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Defending Data Breach Class Actions

Posted on December 18, 2024 by Dissent

Mark P. Henriques of Womble Bond Dickinson has a content-rich post for defense lawyers:

Class actions arising from data breach represented the fastest growing segment of class action filings. In 2023, more than 2000 class actions were filed, more than triple the amount filed in 2022.1 These cases were filed in federal and state courts across the country, with California receiving the largest number of filings. High-profile cases like the $52 million penalty that Marriott agreed to pay in October 2024 highlight the regulatory scrutiny and legal challenges companies face. A Capitology study of 28 cases showed an average stock price drop of 7.27% following announcement of a data breach. Financial companies saw a 17% decrease within the first 16 trading days following a breach. As board members of a public company, it is crucial to understand the strategies for preventing breaches and defending against the class actions that follow.

[…]

To date, the primary targets for data breach class actions have been credit rating agencies, financial institutions, and health care providers.  Plaintiff’s counsel target these industries both because the data they collect is typically highly confidential and because there are often federal or state regulations which help establish a standard of care.

Some state legislatures have grown concerned about the wave of data breach class actions.  One particularly interesting development is a 2024 Tennessee statute, Public Chapter 991, which establishes a heightened liability standard for class actions arising from cybersecurity events.  The statute appears to be designed to protect the healthcare industry, a mainstay of the Tennessee economy.  The bill requires plaintiffs to establish that the cybersecurity event was “caused by the willful and wanton misconduct or gross negligence on the part of the private entity.”  Both Florida and West Virginia have considered similar measures. Other states may follow suit.

Read more about specific cases and bases for defense at Womble Bond Dickinson.

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