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E-Commerce News
Daily Kos Exempt From FEC Regulation; Costs To Prevent Possible Identity Theft Not Recoverable
October 23, 2007
DAILY KOS EXEMPT FROM FEC REGULATIONThe Daily Kos – a blog known for its liberal bent – is not subject to Federal Election Commission ("FEC") regulation. This is the result of the FEC’s recent action dismissing an enforcement case where the Daily Kos was charged with violating campaign finance law by posting blog entries supporting particular federal candidates.
The complaint against the Daily Kos alleged that the Web site should be regulated as a "political committee" because it charges a fee to place advertising on its Web site while providing "a gift of free advertising and candidate media services" by posting blog entries that support candidates.
The FEC rejected that argument, however, noting that the Daily Kos is covered by the media exemption and therefore not subject to federal regulation. Since the 1974 passage of the Federal Election Campaign Act, the FEC has exempted traditional media activity from federal campaign finance regulation. Last year, the FEC adopted regulations that extended the exemption to online media publications.
Those regulations provide that the cost of carrying "a news story, commentary, or editorial by any broadcasting station.... Web site, newspaper, magazine, or other periodical publication, including any Internet or electronic publication," is not a contribution to or expenditure for a candidate unless the facility is owned by a political party, committee, or candidate. Because Kos media is not owned by a political party, committee or candidate, and otherwise qualifies, the FEC’s decision to apply exemption was relatively easy.
As we’ve noted on several occasions, courts seem more and more willing to equate online publications with traditional media. The FEC seems to agree with this approach.
COSTS TO PREVENT POSSIBLE IDENTITY THEFT NOT RECOVERABLE
Costs incurred to ward off a purely speculative threat of identity theft are not recoverable in an action stemming from a bank’s data security breach, according to a recent decision from the United States Court of Appeals for the Seventh Circuit.
The court, applying Indiana law, noted that mere "exposure to harm" is not a compensable injury, and absent evidence of actual or imminent identity theft, preventative costs could not be recovered.
The case arose when hackers hacked into the data system of Evansville, Ind. based Old National Bancorp. The plaintiffs were customers who were notified of the data breach by Old National. The plaintiffs first went on defense by enrolling in voluntary credit monitoring, and then went on offense, by filing a class action suit against Old National seeking to recover the cost of the monitoring under both negligence and breach of contract theories. The court rejected the attempt.
The court noted that the Indiana data breach statute (which was enacted after the Old National breach) created no private right of action against the database owner, and imposed no duty to compensate affected individuals. This suggested to the Court that Indiana law would not recognize the remedy requested by the plaintiffs.
In an interesting analogy, the court compared this case to holdings in toxic tort cases, where courts had rejected damages based on exposure to potential future harm. For the court, exposure to potential identity theft deserves the same treatment.
The plaintiffs were unable to convince the court that they suffered an immediate injury the moment their information was accessed. Given that the plaintiffs were seeking damages for future monitoring, they could not very easily argue that their damages arose at the time of the breach.
The Seventh Circuit’s ruling is consistent with most courts that have considered the issue. The theory is pretty basic. You’re not damaged until, well, you’re damaged. "Fear" of the shoe dropping doesn’t count.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.