On September 15, 2020, the New York Attorney General’s Office (NYAG) announced a settlement with Dunkin’ Brands, Inc. (Dunkin) in connection with a September 2019 lawsuit brought by the NYAG against Dunkin for alleged failures to adequately respond to cyberattacks that impacted approximately 300,000 customers. The proposed settlement—which still must be approved by the court—requires Dunkin to, among other things, notify customers impacted by the attacks, maintain specific cybersecurity procedures to prevent future cyberattacks, and pay $650,000 in penalties.
In September 2019, the NYAG filed a lawsuit against Dunkin in New York County Supreme Court (The People of The State of New York et al. v. Dunkin’ Brands Inc., Index No. 451787/2019) alleging that Dunkin failed to take appropriate action in response to cyberattacks that targeted customers’ data. According to the complaint, in 2015, Dunkin’s customer accounts were targeted in a series of online attacks, during which attackers gained access to “tens of thousands or customer accounts” and stole “[t]ens of thousands of dollars on customers’ store value cards.” Dunkin allegedly became aware of these attacks as early as May 2015, when a third-party app developer alerted Dunkin to the attackers’ attempts to access customer accounts and provided Dunkin’ with a list of over 19,000 customer accounts that had been accessed.
The NYAG further alleged that Dunkin failed to conduct a reasonable investigation or determine which customer accounts had been compromised. Dunkin also allegedly failed to “notify its customers of the breach, reset account passwords to prevent further unauthorized access or freeze the store customer cards registered with their accounts.” In addition, Dunkin purportedly failed to “implement appropriate safeguards to limit future brute force attacks.”
In late 2018, Dunkin was notified by a third-party vendor that “customer accounts had again been attacked, and that the attacks had resulted in the unauthorized access of more than 300,000 customer accounts.” Although Dunkin contacted impacted customers after the 2018 attack, the NYAG’s complaint alleged that Dunkin’s notification was incomplete and misleading.
Notably, the NYAG asserted a cause of action in its complaint under New York’s data breach notification statute — General Business Law § 899-aa — alleging that Dunkin failed to notify consumers and New York state authorities of the data breach. The NYAG also accused Dunkin of violating New York’s consumer protection laws by misrepresenting to consumers that it used reasonable safeguards to protect customers’ personal information.
Under the terms of the proposed settlement, Dunkin will be required to pay $650,000 in penalties and costs to the State of New York. In addition, Dunkin will be required to notify and refund New York customers impacted by the data breach. Dunkin also will be required to “maintain reasonable safeguards to protect against future credential stuffing attacks.” And, if a future attack occurs, Dunkin must “follow incident response procedures . . ., which would include conducting a reasonable investigation to identify customer accounts that may have been compromised, . . . resetting their passwords, providing notice, and transferring their account balances to new stored value card accounts.”
The lawsuit and proposed settlement demonstrate the NYAG’s intention to hold companies accountable for data breaches, as well as for responses to breaches that the NYAG deems inadequate. Companies that do business in New York must familiarize themselves with New York’s new data breach notification law, which went into effect in March 2020. Once a company becomes aware of a potential data breach, it must act quickly to investigate and remediate the breach and, if appropriate, adequately notify consumers who were effected. It is also imperative that companies regularly evaluate their data breach response policies and procedures in order to ensure that they are ready to respond appropriately in the event of a data breach incident.