Chamber Study Concludes Privacy Lawsuits Benefit Attorneys More than Consumers

Statutes allowing plaintiff lawyers to enforce privacy laws through private rights of action are clogging courts and provide no real benefit to consumers, a report from the U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) claims.

By contrast, privacy-related statutes that do not provide a private right of action, but rather delegate enforcement authority to agencies, “often lead to far stronger outcomes that better balance penalties, deterrence better balance penalties, deterrence, innovation, and consumer protection,” according to the business lobby’s report.

The report, Ill-Suited: Private Rights of Action and Privacy Claims, examines how little plaintiffs get from multibillion-dollar consumer privacy lawsuits lawsuits. For example, plaintiffs’ lawyers get up to 30% of settlements from Telephone Consumer Protection Act (TCPA) lawsuits, but only four to eight percent of eligible consumers file settlement claims, the report states.

The report focuses on suits brought under four laws: the TCPA, the Fair Credit Reporting Act (FCRA), the Video Privacy Protection Act (VPPA), and the Illinois Biometric Information Privacy Act (BIPA).

The paper also claims that plaintiffs resort to state privacy and consumer protection statutes to sidestep congressional intent where private rights of action are not provided in federal statutes.

The study, authored by Mark W. Brennan, partner at the Hogan Lovells law firm, also found that lawsuits filed over privacy laws that allow for private rights of actions are increasing. More than 100 lawsuits were filed under the Illinois Biometric Information Privacy Act (BIPA) in the six months after the state Supreme Court ruled BIPA does not require individuals to prove they were actually harmed in order to sue a company for millions of dollars.

“There is only one group that benefits from private lawsuits: plaintiffs’ lawyers who are simply exploiting private rights of action in privacy laws for their own financial gain,” explained Harold Kim, chief operating officer for the U.S. Chamber Institute for Legal Reform. “Rather than allow expert regulators to shape and balance policy and protections, enforcement is driven by frivolous lawsuits that do nothing to protect consumer privacy.”

The ILR report also contends that government agencies are more effective at protecting privacy than private lawsuits, which the author says “stifle innovation and limit consumer choice by threatening companies with time-consuming and expensive litigation.”

“Privacy law presents many complex questions about what to protect, why, how, and to what degree, but it is increasingly clear that these protections should be enforced by expert agencies rather than the plaintiffs’ bar,” Mark Brennan said.

Not surprisingly, plaintiffs’ lawyers have a different view.

Peter Knudsen, director of Communications, the American Association for Justice, contends the ILR argument ignores a key benefit of private actions.

“Far too often consumers place valuable confidential information, such as social security numbers or bank account information, into the hands of multi-billion dollar corporations with the reasonable expectation that the information will be secured. When it isn’t, the Chamber argues that consumers never reasonably believed that information should have been safe in the first place,” Knudsen said. “This conclusion ignores that accountability results in corporations prioritizing the security of consumer data. The Chamber’s solution of government enforcement will not help consumers who have had their medical privacy or financial information compromised.”