Data Compliance & Security

Imagine you are the CEO of company sitting across from an interviewer. The interviewer asks you the age old question, “So tell me about your company’s strengths and weaknesses?”  You start thinking about your competitive advantages that distinguish you from competitors.  You decide to talk about how you know your customers better than the competition, including who they are, what they need, and how your products and services fit their needs and desires.  The interviewer, being somewhat cynical, asks “Aren’t you worried about the liabilities involved with collecting all that data?”

In honor of National Cyber Security Awareness Month, we at Mintz Levin wanted to take the chance to remind our readers of data’s value as an asset and the associated liabilities that stem from its collection and use, as well as provide guidelines for maximizing its value and minimizing its liabilities.  Continue Reading 3 Guidelines to Maximize Value of Data

The term “cloud computing,”  — a process by which remote computers are used to store, manage and process data — is no longer an unfamiliar term. According to at least one estimate, “approximately 90 percent of businesses using the cloud in some fashion.” American Airlines is assessing major providers of cloud services for an eventual relocation of certain portions of its customer website and other applications to the cloud.

What some may not realize is that there are actually three main types of clouds: public, private and hybrid.  Public clouds are those run by a service provider, over a public network.  For example, Amazon Web Services offers public cloud services, among others.  A private cloud is operated for a single entity, and may be hosted internally or by a third-party service provider.  A hybrid cloud is a composition of two or more clouds, such as a private cloud and a public cloud, such that the benefits of both can be realized where appropriate.  Each of these cloud infrastructure types has different advantages and disadvantages.

For a given company looking to migrate to the cloud, the appropriate option will be motivated in part by business considerations; however, data privacy and security laws, compliance best practices, and contractual obligations will provide mandatory baselines that companies cannot ignore. As such, relevant laws, best practices, and contractual obligations serve as a useful starting point when evaluating the appropriate cloud option.

Most every organization has data flow systems that receive data, and then process and use the data to deliver a service. Below are three initial steps a decision maker should take when evaluating a potential cloud infrastructure choice.


First, consider the statutory implications of the types of data being processed

For example, is the system collecting social security numbers and driver’s license numbers? Pursuant to California Civil Code Section 1798.81.5, businesses that “own or license” personal information concerning a California resident are required to “implement and maintain reasonable security procedures and practices . . . to protect the personal information from unauthorized access, destruction, use modification, or disclosure.”  Of course, many other state and federal laws may also provide additional obligations, such as the HIPAA Security Rule, which applies to certain health information under certain circumstances.

Deciding which relevant laws apply, and then interpreting language such as “reasonable security procedures and practices” is a complicated process. Companies should consult experienced legal counsel regarding these risks, especially in light of potential liability.

Second, consider any relevant contractual obligations

For example, many companies may have contracts that provide for certain service level availability (SLA) obligations for services they provide. It is also possible that these contracts could have their own security requirements in place that must be met.

Third, decide which cloud architecture option makes sense in light of the first two steps as well as business considerations

After senior decision makers, with the benefit of experienced legal counsel, have decided what elements of applicable laws, best practices, and contractual obligations apply, further business considerations may need to be addressed from an operational standpoint.  For example, interoperability with other services may be an issue, or scalability may be an issue.


Through these requirements, in conjunction with appropriate information technology stakeholders, the appropriate cloud architecture can be chosen. Private clouds can offer the strongest security controls, as they are operated by a single entity and can offer security options not present in public clouds.  As such, a private cloud may be appropriate where a very strong security stance is deemed necessary.  Public clouds are often less expensive, but offer a more limited range of security options.  A hybrid cloud may be appropriate where an entity hosts certain high security data flow systems, as well as other systems with less sever security requirements.  For example an entity that has an HR system that contains social security numbers, as well as an employee shift scheduling system might choose to host the HR system on a private cloud, while hosting the customer feedback system on a public cloud system, with limited cross over and interoperability between the two systems.

Once you have chosen which cloud suits your business and data flow, the real work of getting appropriate contract documents in place begins.   We’ll discuss those issues in a future blog post.


Last week the clothing retailer Eddie Bauer LLC issued a press release to announce that its point of sale (“POS”) system at retail stores was compromised by malware for more than six months earlier this year.  The communication provided few details but did specify that the malware allowed attackers to access payment card information related to purchases at Eddie Bauer’s more than 350 locations in the United States, Canada and other international markets from January 2 until July 17, 2016.  According to the company, its e-commerce website was not affected.

In an open letter posted online, Eddie Bauer’s CEO Mike Egeck explained that the company had conducted an investigation, involved third party experts and the FBI, and now is in the process of notifying customers and reviewing its IT systems to bolster security.  These are customary and important steps following a security breach to mitigate harm to customers, protect against future threats, and comply with state data breach notification laws.    Read on to find out more ….. Continue Reading Eddie Bauer Latest Victim of POS Malware Attack

On Friday, the heads of the Federal Trade Commission overruled the decision of the Administrative Law Judge (“ALJ”) in In the Matter of LabMd., Inc. The FTC concluded that the ALJ had erred in dismissing the Commission’s case against a lab testing company LabMD and misapplied the unfairness standard.  The key determination by the FTC was that the mere disclosure of sensitive medical information is cognizable harm under Section 5(c) of the FTC Act, 15 U.S.C. § 45(a), irrespective of whether there is further economic or physical harm.   What does this mean for privacy enforcement?   Read on. Continue Reading FTC Plants A Flag With LabMD Ruling: What This Means for Enforcement

In a decision favorable to the airline industry—but not helpful to other companies—the California Court of Appeal said that a privacy enforcement action against Delta is not going to fly.  On May 25, 2016, the Court of Appeal tossed the California Attorney General’s CalOPPA enforcement action against Delta Airlines, affirming the lower court’s 2013 dismissal of the case with prejudice.

As we previously wrote, California AG’s office has been taking incremental steps toward ensuring that mobile applications comply with CalOPPA.  As early as 2012, its office began sending notices of non-compliance to mobile application developers.  When some companies failed to respond, the Attorney General chose Delta as its pilot case, promptly filing its first-ever enforcement action under CalOPPA.  Over the past three years, we have followed the Attorney General’s CalOPPA compliance campaign, including the Delta case.   Continue Reading Delta Wins CalOPPA Case – But Your Mobile App May Not Fly

Mintz Levin’s Immigration Law Blog is running a series titled “Innocents Abroad” addressing issues in an increasingly globalized economy where employers assign employees all over the globe.

These are big questions, reflecting some of the practical concerns in our international marketplace.  The series focuses on the well-intentioned Global HR Director, Ned Help, who will raise hot topics and difficulties his company faces when sending their employees abroad.  We will then explore the common pitfalls and offer practical solutions to the difficulties Ned Help faces.   This month’s edition:   Privacy Considerations – follow the rest of the series at Innocents Abroad.


From:            Carrie Counselor

To:                  Ned Help

Date:              May 24, 2016

RE:     Privacy considerations for employees working abroad

Dear Ned,

I understand that one of your employees will be engaging a six-month temporary assignment around Europe to scope market opportunities, and you’d like to have a better understanding of what to be thinking about in terms of privacy.  Great question!  This is an area where many employers struggle because other jurisdictions protect privacy and personal data quite differently than we do here in the United States.

Generally speaking, federal and state laws applicable to employee information do not have “extraterritorial” effect beyond the information that remains in the United States, meaning that American employees working abroad (even temporarily) will not benefit from US legal protections with respect to personal information collected, stored or transmitted outside of the country.

What makes this area of the law particularly crucial and daunting for employers is that non-US countries frequently offer greater protections to employees and establish far higher compliance obligations on the part of employers.  Of particular concern for you should be the data protection landscape across the European Economic Area (referred to as the “EEA,” encompassing all European Union (EU) Member States as well as Iceland, Liechtenstein and Norway) because each country has passed its own set of national laws governing the collection, use, retention and transmission of personal data. Companies must consider these local laws before electronically monitoring an employee outside the United States or transferring an employee’s personal information back home.  Let’s talk specifics: Continue Reading Innocents Abroad: Privacy Considerations for Employers

As we reported last month, the FCC was preparing a proposed rulemaking (NPRM) to establish privacy and data security requirements for broadband internet access service (BIAS) providers.  The FCC has now released that proposal with comments and reply comments due May 27th and June 27th respectively.

The brief background to this proposal is that in 2015, the FCC adopted net neutrality rules in Open Internet Order, which reclassified BIAS as a common carrier telecommunications service subject to regulation under Title II of the Communications Act.  The Commission determined that, as a consequence of reclassification, Section 222 of the Communications Act, which is part of Title II, would now apply to BIAS providers. Section 222 regulates a telecommunications carrier’s use and disclosure of Customer Proprietary Network Information (“CPNI”) – which includes information related to the quantity, location, and amount of use of a telecommunications service.  The FCC concluded in its Open Internet Order that the rules implementing Section 222 were telephone-centric and ill-suited to BIAS, and so chose to forbear from applying those rules to ISPs.  With this latest release, the FCC is proposing a new set of rules implementing Section 222 that would apply to BIAS providers. Continue Reading FCC Broadband Privacy and Security Proposed Rulemaking Underway

As we wrote previously, the federal government released several guidance documents last month implementing The Cybersecurity Information Sharing Act (CISA).  Among these was the Guidance to Assist Non-Federal Entities to Share Cyber Threat Indicators and Defensive Measures with Federal Entities under CISA published by the Department of Homeland Security and Department of Justice.  This document provides guidance on the circumstances in which personal information of a specific individual may – or may not – need to be shared in order to adequately describe a cyber threat indicator (CTI).   In addition, the release identifies certain categories of information likely to be considered individually identifiable information unrelated to a cybersecurity threat, and provides guidance on sharing CTIs with the government in a manner covered by the Act’s liability protections. Continue Reading CISA Guidelines (Part 3): Guidance to Assist Non-Federal Entities

Look for Part 2 tomorrow:  Recommendations on how to stay out of future reportscalifornia-flag-graphic

California Attorney General Kamala Harris has released a report of the data breaches that have been reported to her office from 2012 until 2015. Although the California data breach notification law took effect in 2003, beginning in 2012, businesses and government agencies have been required to notify the Attorney General of data breaches affecting more than 500 California residents.

The number of personal records that were compromised is staggering; 178 breaches were reported during 2015 and 24 million personal records were compromised.

Continue Reading California by the Numbers (Part 1): 24 Million Compromised in 2015