Categories & Search

Industry: Tax-Exempt Organizations

The Supreme Court Punts on Clarifying the Computer Fraud and Abuse Act

The federal Computer Fraud and Abuse Act of 1986 (“CFAA”) has generated controversy and disagreement among courts and commentators regarding the scope of its application.  The statute, 18 U.S.C. § 1030, which provides for both criminal and civil penalties, prohibits accessing a computer or protected computer “without authorization” or in a manner “exceeding authorized access.”  Courts are divided as to the meaning of these phrases, yet the U.S. Supreme Court recently declined the opportunity to resolve the circuit split that has developed, leaving the exact scope of this important statute in question.

Go

8th Circuit Finds Standing in Data Breach Case but Dismisses on Pleading Deficiencies

In one of the first federal appellate court rulings following the Ninth Circuit’s decision in Robins v. Spokeo, the Eighth Circuit delivered a pyrrhic victory for customers victimized by a data breach.  In Kuhns v. Scottrade, the Eighth Circuit ruled that, although the plaintiff had established standing to pursue a claim against Scottrade, Inc. resulting from a data breach that occurred in 2013, the customer failed to sufficiently allege that the brokerage firm breached its contractual obligations and affirmed dismissal of the case.

Go

Deadline to Meet DFS Cyber Regulation Is Monday

Banks, insurance companies and other financial institutions have only a few days left to comply with the first wave of requirements under New York’s controversial new cybersecurity regulation.

Go

DFS Cyber Regulation Countdown: Who Should Certify Compliance?

Companies subject to New York’s Department of Financial Services (DFS) new cybersecurity regulation should be preparing to comply with the first round of requirements by the upcoming August 28th deadline: enacting a cybersecurity program and policies, implementing user access privileges, designating a Chief Information Security Officer (CISO), employing qualified personnel, and implementing an incident response plan.

Go

Hackers Target the Bottom Line: Business Operations and Earnings

Over the past several years, we have witnessed a fundamental shift in orchestrated cyber-attacks from hacking credit card data and healthcare information to targeting businesses, their operations and bottom lines.

Go

DFS Cyber Compliance Nightmare?

Detailed survey results indicate compliance is far from reach

New York’s powerful Department of Financial Services (DFS) upended cybersecurity regulation with its new and sweeping “Cybersecurity Requirements for Financial Services Companies,” which took effect on March 1, 2017.  But is the financial industry ready and equipped to comply with this detailed regulation?  According to a recent survey published by Ponemon Institute and sponsored by Fasoo, the answer is an unequivocal “no.”

Go

DFS Issues Additional Guidance for Cyber Regulation Compliance

New York’s Department of Financial Services (DFS) has issued additional guidance for compliance with the state’s sweeping cybersecurity regulation that went into effect earlier this year.  Companies covered by the regulation must comply with the first round of requirements by August 28th.

Go

NYS Cyber Regulation Countdown: Continuous Monitoring

In our series of posts leading up to the August 28th deadline for the first phase of requirements under New York’s cybersecurity regulation, the Patterson Belknap team looks at issues that institutions face as they implement the new rules.

In complying with the New York State Department of Financial Services (DFS) cybersecurity regulation, financial institutions have a choice.  They can either employ “continuous monitoring” or, instead, conduct annual “penetration testing” and bi-annual “vulnerability assessments.”

Go

DFS Cyber Compliance Nightmare?

New survey reports less than half of financial firms will meet deadline

A new survey by the Ponemon Institute reports that less than half of the financial institutions covered by New York’s sweeping new cybersecurity regulation say they will “likely” meet next February’s compliance deadline. And even more stunning is the fact that only 13% of those institutions surveyed reported “with certainty” that they would be in full compliance with the regulation by next year.

Go

NYS Cyber Regulation Countdown: “Risk Assessment” – Now or Later?

In our series of posts leading up to the August 28th deadline for the first phase of requirements under New York’s cybersecurity regulation, the Patterson Belknap team looks at issues that institutions face as they implement the new rules.

Go

Ninety Days and Counting: NY Cyber Regulation’s First Deadline

Faced with an approaching August 28th deadline, the more than 3,000 financial institutions that do business in New York should be knee-deep in implementing the first wave of requirements under the State’s sweeping and unprecedented cybersecurity regulation.

Go

The Computer Fraud and Abuse Act Will Need To Wait Another Day In New York’s Commercial Division

Justice Shirley Kornreich recently issued one of the few New York state court decisions  that address the Computer Fraud and Abuse Act (“CFAA”).  Spec Simple, Inc. v. Designer Pages Online LLC,  No. 651860/2015, 2017 BL 160865 (N.Y. Sup. Ct. May 10, 2017).  The CFAA criminalizes both accessing a computer without authorization and exceeding authorized access and thereby obtaining information from any protected computer.  Id. at *3 (citing 18 U.S.C. § 1030(a)(2)(C)). The CFAA also provides a civil cause of action to any person who suffers damage or loss because of a violation of the CFAA.  Id. at *4 (citing 18 U.S.C. § 1030(g)).  As discussed below, the decision provides a helpful look into the interpretation of CFAA claims in the future.

Go

Second Circuit Court of Appeals Denies Rehearing in Microsoft Case

Back in December 2013, a U.S. magistrate issued a seemingly routine warrant in a narcotics case demanding that Microsoft turn over messages from a customer’s email account that resided on a server in Ireland.  That warrant, which issued under a 1986 law called the Stored Communications Act (“SCA”), 18 U.S.C. § 2703, is still being debated today.

Go

FTC Slaps Down ALJ’s Data Security Ruling in LabMD, Sets Broad Mandate for Protection of “Sensitive” Consumer Data

In a sweeping statement of its data security expectations for organizations that maintain consumer information, the Federal Trade Commission on Friday found that LabMD, the defunct medical testing lab, failed to employ adequate data security safeguards in violation of Section 5 of the FTC Act, even though there was no indication that any information had been misused or compromised.

Go

The Paper Trail: The Potential Data-Breach Sitting in your Printer

In April 2016, the sensitive personal medical information of NFL players was stolen from the car of a trainer who had left the files in a backpack in his locked car.  In 2014, Safeway, Inc. settled charges brought by the State of California stemming from an investigation concerning the improper disposal of hard copies of customer information.  In 2014, an insurance company was exposed when maintenance workers who were supposed to move four boxes of member records between floors, instead threw them out.  In 2011, sensitive information regarding an NYPD task force was found in a Manhattan trash can.

Go

LabMD’s Waiting Game: Lingering Questions over FTC’s Authority in Data Security Matters

A contentious legal battle over data security between the Federal Trade Commission and LabMD, a small medical testing lab, is chronicled in the latest edition of Bloomberg Businessweek.  Dune Lawrence’s report raises lingering questions about the FTC’s prosecution of a now-defunct company, tampered evidence and regulatory overreach.

Go

Federal Appeals Court Set to Issue One of the Most Important Privacy Rulings in a Generation

For months, the technology and business communities have been waiting anxiously for a Federal appeals court ruling on whether American companies can be forced to turn over customer information to U.S. law enforcement when that information is stored on servers abroad.  It’s the result of a legal appeal filed last year by Microsoft Corporation that was argued before the U.S. Court of Appeals for the Second Circuit more than seven months ago.

Go

Traditional General Liability Policy Covers Medical Records Mishap

A U.S. appeals court yesterday held that a traditional corporate general liability policy triggered an insurer’s duty to defend a class action lawsuit alleging that a medical records company failed to properly secure patient records on its server.

Go

On the Front Lines of Cybersecurity: The Corporate Challenge

Recent surveys tell us that cybersecurity is the top risk faced by corporate America.  The Bank Director’s 2016 Risk Practices survey – out yesterday – disclosed that three quarters of bank executives and board members believe cybersecurity is their top concern.  And their general counsel agree.  In another recent study, general counsel said that cybersecurity was their top area of organizational risk as well.

Go

Are You Adequately Protected by Your Cybersecurity Insurance? The Sky is the Sub-Limit

For businesses and nonprofit organizations searching for cyber insurance, it is important to know if your coverage limits are adequate.  Whether you are in the market for a new policy or renewing an existing one, you should explore whether your policy has a “sub-limit” that places limitations on your losses and liabilities that may be covered.

Go

FTC Reviews Case Over Legal Standard For Data Security Enforcement Action

Faced with the prospect of overturning a decision by one of its own administrative law judges, the Federal Trade Commission on Tuesday explored ways in which to render a narrow decision.  The argument was the most recent chapter in the long running data security enforcement action against LabMD, the now defunct medical testing laboratory.

Go

The Privilege of PR: Application of the Attorney-Client Privilege to Crisis Communications and Public Relations in Breach Response Planning

Cyber-attacks have become a matter of everyday reality for all businesses: regardless of industry or size, it is no longer if a data breach will happen, but when.  And waiting for a breach to occur before designing and implementing a cyber incidence response plan is generally a recipe for disaster.  

Go

FTC Blasted in LabMD Data Security Case

In a long-running and highly contentious data security enforcement action against LabMD, a small medical testing laboratory, the Federal Trade Commission was handed a stunning defeat late Friday.  In a 92-page Initial Decision, Chief Administrative Law Judge D. Michael Chappell dismissed the FTC’s case against LabMD – after a full administrative trial – based on the Commission’s failure to prove it was “likely” that consumers had been substantially injured in two alleged data security incidents dating back nearly seven years.

Go

Steering Clear of Broken Promises

With last week’s ruling by the Third Circuit Court of Appeals in FTC v. Wyndham Worldwide Corp. solidifying the Federal Trade Commission’s authority to enforce data security practices, organizations that use online computers to store customer information should take notice.  Since 2005, the FTC has stepped up its enforcement efforts and has entered into more than 50 consent decrees relating to cybersecurity matters.  

Go

Third Circuit Affirms FTC’s Authority Over Companies’ Cybersecurity Practices

In a test of the Federal Trade Commission’s authority to police cybersecurity, the Third Circuit Court of Appeals yesterday ruled that the agency has broad power to take action against private sector companies which fail to take adequate steps to protect customer data.

In Federal Trade Commission v. Wyndham Worldwide Corporation, the Third Circuit upheld the FTC’s authority to pursue a lawsuit against the hotel and resort chain based on allegations that it failed to maintain reasonable data security standards.  After three successful cyber-attacks on Wyndham’s computer networks led to the theft of thousands of customers’ records, the FTC sued Wyndham in federal court, alleging that Wyndham’s cybersecurity practices were “unfair and deceptive trade practices.”  The district court denied Wyndham’s motion to dismiss, finding that the Commission had the authority to regulate data security practices.  On appeal, the Third Circuit affirmed the district court’s ruling, holding that the unfairness prong of Section 5 of the FTC Act authorized the FTC to bring enforcement actions for lax data security practices.

This is the first federal appellate decision finding that the FTC has broad cybersecurity enforcement authority under Section 5 of the FTC Act.  Since 2005, the FTC has settled 53 cases against companies related to data security.  Wyndham is one of two companies to challenge the FTC’s authority in this area.  The ruling opens the door for the FTC to commence additional enforcement actions against companies that do not employ reasonable data security practices, especially at a time when Congress has failed to pass comprehensive data security legislation.

Go

Nonprofits and Cybersecurity: Understanding and Managing the Risks of Cyber Threats

With cybercrime striking everywhere from government agencies to Major League Baseball, each new hack is making headlines, launching inquiries, and triggering lawsuits.  Although most of the focus has been on private sector companies and governmental agencies, nonprofit organizations are not exempt (no pun intended) from cyber threats or their consequences.  And sadly, it’s only getting worse.

Go