Data Breach

Third Circuit Shire Decision May Spell Trouble for FTC Cybersecurity Enforcement Plans

In June 2018, medical laboratory LabMD obtained the first-ever court decision overturning a Federal Trade Commission (FTC) cybersecurity enforcement action. (The team directing that effort – led by Doug Meal and Michelle Visser – joined Orrick in January 2019). There, the Eleventh Circuit held that an FTC cease-and-desist order imposing injunctive relief requiring LabMD to implement “reasonable” data security was impermissibly vague. 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. In this regard, Chairman Simons and Commissioner Rebecca Kelly Slaughter announced that the FTC is examining whether it can “further maximize its enforcement reach, in all areas, through strategic use of additional remedies” such as “monetary relief.” READ MORE

Google to Pay $57 Million for GDPR Violations

 

On January 21, 2019, the French data protection supervisory authority (“CNIL”) fined Google €50 million (approximately $57 million) for violating the European General Data Protection Regulation (“GDPR”). The fine penalizes Google for failing to comply with the GDPR’s transparency and notice requirements, and for failing to properly obtain consent from users for ads personalization. This is the largest GDPR fine imposed to date and the first action against a major global tech player. The CNIL’s decision sends an important message to companies that tough enforcement actions are not just a theoretical threat. Companies should look closer at data protection compliance and particularly work on their notices and consent forms. READ MORE

California Sets the Standard With a New IoT Law

This past September Governor Brown signed into law Senate Bill 327, which is the first state law designed to regulate the security features of Internet of Things (IoT) devices. The bill sets minimum security requirements for connected device manufacturers, and provides for enforcement by the California Attorney General. The law will come into effect on January 1, 2020, provided that the state legislature passes Assembly Bill 1906, which is identical to Senate Bill 327. READ MORE

Making Your Head Spin: “Clean Up” Bill Amends the California Consumer Privacy Act, Delaying Enforcement But Making Class Litigation Even MORE Likely

The California Consumer Privacy Act of 2018 (the “CCPA” or the “Act”), which we reported on here and here continues to make headlines as the California legislature fast-tracked a “clean up” bill to amend the CCPA before the end of the 2018 legislative session. In a flurry of legislative activity, the amendment bill (“SB 1121” or the “Amendment”) was revised at least twice in the last week prior to its passage late in the evening on August 31, just hours before the legislative session came to a close. The Amendment now awaits the governor’s signature.

Although many were hoping for substantial clarification on many of the Act’s provisions, the Amendment focuses primarily on cleaning up the text of the hastily-passed CCPA, and falls far short of addressing many of the more substantive questions raised by companies and industry advocates as to the Act’s applicability and implementation. READ MORE

Did California Open (Another) Floodgate for Breach Litigation?

Game-changing Calif. Consumer Privacy Act of 2018 puts statutory breach damages on the table

The recently-enacted California Consumer Privacy Act of 2018 is a game-changer in a number of respects.  The Act imports European GDPR-style rights around data ownership, transparency, and control.  It also contains features that are new to the American privacy landscape, including “pay-for-privacy” (i.e., financial incentives for the collection, sale, and even deletion of personal information) and “anti-discrimination” (i.e., prohibition of different pricing or service-levels to consumers who exercise privacy rights, unless such differentials are “reasonably related to the value provided to the consumer of the consumer’s data”).  Privacy teams will be hard at work assessing and implementing compliance in advance of the January 1, 2020 effective date. READ MORE

SEC Commissioners Provide Guidance on Cybersecurity Disclosures After Wave of Record Incidents

Much has been written about the SEC’s interpretive guidance on cybersecurity disclosures, issued in late February, including Commissioner Stein’s statement that it under-delivers for investors, public companies, and the capital markets. As many observers have noted, the Commission largely repackaged the Division of Corporation Finance’s prior October 2011 guidance. Further, by issuing interpretive guidance, rather than engaging in formal rulemaking, the SEC’s pronouncement does not have the force and effect of law and is not accorded such weight in the adjudicatory process.[1]

READ MORE

What Is the SEC Saying About Cyber Now? A Report From February 2018 SEC Talks

Cybersecurity continues to be “top-of-mind” for the Security and Exchange Commission (SEC).  That point couldn’t be made more clear than in comments and remarks made during the annual “SEC Speaks” conference in Washington, D.C. on February 23 and 24.  Read more for a full summary of the conference, including the SEC’s discussion of cybersecurity-related risk and incident disclosures, the Enforcement division’s formation of a Cyber Unit in the fall of 2017, and the SEC’s increased emphasis on the need for insider trading policies that address the impact of cyber events.

Standing Only Gets You So Far. Scottrade Offers Tactics to Win the Data Breach Class Action War

A recent skirmish about standing in data breach class actions (this time in the Eighth Circuit), involving securities and brokerage firm Scottrade, suggests that, even if plaintiffs win that limited question, there are other key battles that can win the war for defendants.  As we reported with Neiman Marcus, P.F. Chang’s, Nationwide, and Barnes & Noble, the Eighth Circuit’s decision in Kuhn v. Scottrade offers important proactive steps that organizations should consider taking that can mitigate post-breach litigation exposure.  READ MORE

Plaintiffs’ Lawyer Predicts $1 Billion Settlement in Data Breach Case – But Where’s the “Harm”?

This week, a high profile plaintiffs’ firm (Edelson) stated that “if done right,” the data breach class actions against Equifax should yield more than $1 billion in cash going directly to more than 143 million consumers (i.e., roughly $7 per person).

No defendant to date has paid anything close to $1 billion.  In fact, the largest class settlements in breach cases hardly get close:  Target Stores paid $10 million (cash reimbursement for actual losses) and The Home Depot paid $13 million (cash reimbursement for actual losses + credit monitoring).  Will Equifax be different?

Part of the answer revolves around the increasingly debated role and importance of “consumer harm” in resolving data breach disputes. READ MORE

Will I Get Sued After a Data Breach? D.C. Circuit Broadens Scope of Data That Gives Rise to Identity Theft in CareFirst

In the latest sign that data breach class actions are here to stay—and, indeed, growing—the D.C. Circuit resuscitated claims against health insurer CareFirst BlueCross and Blue Shield, following a 2015 breach that compromised member names, dates of birth, email addresses, and subscriber identification numbers of approximately 1.1 million individuals.  The decision aligns the second most powerful federal appellate court in the nation with pre-Spokeo decisions in Neiman Marcus and P.F. Chang and post-Spokeo decisions in other circuits (Third, Seventh, and Eleventh).  In short, an increased risk of identity theft constitutes an imminent injury-in-fact, and the risk of future injury is substantial enough to support Article III standing.

The D.C. Circuit’s holding is an important development.  First, the D.C. Circuit went beyond credit card numbers and social security numbers to expand the scope of data types that create a risk to individuals (i.e., names, birthdates, emails, and health insurance subscriber ID numbers).  Second, the decision makes clear that organizations should carefully consider the interplay between encryption (plus other technical data protection measures) and “risk of harm” exceptions to notification, including exceptions that may be available under HIPAA and GLBA statutory regimes. READ MORE