1. Investigating & Preserving Evidence in Data Security Incidents www.ScottandScottllp.com Robert J. Scott Scott & Scott, LLP 214-999-2902

2. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Potential Legal Implications of a Data Breach º Federal and State Statutory and Regulatory Issues HIPAA Privacy and Security Rules GLBA Safeguards Rules Data breach notification laws Data protection and destruction laws º Civil Liability Unfair Trade Practice Claims Negligence Breach of Contract Unlawful Trade Practices º Examples of pending, past, and potential cases TJX Radio Shack BJ’s Wholesale Club Choice Point DSW Monster

3. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Business Impacts of Data Breach

4. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Evidentiary Risks in the Investigation of a Data Breach? º Discovery of a network security incident investigation creates significant risk management concerns º Attorney client privilege can be lost by involving third parties º Internal investigations or investigations by outside IT professionals alone could be discoverable under the work product privilege º Internal investigations by in-house counsel must avoid problems associated with dual business and legal roles under the primary purpose test

5. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Using Attorney-Client Privilege to Protect the Investigation º Attorney-client privilege protects communications between an attorney and the attorney’s client º Communication must be confidential and made for the purpose of obtaining legal advice from the attorney º Communications regarding investigation of data breach facts is protected by privilege º Privilege held by the client not by the lawyer º Supreme Court’s subject matter test º Less protection may be afforded to in-house counsel because of dual roles

6. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Using the Work-Product Privilege to Protect the Investigation º FRCP 26(b)(3) protects work-product from discovery º Opinion work-product consists of mental impressions, opinions, conclusions, or legal theories of an attorney or other representative of a party º Ordinary work-product, including raw factual information, consists of preparation materials that do not disclose opinions or impressions º Ordinary work-product discoverable on showing a substantial need and inability to obtain the substantial equivalent by some other means º The primary purpose test for anticipation of litigation º Documents created for a business purpose are not protected even when the information developed may be helpful in legal proceedings

7. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP State Breach Notification Laws

8. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Statutory Notification Obligations º 39 states and the District of Columbia have data breach and/or identity theft statutory schemes and recently enacted federal statutes may apply º All the statutes have been enacted in the last few years, with little or no case law interpreting them º Interpretations must be based upon “good faith” and should involve review of legislative history and contain appropriate disclaimers regarding deference to regulatory agencies interpretation

9. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP The Problem of Over Reporting

10. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Attorney-Client Privilege and Advice Regarding Statutory and Regulatory Notice Obligations º Attorney-client privilege should protect advice given by an attorney when assessing whether a company is required to give notice in each state where it does business, where a potential loss of data may have occurred, or under federal law º Attorney-client privilege should protect advice regarding how notice is required to be given, when notice should be given, the form notice should take, and what the contents of any notice should be º Privilege is important to shield this decision-making process from discovery in subsequent litigation where plaintiffs may allege claims based on inadequate notice

11. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Preserving and Collecting Evidence º Ethical obligation of an attorney to avoid having the client get into a spoliation situation Litigants have an obligation to preserve relevant evidence Spoliation applies to electronic information as well as other documents Adverse inference instruction may be granted even where party did not intentionally destroy the evidence

12. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Ethical Implications of Discovery Obligations in Data Breach Civil Litigation º Duty to supplement disclosures and discovery responses under FRCP 26(e) º New e-discovery rules Attorney with IT personnel on discovery team can make certain all information is collected and reviewed º Potential problems resulting from incomplete compliance with obligations Sanctions under the rules Client’s litigation position could be affected by failure to comply with discovery obligations

13. Investigating & Preserving Evidence in Data Security Incidents © 2007 Scott&Scott, LLP Contact Information Robert J. Scott Scott & Scott, LLP 2200 Ross Avenue, Suite 5000E Dallas, Texas 75201 Phone: 214-999-2902 Fax: 214-999-0333 rjscott@scottandscottllp.com