Cybersecurity

International Transfers at Risk – The EDPB’s Guidelines on International Transfers Post-Schrems II

On November 11, 2020, the European Data Protection Board (EDPB) published its long-awaited guidance on what parties to international data transfers should be doing to perform such transfers in a manner compliant with the Regulation (EU) 2016/679 (the General Data Protection Regulation or GDPR) in light of the European Court of Justice’s (CJEU) decision in Case C-311/18 Data Protection Commissioner v Facebook Ireland and Maximillian Schrems (Schrems II).

Unfortunately, the draft guidelines provide no panacea for companies engaged in international data transfers of personal data from the EEA to third countries. Instead, organizations face 55 pages of guidance that provide few workable solutions for international data transferors—apart from a lengthy protocol for conducting risk assessments. READ MORE

Upcoming Webinar: Data, Privacy and Cyber Security Issues in International Arbitration

Join Orrick and the Silicon Valley Arbitration and Mediation Center (SVAMC) on November 4, 2020, for a complimentary webinar on how arbitration can deal with substantive data, privacy and cyber issues arising in international disputes. Orrick’s James Hargrove (International Arbitration partner/Geneva and London) and Keily Blair (Cyber, Privacy & Data Innovation partner/London) will join other panelists to address current topics in arbitrating data and cyber issues, for example, arbitrability, mass arbitrations, multiplicity of proceedings, follow-on claims from data breaches, territorial limitations, interim and final relief and sanctions, future issues – how will arbitration deal with the ever-growing importance and value of data. Keily, James and their fellow panelists will put an up-to-date focus on data, privacy and cyber issues in arbitration proceedings, with a discussion of current practices, remote hearings and technological advances, hearings protocols, increased cyber risks and steps to protect data integrity.  Learn more and register here.

Webinar  |  November 4, 2020  |  12:00pm – 1:00pm EST

Sedona Conference Proposes Legal Test for “Reasonable Security”

The legal risks associated with cybersecurity continue to increase, as regulators and plaintiffs’ lawyers become more and more aggressive in bringing cybersecurity claims under existing laws and as legislatures continue to enact new ones. A key element of many of the cybersecurity claims brought under these laws is a requirement to show that the company in question failed to implement “reasonable” security for personal information. California’s new Consumer Privacy Act (“CCPA”), for instance, allows consumers to sue businesses for statutory damages when specified types of personal information are subject to unauthorized access and exfiltration, theft, or disclosure because of a failure to implement and maintain “reasonable” security measures and the business has not cured the alleged violation within the CCPA’s pre-suit period. Cal. Civ. Code § 1798.150. Even though consumers often suffer no injury in a data beach, the CCPA provides for statutory damages of $100–$750 per consumer per incident. READ MORE

Have EU Employees? Beware: H&M Slapped with Massive GDPR Fine for Wrongful Processing of Employee Data, Despite Cooperation

On October 1st, 2020, the Data Protection Authority of Hamburg (“DPA”) announced that it issued a massive EUR 35.3 million fine against the clothing company H&M Hennes & Mauritz Online Shop A.B. & Co. KG (“H&M”) for the alleged wrongful collection of data of a couple of hundred employees which related to their private life (the English press release can be accessed here). This is the highest fine that has ever been issued in Germany, sending a strong signal to companies to ensure they comply with the data protection law when they process employee data. READ MORE

SWISS-U.S. PRIVACY SHIELD: SCHREMS 2.0’S LATEST VICTIM?

Following the CJEU’s invalidation of the EU Commission’s adequacy decision on the EU-U.S. Privacy Shield in Schrems 2.0, on  September 8, 2020, the Federal Data Protection and Information Commissioner (FDPIC) found that the Swiss-U.S. Privacy Shield does not meet the data protection standards set by the country’s Federal Act on Data Protection (FADP). READ MORE

Brazil’s LGPD Poised to Take Effect in a Matter of Days

Brazil’s long-anticipated data protection law, Lei Geral De Proteção de Dados Pessoais (“General Law for Data Protection” or “LGPD”), now appears positioned to take effect in a matter of days.  Ever since the law was originally passed in August 2018, implementation and enforcement timelines have been in flux.  In a rather sudden turn of events last week, however, dramatic back-to-back votes by each house of Brazil’s National Congress now put the substantive provisions of the LGPD on track to take effect in a few days’ time, upon approval by Brazil’s president.  The LGPD’s administrative fines and sanctions provisions remain scheduled to take effect next year in August 2021. READ MORE

Pending U.S. Supreme Court Cases May Restrict FTC’s Pursuit of Monetary Relief in Privacy and Cybersecurity Matters

Earlier this month, the U.S. Supreme Court agreed to hear a pair of cases that provide it with the opportunity to severely restrict the Federal Trade Commission’s (“FTC’s”) authority to obtain equitable money relief in consumer protection enforcement actions, including privacy and cybersecurity matters. Under Section 13(b) of the FTC Act, in certain circumstances the FTC is empowered to bring actions in federal court to seek temporary restraining orders and injunctions for violations of the Act. In two consolidated cases, FTC v. Credit Bureau Center, LLC and AMG Capital Management, LLC v. FTC, the Supreme Court will now consider whether, as the FTC claims, this provision also authorizes the agency to seek equitable money relief for such violations, even though the provision makes no mention of money relief. The decision will have broad implications because the FTC has relied on Section 13(b) to seek monetary relief in consumer protection enforcement actions, including privacy and cybersecurity matters. A ruling against the FTC could substantially alter the FTC’s approach to privacy and cybersecurity enforcement.

The FTC’s privacy and cybersecurity enforcement actions typically rely on Section 5 of the FTC Act, which prohibits unfair or deceptive trade practices. The FTC takes the position that a failure to implement “reasonable” cybersecurity or privacy practices can constitute an “unfair” practice, and that making false or misleading statements about such practices can be a “deceptive” trade practice under the statute.

The FTC can enforce Section 5 in two ways. First, it can rely on its traditional administrative enforcement authority, which allows the FTC to initiate an administrative proceeding to issue an order to “cease and desist” violations of Section 5, but only provides for monetary relief in limited circumstances. Second, in certain situations the FTC can sue directly in federal court under Section 13(b) of the FTC Act. Although Section 13(b) authorizes only “injunctions,” the FTC often brings cases under this section in federal court seeking monetary relief under equitable doctrines such as restitution, disgorgement and rescission of contracts.

Until recently, courts universally accepted the FTC’s expansive view that its authority under Section 13(b) to obtain “injunctions” enables it to seek equitable monetary relief. But that has begun to change. In Credit Bureau, the Seventh Circuit rejected the FTC’s position that Section 13(b) authorizes monetary relief on the ground that an implied equitable monetary remedy would be incompatible with the FTC Act’s express remedial scheme. Most notably, the court observed that the FTC Act has two detailed remedial provisions expressly authorizing equitable money relief if the FTC follows certain procedures. The FTC’s broad reading of Section 13(b) would allow the agency to circumvent these conditions on obtaining equitable money relief, contrary to the intent of Congress. And in AMG Capital Management, although the Ninth Circuit considered itself bound to follow its prior precedent allowing the FTC to obtain money relief under Section 13(b), two of the three panel members joined a special concurrence arguing that this position is “no longer tenable.” And a decision from the Third Circuit last year, while not addressing whether the FTC is barred from pursuing money relief under Section 13(b), held that to pursue such relief the FTC must, at a minimum, allege facts plausibly suggesting that the company “is violating, or is about to violate,” the law.

If the Supreme Court restricts or eliminates the FTC’s pursuit of equitable money relief under Section 13(b), its decision would represent a significant setback for the FTC’s recent attempts to expand its remedial authority in privacy and cybersecurity cases, among others. In June 2018, medical laboratory LabMD obtained the first-ever court decision overturning an FTC cybersecurity enforcement action, convincing the Eleventh Circuit that an FTC cease-and-desist order imposing injunctive relief requiring LabMD to implement “reasonable” data security was impermissibly vague. (The team directing that effort – led by Doug Meal and Michelle Visser – joined Orrick in January 2019.) In the wake of LabMD, the FTC’s new Chairman, Joseph Simons, stated that he was “very nervous” that the agency lacked the remedial authority it needed to deter allegedly insufficient data security practices and that, among other things, the FTC was exploring whether it has additional untapped authority it could use in this space. The FTC has followed through on that promise in the ensuing years, pursuing a wide range of additional remedies, including equitable money relief. An adverse ruling by the Supreme Court could strike a severe blow to the FTC’s efforts on this front.

Such a ruling is entirely possible. Just last month in SEC v. Liu, the Supreme Court recognized limits on the disgorgement power of the Securities and Exchange Commission, determining that it is restricted to situations where the remedy does not exceed a wrongdoer’s net profits and is awarded for victims. However, unlike the FTC Act, the SEC Act specifically authorizes the SEC to seek “equitable relief.” Therefore, the consolidated AMG and Credit Bureau cases afford the Supreme Court an opportunity to recognize even greater restrictions on the FTC’s authority to obtain equitable money relief under Section 13(b) – or, as the Seventh Circuit did in Credit Bureau, to reject such authority altogether.

While in the short term such a ruling may reduce the monetary risks of FTC privacy and cybersecurity enforcement for companies collecting personal information, it could serve as a catalyst for a legislative proposal that would provide the FTC significant new authority to police privacy and security violations and assess civil penalties.

To discuss these cases in more detail, or for advice on the FTC’s privacy and cybersecurity enforcement program more generally, please feel free to contact any member of our privacy & cybersecurity team, which has immense experience in this area.

Privacy Shield Sunk – SCCs Treading Water: What Can Companies Do to Keep Their Head Above Water

Today the European Court of Justice (CJEU) published its highly anticipated judgement in the case of Data Protection Commissioner Ireland v Facebook Ireland Limited, Maximillian Schrems, colloquially known as “Schrems 2.0”. There were three key elements to the decision:

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Schrems 2.0 – The Next Big Blow for EU-US Data Flows? – What to Expect on Thursday, July 16th

Whatever the outcome of Schrems 2.0, the key takeaway is, don’t panic.

Tomorrow, July 16, 2020, the European Court of Justice (CJEU) is expected to rule in the case of Data Protection Commissioner Ireland v Facebook Ireland Limited, Maximillian Schrems, colloquially known as “Schrems 2.0”.

The main ingredients haven’t changed much for this long-awaited sequel to the decision that invalidated the Safe Harbor regime in 2015: Austrian data protection activist Max Schrems, Facebook Ireland, Ltd, and another commonly used international personal data transfer mechanism on the chopping block for invalidation.

This time around the court is considering the validity of the Standard Contractual Clauses (SCC) adopted by the European Commission, which goes beyond EU-U.S. transfers and could affect most agreements governing data sharing between the EU and the rest of the world. Regardless of the outcome, tomorrow’s decision is going to have a profound impact on the way international data transfers are treated for years to come – but the key takeaway is not to panic. In this blog post, we have set out the three potential rulings open to the CJEU and what steps you can take to following such a ruling. READ MORE

Parkview Health Decision Highlights Vicarious Data Breach Liability Risk in the United States

A recent decision in Indiana highlights the data security liability risks facing employers based on the actions of their employees, extending vicarious liability even to cases where the employees were acting wholly for personal purposes. In SoderVick v. Parkview Health Sys., Inc., the Court of Appeals of Indiana reversed summary judgment in favor of the defendant, reviving claims of respondeat superior against Parkview Health Systems, Inc. (“Parkview”) where the hospital’s employee texted personal health information to a third party. No. 19A-CT-2671, 2020 WL 2503923 (Ind. Ct. App. May 15, 2020). We recently noted a decision of the Supreme Court of the United Kingdom in WM Morrison Supermarks plc v. Various Claimants (“Morrison”) where the Court made the contrary determination, ruling that the large supermarket chain Morrison could not be held vicariously liable as a matter of law for the intentional acts of a rogue employee who posted the payroll data of Morrison employees on the Internet. But as we also explained, businesses that collect personal information should be cautious about reading too much into that ruling: while the Court allowed the appeal in favor of Morrison, the decision turned on the particular facts of the case (where the rogue employee actively tried to damage his employer). The Parkview Health decision further underscores this need for caution, especially with increased remote work due to COVID-19 where the risk of employers being sued over security breaches caused by their employees is, unfortunately, ever-increasing. READ MORE