After Sony Data Breach, Lawsuits Flood The Courts

PlayStation 3

In the past year especially, there seem to be a spate of lawsuits following every privacy or security snafu that makes a few headlines. Consider Apple (NSDQ: AAPL), which was slammed with lawsuits after its most recent privacy headline, the revelation that iPhones maintain a file that includes location data. A new analysis by Reuters (NYSE: TRI) shows just how prevalent these lawsuits have become, but also suggests it will be tough for this eager new crop of internet lawyers to actually turn their accusations into big wins.

In the wake of Sony’s admission that information for millions of accounts was stolen, Reuters has tallied no less than 25 federal lawsuits. That number shows a very active bar of plaintiffs’ lawyers who believe that they’ll be able to turn companies’ privacy snafus and data breaches into serious cash payouts.

The Reuters data meshes with anecdotes I’ve been hearing from sources in the corporate defense bar, many of whom are saying they’re defending against more privacy lawsuits than ever before.

It isn’t clear that the strategy will necessarily be a success for plaintiffs, either in the courtroom or for the firms’ bottom line–but it sure isn’t going to stop anyone from trying. So for now, significant litigation fees are going to be par for the course for companies with headline-grabbing data breaches.

The reason it might not be a great business for plaintiffs is that the payouts just aren’t that big in privacy lawsuits, compared to the “classic securities fraud cases” that sometimes yield nine-figure settlements, said Jay Edelson of the Edelson McGuire law firm. Still, Edelson McGuire, which specializes is privacy-related technology cases, has grown from five to 20 lawyers in the past three years, Edelson told Reuters.

According to Edelson, attorneys’ fees in breach cases have historically topped out at $7 million to $8 million. Reuters notes that a 2002 internet advertising case involving Doubleclick paid $1.8 million in legal fees as part of the settlement.

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