Businesses have largely benefitted from the proliferation of mobile devices and text messaging apps that facilitate quick, round-the-clock communications. However, such technologies also make it increasingly difficult to monitor and control the unauthorized distribution of confidential data. On March 30, UK regulators fined a former managing director of Jeffries Group for divulging confidential client information. The banker, Christopher Niehaus, shared confidential information with two friends using WhatsApp, a popular text messaging app. The exposed information included the identity of a Jeffries Group client, the details of a deal involving the client, and the bank’s fee for the transaction. Perhaps the most surprising aspect of this story is that the leak was discovered at all. Because data sent on WhatsApp are encrypted and Mr. Niehaus used his personal mobile phone to send the messages, Jeffries Group only viewed the communications—and subsequently informed regulators—after Mr. Niehaus turned his device over to the bank in connection with an unrelated investigation. Continue Reading Encrypted Messaging Apps Create New Data Privacy Headaches for Employers
Plaintiffs’ lawyers across the land have trumpeted the U.S. Supreme Court’s decision in Spokeo as a victory (or at least not a loss). Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). At least one plaintiff’s lawyer has gone so far as to suggest that defense lawyers who raise Spokeo-based arguments should fear sanctions. As a Southern colleague of mine would say, those lawyers are trying to make a silk purse of a sow’s ear.
Although many post-Spokeo decisions have not yielded dismissal, many have, and they have done so based largely on Spokeo, which does more than reaffirm prior notions of standing and rather strengthens them in a way that is quite beneficial to corporate defendants facing trumped-up claims with no real harm. One of the most recent defense victories post-Spokeo is Meyers v. Nicolet Rest. of De Pere, LLC, 2016 U.S. App. LEXIS 22139 (7th Cir. Dec. 13, 2016). Continue Reading Spokeo Was a Loss for Plaintiffs, Seventh Circuit Reaffirms
A relatively new breed of data breach class action involves financial institutions suing merchants for expenses associated with credit card data breaches. Although merchants may not have contractual privity with the card issuers (and instead may have contractual privity with the credit card brands or payment processors), the financial institutions in these cases claim that the retailers should still compensate the financial institutions for costs associated with fraudulent charges and reissuance of credit cards as a result of a data breach. In the most recent decision involving these sorts of claims, an Illinois federal judge found the financial institutions’ claims against the Shnucks grocery store chain too vague to survive Rule 12 dismissal. See Cmty. Bank of Trenton v. Schnuck Mkts., 2016 U.S. Dist. LEXIS 133482 (S.D. Ill. Sept. 28, 2016). The court reasoned that although “the parties are charting relatively new territory in the data breach context by presenting a case between financial institutions and a merchant (as opposed to customers and a merchant), . . . the Court notes that the generality made it difficult to assess the plausibility of such claims.” Id. at *8-9. Continue Reading Schnucks Shakes Card Issuer Data Breach Class Action, For Now
After nine months of intense negotiations and uncertainty, and despite ongoing criticisms from powerful data protection regulators, the new EU-U.S. Privacy Shield program went into effect this week as the U.S. Department of Commerce began accepting applications online. Some companies that are self-certifying their compliance have already submitted their documentation and many more are expected to do so in the coming days and weeks as they seek shelter under the replacement for the long-standing EU-U.S. Safe Harbor arrangement that was invalidated by the European Court of Justice last year.
Companies can now “sign up” for the Privacy Shield list, but they should not expect a rubber stamp from the Commerce Department just because they have self-certified. To ensure that their applications are approved, companies should take the following steps:
- Confirm that they are eligible to participate—not all organizations are. Only companies subject to the jurisdiction of the FTC or the DOT may participate at this time
- Identify their independent recourse mechanism—under the new framework, self-certifying organizations must provide an independent recourse mechanism available to investigate unresolved complaints at no cost to the individual
- Ensure that they have compliance verification mechanisms in place
- Designate contacts within their organizations to serve as liaisons regarding the Privacy Shield
- Review the information required to self-certify
- Go online to www.privacyshield.gov to self-certify
It’s been awhile since last we published for our firm blog Media & Privacy Risk Report, and one thing is largely to blame: ransomware attacks on our clients have been keeping us very busy. We’ve learned many lessons from these attacks that we plan to share over the coming months with our readers. But the focus of this post is recent guidance from the Office of Civil Rights of the Department of Health and Human Services (OCR) indicating that any ransomware attack involving protected health information PHI) could be a data breach with Health Insurance Portability and Accountability Act (HIPAA) reporting obligations.
Often in ransomware matters, a hacker encrypts data and demands that a ransom be paid (usually in Bitcoin) before the hacker will decrypt the data and make it once again accessible to the data owner (or covered entity) or maintainer (or business associate). But just because a hacker has frozen your data, does that mean that the hacker has accessed, acquired or exfiltrated your data? Isn’t it possible that a hacker could freeze your data without accessing, acquiring or exfiltrating it? By analogy, couldn’t someone render the locks on your house unusable (and thus your house inaccessible to you without a forced break-in) without actually accessing your house, acquiring anything within your house, or taking anything out of your house? It would seem that the answer would be yes. But if the OCR is asked that question, the presumption is that the answer is no, at least in the realm of ransomware attacks. Continue Reading OCR: Ransomware Attack Often Is a Data Breach
As published in State Bar of Michigan Health Care Law Section
“In recent years, the likelihood of suffering a data breach has risen significantly for American companies across numerous industries. Health care providers, in particular, have been targeted due to the value of the sensitive information they hold regarding their patients and employees, including birth dates and Social Security numbers. Health care providers that suffer data breaches risk incurring significant fines, settlement amounts, legal fees, negative publicity and increased scrutiny from regulatory authorities …”
To read the publication in its entirety, please click here.
The Internal Revenue Service recently issued an alert to payroll and human resources professionals to be aware of an emerging phishing e-mail scheme that purports to be from company executives and requests personal information about employees1. Vedder Price would like to reiterate this alert, as it is personally aware of multiple companies having fallen victim to this scheme in the past few days.
The phishing e-mails typically appear to be from the company CEO or other executive, and are generally directed to a company employee in the payroll, human resources or accounting departments. The “CEO” sends an e-mail to the company employee and requests certain tax documents or other personally identifiable information (“PII”) pertaining to the company employees, including W-2s, SSNs, dates of birth, addresses and salaries. Continue Reading Emerging Phishing E-mail Scheme Alert
Last week, the European Commission unveiled the latest documentation related to the EU-U.S. Privacy Shield intended to restore trust in transatlantic data transfer and establish a mechanism for U.S. companies to once again transfer data from the EU with confidence. We wrote last month about the initial announcement of the Privacy Shield but expressed caution about whether the European Union and the United States would be able to iron out the details of the complicated agreement before the February 29, 2016 deadline set by the Article 29 Working Party (“WP29”). But it appears that the two sides were able to make significant progress in the month of February, and the European Commission released more than 120 pages of documentation setting forth the new Privacy Shield requirements.
There are many details in the documentation released last week, but following are the key points:
- Participating organizations will be required to follow rules related to consent, relevance, proportionality, access and correction.
- Arbitration will be available for disputes.
- Participating organizations will be required to provide additional information to data subjects at the point of consent.
- Participating organizations must implement stronger controls on data transfers to third-party data processors and controllers.
- Participating organizations must commit to address EU member complaints “expeditiously” through the FTC.
- The FTC will verify self-certification.
It remains to be seen whether this will be enough to satisfy key stakeholders in the EU. WP39 has announced that it will provide its opinion on the level of protection afforded by the Privacy Shield on April 13, 2016. We will continue to monitor these developments and keep you apprised.
In a February 19th speech at the annual SEC Speaks conference, Stephanie Avakian, Deputy Director of the SEC’s Division of Enforcement, explained what the SEC expects of entities that experience a cyber intrusion and how the SEC decides whether to investigate such entities.
With respect to responding to cyber intrusion, the SEC’s stated expectations are high level and axiomatic. Entities are expected to (1) assess the situation, (2) address the problem and (3) minimize the damage. Ms. Avakian emphasized the importance of quickly involving authorities such as the FBI or Department of Homeland Security.
Ms. Avakian also expressed awareness of the practical impediments to self-reporting cyber intrusions to the SEC. Specifically, entities may be hesitant to do so for fear of triggering an investigation and enforcement action regarding their policies/procedures and implementation thereof. To assuage this concern, Ms. Avakian noted that the SEC’s goals in the cybersecurity area are to prevent hacking, protect customer data and ensure the smooth operation of America’s financial system. In other words, the SEC—at least from a priority standpoint—is on the same side as the entities that may fall prey to a cyber intrusion. In the case of registrants, when investigating cyber intrusions the SEC will focus on whether a registrant had policies and procedures reasonably designed to protect customer data and related remediation action plans. In the case of public companies, the SEC is not looking to second-guess good-faith decisions regarding data privacy, and would likely not bring an enforcement action against a cyber intrusion victim absent a “significant” disclosure issue. Ms. Avakian also pointed out that entities who self-disclose cyber intrusions will be rewarded with cooperation credit. Continue Reading SEC Speaks: How the SEC Decides Whether to Investigate Breached Entities
Politicians in both the European Union and United States touted Tuesday’s agreement on a new “Privacy Shield” for EU-U.S. data transfers as a resolution to the data transfer quagmire that has faced companies since the EU-U.S. Safe Harbor was invalidated in October. While this new deal is a promising step in the right direction for companies that transfer data from the EU to the United States, there are still many questions about exactly what the requirements of the new Privacy Shield will be, how an American company can ensure compliance with those requirements and (perhaps most importantly) whether the European Court of Justice will validate the new rules.
Indeed, the deal heralded by politicians on both sides of the Atlantic appears to be only a high-level agreement—they expect to document the actual terms over the next few weeks (the Article 29 Working Party (WP29), the body made up of representatives of individual European Member States’ data protection authorities, has called for it to be fully documented by the end of February). Thus, we anticipate quite a bit more negotiation on the precise scope and language of the requirements. Meanwhile, WP29, which had been assessing data transfer mechanisms like standard contractual clauses and model contracts for possible flaws that would lead to enforcement actions, announced that it will not take enforcement actions based on its concerns about these mechanisms while it awaits the details of the new transfer deal. Continue Reading Privacy Shield Offers Hope on EU-U.S. Data Transfer—For Now