Lawyers often say “bad facts make bad law”. Combine that with weak legal arguments and, well, things can get really bad, really fast. That’s precisely what happened to Wyndham yesterday when the Third Circuit affirmed a federal District Court decision that the Federal Trade Commission (“FTC”) has authority to regulate cybersecurity under the unfairness prong of § 45(a) of the Federal Trade Commission Act. While commentators may disagree on the result from a legal or policy perspective, one thing is for certain, it was a bad result for Wyndham. The decision rejected in no uncertain terms Wyndham's argument that the FTC lacked authority; and not kindly.
- failed to use strong (and in some cases any) passwords to limit access to computer files;
- failed to use firewalls to separate corporate and hotel computer systems;
- improperly stored payment information in clear text;
- failed to implement reasonable measures to detect security breaches;
- failed to implement proper incident response procedures or remedial steps after learning of a data breach; and
- failed to adequately restrict access to company systems by third party vendors.
The claims stem from three separate data breaches over a period of two years in which hackers obtained the private information of more than 600,000 customers, which led to more than $10.6 million in fraudulent charges.
After some delay, the new federal regulations giving gift card holders greater protections took effect recently, adding to a patchwork of state consumer laws already in place. The new regulations apply to both issuers and sellers of store gift cards, gift certificates, and general use prepaid cards, such as prepaid Visas or Mastercards, sold after August 22, 2010. We’ve seen our clients consider conflicts between state and federal law, advertising policies for resellers, tax recognition on gift card income, and unclaimed property laws.
Greg Duff founded and chairs Foster Garvey’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.