Privacy Advisor

Amidst U.S. Gov’t Shutdown, State AGs Chuckle at Idea of Federal Breach Law

October 2, 2013

By Sam Pfeifle
Publications Director

Near the end of the literarily titled panel discussion “The Widening Gyre of State AGs” here at the IAPP Privacy Academy in Seattle, WA, one brave soul asked what seemed like an obvious question: Would it make sense for there to be one all-encompassing federal data breach notification law rather than the 49 state laws that firms currently need to navigate?

“No,” said Paula Selis, senior counsel, Consumer Protection Division, Washington State Attorney General’s Office. “There’s a problem with federal preemption. By the time a federal law has been passed, it’s been watered down by so many constituencies that it’s just not effective.”

“But,” countered the intrepid attendee, “is that the problem? Don’t all of you think you have the best laws in the country? It leaves a company to guess how to figure out what to do if there’s a breach?”

“That’s a leading question,” laughed Selis.

“And argumentative to boot,” added Vermont AG William Sorrell.

In all seriousness, though, the “point is well taken,” said Selis. “With a patchwork of laws, you’re left as the breacher with not knowing what you have to comply with, and often you comply with the highest common denominator…”

“Don’t you mean the lowest common denominator?”

“No, I think the highest,” Selis continued. “If you’re doing business across the country, as most firms are nowadays, and you’ve got to comply with California or Massachusetts, you’ll probably wind up complying with all the laws. And that’s a good thing … I like that California requires a privacy policy. Washington doesn’t have that law, but as a practical matter, that means there’s a policy on just about every site, and that allows us to go after companies” in unfair or deceptive acts or practices statute cases.

Divonne Smoyer, William H. Sorrell, Paula Selis, Joanne B. McNabb

And, sure, if done right, like with the Fair Credit Reporting Act, a really strong federal law can take “the best of what states are doing and create a very good piece of uniform legislation.”

But the assembled panel thought it unlikely that the currently constituted U.S. Congress could come up with such a strong federal law.

“It can be done in this arena,” Sorrell allowed, “but AGs from all states have a very visceral reaction to federal preemption.” He laughed out loud. “You’d like to have this organization, the U.S. Congress—upon which, what, eight percent of Americans look favorably—you want us to say, ‘Oh, yes, we’re going to trust that body of public servants to do what’s right for our states’ citizens?’ No way. No how.”

So, yeah, don’t expect a federal data breach reporting law anytime soon.

That was just one of many illuminating moments during the panel discussion hosted by Divonne Smoyer, partner at Dickstein Shapiro LLP and the person responsible for the wonderful reference to “The Second Coming” by William Butler Yeats (and, by extension, Chinua Achebe’s masterpiece, Things Fall Apart), in the session’s title. The speakers also included last-minute stand-in Joanne McNabb, CIPP/US, CIPP/G, CIPP/IT, director of privacy education and policy in the recently created Privacy Enforcement and Protection Unit in the California AG’s office.

Her message? California has just begun to get active with privacy enforcement. Not only did the AG’s office sponsor the recent amendment to CalOPPA to “require an operator to disclose how it responds to ‘Do-Not-Track’ signals or other mechanisms that provide consumers a choice regarding the collection of personally identifiable information,” but the office is also ready and willing to enforce the new data breach legislation, which requires notice to consumers even if their actual names aren’t involved in the breach.

“We now have five deputy AGs just for privacy,” McNabb noted, “plus me and another for the education and policy beat. Plus we have two technologists under contract to help with understanding and enforcement.” Her office published last year a data breach report and that has made the AG’s office only more emboldened to hold companies accountable.

“Many companies still don’t take even the simplest measures,” McNabb said. “While I do think there’s been progress since 2003 when we passed the first data breach law, we still found an astonishing incidence of sensitive personal information not being encrypted while in transit.”

But all three panelists insisted they’re not slavering over the idea of punishing companies. They said companies who are honest and upfront about data breaches that resulted from simple human error and not systemic negligence would be unlikely to face sanctions.

“Not notifying us and us hearing from the media or a consumer or whatever,” said Sorrell, “that means you start with at least one strike against you.”

While Selis could only speak for her own office in Washington, “My guess is that if you have a relationship with (your state’s AG office) and you have a breach and call up and say, ‘Here’s what we need to find out,’ my guess is that most offices understand those kinds of things … We’re not out to enforce the law if there’s no benefit to consumers.”

“That call about ‘we think there might be a breach, but we’re not sure,’ that goes a loooong way,” agreed Sorrell. “And when you’re balancing on whether to bring an enforcement action and how tough to be, those early heads-up questions before you know the reporting obligation has been triggered, that really goes a long way.”

But, “should you have been able to discover it sooner?” asked McNabb. “The fact that you turned a blind eye so you wouldn’t have to find out, and industry practice says you should have, well that’s going to be a problem.”

Read More By Sam Pfeifle:
“Privacy by Default” May Be Big Post-Regulation Issue
Privacy Enforcement: “It’s a Two-Way Street”
Data Protection and Privacy Commissioners Release Resolutions on Tracking, Profiling, International Cooperation
What NIST Is Hoping To Get Out Of Its Privacy Grant Program