Last Thursday, Governor Cuomo signed New York’s latest data security bill – the Stop Hacks and Improve Electronic Data Security, or “SHIELD” Act. The Act, which we have followed on this blog since November 2017, imposes new notification obligations on businesses managing private data when a security breach occurs. Capital One’s recent breach underscores the significance of the changing regulatory landscape, as both businesses and the government attempt to navigate and protect against large-scale cybersecurity attacks, and the importance of understanding notification obligations, should those efforts fail.
Last Thursday, Slack Technologies, Inc. (Slack) announced that it would reset passwords for a number of accounts compromised by a security breach that occurred more than four years ago, in March 2015. Slack—a fast-growing messaging service that launched in 2014 and went public last month—provided little explanation for its delay in action and minimized the scope of the incident, claiming that it only affected a small percentage of current Slack users. The narrow scope and timing of Slack’s disclosure raise interesting questions about the heightened scrutiny public companies now face when dealing with cybersecurity incidents.
The U.S. Office of Personnel Management (“OPM”) made headlines when several hacks of confidential data came to light in 2015, intrusions that compromised the personal data of over 20 million individuals. On July 21, 2019, in AFGE v. OPM (In re United States OPM Data Sec. Breach Litig.), Nos. 17-5217, 17-5232, 2019 U.S. App. LEXIS 18609 (D.C. Cir. June 21, 2019), a divided panel of the United States Court of Appeals for the D.C. Circuit breathed new life into litigation stemming from those breaches and injected yet another piece into the growing puzzle surrounding constitutional standing in breach litigation. The case had previously been dismissed after a district court held that the plaintiffs lacked standing based on their failure to allege concrete injuries. In a divided opinion, the D.C. Circuit panel reversed, holding that the plaintiffs’ allegations of potential future harm were sufficient for the case to move forward.
The New York State Senate recently passed The Stop Hacks and Improve Electronic Data Security Act, or SHIELD Act, leaving only the Governor’s signature as the final step to the SHIELD Act becoming the country’s newest—and one of the most stringent—breach notification laws. Given Governor Cuomo’s previous support for robust cybersecurity protection, New York may soon join a growing number of states beefing up their notification statutes.
As we’ve written about in the past, the SAFETY Act has the potential to help companies mitigate their risk from cyber-terrorism. As previously noted, the statute has never been fully tested in courts, so the full contours of its protection remain uncertain. Nonetheless, the benefits of SAFETY Act approval may extend well beyond those mandated by Congress: to the right company, SAFETY Act approval could be a significant market differentiator and, in the right circumstances, could be a powerful tool in litigation even when the Act does not itself apply.
Patterson Belknap Webb & Tyler LLP is deeply saddened to announce the passing of our partner and friend Craig A. Newman, the founding editor of the Data Security Law Blog. Craig was a litigation partner with Patterson Belknap from 2015 to 2019 and served as chair of the Firm’s Privacy & Data Security practice. He was a source of wisdom, warmth and humor, and will be missed. More information can be found on the Firm’s website here.
It’s been a tough week for the healthcare industry.
Just days after Quest Diagnostics reported a breach at a third-party vendor affecting approximately 11.9 million of its patients, LabCorp disclosed that a breach at the same vendor exposed the personal and financial data of 7.7 million of its customers.
Illinois is set to become the 29th state that will require data breaches affecting more than 500 residents to be reported to the state’s attorney general.
Today, New York’s top financial regulator, the Department of Financial Services, announced the formation of a dedicated “Cybersecurity Division.” In a news release issued earlier today, the agency said the new division “will focus on protecting consumers and industries from cyber threats ….”
Hackers have managed to break into the accounts of 100 sellers at Amazon.com. The hackers funneled money from the seller’s accounts—either from sales or loans—into their own bank accounts after stealing seller credentials. It is not clear how much money was stolen in the incident.
Last week President Trump issued an executive order targeted at improving the quality of the federal government’s cybersecurity workforce. The executive order—which acknowledges the shortage of qualified employees for cybersecurity jobs—would implement a number of steps to strengthen and expand cyber knowledge within the federal government.
The FBI’s Internet Crime Complaint Center, better known as IC3, released its 2018 Internet Crimes Report. For those unfamiliar with the IC3, it was established by the FBI in May 2000 as a central repository for public complaints of internet-based crimes. Since its inception, IC3 has received more than 4 million complaints. To facilitate law enforcement efforts and promote public awareness, IC3 analyzes the complaints it receives and disseminates information to the public and law enforcement. Among other things, it identifies trending scams, refers scams that do not meet federal law enforcement thresholds to state and local law enforcement, and provides victim services. New in 2018, IC3 created the Recovery Asset Team to help victims of internet-facilitated schemes recover funds and the Victim Specialist-Internet Crime position to provide crisis intervention, needs assessments, and referrals.
In its first official statement about the CLOUD Act – the Clarifying Lawful Overseas Use of Data Act – the U.S. Department of Justice has published a white paper, “Promoting Public Safety, Privacy and the Rule of Law Around the World: The Purpose and Impact of the CLOUD Act,” discussing its view on the law enacted in March 2018. The CLOUD Act, established revised procedures for government requests for data held by technology companies outside of the U.S.
The Securities and Exchange Commission is warning investment firms to step up their game when it comes to following the agency’s privacy rules. In a Risk Alert issued by the Office of Compliance Inspections and Examinations (OCIE), a laundry list of compliance “deficiencies or weaknesses” were identified in recent examinations of SEC-registered investment advisers and broker dealers.
The federal government’s record for effective cyber defenses of its own websites has not been stellar over the past few years. Federal government agencies ranging from the Office of Personnel Management to the National Archives have suffered data breaches, as have nearly a dozen other agencies.
In our third and final installment on the California Consumer Privacy Act’s (CCPA) expansive definition of “personal information,” we look at other sections of the CCPA that either limit the applicability of the law’s “personal information” definition or exclude information from coverage under the law.
When you think about reporting a healthcare data breach to authorities, family-owned furniture manufacturers nestled in the serenity of North Carolina aren’t exactly at the top of the list.
Our three-part series on the California Consumer Privacy Act’s (CCPA) expansive definition of “personal information” is designed to help businesses identify whether they hold information covered under the law, while also highlighting the potential pitfalls in the definition as we await interpretative regulations from the California Attorney General and potential amendments from the state’s legislature. In Part I, we explored the breadth of the definition. We now turn to the law’s two explicit exclusions from the definition of “personal information.”
The incoming chief of New York’s top financial services regulator called cybersecurity “the number one threat facing all industries and governments globally” during a speech on Friday, April 12, 2019 at the Association of the Bar of the City of New York.
The nation’s top law enforcement agency is rebooting its cybercrime capabilities.
In an effort to keep up with the evolving threats against property, critical infrastructure and human life posed by cyber-attacks –especially those launched by foreign adversaries – the Federal Bureau of Investigation is seeking to reposition its priorities and fortify its capacity to fight cybercrime.
Companies from California to New York are already scrambling to comply with a growing patchwork of privacy laws covering both businesses and consumers.
Almost weekly, it seems there is another news article about a bug bounty program sponsored by a major corporation where an amateur hacker – often a teenager – is paid a sizeable sum of money for finding a bug in a company’s operating system or code. Often, these articles describe just how much money these teens make from bug bounty programs; one headline from March 12, 2019 describes how bug bounty programs have made “one teen a millionaire hacker.” In another from February 2019, Apple paid a 14-year-old hacker an undisclosed sum after he found a security flaw in FaceTime.
When New York’s far-reaching cybersecurity law for financial institutions was enacted more than two years ago, some predicted it would serve as a national blueprint for future data security laws. Now, as the U.S. Federal Trade Commission considers changes to two privacy rules designed to safeguard customer information held by financial institutions, the proposed changes to one law – the Safeguards Rule – hue closely to a handful of requirements already in place in New York.
NY Appellate Court Slams “Egregious Litigation Misconduct” and “Improperly Accessed” Email Communications
When we hear about discovery abuses in litigation, we often think of overzealous lawyers using obstructionist tactics. Such behavior, however, rarely involves litigants “improperly accessing” the email communications of an adversary or accessing privileged attorney-client communications that disclose litigation strategies.
Before investing in a company, would you want to know whether the board of directors had cybersecurity expertise?
A bipartisan group of senators have proposed a bill, Senate Bill 592, that would require every public company to disclose the cybersecurity background of its directors, and, if none exists, explain why the company doesn’t believe it is necessary.
Many consumers have become painfully aware of the risks that data breaches pose in a digital world. And now, their legal claims may not be ultimately decided by a judge or jury but sent off to arbitration.
The use of biometric technology is fast becoming the next big thing in privacy litigation. There was last month’s decision by the Illinois Supreme Court that upheld a consumer’s right to sue companies for collecting biometric data – such as fingerprints and iris scans – without first disclosing how such information will be used. See our blog on that ruling here.
A recent report by the Government Accountability Office (GAO) is recommending that Congress adopt comprehensive federal data privacy legislation. The GAO’s proposal is, in part, meant to address limitations of the current privacy regulatory landscape, which is mostly piecemeal, industry-specific regulation at both the federal and state levels. The GAO’s 56-page report follows more than a year of interviews with officials from various federal agencies that have taken active roles in data security issues, including the Federal Trade Commission (FTC), Federal Communications Commission, and the Consumer Financial Protection Bureau, as well as stakeholders from industry and academia.
It’s been almost two years since New York’s top banking regulator implemented one of the nation’s most stringent cybersecurity regulations. Since then, thousands of financial institutions have recruited chief information security officers, implemented cybersecurity programs, performed penetration testing, and imposed encryption requirements on their most sensitive information.
It’s a marathon month for the thousands of financial institutions and insurance companies covered by New York’s landmark cybersecurity regulation. In little more than a week, these businesses must file their second annual certification of compliance with the State’s Department of Financial Services. Two weeks later, they must also come into compliance with the regulation’s third-party vendor requirements, the final milestone in the two-year roll out of the cybersecurity regulation.
In a country renowned for protecting the privacy of its citizens, Germany has undertaken a pilot that does just the opposite. In a trade off between privacy and convenience, German residents can enroll in a digital service where their mail is emailed to them anywhere in the world.
A Shield From Cyber Liability: Integrating SAFETY Act Protections Into Institutional Cyber Governance
An obscure federal law called the SAFETY Act recently captured national headlines when MGM Resorts International invoked it in a series of pre-emptive, declaratory judgment law suits against the victims of the 2017 Harvest Festival Las Vegas shooting. MGM sued the victims in an effort to avoid liability in connection with the tragedy. MGM owns the Mandalay Bay hotel, where Stephen Paddock, from his 32nd floor suite, shot and killed 58 people and wounded hundreds more who were attending a music festival next door.
The New York Times Features Op-Ed by Craig Newman: "Lessons for Corporate Boardrooms From Yahoo’s Cybersecurity Settlement"
The New York Times featured an op-ed last week written by Craig A. Newman, Chair of Patterson Belknap’s Privacy and Data Security Practice, entitled “Lessons for Corporate Boardrooms From Yahoo’s Cybersecurity Settlement.” In the op-ed, Mr. Newman discusses how the January 2019 settlement “marked the first time that shareholders have been awarded monetary damages in a derivative lawsuit related to a data breach.” Mr. Newman notes, “the settlement signals that director and officer liability for cybersecurity oversight is entering new and potentially perilous territory.”
To read the full article, click here.
In a ruling with wide-spread implications, the Illinois Supreme Court on Friday upheld a consumer’s right to sue companies for collecting biometric data – such as finger prints and iris scans – without disclosing how such information will be used.
In a four-part publication, a Task Force that included the Department of Health and Human Services (HHS) and private sector industry leaders released guidance for the healthcare industry on cybersecurity best practices. The guidance, Health Industry Cybersecurity Practices (HICP): Managing Threats and Protecting Patients, focuses on healthcare providers, payors and pharmaceutical companies.
With full implementation of New York’s groundbreaking cybersecurity regulation only six weeks away, the state’s top banking regulator took the opportunity to praise the many financial institutions that have adopted systems to better protect consumers from cybercrime.
Among other things, 2018 was the year of the shareholder data breach stock-drop lawsuit. As we’ve previously reported, it was the year that shareholders began routinely suing companies after an announcement of a data breach, seeking damages for a hit to the company’s stock price.
Yesterday, a Superior Court judge in Santa Clara, California approved what is believed to be the first monetary award to a company in a data breach-related derivative lawsuit. Until now, such breach-related derivative cases have settled through a combination of governance changes and modest awards of attorney’s fees.
Businesses covered by the recently enacted California Consumer Privacy Act of 2018 (CCPA) are scrambling to comply with the statute, which becomes “operative” on January 1, 2020, unless that date is changed by the California legislature. As we have noted in earlier blog posts, the CCPA is the most sweeping privacy law in the U.S. and has significant implications for any business that falls within its coverage.
Yesterday, by e-mail and on its website, the California Department of Justice (DOJ) announced that it would hold “six statewide forums to collect feedback” in advance of the rulemaking process for the California Consumer Privacy Act (CCPA). The announcement did not include proposed rules or regulations, which must be adopted by July 1, 2020.
Investment advisers may want to think twice before texting clients any advice in the New Year.
In a recently issued Risk Alert, the U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) reminded investment advisers of their obligations under the Investment Advisers Act of 1940 (Advisers Act) when they or their personnel use electronic messaging for business-related communications.
With the New Year fast approaching, so begins the one-year countdown to the California Consumer Privacy Act, or CCPA, going into effect.
Wire fraud committed by cybercriminals is not a new phenomenon. The FBI and other government agencies have regularly warned against wire fraud scams—called “business email compromises” or BECs—where criminals pose as vendors or company executives and use email to dupe company insiders into wiring money into bank accounts controlled by the perpetrators. And in some instances, the amounts involved are staggering.
With the year quickly coming to a close, it’s time for organizations covered by New York’s Cybersecurity Regulation for Financial Service Companies to take stock of their compliance efforts before popping any champagne corks to usher in the New Year.
Protecting children’s online privacy remains a point of focus for the New York Attorney General. That’s the upshot of the recent record-setting settlement with Oath Inc. – formerly AOL, Inc. – for violating the Children’s Online Privacy Protection Rule (COPPA).
Cybersecurity has played an important role in the U.S. Securities and Exchange Commission’s regulatory agenda during the past year.
And it’s likely to become even more important in 2019.
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