California Victims Of Yahoo Breach Pursue Claims In State, Not Federal Court

Six lawsuits against Yahoo have been filed in California state courts since the company revealed its massive data breach of 500 million user accounts in September. Although federal cases are arising as well, it appears plaintiffs are trying to take advantage of a state court system that has historically been more sympathetic to breach victims' plight.  

The key benefit: "The Federal court has historically required proof of actual injury to have occurred as a result of a breach," explains privacy expert Rebecca Herold, of Rebecca Herold & Associates. "The [California] courts have not been as strict in requiring such evidence of injury."

Herold explains that California residents may choose to limit a class action case to plaintiffs who are California residents instead of being lumped in those all over the country; particularly since certain regulations, like the state's strict data breach notification law, will apply only to them.

However, the first suit filed in California was filed by New York resident Ronald Schwartz on behalf of all affected US users. The suit accuses Yahoo of "reckless disregard for the security of its users' personal information that it promised to protect." On Oct. 7, Schwartz's attorneys made a motion to relate his case to some of those filed by others.

The various cases invoke California's laws on negligence, personal injury, breach of contract, consumer protection and invasion of privacy, and data breach notification. California was a trailblazer in data breach notification law, and being that there is still suspicion about when precisely Yahoo discovered this breach, there may be concerns that they violated strict notification regulation by delaying reports.

"[California] has long been seen as consumer-friendly with strong support for privacy protection, for over 14 years now," says Herold. "With that history of being pro-consumer and pro-privacy, the plaintiffs from California may believe they are more likely to win their case than they would from a Federal court, which historically has seemed to support businesses more than consumers when it comes to privacy breaches."

Whether or not users can prove the breach has done damage to them, the breach has hurt Yahoo. So much damage has been done to the company that it may trigger a "material adverse change" clause in its merger agreement with Verizon, which would enable Verizon to renegotiate the $4.8 billion arrangement made between the two companies this summer.