Leadership Through the Firestorm - Legal Counsel's Role in Guiding Through Cybersecurity and Data Loss. This is a keynote speech delivered by Shawn Tuma to the Paralegal Division of the State Bar of Texas on June 17, 2016.
2. Shawn Tuma
Cybersecurity Partner
Scheef & Stone, L.L.P.
214.472.2135
shawn.tuma@solidcounsel.com
@shawnetuma
blog: www.shawnetuma.com
web: www.solidcounsel.com
This information provided is
for educational purposes only,
does not constitute legal
advice, and no attorney-client
relationship is created by this
presentation.
ShawnTuma is a business lawyer with an internationally recognized
reputation in cybersecurity, computer fraud and data privacy law. He is a
Cybersecurity & Data Protection Partner at Scheef & Stone, LLP, a full-
service commercial law firm inTexas that represents businesses of all
sizes throughout the United States and around the world.
Board of Directors, NorthTexas Cyber Forensics Lab
Board of Directors & General Counsel, Cyber Future Foundation
Texas SuperLawyers 2015-16 (IP Litigation)
Best Lawyers in Dallas 2014-16, D Magazine (Digital Information Law)
Council, Computer &Technology Section, State Bar ofTexas
Chair, Civil Litigation & Appellate Section, Collin County Bar
Association
College of the State Bar ofTexas
Privacy and Data Security Committee, Litigation, Intellectual
Property Law, and Business Sections of the State Bar ofTexas
Information Security Committee of the Section on Science &
Technology Committee of the American Bar Association
NorthTexas Crime Commission,Cybercrime Committee
Infragard (FBI)
International Association of Privacy Professionals (IAPP)
Information Systems Security Association (ISSA)
Board of Advisors, Optiv Security
Editor, Business Cybersecurity Business Law Blog
3. “There are only two types of companies: those that have
been hacked, and those that will be.” –Robert Mueller
4. “It’s not a matter of if, but a matter of when”
14. Immediate Priorities
• Assess the situation
• Be a counselor
• Instill confidence
• Bring peace
• Facilitate rational
thought & behavior
15. www.solidcounsel.com
Who are targets?
Key Point: We are all targets
Your clients’ businesses
Your law firms
Big firms (give examples)
James Shelton Example
Rural Texas solo practitioner
Employee left, didn’t change password or disable acct
Hackers accessed, spoofed email, sent “pleadings” all over,
including other countries
16. www.solidcounsel.com
Privilege / Work Product
KEY POINT: Attorney’s may have privilege
“Target has demonstrated . . . that the work of the
Data Breach Task Force was focused not on
remediation of the breach . . . but on informing
Target’s in-house and outside counsel about the
breach so that Target’s attorneys could provide
the company with legal advice and prepare to
defend the company in litigation that was already
pending and was reasonably expected to follow.”
In re Target Corp. Customer Data Breach
Litigation
17. www.solidcounsel.com
ACC Study (Sept ‘15)
What concerns keep
Chief Legal Officers
awake at night?
#2 = Data Breaches
82% consider as
somewhat, very, or
extremely important
18. www.solidcounsel.com
Cost of a Data Breach – US
2013 Cost
• $188.00 per record
• $5.4 million = total average cost paid by organizations
2014 Cost
• $201 per record
• $5.9 million = total average cost paid by organizations
2015 Cost
• $217 per record
• $6.5 million = total average cost paid by organizations
(Ponemon Institute Cost of Data Breach Studies)
19. www.solidcounsel.com
Legal Obligations
International Laws
Safe Harbor
Privacy Shield
Federal Laws & Regs
HIPAA, GLBA, FERPA
FTC, FCC, SEC
State Laws
47 states (Ala, NM, SD)
Fla (w/in 30 days)
OH & VT (45 days)
Industry Groups
PCI, FINRA, etc.
Contracts
Vendors & Suppliers
Business Partners
Data Security Addendum
20. www.solidcounsel.com
Ancient Cybersecurity
Wisdom
Water shapes its course
according to the nature of the
ground over which it flows;
the soldier works out his
victory in relation to the foe
whom he is facing.”
“In all fighting the direct
method may be used for
joining battle, but indirect
methods will be needed to
secure victory.”
21. “An ounce of prevention is cheaper than
the first day of litigation.”
25. www.solidcounsel.com
Regulatory & Administrative - FTC
KEY POINT: You must have basic IT security
F.T.C. v. Wyndham Worldwide Corp., 799 F.3d 236 (3rd Cir. Aug. 24,
2015).
The FTC has authority to regulate cybersecurity under the
unfairness prong of § 45(a) of the Federal Trade Commission
Act.
Companies have fair notice that their specific cybersecurity
practices could fall short of that provision.
3 breaches / 619,000 records / $10.6 million in fraud
Rudimentary practices v. 2007 guidebook
Website Privacy Policy misrepresentations
Jurisdiction v. set standard?
27. www.solidcounsel.com
The Basics
Best Practices
Documented
Basic IT Security
Basic Physical Security
Security Focused P&P
Company
Workforce
Network
Website / Privacy / TOS
Business Associates
Social Engineering
Implementation
Training
28. www.solidcounsel.com
Regulatory & Administrative – FTC
KEY POINT: You must evaluate business partners’ security
In re GMR Transcription Svcs, Inc., 2014 WL 4252393 (Aug. 14,
2014). FTC’s Order requires business to follow 3 steps when
contracting with third party service providers:
1. Investigate before hiring data service providers.
2. Obligate their data service providers to adhere to the
appropriate level of data security protections.
3. Verify that the data service providers are complying with
obligations (contracts).
29. www.solidcounsel.com
Addendum to Business Contracts
KEY POINT: Know your contractual obligations
Common names for the Addendum:
Data Security & Privacy; Data Privacy; Cybersecurity; Privacy;
Information Security.
Common features
Defines subject “Data” being protected in categories.
Describes acceptable and prohibited uses for Data.
Describes standards for protecting Data.
Describes requirements for deleting Data.
Describes obligations if a breach of Data.
Allocates responsibility if a breach of Data.
Requires binding third parties to similar provisions.
30. www.solidcounsel.com
Regulatory & Administrative – SEC
KEY POINT: You must have written (1) Policies &
Procedures and (2) Incident Response Plan
S.E.C. v. R.T. Jones Capital Equities Management, Consent
Order (Sept. 22, 2015).
“Firms must adopt written policies to protect their clients’
private information”
“they need to anticipate potential cybersecurity events
and
have clear procedures in place rather than waiting to
react once a breach occurs.”
violated this “safeguards rule
100,000 records (no reports of harm)
$75,000 penalty
34. www.solidcounsel.com
Officer & Director Liability
KEY POINT: “boards that choose to ignore, or minimize,
the importance of cybersecurity oversight responsibility,
do so at their own peril.” SEC Commissioner Luis A. Aguilar, June
10, 2014.
Heartland Payment Systems, TJ Maxx, Target, Home Depot, Wyndham
Derivative claims premised on the harm to the company from data breach.
Caremark Claims:
Premised on lack of oversight = breach of the duty of loyalty and good faith
Cannot insulate the officers and directors = PERSONAL LIABILITY!
Standard:
(1) “utterly failed” to implement reporting system or controls; or
(2) “consciously failed” to monitor or oversee system.
35. www.solidcounsel.com
Officer & Director Liability
Palkon v. Holmes, 2014 WL 5341880, *5-6 (D. NJ Oct. 20,
2014).
Derivative action for failing to ensure Wyndham implemented
adequate security policies and procedures.
Order Dismissing: The board satisfied the business judgement rule
by staying reasonably informed of the cybersecurity risks and
exercising appropriate oversight in the face of the known risks.
Well-documented history of diligence showed Board
Discussed cybersecurity risks, company security policies and
proposed enhancements in 14 quarterly meetings; and
Implemented some of those cybersecurity measures.
37. www.solidcounsel.com
Cyber Insurance – Key Questions
Even know if you have it?
What period does the
policy cover?
Are Officers & Directors
Covered?
Cover 3rd Party Caused
Events?
Social Engineering
coverage?
Cover insiders intentional
acts (vs. negligent)
Contractual liability?
What is the triggering
event?
What types of data are
covered?
What kind of incidents are
covered?
Acts of war?
Required carrier list for
attorneys & experts?
Other similar risks?
38. Virtually all companies will be
breached.Will they be liable?
It’s not the breach; it’s their diligence
and response that matter most.
Companies have a duty to be
reasonably informed of and take
reasonable measures to protect
against cybersecurity risks.