The complaint alleges further that in August 2020, the company disclosed that a hacker had accessed personal identifying information for 54 million customers, which incident has led to an ongoing FCC investigation and dozens of consumer class action lawsuits. The complaint alleges, however, that the board members were “long aware of red flags demonstrating that the Company did not have an effective system of internal controls to ensure the safety and security of customers’ personal identifying information in the face of this threat.” The complaint alleges that since 2015 hackers had “frequently exploited weaknesses” the company’s cybersecurity, noting that in February 2021 the FTC levied a $92 million fine against the company for its failure to protect customer location information and finding that the company’s privacy safeguards were “fundamentally weak.” The company’s board was, according to the complaint “aware of the substantial risks posed to the Company, having recognized those very risks in public filings with the SEC and having assured stockholders that those risks were being properly managed.” According to the recently filed shareholder derivative complaint, in the course of its operations, the company obtains and stores the personal identifying information of its millions of customers, making it a target for hackers. T-Mobile USA is a telecommunications company. A copy of the plaintiff’s complaint in the Novemlawsuit can be found here. Although the plaintiff’s complaint does not expressly use the words “breach of the duty of oversight” or refer to “Caremark duties,” the complaint does refer to the board’s alleged “failure to monitor” and to the board’s alleged failure “to heed red flags” – the very kind of allegations that are at the heart of breach of the duty of oversight claims. The latest example of this type of claim is the shareholder derivative suit filed this week against the board of T-Mobile USA. However, in recent months, the plaintiffs’ lawyers have shown an increasing inclination to file these claims based on allegations of breach of the duty of oversight. The filing of data breach and other cybersecurity incident-related shareholder derivative lawsuits against corporate boards is nothing new plaintiffs’ lawyers have been filing these kinds of claims now for several years.
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