Graves Concerns

Just about anyone who cares knows by now that most states have data breach notification statutes. What’s not as well known, even among security professionals, is that Minnesota has long had another statute that could require reporting of data breaches. Taken literally, the statute would require reporting even when Minnesota’s data breach notification law does not.

The law is in Minnesota Statutes section 609.8911, which was added in 1994. It reads:

A person who has reason to believe that any provision of section 609.88, 609.89, or 609.891 is being or has been violated shall report the suspected violation to the prosecuting authority in the county in which all or part of the suspected violation occurred. A person who makes a report under this section is immune from any criminal or civil liability that otherwise might result from the person’s action, if the person is acting in good faith.

Chapter 609 is Minnesota’s criminal code, and sections 609.88, 609.89, and 609.891 are Minnesota’s computer crime statutes. Section 609.8911 therefore says that anyone who “has reason to believe” that any successful or attempted unauthorized computer access, damage, or theft has taken place must notify the county prosecutor.

Note what the statute does not say:

• It’s not limited to data an organization “owns or licenses,” as section 325E.61 is for data breach notification.

• It does not limit the reporting duty to situations where there’s a reasonable chance that the data was obtained by a third party. Because Minnesota’s computer crime statute outlaws attempted acts of computer crime, it seems to be irrelevant whether the attempted computer theft, damage, or unauthorized access was successful.
• It’s not even limited to data the organization handles—the language of the statute would seem to require telling the county attorney that someone else was hacked.

That’s broad. For example, a literal reading of the statute’s language would require calling the county prosecutor every time a virus scanner finds a virus. A virus either accesses a computer without authorization or damages it. As soon as the virus scanner alerts the user to the the presence of the virus, that user has reason to know that someone committed a computer crime. Does it matter that the user doesn’t know who committed the crime, that the county prosecutor can’t do anything with the information, or that universal compliance with the letter of the law would flood the prosecutor’s phone line with nothing but “I just got a virus” calls? Maybe in the real world, but there’s nothing in the statute to suggest that these concerns relieve anyone of the duty to report.

The statute is missing something else: penalty provisions. Any self-respecting criminal statute has two parts: (1) a list of things not to do, and (2) the penalties for doing those things. Criminal penalties can be specific, or they can just categorize the crime (as a felony, misdemeanor, etc.), but to have any force, they have to say what the cost of violating the law would be. There’s some question whether this is even a criminal statute—it’s in the criminal code, but it states an affirmative duty, not a prohibition, and it has no penalty provision. If it is a criminal statute, it’s mostly toothless.

It also appears that the statute has never been used. A search of Minnesota cases reveals no instance in which the statute was even cited, much less used to convict someone.

Becuase the statute has no penalties and has never been enforced, can you ignore it? Maybe. The stakes of doing so certainly seem low. But just try to find a lawyer who will say it’s okay to ignore any statute, even a toothless unenforced statute.

One reason to comply with the statute is that even a statute without penalty provisions can form the basis of a negligence per se claim. Negligence per se is a way for a plaintiff to use a statutory requirement to skip the usual inquiry into whether the defendant used reasonable care. There are technical requirements for negligence per se claims, but if those are met, a plaintiff’s case is made much easier. Here’s how it might work with section 609.8911:

1. A company sees an attempted attack, but doesn’t reasonably believe the attacker obtained any personal information, so does not report it.

2. The attacker, who actually did obtain data, misuses it, harming one of the data subjects.
3. The data subjects file a class-action against the company, claiming that the company was negligent in not telling them about the breach. To establish negligence, the plaintiffs point to section 609.8911, which says the company should have reported the attempted breach to the county prosecutor.

And—voila—a statute with no penalty provision has just become a problem for the company. Admittedly, that’s a stretch, and there are those “technical requirements” referred to earlier, but lawyers have advised their clients to avoid less probable risks.

The language of the statute, the lack of a penalty, and its immunity provision might make one wonder about the original purpose of the statute. It turns out that it was actually an early attempt at requiring data breach notification. In Minnesota House Judiciary Committee hearings held March 18, 1994, Rep. Phyllis Kahn, author of the original Minnesota computer crime law and the duty-to-report provision, said that her bill was an attempt to force banks and financial institutions to report computer crimes they might otherwise prefer to hide. It was “generally believed,” she said, that computer crimes were under-reported because these institutions preferred maintaining an appearance of security that could be hurt by disclosing a breach. She acknowledged that the section did not include any penalties for failing to report, but said that her bill would be a “good step forward,” and that she couldn’t imagine what a good penalty would be.

A few states have similar duties to report computer crimes, including Ohio and Utah. Georgia had a similar statute that was repealed in 1991. A handful of other states have general duties to report any crimes (or sometimes felonies), but in most states, there is no duty to report that one has seen a crime. The computer duty-to-report statutes appear to be isolated exceptions to this general rule.

Minnesota has a real data breach notification statute for a few years now. Perhaps it is time for the legislature to repeal or substantially modify section 609.8911. But until that happens, the safest course for any organization is to send the county prosecutor notice of any attempted data breach. It may seem silly (partly because, in many cases, it is), but that’s the letter of the law. With any luck, the busy prosecutor will respond with, “Thanks, but please don’t bother me again.”

On July 17, North Carolina amended its data breach notification law and changed some credit freeze and credit monitoring requirements.

The new law, S.B. 1017, makes two small changes to North Carolina’s notification requirements. First, it requires telling the state Attorney General about breaches of any size, not just those that affect more than one thousand people. Second, it requires the notifications to include contact information for the consumer reporting agencies (CRAs), the FTC, and the North Carolina Attorney General’s office.

The statute still has the same notification triggers as before: it applies to any business that “owns or licenses” personal information. The law applies to businesses that own or license data, but the statute’s definition of a “security breach” is not limited to breaches of information the business owns or licenses. It may just be a quirk of wording, but it looks like the law requires any business that owns or licenses data to notify people affected by any security breach. In fact, there’s nothing in the language saying that companies only have to disclose their own breaches:

N.C. Gen. Stat. § 75-65(a): Any business that owns or licenses personal information of residents of North Carolina or any business that conducts business in North Carolina that owns or licenses personal information in any form (whether computerized, paper, or otherwise) shall provide notice to the affected person that there has been a security breach following discovery or notification of the breach. . . .

I doubt that’s the intention of the law, but there’s the language: companies that own or license data shall notify the affected person that “there has been a security breach.” So, maybe it’s a business’s duty to inform consumers that a competitor has been breached?

Also note the statute’s broad interstate reach, pulling in “any business that conducts business in North Carolina that owns or licenses personal information in any form.” It doesn’t even bother to limit the reach of the statute to businesses that own or license personal information about North Carolina residents.

The law’s big changes are to consumer credit reporting. It made quite a few changes to the state’s security freeze law. It reduced the time Consumer Reporting Agencies (CRAs) can take to initiate or remove a freeze from five days to three, gives CRAs fifteen minutes to temporarily lift a freeze once the consumer has requested a temporary lift by phone or e-mail (if the request is by mail, the CRA has three days), prohibits the CRAs from charging for placing, removing, or temporarily lifting a credit freeze unless the request was by mail (the old law allowed charging $10 per request), and requires that credit reports under a freeze say that the freeze does not reflect a negative score, history, report, or rating.

Finally, the law adds a “Credit Monitoring Services Act,” which might as well be titled the “freecreditreport.com” act. It requires anyone who provides credit monitoring or obtains a credit report on behalf of a consumer for a fee to give clear and conspicuous notice of the consumer’s right to a free credit report.

Missouri finally passed a data breach notification law this year as part of an omnibus crime bill, H.B. 62. That brings the number of states without data breach notification laws to five: Alabama, Kentucky, Mississippi, New Mexico, and South Dakota.

The law itself is pretty standard, at least as much as anything with fifty-five versions can be called “standard.” It requires anyone with personal information about a Missouri resident to notify the resident of a breach of security, defines “personal data” as any of the usual suspects plus a name (although, as John Bambenek points out, a name isn’t actually needed to steal money from someone’s checking account with ACH), requires the notice to be made “without unreasonable delay,” and allows safe harbors for encryption and cases where the data handler determines identity fraud is not likely. Notification can be written, by phone, or with certain electronic notice. The law allows substitute notice if personal notice would cost over $100,000, if more than 50,000 people are affected, or if there isn’t enough contact information to contact people directly. A data handler who has to notify more than one thousand people also has to alert the media, the attorney general’s office, and the credit reporting agencies. Enforcement is by the attorney general, with a civil penalty of $50,000 per breach for willful violations.

Senator Feinstein’s national data breach notification bill hasn’t emerged from committee since she introduced it in January. It’s now a bit of a race to see which happens first: a nationwide breach notification bill, or the remaining states passing their own versions.