With the recent hacks into Sony’s system and the emails sent to Home Depot’s customers regarding the breach of its system, data breach is no longer some fantastical notion that only plays out in a 1980s sci-fi movie. It is a real threat to businesses and their employees and customers, and that threat rises during the holiday season, when the average consumer spends approximately $800 on gifts for family, friends, and co-workers.
Venture back with me to December 2013, when Target Corporation announced that it was hacked, which resulted in 110 million of its customers having their credit- and debit-card information stolen. When I came across a recent ruling in that case, my reaction was: “Oh, yes. I vaguely remember that happening,” and I might have even been a customer who received an email from Target explaining the breach. My point is that, as consumers, the shock has worn off, and we are not surprised to hear about such breaches. But businesses cannot be so cavalier—the courts require vigilance in the protection of data.
As we have reported on our blog, multiple lawsuits arose shortly after Target’s announcement, resulting in the consolidation of all federal cases into In re: Target Corp. Customer Data Security Breach Litig., which involved claims brought by financial institutions on one hand, and by consumers on the other. Just last month, the District of Minnesota ruled largely in favor of the financial institutions on Target’s motion to dismiss, making it clear that Target breached its duty to maintain adequate security systems.
Just in time for the holiday season, the now famous Sony breach (which, in part, resulted in the cancellation of most theater showings of the movie, “The Interview”) has triggered at least six class-action complaints filed in California federal and state courts against Sony Pictures Entertainment, Inc. The hacking incident allegedly exposed volumes of confidential emails, social security numbers, and salary and medical information of Sony’s former and current employees. The gist of the complaints is that Sony, despite being aware that hackers were able to breach their system, “failed to develop, maintain, and implement internet security measures on its corporate network,” and this led to the catastrophic data breach that one complaint calls an “epic nightmare.” Just last week at the Consumer Electronics Show, Sony’s CEO, Kazuo Hirai described the hack, noting that Sony and its current and former employees “were the victim of one of the most vicious and malicious cyber attacks in recent history.”
The class action filed in Los Angeles Superior Court also blames Sony for its decision regarding “The Interview,” since the film allegedly sparked the ire of hackers who were not pleased with the subject matter (a planned talk show assassination of North Korea’s leader, who was heavily parodied). In addition to its limited theatrical release, it was recently reported that the film has earned over $30 Million in online and on demand sales.
It is too early to predict the outcome of these actions, but it is likely that the federal complaints regarding Sony will ultimately be consolidated. As with most data breach cases, we anticipate heavily briefed motions to dismiss on standing and other grounds. We will, or course, track these cases and provide updated reports as developments unfold.