Among the lawsuits piling up against Equifax Inc. stemming from the massive data breach that put approximately 143 million consumers’ data at risk are proposed class actions filed by investors who say the credit reporting agency broke securities laws.
Investors, who have filed suits in federal court in New York and Georgia, allege that the agency failed to protect its data systems and thus made false statements in recent financial statements about the soundness of its cybersecurity.
Investors say that the Equifax’s misinformation artificially inflated its stock price.
After the breach was publicly revealed on Sept. 7, Equifax’s stock price plunged from about $142 per share to about $118. According to court papers, as of July, Equifax had about 120 million outstanding shares.
Among the plaintiffs who have filed investor suits are the Shareholders Foundation, which filed suit last week in the U.S. District Court for the Northern District of Georgia; and investors Robert Brock and Patrick Groover, who filed in the U.S. District Court for the Southern District of New York on Sept. 15 and Sept. 18, respectively.
Gerald Silk, a partner at New York’s Bernstein Litowitz Berger & Grossman who is not involved with the suits, said that under the Private Securities Litigation Reform Act, the cases will be consolidated and a lead plaintiff with the most investor losses will be appointed in that action.
Silk also said, though, that at this point the lawyers in these cases have wide-ranging investigations ahead of them.
“The investigations right now are focused on connecting the dots to the senior-level people and, in particular, the people who were making statements to investors about the quality of the company’s controls, their safety procedures and things like that,” he said.
In the weeks since the breach, which put consumers’ names, Social Security numbers, birthdays and addresses at risk, legal challenges against Equifax have been gathering on multiple fronts.
Consumers have filed class actions alleging violations of the Fair Credit Reporting Act, the Federal Trade Commission has announced that it would launch a probe into the matter and two-thirds of state attorneys general have signed onto a letter expressing concern over how the company has treated customers who have sought to safeguard their credit histories.
As of Monday, more than 70 class actions had been filed against Equifax. Phyllis Sumner of King & Spalding has been tapped to serve as lead defense counsel for the company.
The growing list of plaintiffs includes veteran short-seller Carson Block, who, in a suit filed in the U.S. District Court for the Northern District of California, said he seeks damages of at least $500,000 for the “stress, nuisance and annoyance” of dealing with issues stemming from the breach.
Last week, a team of attorneys representing consumers led by John Yanchunis of Morgan & Morgan and former Georgia Gov. Roy Barnes filed to consolidate class actions in the Northern District of Georgia.
Among the defendants named in investors’ suits is John Gamble, Equifax’s chief financial officer who is a named party in the investors’ suits, and two other agency executives sold off $1.8 billion worth of stock in the agency just days after the company learned it had been hacked.
Two Dorsey & Whitney partners said in a blog post published on Sept. 15 on Harvard Law School’s Forum on Corporate Governance and Financial Regulation that, while all of the facts on the executives dumping their stocks are not yet public, the situation raises “fundamental questions,” such as whether or not Equifax’s insider trading rules required that the executives obtain approval before they sold their shares.
Amanda Bronstad and R. Robin McDonald contributed to this report.