Two decisions last week further widened the divide among the Courts of Appeals in applying Spokeo in cybersecurity litigation.

The U.S. Computer Emergency Readiness Team (US-CERT) is implementing new reporting requirements beginning April 1, 2017, and just released new guidelines to help federal departments and agencies; state, local, tribal, and territorial government entities; information sharing and analysis organizations; and foreign, commercial and private-sector organizations submit incident notifications to the federal government.

Two Courts of Appeals have issued decisions during the past week related to cybersecurity and data retention which anyone who maintains electronic data and personal information should read.

As we recently touched on at the KMK Cybersecurity Seminar, lower courts are beginning to apply Spokeo Inc. v. Robins as defendants renew challenges to class certification. 

This post is a follow-up to January’s cybersecurity post discussing the cybersecurity considerations in performing due diligence in M&A transactions. The previous discussion can be found here. This post addresses two contractual provisions, the closing conditions and indemnification, which, if properly utilized, can protect acquiring companies from taking on too much cybersecurity risk in M&A transactions.

The Cybersecurity Information Sharing Act (CISA), S. 754, was signed into law by President Obama on December 18, 2015 as part of the larger 2016 Omnibus Spending Bill, and arrived on the cybersecurity landscape with an equally strong set of supporters and opponents.  With strong views on both sides, CISA is the first step in building what all will likely agree is of critical importance – improving cybersecurity in the United States.  

In today’s M&A transactions, cybersecurity deficiencies in a target company pose potentially significant financial and regulatory risks to the acquiring company. For this reason, new measures must be implemented in M&A transactions to protect both companies from today’s emerging cybersecurity epidemic.

Recently, the European Union Court of Justice invalidated a Safe Harbor Framework (established in 2000), which thousands of companies relied upon to facilitate the transfer, processing and storage of data from the EU to the U.S.  Any company that processes and stores data from the EU, including customer and employee personal data, should be reviewing its contracts and procedures and monitoring these developments. 

In a case that will have significant ramifications for the legal landscape relating to cybersecurity, the Third Circuit Court of Appeals affirmed a lower court’s decision that the Federal Trade Commission (FTC) had the authority to regulate companies’ data security practices.

On August 11, 2015, federal prosecutors in New York and New Jersey filed criminal charges against two alleged hackers and seven other individuals who allegedly traded securities based upon stolen information. The Securities and Exchange Commission filed a related civil complaint against those same nine individuals, as well as 23 other individuals and corporate entities.

Blog Contacts:  
Joe Callow, Litigation Partner
jcallow@kmklaw.com or 513.579.6419

Rob Lesan, Business Representation & Transactions Partner
rlesan@kmklaw.com or 513.579.6939

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