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Rise in Data Breach Lawsuits Fuels Growth in Federal Consumer Protection Litigation

data breach

In a notable shift, federal consumer protection lawsuits have begun to rise after nearly a decade of decline, driven primarily by a surge in data breach cases. According to Lex Machina's latest Consumer Protection Litigation Report, the number of these cases increased from 13,485 in 2022 to 14,515 in 2023, marking a 7.6% rise. This trend underscores the growing concern over data security and privacy in the digital age.

The Rise of Class Actions and Data Breach Cases

Class action lawsuits have played a significant role in this resurgence. In 2023, there were 5,455 new class action cases, a 31% increase from the previous year. This is the third-highest number of class action filings in the past decade. Data breaches, in particular, have been a major driver of this uptick, with 2,040 data breach cases filed in 2023 compared to 732 in 2022, nearly a threefold increase.

This increase is attributed to the widespread impact of data breaches, which often affect large numbers of consumers simultaneously. A notable example was the cyberattack on Progress Software Corp.'s MOVEit file-sharing tool, which exposed the records of numerous government agencies and approximately 8,000 organizations globally. This incident alone has led to dozens of lawsuits, potentially impacting millions of individuals.

Distribution of Data Breach Cases

The defendants in these data breach cases are varied, with loan agencies and banks frequently targeted. While the report does not single out specific incidents behind the surge, it draws a parallel to the 2017 spike in data breach litigation following the Equifax breach that affected 147 million people.

Trends in Other Consumer Protection Lawsuits

Other areas of consumer protection litigation have also seen changes. Disputes under the Fair Credit Reporting Act (FCRA) have continued to rise, with 5,106 cases in 2023, slightly down from 2022 but still the second-highest in the past decade. This steady rise is partly due to consumers becoming more vigilant about their credit reports and ongoing legal ambiguities in different jurisdictions.

The Telephone Consumer Protection Act (TCPA) cases saw an increase for the first time since 2016, with 1,537 new cases in 2023, up by about 100 cases from the previous year. This rise follows new FCC rulings that tighten consent requirements for telemarketing calls.

Judicial and Legal Representation Trends

The report highlights the Central District of California as the most popular venue for consumer protection cases, followed by the Middle District of Florida and the Northern District of Illinois. On the legal representation front, Atlas Consumer Law, a division of Sulaiman Law Group Ltd., led in filing cases, followed by Stein Saks PLLC and Milberg Coleman Bryson Phillips Grossman PLLC.

Defense Representation and Case Outcomes

On the defense side, Jones Day was the most active firm, handling 3,773 cases in 84 districts. Schuckit & Associates and Seyfarth Shaw LLP followed. Most cases resolved between 2021 and 2023 were settled or resolved on procedural grounds, with defendants winning twice as often as claimants in substantive judgments.

The resurgence of federal consumer protection lawsuits, particularly those involving data breaches, highlights the increasing importance of data security in the digital age. As consumers become more aware of their rights and more incidents come to light, this trend is likely to continue, influencing both legal strategies and cybersecurity practices across industries.