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On April 9, 2007, the California Court of Appeal, Second Appellate District, affirmed a ruling of the Los Angeles Superior Court permitting the disclosure to counsel for a putative class of the names, addresses, and telephone numbers of the defendant’s current and former employees unless, following proper opt-out notice, they objected in writing to the disclosure.
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Under legislation recently proposed in California, retailers doing business in the state would be subject to enhanced data destruction requirements, and all businesses would be affected by new data breach notification requirements.  In the wake of the TJX Companies data breach, which may have affected more than 46.2 million credit and debit cards, California Assemblyman Dave Jones introduced revised A.B. 779.  That legislation reiterates that retailers are subject to the same data safeguard requirements as other businesses that maintain customer records or own or license personal information, while significantly truncating the period of time retailers may retain personal information of customers.  The bill also would revise the data breach notification laws applicable to all businesses that own or license personal information.  

Last week, a panel of the Ninth Circuit Court of Appeals held that in the absence of an announced monitoring policy, the mere act of connecting a computer to a network does not extinguish a user’s reasonable expectation of privacy, under the Fourth Amendment, in the contents of his or her computer. The panel announced its holding in United States v. Jerome T. Heckenkamp, Nos. 05-10322 and 05-10323 (9th Cir. April 5, 2007), wherein it upheld the introduction of evidence obtained by University of Wisconsin employees through remote and direct access of a student computer attached to a university network. Although it recognized the defendant’s reasonable expectation of privacy, the panel upheld the lower court’s admission of evidence under the judicially-created “special needs” exception to the Fourth Amendment because the alleged hacking posed an immediate threat to the university network and the searches were not conducted for a law enforcement purpose.   

Broker-dealer firms are well advised to review and update their privacy policies, in light of the Securities and Exchange Commission’s (“SEC”) recent enforcement and investigation activities arising from Regulation S-P.

According to trade press, recently the SEC informed one independent broker-dealer firm, Next Financial Group, Inc. of Houston, Texas, that it may file a “privacy” suit under Regulation S-P. The suit would be based on the practice, which Next maintains is common among independent broker-dealer firms, of requiring broker recruits from other firms to provide Next with customer information in anticipation of the move. According to the press, the SEC contends that before the brokers left their firms to join Next, they should have asked clients for their consent to use any information at the new firm. Alternatively, Next should have only required brokers to provide this information if the brokers’ prior firms had stated in their privacy policies that departing brokers may take certain customer information to competing firms (and the particular consumers had not opted-out of this policy). The SEC is reportedly considering suing Next for violations of Regulation S-P, as well as for aiding and abetting the violations by the brokers it recruited.  

On March 21, 2007, eight federal regulatory agencies (“Joint Agencies”) with jurisdiction over Gramm-Leach-Bliley Act (“GLBA”) regulated “financial institutions” issued an interagency proposal for a new model privacy form. The proposal is the result of a lengthy process the Joint Agencies began in 2001 to improve the format of GLBA privacy notices to make them more comprehensible to consumers. In addition to a lack of clarity, the Joint Agencies and consumer and privacy advocates have been concerned about the length of notices and the overuse of legal terms.

Section 503 of the GLBA, 15 U.S.C. § 1603 and current rules, require financial institutions to provide their customers with a notice that describes, among other things, how they protect nonpublic personal information, the categories of nonpublic personal information collected, the affiliates and the nonaffiliated third parties to whom such information is disclosed, and a description of the customer’s right to prevent certain disclosures to nonaffiliated third parties. These notices must be provided at the outset of the institution’s relationship with a customer and, in the case of long-standing relationships, on an annual basis. Current rules do not mandate a standard format or particular wording for the notices, however, they provide sample clauses that financial institutions can use to satisfy the notice requirements.

Welcome to the Proskauer Privacy Law Blog. Proskauer’s Privacy and Data Security Practice Group is tremendously pleased to bring you what we hope will become a trusted source for summary and analysis of breaking legal developments in the evolving field of privacy and data security law. This blog is designed…

Last month, a group of eight Republican lawmakers introduced H.R. 837, the Internet Stopping Adults Facilitating the Exploitation of Today’s Youth (SAFETY) Act 2007. The bill would give the Attorney General very broad authority to enact rules requiring Internet Service Providers (“ISPs”) to retain records so law enforcement could access their customers’ online activities.
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