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Financial Services Law Insights and Observations

11th Circuit affirms majority of $380 million data breach settlement

Courts Privacy/Cyber Risk & Data Security Data Breach Class Action Settlement Consumer Reporting Agency Consumer Data Appellate

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On June 3, the U.S. Court of Appeals for the Eleventh Circuit affirmed a district court’s approval of a roughly $380.5 million settlement between a class of consumers (plaintiffs) and a large consumer reporting agency (CRA), which resolved allegations arising from a 2017 cyberattack that caused a data breach of the CRA. (Covered by InfoBytes here.) The 11th Circuit’s opinion resolves challenges brought by objectors to the settlement who argued that plaintiffs lacked Article III standing because they did not have their identities stolen, and challenged, among other things, certain procedural requirements, the appropriateness of class certification given the possibility that some class members may have been able to recover state statutory damages, and the district court’s adoption of an approval order “ghostwritten” by plaintiffs’ counsel. The objectors also argued that the settlement was inadequate given the “unique risks associated with stolen social security numbers,” and disagreed with the award of $77.5 million in attorneys’ fees, as well as the district court’s decision to impose appeal bonds of $2,000 on each objector.

On appeal, the 11th Circuit rejected almost all of the objectors’ arguments after determining that class members—even if they were not victims of identity theft—faced a material risk of harm. The appellate court also held that the procedural requirements were not particularly burdensome given the roughly 147 million class members involved. Moreover, the appellate court concluded that the fact that class members in a couple of states could have argued for statutory damages did not make the named plaintiffs inadequate class representatives. Furthermore, the appellate court noted that (i) the settlement addressed the seriousness of the stolen social security numbers; (ii) attorneys’ fees (equal to 20.36 percent of the common fund) were within the reasonable range; (iii) objectors failed to show any “practice of uncritically adopting counsel’s proposed orders”; and (iv) the district court did not “abuse its discretion when it imposed the appeal bonds based on its finding that there was a ‘substantial risk that the costs of appeal will not be paid unless a bond is required.’” Moreover, the 11th Circuit noted that “[a]bsent the settlement, the class action could have faced serious hurdles to recovery, and now the class is entitled to significant settlement benefits that may not have even been achieved at trial,” adding that the FTC, CFPB, and state attorneys general for 48 states, the District of Columbia, and Puerto Rico all support the settlement.

The appellate court, however, did reverse the district court’s award of incentive payments to class representative and remanded the case solely for the purpose of vacating the awards.

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