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Posts Tagged ‘wiretapping’

Data breach cases are popular targets for class actions these days because a single incident of hacking or theft can expose the sensitive personal or financial information of millions of people at a time.  However, a key hurdle in these cases has been proof of harm sufficient to satisfy the Article III injury-in-fact standard for cases filed in the federal courts (or in state courts that apply a similar injury-in-fact standard).  Recently, plaintiffs have been attempting to get around the standing problem by alleging that they had to incur credit monitoring fees or other out-of-pocket expenses due to a fear of identity theft.

Shannon Tan, associate corporate counsel for Raymond James Financial, Inc., in St. Petersburg, FL, recently authored an insightful article for the IAPP newsletter The Privacy Advisor, titled Supreme Court Wiretap Ruling Upholds Stringent Standing-To-Sue Requirements.  Tan’s article discusses the potential impact of the Supreme Court’s decision in Clapper v. Amnesty International USA on the question of Article III standing in civil data breach cases.  Tan points out that while Clapper is case involving alleged wiretapping by the government, it is likely to make it more difficult for plaintiffs to meet the Article III standing requirements in civil data breach cases because data breaches often don’t result in any immediate harm but only a threat of potential future harm.  A threat of harm must be “certainly impending” to satisfy the Article III standard set forth in Clapper.  This issue is exacerbated in the class action context, because even if some members of the class can prove actual harm, such as identity theft, it is a rare case where the plaintiff would have some common proof that identity theft occurred for all class members, a problem that recently doomed certification of a class action in In re Hannaford Bros. Co. Customer Data Security Breach Litigation.

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The Ninth Circuit Court of Appeals issued a ruling yesterday that will be a blow to plaintiffs seeking to sue call centers in class actions for violations of California’s Invasion of Privacy Law, Cal. Penal Code § 632 (sometimes called the “wiretapping” statute).  The law prohibits the recording or monitoring of confidential telephone calls without the caller’s consent.  It is an appealing basis for class action claims because it provides for statutory penalty of $5,000 per violation, creating the possibility of annihilating exposure in a case that involves a call center that handles thousands of customer calls.

In Faulkner v. ADT Security Services, Inc., the court affirmed the trial court’s dismissal of a claim under the statute based on allegations that a call center for a security company recorded the call of a customer who called with a billing dispute.  The Ninth Circuit fell short of holding that a billing dispute with a security company could never qualify as a “confidential” communication giving rise to liability under the law, but it did observe that whether a particular call was confidential would require unique facts:

For example, a caller might be asked to verify his identity by confirming his social security number or his unlisted telephone number, or to disclose other private or potentially private information. If adequately pled, such facts might well support a finding of confidentiality.

Slip op. at 9, n.***.  The need to examine the particular content of each call to determine whether liability is present would in most cases create an individualized issue of fact preventing class certification.  So, although the ruling does not close the door on claims against call centers for violations of the Invasion of Privacy law, it presents a hurdle to the certification of potentially bankrupting class actions.

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