Wave of Class Actions for Data Security Breaches

If your company collects customers’ personal data in the course of its business, be aware of the wave of class actions that have recently been filed arising out of data security breaches. Finkelstein Thompson, a DC-based law firm, over the past year has filed a series of class actions against businesses that have fallen victim to such data breaches.

One such suit, filed in the Northern District of Georgia, asserts claims against RBS WorldPay, Inc. for negligence, breach of implied contracts, and violation of state unfair trade law, after hackers allegedly gained access to the personal information of approximately 1.5 million RBS cardholders. In an incident apparently related to this security breach, Fox News reported -- citing FBI sources-- that thieves, using cloned ATM cards with the stolen data, withdrew $9 million from ATMs in a coordinated attack in 49 cities, including Atlanta, Chicago, New York, Montreal, Moscow, and Hong Kong. This incident has garnered considerable media attention and will likely result in similar suits being filed against RBS across the country as a result of the security breach.

While this sort of case is extremely difficult to sustain given the absence of actual harm, the litigation and reputational costs associated with them are significant for businesses targeted by this litigation, particularly given the resulting media attention. Therefore, be forewarned, and regularly evaluate your data collection, data use, and data maintenance procedures and infrastructure with both your IT personnel and legal counsel.

For further discussion of this case, see our recently published piece in the ABA Secure Times” newsletter. And for a broader discussion of how other cases have addressed these types of claims, please see our article published in Andrews Litigation Reporter.