In In re Zappos.com, Inc., Customer Data Security Breach Litigation (9th Cir., Mar. 8, 2018), the U.S. Court of Appeals for the 9th Circuit issued a decision that represents a more expansive way to understand data security harm. The case arises out of a breach where hackers stole personal data on 24 million+ individuals. Although some plaintiffs alleged they suffered identity theft as a result of the breach, other plaintiffs did not. The district court held that the plaintiffs that hadn’t yet suffered an identity theft lacked standing.
Standing is a requirement in federal court that plaintiffs must allege that they have suffered an “injury in fact” — an injury that is concrete, particularized, and actual or imminent. If plaintiffs lack standing, their case is dismissed and can’t proceed. For a long time, most litigation arising out of data breaches was dismissed for lack of standing because courts held that plaintiffs whose data was compromised in a breach didn’t suffer any harm. Clapper v. Amnesty International USA,568 U.S. 398 (2013). In that case, the Supreme Court held that the plaintiffs couldn’t prove for certain that they were under surveillance. The Court concluded that the plaintiffs were merely speculating about future possible harm.
Early on, most courts rejected standing in data breach cases. A few courts resisted this trend, including the 9th Circuit in Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010). There, the court held that an increased future risk of harm could be sufficient to establish standing.
My new article was just published: Risk and Anxiety: A Theory of Data Breach Harms, 96 Texas Law Review 737 (2018). I co-authored the piece with Professor Danielle Keats Citron. We argue that the issue of harm needs a serious rethinking. Courts are too quick to conclude that data breaches don’t create harm. There are two key dimensions to data breach harm — risk and anxiety — both of which have been an area of struggle for courts.
Many courts find that anything involving risk is too difficult to measure and not concrete enough to constitute actual injury. Yet, outside of the world of the judiciary, other fields and industries have recognized risk as something concrete. Today, risk is readily quantified, addressed, and factored into countless decisions of great importance. As we note in the article: “Ironically, the very companies being sued for data breaches make high-stakes decisions about cyber security based upon an analysis of risk.” Despite the challenges of addressing risk, courts in other areas of law have done just that. These bodies of law are oddly ignored in data breach cases.
When it comes to anxiety — the emotional distress people might feel based upon a breach — courts often quickly dismiss it by noting that emotional distress alone is too vague and unsupportable in proof to be recognized as harm. Yet in other areas of law, emotional distress alone is sufficient to establish harm. In many cases, this fact is so well-settled that harm is rarely an issue in dispute.
We aim to provide greater coherence to this troubled body of law. We work our way through a series of examples — various types of data breach — and discuss whether harm should be recognized. We don’t think harm should be recognized in all instances, but there are many situations where we would find harm where the majority of courts today would not.