McDonald's Corp. (NYSE: MCD) and a franchisee have settled a $3 million lawsuit in which a customer said nude photos of his wife were copied from a cell phone he left in a McDonald's restaurant, On Point has learned.

Phillip Sherman's unusual negligence case alleging McDonald's employees breached a duty to “protect and secure” the contents of his phone was set for trial last week in Washington County (Ark.) Circuit Court. But a judge signed dismissal papers Feb. 26.

"We are pleased that this matter has been concluded," Bill Mathews, co-owner of the franchisee, said in a statement. "We strive to provide a safe and positive environment for all our customers. We respect their privacy."

According to Sherman's complaint, the manager of a McDonald's in Fayetteville, Ark., told him he would turn the phone off and put it in a safe place after Sherman left it at the restaurant on July 5, 2008. He had stored nude photos of his wife in the phone but before he could pick it up the next day, the photos were downloaded and posted on the Internet.

The suit argued McDonald's and the franchisee, Mathews Management Co., were liable for “negligent performance of [an] undertaking to render services” since the store manager had failed to keep the phone secure.

Mathews contended it owed no duty to Sherman because “The phone was left at the restaurant solely due to plaintiffs' negligence, and there is no law establishing a duty on the part of a restaurant franchisee to safeguard the contents of a negligently lost cell phone.” But Circuit Court Judge Mary Ann Gunn denied its motion to dismiss in April 2009.

There is no case law that specifically addresses whether a business can be sued for misappropriating the contents of a customer's cell phone. Sherman cited a case in which the Arkansas Supreme Court said an employment agency could be sued for failing to protect a client from the prospective employer who raped her.

“The Restatement of Torts recognizes ... that simply because a third person commits a crime, that does not always exonerate one who created the situation which allowed the crime to occur,” the court noted.

Cell phone privacy cases have also been filed recently by students against school officials. The 4th U.S. Circuit Court of Appeals is reviewing the case of a Virginia woman who sued police officers for viewing nude photos of her that were stored in a cell phone they had seized from her boyfriend during a DUI arrest.

By Matthew Heller
3/30/10