Empirical Analysis of Data Breach Litigation

In recent years, many lawsuits have been filed by individuals seeking legal redress for harms caused by the loss or theft of their personal information. However, very little is known about the drivers, mechanics, and outcomes of those lawsuits, making it difficult to assess the effectiveness of litigation at balancing organizations' usage of personal data with individual privacy rights. Using a unique and manually collected database, we analyze court dockets for more than 230 federal data breach lawsuits from 2000 to 2010. We investigate two questions: Which data breaches are being litigated? and Which data breach lawsuits are settling? Our results suggest that the odds of a firm being sued are 3.5 times greater when individuals suffer financial harm, but 6 times lower when the firm provides free credit monitoring. Moreover, defendants settle 30 percent more often when plaintiffs allege financial loss, or when faced with a certified class action suit. By providing the first comprehensive empirical analysis of data breach litigation, our findings offer insight into the debate over privacy litigation versus privacy regulation.