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At least six directors and officers liability lawsuits have been filed due to major data breaches at Target Corp. and Wyndham Worldwide Corp., all of which are shareholder derivative lawsuits filed by shareholders on the companies' behalf.
They seek damages and that Target and Wyndham be directed to reform their activities and improve their corporate governance and internal procedures.
The lawsuits are:
Dennis Palkon, derivatively on behalf of Wyndham Worldwide Corp. v. Stephen P. Holmes et al. and Wyndham Worldwide Corp., which was filed in February in Newark, New Jersey, federal court. Mr. Holmes is chairman and CEO of Wyndham Worldwide.
The heavily-redacted suit alleges thieves got sensitive personal and financial data from more than 619,000 customers in three separate incidents, which Wyndham failed to disclose in a timely basis.
The suit argues the defendants' “failures to implement appropriate internal controls at (Wyndham) designed to protect and prevent repetitive data breaches have severely damaged” the company, and that a Federal Trade Commission action “poses the risk of tens of millions of dollars in further damages to the company.”
The suit against Wyndham's directors and officers alleges breach of fiduciary duty, waste of corporate assets and unjust enrichment.
Four shareholder derivative actions against Target and its directors and officers have been consolidated and are being heard in federal district court in Minneapolis.
Three suits were filed in January and a fourth was filed in February. The cases were consolidated in April. Three of the lawsuits were filed by individuals, and the fourth was filed by the Police Retirement System of St. Louis.
A related shareholder derivative action, filed in February, is pending in state court in Minneapolis.
The consolidated litigation alleges the breach of the company's information security systems may have affected about 110 million Target customers, and that Target customers who have been victims of identity theft and their banks have incurred millions of dollars due to fraud and the cost of card replacements.
The litigation, which asserts breach of fiduciary duty, unjust enrichment and corporate waste, alleges that Target executives and directors “consciously failed to act in the face of numerous warnings about the risk of potential security breaches at Target stores.”
When a company gets hit by a major data breach, the business, its leaders and its board members should be prepared for directors and officers liability related litigation that is certain to follow.