Feeds

FTC gets judicial thumbs-up to SUE firms over data breaches

If you don't take 'reasonable and appropriate' measures, get ready for court

The Essential Guide to IT Transformation

In a ruling this week, a US federal judge affirmed the Federal Trade Commission's authority to file lawsuits against companies for failing to take "reasonable and appropriate" data security measures, rejecting a claim that the agency lacks that power.

District Judge Esther Salas of the US District Court of New Jersey denied Wyndham Worldwide's motion to dismiss a 2012 suit filed against it by the FTC, clearing the way for the hotelier to stand trial on charges of deceptive and unfair business practices.

Wyndham had argued that such lawsuits were outside the FTC's discretion, likening the case to FDA v Brown & Williamson Tobacco Corp., in which the Supreme Court found that the Food and Drug Administration lacked the authority to regulate cigarettes.

But in a 42-page opinion [PDF], Judge Salas disagreed, saying, "the Court rejects this challenge to the FTC's authority because the circumstances here differ from those in Brown & Williamson."

The FTC has accused Wyndham – which operates a number of hotel chains including Days Inn, Howard Johnson, Ramada, Super 8, and Travelodge – of "repeated failures" to protect its customers' data that led to multiple data breaches between 2008 and 2010, at least one of which went undetected for almost four months.

Among the agency's claims are that Wyndham allowed its employees to use easy-to-guess passwords, left its systems connected to the internet without a firewall, failed to inventory its systems regularly, and in some cases didn't even know where its servers were physically located.

If those charges aren't bad enough, the FTC also alleges that Wyndham stored credit card information on its servers in unencrypted plain text, essentially leaving it wide open for theft. In all, the regulator says, more than 600,000 customer accounts were ultimately compromised.

The FTC alleges that Wyndham's practices were "unfair" because they were "likely to cause substantial injury to consumers that consumers cannot reasonably avoid themselves." The agency also says Wyndham's privacy policy led customers to believe their sensitive data was more secure than it was, which the FTC claims was "deceptive."

In her ruling on Monday, Judge Salas affirmed that the FTC had satisfied the legal requirements to bring both those claims to trial.

Should Wyndham be found guilty, the FTC seeks an injunction preventing any further violations, plus "such relief as the Court finds necessary to redress injury to consumers resulting from Defendants' violations of the FTC Act, including but not limited to, rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies."

For its part, Wyndham Worldwide says the FTC's claims are "without merit." ®

Build a business case: developing custom apps

More from The Register

next story
Arrr: Freetard-bothering Digital Economy Act tied up, thrown in the hold
Ministry of Fun confirms: Yes, we're busy doing nothing
'Blow it up': Plods pop round for chat with Commonwealth Games tweeter
You'd better not be talking about the council's housing plans
Help yourself to anyone's photos FOR FREE, suggests UK.gov
Copyright law reforms will keep m'learned friends busy
ONE EMAIL costs mining company $300 MEEELION
Environmental activist walks free after hoax sent share price over a cliff
Apple smacked with privacy sueball over Location Services
Class action launched on behalf of 100 million iPhone owners
UK government officially adopts Open Document Format
Microsoft insurgency fails, earns snarky remark from UK digital services head
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.