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contents
NOVEMBER 2020 Volume 17/ Number 4
4 EDITOR’S DESK COMPLIANCE
7 CCPA 2020: WHAT’S HAPPENED AND WHAT TO EXPECT Three in ten requests are attempts to steal information. By Daniel Barber 10 MANAGING PARALLEL GOVERNMENT INVESTIGATIONS AND CIVIL LAWSUITS
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Parse out the stakes, control the flow. By Adam H. Schuman FEATURE COLUMN WORKPLACE ISSUES
13 REMOTE WORK, EMPLOYEE WELL-BEING AND COVID-19
16 PLANNING ENABLES LEGAL DEPARTMENTS TO HANDLE PANDEMIC-RELATED LITIGATION Segregating operations from litigation leads to risk. By Timothy Fazio
Different takes on remote work in the U.S. and the EU. By Stephan Swinkels
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EDITOR’S DESK
C
OVID-19 is on everyone’s mind now, and in this edition of Today’s General Counsel, Timothy Fazio offers advice on how in-house legal operations attorneys and their colleagues
on the litigation side can plan ahead concerning COVID-related risk. Adam Schuman discusses strategies for managing parallel government investigations and the civil lawsuits they can spawn. Daniel Barber writes about how California’s Consumer Privacy Act is playing out, and columnist Stephan Swinkels considers the differing reactions that U.S. and European employers have had to remote working and its effect on their employees’ well-being during the pandemic. As of this issue, Today’s General Counsel will be published monthly instead of quarterly, and exclusively on our new digital platform. We have made these changes so that we can present timely, incisive content to readers that we know are pressed for time, but in need of pointed, relevant information presented in a format they can access on the go, and on the device of their choice. Please let us know what you think at editor@todaysgc.com.
Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com
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COMPLIANCE
CCPA 2020: What’s Happened and What to Expect By DANIEL BARBER
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his past July, the California Consumer Privacy Act (CCPA) hit two milestones. The six-month point of the law being in force arrived, and enforcement began. The law had a six-month grace period, but no one anticipated that during this period there would be a pandemic that forced millions to switch to remote work with most activities moved online. Nevertheless, California Attorney General Xavier Becerra decided to continue with enforcement as planned. With enforcement ramping up, organizations are being tested on whether they can handle BACK TO CONTENTS
managing data subject requests from users, along with CCPA requirements regarding selling data and disclosures surrounding consumer data. Were businesses ready for the CCPA?
Data Subject Requests One of the most frequently asked questions is, “How many data subject matter requests should I expect per year?” The answers vary by industry and company size. Understanding the types of request a business will receive can help them plan for how to handle and process requests. Under the CCPA, there are
three different types of requests users can make to a company: the right to know the data collected, or access requests; deletion requests; and “do not sell” (DNS) requests. By a large margin, consumers preferred to have their records deleted at the beginning of 2020. But as the year progressed, DNS requests increased and have subsequently remained the most common request. Our research found that 48 percent of all requests were DNS compared to 31 percent for deletion requests and 21 percent for access requests. To answer how many Data Subject Requests (DSRs) businesses should expect per year,
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we can consider the average business-to-consumer company, which will receive around 170 DSRs per million records each year. Out of these, 84 will be DNS requests if consumer preferences to prevent businesses from selling their data continue. To facilitate these requests manually, organizations can expect to spend approximately $240,000, requiring the resources of as many as two dozen employees.
Verifying DSRs When the CCPA was first introduced in 2018, privacy and security experts had concerns about verifying those who requested personal data from a
Under the CCPA, there are three different types of requests users can make to a company. company. How would businesses be able to confirm that persons attempting to access records are who they say they are, and will consumers’ privacy be at greater risk if malicious actors attempt to steal information? “In the name of empowering consumers, the law is actually introducing threat vectors that can be manipulated by fraudsters,” wrote security and privacy experts Annie Bai and Peter McLaughlin. “This presents a considerable risk to organizations by enabling a data breach while ostensibly trying to comply with the law and support a consumer’s data access request.” In further revisions of the CCPA, verification was addressed, and a system of checks and
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balances was put in place by requiring companies to verify and authenticate individuals making data requests. Jennifer Elleman and Steven Stransky of Thompson Hine wrote a recent article detailing how certain CCPA amendments addressed the risk that comes without verification. The CCPA regulation now provides two methods businesses can use to verify the identities of individuals submitting data access and deletion requests. “First, if a business maintains a password-protected account, it ‘may verify the consumer’s identity through the business’s existing authentication practices for the consumer’s account.’ Second, if the individual does not have a password-protected account, identity verification becomes more complex and is subject to different standards, depending on the nature of the request and the type of the personal information at issue.” (Privacy Tracker, June 30, 2020) In the first case, verification is simple for password-protected accounts, though passwords are not always fail-proof. In the second case, verification becomes more ambiguous and companies must determine proper measures to confirm the identity of an individual and protect their data. For accounts that aren’t password protected, the CCPA suggests a multi-tiered verification process. According to Phillip Yannella and Gregory Szewczyk, “To meet this standard, businesses could match two . . . pieces of consumer-provided personal information with personal information maintained by the business. For requests to know specific pieces of information, businesses must verify the consumer to a reasonably high degree of certainty, which can be
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accomplished by matching three . . . pieces of consumer-provided personal information with personal information retained by the business.” (Cyber Adviser, October 21, 2019) Our company’s report reveals how vital the verification process for DSRs is to prevent fraud. Three in 10 requests will go unverified and could be attempts at accessing or deleting other individuals. Out of these unverified DSRs, 21 percent were marked as spam by businesses. While DNS requests make up the majority of verified requests from users, requests identified as fraudulent are most commonly access requests — an astounding 70 percent of all unverified inquiries. This data point validates the suspicion that people may attempt to misuse DSRs to gain access to another individual’s personal data. If the CCPA follows the path of the General Data Protection Regulation (GDPR), expect to see major fines from the CCPA. High profile cases and company privacy practice exposure could change the way in which consumers submit data requests, especially if there is a large data breach. We still don’t know how the pandemic will impact future requests.
Daniel Barber is the CEO and co-founder of DataGrail, a technology platform that helps organizations automate their privacy programs and become compliant with CCPA, GDPR and other privacy regulations. Daniel@datagrail.io
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COMPLIANCE
Managing Parallel Government Investigations and Civil Lawsuits A Primer For In-House Counsel By ADAM H. SCHUMAN
D
efending against parallel government investigations and civil lawsuits can feel like treading water — the longer it goes on, the happier you are that your head remains above water. In-house counsel must master content from voluminous documents and numerous witnesses and provide regular status updates and outcome forecasts. Developing strategy that contemplates the big picture is critical. The following are three key elements to building a multi-front defense strategy:
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1. Parse Out What Is at Stake in Each Matter In the rush to respond to investigations and lawsuits, periodically pause and rethink what is at stake. Is the downside risk of a given matter largely monetary? If so, how significant? A class action lawsuit might be costly, but it is usually only money at stake. A congressional investigation could have a big impact upon a corporation’s reputation and stock price, but there’s no direct risk of outof-pocket damages. More ominously, an investiga-
TODAYSGENERALCOUNSEL.COM NOVEMBER 202 0
tion by the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), or state attorneys general (AGs), can include monetary and nonmonetary penalties, as well as significant harm to a corporation’s standing with its clients and investors. In-house counsel can better develop a defensive strategy across multiple matters by understanding the type and scope of harm at risk from each. Such strategic thinking reaches beyond issues of resource management. It considers broader topics such as how evidence disclosed in one forum might negatively impact another matter, whether settlements might be achieved on optimal terms by prioritizing them, and whether they are approached globally or independently. Actively managing the interactions and sequencing can then help minimize the potential damage.
2. Understand to What Extent You Can Control the Flow Procedural rules and practices abound for governing the progress of investigations and lawsuits. Depending on the forum, however, distinctions arise regarding the ability to influence the path BACK TO CONTENTS
forward. In-house counsel should identify these key differences so that they can be leveraged for benefit. A ruling, a settlement, or even the basic production of documents and testimony can have collateral consequences for upcoming matters. They could be viewed as evidence, admissions or some form of issue estoppel. Think through the optimal sequencing of events, and pursue that path using whatever tools exist to influence how matters progress. At one end of the spectrum, congressional investigations can be fast and furious. Corporate witnesses can be called to testify on short notice; documents can be compelled with few of the limitations against public disclosure afforded in other government investigations; the political element can create a constant spin of information to the press; and in-house counsel may possess few tools to influence the pace of the investigation. Key documents and testimony may become public — often at a public hearing — and therefore available to other government agencies and the plaintiff’s bar. Those materials could be incorporated into allegations of wrongdoing and press campaigns in separate matters targeting the corporation. Unlike the congressional setting, investigations by the DOJ, the SEC, or AGs may resemble a plaintiff’s civil lawsuit, especially when litigated in a federal or state court. These similarities may include motion practice and discovery pursuant to procedural rules, thereby affording in-house counsel multiple opportunities to affect the timing and progress toward resolution. In addition, documents and testimony produced pre-trial may be afforded BACK TO CONTENTS
Investigations by the DOJ, the SEC, or AGs may resemble a plaintiff’s civil lawsuit. better protections against public disclosure than in the congressional setting. Many government investigations may never reach a courthouse. In that pre-litigation context, they can involve a host of formal and informal procedures that shape how much influence or insight in-house counsel have regarding the pace of the investigation. When addressing DOJ, SEC or AG subpoenas, for example, at which juncture will the government attorneys share or debate their concerns? Will that occur pursuant to an established process, such as an SEC Wells Notice? Can the investigation be closed prior to its public disclosure? When might a resolution best be negotiated? In-house counsel benefit from thoughtfully considering these questions from the outset. Although the extent to which a corporation under investigation can manage the timing of events will vary, these issues should remain front of mind. One needs to understand which tools might be employed for a client’s advantage, particularly to reduce the risk that events in one matter will negatively influence another.
3. Actively Manage for Multiple Outcomes Understanding that the different stakes and processes around investigations and lawsuits enables in-house counsel to develop affirmative strategies for defending them. Analyze each individual matter, but consider them together when delivering legal advice. For example, plaintiffs’ lawsuits commonly follow congressional
investigations and include pleadings testimony from public hearings. Although the congressional hearing may not constitute a direct liability risk, keep in mind that any public statements by corporate representatives at or about the hearing might be incorporated into a plaintiff’s allegations pursuing liability. In-house counsel thus must decide whether the corporation can humbly accept responsibility before Congress when its words might later be cited as an admission of liability. Another area calling for careful deliberation is timing of the resolution of investigations and lawsuits. If your competitors face similar scrutiny, will you settle contemporaneously? On the same terms? Sometimes the first company to settle gets the best terms — an incentive to settle alone and early. But it may be preferable in other contexts to settle as a group, which can reduce the risk to the brand or standing in the industry. In-house counsel should similarly contemplate the interplay between settling government investigations and plaintiffs’ lawsuits. Settlement may include formal admissions, which a plaintiff may seize upon in prosecuting a civil lawsuit. Indeed, plaintiffs’ attorneys may deliberately delay the litigation of their case in anticipation that the defendant might enter such a settlement and create potentially advantageous evidence. Countering that tactic, a prompt settlement of a plaintiff’s action might be achieved at a lower price in advance of the government matter settling. As a final example, in-house counsel should take care when
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managing multiple investigations by different government authorities. Are AGs coordinating on a joint investigation? Will some AGs work together and others not? Will some AGs surface only after other AGs take some public action? Likewise, when both state and federal authorities have open investigations, will they coordinate? Generally, a corporation may find that preferable settlement terms are offered when government agencies compete to demonstrate public leadership. A settlement on relatively favorable terms might be achieved swiftly with one entity, possibly prompting others to abandon their investigations. If multiple government investigations seem unavoidable, however, then a corporation benefits the most from achieving a global resolution and ending the risks and distraction of defending disparate investigations. In-house counsel juggle daily crises in the best of times, and confronting multiple investigations and lawsuits can stretch resources. Taking the time to identify underlying risks, evaluate opportunities, and pursue a deliberate strategy toward resolution will serve counsel well in such challenging situations.
Adam H. Schuman is a partner in the New York office of Perkins Coie. Previously he was Chief Legal Officer of Standard & Poor’s Ratings Services, an Assistant U.S. Attorney in the Eastern District of New York, and Special Counsel for Public Integrity in the New York State Governor’s Office. aschuman@perkinscoie.com
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WORKPL ACE ISSUES
Remote Work, Employee Well-Being and COVID-19 By STEPHAN SWINKELS
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he COVID-19 pandemic has been a catalyst for fundamental workplace change globally; but at least in the area of remote work, the long-term implications might be different in the United States than in Europe. That’s according to two surveys our firm recently conducted of in-house counsel and human resources executives in the United States (the COVID-19 Return to Work Survey, released in May 2020) and Europe (the European Employer COVID-19 Survey, released in September 2020). Both gauged employer sentiment around a host of pressing BACK TO CONTENTS
employment matters, including how employers view the shift to remote work and whether flexible work policies will change in the long term due to the pandemic. The European survey also addressed steps that companies have taken regarding employees’ mental health and well-being, which has become an increasingly important topic on both continents prior to — but certainly as a consequence of — the pandemic, to say nothing of the broader events of 2020.
Different Views in the United States And Europe Despite the abrupt shift to remote
work early this year, media reports in subsequent months showed European employers pleasantly surprised that a body doesn’t need to be behind a desk to produce quality work. That change in thinking came through in survey results too, as 61 percent of the more than 750 European executives we surveyed said a greater acceptance of remote work would be a positive long-term effect of COVID-19. Additionally, queried how their organizations are managing work-from-home requests, or plan to manage them when offices reopen, 41 percent replied that they are making or will make changes to their remote work
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policies to increase flexibility — so long as employees demonstrate the ability to work effectively from home. Interestingly, employers responding to our U.S. survey did not express the same level of enthusiasm about the long-term shift to remote work. Only 30 percent said they plan to change policies to allow employees to continue working remotely. Further, 52 percent of our U.S. respondents plan to remain flexible on remote work only until the pandemic subsides, compared to 34 percent of European respondents who responded similarly. And 80 percent of European respondents are requiring or considering requiring more employees to work remotely somewhat or to a great extent, compared to 50 percent of U.S. employers. Forty-one percent of European respondents say they are considering the shift to achieve greater productivity. I see this as representing a remarkable shift in attitudes that will likely only grow as employers compete for talent in a post-pandemic environment.
Focus On Mental Health Another major workplace concern for employers has been employees’ mental health and well-being. Although many employees find the option of working remotely beneficial, there are some drawbacks that employers should consider when adjusting policies, based on the past several months’ experience. Research shows that employees can be just as productive, or even more productive, working remotely; but a remote environment can blur the separation between work and home, which can lead to burnout. Remote work environments can feel isolating at
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a time when uncertainty outside of work is triggering stress, anxiety or depression. Data from our European survey offers a silver lining: The vast majority (90 percent) of employers surveyed are taking at least some action to address employee mental health and well-being during the pandemic. More than half are offering more flexible work schedules to accommodate employees’ personal needs, and 51 percent report soliciting frequent feedback on their organizations’ response to the pandemic. We know many U.S. employers consider the issue a top priority as well, and companies on both continents are making strides to provide flexibility and listen to employees’ concerns — though there is more that can be done. Employers can consider offering Employee Assistance Plans (EAPs) and providing managers with additional training to support employees in need of help. Indeed, our European survey shows that about a third of participating employers are implementing mental health support services and EAPs, and nearly a quarter provide managers with additional training. During these difficult times, it is important that employers focus on facilitating connection among their teams and encouraging collaboration and relationship building. In addition to supporting the well-being of individual employees, these steps benefit the organization as a whole by enhancing a healthy work environment and employee retention. Although there is greater acceptance that employees can be just as industrious at home, companies recognize that there are important elements of the
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employee-employer relationship that are difficult to duplicate in a remote environment. I call those the kind of “soft-productivity” that leads to loyalty and identification with the company’s values. To position themselves for longterm success, companies have to find new ways to foster creative thinking and idea generation, as well as feelings of connection to the company — without which, for example, talent may be more easily lured away by competitors. As the COVID-19 pandemic quickly ballooned from a health and safety issue to an unprecedented crisis impacting every facet of workforce management, employers have had to constantly pivot and address issues that were unthinkable a year ago. Although the long-term implications of the crisis remain to be seen, the rise of flexible work schedules and the focus on employee well-being are two areas that are likely here to stay. I think we can all call that a positive effect of this crisis.
Stephan Swinkels is a shareholder with Littler Mendelson. He leads development and integration of the firm’s global practice. sswinkels@littler. com To download the Littler European Employer COVID-19 Survey Report referenced in this article, please visit: www.littler.com/ europe-covid-19-survey.
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FEATURE
Planning Enables Legal Departments to Handle PandemicRelated Litigation By TIMOTHY FAZIO It is not really true that no one saw the COVID-19 pandemic coming. Many lawyers, insurers, healthcare providers and others involved in risk management knew it was coming, or at least they knew something like it was coming. Game-changing tragedies are nothing new. Risk managers have been preparing their operations to deal with the unknown for a long time — through infrastructure, financial hedging, legal protections and other tactics. In-house law departments are in a unique position to minimize the effects on a company from events like the COVID-19 pandemic by building a coordinated and thoughtful approach to law department operations. Whether a single general counsel or a global in-house team, law departments deal with day-to-day legal and strategic questions to help the company grow and function safely and in compliance with law. In-house attorneys manage “operations” work related to contract issues (e.g., negotiation, interpretation and termination strategy), pre-litigation dispute resolution, risk management and other business-centric duties designed to
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grow and safeguard the company. Operations attorneys are not often pure litigators. Although segregation of operations and litigation duties make practical sense, it can lead to substantial gaps in the overall risk profile for successfully handling disputes. To minimize risk, savvy operations attorneys routinely partner with litigators to build in strategic protections at the beginning of a business decision or a venture’s life cycle. When building a comprehensive litigation risk mitigation strategy, operations attorneys benefit from thinking like litigators. Litigators provide valuable insight and experience into what obstacles can be erected or torn down at the initial business decision stage to limit disputes generally, as well as putting the company in position to efficiently win a dispute through effective negotiation or a calculated dispute resolution technique. Here are some strategies to develop with litigation counsel. Follow Core Practices and Goals: Adhering to a core understanding of strategic goals, best practices and industry standards
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helps avoid conflicting approaches and unexpected risk. The operations function must analyze each opportunity or threat by thinking in terms of the core understanding and vision of the company, and how addressing the matter at hand will further it or erode it. Without a global understanding of priorities, operations can inadvertently increase litigation risk by failing to account for abnormal events. Some common mistakes are permitting the business to deal with litigious companies or within a notoriously litigious or government-scrutinized industry; permitting receivables to grow too BACK TO CONTENTS
Understand the company’s tolerance level for litigation. large or remain outstanding for too long; and placing employees in risky work situations. Develop Universal Contracting Principles: Although it is impossible to create a one-size-fits-all contract, operations attorneys can identify language and conditions of core concern and educate the business team about the reasoning behind them so they are better able to negotiate. Whether company attorneys or counterparty attorneys draft the contract, the operations attorney BACK TO CONTENTS
managing negotiations should be sensitive to including the key principles. These principles include thoughtful force majeure clauses; whether disputes will be resolved through business negotiation, mediation, arbitration or federal/state court; whether the company will charge (and conversely be charged) interest on unpaid invoices; whether prevailing parties will be awarded attorney fees and costs; what insurance coverage is acceptable for a given line of business; and
whether there are jurisdictional laws or norms to consider. Incorporating the right language can be critical to avoiding, limiting or exacerbating disputes if they arise by creating leverage against an adversary taking a more aggressive stance, or disregarding payment and other contract terms. Implement Company-Wide Dispute Resolution Strategies: Understand the company’s tolerance level for litigation. Does the landscape make it more beneficial
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to vigorously defend/prosecute litigation as a deterrent and overall cost savings, even if the individual matter is a loss? Or is it better to end disputes quickly through settlements, even with over-payments, to ensure minimum public exposure and avoid litigation risk and associated business disruption costs? Are there segments of company operations or different geographic locations that require different tactics? For example, discrimination/harassment matters may not be appropriate to keep private, but government investigations of financial activities may be. The company’s overall approach can be included in initial contracting and business negotiations, setting the stage to increase or decrease leverage in the event of future disputes. Understand Litigation Risk/ Reward: Business cannot succeed without risk. The question is the
tolerable level of risk calculated by experienced business executives, operators and attorneys. Successful business partners know the core business and its principles, and use that understanding to help counsel for risk in business undertakings. Understanding the industry, competitors’ behavior, expected benefits from a venture, and employee morale and culture inform the advice appropriate for major business decisions. By incorporating the abovementioned contracting tactics, a company can increase the reward and decrease the risk for pursuing or defending a dispute aggressively, having already created leverage for the counterparty to yield to more favorable settlement terms, or setting the company up for success in the event of full adjudication. Although these best practices have a significant impact on com-
pany operations during “normal” times, their benefit is highlighted in today’s “new normal.” Whether a COVID-19-related dispute arises from failure to pay, failure to fulfill, claims of force majeure or other reasons, well-prepared law departments will find themselves armed with the tools and leverage to resolve these matters efficiently as a result of forward-thinking operations attorneys who partnered with their in-house and outside litigation counterparts.
Timothy Fazio is a partner in Hunton Andrews Kurth’s Boston office. He is a litigator and trial lawyer who concentrates on complex business litigation and government/internal investigations. tfazio@hunton.com
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