California Legislative Effort to Avert Privacy Ballot Initiative a Race Against the Clock

On Thursday, June 22, 2018, a previously dead California Assembly bill, AB 375, was revised as a proposed alternative to the ballot initiative known as the California Consumer Privacy Act of 2018 (CCPA),[1] which is expected to be on the November ballot. It was read a third time and amended on June 25 and re-referred to the Senate Judiciary Committee. If the bill is passed and signed into law by June 28, 2018 – the deadline for finalizing what will be on the ballot – ballot initiative supporters have reportedly agreed to pull the ballot initiative. Below is a summary of key similarities and differences between AB 375 and the CCPA. If AB 375 is passed and signed by the governor this week in time for the CCPA to be withdrawn and we confirm it is withdrawn, we will provide greater detail on what AB 375 will require. The full text of the ballot initiative is here, and the full text of AB 375 is here.

The legislative approach in AB 375 will result in regulation of more for-profit entities than the ballot initiative would, as an entity with annual gross revenue in excess of $25 million is considered a “business” under the legislative approach, whereas under the ballot initiative, an entity is considered a business if it has annual gross revenue in excess of $50 million. Further, the definition of business is broader in the legislative approach in that it also applies to businesses that annually “sell” (broadly defined) personal information of “100,000 or more consumers or devices,” as provided by the CCPA, to include a business that “buys, receives for the business’ commercial purposes, sells, or shares for commercial purposes [broadly defined] … personal information of 50,000 or more consumers, devices, or households.” In addition to the different threshold number of data subjects, a key distinction is that AB 375 explicitly covers the recipients of personal information from a third party, while the CCPA addresses only a business “that collects consumer’s personal information.”

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Privacy Advocates See Victory as Supreme Court Extends Fourth Amendment Protections to Historical Cellphone Location Information

On June 22, the Supreme Court issued its highly anticipated decision addressing privacy in the digital age, holding that the government generally must obtain a search warrant supported by probable cause to search a target’s historical cell site location information (CSLI), which can provide a detailed record of an individual’s whereabouts. In siding with the petitioner, Timothy Carpenter, who was convicted and sentenced to prison based largely on 127 days of CSLI that placed him near the scene of a string of armed robberies, the Court confirmed that individuals have an expectation of privacy in their historical CSLI that is protected by the Fourth Amendment. Writing for the majority, Chief Justice Roberts spurned mechanical applications of traditional Fourth Amendment doctrine, preferring instead to endorse a more flexible and nuanced approach to privacy in the digital age, where rapidly advancing technologies threaten to erode privacy protections.

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California Legislature Working Feverishly To Avert Privacy Ballot Initiative

We have previously reported a ballot initiative known as the California Consumer Privacy Act of 2018 (“CCPA”), that is expected to be on the November ballot.  If passed, it would make sweeping changes to consumer privacy protection rights for Californians, likely creating a new national standard.  On June 21st, the California Assembly amended AB- 375, formerly a bill that would have regulated privacy practices of Broadband Internet Access Service Providers in reaction to the FCC’s withdrawal of its BIAS privacy rule, to propose an alternative to CCPA.  It has been reported that the initiative’s sponsors will pull the initiative if AB-375 is passed and signed into law by the Governor.  However, the legislature will have to move fast, because after June 28 the November ballot will be set and the initiative cannot be withdrawn.  If AB-375 becomes law in time to kill the initiative much of what the initiative seeks to accomplish will become law, but notably not a private right of action and class action relief for most violations.  There would be a private right of action for a data breach incident resulting from security that failed to meet the California standards but only if the Attorney General declined to bring an action.  We will be tracking the legislative effort to avert CCPA and reporting on whether the June 28 deadline is met, as well as detail on what new standards AB-375 will mandate if it becomes law.

The Weekly Privacy Rewind

Class Actions

Finkly & Sons Co. Faces Illinois Biometric Information Privacy Act Class Action

• A former employee of steelmaker A. Finkly & Sons Co. filed a putative class action against the company in Cook County, Illinois, for violations of the Illinois Biometric Information Privacy Act (BIPA).

• The case alleges the company violated BIPA by inappropriately collecting biometric data in the form of handprints for a timekeeping program without obtaining prior consent of employees, and it seeks damages of up to $5,000 per violation.

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OCR Announces Intention to Move Forward With Development of Methodology to Distribute Enforcement Funds to Victims of HIPAA Violations

The Office for Civil Rights (OCR) updated its agenda, outlining proposed and final rules as well as pre-rule document releases for 2018. A notable, and highly anticipated, advance notice of proposed rulemaking included on the agenda indicates OCR will seek comments on establishing a way to distribute funds collected from Health Insurance Portability and Accountability Act (HIPAA) enforcement actions to individuals harmed by the underlying incident. This would fulfill a long-awaited and overdue requirement included in the Health Information Technology for Economic and Clinical Health (HITECH) Act, which required OCR to issue regulations about this methodology within three years of HITECH’s 2009 enactment date. The agenda indicates this advanced notice of proposed rulemaking will be released sometime in November 2018.

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11th Circuit Issues Opinion Vacating Order That Required LabMD to Overhaul Its Data Security Program

On June 6, the 11th Circuit issued its long-awaited decision on LabMD Inc. v. Federal Trade Commission, vacating as unenforceable the Federal Trade Commission’s (FTC’s) cease and desist order that required LabMD to create and implement a variety of protective measures with respect to data security. Notably, however, the decision did not address the most important issue in the case: LabMD’s contention that the FTC lacks jurisdiction to enforce allegations that inadequate data security constitutes an unfair act or practice under Section 5 of the FTC Act (15 U.S.C. § 45(a)).

In 2005, a billing manager at LabMD downloaded the peer-to-peer file-sharing application LimeWire, inadvertently enabling the sharing of some files, including one that contained the personal information of 9,300 consumers. In 2008, an entity specializing in data security found this file and attempted to use it to pitch its data security services to LabMD. After negotiations between the data security vendor and LabMD fell through, in 2009, the data security vendor shared the file with the FTC, prompting a lengthy investigation. In August 2013, the FTC issued an administrative complaint against LabMD, alleging that its failure to provide reasonable and appropriate security for personal information on its computer networks amounted to an unfair act or practice. Continue Reading

The Weekly Privacy Rewind

Canada

Canadian Banks Notify 90,000 Following Breach

• Bank of Montreal and Canadian Imperial Bank of Commerce announced that they were contacted by hackers and informed that nearly 90,000 customers’ personal information was accessed.

• The banks will notify customers of the breach and indicate they believe they have fixed the vulnerabilities that led to the breach.

EU/GDPR

Privacy Activist Accuses Tech Companies of Violating GDPR

• Privacy activist Max Schrems recently filed complaints against several tech companies, including Facebook, WhatsApp and Instagram, for allegedly violating GDPR’s consent requirement for users to accept a company’s privacy policy.

• Schrems alleges that the tech companies forced users to accept their privacy policy or face expulsion from use of their services.

• These cases will be some of the first to be litigated under the new GDPR since the law went into effect on May 25, 2018.

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New Jersey Attorney General’s Office Ramping Up Data Privacy and Cybersecurity Enforcement Efforts

The Office of the New Jersey Attorney General (AG’s Office) recently announced that it will be creating a new civil enforcement unit, known as the Data Privacy & Cybersecurity Section (DPC Section), to investigate data breaches impacting New Jersey residents and to enforce federal and state data privacy and cybersecurity laws. New Jersey’s AG joins an expanding list of state AGs, including those of California, Connecticut, Indiana, Maryland, Massachusetts, New York, and North Carolina, who are dedicating more resources to data breach investigation and enforcement actions.

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Colorado Enacts Sweeping Changes to Data Breach Reporting Requirements and Adds New Data Security Requirements

Colorado’s Gov. John Hickenlooper signed a bill that significantly strengthens its current data breach notification requirements and adds new measures designed to enhance protections for consumer data privacy. The new law will go into effect on Sept. 1, 2018.

Disposal of personal identifying information

As previously discussed here (while the bill was in committee), HB18-1128 creates more stringent requirements regarding the disposal of personal information. Under C.R.S.A. § 6-1-713, all “covered entit[ies] in the state that maintain[] paper or electronic documents during the course of business that contain personal identifying information” will be required to develop a written policy for the destruction or disposal of such information once such documentation is “no longer needed.”

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Arizona Expands Its Data Breach Notification Statute

Effective August 1, 2018, the House Bill 2154 recently signed by the Arizona governor will expand the current Arizona data breach notification law. Following the trend of other states, the amended statute expands the definition of “personal information.” The law will now require individual and regulatory notification within 45 days of a breach and will expand the risk of harm provision to not require individual or regulatory notification if it is determined the breach is unlikely to result in substantial economic loss to affected individuals.

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