Strahilevitz & Liu paper offers theory for Article III standing in data breach cases

Lior Strahilevitz of Chicago and Lisa Yao Liu of the Columbia Business School have written Cash Substitution and Deferred Consumption as Data Breach Harms. Here’s the abstract:

Federal courts have long been divided over whether consumers whose data are breached suffer an “injury in fact” that gives them standing to sue under Article III of the United States Constitution. Judicial opinions find no constitutional standing in a narrow majority of such cases, and plaintiffs are likely to lose absent causal links to subsequent identity theft or the disclosure of embarrassing information. Consumers whose data are breached thus are left without a federal remedy, and firms’ incentives to invest in data security are diminished. Our paper identifies a novel injury that results from data breaches. Upon learning about local data breaches, consumers immediately and temporarily reduce their purchases and shift from credit card purchases to cash transactions. These effects are more pronounced with respect to purchases that are characterized by greater elasticity of demand. After a data breach, many consumers forego both the benefits of a short-term loan from their credit card issuer, cash-back benefits, and other perks associated with card purchases. In light of our empirical results, the standing barrier that has thwarted so many data breach suits in federal court may be easily surmounted.


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