Settlement of Ameritrade Data Breach Litigation Preliminarily Approved

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

The federal district court in San Francisco has preliminarily approved a settlement of class action claims against online investment broker Ameritrade for allegedly failing to prevent a data security breach that exposed accountholders' private information to spammers and rendered the same information vulnerable to others.

Although the court was concerned that the broker had agreed to pay class counsel $1.87 million in attorney's fees, while the class itself was to receive no monetary award, the proposed settlement was deemed "within the range of possible approval."

The Attorney General of Texas had originally objected to the settlement as merely a promise by the broker to conduct security measures that a responsible company should conduct anyway. However, after negotiations between the attorney general and the broker, the attorney general agreed to withdraw its objections because of amendments made to the proposed settlement.

The amended settlement agreement, after final approval, would provide class members with a one-year subscription for an anti-virus, anti-spam Internet security product. The broker agreed to post a warning on its website regarding "stock-touting" spam, to retain independent experts to conduct bi-annual penetration tests of its electronic data, and to engage in other practices aimed at preventing identity theft.

Under the changes made to the settlement in response to the Texas attorney general's objections, individual class members would retain the right to pursue future claims arising from identity theft. In addition, the settlement will not release any claims of a governmental entity.

The decision is In re TD Ameritrade Accountholder Litigation, CCH Privacy Law in Marketing ¶60,333.

A fairness hearing for the approval of the settlement is scheduled for September 10, 2009. Further information about the litigation and settlement appears here.