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Appeals Court: Lower Court Erred In Dismissing CU Breach Suit
KNOXVILLE, Tenn. (7/8/13)--A Tennessee appellate court Wednesday overturned a lower court's ruling that dismissed a lawsuit by Copper Basin FCU (CBFCU) and CUMIS Insurance Society against FiServ Solutions Inc. over nearly $545,000 in losses incurred during a data breach.
The Court of Appeals of Tennessee at Knoxville reversed the decision and remanded the case to the lower court for further proceedings, saying "we hold that the complaint alleges sufficient facts to allow the case to proceed, and, therefore, dismissal was in error."
The credit union is alleging negligence and breach of contract stemming from a computer hacking in which it found out that its antivirus firewall and protection software had not been activated and allowed for hackers to access passwords and change user names. CUMIS's insurance policy covered the funds in the event of a computer hacking.
At issue was a master agreement between CBFCU and Fiserv's Integrasys division for technical support and Web defense services, which required the purchase of Trend Micro Antivirus Firewall and Protection software. The contract subscription was renewed in May 2009. In July 2009, credit union employees contacted FiServ about an unusual number of "pop-up" advertisements on their computers, and FiServ informed them it corrected the problem, said the court's opinion document.
On July 15, the credit union learned about the hackers'  origination of  "transfers from CBFCU's account with Volunteer Corporate into a large number of privately owned accounts distributed in banks across the U.S.," said the ruling.  The credit union and VolCorp retrieved all but $544,789.41 of the stolen funds. Afterward, according to the court documents, the credit union discovered the Web defense software had never been activated. It filed suit on July 12, 2011.
FiServ had argued that the credit union had filed the case too late and that the Web defense and technical support duties were governed by the master agreement. The credit union said a separate, earlier contract applied to the case, and that the master agreement covered only provision data process services.
The appellate court said that the lower court's reliance on the master agreement  in dismissing the case was in error and that the suit had been filed within the time period allowed.

"Of course we're pleased with the appellate court decision, but because this matter is still pending, we are not able to comment further," Phil Tschudy, media relations manager of CUNA Mutual Group, told News Now.


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