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.


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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.

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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.


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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

HHS Jumps on the Cybersecurity Information Sharing Bandwagon; Third Circuit on Economic Loss as a basis for Negligence Claim; FTC workshop on Ransomware; German draft implementing law for GDPR revealed.

HHS Jumps on the Cybersecurity Information Sharing Bandwagon

Because of recent news reports confirming that cyberattacks against healthcare agencies have increased 125 % in the past five years, HHS is encouraging HIPAA Covered Entities and Business Associates to share information to combat future attacks.

HHS, based on authority from Executive Order 13591 and the Cybersecurity Information Security Act (CISA), is urging Covered Entities and Business Associates to join Information Sharing and Analysis Organizations (ISAOs) to share security threat and vulnerability information related to electronic protected health information (ePHI).

Ideally, ISAOs will provide a mechanism for sharing information bi-directionally “between HHS and the Health Care and Public Health (HPH) sector regarding cyber threats and will also provide outreach and education to the HPH sector.” This press release from HHS follows a similar measure by the Department of Homeland Security, which also encourages information sharing to mitigate the risk of cyberattacks.

In developing ISAOs in the health care sector, it is critical to consider three things:

  • the standards and best practices for the creation of ISAOs to ensure that covered entities and business associates that participate gain the protections of such information sharing under CISA;
  • the data that is shared in light of what is permitted under the HIPAA Privacy Rule; and
  • how participation in an ISAO can support compliance with the HIPAA Security Rule.

Crowell & Moring is a leading expert in the creation of ISAOs and HIPAA compliance and can help stakeholders that seek to comply with HHS’s call to action to consider the intersection of these various legal frameworks


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Bavarian DPA: fines under GDPR to be calculated based on revenues of whole company group; ICO publishes report on data security incident trends.

Bavarian DPA: fines under GDPR to be calculated based on revenues of whole company group

On September 01, 2016, the German Data Protection Authority of Bavaria (BayLDA) has announced that according to their understanding, sanctions under the GDPR will be calculated based on the revenue of a whole company group. According to the authority, this should apply even when only one single entity is responsible for an incident.

In its position paper, the BayLDA elaborates that fines under the GDPR have to be “effective, proportionate, and dissuasive.” For most infringements, the fine can amount up to a maximum of either € 10 million, or 2% of the company’s annual global turnover (the higher will apply). For serious infringements, the fine can even amount up to the higher of € 20 Million or 4% of the respective turnover. The turnover will comprise of the turnover of the whole company group a company belongs to, according to recital 150 of the preamble, which relates to the “economic concept of an undertaking”.

Although the BayLDA’s position paper is non-binding, the interpretations and views published can nevertheless be considered very important hints on how in particular the German Data Protection authorities will interpret and enforce the new Regulation, which will enter into force on 25 May 2018. The European Data Protection Board, a group of representatives of the EU Member States (currently known as Article 29 Working Party), is expected to issue guidelines on the calculation of fines.


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EU Commission publishes first results of consultation of e-Privacy Directive; Irish DPA issues Guidance on Location Data.

European Commission publishes summary report on consultation of e-Privacy Directive

On August 4, 2016, the European Commission has published a first summary report on the public consultation on the evaluation and review of the e-Privacy Directive (Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications), also known as ‘e-Privacy’ or ‘Cookie’ Directive.

Two weeks ago, on July 19, 2016, the Article 29 Working Party, an EU advisory body comprised by representatives of the national Data Protection Authorities, had also published a detailed opinion on this issue.

The ‘e-Privacy Directive’, which contains specific rules relating to the processing of personal data in the e-Communications sector, needs to be adapted to the new European General Data Protection Regulation (‘GDPR’), which will replace the former EU Directive 95/46/EC as from May 25, 2016. The GDPR aims to ensure modernized rules and increased harmonization for Privacy in Europe and is part of the European Commission’s Digital Single Market (DSM) Strategy.

The 421 stakeholders in the consultation, of whom more than ¼ are situated in Germany, agree with a vast majority of 83% that specific privacy rules for e-Communication are useful to ensure the confidentiality of communications. In addition, 76% of respondents believe that the Directive should as well apply to so-called ‘over-the-top’ service providers (OTT), when offering VoIP services or instant messaging. However, more than ¾ of the respondents also said that until now, the Directive has achieved its aims only to a limited extent, due to – among others – too little enforcement and compliance pressure.

The Commission’s conclusions drawn from the consultation, as well as proposals on how to adapt the Directive are expected to be released later this year.


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