Last year, 6.5 million LinkedIn users had their passwords hacked and posted on another website. Soon after, the professional-networking giant was facing a lawsuit in federal court. According to the people who filed the lawsuit, LinkedIn exhibited negligence, breach of contract and was in violation of California's consumer protection laws. The plaintiffs argued that LinkedIn failed to follow its own terms around password encryption.
LinkedIn, of course, disagreed. They filed to have the lawsuit dismissed, and a U.S. district judge in San Jose recently granted their request. According to him, the plaintiffs did not adequately explaining how the harm they were caused by the hacking incident was connected to LinkedIn's alleged misconduct.
LinkedIn's situation exemplifies the obstacles that many businesses face. While not all businesses are challenged by this exact issue, problems can arise that are out of a company's control. When that happens, consumers, investors or shareholders may challenge a company's business practices -- sometimes by taking legal action. If this occurs, it is important for businesses to be prepared.
To ensure that your best interests are protected if you are going through business litigation, speaking to an experienced attorney is advisable. Had LinkedIn been taken to trial and lost in a situation like this, it is likely their reputation would have been substantially tarnished, not to mention the potential financial impact it could have had on the company. Because they were able to identify the holes in the plaintiffs' case, however, they were able to show that the allegations were not well supported.
Source: Bloomberg, "LinkedIn Wins Dismissal of Privacy Suit Over Hacking," Joel Rosenblatt, March 5, 2013