Skip to content

Discerning Data

  • About Us
  • Additional Resources
  • Contact Us

DISCERNING DATA

A Faegre Drinker Blog Covering the Latest in Privacy, Cybersecurity and Data Strategy

  • Privacy
  • Cybersecurity
  • Data Strategy
  • Disruptionware

Supreme Court Gives Companies Another Tool To Fend Off Data Breach Class Actions

Share

In the wake of data breaches, companies may find themselves targets of class actions by customers or employees whose personal information was compromised in the breach. The exposure is considerable, with an estimated 765 million people impacted by data breaches between April and June of 2018. As we previously reported, some courts have allowed consumer and employee data breach cases to proceed despite threshold challenges – leading to multi-million-dollar settlements. And in Dittman, Pennsylvania’s Supreme Court recently held that an employer owed an affirmative duty to exercise reasonable care to protect employees’ personal nonpublic data from data breaches.

Supreme Court precedent suggests that use of consumer and employee arbitration agreements may significantly limit a company’s class action exposure in the wake of a data breach. The Court’s April 24th opinion in Lamps Plus v. Varela arose in the wake of a phishing scheme targeting the plaintiff’s employer, who allegedly disclosed the tax information of over a thousand of the company’s employees to the perpetrator of the scheme. After a fraudulent tax return was filed in his name, Frank Varela sued his employer on behalf of a class of all employees whose information was compromised in the breach. The employer moved to compel individual arbitration and to dismiss the lawsuit; the district court agreed to compel arbitration, but did so on a classwide basis. The Ninth Circuit affirmed, finding that the arbitration agreement was ambiguous on the permissibility of classwide arbitration, and applied California’s general rule of contra proferentem to construe contractual ambiguities against the drafter. The Supreme Court granted the employer’s petition for certiorari.

The majority opinion was emphatic: “Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.” The majority thus recognized (as it has in several prior cases) that permitting arbitration to proceed on a classwide basis fundamentally undermines the benefits of arbitration – “lower costs, greater efficiency and speed.” The Court thus remanded to allow employees to pursue claims regarding theft of their personal nonpublic financial information in individual arbitration. The decision extends existing Supreme Court precedents enforcing arbitration agreements despite efforts by plaintiffs to undermine the force of those agreements. Those decisions include Stolt-Nielsen, in which the Court held that a court cannot compel class arbitration when the arbitration agreement in question is “silent”, as well as Concepcion and Epic Systems – which, respectively, upheld the use of class action waivers in consumer and employment arbitration agreements.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

Receive Email Alerts to New Articles

SUBSCRIBE

April 26, 2019
Written by: Mark Taticchi
Category: Privacy
Tags: data breach, data privacy

Post navigation

Previous Previous post: FBI Releases 2018 Internet Crime Report
Next Next post: HHS Immediately Reduces Annual Limits Across HIPAA Violations

Search the Blog

Sign Up for Email Alerts

PODCASTS

Faegre Drinker on Law and Technology

©2023 Faegre Drinker Biddle & Reath LLP. All Rights Reserved. Lawyer Advertising.

  • About Us
  • Additional Resources
  • Contact Us
We use cookies to improve your experience with our website. By browsing our site, you are agreeing to the use of cookies. For more information about how we use cookies, please review our privacy policy and cookie policy. OK
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT