The California Court of Appeal recently held that in order to recover under California’s Confidentiality of Medical Information Act (CMIA), Civ. Code §§ 56 et seq., a plaintiff must plead and prove that the “stolen medical information was actually viewed by an unauthorized person.” Sutter Health et al. v. The Superior Court of Sacramento County (Atkins), Case No. C072591 (Cal. Ct. App. July 21, 2014). The court held that mere possession of medical information or records by an unauthorized person was insufficient to establish a breach of confidentiality if the unauthorized person has not viewed the records. This case is very good news for California health care providers, because it substantially increases the burden on plaintiffs in health information breach cases, and brings California more in line with other states—where courts often dismiss security breach actions on the distinct but similar basis of a lack of demonstrated harm.

The Sutter Health case arose after a thief broke into an office of Sutter Health and stole a desktop computer containing the information of approximately 4 million patients. The records were stored on a hard drive that was password-protected, but unencrypted. When Sutter Health gave notice of the theft, a number of the individuals filed separate actions as class actions that were coordinated and were seeking “nominal” damages of $1,000 for each class member under CMIA—which could have totaled more than $4 billion based upon the number of records involved.

Sutter Health filed a demurrer to the complaint and a motion to strike the class allegations. The trial court overruled the demurrer and denied the motion to strike. The Court of Appeal reversed, directing the trial court to enter a new order sustaining the demurrer without leave to amend, and dismissing the lawsuit.

The plaintiffs argued that Sutter Health negligently stored their medical information, and that negligent storage resulted in a change of possession of the information to an unauthorized person, which was sufficient to state a cause of action. The court rejected this argument. The court held that section 56.101, which imposes broad duties on health care providers with respect to the confidentiality of medical information, is not violated if confidentiality is not breached. The focus of section 56.101 is “‘preserving the confidentiality’ of the medical information, not necessarily preventing others from gaining possession of the paper-based or electronic information itself.” (Emphasis in original.) Change of possession is expressly allowed under section 56.101 so long as confidentiality is preserved. The court found that while the change in possession of Sutter Health’s computer increased the risk of a confidentiality breach, CMIA “does not provide liability for increasing the risk of a confidentiality breach.” There was no allegation that an unauthorized person had viewed the records. The court observed “[t]he legislation at issue is the ‘Confidentiality of Medical Information Act,’ not the ‘Possession of Medical Information Act.’” Because there was no violation of section 56.101, the court concluded there was no reason to look to section 56.36 for a remedy. “No damages, not even nominal damages, are available unless the injury protected is suffered.”

The Sutter Health court made clear that it had reached the same conclusion as another recent decision in Regents of University of California v. Superior Court, 220 Cal. App. 4th 549 (2013) —although by a different analytical route. Both courts agree that violation of CMIA requires pleading and proof that confidential information was breached as a result of the health care provider’s negligence, and no claim can be asserted under CMIA unless confidential information actually has been viewed by some unauthorized person. But in Regents the defendant did not dispute that violation of the maintenance and storage obligation under section 56.101 had been adequately pleaded, even though there was no evidence of unauthorized access—so the Regents court’s analysis focused on the remedy provision of section 56.36 as incorporated into section 56.101. The Sutter Health court, by contrast, reasoned it was unnecessary to invoke the remedy provision in section 56.36(b) because, without an actual confidentiality breach, a health care provider has not violated section 56.101. The Sutter Health court noted it would reach the same conclusion even if it considered section 56.36(b), since it required a “violation of this part” meaning an earlier section of CMIA—here, section 56.101.

The Sutter Health court also was presented with three other questions: whether a cause of action had been stated under section 56.10, whether a class action was appropriate under the circumstances, and whether a potential award of $4 billion in “nominal” damages violated Sutter Health’s due process rights. It declined to address the latter two questions, however, because Sutter Health’s petition was resolved by the court’s determination that the plaintiffs had failed to state a cause of action. The Sutter Health court held section 56.10 concerns an affirmative communicative act and, because no such act was at issue, no cause of action based on section 56.10 was stated.

Sutter Health adds to the growing body of law interpreting and generally narrowing the scope of CMIA for private plaintiff nominal damages claims. See, e.g., Eisenhower Medical Center v. Superior Court (Malanche), 226 Cal. App. 4th 430 (2014) (concluding a “health care provider cannot be held liable under the relevant portions of the CMIA for the release of an individual’s personal identifying information that is not coupled with that individual’s medical history, mental or physical condition, or treatment.”). Nevertheless, like many recent privacy and data breach cases, Sutter Health underscores the importance of implementing effective security measures to protect patient confidentiality, such as encrypting data.