Online Privacy and Advertising: The Rise of the Class Action Lawsuit

The prevalence of online advertising, the rise of websites that collect personal information (like social networking sites), and the enactment of several federal statutes protecting online users have resulted in more and more lawsuits claiming breaches of privacy. Many of these lawsuits have conglomerated into class action suits, which are more likely to be litigated due to their efficiency and potential for greater damages. It is important for websites that collect information to be aware of this trend, and understand steps that can be taken to protect themselves.

One of the biggest issues facing websites is simply the threat of a lawsuit. For most website operators, the cost of litigation, combined with the potential hit to their public perception, is enough to convince them to quickly settle claims for breach of privacy. But a website with a history of settlement is a prime target for easy money for users and plaintiff’s attorneys.

The two most important things website operators need to know to protect themselves from lawsuits is (1) that such suits are generally losers for the plaintiffs and (2) that honoring its own Privacy Policy or Terms of Use is generally a very effective defense for websites accused of breaching user privacy.

Firstly, plaintiffs have a tough time succeeding in their breach of privacy claims. For instance, proving actual damages is difficult, particularly when there is no monetary loss claimed. And while most claims arise under federal statutes that provide damages for plaintiffs, many plaintiffs do not have standing under these statutes because much of the private information at issue in many online privacy cases is not protected. Further, threats of class action suits should be met with skepticism due to the practical difficulties of finding similarly situated plaintiffs—many times different potential plaintiffs have varying consent, causation, reliance, and injury claims and are thus unable to bring a suit as a class.

Secondly, most website operators can defeat a breach of privacy claim by proving the plaintiff-user consented to the website’s Terms of Use and/or its Privacy Policy. While every case is different, and these devices are certainly not a shield to all liability, strong Terms of Use agreements and clear Privacy Policies can act as effective deterrents to threatened lawsuits. Website operators should seek legal advice in crafting these devices to ensure their legal enforceability.

In the end, breach of privacy cases are on the rise, and website operators should be aware of this. Operators should be cognizant of the trend towards settlement of such cases due to website operators’ vulnerability in the court of public opinion. But awareness of the legal difficulties plaintiffs generally face in breach of privacy cases, and the implementation of strong Terms of Use and Privacy Policies, are a good start in protecting websites from falling prey to the trend.