On December 27, 2017, the New York Secretary of State sent a demand letter to Equifax Inc.’s interim CEO requesting additional information to aid the Division of Consumer Protection’s efforts “to investigate, mediate and/or mitigate identity theft complaints from consumers generally” as well as its investigation into the data breach disclosed by Equifax, Inc. on July 29, 2017, in which the personal data of approximately 143 million individuals (including 8.4 million New York residents) was compromised.  The letter demands that Equifax, Inc. provide a direct contact to respond to consumer concerns and requests information in 10 categories, including (a) a summary of the credit reporting agency’s plan (if any) to make affected New York residents “whole” following the breach, (b) a copy of the forensic review prepared by the cybersecurity firm Mandiant, (c) New York-specific data for those consumers whose credit card details or dispute documents containing personally identifiable information were exposed in the breach and (d) the number of children 15 years old and younger affected by the breach, nationwide as well as within New York, and the “long-term protection response” (if any) created for such affected children.  The demand was made pursuant to emergency regulations adopted by the Department of State in December 2017 that require credit reporting agencies to respond to requests made by the Division of Consumer Protection within 10 business days.  A company spokesperson for Equifax, Inc. confirmed on January 4, 2018 that the credit reporting agency intends to respond to the demand letter within the required time period.  This demand is the latest development in a plethora of investigations by various law enforcement agencies and regulators into the breach and follows requests for information from all 50 state attorneys general as well as a subpoena from the New York Department of Financial Services (“DFS”). Continue Reading New York Regulator Demands Additional Information from Equifax

A recent decision by an intermediate Illinois appellate court, Rosenbach v. Six Flags Entm’t Corp.,[1] suggests that state courts—which are not bound by federal Article III standing limitations in entertaining suits—will not necessarily provide a more plaintiff-friendly forum for data privacy suits than their federal counterparts.

Earlier this month, we wrote about the Second Circuit’s summary order in Vigil v. Take-Two Interactive Software, Inc.[2]  There, the court affirmed the dismissal of a class action lawsuit brought in the Southern District of New York under the Illinois Biometric Information Privacy Act[3] (“BIPA”) for want of Article III standing because the plaintiffs had failed to allege an injury-in-fact, but remanded the case with instructions to amend the judgment and enter a dismissal without prejudice.[4]  The district court had ruled that the BIPA’s limitation of the private right of action to a “person aggrieved by a violation” meant that the plaintiffs’ failure to allege an injury-in-fact was also fatal to their claims as a matter of state law, meaning that the case should be dismissed with prejudice for failure to state a claim.[5]  The Second Circuit vacated that portion of the ruling on jurisdictional grounds, which left the door open for the plaintiffs to attempt to bring their claims in state court without any allegation of actual harm. Continue Reading Illinois Appellate Court Holds That Mere Technical Violations Of Data Privacy Statute Are Insufficient To State A Claim

In the wake of the high-profile breaches at Equifax and Uber, several constituencies have been making a sustained push for a federal data protection and breach statute.  Last week, a broad coalition of bank, insurance and retail associations urged Congress to pass national legislation establishing uniform data protection and breach notification standards.  In their letter, the organizations stressed that businesses and consumers would benefit from uniform requirements, in contrast to the current regime involving overlapping and sometimes differing State requirements.  Among other things, the letter urged Congress to adopt legislation that imposed flexible and scalable standards for data protection depending on the size and nature of the company and exclusive enforcement of the new national standards by the FTC and state Attorneys General (other than entities subject to state insurance regulation or who comply with the Gramm-Leach-Bliley Act and HIPAA). Continue Reading 2018 Brings Continued Calls for a Federal Data Protection and Breach Statute

In late November, the Second Circuit issued a summary order in Vigil v. Take-Two Interactive Software, Inc,[1] which affirmed the dismissal of a class action lawsuit brought in the Southern District of New York under the Illinois Biometric Information Privacy Act (“BIPA”) for lack of standing.[2]  In doing so, the court followed established Second Circuit precedent and highlighted the continuing difficulties plaintiffs face in establishing standing for certain technical violations of data privacy statutes, when those violations are unaccompanied by allegations of a breach or likelihood of improper access.  The case also serves as a reminder that as states pass statutes covering new types of technology and data, companies will need to remain vigilant in protecting a wider range of information than before. Continue Reading Second Circuit Issues Order Affirming Dismissal of Data Privacy Class Action Suit

A recent enforcement action by the Massachusetts’s Attorney General Office (“Mass. AG”) serves as a stark reminder of how important it is to have robust data security policies and practices in all respects, including with respect to company equipment and locally stored data. Continue Reading Massachusetts Attorney General Settles For Data Breach Over Stolen Laptop—Sign of Increased Enforcement Scrutiny?

On November 28, 2017, Cleary Gottlieb, in partnership with K2 Intelligence and BlueVoyant, hosted an afternoon conference in New York on “Cybersecurity Lessons from the Boardroom and C-Suite to the Front Lines,” featuring data security experts, law enforcement, regulators, board members, and in-house counsel of global companies.

Click here for the key takeaways from the two plenary discussions and three break-out sessions.

On Monday, December 11, 2017, SEC Chairman Jay Clayton waded into the ongoing debate surrounding cryptocurrencies, initial coin offerings, and the regulation of both.  In a statement urging potential investors to exercise caution and market professionals to focus on their responsibility to help protect investors, the Chairman warned of the susceptibility of the burgeoning crypto markets to manipulation and fraud. Continue Reading SEC Chairman Offers Views on Initial Coin Offerings

Since the adoption of the General Data Protection Regulation (GDPR) in 2016, considerable attention has focused on the vastly increased scope of potential administrative fines, and even more attention is being paid to the issue with the GDPR becoming effective on May 25, 2018.  In this post, we summarize the key fining provisions, and analyze the recent relevant guidance on this issue from the Article 29 Working Party (an advisory group consisting of representatives from national data protection authorities together with the European Commission). Continue Reading Administrative Fines Under the GDPR

Following the generally positive assessment of the EU-U.S. Privacy Shield framework (the “Privacy Shield”) by the European Commission further to its first annual review, the Article 29 Working Party (an advisory group consisting of representatives from national data protection authorities together with the European Commission), released its own opinion (the “WP29 Opinion”), which was more critical and called for immediate actions to be taken on the part of the United States.

While the Article 29 Working Party praised some improvements made by U.S. authorities in terms of transparency and surveillance, the WP29 Opinion noted significant outstanding issues which ought to be remedied before the second annual review of the Privacy Shield or even earlier.  In particular, the Article 29 Working Party expressed concerns relating to the supervision of U.S. surveillance programs, the processing by U.S. authorities of personal data transferred under the Privacy Shield for national security purposes and the implementation of redress mechanisms available to individuals located in the EU against U.S. companies that are not using personal data in accordance with their commitments under the Privacy Shield.  The Article 29 Working Party has set out as priorities the appointment of an independent Ombudsperson entrusted with the appropriate powers, the clarification of internal procedural rules relating to the interaction between the Ombudsperson and other intelligence or oversight bodies (including declassification rules) and the appointment by the U.S. administration of the members of the Privacy and Civil Liberties Oversight Board contemplated by the Privacy Shield.  According to the Article 29 Working Party, those priority issues should be resolved by May 25, 2018, which is the deadline for compliance with the EU’s General Data Protection Regulation (GDPR) (please refer to our prior Alert Memo in that regard).

Other issues identified by the Article 29 Working Party related to the lack of information given to individuals in the EU regarding the exercise of their rights under the Privacy Shield and the need to increasingly monitor compliance of companies certified under the Privacy Shield.  The WP29 Opinion also provided specific recommendations with regard to the processing of employee data, rules regarding automated decision-making and the profiling of individuals, and the self-certification process by U.S. companies wishing to take advantage of the Privacy Shield.

The Article 29 Working Party advised that in the event of a failure to take the actions it prescribed in the WP29 Opinion within the next year, it reserved the right to challenge the validity of the European Commission’s adequacy decision underlying the Privacy Shield in national courts, which could result in its annulment. In that regard, some of the arguments the Article 29 Working Party could raise (such as the broad access to personal data by U.S. authorities for national security purposes) appear to be similar to those that resulted in the invalidation of the Safe Harbor scheme (the Privacy Shield’s predecessor) by the Court of Justice of the European Union in its Schrems v. Data Protection Commissioner judgment.

The Privacy Shield is also subject to pending challenges, one of which was dismissed on November 22, 2017, albeit not on substantive grounds but as a result of the applicant’s lack standing to act.  These challenges to the Privacy Shield echo other actions seeking to invalidate alternative legal grounds to transfer personal data from the EU to the United States, such as the one initiated by Mr. Schrems and the Irish Data Commissioner to question the legitimacy of so-called Standard Contractual Clauses (“SCCs,” also commonly referred to as Model Contracts), which is now pending before the Court of Justice of the European Union for a preliminary ruling.

The invalidation of both the Privacy Shield and the SCCs as approved methods for transferring personal data would cause serious disruptions in the flow of data and, as a result, business relations, between EU and U.S. companies.

On December 5, 2017, the National Institute of Standards and Technology (“NIST”) published a proposed update to its Framework for Improving Critical Infrastructure Cybersecurity (the “Framework”).  NIST is a non-regulatory federal agency within the Department of Commerce, with a mission to promote innovation and industrial competitiveness in the United States by advancing measurement science, standards and technology in beneficial ways.  The Framework was initially developed as a result of the issuance of Executive Order 13636 in 2013 (“Executive Order”), which specifically addressed the cybersecurity of critical infrastructure (defined below) and directed NIST to work with stakeholders to develop a voluntary framework for reducing cyber risks to such critical infrastructure.  Therefore, the Framework provides nonbinding guidance, and compliance is not mandatory.  In practice, the Framework is used as the basis for best practices by many companies in the United States that have cybersecurity policies and procedures.  The Framework has generally been praised as a successful example of cooperation between the public and private sector and is cited by many as a more effective approach than prescriptive regulatory requirements. Continue Reading NIST Proposes Fine-Tuning of its Framework for Improving Critical Infrastructure Cybersecurity