The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

According to a 2019 survey, Chief Legal Officers ranked data breaches as the most important issue keeping them “up at night.” Cybersecurity also remained top of mind for boards and other corporate

On Tuesday, November 12, 2019, the U.S. Federal Trade Commission (“FTC” or “Commission”) announced a proposed settlement with InfoTrax Systems, L.C. (“InfoTrax”), a third-party service provider, regarding multiple data security failures.  As a result of these security shortcomings, a hacker accessed about one million consumers’ sensitive personal information after more than twenty intrusions into InfoTrax’s network.  This settlement marks one of the first instances in which the FTC has alleged a violation of the FTC Act predicated solely upon the failure to maintain reasonable security measures by a third-party service provider.  The settlement is also notable for a Commissioner’s concurring statement criticizing the settlement’s standard twenty-year term.
Continue Reading Latest FTC Data Privacy Settlement May Signal More Direct Approach to Regulating Data Security

On July 25, 2019, New York Governor Andrew Cuomo signed into law the Stop Hacks and Improve Electronic Data Security Act (the “SHIELD Act” or the “Act”), which expands data breach notification obligations under New York law and for the first time imposes affirmative cybersecurity obligations on covered entities.

The Act makes five principal changes

On 9 July, the UK Information Commissioner’s Office (“ICO”) issued a notice of its intention to fine Marriott International, Inc. (“Marriott”) £99,200,396 for alleged infringements of the EU General Data Protection Regulation ( “GDPR”) in connection with a cybersecurity incident notified to the ICO by Marriott in November 2018. The ICO’s public statement followed Marriott’s disclosure of the ICO’s intention to the US Securities and Exchange Commission (“SEC”) and comes just one day after the ICO published its notice of intention to fine British Airways £183.4 million (see our previous blog post here). The proposed fines, if enforced by the ICO, will be the two highest fines levied under the GDPR, to date.
Continue Reading UK Regulator Intends to Fine Marriott £99 Million for Personal Data Breach, Spotlighting M&A Cybersecurity Diligence

The UK Information Commissioner’s Office (“ICO”) has issued a notice of intention to fine British Airways following an extensive investigation into the British Airways cybersecurity incident (notified by British Airways to the ICO in September 2018).  The fine of £183.4 million relates to various alleged infringements of the EU General Data Protection Regulation (“GDPR”).
Continue Reading UK Data Protection Regulator Issues Notice of Intention to Fine British Airways £183.4 Million for Personal Data Breach

Potentially signaling an expansion of the scope of constitutional standing in data breach cases, a district court in the Northern District of California recently held that the exposure of users’ non-sensitive, publicly available personal information may be sufficient to establish an injury-in-fact.[1]
Continue Reading District Court Finds Allegations That Data Breach Exposed Publicly Available and Non-Sensitive Personal Information Sufficient for Article III Standing

In the past year, members of the U.S. Congress and Senate on both sides of the aisle have proposed data privacy bills that would impose nationwide standards on companies who collect and/or share consumers’ personal information. Currently, all 50 states have separate, but often overlapping, data privacy regimes—each subjecting companies to various combinations of recordkeeping standards, data sharing restrictions, and data breach reporting requirements—creating a patchwork of state laws that can generate substantial uncertainty for corporations.
Continue Reading Legislators Propose Differing Approaches to Federalizing Corporate Responsibility for Data Breaches

In 2018, data privacy and cyber breaches made headlines throughout the year.

Major companies continued to suffer data breaches, highlighting the risks and potential costs of cyber incidents across industries.  At the same time, a growing and overlapping thicket of data security and privacy regulations—within the U.S., European Union, Latin America, and elsewhere—continued to increase

On December 13, 2018, the District Court for the Northern District of California dismissed a putative securities class action brought against PayPal Holdings, its subsidiary TIO Networks Corp., and several executives of both companies for a security breach that resulted in the potential compromise of personally identifiable information for 1.6 million customers.  In Sgarlata v. PayPal Holdings Inc., No. 17-cv-06956-EMC, 2018 WL 6592771 (N.D. Cal. Dec. 13, 2018) (“Sgarlata”), the court dismissed the complaint for failure to plead scienter because plaintiffs failed to adequately plead that defendants knew not only of an actual security breach, but also the magnitude of the breach and the type of data accessed.[1]
Continue Reading California District Court Dismisses Securities Class Action After Plaintiffs Failed to Plead that PayPal Knew Magnitude of Security Breach

On October 15, 2018, the U.S. Department of Health and Human Services, Office for Civil Rights (OCR) announced a $16 million settlement with Anthem, Inc. over alleged violations of federal privacy and security regulations under the Health Insurance Portability and Accountability Act (HIPAA).  The settlement resolves an investigation following a data breach that exposed protected health information of nearly 79 million people.  According to OCR, the incident is the largest health data breach to date in the United States and Anthem’s payment similarly represents the largest HIPAA settlement to date.  The settlement is consistent with OCR’s recent focus on enforcing regulatory requirements to conduct an accurate and thorough risk analysis and maintain appropriate mechanisms to monitor systems that contain protected health information and to control access to that information. It also highlights the agency’s distinct cybersecurity remediation approach.
Continue Reading The U.S. Department of Health And Human Services Settles With Anthem for Record $16M Over Alleged HIPAA Violations