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Current Trends in Data Security Litigation
Pressed by new security breach disclosure laws, companies and universities have been compelled to disclose quite a number of security breaches in recent years. One of the first highly publicized data security breaches involved the consumer information broker, ChoicePoint Inc., which announced in 2005 that criminals posing as legitimate businesses accessed the personal information of more than 145,000 individuals. Following the ChoicePoint incident, a cascade of personal data security breaches became public, involving companies such as BJ's Wholesale Club, LexisNexis, and MasterCard International, which suffered a security breach affecting more than 40 million credit cards stemming from unauthorized access to the computer network of CardSystems Solutions, an Arizona-based company that processes credit card payments. Subsequently, both CardSystems and ChoicePoint settled their data breach charges with the FTC, agreeing, among other things, to implement new data security procedures, obtain independent data security audits bi-annually for 20 years, and, in the case of ChoicePoint, pay millions of dollars in civil penalties. See, FTC press releases, available at http://ftc.gov/opa/2006/02/cardsystems_r.htm and www.ftc.gov/opa/2006/01/choicepoint.htm.
Both companies continue to face civil lawsuits filed in the California courts, with plaintiffs seeking injunctive relief and damages stemming from the data security breaches. In the ChoicePoint consolidated class action litigation, the California district court dismissed two claims, but ChoicePoint still faces claims under the federal Fair Credit Reporting Act ('FCRA') and the California Credit Reporting Agencies Act ('CCRAA'), among others. See, Harrington v. ChoicePoint Inc., No. 05-cv-1294 MRP (JWJx) (C.D. Cal., Sept. 15, 2005). CardSystems faces a similar suit in California Superior Court, with plaintiffs alleging that the defendants violated certain provisions of the state's data protection statute, namely Cal. Civ. Code '1798.81. See, Parke et al. v. CardSystems Solutions, Inc., No. CGC-05-44264 (S.F. Cty. Super. Ct., First Am. Comp., filed July 6, 2005).
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