3-minute read
As the digital transformation touches every corner of our lives — from how we bank and shop to how we access healthcare and communicate — online privacy has become one of the defining public policy issues of our time. Legislation aimed at protecting consumer data remains under consideration in Albany, and new laws have been introduced in Congress and statehouses throughout the country. The debate about these bills has increasingly hinged on whether proposed laws should be enforced by government agencies, like the state attorney general’s office, or if private, profit-motivated law firms should be deputized to file lawsuits.
A new report from the New York Civil Justice Institute reveals that a “litigation industrial complex” has grown around privacy laws that include broad private rights of action. These private rights of action allow attorneys to file, and profit from, lawsuits for things typically regulated by the government. These have become problematic provisions that have led to a flood of questionable, no-harm class actions, and settlements that leave the supposedly aggrieved consumers empty-handed. The lawyers appear to benefit more than the consumers they allegedly represent.
Private rights of action frequently authorize massive class action lawsuits. These lawsuits are often initiated by lawyers who identify a potential claim, then recruit lead plaintiffs to represent the class. The desire for money comes well before any actual harm. The majority of class consumers are generally unaware that the case was filed or that the alleged violation occurred at all. Research shows that the class of consumers in these cases rarely sees meaningful, if any, compensation. Too often, class action lawsuits result in large attorneys’ fees and the distribution of leftover settlement funds, known as cy pres awardsto third-party advocacy organizations. These groups, funded in part by those very settlements, then appear at public hearings and lawmaker meetings to advocate for more laws that contain private rights of action and more lawsuits from which they get paid. A self-sustaining, litigation-fueled merry-go-round.
Organizations like the Electronic Privacy Information Center, Consumer Reports and the Public Interest Research Groups have all received cy pres funds from privacy class actions. At the same time, they call on Congress and state lawmakers to include private enforcement mechanisms in new bills. They’ve also been known to file legal briefs to support expanding the scope of existing laws, even when the scenario giving rise to the lawsuit was never meant to be covered by the original statute. For example, lawyers have recently used a law enacted with Blockbuster video in mind to sue over social media advertising.
Let’s be clear: skepticism around private rights of action is not about denying consumers a path to justice. When someone suffers a real injury due to the negligence of another, they should be able to sue. However, in cases where no one was harmed, enforcement should be handled by publicly accountable regulators and prosecutors, not law firms looking for big payouts.
State and federal agencies are far-better equipped to serve the public interest than profit-seeking lawyers. Public agencies can investigate bad actors, issue guidance, and bring enforcement actions that reflect the public’s interest, not private financial incentives. And when penalties are imposed, the damages collected can go toward restitution or supporting government data privacy initiatives, not cycled back to lobbying groups.
In New York, the stakes are especially high. Businesses already struggle to operate in a hostile liability climateand the trial lawyers’ lobby and their favored advocacy groups are among the most influential groups in Albany. If lawmakers make it easier and more lucrative to sue, we risk encouraging a wave of lawsuits that do little to protect consumers, and a lot to enrich the wealthy and powerful lawsuit industry.
As legislators around the country debate these proposals, they should ask tough questions of the organizations that show up to public hearings in support of private rights of action: Have they received money from past settlements? Do they have ties to class action law firms? Will they get money from more litigation?
Privacy protections are too important to be hijacked by a self-interested few. If we want to build a system that truly safeguards New Yorkers’ data, promotes trust and upholds the public interest, we need strong public enforcement, not a revolving door of lawsuits and cy pres settlements that serve the same small group of insiders over and over again.
Let’s put consumers first — and ensure our institutions of justice aren’t transformed into just another business model.
Tom Stebbins is the executive director at the Lawsuit Reform Alliance of New York.
