LabMD Vows to Nail Tiversa in FTC Data Security Row

08 Jun LabMD Vows to Nail Tiversa in FTC Data Security Row



A great article reblogged from Law 360 outlining the latest news in the lawsuit.

 LabMD Inc. pledged Tuesday to grill Tiversa Inc. representatives about how they obtained a confidential spreadsheet that has formed the foundation of the Federal Trade Commission’s data security claims against LabMD, once a trial delay prompted by a congressional probe of Tiversa is lifted.

During a conference call with reporters, LabMD CEO Michael J. Daugherty and Cause of Action Senior Vice President Reed Rubinstein, who is one of the attorneys representing the cancer screener, expounded on the “very unexpected development” in its data security fight with the FTC that transpired last week, after cyberintelligence firm Tiversa informed Administrative Law Judge D. Michael Chappell that it was being investigated by the House Oversight and Government Reform Committee.

As a result of the surprising probe, which Rubinstein said is “apparently related to Tiversa’s relationship with federal agencies generally,” the Tiversa executive and employee who were slated to appear before the administrative court Friday refused to testify, leading Chappell to place the trial in recess until June 12, to allow counsel to determine how the congressional probe would impact the trial.

“As far as LabMD is concerned, we were prepared and remain prepared to go forward with adjudication once Judge Chappell allows us to do so … and examine the witnesses to find out what really happened,” Rubinstein said Tuesday. “There are still lots of questions remaining about the FTC’s investigation and the underlying basis of the case.”

The temporarily stalled administrative proceeding began in August, when the FTC filed a complaint alleging that LabMD violated the unfairness prong of Section 5 of the FTC Act, by failing to safeguard medical and financial information on nearly 1 million customers and allowing data to leak onto peer-to-peer file-sharing network LimeWire and into the hands of identity thieves.

According to the commission’s complaint, the central data leak onto LimeWire of certain “insurance aging reports” containing confidential patient information was allegedly discovered by Tiversa, a data security company who alerted LabMD in May 2008 that it had obtained the reports.

Being able to depose the designated Tiversa representatives — namely, CEO Robert Boback and former employee Rick Wallace — to ascertain exactly how the company came into possession of the file is vital to disproving the FTC’s allegations that the cancer screener lacked reasonable data security, Daugherty and Rubinstein said Tuesday.

“The prominence and admissibility of the evidence in question remains arguable,” Daugherty said. “The FTC made the [Limewire] file the foundation of the case and … of claims from experts. If there are questions and it turns out that the file was not taken appropriately or where it was found was not true, then the bedrock would disappear.”

While reluctant to get into specifics, Rubinstein told reporters that LabMD’s counsel had been planning to question the Tiversa representatives about “a variety of circumstances and occurrences” related to the file that “was really the centerpiece of the action.”

“There’s a dispute about the circumstances under which that file was obtained, so we suspected that would have been part of [the questioning],” he said. “We are ready and anticipating on June 12 starting up and proceeding with the examination we would have done last Friday.”

If events go as LabMD hopes, the June 12 hearing is likely to feature the testimony of Wallace, who on Friday indicated, through his attorney William Burck of Quinn Emanuel Urquhart & Sullivan LLP, that he would invoke his Fifth Amendment right against self-incrimination if called on to testify in light of the congressional probe that he’d reportedly learned of the day before the hearing.

The delay in the trial is intended to give Wallace time to work out a potential immunity deal with the House Oversight Committee that would extend to his trial testimony, an arrangement that Burck told the court Friday that his client is in the process of negotiating.

As for Boback, his attorney Jarrod D. Shaw of Reed Smith LLP informed the court Friday that Boback could not testify, although he didn’t elaborate as to whether he would also plead the Fifth. Rubinstein said Tuesday that he is hopeful that LabMD’s counsel would be able to depose Boback this week outside of court, in accordance with a deal hammered out last week to accommodate Boback’s planned travels to Africa.

In the meantime, LabMD — which has stopped providing all services except for furnishing records to former patients, a task that Daugherty said he is handling on his own on a volunteer basis — and its counsel intend to “sit back” and see if the congressional probe shines any light on their long-running assertion that the FTC is unfairly targeting the cancer screener based on faulty evidence, according to Rubinstein.

“We’ve always found it quite hard to understand why the commission has chosen to devote massive amounts of staff time and resources to this case, and now there appears to be a House investigation that apparently addresses certain aspects of the subject matter of the case,” he said. “We hope that once all the facts are out, cooler heads will prevail, and the commission will do the right thing.”


Reblogged from Law360; Click HERE to read the rest of the article.


Michael Daugherty

Michael Daugherty is President & CEO of LabMD, an Atlanta-based clinical and anatomic medical laboratory with a national client base. Mike founded LabMD in 1996 after 14 years in surgical device sales with U.S. Surgical Corp. and Mentor Corporation. Outside of LabMD, enjoys playing tennis, travel, and flying his Cirrus SR22 Turbo single engine aircraft.