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Consumer Claims Proving to be Costly to Companies

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In the past, when a consumer services company made a public announcement about a data breach, the repercussions could include bad press for the company. Sometimes this results in a dip in company stock on the trading market. The FTC may also dictate a consent decree in which the company vows never to make the same mistake. 

These consequences are significant but recently the stakes have been raised even higher. When individuals or groups tried to sue a company for trauma resulting from a data breach, the courts have rarely awarded plaintiffs for pecuniary losses since it has been difficult to prove. A company involved in a data breach settled very cheaply by providing credit monitoring services to the plaintiffs. However, two recent cases have awarded substantial claims for damages to consumers affected by data breaches.   

On January 07, 2009 a US federal court awarded a claim to Vicki L. Pinero for damages that she suffered as a result of an unfair trade practice of Jackson Hewitt Services, Inc. Jackson Hewitt falsely promised data protection as a way to get clients. Pinero’s tax returns were discovered in a publicly accessible trash bin outside of the tax service office. This case opened the door for class action lawsuits with significant monetary awards. 

On January 27, 2009 the US Department of Veterans Affairs had to provide a settlement of $20 million dollars for multiple consolidated class action lawsuits filed against them for a data breach in 2006.  An analyst had taken home a lap top containing sensitive data of 26 million veterans and 2.2 million active duty military personnel.  When the FBI recovered the lap top it was determined no one accessed the information. This case is pivotal due to the fact the US Department of Veterans Affairs was still willing to commit payments of $20 million for the plaintiffs’ claim despite no evidence of actual damages. 

One way consumer service companies may avoid data breaches, as well as paying for the associated damage claims, is to contract a compliant information destruction company. 

Pinero v. Jackson Hewitt Service, Inc. Article 

VA $20 Million Settlement Article