In re Accellion, Inc. Data Breach Litigation

Background

Accellion, Inc. offered cloud-based software for secure file transfers, including its File Transfer Appliance. The opinion states that several threat actors exploited vulnerabilities in that product in December 2020 and stole sensitive information from its clients.

Beginning in February 2021, plaintiffs filed lawsuits against Accellion and, in some cases, the client institutions from which information was stolen. The cases involved different kinds of information, including health information, banking information, government information, and Social Security numbers. The court had consolidated fourteen cases: nine naming only Accellion and five naming Accellion and at least one client defendant, including Health Net and Flagstar Bank.

The court had received four applications for appointment of interim class counsel under Federal Rule of Civil Procedure 23(g)(3). Interim class counsel may represent a proposed class before the court decides whether to certify the case as a class action. The applications proposed different leadership structures, including co-lead counsel and steering committees. Defendants did not oppose any of the applications.

Legal Standard

The court considered the factors in Rule 23(g)(1), including the work counsel had done investigating potential claims, their experience with class actions and complex litigation, their knowledge of the applicable law, and the resources they would commit. Because the court found more than one adequate applicant, it had to select the applicant or applicants best able to represent the proposed class.

Analysis

The court found that all four applicant groups were adequate. Each had investigated the data breach, filed cases within weeks of one another, and demonstrated experience with class actions, complex litigation, data-breach litigation, and consumer-privacy litigation. The court also found that the applicants understood the applicable law and would commit sufficient resources.

The court nevertheless selected a two-firm team consisting of Girard Sharp and Susman Godfrey. It reasoned that a lean and efficient leadership structure would best serve the proposed class because early settlement and class-wide resolution were realistic possibilities. The court stated that the class would not gain as much from the greater resources and manpower available through the larger coalitions proposed by other applicants if settlement was near. The court also noted that renewed requests for additional counsel or a committee could be considered if settlement prospects changed.

The court was also concerned about the fairness review required for settlements reached before class certification and before interim class counsel was appointed. It noted that settlements had been reached with multiple defendants before the appointment of interim counsel. Girard Sharp and Susman Godfrey had not participated in those negotiations, and both firms had recognized the procedural fairness concerns. The court concluded that appointing independent counsel would allow a preemptive evaluation of the proposed settlements rather than leaving similar review until final settlement approval.

Order

The court APPOINTED Girard Sharp LLP and Susman Godfrey LLP as interim co-lead counsel under Rule 23(g)(3). It directed them to evaluate whether claims or parties should be severed and transferred, propose a severance strategy if appropriate, and evaluate the proposed settlements with particular attention to the heightened fairness standard applicable to settlements reached before class certification.

The court also required the co-lead firms to keep accurate, contemporaneous billing records in tenth-of-an-hour increments, exchange and review those records monthly, and provide them to the court confidentially every quarter or when requested. The court set a status conference for April 13, 2023, and required a joint statement addressing a proposed case schedule and updates on the assigned tasks. This order appointed interim counsel; it did not decide whether the case should ultimately be certified as a class action or resolve the underlying claims.