72. Defendants invaded the privacy of Plaintiff and the class members through Defendants' conduct was

an unreasonable public disclosure of private facts.

unreasonable and seriously interfered with Plaintiff and the class members' privacy 22

interest. Defendants publicized information concerning Plaintiff and the class members' private life by disposing of their confidential tax returns and other related documents in a public dumpster, with free access to any citizen. Such improper disclosure is highly offensive to the reasonable person and the improperly disclosed documents are not of legitimate public concern. 73. As a result of Defendants' unlawful and tortious conduct, the class members

have sufferred, and will continue to suffer, damages in an amount to be determined at trial. COUNT 6: VIOLATION OF LA SECURITY BREACH STATUTE 74. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 73 in support of this count. 75. La. Rev. Stat. § 51:3072 provides:

The legislature hereby finds and declares that: (1) The privacy and financial security of individuals are increasingly at risk due to the ever more widespread collection of personal information. (2) Credit card transactions, magazine subscriptions, telephone numbers, real estate records, automobile registrations, consumer surveys, warranty registrations, credit reports, and Internet web sites are all sources of personal information and form the source material of identity theft. (3) The crime of identity theft is on the rise in the United States. Criminals who steal personal information use the information to open credit card accounts, write bad checks, buy automobiles, and commit other financial crimes using the identity of another person. (4) Identity theft is costly to the marketplace and to consumers. (5) Victims of identity theft must act quickly to minimize the damage; therefore, expeditious notification of possible misuse of a person's personal information is imperative. 23

76.

La. Rev. Stat. § 51:3074 requires businesses to notify their customers when

a security breach has occurred, compromising their confidential, financial or personal information. La. Rev. Stat. § 51:3075 provides "[a] civil action may be instituted to recover actual damages resulting from the failure to disclose in a timely manner to a person that there has been a breach of the security system resulting in the disclosure of a person's personal information." 77. Defendants caused, or permitted, the security breach to occur through their

improper disposal of the class members' tax returns and confidential, financial and personal information. Such intentional violation of the LA Security Breach Statute has caused, and will continue to cause, the class members to suffer actual damages in an amount to be determined at trial. COUNT 7: DECLARATORY JUDGMENT 78. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 77 in support of this count. 79. Pursuant to Fed. R. Civ. P. 57 and 28 U.S.C. § 2201, the class members seek

and are entitled to a declaratory judgment that Defendants' improper disposal of their tax returns violated federal and state law. COUNT 8: INJUNCTION 80. On behalf of the putative class, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 79 in support of this count.

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81.

Pursuant to Fed. R. Civ. P. 65, the class members seek and are entitled to an

injunction, ordering Defendants to cease making unauthorized disclosures of their tax returns and confidential, financial and private information, and to comply with all federal and state laws, regulations, and rules regarding the proper dislosal of such documents. COUNT 9: VIOLATION OF LA UNFAIR TRADE PRACTICES STATUTE (Brought by Plaintiff Individually) 82. On behalf of herself only, Plaintiff hereby incorporates, as if written in

extenso, ¶¶ 1 ­ 81 in support of this count. 83. La. Rev. Stat. § 51:1405 provides "[u]nfair methods of competition and unfair

or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." 84. In an attempt to convince Plaintiff to use the services of Jackson Hewitt,

Defendants falsely represented to her that they would maintain the confidentiality of her tax returns and financial and private information. Further, Defendants falsely advertised and represented that they would comply with their "Privacy Policy." 85. Defendants unfair and/or deceptive actions offend established public policy

and are immoral, unethical, oppressive, unscrupulous, and substantially injurious to Plaintiff. 86. Pursuant to La. Rev. Stat. § 51:1409, Plaintiff has a private right of action

against Defendants for the damages she has sustained due to Defendants' unfair and/or deceptive trade practices.

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DEMAND FOR TRIAL BY JURY 87. to all issues. WHEREFORE, the premises considered, Plaintiff, on behalf of herself and all others similarly situated, respectfully requests that Defendants appear and respond as appropriate to this First Amended Class Action Complaint, and that judgment be rendered against Defendants, awarding Plaintiff and the class members all damages to which they are entitled, including compensatory, exemplary, and punitive damages; all costs; interest from the date of judicial demand; and, attorneys' fees. Respectfully Submitted, On behalf of herself and the putative class, Plaintiff demands a trial by jury as

CERTIFICATE OF SERVICE I hereby certify that a copy of the above and foregoing has been forwarded to all counsel of record by email; ___ by hand; ___ by fax; by FedEx; ___ by placing a copy of same in the U.S. Mail, postage prepaid this 15th day of July 2008. /s/ Bryan C. Shartle Bryan C. Shartle

/s/ Bryan C. Shartle David Israel (LSBA No. 7174) (T.A.) Bryan C. Shartle (LSBA No. 27640) Justin H . Homes (LSBA No. 24460)
SESSIONS, FISHMAN, NATHAN & ISRAEL, L.L.P.

3850 N. Causeway Blvd. Lakeway II, Suite 200 Metairie, Louisiana 70002 Telephone: [phone] Facsimile: [phone] Attorneys for Plaintiff, Vicki L. Pinero

N:\1-DI-Non-Collector-Misconduct\Pinero, Vicki-Class Action\Pleadings\LA Lawsuit\First Amended Complaint.doc

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