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9th Circuit Ruling To Open Lawsuit Floodgates?

Wednesday, March 2, 2011 at 12:50pm by Archive
Archive

The 9th Circuit U.S. Court of Appeals held recently, in Krottner v. Starbucks Corporation, that increased risk of future misuse of personal data following the theft of a laptop containing the unencrypted personal data of a group of current and former Starbucks employees amounted to an injury sufficient to confer standing to sue in federal court. Note that the employee PII that was stolen was not used by the perpetrators.

I’m no lawyer, but it seems to me that this decision could help open the floodgates to class action lawsuits against corporations who lose the personal data of employees or customers. Said a different way, I suspect that privacy class action lawsuits will become more difficult to dismiss. One of the interesting facts of this case was that the judges concluded that the data breach plaintiffs can sue based only on allegations of “generalized anxiety and stress” – no demonstration of out-of-pocket damages required.

While this case won’t singlehandedly cause organizations to run out and make sure that they have sound data protection implementations, it is certainly a nudge in that direction. Which is a good thing. In the end, the case indicates that if the laptop had been encrypted, the mere fact that the laptop was stolen would not confer standing. The use of encryption, like McAfee’s Endpoint Encryption, could therefore significantly reduce the threat of litigation and/or class actions.

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