Data Breaches

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On January 5, 2010, Judge William Hibbler of the U.S. District Court for the Northern District of Illinois became the latest federal district judge to share his views about whether an increased risk of future harm based on the inadvertent exposure of personal information is a legally cognizable harm. In Rowe v. UniCare Life & Health Insurance Co., No. 1:09-cv-2286 (N.D. Ill. Jan. 5, 2010), Judge Hibbler . . . hinted that the plaintiff’s claims for violations of the Fair Credit Reporting Act (“FCRA”) and the Illinois Insurance Information and Privacy Act, as well as his common law claims of invasion of privacy, negligence and breach of implied contract, may ultimately be dismissed if the plaintiff failed to show a basis for damages other than his alleged increased risk of future harm, such as identity theft.
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On December 7, 2009, a federal district court sitting in New Jersey dismissed a securities fraud class action lawsuit against Heartland Payment Systems arising from a massive breach of credit and debit card information and, in doing so, reinforced the difficulties private plaintiffs face in bringing data breach lawsuits under the federal securities laws.

In Amburgy v. Express Scripts, Inc., Magistrate Judge Frederick R. Buckles of the U.S. District Court for the Eastern District of Missouri held that “plaintiff’s asserted claim of ‘increased-risk-of-harm’ fails to meet the constitutional requirement that a plaintiff demonstrate harm that is ‘actual or imminent, not conjectural or hypothetical.’ Plaintiff has therefore failed to carry his burden of demonstrating that he has standing to bring this suit.”
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A typical corporate data security policy classifies consumer contact information as confidential, but not “highly confidential” or “sensitive.”  Should mere contact information be afforded greater protection?

One case on point has dragged on since late 2007, when Ameritrade reported that a database of its customers’ contact information (including names, physical addresses, email addresses and phone numbers) had been compromised. A class action law suit quickly followed, and the third settlement attempt was rejected just recently by the court on the grounds that, in the judge’s view, it provided an inadequate remedy for the affected consumers.

On August 24 and 25, 2009, the Department of Health and Human Services (“HHS”) and the Federal Trade Commission (“FTC”), respectively published rules on when and how covered entities regulated by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and vendors of personal health records (“PHR”) must notify…

Where the only harm alleged is mere “speculation as to a possible risk of injury,” a claim cannot survive a 12(b)(6) motion to dismiss, according to a District of Connecticut decision issued on August 31, 2009. McLoughlin v. People’s United Bank, Inc., and Bank of New York Mellon, Inc., No. 3:08-cv-00944-VLB (D. Conn. Aug. 31, 2009), thus follows a long and growing line of cases which simply hold that where there is no actual harm, there can be no case.
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In the context of wireless network security, we hear a lot about WEP vs WPA, but these technologies are not widely understood, especially among attorneys.

WEP and WPA are two alternative ways to secure a wireless network from unauthorized interception, and WPA is more secure than WEP. In fact, researchers have reported consistently for several years that it is relatively easy to break into a WEP-secured wireless network. For that reason, as discussed further below, industry standards as well as regulators require that WPA (instead of WEP) be used to secure wireless networks that are used to transmit sensitive information such as credit card numbers. Nonetheless, many companies are still using WEP.