On or around July 17, 2015, UCLA Health suffered a cyberattack that affected approximately 4.5 million individuals’ personal and health information.  A week later, the Regents of the University of California were hit with a series of class action suits related to the breach.  After four years of litigation, the matter is coming to a close.  On June 18, 2019, the court will finally determine whether the settlement reached by the parties is fair, reasonable, and adequate.  At present, the total cost of the settlement may exceed $11 million.  This settlement is just one example of how a privacy incident can embroil an organization in costly litigation for years after the initial incident and underlines the benefits of implementing secure systems and procedures before an incident occurs.

The proposed settlement will require UCLA to provide two years of credit monitoring, identity theft protection, and insurance coverage for affected persons.  UCLA will also set aside $2 million to settle claims for any unreimbursed losses associated with identity theft.  UCLA will spend an additional $5.5 million plus any remaining balance on the $2 million claims budget towards cybersecurity enhancements for the UCLA Health Network.  In total, there would be $7.5 million dollars set aside to reimburse claims and enhance security procedures.  However, UCLA must also cover the up-to $3.4 million in fees and costs of the class action plaintiffs’ attorneys.
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Back in 2008, Illinois became the first state to pass legislation specifically protecting individuals’ biometric data. Following years of legal challenges, some of the major questions about the law are about to be resolved (hopefully). Two major legal challenges, one now at the Illinois Supreme Court and another with the Court of Appeals for the Ninth Circuit, seek to clarify the foundational issues that have been a battleground for privacy litigation — standing and injury. To understand the stakes, Illinois’ Biometric Information Privacy Act requires companies who obtain a person’s biometric information to: (1) obtain a written release prior to their information being stored and collected; (2) provide notice that their information is being stored and collected; (3) state how long the information will be stored and used; and (4) disclose the specific purpose for its storage and use. The law further provides individuals with a private right of action. However, in order to trigger that private right, an individual must be “aggrieved.”
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When a data breach occurs at a company, not only is customer data vulnerable but so is employee information. But what obligations do employers owe their employees?

This issue was recently decided in part, at least with respect to Pennsylvania employers, in Dittman v. UPMC, 43 WAP 2017, 2018 WL 6072199, at *14 (Pa. Nov. 21, 2018).  In Dittman, a group of employees sued their employer, the University of Pittsburg Medical Center, for failure to take reasonable care to protect their personal private information.  On appeal, the Supreme Court of Pennsylvania overturned the decision of the lower court and held that an employer owes a common law duty of care to its employees to use reasonable care to safeguard their sensitive data as stored on the employer’s internet-accessible computer system. Notably, the employees’ position was not that the employer engaged in any misfeasance, but nonfeasance for failure to prevent the harm from occurring. The Supreme Court found that the mere fact that third parties committed the wrongdoing – the data breach – did not negate the duty of the employer to safeguard the employees’ sensitive information that they were required to provide the employer as a condition of employment.

The Dittman case is certainly not the first time a group of employees sued an employer based upon a data breach of the employer’s computer system that resulted in the disclosure of the employees’ personally identifiable information. In Sackin v. TransPerfect Global, Inc., 278 F. Supp. 739 (S.D.N.Y. 2017), the employer moved to dismiss a class action filed by the employees, which motion was denied, in part. Among other things, the district court found that the complaint sufficiently stated a cause of action for breach of common law duty of care and that the employer violated its duty to take reasonable steps to protect the employees’ data. The court also found that a viable cause of action existed for breach of the implied contract between the employer and employees, but not for breach of the terms of the employment contract. With respect to the former, the conduct and course of dealing between the parties was deemed to rise to the level of an implied contract because, as a prerequisite of employment, the employees were required to provide the employer with certain sensitive data, and given how commonplace data and identity theft are in the current day and age, the court found an implied assent by the recipient to protect that data.
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As the number of data breaches increases, so do the number of data breach-related lawsuits, whether styled as class actions or individual lawsuits. To the extent these lawsuits are commenced in the federal courts, it gives rise to the question of what satisfies Article III standing. Merely because a data breach may have occurred and personally identifiable information may have been exposed, or is at risk of being exposed, does not necessarily confer standing of the party whose information has been compromised in the absence of actual harm. As with most litigations, the answer also depends, at least in part, in what jurisdiction the lawsuit is commenced.

In Gilot v. Equivity, 18-CV-3492 (WFK), 2018 WL 3653150, at *1 (E.D.N.Y. July 31, 2018), the district court reinforced the Second Circuit’s position on what is required for a plaintiff to have Article III standing. In Gilot, an action commenced by an individual was dismissed for lack of standing where it was only alleged that the unauthorized release of her personally identifiable information to a third party without her consent could lead to potential identity theft. The words “could” and “potential” are important because in the Second Circuit, as in the First, Third and Eighth Circuits, having been put at risk, without actual harm, is insufficient to confer Article III standing upon a plaintiff.

The Eleventh Circuit generally follows the First, Second, Third, and Eighth Circuits; however, the threshold for damages to confer standing is lower. In Muransky v. Godiva Chocolatier, Inc., 905 F.3d 1200 (11th Cir. 2018), the plaintiff alleged that the merchant violated the Fair and Accurate Credit Transactions Act (FACTA) by printing an untruncated receipt with more than five digits of the customer’s credit card number. This statutory violation was sufficient to withstand a motion to dismiss for lack of standing since it constituted damages in the form of the plaintiff needing to bear the cost of safely keeping or disposing of the receipt to avoid someone obtaining the credit card number.
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On October 18, 2018, the Food and Drug Administration (“FDA”) released draft guidance outlining its plans for the management of cybersecurity risks in medical devices. Commenters now have until March 17, 2019, to submit comments to the FDA and get their concerns on the record. More information about submitting comments can be found at the end of this post.

This FDA guidance revision will replace existing guidance released in 2014, which as you can see, includes recommendations, but does not attempt to classify devices. The recent draft guidance takes a more aggressive posture and separates devices into those with a Tier 1 “Higher Cybersecurity Risk” and those with a Tier 2 “Standard Cybersecurity Risk.”

Tier 1 devices are those that meet the following criteria:

1) The device is capable of connecting (e.g., wired, wirelessly) to another medical or non-medical product, or to a network, or to the Internet; and

2) A cybersecurity incident affecting the device could directly result in harm to multiple patients.

Tier 2 devices are any medical device that does not meet the criteria in Tier 1.

The FDA has varying guidance for devices depending on the Tier of the device. The FDA provides guidance for Tier 1 and Tier 2 devices on applying the NIST Cybersecurity Framework, providing appropriate cybersecurity documentation, and adhering to labeling recommendations.


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Cathay Pacific recently disclosed that a data breach occurred exposing information for as many as 9.4 million people – the largest airline data breach ever. The extent of the information obtained varied from credit card information (although it is reported that only partial credit information was obtained or that the cards were expired), to telephone

Shipman & Goodwin attorney Daniel Schwartz will co-present on data privacy issues and the necessary steps employers must take to protect employee data, as part of the firm’s 2018 Labor and Employment Fall Seminar.

During the session, “If You Collect It, You Must Protect It: Dealing with Employee Data Privacy Issues,” Dan will discuss

Effective January 1, 2020, California will require manufacturers of “connected devices” to equip those devices with reasonable security features. An example of a reasonable security feature (provided in the bill) would be to assign each device a unique password or to prompt the user to generate a password on setup.

This new law follows a

Just last month, the National Institute of Standards and Technology (“NIST”), in concert with the National Cybersecurity Center of Excellence (“NCCoE”), jointly published a behemoth guide to securing Electronic Health Records (“EHR”) on mobile devices.

The guide is a reaction to the growing number of issues with EHR in the mobile application context, as healthcare

As the lazy days of summer wind down slowly at first, and then all at once, now is a good time for a reminder that your own employees returning to work full steam may pose the biggest threat to your cybersecurity. According to the U.S. Department of Health and Human Services Office for Civil Rights,