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Jul 24
2012

Ifrah Law Partner Michelle Cohen: Don’t Consider Yourself Immune to Data Breaches

Michelle Cohen recently joined Ifrah Law as a partner. Here is an edited transcript of a recent interview with Ms. Cohen.

Question: What are some of your legal experiences and strengths that you’d like to highlight?

Answer: I have many years of experience representing clients engaged in various industry sectors before state attorney generals, the FTC and the FCC, particularly in investigations and enforcement matters. I have a deep knowledge of marketing law and have counseled and defended clients in dozens of matters involving the Telephone Consumer Protection Act, the federal Can Spam Act, and state and federal telemarketing laws and regulations. I also sat for and passed the Certified Information Privacy Professional examination administered by the International Association of Privacy Professionals. This demonstrates my broad capabilities in the field of privacy law.

Some recent matters of note include managing a data loss incident for a client that entailed notifications to several state attorney generals’ offices, assisting the client with remediation and public relations management, and reviewing existing data retention policies, as well as a follow-up investigation at the state level. The client was able to move forward without any enforcement activity.

On the Telephone Consumer Protection Act side, I have supervised teams of attorneys in defending class and individual actions and resolved FCC enforcement matters (including without any penalties).

My training as both a litigator and a regulatory/corporate advisor allows me to offer a wide range of services to clients. I take great pride in knowing that my regulatory advice to clients in how to craft their business practices and establish meaningful policies has resulted in these clients avoiding enforcement actions and litigation.

Question: There has been a lot of publicity these days about data breaches that have caused serious harm to a number of retailers, credit card companies, banks, and others. Do you think there has been a real uptick in the number of such breaches, and if so, why has it occurred?

Answer: I think the increased publicity stems more from the growing awareness on the part of companies and the press that there are various types of data breaches and data losses that are covered by federal and state laws and that need to be reported and remediated. Some years back, if a laptop containing sensitive information was stolen from an employee’s car, the company might disable the account and report the theft, but the event did not necessarily trigger potentially thousands of notices to those affected, state attorney generals and consumer protection offices, publicity (via news reports and blogs that cover daily breaches) and possible lawsuits and enforcement activity. Today, that one event can result in all of those actions occurring.

Question: What is your advice to companies that may someday face a data breach?

Answer: A couple of months ago, I wrote an article regarding data breaches. The central point was that no organization should consider itself immune. Rather, a data breach (in the form of a bad actor) or a data loss (for instance, by negligent but unintentional employee action) WILL occur, no matter how many precautions a company takes. The key is to have policies in place regarding data security, to train employees in an effort to prevent negligent actions, and to be prepared for actions that will need to be taken when an event occurs. Organizations should have a team in place (human resources, legal, public relations, etc.) for dealing with these types of problems. Data loss events require swift, but considered action. In particular, some of the state breach laws have deadlines, and companies have found themselves under investigation (or involved in litigation) when their responses to a breach have been too slow or failed to meet the requirements of the law. These legal ramifications, combined with the negative publicity that WILL follow, can often be much worse than the actual data loss event.

Question: Are some companies failing to put the best safety provisions in place?

Answer: Most large companies have incorporated data safety policies; however, many medium size and smaller businesses have not done so. In addition, I think that many companies, both large and small, do not realize the scope and applicability of many of the laws. For example, consider a large company based in Texas, with most of its employees in that state. Its managers may not realize that if the company has three employees in Massachusetts, they are covered by Massachusetts’ data protection law. This statute has very specific requirements, including a requirement for a Massachusetts-specific information security plan. Let’s say the Texas company has a data loss and has to notify the Massachusetts employees and the Massachusetts Attorney General’s office along with all of its other employees. The company may get a follow-up inquiry from the Massachusetts AG asking for a copy of that company’s Massachusetts-compliant written information security policy. If the company does not have one, because it never realized it fell within that state’s law, it may find itself in some hot water there.

Accordingly, all organizations need to be proactive in their data security planning and must provide continuing updates to their policies, training, and understanding of what federal, state, and international laws may apply to their operations.

posted in:
Privacy
Apr 14
2014

“Heartbleed” Bug – Antibiotics Won’t Help, Changing Passwords Might

By Michelle Cohen, CIPP-US

After recovering from high-profile data breaches at Target and Neiman Marcus, signing up for free credit monitoring and analyzing our credit reports, a new Internet villain recently emerged:  the “Heartbleed Bug.”  The Heartbleed Bug is a security flaw present on Open SSL, popular software run on most webservers.  This open source software is widely used to encrypt web communications.  The Heartbleed Bug affects approximately 500,000 websites, including reportedly Yahoo, OK Cupid, and Tumblr.  And, in addition to websites, the Bug may impact networking devices such as video conferencing services, smartphones, and work phones.

The danger of the Heartbleed Bug lies in its ability to reveal the content of a server’s memory. Then, the Bug can grab sensitive data stored in the memory, including passwords, user names, and credit card numbers.  Adding insult to injury, the Bug has existed for at least two years, giving hackers a huge head start.  News reports and some websites have urged users to change their passwords.  Others have warned individuals not to change their passwords until a website has indicated it has installed the security patch that “cures” the Bug.  Several sites offer tools to “test” whether an indicated website is vulnerable to the Heartbleed Bug, including one by McAfee. In terms of priorities, users should focus on sites where they bank, conduct e-commerce, e-mail and use file storage accounts.

Further intrigue comes from the fact that a recent Bloomberg report alleged that the National Security Agency (“NSA”) knew about the Bug for at least two years, but may have utilized the vulnerabilities to access information.  The NSA has denied it had knowledge of the Bug.

While we have yet to see a “rush to the courthouse” following the announcement of the Heartbleed Bug, we anticipate lawsuits and enforcement could follow where organizations do not act in response to the Bug by installing the necessary security patch.  Companies (including our clients in the Internet marketing and I-gaming industries) should investigate whether their websites, apps, or other services (such as cloud services) use Open SSL – then take immediate efforts to oversee the installation of the security patch.  Organizations should also advise users of the status of the Heartbleed Bug fix and encourage users to change their passwords, with different passwords across different services.

posted in:
Cybersecurity
Feb 25
2014

Attorney General Holder Calls on Congress to Establish Strong National Data Breach Notification Standard

By Michelle Cohen, CIPP-US

Yesterday, in his weekly video address, Attorney General Eric Holder urged Congress to create a national data breach notification standard requiring companies to quickly notify consumers of a breach of their personal or financial information.  In the wake of the high profile holiday season data breaches at retailers Target and Neiman Marcus, Holder stated that the Department of Justice and the U.S. Secret Service continue to work to investigate hacking and cybercrimes. However, Holder believes that Congress should act to establish a federal notification requirement to protect consumers.  Holder’s video address is available here .

Currently, at least forty-six states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands have laws requiring private or government entities to notify individuals of security breaches of information involving personally identifiable information.  As might be expected, the laws vary widely from state to state, particularly in the timing requirement for the breach notifications.  Most laws allow delay to accommodate a law enforcement investigation.

Some states require notification as soon as reasonably practicable.  Others require notification within 45 days.  Yet organizations have faced lawsuits for failing to notify on a timely basis, even where there is no set standard.  This presents a difficult situation for companies.  Organizations need to investigate a data breach and determine the type of information affected, who was affected (and thus needs to be notified), and importantly, whether the breach is ongoing such that the company must immediately implement remedial measures.

Attorney General Holder believes Congress should set a national standard that will better protect consumers. Holder asserts that a federal requirement should enable law enforcement to investigate the data breaches quickly and to hold organizations accountable when they fail to protect personal and financial information. Holder’s video message did include a reference that this requirement should create “reasonable exemptions” for companies to avoid creating unnecessary burdens.

The Target and Neiman Marcus data breaches have certainly raised the profile of cybersecurity issues on Capitol Hill, with several bills having been introduced in recent weeks addressing data breaches.  While the states certainly took the lead in protecting consumers by enacting data breach laws over the past several years, a properly-crafted national standard could provide more consistent guidance for industry and a uniform rule for consumers irrespective of their home states.  Should Congress move forward on a data breach law, reasonable accommodations need to be made for companies to have time to investigate data breaches, to determine scope, persons affected, and the type of information affected.  A national standard setting forth a notification deadline would also presumably alleviate the “rush to the courthouse” from the plaintiff’s bar with data breach notification timing allegations.  

tags:
Jan 28
2014

Data Privacy Day

By Michelle Cohen, CIPP-US

On January 28th, in an effort raise awareness of privacy and data privacy, the United States, Canada and 27 countries of the European Union celebrate International Data Privacy Day.  Many organizations use Data Privacy Day as an opportunity to educate their employees and stakeholders about privacy-related topics.  With the recent, high-profile data breaches as Target, Neiman Marcus, and potentially, Michaels, the need for training and instruction on data security is more critical than ever before.  In this vein, we’ve set forth our views on what we see as the year ahead in legal developments relating to data security and what companies can do to prepare.

Legislation Introduced but on the Move?

Data security and data breaches will continue to be the focus of regulators and Congress through 2014.  In fact, Congress summoned Target’s Chief Financial Officer to appear before the Senate Judiciary Committee on February 4th and a House committee is seeking extensive documents from Target about its security program.  Meanwhile, Senator Leahy re-introduced data breach legislation which would set a federal standard for data breach notifications (most states now require notifications, though the requirements differ state-to-state).

Senators Carper and Blunt introduced a separate bipartisan bill intended to establish national data security standards, set a federal breach notification requirement, and also require notification to federal agencies, police, and consumer reporting agencies when breaches affect more than 5,000 persons.  Many companies have suffered data breaches and then faced civil lawsuits under various causes of actions, including allegations that they did not notify customers promptly.  As a result, there may be strong support for federal standards rather than facing a patchwork of state laws. While the Target breach has certainly renewed interest in data security, and we expect Congress will conduct numerous hearings, ultimate passage of data breach legislation this Congress is still probably a longshot.

Watching Wyndham Take on FTC

As covered in this blog, various Wyndham entities have struck back at the FTC, challenging the FTC’s authority to bring an action against Wyndham for alleged data security failures. The Wyndham entities claim that the FTC may not set data security standards absent specific authority from Congress.  Yet, with Congress having not set data security standards thus far, the court in oral arguments seemed concerned about leaving a void in the data security area.  Wyndham’s motion to dismiss remains pending in federal court in New Jersey.  Most observers think the court will be hard pressed to limit the FTC’s authority under Section 5 of the FTC Act, which broadly prohibits ”unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce”  and provides the FTC with administrative and civil litigation enforcement authority.  The agency has used this administrative authority with great success, bringing numerous data privacy actions that usually result in settlements by companies rather than risk further litigation expenses, penalties, and reputational damage.  We think the FTC will remain vigilant in this space, including attention on the security of mobile apps.

Class Actions Jump on Breaches

Whether breaches affect Sony Playstation, Adobe,  Target, or some other company, the class action firms have been busy filing lawsuits based upon data breaches.  For example, by year end, at least 40 suits had already been filed against Target, with seven filed the day Target disclosed the breach.  The plaintiffs use various theories – including violations of consumer protection statutes, negligence, fraud, breach of contract, breach of fiduciary duty, invasion of privacy and conversion.  But, if a consumer’s information was potentially breached, yet nothing happened to the consumer as a result, does that consumer have cognizable damages?  That has been a huge sticking point for these lawsuits.  Yet, the class action lawyers will continue to file these suits and some companies will settle to avoid further reputational damages and litigation expenses.

Don’t Count out the States

States have taken the lead in setting data breach notification standards, and in some cases data security requirements.  For instance, in March 2010, Massachusetts enacted strict data security regulations.  Organizations that own or license personal information of Massachusetts residents are required to develop and implement a written comprehensive information security program (“CISP”) to protect that information.  Almost all of the states have standards setting forth what types of information are covered by data breaches, who gets notified, what content goes in the notifications and, the timing of the notifications.  Multiple states are investigating the Target breach; certainly less well known breaches get state regulators’ attention as well.  We predict the states will continue to be active regulators and enforcers of data security and data breaches, and will likely continue to “rule the roost” while federal legislation lags behind.

Preparation and Training Still Key

We’ve said before that, unfortunately, no company is immune from data breaches.  Companies cannot assume that they have the best anti-malware or security features and that these other newsworthy breaches resulted from lapses that would not apply to them.  Whether it is a sophisticated hacker or, more commonly, a well-meaning but negligent employee, data loss and data breaches will occur.  All organizations should have procedures in place NOW to prevent data loss and to prepare for a breach.  This includes IT, human resources, legal, and communications resources.  Companies should designate a “data security/data breach” team with representatives from these key departments (working with outside counsel and other privacy breach specialists when needed).  The team should meet periodically to review procedures, recommend improvements, and engage in periodic training on data security.

We can’t stress here enough about employee training.  An employee who, for instance, wants to finish a project at home after stopping by the gym might download information that contains sensitive personal information onto a flash drive.  Let’s say the gym bag gets stolen, along with the flash drive.  Well, the employee’s unlucky company may now have a huge data breach situation on its hands requiring notices to customers, state attorneys general, and potential litigation and other expenses (such as paying for creditor monitoring, now industry standard).  Employees need training about securing sensitive information – from shredding documents instead of putting them in the dumpster, to encrypting information that is being taken offsite, to avoiding “phishing” scams, to having unique passwords they change periodically.  According to recent reports, “password” and “123456” are still among the most popular passwords.  While data breaches cannot be avoided completely, we can ameliorate some risks with better practices in our organizations.

Jan 28
2013

A Cautionary Tale for Data Privacy Day

Angered by the recent tragic suicide of Internet activist Aaron Swartz, a group of hackers claiming to be from the group Anonymous, made threats over the weekend to release sensitive information about the United States Department of Justice. The group claimed to have a file on multiple servers that is ready to be released immediately.

Swartz’s suicide has served to mobilize the group Anonymous, a loosely defined collective of Internet “hacktivists” that oppose attempts to limit Internet freedoms. Anonymous is a staunch advocate of open access to information, as was Swartz. Anonymous said that Swartz “was killed” because he “faced an impossible choice.”

Swartz was facing federal computer fraud charges that carried a maximum sentence of 35 years in prison, although in reality he probably would not have been given a sentence anywhere near approaching the statutory maximum. Prosecutors told Swartz’s legal team they would recommend to the judge a sentence of six months in a low-security setting.

The charges arose from allegations that he made freely available an enormous archive of research articles and similar documents offered by JSTOR, an online academic database, through the computers at the Massachusetts Institute of Technology.

Swartz was a leading activist involved in the movement to make information more freely available on the Internet and is credited with helping to lead the protests that ultimately defeated the Stop Online Piracy Act (SOPA), a statute that would have significantly broadened law enforcement powers in policing Internet content that may violate U.S. copyright laws.

Earlier this month, Rep. Zoe Lofgren (D-Calif.) indicated that she is drafting a bill that she terms “Aaron’s Law,” which would limit the scope of the Computer Fraud and Abuse Act, a 1986 law that prosecutors used to help bring these charges against Swartz.

The hackers reportedly hijacked the website of the United States Sentencing Commission, the federal agency responsible for the federal sentencing guidelines for criminal offenses. They said that the Sentencing Commission’s website was chosen because of its influence in creating sentences that they deemed unfair. The hackers posted a message that demanded reform of the criminal justice system or threatening that sensitive information would be leaked. Anonymous also posted an editable version of the website, which invited users to edit it as they pleased.

Today is Data Privacy Day. These recent incidents serve to show that no organization – not even the U.S. Department of Justice – is immune from security breaches. Data breaches and data losses will occur and it is crucial for an organization to be prepared and have policies in place to allow a quick response when something does happen.

The legal ramifications and bad publicity that follow such an incident can be very damaging to an organization. However, by making sure that you are prepared, you can minimize your damages. Preparedness involves consultation across a range of specialties, including information technology, legal advice, and public relations. The impact that a data breach or loss can have on the bottom line of any organization is enormous and preparation is the best method to combat it.

A data breach or data loss can also have far-reaching legal consequences under international, federal and various state laws. For example, companies may not realize that if they have even a few employees or customers in a state, it may trigger a number of different requirements under state privacy laws. In order to avoid problems with federal agencies or state attorney general offices, it is best for companies to have a plan in place in advance and make sure they are already compliant with all relevant laws.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, healthcare, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen, David Deitch, and associates Rachel Hirsch, Jeff Hamlin, Steven Eichorn, Sarah Coffey, Nicole Kardell, Casselle Smith, and Griffin Finan. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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