As we near the end of a year that has seen more than its share of massive data breaches, two bills have been introduced (one re-introduced) in the U.S. Senate. Continue Reading Two Data Breach Bills Introduced in US Senate
Recently proposed legislation in Ohio could provide businesses with special protection from lawsuits in the event of a hack under certain circumstances. Senate Bill 220 would shelter businesses that have been proactive in instituting defenses to guard against data breaches. The idea is to encourage firms to voluntarily enact privacy protections by promising them the ability to later claim an affirmative defense in court should a hack still occur.
Other states already require businesses to meet specific standards with regard to providing cyber security protections and preventing data breaches. In New York, businesses licensed by the Department of Financial Services (DFS) must meet compliance standards in accordance with DFS cybersecurity regulations. These standards require licensees to have a written cybersecurity program in place, maintain a cybersecurity policy that covers 14 regulation-specific areas, designate a qualified employee as a Chief Information Security Officer, and implement an incident response plan, among additional imperatives. Similarly, states differ with regard to their requirements of businesses in providing data breach notices. For example, in Massachusetts, notices must be provided to the affected resident, the Attorney General’s office, and to the Office of Consumer Affairs and Business Regulation (OCABR).
Ohio’s Senate Bill 220 is interesting in that it does not lay out a minimum set of standards that, if not met, could serve as grounds for litigation in the event of a breach. Businesses will be tasked with instituting their own cybersecurity programs using one of eight industry-specific frameworks developed by the National Institute of Standards and Technology. The legislation provides for an evolving standard, which means lawmakers won’t have to continually revisit the issue to update a minimum set of standards. Whether or not a business qualifies for the safe harbor provision will be up to a judge to determine if such business has met its burden. Ultimately, the key takeaway is that this new legislation will provide for compliance as an affirmative defense for businesses facing a lawsuit as a result of a data breach.
The Mintz Levin team will continue to monitor this pending legislation and update our readers as it develops.
Has your company recently beefed up its employee identification and access security and added biometric identifiers, such as fingerprints, facial recognition, or retina scans? Have you implemented new timekeeping technology utilizing biometric identifiers like fingerprints or palm prints in lieu of punch clocks? All of these developments provide an extra measure of security control beyond key cards which can be lost or stolen, and can help to control a time-keeping fraud practice known as “buddy punching.” If you have operations and employees in Illinois (or if you utilize biometrics such as voice scans to authenticate customers located in Illinois), your risk and liability could have increased with the adoption of such biometric technology, so read on …. Continue Reading The Law of Unintended Consequences: BIPA and the Effects of the Illinois Class Action Epidemic on Employers
This week’s disclosure that a 2013 data breach may have affected all 3 billion Yahoo accounts then in existence could alter the scope of the consolidated data breach cases currently pending against Yahoo in the federal court in San Francisco. In the wake of the court’s August 30 order denying Yahoo’s motion to dismiss the case, the parties have been in the process of negotiating a schedule for discovery and motion practice. The parties had been due to make their joint scheduling submission to the Court today. However, just last night, Judge Lucy Koh issued an order postponing the submission deadline in order to allow the parties to address the impact of Yahoo’s recent disclosure. The court ordered Yahoo to “disclose to Plaintiffs available information regarding the recent data breach disclosure by October 6, 2017, so that the Joint Case Management Statement can propose a realistic amended case schedule.” The court also directed that Yahoo “expedite its production of discovery regarding the recent data breach disclosure and include a proposal to do so” in the parties’ joint scheduling submission, which is now due to be submitted on October 11, 2017.
As data breaches dominate national headlines it remains important as ever for businesses to invest in security and to be ready to respond if a breach occurs. Part of your preparedness program should be staying current on data breach legislation at the state level and we are here to help with a new installment of our “Mintz Matrix,” a detailed survey of U.S. state data breach notification laws.
There have been a few notable developments since we last published an update of the Mintz Matrix and below we have provided a snapshot of these changes. Before reading on please download a copy of our September 2017 edition of the Mintz Matrix by clicking here. Continue Reading The Mintz Matrix – September 2017
Earlier this month, an appellate panel of the federal DC Circuit unanimously held that individuals affected by a healthcare insurer’s data breach in 2014 could pursue claims against the insurer stemming from the cyberattack. In the process, the panel deepened a circuit split on the question of whether data breach victims have standing to pursue claims based solely on exposure of their sensitive personal information, while also adding significant risk of cyber-liability for companies that collect and store medical records of individuals.
In Attias v. CareFirst, Inc., the plaintiffs asserted claims on behalf of a purported class of one million customers of CareFirst, Inc. (“CareFirst”), a healthcare insurer in the Washington, DC metro area. In the 2014 cyberattack, hackers penetrated 22 computers and compromised the identifying health data of one million customers, including customer names, addresses, email addresses, subscriber ID numbers, and Social Security numbers. The plaintiffs did not allege that they had suffered any direct financial injury as a result of their identifying health data being exposed, but did allege they suffered an “increased risk of identity theft” as a result of CareFirst’s alleged negligent conduct. The district court granted CareFirst’s motion to dismiss, which asserted that the plaintiffs lacked standing to bring their alleged claims because they had not asserted either a present injury arising from the data breach or a “high enough likelihood of future injury.” Continue Reading D.C. Circuit Holds Cyber-Theft of Customers’ Medical Identifying Information Created Sufficient Increased Risk of Harm to Establish Standing
If you are one of the many businesses licensed by the New York Department of Financial Services (DFS), and cannot avail yourself of the (very) limited exemptions, you must be ready for the first compliance transition date for the stringent DFS cybersecurity regulations – August 28, 2017.
Just in case you’d forgotten, the DFS cybersecurity regulations became effective March 1, 2017 and you can refresh your memory here. Continue Reading Are You Ready for the New York August 28th Compliance Deadline?
If you are a retailer with locations in New Jersey, you will need to review your procedures in anticipation of a new law effective October 1, 2017.
New Jersey Governor Chris Christie has signed the Personal Information Privacy and Protection Act (we can now add #PIPPA to the alphabet soup of privacy acronyms…..), which limits the ability of retailers to collect PII scanned from customer driver’s licenses and identification cards and restricts the usage of any PII collected for the purposes identified in the Act.
Within recent years, retailers have commonly started a practice of scanning the barcodes on customer ID cards to verify the authenticity of an ID presented, verify identity when credit cards are used, or to prevent and control fraudulent merchandise return practices (or to identify consumers who abuse return policies).
Under PIPPA, retailers will only be permitted to scan ID cards to:
- Verify the card’s authenticity or the person’s identity, if the customer pays for goods or services with a method other than cash; returns an item; or requests a refund or exchange.
- Verify the customer’s age when providing age-restricted goods or services to the customer.
- Prevent fraud or other criminal activity if the person returns an item or requests a refund or an exchange and the retailer uses a fraud prevention company or service.
- Establish or maintain a contractual relationship.
- Record, retain, or transmit information as required by state or federal law.
- Transmit information to a consumer reporting agency, financial institution, or debt collector to be used as permitted by federal laws, including the Fair Credit Reporting Act, Gramm-Leach-Bliley Act, and Fair Debt Collection Practices Act.
- Record, retain, or transmit information by a covered entity under HIPAA and related regulations.
PIPPA prohibits retailers from sharing the information with marketers or other third parties that are unknown to consumers. It is unlikely that an online privacy notice describing sharing of scanned ID information with third parties would comply with PIPPA. In-store notice of any such practices will likely be required.
The big “however” in this legislation is the restrictions on retention of the information when collected for the permitted purposes. Under PIPPA businesses cannot retain information related to how the customer paid for the goods, whether the customer returned an item or requested a refund, and cannot store ages. Retailers will only be permitted to collect the customer’s name, address, and date of birth; the issuing state; and the ID card number. Any of this information collected from scanned ID cards Is required to be “securely stored” and PIPPA makes it clear that any security breach of this information is subject to New Jersey’s data breach notification law and must be reported to any affected individual and the New Jersey State Police.
And there are penalties. PIPPA provides civil penalties of $2,500 for a first offense, and $5,000 for any subsequent offices. Further the law allows for “any person aggrieved by a violation” to bring an action in NJ Superior Court to recover damages.
Despite some courts’ evident confusion about the impact of payment card theft on consumer cardholders, other courts are getting it right. Just this week, a judge in the Northern District of Illinois issued an order dismissing the second amended complaint filed by consumer cardholders in In re Barnes & Noble Pin Pad Litig. (N.D. Ill.). This order marked the third time that the court had dismissed the consumer cardholder claims due to lack of injury. Here, as in every theft of credit or debit card data, the fact that consumers are held harmless for fraudulent charges on their cards means that such losses – which are borne by the issuing banks – do not result in injury to consumers sufficient to confer statutory or constitutional standing. This leaves plaintiffs, like those in Barnes & Noble, to argue that they sustained actionable injury because of inconvenience (cards are replaced, accounts are temporarily frozen) or apprehension of potential future harm (future adverse credit impact). The court in Barnes & Noble held the former to be insufficiently significant to allow claims under statutes requiring proof of loss, while the latter was deemed too speculative to permit standing. Even though plaintiffs could show that they purchased credit monitoring services after the breach, the court held that money spent on attempts to mitigate future fraud are not injury that may be redressed under state unfair competition law.
Having dismissed three separate attempts to plead an actionable claim, the court dismissed the second amended complaint in Barnes & Noble with prejudice. With this ruling, the court has provided additional support for defendants resisting consumer claims arising from theft of payment card data.