Online stationery and craft company Minted Inc. has been hit with a CCPA class action lawsuit, stemming from a massive data breach the company disclosed in late May. The proposed class action lawsuit, filed in a California federal court, claims that Minted Inc. failed to implement “reasonable security measures” and to properly encrypt certain personal information. See Atkinson v. Minted, Inc., No. 3:20-cv-03869 (N.D. Cal. June 11, 2020). As a result, the hackers allegedly accessed the company’s database that contained customers’ names and login credentials, including unredacted and unencrypted account information. Some 73.2 million records were allegedly stolen and included passwords, names, and other information.
The Minted Inc. lawsuit is predicated on the California Consumer Privacy Act. It also asserts other causes of action, such as California’s Unfair Competition Law, negligence, breach of contract, and breach of implied contract. The putative class seeks compensatory damages, punitive damages, and penalties. The plaintiffs asked the court to certify two classes: (1) a California class predicated on the CCPA and the UCL and (2) a nationwide class, which includes those consumers to whom the CCPA and the UCL do not apply.
As a reminder, the CCPA applies to many companies doing business in California, if they meet certain thresholds, which we previously discussed here. If the company subject to the CCPA fails to implement “reasonable security measures,” and a data breach subsequently results, the victims of the data breach that are California residents can file a class action and seek significant statutory penalties, ranging from $100 to $750 per every single violation. In a breach involving 73.2 million records, these penalties quickly escalate to “bet the company” damages, if a large percentage of the putative class plaintiffs reside in California and can claim CCPA penalties. Additionally, California Attorney General can seek even higher penalties through a regulatory enforcement action, although it is presently unclear how the AG intends to enforce the CCPA, and the draft regulations only became final late last month, as we discussed here.
“Reasonable security” is a particularly thorny topic and one that has not been defined in the CCPA, or by the courts to any degree. We discussed the “reasonable security” threshold in a recent webinar with recommendations as to how to develop a reasonable, sustainable, and defensible information security program.
The CCPA is gaining significant traction in California. We previously reported here on the very first CCPA class action complaint, which was filed earlier this year—Fuentes v. Sunshine Behavioral Health Group, LLC, Case No. 8:20-cv-00487 (C.D. Cal. March 10, 2020). Similarly to the Minted Inc. lawsuit, it stemmed from a data breach, which allegedly exposed highly sensitive personal and medical information of thousands of patients. We also wrote here about the first-of-its kind California class action, Barnes v. Hanna Andersson, LLC, which relied on the CCPA to form a basis for a claim under another California statute but did not expressly assert a CCPA cause of action. We anticipate a steady increase in the number of CCPA data breach class actions that will be filed this year.
We have been closely tracking all CCPA-related developments and will continue to report on the latest legal developments. If you have any questions relating to the CCPA specifically, development or assessment of information security programs, or to privacy class actions generally, contact our privacy team at Mintz.