Category

Data Breach

Wendy’s Agrees To Settle Data Breach Class-Action Lawsuit Filed By Banks For $50M

By | Class Action Lawsuits, Data Breach

In 2015 and 2016, hackers infected 1,025 of Wendy’s restaurants’ point-of-sale systems with malware, leading to a massive data breach involving the loss of massive quantities of payment card data. The POS malware attacks came in two waves, both of which began in the fall of 2015. An estimated 18 million payment cards issued by approximately 7,500 financial institutions were compromised in the data breach.

In April 2016, First Choice Federal Credit Union filed a lawsuit against Wendy’s, seeking class-action status on behalf of all affected financial institutions. The lawsuit seeks to have Wendy’s compensate affected card issuers for breach-related losses and expenses, such as the cost of reissuing cards and compensating cardholders for fraud losses. The Federal Deposit Insurance Corporation and other organizations subsequently joined the class-action lawsuit.

Wendy’s recently agreed to settle the class-action data breach lawsuit by paying $50 million into a settlement fund. Wendy’s is expected to pay approximately $27.5 million with the balance covered by insurance. After the proposed settlement is approved by the court, payments are expected to be made in late 2019. $36 million of the $50 million settlement fund is set aside to compensate banks for card data exposed in the breach.

Court documents reportedly state, “Under the settlement agreement, defendants will create a non-reversionary settlement fund of $50 million in exchange for a release of all claims against Wendy’s franchisees arising from third-party criminal cyberattacks of certain of Wendys’ [sic] independently owned and operated franchisee restaurants involving malware variants targeting customers’ payment card information that Wendy’s reported in 2016 (the ‘data breach’) … The settlement fund will be used to pay: (1) disbursements to settlement class members that file approved claims; (2) the costs of settlement administration and any taxes due on the settlement fund account; (3) attorneys’ fees, costs, and expenses to class counsel in amounts approved by the court; and (4) service awards to the settlement class representatives in amounts approved by the court.”

Wendy’s estimates that its total costs resulting from the data breaches will reach nearly $34 million (a separate consumer class-action lawsuit was filed in February 2016 and was settled by Wendy’s in October 2018 for $3.4 million).

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If your business suffered financial or other significant harm due to a data breach in  the United States, email us at info@businesslitigationcontingencylawyers.com or telephone us toll-free in the United States at 800-756-2143 to discuss whether your data breach matter may be appropriate to be handled on a contingency basis.

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Illinois Supreme Court Holds Aggrieved Person Under Biometric Information Privacy Act Need Not Show Actual Injury

By | Business Litigation, Class Action Lawsuits, Data Breach

The Supreme Court of the State of Illinois (“Illinois Supreme Court” ) held in its opinion filed on January 25, 2019 that an individual need not allege some actual injury or adverse effect, beyond violation of his or her rights under the Biometric Information Privacy Act (“Act”) (740 ILCS 14/1 et seq. (West 2016)), in order to qualify as an “aggrieved” person and be entitled to seek liquidated damages and injunctive relief pursuant to the Act.

The Act was enacted in 2008 to help regulate “the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information.” § 5(g). The Act defines “biometric identifier” to mean “a retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry.” § 10. “Biometric information” means “any information, regardless of how it is captured, converted, stored, or shared, based on an individual’s biometric identifier used to identify an individual.”

The Act imposes numerous restrictions on how private entities collect, retain, disclose and destroy biometric identifiers. Section 15 of the Act (§ 15) imposes on private entities various obligations regarding the collection, retention, disclosure, and destruction of biometric indentifiers and biometric information. Among these is the following:  (b) No private entity may collect, capture, purchase, receive through trade, or otherwise obtain a person’s or a customer’s biometric identifier or biometric information, unless it first: (1) informs the subject or the subject’s legally authorized representative in writing that a biometric identifier or biometric information is being collected or stored; (2) informs the subject or the subject’s legally authorized representative in writing of the specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored, and used; and (3) receives a written release executed by the subject of the biometric identifier or biometric information or the subject’s legally authorized representative.

Under the Act, any person “aggrieved” by a violation of its provisions “shall have a right of action *** against an offending party” and “may recover for each violation” the greater of liquidated damages or actual damages, reasonable attorney fees and costs, and any other relief, including an injunction, that the court deems appropriate. § 20.

In the case the Illinois Supreme Court was deciding,  Six Flags Entertainment Corporation and its subsidiary Great America LLC (“defendants”) own and operate the Six Flags Great America amusement park in Gurnee, Illinois. Defendants sell repeat-entry passes to the park. Since at least 2014, defendants have used a fingerprinting process when issuing those passes. The defendants’ system scans pass holders’ fingerprints; collects, records and stores ‘biometric’ identifiers and information gleaned from the fingerprints; and then stores that data in order to quickly verify customer identities upon subsequent visits by having customers scan their fingerprints to enter the theme park, making entry into the park faster and more seamless, maximizing the time pass holders are in the park spending money, and eliminating lost revenue due to fraud or park entry with someone else’s pass.

The plaintiff’s 14-year-old son visited defendants’ amusement park on a school field trip in May or June 2014, while the fingerprinting system was in operation. The plaintiff purchased a season pass for her son online. The plaintiff paid for the pass and provided personal information about her son, but he had to complete the sign-up process in person once he arrived at the amusement park. The process involved two steps. First, the plaintiff’s son went to a security checkpoint, where he was asked to scan his thumb into defendants’ biometric data capture system. After that, he was directed to a nearby administrative building, where he obtained a season pass card. The card and his thumbprint, when used together, enabled him to gain access as a season pass holder.

The plaintiff’s class-action complaint alleged that neither the plaintiff nor her minor son were informed in writing or in any other way of the specific purpose and length of term for which his fingerprint had been collected. Neither of them signed any written release regarding taking of the fingerprint, and neither of them consented in writing “to the collection, storage, use sale, lease, dissemination, disclosure, redisclosure, or trade of, or for [defendants] to otherwise profit from, [the son’s] thumbprint or associated biometric identifiers or information.”

The defendants argued, and the intermediate appellate court agreed,  that  a plaintiff is not “aggrieved” within the meaning of the Act and may not pursue either damages or injunctive relief under the Act based solely on a defendant’s violation of the statute. Additional injury or adverse effect must be alleged. The injury or adverse effect need not be pecuniary, the appellate court held, but it must be more than a “technical violation of the Act.”

The Illinois Supreme Court stated that through the Act, the Illinois General Assembly has codified that individuals possess a right to privacy in and control over their biometric identifiers and biometric information. The duties imposed on private entities by section 15 of the Act regarding the collection, retention, disclosure, and destruction of a person’s or customer’s biometric identifiers or biometric information define the contours of that statutory right. The Illinois Supreme Court held that accordingly, when a private entity fails to comply with one of section 15’s requirements, that violation constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach. Such a person or customer would clearly be “aggrieved” within the meaning of section 20 of the Act and entitled to seek recovery under that provision (a person is prejudiced or aggrieved, in the legal sense, when a legal right is invaded by the act complained of or his pecuniary interest is directly affected by the decree or judgment.). No additional consequences need be pleaded or proved. The violation, in itself, is sufficient to support the individual’s or customer’s statutory cause of action.

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Security Breaches And Data Dumps

By | Cyber Security, Data Breach

A cybersecurity researcher has revealed in his blog a data breach made up of many different individual data breaches from thousands of different sources that consists of a set of email addresses and passwords totaling 2,692,818,238 rows, which he has designated as “Collection #1,” containing 772,904,991 unique email addresses along with 21,222,975 unique passwords.

The cybersecurity blogger cited a large collection of files on the popular cloud service, MEGA, which totaled over 12,000 separate files and more than 87GB of data.

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The Collection #1 data reportedly was first posted to underground forums in October 2018 and is just a subset of a much larger tranche of passwords being sold online for $45.00 by a seller who self-identifies as “Sanixer.” Sanixer reportedly admits that Collection #1 was at least 2 to 3 years old and is a mix of “dumps and leaked bases.” However, he allegedly offers for sale other “password packages” that total more than 4 terabytes in size and are less than one year old.

A cybersecurity expert states that a core reason so many accounts get compromised is that far too many people choose poor passwords, re-use passwords and email addresses across multiple sites, and are not taking advantage of multi-factor authentication options when they are available. The cybersecurity expert recommends instead of thinking about passwords, consider using unique, lengthy passphrases — collections of words in an order you can remember — when a site allows it. In general, a long, unique passphrase takes far more effort to crack than a short, complex one.

The cybersecurity expert suggests that if you are the type of person who likes to re-use passwords, then you definitely need to be using a password manager, which helps you pick and remember strong and unique passwords/passphrases and essentially lets you use the same strong master password/passphrase across all Web sites.

The cybersecurity expert further suggests that you go to twofactorauth.org and to see if you are taking full advantage of multi-factor authentication at sites you trust with your data. Multi-factor authentication helps because even if hackers manage to guess or steal your password just because they hacked some Web site, that password will be useless to them unless they can also compromise that second factor — be it your mobile device or security key.

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If your business suffered financial or other significant harm due to a cybersecurity breach in  the United States, email us at info@businesslitigationcontingencylawyers.com or telephone us toll-free in the United States at 800-756-2143 to discuss whether your cyber security breach matter may be appropriate to be handled on a contingency basis.

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Two Ukrainian Nationals Indicted For Hacking EDGAR Reports

By | Data Breach

The U.S. Attorney’s Office for the District of New Jersey announced on January 15, 2019 that two Ukrainian men have been charged for their roles in a large-scale, international conspiracy to hack into the Securities and Exchange Commission’s (SEC) computer systems and profit by trading on critical information they stole.

The 16-count indictment alleges that from February 2016 to March 2017, the defendants and others conspired to gain unauthorized access to the computer networks of the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system, which is used by publicly traded companies to file required disclosures, such as annual and quarterly earnings reports. These filings contained detailed information about the financial condition and operations of the companies, including their earnings. Such information can, and often does, affect the stock price of the companies when it is made public, and is therefore highly confidential prior to its disclosure to the general public.

The EDGAR system allows companies to make test filings in advance of a public filing. These test filings often contain information that is the same or similar to the information in the final filing. The defendants allegedly stole thousands of test filings before they were released to the public, and sought to profit from their theft by using the information in the test filings to trade before the investing public learned the information.

The indictment alleges that in order to gain access to the SEC’s computer networks, the defendants used a series of targeted cyber-attacks, including directory traversal attacks, phishing attacks, and infecting computers with malware. Once the defendants had access to the test filings on the EDGAR system, they allegedly stole them by copying the test filings to servers they controlled. For example, between May 2016 and October 2016, the defendants extracted thousands of test filings from the EDGAR servers to a server they controlled in Lithuania.

The wire fraud conspiracy and substantive wire fraud counts with which the defendants are charged carry a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss from the offense. The securities fraud conspiracy, computer fraud conspiracy, and substantive computer fraud counts with which the defendants are charged carry a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense.

Source

If your business is presently or may soon be involved in data breach litigation in the United States, email us at info@businesslitigationcontingencylawyers.com or telephone us toll-free in the United States at 800-756-2143 to find business litigation contingency lawyers who may handle your data breach litigation matter on a contingency basis.

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Massachusetts Strengthens Its Data Breach Law By Adding Amendments

By | Cyber Security, Data Breach

Massachusetts Governor Charlie Baker signed a new law on January 10, 2019  that significantly amends and strengthens Massachusetts’ data breach notification law when it becomes effective on April 11, 2019.

A new requirement requires an offer of complimentary credit monitoring for a period of not less than 18 months when the data security breach involves a Massachusetts resident’s Social Security number. The new law requires that a person who experienced a breach of security that involves a resident’s Social Security number to “file a report with the attorney general and the director of consumer affairs and business regulation certifying their credit monitoring services comply with” the new requirement to offer complimentary credit monitoring services for a period of not less than 18 months. If the breach happened at a credit monitoring agency, the agency would have to provide three-and-a-half years of free monitoring.

The new law (i.e., amendments to the existing law) requires a rolling notification to individuals under certain circumstances (“A notice provided pursuant to this section shall not be delayed on grounds that the total number of residents affected is not yet ascertained. In such case, and where otherwise necessary to update or correct the information required, a person or agency shall provide additional notice as soon as practicable and without unreasonable delay upon learning such additional information.” ). The amended law also requires that the notice to individuals must identify the name of the parent or affiliated corporation if the organization that experienced a breach of security is owned by another person or corporation.

The amended law includes a new requirement to inform the state regulators “whether the person or agency maintains a written information security program.” Massachusetts regulations currently require “[e]very person that owns or licenses personal information about a resident of the Commonwealth [to] develop, implement, and maintain a comprehensive information security program.” 201 CMR § 17.03(1).

Credit reporting agencies will be required to provide a “security freeze” free of charge when a consumer requests it, and third parties to gain consumers’ written consent before obtaining credit reports for non-credit purposes. If someone requests a credit freeze from one credit agency, that agency would be required to tell them how to contact the other major credit agencies.

Upon request, a credit agency would be required to disclose what is in someone’s credit history and who the agency has provided a credit report to within the past six months, and up to two years for employment purposes.

A credit agency could not charge more than $8 for a copy of a credit report and could not charge at all if someone were turned down for a job, home rental or insurance due to poor credit during the past 60 days. The law sets out rules for disputing credit reports.

In signing the amendments into law, the Massachusetts Governor stated, “The improvements made to Massachusetts laws in this legislation are necessary to protect consumers from the consequences of data breaches that could expose personal information and to give consumers more control over their data and how it is used.”

Source

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Massachusetts Data Breach Law

By | Cyber Security, Data Breach

The Massachusetts Data Breach Notification Law requires businesses and others that own or license personal information of residents of Massachusetts to notify the Office of Consumer Affairs and Business Regulation and the Office of Attorney General when they know or have reason to know of a breach of security. They must also provide notice if they know or have reason to know that the personal information of a Massachusetts resident was acquired or used by an unauthorized person, or used for an unauthorized purpose. In addition to providing notice to government agencies, they must also notify the consumers whose information is at risk.

Definition Of Data Breach

A data breach is the unauthorized acquisition or use of sensitive personal information that creates a substantial risk of identity theft or fraud. Data breaches can be the result of criminal cyber-activity, such as hacking or ransomware, or because of employee error, such as emailing information to the wrong person.

Definition Of Personal Information

The law defines personal information as a resident’s first name and last name or first initial and last name in combination with any 1 or more of the following data elements that relate to such resident:

(a) Social Security number;

(b) driver’s license number or state-issued identification card number; or

(c) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password, that would permit access to a resident’s financial account.

Personal information does not include information that can be legally obtained from publicly available sources, such as addresses or birthdays.

Requirements For Reporting Data Breach

Within a reasonable amount of time after either the discovery of a breach or knowledge that personal information was obtained, the business or entity that was breached must notify both the Office of Consumer Affairs and Business Regulation and the Attorney General’s Office of the breach.

The notification must include:

  • A detailed description of the nature and circumstances of the breach of security or unauthorized acquisition or use of personal information;
  • The number of Massachusetts residents affected as of the time of notification;
  • The steps already taken relative to the incident;
  • Any steps intended to be taken relative to the incident subsequent to notification; and
  • Information regarding whether law enforcement is engaged investigating the incident.

Some data breaches are a result of a breach from a third-party vendor or other entity. For example, in addition to the regular reporting requirements, the law also requires financial institutions to report when a debit or credit card they issue is compromised. This means a breach may have occurred at a retailer but if the consumer used their bank issued card, the financial institution reports the breach as well.

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Data Breach Class Action Lawsuit Filed Against Marriott International, Inc.

By | Class Action Lawsuits, Data Breach

A class-action lawsuit was filed on November 30, 2018 against Marriott International, Inc. (“Marriott) on behalf of over 500 million consumers whose personal information, including their names, birthdates, addresses, locations, gender information, email addresses, payment card information, and passport information were stolen.

Bethesda, Maryland-based Marriott is a leading global lodging company with more than 6,700 properties across 130 countries and territories, reporting revenues of more than $22 billion in fiscal year 2017. Founded by J. Willard and Alice Marriott and guided by family leadership for more than 90 years, the company is headquartered outside of Washington, D.C. Marriott’s hotel brands include W Hotels, St. Regis, Sheraton Hotels, and Westin Hotels. Source

The class action lawsuit alleges that cybercriminals broke into Marriott’s servers in 2014 and obtained the personal information of approximately 500 million Marriott customers, and continued to have access throughout Marriott’s system, with unfettered and undetected access, for four years. The lawsuit alleges that Marriott did not discover the breach until September 8, 2018 yet did not notify its consumers until November 30, 2018. Marriott allegedly does not know the origin or identity of the hackers and has not fully assessed the scope of the attack.

The Marriott class action lawsuit alleges that Marriott failed to ensure the integrity of its servers and to properly safeguard consumers’ highly sensitive and confidential information, knowing that it had an obligation to protect the personal and financial data of its guests and customers and being aware of the significant repercussions to its customers if it failed to do so.  The class-action lawsuit alleges that Marriott  violated consumer protection statutes, breached confidence, and was reckless and grossly negligent.

Source

On November 30, 2018, Marriott issued the following statement (in part):

Marriott has taken measures to investigate and address a data security incident involving the Starwood guest reservation database.  On November 19, 2018, the investigation determined that there was unauthorized access to the database, which contained guest information relating to reservations at Starwood properties* on or before September 10, 2018.

On September 8, 2018, Marriott received an alert from an internal security tool regarding an attempt to access the Starwood guest reservation database in the United States.  Marriott quickly engaged leading security experts to help determine what occurred.  Marriott learned during the investigation that there had been unauthorized access to the Starwood network since 2014.  The company recently discovered that an unauthorized party had copied and encrypted information, and took steps towards removing it.  On November 19, 2018, Marriott was able to decrypt the information and determined that the contents were from the Starwood guest reservation database.

The company has not finished identifying duplicate information in the database, but believes it contains information on up to approximately 500 million guests who made a reservation at a Starwood property.  For approximately 327 million of these guests, the information includes some combination of name, mailing address, phone number, email address, passport number, Starwood Preferred Guest (“SPG”) account information, date of birth, gender, arrival and departure information, reservation date, and communication preferences.  For some, the information also includes payment card numbers and payment card expiration dates, but the payment card numbers were encrypted using Advanced Encryption Standard encryption (AES-128).  There are two components needed to decrypt the payment card numbers, and at this point, Marriott has not been able to rule out the possibility that both were taken.  For the remaining guests, the information was limited to name and sometimes other data such as mailing address, email address, or other information.

Source

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Average Cost Of Data Breach In 2018: $3.86 Million

By | Data Breach

The IBM Security and Ponemon Institute’s 2018 Cost of Data Breach Study: Global Overview reported that “data breaches continue to be costlier and result in more consumer records being lost or stolen, year after year.” The finding was based on interviews of more than 2,200 IT, data protection, and compliance professionals from 477 companies that have experienced a data breach over the past 12 months.

The report found that the average total cost of a data breach, the average cost for each lost or stolen record
(per capita cost), and the average size of data breaches in 2018 have all increased over the averages reported in 2017:

  • The average total cost rose from $3.62 to $3.86 million, an increase of 6.4 percent;
  • The average cost for each lost record rose from $141 to $148, an increase of 4.8 percent; and,
  • The average size of the data breaches increased by 2.2 percent.

Probability Of Future Data Breach

Two factors were used to determine the probability of a future data breach: the size of the data breach reported in this year’s research and where the organization is located:

  • The average global probability of a material breach in the next 24 months is 27.9 percent, an increase over last year’s 27.7 percent;
  • South Africa has the highest probability of experiencing a future data breach, at 43 percent; and,
  • Germany has the lowest probability of having a future data breach, at 14.3 percent.

The study also reported on the relationship between how quickly an organization can identify and contain data breach incidents and the financial consequences:

  • The mean time to identify (MTTI) was 197 days;
  • The mean time to contain (MTTC) was 69 days; and,
  • Companies that contained a breach in less than 30 days saved over $1 million vs. those that took more than 30 days to resolve.

The study also found:

  • The average cost of a breach for organizations that fully deploy security automation is $2.88 million;
  • Without automation, estimated cost is $4.43 million (a $1.55 million net cost difference);
  • The extensive use of IoT devices increased cost by $5 per compromised record;
  • A mega breach (defined as a data breach involving more than one million compromised records) of 1 million records yields an average total cost of $40 million; and,
  • A mega breach of 50 million records yields an average total cost of $350 million.

The key findings in the report were:

The global cost of data breach increased (the average total cost of data breach increased by 6.4 percent and the per capita cost increased by 4.8 percent; the average size of a data breach (number of records lost or stolen) also increased by 2.2 percent);

Data breaches are the most costly in the United States and the Middle East and least costly in Brazil and India (the average total cost in the United States was $7.91 million and the average total cost in the Middle East was $5.31 million; the lowest average total cost was $1.24 million in Brazil and $1.77 million in India; and, the highest average per capita costs were $233 in the United States and $202 in Canada);

Notification costs are the highest in the United States (these costs include the creation of contact databases, determination of all regulatory requirements, engagement of outside experts, postal expenditures, email bounce-backs and inbound communication setups; notification costs for organizations in the United States were the highest at $740,000 whereas India had the lowest at $20,000);

The United States and the Middle East spend the most on post data breach response (post data breach response activities include help desk activities, inbound communications, special investigative activities, remediation, legal expenditures, product discounts, identity protection services and regulatory interventions; in the United States, these costs were $1.76 million and were $1.47 million in the Middle East);

Canada has the highest direct costs and the United States has the highest indirect costs (Canada had the highest direct cost at $81 per compromised record (direct costs refer to the expense outlay to accomplish a given activity such as engaging forensic experts, hiring a law firm, or offering victims identity protection services); the United States had the highest indirect per capita cost at $152 (indirect costs include employees’ time, effort, and other organizational resources spent notifying victims and investigating the incident, as well as the loss of goodwill and customer churn);

The faster a data breach can be identified and contained, the lower the costs (for the consolidated sample of 477 companies, the mean time to identify (MTTI) was 197 days, and the mean time to contain (MTTC) was 69 days; both the time to identify and the time to contain were highest for malicious and criminal attacks and much lower for data breaches caused by human error; companies that identified a breach in less than 100 days saved more than $1 million as compared to those that took more than 100 days; similarly, companies that contained a breach in less than 30 days saved over $1 million as compared to those that took more than 30 days to resolve);

Hackers and criminal insiders cause the most data breaches (forty-eight percent of all breaches in this year’s study were caused by malicious or criminal attacks; the average cost per record to resolve such an attack was $157; in contrast, system glitches cost $131 per record and human error or negligence costs $128 per record; companies in the United States and Canada spent the most to resolve a malicious or criminal attack ($258 and $213 per record, respectively); Brazil and India spent far less ($73 and $76 per record, respectively));

Incident response teams and the extensive use of encryption reduce costs (in this year’s research, an incident response (IR) team reduced the cost by as much as $14 per compromised record; hence, companies with a strong IR capability could anticipate an adjusted cost of $134, down from $148 per record; similarly, the extensive use of encryption reduced cost by $13 per capita, for an adjusted average cost of $135,
down from $148 per record);

Third party involvement in a breach and extensive cloud migration at the time of the breach increases the cost (if a third party caused the data breach, the cost increased by more than $13 per compromised record for an adjusted average cost of $161, up from $148 per record; organizations undergoing a major cloud migration at the time of the breach saw the cost increase to per capita cost by $12, for an adjusted average cost of $160, up from $148 per record);

The loss of customer trust has serious financial consequences (organizations that lost less than one percent of their customers due to a data breach resulted in an average total cost of $2.8 million; if four percent or more was lost, the average total cost was $6 million, a difference of $3.2 million).

Source

If your business is presently or may soon be involved in data breach litigation in the United States, email us at info@businesslitigationcontingencylawyers.com or telephone us toll-free in the United States at 800-756-2143 to find business litigation contingency lawyers who may handle your data breach litigation matter on a contingency basis.

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