United States: Be Prepared For Law Firm Data Breach Litigation

Last Updated: January 9 2017
Article by Scott L. Vernick and Peter C. Buckley

Mossack Fonseca. Before April 2016, most of us had never even heard of a Panamanian law firm by that name. But, after one of the largest and certainly most high-profile cyberattacks, the firm and its mountain of records evidencing shell companies, straw transactions and offshore accounts — documents that have come to be known as the "Panama Papers" — have become synonymous with one of the hottest topics in the legal industry: cybersecurity.

Since an anonymous source leaked over 11 million Mossack Fonseca files to a German newspaper that shared them with the International Consortium of Investigative Journalists, the news media has been running stories about how the rich and famous hide their money and avoid taxes.

The legal industry had already been focused on cybersecurity after PricewaterhouseCoopers warned in 2011 that "there is no question that law firms are among the companies being targeted by cyber-criminals." But the Panama Papers removed any doubt about whether the threat was more than hypothetical.

Indeed, according to a recent survey published by the American Bar Association, 26 percent of firms with more than 500 attorneys have experienced a security breach. Firms have long been focused on protecting themselves against cyberattacks, working with their information technology teams and outside vendors to understand the risks and to shore up their defenses.

The focus has been not only on network integrity, firewalls, antivirus software and disaster recovery, but also on educating their attorneys and staff about data security. While some data breaches are the work of sophisticated cybercriminals, a lost laptop or a compromised password are enough to cause major damage.

But now, as is often the case with game-changing news stories about sensitive information or big money, the focus has shifted, at least in part, to the courts. Lawyers have a duty to protect the confidentiality of client information, so if that confidentiality is compromised, we can expect that litigation will follow.

Indeed, just recently, a court unsealed a complaint filed by well-known class action lawyer Jay Edelson in the first public data security class action against a U.S. law firm — Shore v. Johnson & Bell Ltd., No. 16-CV-4363 (N.D. Ill.). Shore has garnered media attention because it is the first public suit, but Edelson's public comments make clear that Johnson & Bell is not his only target or only pending suit.

While the case law on law firm data breach litigation has largely yet to be written, there are certain fundamental tenets worth exploring as existing defenses are tailored to fit these new circumstances and technology.


The Rules of Professional Conduct in every state generally provide, consistent with Rule 1.6(c) of the Model Rules, that "[a] lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client." So, what are "reasonable efforts"?

Certainly, there must be some degree of proportionality: valuable trade secrets likely require more protection than random e-mails, and Mossack Fonseca likely owes a higher duty to protect the identities of its privacy-seeking clients than attorneys representing litigants in a public forum.

There must also be some recognition that the threat landscape changes almost daily, and so "reasonable efforts" should reflect industry "best practices" at a point in time, and some degree of proportionality, taking into account the value of the content being protected, cost of the protection and practical technical considerations.


Legal malpractice actions often turn on how the standard of care is defined. Without years of precedent to guide them, courts are likely to search for benchmarks in this evolving area of the law.

For example, since 2002, the office of the California Attorney General has taken a lead role in data security enforcement. Its 2016 Data Breach Report cites a list of 20 critical security controls published by the Center for Internet Security, and concludes that failure to implement applicable controls constitutes "a lack of reasonable security."

While this area continues to develop, it is difficult to imagine a more definitive statement or a more reliable source and so we recommend that our law firm clients take note of the "CIS 20."


Most malpractice plaintiffs can establish at least an argument on duty and breach, and so causation is often where actions against attorneys are decided. Although the list of hypothetical data breach plaintiffs is a long one, we think that causation will remain a fertile ground for defenses.

Was the information actually confidential? Are there instances of prior disclosure? Would the information have been discovered inevitably or through the discovery process? Did the client have a duty to disclose? Does the disclosed information reveal something illegal?

In some instances, an attorney will face a decision about the client relationship, so these arguments may be difficult to make. But in others, the arguments will be justified in view of litigation exposure. As always, close attention to the causal chain is a must when responding to clients who sue.

Standing and Damages

Defending lawyers often involves defending against damages theories that stretch the bounds of the law and the imagination. We anticipate that these suits will be no different and, if anything, that data breach litigation will involve more than its fair share of novel theories.

Most states require "actual loss" in suits against lawyers, so plaintiffs are frequently foreclosed from pursuing consequential damages or theories that rely upon conjecture and speculation. Breaches of confidentiality are especially susceptible to such theories, and lawyers will be wise to keep the "actual loss" case law close at hand and to look for opportunities to challenge standing under Article III in the absence of an identifiable injury.

As with other technology-related developments, the key principles will remain the same, but their application may change as the technology evolves and as firms and clients become more sensitive to the risks posed by cyberattack.

Notwithstanding all of the uncertainty, one thing is for sure: every client should review their coverage with their insurer to make certain that they are protected in the event of cyberattack.

Originally published by Law360.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Scott L. Vernick
Peter C. Buckley
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.