On January 13, 2020, U.S. District Court Judge Castel of the Southern District of New York in SEC v. Telegram Group Inc. et al., No. 19 Civ. 9439 (PKC) granted the motion of the U.S. Securities and Exchange Commission (“SEC”) to compel Telegram Group Inc., a technology company best known for its secure messaging app, to produce overseas bank records (Dkt. 67). The SEC had sought these records “fully unredacted” on an expedited basis in support of its claim that Telegram engaged in an unregistered securities offering (Dkt. 52). Telegram objected to any production, asserting that the records were of questionable relevance, that they contained banking and personal information protected by a host of foreign laws, and that it would be unduly burdensome to “to cull through these records and redact the personal information of non-U.S. persons and entities subject to foreign data privacy law protections.” (Dkt. 55). In a short decision, the Court ordered Telegram to produce the records on a tight timeline, holding that “[o]nly redactions necessitated by foreign privacy laws shall be permitted, and a log stating the basis for any redaction shall be produced at the same time the redacted documents are produced.”

There are a few key takeaways from this decision. First, the Court recognized foreign data privacy laws as legitimate grounds for withholding otherwise discoverable information. Defendant was not given a blank check to redact; rather, the Court required Telegram to log the basis for any privacy assertions, and one can expect the SEC will closely question Telegram on the redactions. At the same time, the Court clearly did not agree with the SEC’s characterization of data privacy laws as “blocking statutes” to be ignored, and was not swayed by its complaints that Telegram had not shown that such laws require deference. This is consistent with an observed general heightened sensitivity to data privacy and data security interests in the U.S. and abroad.

Judge Castel’s approach represents a change from U.S. courts’ prior dismissive treatment of similar disclosure objections. Courts traditionally would apply a multi-factor comity analysis that generally prioritized U.S. discovery interests over those of conflicting foreign laws and ultimately required unredacted production. See, e.g., Laydon v. Mizuho Bank, Ltd., 183 F. Supp.3d 409 (S.D.N.Y. 2016) (requiring unredacted production of data protected by the then EU privacy regulation, the 1995 EU Directive 95/46/EC, based on comity analysis set out in Société Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522, 544 n.29 (1987) (hereinafter “Aerospatiale”)). Certainly, the SEC pushed for the customary approach, but Judge Castel appears implicitly to have to have resolved in short form (or skipped over) the Aerospatiale comity analysis and accepted the legitimacy of foreign restrictions on disclosure in U.S. proceedings.


Continue Reading Burden of Compliance With Foreign Data Privacy Laws Does Not Justify Withholding of Banking Records

Consent is only one of the six legal grounds for processing personal data under the GDPR, but it is certainly the most well-known. While it might look safe and solid at first sight, it is becoming the weakest link of the GDPR compliance chain.

First, consent can be withdrawn at any time, and the process

On October 1, 2019, the Court of Justice of the European Union (CJEU) issued a final ruling in the Planet49 case (case C-673/17 – available here).

Following a request for preliminary ruling from the German Federal Court of Justice, the Bundesgerichtshof, the CJEU interpreted the consent requirement of Directive 2002/58/EC, as amended by Directive 2009/136/EC (hereafter the “e-Privacy Directive”) in light of former Directive 95/46/EU (hereafter the “Data Protection Directive”) as well as in light of its successor – the General Data Protection Regulation (GDPR).

The Court made it clear that the placing and reading of tracking cookies on a user’s terminal equipment requires an active and unambiguous consent of the user. A pre-ticked checkbox does not meet these requirements and therefore does not constitute a valid consent. Also, the Court underlined that consent must be specific. In the case at hand, the act of selecting a button to participate in a promotional online lottery cannot be construed as consent of the user to the storage of cookies.

Moreover, the Court clarified that these requirements regarding the consent of the user for usage of cookies are applicable regardless of whether the information stored or consulted on the user’s device constitutes “personal data.”

Finally, the Court held that cookie consent must be “informed” as per the GDPR, which means that service providers must also provide information on the duration of the operation of cookies, as well as in relation to any third party access to those cookies.

The facts


Continue Reading Court of Justice of the European Union Finds that Pre-Ticked Checkboxes Are Not Valid Consents under GDPR

Executive summary

On September 17, 2019, the Belgian Data Protection Authority (DPA) issued a fine of EUR 10,000 for a breach of the General Data Protection Regulation’s (GDPR). The case related to a merchant who required the use of an electronic identity card as the sole means for the issuance of loyalty cards.

The DPA found that this practice did not comply with GDPR’s standards on (a) data minimization, as the electronic identity card contains much more information about the holder than is necessary for the purposes of creating a loyalty card; and (b) consent, because customers were not offered a real choice on whether they should provide access to the data on their electronic identity card in exchange for a loyalty card. As a result, the customers’ consent was not considered as freely given and therefore invalid.

The DPA also found that the merchant had not done enough to inform customer about its data processing activities, and thereby violated its information duties under the GDPR.

The facts


Continue Reading Belgian Data Protection Authority Finds Merchant Violated GDPR by Requiring Customers to Provide Electronic ID to Receive Loyalty Card

On 29 July 2019, the Court of Justice of the European Union (CJEU) issued a decision in the Fashion ID case, a case referred to it by a German court. In this blog post we will focus on what this case means with regard to joint controllership when you have social media plug-ins on your

The European Union’s (“EU”) General Data Protection Regulation (“GDPR”) turned one year old on May 25th. European data protection regulators celebrated by continuing to work through a rising number of complaints and infractions, and by stepping up their monitoring for violations. US companies are directly in the crosshairs. Whether based in the EU or not, a company is potentially subject to the GDPR (and its stiff fines up to 4% of annual global revenue) if it offers goods or services to data subjects located in the EU, or monitors individuals’ online behavior or personal information in the EU. This means that a US company engaged in the common business practice of collecting data from its EU customers must assess and implement business practices to ensure GDPR compliance.

The US and EU engaged in approximately $1.3 trillion dollars in trade last year. With that level of economic activity, and accompanying data flows, many US companies should already have in place the basic structures for GDPR compliance. However, recent surveys suggest that a significant number of companies impacted by the GDPR are still grappling with compliance. In a recent Forrester Research study, “Security Through Simplicity,” over half of the responding IT decision-makers revealed that their companies had not yet carried out even basic GDPR compliance steps such as vetting third-party vendors, hiring data protection officers, training employees, setting up mechanisms for the “72-hour data breach notification” requirement, and collecting evidence and documenting efforts to address GDPR compliance risks. Further, only about 4,650 US companies are currently registered and self-certified with the EU-US Privacy Shield framework (compared to the over 100,000 mid- to large-sized companies in the US, according to business census data). Such certification goes a long way toward permitting a US company to receive certain EU data in a GDPR compliant manner.


Continue Reading At the GDPR’s First Anniversary, the Impact on US Companies Grows

When the European Commission re-approved the Privacy Shield agreement during its first annual review in the fall of 2017, permitting the transatlantic transfer of personal information to compliant U.S. companies to continue, it did so with a number of reservations. As the Privacy Shield agreement fast approaches its second annual review at the end of this week, it remains to be seen if the steps taken by the U.S. government at the close of the summer will be enough to satisfy skeptical European lawmakers.

Continue Reading Outcome of Privacy Shield Review Uncertain, Despite U.S. Steps Toward Compliance

The European Commission has recently released a new website providing guidance on the General Data Protection Regulation (“GDPR”) implementation requirements.  The website provides a plethora of resources both to industry looking to become compliant with GDPR standards as well as to citizens looking to understand their data protection rights.  Highlights of the website include a

Kansas Judge Rules that Class Action over CareCentrix Data Breach may Proceed

On December 19, 2016, in Hapka v. Carecentrix, the United States District Court for the District of Kansas denied CareCentrix, Inc.’s (CareCentrix) motion to dismiss a class action suit arising from a data breach affecting CareCentrix’s personal and tax information regarding thousands of employees.  The Court found that plaintiff Sarah Hapka, individually and on behalf of all others similarly situated, met the Article III standing requirements and sufficiently alleged a claim upon which relief could be granted.

Hapka claimed that in February 2016, an unauthorized person posed as one of CareCentrix’s employees and emailed a request for current and former employees’ Internal Revenue Service (IRS) Wage and Tax Statements (W-2 Forms). One of CareCentrix’s employees complied with the request, providing the W-2 Forms which included employees’ names, addresses, birth dates, wages, and Social Security Numbers.  Hapka alleged that shortly after this data breach, she received a letter from the IRS indicating that someone filed a fraudulent tax return in her name.  She later brought the underlying putative class action claiming that CareCentrix negligently permitted the data breach and that she and the class of plaintiffs will suffer imminent and certain impending injury of fraud and identity theft.

CareCentrix conceded that Hapka suffered some form of actual, concrete injury due to the filing of a false tax return. However, it argued that the other allegations of injury—the impending costs of countering the current tax fraud and heightened risk for future identify theft—are too speculative to meet the Article III standing bar set by the Supreme Court’s decision in Spokeo, Inc. v. Robins, which required plaintiffs to show an invasion of a legally protected interest and allege a concrete injury.  The Court rejected CareCentrix’s attempt to look at the plaintiff’s alleged injuries in a vacuum, stating that “[t]he fact that her stolen information has been used once has a direct impact on the plausibility of future harm.” Although the Court acknowledged that federal courts have disagreed about whether an alleged increased risk of identity theft is a sufficient injury to meet standing requirements, it followed the line of cases finding standing because the plaintiffs suffered from identity theft after a data breach.  Ultimately, the Court held that the plaintiffs met standing requirements.

The Court further rejected CareCentrix’s claim that Hapka failed to adequately plead the negligence claim because it did not have a statutory duty of care regarding employee information, and that plaintiff failed to allege any common-law duty. The Court found that identification of a statutory duty was unnecessary, and that the allegations that the harm was foreseeable established a common-law duty to exercise reasonable care.

This case further highlights how the Supreme Court’s decision in Spokeo earlier this year has produced varied results in breach litigation.  The Kansas Court acknowledged the split among federal courts on standing requirements, but effectively avoided ruling on the issue since Hapka actually suffered injury due to the filing of a false tax return.  If the plaintiffs did not have this example demonstrating that a concrete injury had in fact occurred, it is questionable whether the Kansas Court would have decided to deny CareCentrix’s dismissal motion on standing grounds.


Continue Reading December 2016 Monthly Update

Hospital pays $2.1MM HIPAA settlement; Dynamic IP addresses protected under EU laws; EU guidance on GDPR coming soon; California’s new privacy compliance tool; banking regulators consider cybersecurity; FCC privacy proposal comments; OMB’s new privacy office; DFARS finalizes Safeguarding Rule

Hospital pays $2.1M to settle alleged HIPAA violations

St. Joseph Health, a California-based health system, reached