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Empirical Analysis of Data Breach Litigation

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  • Sasha Romanosky
  • David Hoffman
  • Alessandro Acquisti

Abstract

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.

Suggested Citation

  • Sasha Romanosky & David Hoffman & Alessandro Acquisti, 2014. "Empirical Analysis of Data Breach Litigation," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 11(1), pages 74-104, March.
    • Handle: RePEc:wly:empleg:v:11:y:2014:i:1:p:74-104
    DOI: 10.1111/jels.12035
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    References listed on IDEAS

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    Cited by:

    1. Wang, Jimin & Ho, Choy Yeing (Chloe) & Shan, Yuan George, 2024. "Does cybersecurity risk stifle corporate innovation activities?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. Jens Foerderer & Sebastian W. Schuetz, 2022. "Data Breach Announcements and Stock Market Reactions: A Matter of Timing?," Management Science, INFORMS, vol. 68(10), pages 7298-7322, October.
    3. Alexander Oluka, 2023. "Analysing the implications of cybersecurity breaches on firm leadership," Technology audit and production reserves, PC TECHNOLOGY CENTER, vol. 6(4(74)), pages 20-26, October.
    4. Jing Chen & Elaine Henry & Xi Jiang, 2023. "Is Cybersecurity Risk Factor Disclosure Informative? Evidence from Disclosures Following a Data Breach," Journal of Business Ethics, Springer, vol. 187(1), pages 199-224, September.
    5. Park, Sangchul, 2019. "Why information security law has been ineffective in addressing security vulnerabilities: Evidence from California data breach notifications and relevant court and government records," International Review of Law and Economics, Elsevier, vol. 58(C), pages 132-145.
    6. Kristin Masuch & Maike Greve & Simon Trang, 2021. "What to do after a data breach? Examining apology and compensation as response strategies for health service providers," Electronic Markets, Springer;IIM University of St. Gallen, vol. 31(4), pages 829-848, December.
    7. Singh, Amanjot, 2023. "Data breaches (hacking) and trade credit," Global Finance Journal, Elsevier, vol. 57(C).
    8. Luca Allodi & Fabio Massacci, 2017. "Security Events and Vulnerability Data for Cybersecurity Risk Estimation," Risk Analysis, John Wiley & Sons, vol. 37(8), pages 1606-1627, August.
    9. Antill, Samuel & Grenadier, Steven R., 2023. "Financing the litigation arms race," Journal of Financial Economics, Elsevier, vol. 149(2), pages 218-234.
    10. Guha, Abhijit & Grewal, Dhruv & Kopalle, Praveen K. & Haenlein, Michael & Schneider, Matthew J. & Jung, Hyunseok & Moustafa, Rida & Hegde, Dinesh R. & Hawkins, Gary, 2021. "How artificial intelligence will affect the future of retailing," Journal of Retailing, Elsevier, vol. 97(1), pages 28-41.

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