Jay Ponazecki, Saori Horikawa

On May 19, 2006, the Osaka District Court issued a decision awarding 6,000 yen (approximately $54) to each of the plaintiffs, a small group of subscribers of the Yahoo!BB broadband Internet service, who sued for compensation for the emotional distress that they suffered in connection with the massive security breach that occurred in early 2004. In this incident, a former temporary employee at Softbank BB gave partners a user name and password he had been using when he was working for Softbank BB to access the company computer systems remotely, and the personal information of at least 4.6 million customers of the Yahoo!BB service was accessed and used in an effort to extort approximately 2 billion yen from Softbank.

This case is the first private lawsuit to be filed in connection with this incident. Claims for 100,000 yen (approximately $893) for each plaintiff were made against BB Technology (formerly Softbank BB Corp.) and Yahoo! Japan, but the claim against Yahoo! Japan was rejected, because there was no leakage of information that was managed by Yahoo! Japan and it had no supervisory obligations over BB Technology.

The decision stated that defendant BB Technology had violated its duty of care, as a business that holds a large amount of personal information, to prevent the improper access and leakage of personal information. The court noted that, after the former contract employee left the company, the company did not change the username and password, which were subsequently used by other workers. The court concluded that BB Technology could have foreseen the improper access to the company computer network by the former contract employee, and that the information leakage could have been prevented with appropriate security measures, and awarded a total of 6,000 yen each to the plaintiffs; 5,000 yen in compensation for emotional distress and 1,000 yen for lawyer's fees.

Japan does not have a U.S. style class-action system, and the group of plaintiffs is but a small fraction of the 4.6 million affected customers of Yahoo!BB. After the incident, BB Technology had tried to appease all such subscribers and prevent any such litigation by issuing a 500 yen (approximately $4.50) cash voucher as "apology money" to each subscriber of its Yahoo!BB service. BB Technology may yet decide to appeal the decision, but this case may signal the opening of the floodgates to other private lawsuits of this kindin Japan.

This incident occurred before the Law Concerning the Protection of Personal Information (PIPL) became effective as to the private sector in April 2005. The PIPL does not provide for a private cause of action against businesses handling personal information, but it also does not prevent private litigants from bringing tort claims against businesses handling their personal information.

This Legal Update has been based on reports o the case by the news media, as the courts do not release copies of the decisions to the public.

Reprinted with Permission of Morrison and Foerster.