Manufacturers of products often are not prepared for, or aware that cybersecurity incidents can disrupt production and distribution of product. A recent filing by Molson-Coors Beverage Company illustrates that manufacturers face similar cybersecurity risks as other industries.
On March 11, 2020, Molson-Coors filed a Form 8-K with the Securities and Exchange Commission stating that:
Molson Coors Beverage Company (the “Company”) announced that it experienced a systems outage that was caused by a cybersecurity incident. The Company has engaged leading forensic information technology firms and legal counsel to assist the Company’s investigation into the incident and the Company is working around the clock to get its systems back up as quickly as possible.
Although the Company is actively managing this cybersecurity incident, it has caused and may continue to cause a delay or disruption to parts of the Company’s business, including its brewery operations, production, and shipments. In addition to the other information set forth in this report, one should carefully consider the discussion on the risks and uncertainties that cybersecurity incidents and operational disruptions to key facilities may have on the Company, its business and financial results contained in Part I, “Item 1A. Risk Factors” in its 2020 Annual Report on Form 10-K, filed with the SEC on February 11, 2021.
Manufacturing businesses may wish to consider prioritizing cybersecurity readiness in their processes, including backup plans, contingent operations plans, and disaster recovery plans.
It is no longer a matter of if, but when companies that suffer a data breach will be sued in a class action lawsuit following a data breach. Many of those data breach cases get dismissed, as it is difficult for consumers to show they have suffered a compensable harm from a particular data breach.
What is less common is a public company getting hit with a class action lawsuit by investors for securities fraud following a data breach. Several companies have been sued under the theory that since the company failed to protect customer data and made false and misleading statements about the company’s business, operational and financial results, proposed class members of all persons and entities that purchased or acquired shares in the time frame leading up to and following the data breach are entitled to damages, interest, fees and costs.
The common allegations in these cases are that the company issued SEC disclosures and letters to shareholders that the company was doing well, and that it had effective data security measures in place or had improved efforts around data security, when, in fact, the data breach was caused by inadequate data security measures, that the company faced a higher risk of cybersecurity failure because of automation and efficiency initiatives, and therefore, the public statements were materially false and misleading.
When issuing public statements about data security on websites or through letters to investors or in public filings, consideration of how those statements can be used in the wake of a data breach is important. Otherwise, the increase in securities fraud litigation will continue, just as we have experienced with data breach class action litigation.