ROCKYOU DATA BREACH CLASS ACTION POISED FOR SETTLEMENT

When Alan Claridge’s personal information was compromised in the breach of data from RockYou in 2009, he sued the company for damages. Last week, after two years in litigation, a settlement was proposed — and legal experts say it might prop the door open for more lawsuits.

According to the proposed settlement agreement, the judgment in Claridge’s favor awards him only $2,000 — though his lawyers get $290,000. The financially troubled RockYou claimed inability to pay the judgment.

The proposed settlement might not make Claridge a rich man, but legal experts say he might have made his point about the liability of companies that lose customer data through breaches, according to a commentary by Data Privacy Monitor.

“Because only the plaintiff’s claims would be dismissed with prejudice, other putative class members may still assert claims for monetary damages,” the report says. “It is important to note that the proposed settlement does not vacate the district court’s April 2011 decision, leaving it of record for other plaintiffs to reference in future putative class actions.”

Claridge was one of 32 million users whose data was breached in the hack of RockYou in December 2009, and his class-action lawsuit alleges negligence in the company’s security practices. According to the lawsuit, RockYou stored all user account data in plain text in its database, unencrypted. The company also only required a five-character password, and did not permit those passwords to use special characters. RockYou used email to send the passwords out.

The crackers breached the RockYou database using an SQL vulnerability that had been documented for more 10 years, according to the lawsuit. The security breach also revealed passwords to outside websites, such as Facebook and MySpace. RockyYou didn’t notify users for days after the breach, and incorrectly reported that it affected only older applications.