Peter A. Nelson, Counsel

As we have previously reported, there has been a major uptick over the past few years—and particularly during the COVID-19 pandemic—in ransomware attacks. These attacks consist of an intrusion by a cybercriminal into the victim’s computers or network, followed by deployment of malware that encrypts the victim’s files, preventing access until a payment is made.  More recently, these ransomware attacks also include exfiltration of data as a way to generate even more leverage over the victim.  The incentives for victims of ransomware attacks to pay the ransom are substantial:  the need to stop the attack, regain access to their data, restore business functions, and ensure that any stolen data is destroyed and not sold or exploited by bad actors make these attacks existential events.  On the other hand, making these ransomware payments brings its own risks.  This includes substantial regulatory risk as those payments may run afoul of the U.S. Treasury Department’s Office of Foreign Asset Control (“OFAC”) guidance—since the payments may be made to parties who are on OFAC’s black list.  Although there have not yet been any OFAC enforcement actions against those who have made ransomware payments, companies should be aware of the risk of going forward with a ransom payment.

In a recent ruling with important consequences for data breach litigation, a federal court in Pennsylvania ruled that Rutter’s—a Pennsylvania convenience store chain that suffered a data breach—must disclose the investigative report it commissioned from a third-party after the breach. This is a recurring issue in data breach litigation and one that has far-reaching implications for how companies respond to data breaches or other security incidents.  This is also the latest entry in an evolving, and not entirely consistent, line of cases that are broadly chipping away at the attorney-client privilege and the work-product doctrine protections companies argue should apply to their investigative reports.

The SEC is ramping up its cybersecurity disclosure enforcement.  While the agency had made significant efforts relating to cybersecurity disclosure previously, there has been surprisingly little SEC activity in this area since 2018—even though the last three years has seen an explosion of high-profile data security incidents.  That changed in June of this year, however, with the SEC taking three major actions that demonstrate a renewed interest in such enforcement.  First, the SEC announced its intention to issue a new rule regulating cybersecurity risk governance disclosure.  Second, it announced its first charges and settlement for cybersecurity disclosure violations since 2018.  And third, it revealed a significant cybersecurity disclosure investigation relating to the recent SolarWinds supply-chain attack.  In light of these developments, now would be a good time for issuers and registered entities to review the SEC’s expectations for cybersecurity disclosure, and implement any necessary changes to their respective policies and procedures, and disclosure practices.

Companies that do business in New York or with New Yorkers could soon face an onslaught of biometric privacy-related litigation, courtesy of New York Assembly Bill 27, the Biometric Privacy Act (“BPA”). Currently pending before the legislature, the bill is modeled on Illinois’ Biometric Information Privacy Act (“BIPA”) and, like that law, would impose a set of rules businesses must follow when collecting biometric information. Critically, the BPA would create a private right of action for those “aggrieved” by violations of the law.

New York’s Department of Financial Services (“DFS”) announced on Wednesday, March 3, 2021, that an independent mortgage lender, Residential Mortgage Services Inc. (“RMS”), has agreed to pay a $1.5 million fine to the agency in a settlement resulting from violations of its Cybersecurity Regulation. This is just the second enforcement action brought by DFS under the Cybersecurity Regulation, which was the first of its kind nationally.

On December 13, the software and service provider SolarWinds announced that its Orion software platform had been the target of a sophisticated cyber attack that may have resulted in malicious code being pushed to as many as 18,000 customers.  The SolarWinds software is used by many corporate and not-for-profit entities of all sizes to monitor the health of their IT networks.  Although the details of this breach are still unfolding, based on the information currently available, Orion users who updated their software between March and June of this year are potentially affected.

Well before the California Attorney General’s power to enforce the California Consumer Privacy Act (CCPA) commenced on July 1, 2020, as we have recently reported, private plaintiffs had already jumped into the fray, suing companies like Zoom and Houseparty for alleged violations of the CCPA. We noted that if one of these private lawsuits were to survive a motion to dismiss, it could lead to a substantial increase in class action litigation under the CCPA. Another putative class action under the CCPA that was filed on June 11, 2020 against Minted, Inc.—the popular online stationery, art, and home décor company—joins the growing list of private CCPA lawsuits and adds another wrinkle to this new area of law.

As we previously detailed, the coronavirus pandemic has expanded opportunities for nefarious actors to exploit the digital vulnerabilities of individuals, local governments, industries, organizations, and essential services as they rapidly adapt to the public health crisis. Recent reports have confirmed that attacks and cyber scams associated with the pandemic are in fact on the rise.

On March 17, 2020, a group of thirty-two trade associations and two corporations formally requested that the California Attorney General (AG) delay enforcement of the California Consumer Privacy Act (CCPA) until January 2, 2021, due to the ongoing COVID-19 pandemic. The trade associations represent leading companies in a wide range of industries, including healthcare and pharmaceuticals, transportation, logistics, advertising, insurance, entertainment, real estate, banking and finance, and technology.

This is the fourth post in our series discussing the practical impact of the California Attorney General’s regulations to the California Consumer Privacy Act (CCPA). See our previous CCPA posts here.

The CCPA took effect on January 1, 2020, and already a putative class action has been filed, albeit over a data breach that allegedly occurred before the CCPA’s effective date. In addition, although the statute is now operative, its implementing regulations remain in flux. On February 7, 2020, the California Attorney General (AG) issued a notice of modification to the proposed regulations originally issued in October 2019. And on March 11, 2020, the AG released a second set of modifications. These modifications—published in a clean and redline version—contain important updates clarifying notice requirements, consumer request acceptance and response obligations, service provider responsibilities, and when discrimination related to financial incentives is permissible.

On January 1, 2020, the California Consumer Privacy Act (CCPA) becomes operative.  As we reported last month, the California Attorney General (AG) released long-awaited draft regulations to the CCPA. This is the third installment in a series of posts discussing the regulations most relevant to companies as they determine whether they are covered under the law and how to comply.  This post discusses the key regulations on business verification of requests made by consumers and the non-discrimination provision of the CCPA. 

As we recently reported on this blog, the California Attorney General (AG) released long awaited draft regulations to the California Consumer Privacy Act (CCPA). The regulations provided clarity on several provisions in the law, while also failing to answer some open questions. In a series of upcoming blog posts, we will discuss the regulations most directly relevant to companies as they determine whether they are covered under the law and how to comply. This first post discusses the notices and privacy policies described in detail in the proposed regulations.

As readers of the Data Security Blog will know, the California Consumer Privacy Act (“CCPA”) becomes operative on January 1, 2020.  The CCPA is the most sweeping consumer privacy law in the United States, covering most for-profit businesses that do business in California and collect the personal information of “consumers,” meaning California residents. 

Professional athletes, teams, and leagues have embraced wearable technology.  But as this new technology becomes ubiquitous, a new category of valuable—and personally sensitive—data has emerged, raising novel data security issues and incentives for would-be hackers.

A cybersecurity vulnerability at Stanford University exposed thousands of sensitive files containing details of sexual assault investigations and disciplinary actions. The story of what happened—and why it should be an object lesson for higher education. The second of a three-part series.

While courts and the Federal Rules of Evidence take an increasingly pragmatic approach to the question of when inadvertent disclosure of privileged information results in waiver, a recent federal magistrate’s ruling serves as a potent warning that use of a file-sharing site—without sufficient safeguards—may constitute a waiver. Harleysville Insurance Co. v. Holding Funeral Home, Inc., No. 1:15-cv-00057 (W.D. Va. Feb. 9, 2017) is the first published decision to find that the use of a file-sharing site to exchange potentially privileged information constituted a waiver of the attorney-client privilege and work product protection—because the company failed to password protect its transmission.

On January 23, 2017, President Donald Trump named Ajit Pai as Chairman of the Federal Communications Commission (FCC).  In his previous role as the senior Republican on the FCC under President Barack Obama, Mr. Pai was an outspoken critic of the agency’s decision to assert jurisdiction over Internet Service Providers (“ISPs”) and its rules governing broadband privacy.  Pai’s appointment suggests that significant changes may be on the horizon.

Last week marked the first time a U.S. law firm was publicly named in a class action data security lawsuit.  Originally filed in April 2016, the class action complaint in Shore v. Johnson & Bell, Ltd., 16-cv-4363 (N.D. Ill.), was unsealed last week after months of back-and-forth over whether the alleged security flaws had been patched.  The complaint accuses Johnson & Bell, a mid-sized Chicago firm, of “systematically exposing confidential client information and storing client data without adequate security.”  The lawsuit makes no claim that any client information has been stolen or misused.  Even so, the filing of this complaint amplifies the risks already facing law firms – including reputational – at a time when data security is a top concern for law firms and their clients.

Several recent federal court decisions have added guidance on the still-unsettled question of when a plaintiff has Article III standing to sue based on a data breach or other data security or privacy event.  These cases—Attias v. CareFirst, Inc. (D.D.C.), Wood v. J. Choo USA, Inc. (S.D. Fla.), and Guarisma v. Microsoft (S.D. Fla.)—offer somewhat mixed guidance for defendants in class action privacy-related lawsuits looking to use a standing challenge as a quick escape.

Microsoft’s blockbuster acquisition of LinkedIn earlier this month—a deal where concerns for privacy and data security loomed large—provides a glimpse into the growing trend of including separate privacy and data security representations in merger and acquisition agreements.  Because the trend is so recent, there is no consensus or standard practice at this point for drafting these representations.  The LinkedIn privacy and data security representation is a good example of the evolving nature of these representations.