Access Denied: Data Breach Litigation, Article III Standing, and a Proposed Statutory Solution

Abstract

I. DATA BREACHES: AN OVERVIEWOn September 22, 2016, technology company Yahoo! announced that a third party had wrongfully gained access to at least 500 million Yahoo! user accounts, the largest data breach1 in history.2 Hackers stole individuals' names, telephone numbers, email addresses, dates of birth, passwords, and security questions and answers.3 Because individuals often use the same email address, password, and security questions for multiple Internet accounts, the third party hacker could potentially gain access to additional private accounts, including financial accounts, of 500 million individuals.4More recently, Equifax - a major credit-reporting firm - announced that hackers accessed the personal information of more than 140 million U.S. customers.5 The obtained information includes individuals' names, addresses, Social Security numbers, and driver's license numbers.6 The hackers could use this extensive information to open new financial accounts in individuals' names, make fraudulent charges on their credit cards, and commit tax fraud.7 Due to the scope of the breach, the affected individuals will have to monitor their credit and personal accounts for the rest of their lives because hackers can use the stolen in formation for many years going forward to commit fraud, including "creating a new you."8The data breaches of Yahoo! and Equifax are two of the largest known data breaches and are part of a trend in recent years in which the size and scope of data breaches of major corporations have steadily increased.9 This trend is expected to continue as hackers become increasingly sophisticated and more personal information is stored digitally.10 Federal courts' interpretations of Article III standing requirements, however, frequently result in unjust outcomes for data breach victims.11 In everyday life, individuals provide businesses and other entities with their personal information. Indeed, it is inconceivable that individuals could successfully function in the modern world without sharing such information. Yet when the information falls into the hands of hackers, individuals may suffer identity theft, fraudulent credit card charges, and other consequences. Individuals whose private information is accessed therefore reasonably expend considerable time, energy, and money protecting their identity and financial accounts by purchasing credit-monitoring services, monitoring their accounts for fraudulent charges, disputing any fraud that occurs, and paying fees associated with credit freezes.In order to recover the costs incurred following a data breach, data breach victims frequently attempt to sue the companies that failed to adequately protect their information from hackers.12 Some federal courts, however, have found that data breach victims cannot satisfy Article III standing requirements. As a result, courts dismiss lawsuits against the organizations that allowed victims' information to be accessed due to insufficient data security safeguards. While this outcome may be justified legally under current Article III jurisprudence, many victims of data breaches cannot recover the costs they incur in response to a data breach.This Note attempts to propose a solution to the immediate dilemma faced by many victims of data breaches - that they cannot even get their day in court. First, I briefly review the constitutional law doctrine of Article III standing, focusing primarily on the injury-in-fact requirement.13 I then turn to a survey of the different approaches to Article III standing in data breach cases as applied in various federal jurisdictions and look at the impact of the recent U.S. Supreme Court decision in Spokeo v. Robbins on data breach litigation going forward.14 I conclude with a proposed solution to the Article III hurdles faced by data breach plaintiffs by arguing that Congress should pass a comprehensive law regulating data breaches that would afford victims statutory standing to pursue their claims against companies that fail to adequately protect their information. …