22 Aug The Eleventh Circuit is holding oral arguments
The Eleventh Circuit has announced that they are going to hold oral arguments in LabMD’s case even though the appellate court had refused. See below for Law 360’s reporting of this development. To view the original article, click HERE.
The Eleventh Circuit said Wednesday that it has decided to hold oral arguments on LabMD Inc.’s latest bid to halt the Federal Trade Commission from policing corporate data-security standards, a dispute which the appellate court has already once refused to entertain.
In a brief docket entry, the appellate court announced that it “has determined that oral arguments will be necessary in this case,” which LabMD mounted in May after a Georgia district court ruled that it lacked jurisdiction to consider whether the FTC had overstepped its statutory authority by bringing a closely-watched administrative proceeding accusing the laboratory of failing to implement reasonable data security standards to protect private health information.
The Eleventh Circuit in May declined to hear the appeal on an expedited briefing schedule or grant a stay of the administrative proceeding pending its review of the lower court’s ruling, but both the laboratory and the FTC have since filed their briefs in the case, leading the appellate court to issue its oral argument determination Wednesday.
“The court’s decision to grant oral argument indicates that this case presents important issues about the FTC’s abuse of authority, and we are optimistic that LabMD will prevail once all arguments are made,” Cause of Action Executive Director Dan Epstein said in a statement Wednesday.
The court has yet to set a date for oral arguments, and a representative for the FTC could not be immediately reached for comment Wednesday.
The often contentious dispute between the regulator and medical testing laboratory began in August 2013, when the FTC filed an administrative complaint alleging that LabMD failed to safeguard medical and financial information on nearly 1 million customers and allowed data to leak on to the peer-to-peer file-sharing network LimeWire and into the hands of identity thieves.
Instead of settling the claims, LabMD became only the second company, after hotel chain Wyndham Worldwide Corp., to push back at the commission’s authority to regulate the security of consumer information as an “unfair” practice under Section 5.
Besides responding to the administrative complaint, the company also asked the District of Columbia and the Eleventh Circuit in separate filings to halt the commission from proceeding with its action.
In February, the Eleventh Circuit ruled that it could not review the Section 5 challenge because the statute “only gives courts of appeal authority to review an order of the commission to cease and desist from using any method of competition or act or practice, [and] there is no such order here.”
The determination led LabMD to abandon the complaint it already had brought in the District of Columbia for an injunction halting the administrative case and file a new complaint in Georgia.
In May, the Georgia federal court threw out the suit, ruling that district courts are in no position to interfere with ongoing administrative enforcement actions.
After the Eleventh Circuit refused to disrupt the proceeding in May, the FTC responded to the laboratory’s appeal by urging the appellate court to uphold the lower court’s holding that it is premature for the court to become involved in the administrative proceeding.
If the outcome of the proceeding ends up being unfavorable to LabMD, it can bring its challenge at that point, the FTC asserted in its brief.
But LabMD countered in an Aug. 11 reply brief that the court should be able to review an executive branch agency’s action under the Administrative Procedure Act before the administrative case concludes, and that its First Amendment retaliation claim can proceed because constitutional claims arising in an administrative case need not wait until the agency takes a final action.
The disputed trial before the administrative law judge that LabMD is seeking to halt began in May, although the proceedings were quickly put on hold and have yet to resume following the discovery that a Republican-led House committee is investigating data security firm Tiversa Inc., which is a key player in the FTC’s case.
LabMD is represented by Cause of Action, which has retained Ronald L. Raider, Burleigh L. Singleton and William D. Meyer of Kilpatrick Townsend & Stockton LLP, and Reed D. Rubinstein of Dinsmore & Shohl LLP.
The FTC is represented by its own Perham Gorji, and by Mark B. Stern, Lauren Fascett, Adrienne E. Fowler and Abby Christine Wright of the U.S. Department of Justice.
The case is LabMD Inc. v. Federal Trade Commission, case number 14-12144, in the U.S. Court of Appeals for the Eleventh Circuit.
