A new report investigating the rapid rise in data breach lawsuits and web tracking settlements points to a convergence of three primary drivers: an explosion in litigation fueled by a small group of plaintiffs’ firms, the application of antiquated state and federal wiretapping laws to modern website technologies, and a fragmented legal landscape that encourages quick settlements to avoid uncertainty and high litigation costs .

Here is a summary of the key drivers identified by recent investigations and legal analyses:

? Driver 1: The Dramatic Surge in Data Breach Class Actions

Data breach lawsuits have become one of the fastest-growing areas of complex litigation, with 2025 setting new records .

• Record-Breaking Numbers: In the first half of 2025 alone, plaintiffs filed 944 data breach class actions, a rate of nearly 158 per month. By the end of the year, this number ballooned to over 1,822 filings, demonstrating a massive increase in litigation activity .

• Evolving Threat Landscape: The surge is being driven by increasingly sophisticated cybercriminals and a surge in ransomware attacks, where hackers steal data and demand payment not to publish it. Even paying the ransom does not guarantee the data is deleted, and the sheer scale of these breaches—often involving hundreds of millions of records—drives litigation risk and settlement exposure .

• No Industry Is Immune: The litigation has impacted a broad spectrum of sectors, including finance, healthcare, technology, retail, education, and professional services . For example, a recent lawsuit against Grubhub alleges the company’s “negligence and insufficient data security” led to a breach exposing the personal information of millions of customers and drivers .

• Rising Costs: Settlement values and legal fees are climbing as a result of larger class sizes, more sensitive data being exposed, and increased judicial sympathy toward plaintiffs .

?️ Driver 2: The Explosion of Web Tracking Lawsuits Under Old Wiretapping Laws

Parallel to data breach suits, there has been a sharp increase in privacy class actions related to common website technologies, often referred to as “web tracking” or “digital wiretapping” lawsuits .

• The Core Allegation: Plaintiffs’ attorneys are using state and federal wiretapping laws, such as the California Invasion of Privacy Act (CIPA) and the Electronic Communications Privacy Act (ECPA), originally drafted in the era of physical telephone lines, to sue website operators . They allege that standard tools like Google Analytics, session replay software, chatbots, and marketing pixels from companies like Meta and TikTok constitute illegal “eavesdropping” or the use of an unauthorized “pen register” .

• Massive Statutory Damages: A key driver for plaintiffs is that these laws often provide for statutory damages of up to $5,000 per violation (per website visitor) , without the plaintiff needing to prove any actual financial harm . This creates potentially enormous exposure, even for websites with moderate traffic or business-to-business (B2B) companies .

• A “Cottage Industry” of Litigation: According to a report from the cyber risk intelligence company KYND, these types of privacy lawsuits have skyrocketed, with the total number of cases now eclipsing 2,000 . This has created a “cottage industry” where a relatively small group of plaintiffs’ firms send demand letters to website operators, often at random, to pressure them into quick, low-cost settlements to avoid the expense of litigation .

• SMBs Are Particularly Exposed: Small and medium-sized businesses (SMBs) are especially vulnerable. They are more likely to use common website configurations and third-party tools without visible user consent mechanisms. The report by KYND found that about 18% of North American organizations have tracking technologies operating without any visible user consent, and this percentage is higher among SMBs .

⚖️ Driver 3: A Fragmented and Uncertain Legal Landscape

The rapid rise in litigation is both fueled by and contributes to a legal environment marked by significant uncertainty, which incentivizes settlements .

• Inconsistent Court Rulings: Courts are deeply divided on whether laws like CIPA apply to modern internet technologies. Some judges dismiss these lawsuits, arguing that the 1967 statute was never meant to cover website cookies, while others allow the cases to proceed, creating a “minefield” for businesses . A federal judge in one recent case described the situation as a “mess,” urging the California legislature to update the law .

• No Binding Precedent: The California Court of Appeals, which could provide a definitive ruling, has so far been silent on the application of CIPA to online technologies. A key appeal is scheduled to be heard in spring 2026, and its outcome could determine whether this type of litigation continues to flourish or is reined in .

• The Pressure to Settle: This lack of clear, binding legal precedent puts enormous pressure on companies to settle cases, even those with weak legal merit . Facing the threat of a class action, statutory damages, and the high cost of litigation with no guarantee of a favorable ruling, many businesses find it more economical to pay a settlement .

• A Patchwork of New Privacy Laws: Adding to the complexity, as of January 2026, 20 U.S. states are actively enforcing their own comprehensive privacy laws (like the CCPA in California), creating a complex and varied compliance environment for organizations. While many of these laws don’t have a “private right of action” (meaning individuals can’t sue for violations), they shape expectations and are often used in conjunction with older wiretapping laws in lawsuits .

I hope this report provides a clear overview of the key factors driving the rise in this type of litigation. The situation remains fluid, with several key appellate court decisions expected later this year that could significantly alter the legal landscape.