Thousands of web-tracking lawsuits face extinction under California overhaul
Thousands of web-tracking lawsuits face extinction under California overhaul By David Thomas and Mike Scarcella
Oct 1 (Reuters) - (Billable Hours is Reuters' weekly report on lawyers and money. Please send tips or suggestions to D.Thomas@thomsonreuters.com)
A legislative change in California is set to erase a segment of website privacy litigation that has spawned thousands of lawsuits from plaintiffs' lawyers and generated millions of dollars in settlements.
Governor Gavin Newsom on Wednesday signed into law legislation that strips a private right of action from part of the California Invasion of Privacy Act (CIPA), sometimes referred to as the pen register and trap-and-trace provision. Lawyers have lodged thousands of lawsuits and demand letters in recent years claiming that website tracking tools violate the provision.
Senate Bill 690, which takes effect January 1, ends the ability to bring such cases and applies retroactively to claims brought within the past two years.
In a Wednesday message to California's Senate, Newsom said the measure "addresses the vexatious use of CIPA lawsuits and demand letters to extract settlement money from small businesses."
CIPA allows statutory penalties of $5,000 per violation, creating huge financial exposure for businesses that were vulnerable to private web-tracking claims, corporate defense lawyers told Reuters.
Class action claims brought under the pen register provision of CIPA can "very quickly get to tens of millions, if not hundreds of millions of dollars," said J. Colin Knisely, a partner at Duane Morris who defends clients against these claims. They're also easy to file, as the pen register provision of CIPA doesn't require plaintiffs to establish that specific private data was captured by user-tracking tools.
"They don’t need to show the contents, only that there was interception of this metadata," Knisely said. "That made it kind of a cheaper to plead at scale, and fueled mass demand letters."
Forbes and the Los Angeles Times earlier this year agreed to settle class action lawsuits brought under CIPA for $10 million and $3.85 million, respectively.
Attorneys at law firm Fisher Phillips have estimated that over 4,700 lawsuits have been filed in California, or were filed in other states but invoked California law, relating to digital wiretapping since 2022. About two-thirds of them included a claim under CIPA's pen register provision, said Fisher Phillips partner Usama Kahf.
Kahf said the firm's estimate does not include potentially thousands of demand letters and arbitration filings.
Still, some privacy lawyers said the change to CIPA won't keep them from bringing similar privacy lawsuits. SB 690 initially contained language that would have exempted businesses from liability under multiple provisions of CIPA if they could show their website user tracking, wiretapping and confidential recordings served a "commercial business purpose." But the scope of the bill was narrowed to stripping out the private right of action under CIPA's pen register provision.
Those changes prompted several groups who initially opposed SB 690, including Consumer Attorneys of California, to switch their positions.
"While removing consumer enforcement and doing so retroactively is concerning, SB 690 strikes the right balance of protecting business while preserving core privacy rights," the groups wrote in a September 24 letter to Newsom.
The governor, in his message to the California Senate, said more work is needed "as CIPA contains other decades-old statutes that are also susceptible to abuse by overly aggressive litigants." He asked lawmakers next year to find "a fair balance between protecting private information and prevent rapacious litigation."
Josh Swigart, who runs the California-based plaintiffs' firm Swigart Law Group, said lawsuits under CIPA's pen register provision comprise a "significant portion of our practice," but he does not expect changes to the law to harm the firm's business.
"I’m not too worried about it," Swigart said.
Swigart said they typically bring a variety of claims relating to privacy and web tracking against businesses under other California and federal laws. Kahf and Knisely said they have already seen plaintiffs' lawyers bringing web-tracking cases under different statutes.
"It’s plugging one hole," Kahf said of SB 690. "When you plug one hole, the water is going to find another hole."
GIBSON DUNN REVEALS RATES IN LIV GOLF BANKRUPTCY
Law firm Gibson Dunn, which represents LIV Golf in its US bankruptcy, expects to charge between $2,090 and $3,240 an hour for partners, $1,845 to $1,990 for counsel and $995 to $1,780 for associates, a court filing on Wednesday showed.
Gibson Dunn said the rates are the same that it charged to the company before its bankruptcy court filing and are slightly below the firm's standard rates for comparable restructuring, corporate and litigation matters. The firm said additionally it has applied a 20% discount on the total fees incurred by LIV.
The professional men's golf league and PGA Tour competitor filed for bankruptcy protection last month in New Jersey as a step toward restructuring. LIV has said it plans to continue operating while it reorganizes. Gibson Dunn did not immediately respond to a request for comment, and LIV had no immediate comment.
The filing said Gibson Dunn’s Scott Greenberg, head of the firm’s business restructuring and reorganization practice, will charge $3,240 an hour. Greenberg is also a member of the firm’s executive committee.
Richard Birns, co-leader of Gibson Dunn’s private equity practice, will bill at $2,760 an hour, the filing showed. Restructuring partner Matthew Williams will charge $2,545 an hour, according to the filing.
Also on Billable Hours' radar this week...
--In the escalating competition for future associates, large law firms are recruiting students from top law schools earlier than ever, Reuters columnist Sara Randazzo reports. The accelerated hiring process has drawn criticism from law students and school administrators alike.
--Litigation funder Burford Capital said its funding arrangement would give it an entitlement to about $1.4 billion of the $5.7 billion patent award Taction Technology won against Apple.
--Plaintiffs firms including Beasley Allen are set to receive more than $14 million for their work on Alabama's first-in-the-nation settlement with TikTok and its parent ByteDance over claims they helped fuel teen addiction.
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(Reporting by David Thomas, Sara Merken and Mike Scarcella )