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The OPM lawsuit will only make the lawyers rich

Ira Winkler | July 9, 2015
Class-action lawsuits are pursued by lawyers for a reason: They’re a great way for them to make a lot of money. Too little of that money is ever seen by the victims, though.

So that's what the members of the class -- you know, the actual victims -- are set to get per the settlement the lawyers arranged. How about the lawyers themselves? Well, they have asked for $6.75 million. Like the victims, they will have to share that payout, and there are five law firms involved. Still, I think it's safe to say that there's nothing like a million lawyers involved (though it always feels that way) -- they'll do much better than 10 cents or a dollar each. But be assured, they won't charge you for helping you get your $1. That's the kind of good-hearted people they are.

Some victims will do better than others. The ones whom the lawyers tracked down to serve as the class representatives had to show up for depositions, and their names were used to facilitate the lawyers in getting their $6.75 million. The attorneys were very generous to these people, requesting that they receive a whopping $500 each for all of their time and trouble.

That could be the extent of riches that victims could see from the class-action lawsuit regarding the most infamous credit card hack in history, a breach in which thousands of people experienced actual damages. There is no reason to think class action regarding the OPM hack will turn out any differently.

The filing for the OPM lawsuit makes reference to the Privacy Act of 1974. That act specifies statutory damages of $1,000 per incident. This means that any person who had their data compromised, whether they suffered losses or not, can be awarded $1,000 if it is determined that there was a violation of the Privacy Act. The specter of such a requirement can serve as a powerful inducement for organizations to settle a lawsuit. Think about it. If the case goes to trial and a violation of the Privacy Act is found, the OPM could be held liable for $1,000 per individual in the class action. With potentially 30 million victims in this case, that would come to $30 billion. I suspect most parties to the class action would be happy with that $1,000, but the lawyers are much more inclined to settle. That's how you end up with the law firms raking in millions while the victims gather a few cents.

I have reason to hold such a jaded outlook on this topic. I have talked to attorneys who engage in class actions. One thing that they say to justify their deeds is that such lawsuits are not really about reimbursing the victims, but rather about setting up incentives that can change the processes that resulted in the damages at the root of the lawsuit. They also say that victims who would prefer to hold out for a judgment that actually might compensate the victims are being greedy.


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