Recently, a Google researcher discovered a serious flaw with the content delivery network (CDN) provided by CloudFlare.  This vulnerability has now become known as Cloudbleed, in a nod to the earlier Heartbleed SSL vulnerability.  The Cloudfare CDN allows users of the service to have their content stored at Cloudflare Network Points of Presence (PoPs) rather than a single origin server.  This reduces the amount of time it takes to serve websites in disparate geographical locations.  The service is popular, with Cloudflare having over five million customers, including Uber, OkCupid, and FitBit.

The Cloudbleed vulnerability involved a situation where sensitive data was inadvertently displayed or “leaked” when visiting a website that used certain Cloudflare functionality.  Cloudflare has estimated that the leak was executed 1,242,071 times between September 22nd and February 18th.  Search engines such as Bing, Yahoo, Baidu and Google also cached the leaked data.  The researcher who discovered the leak found all sorts of sensitive data being leaked, including private messages from major dating sites, full messages from a well-known chat service, online password manager data and hotel bookings, passwords and keys.

The Clouldbleed vulnerability is a reminder that companies that leverage external vendors to receive, process, store, or transfer sensitive data must find ways to reduce the risk created by the relationship to an acceptable level.  We have three steps that companies should consider taking to accomplish this.  

First, companies should understand how external vendors will interact with their data flows.  Companies that leverage Cloudflare services have given it access to sensitive data, including private messages, passwords, and keys.  The risks of providing this data to external vendors cannot be understood if the company itself does not understand at a senior organizational level what is being transferred.  Ask questions about the proposed procurement of vendor-provided services to understand what interaction the service/vendor has with your data.

Second, companies should make sure that they have permission to transfer user data to third parties, based on its existing terms of use and privacy policy documents that the relevant data subjects have agreed to.  Generally speaking, in most cases, the company collecting the data from the data subject will remain responsible for any issues that occur downstream, including loss or breach of the data through a third party vendor relationship.

Third, companies should carefully negotiate their vendor contracts in light of their own risk tolerance.  The contract should contemplate the data at issue, including by type and category, such as private messages and passwords, and should to the extent feasible transfer all risk of a breach on the vendor side to the vendor.  In many cases, it will be appropriate to require that the vendor carry insurance to satisfy its obligations under the agreement, including data breach remediation should it become an issue.

Companies with any questions regarding this process should not hesitate to contact the Privacy and Security team at Mintz Levin.

 

Two recent data breach incidents in the healthcare industry prove what readers of this blog have heard all too often:  KNOW THY VENDORS.

Last week, Phoenix-based Banner Health reported one of the year’s largest data breaches.  Banner reported that it had suffered a massive cyberattack potentially affecting the information of 3.7 million patients, health plan members and beneficiaries, providers.   This attack is notable for all companies and not just healthcare providers covered by HIPAA.   Reportedly, the attack occurred through the computer systems that process food and beverage purchases in the Banner system.  In the incident, according to reports, the hackers gained access to the larger systems through the point-of-sale computer system that processes food and beverage purchases.  The attack was discovered on July 13, and Banner believes hackers originally gained access on June 17. Continue Reading To Protect Data: Keep Your Network Access Close, and Your Vendors Closer

Written by Kevin McGinty

A recently-filed class action lawsuit asserts claims against the Winn-Dixie supermarket chain and a third-party vendor, Purchasing Power, LLC, in connection with the alleged theft of employee data provided to Purchasing Power in order to administer a discount purchasing program offered to Winn-Dixie employees.  The claims advanced against Winn-Dixie and Purchasing Power highlight the potential risks associated with sharing employee or customer data with third party vendors, and underscore the need for companies to ensure that the data security practices of third-party vendors are consistent with those of the companies themselves.  The complaint also demonstrates how failure to make prompt disclosure of data breaches to affected individuals can increase the risk of class action litigation.

According to the complaint in Burrows v. Purchasing Power, LLC, Case No. 1:12-cv-22800 (S.D. Fla.), Winn-Dixie either transferred or permitted Purchasing Power to access personally identifiable information (“PII”) of Winn-Dixie employees for the purpose of making a discount purchasing program available to Winn-Dixie’s employees.  The complaint alleges that Winn-Dixie notified employees on January 27, 2012 that Winn-Dixie employee data had been inappropriately accessed by an employee of Purchasing Power.  The notice further stated that Winn-Dixie first learned of the data theft in October 2011.  According to the complaint, Winn-Dixie did not explain the reason for its delay in providing notice, and Purchasing Power has never, at any time, provided notice of the breach to Winn-Dixie employees.

One unique aspect of Burrows that distinguishes it from the typical privacy class action is an allegation that the named plaintiff suffered actual injury by reason of a data breach.  Specifically, plaintiff alleges that the Internal Revenue Service refused to accept his 2011 federal income tax return, stating that a return had already been filed in his name.  Plaintiff claims that someone who had access to the PII stolen from Purchasing Power filed the return, thereby depriving plaintiff of an anticipated refund.  He seeks damages associated with the lost refund, in addition to other damages associated with the risk of further misuse of his PII.

The complaint asserts claims for negligence, violation of the federal Stored Communications Act, 18 U.S.C. § 2702, violation of the Florida Unfair and Deceptive Trade Practices Act, and breach of the common law right to privacy.  Plaintiff asserts these claims on behalf of a putative class of all Florida employees of Winn-Dixie whose PII was provided to or accessed by Purchasing Power.

The complaint in Burrows has some evident flaws.  The Stored Communications Act only applies to conduct by entities such as Internet service providers that are engaged in the “provision to the public of computer storage or processing services by means of an electronic communications system.”  18 U.S.C. § 2711(2).  Neither the defendants nor the conduct alleged facially meet this requirement.  Further, the particularized harm allegedly suffered by the named plaintiff allows defendants to argue that determining whether class members suffered actual injury would raise highly individualized questions of fact that preclude certification of a plaintiff class to seek money damages under Fed. R. Civ. P. 23(b)(3).

Nonetheless, certain aspects of Burrows pose challenges for the defendants.  Where, as here, the data breach allegedly resulted from a targeted effort to steal PII – unlike cases involving thefts of laptops, in which any data theft is incidental – courts have been more receptive to claims that class members’ costs to mitigate risk of identity theft constitute cognizable injury.  The actual injury allegedly suffered by the named plaintiff supports the argument that the threat of misuse of the stolen data is not speculative and, therefore, warrants monetary and injunctive relief.

Burrows provides a timely reminder that it is critical that any company that shares customer or employee PII with a vendor must ensure that the vendor can adequately protect such data.  Executing a written agreement specifying the company’s and the vendor’s respective data security obligations is a necessary, but not sufficient step.  The contract will not be worth the paper on which it is written if the vendor lacks the capability to comply with its obligations.  Individuals responsible for the company’s data security practices must engage in sufficient due diligence to assure the company that the vendor’s data security practices are at least commensurate with the company’s practices and otherwise comply with the legal requirements of all applicable states and jurisdictions.  In addition, to provide proper incentives to adhere to contract requirements, the agreement should indemnify the company for any losses caused by the vendor’s failure to satisfy its data security obligations.

Finally, Burrows illustrates the critical importance of prompt notification whenever a data breach occurs.  If plaintiff was indeed victimized by someone who filed a bogus return using the plaintiff’s stolen PII, notice to employees in October 2011, perhaps combined with proactive steps to protect affected employees from misuse of data, might have forestalled such an injury.  Absent such an occurrence, it is unlikely that a lawsuit would ever have been filed.  Ultimately, providing prompt notice whenever a data breach occurs avoids violating state law notice requirements and discourages the filing of class action lawsuits.