Media

David Slays Goliath As LabMD Defeats The Federal Trade Commission

Chief Administrative Law Judge Dismisses Complaint and Hammers the FTC

FOR IMMEDIATE RELEASE: November 16, 2015

MEDIA CONTACT: Geoff Holtzman l geoff.holtzman@causeofaction.org l 703-405-3511

WASHINGTON – LabMD, an Atlanta-based cancer detection laboratory, was vindicated in its six-year struggle against the Federal Trade Commission’s overreach when FTC Chief Administrative Law Judge Michael Chappell dismissed the Commission’s complaint on Friday.

Cause of Action Institute Executive Director Daniel Epstein issued the following statement:

“This ruling confirms what our client, LabMD, has said all along, which is that the Federal Trade Commission’s case is meritless. FTC spent millions of taxpayer dollars to pursue its baseless case against LabMD, an innovative and successful provider of cancer diagnostics. Although FTC’s ostensible justification for this boondoggle was “data security,” it produced no evidence that even a single patient was harmed by LabMD’s alleged inadequacies. Instead, it was the FTC that victimized LabMD and its employees, and more importantly, the doctors that it served.

The facts never mattered to the FTC. In the end, the purpose of this case was to intimidate other businesses that might consider standing up for their rights, and to make LabMD pay for speaking out against the government. This ruling puts return address on bureaucratic abuses of power, and proves that sometimes the good guys win.”

This ruling culminates a series of victories for Cause of Action against the FTC’s overreach. Highlights include:

• Forcing an FTC Commissioner to recuse herselffrom the case.
• Ensuring that all the evidence the FTC obtained from third-party Tiversa was excluded.
• Securing immunity for a whistleblower, who exposed the truth about this case.

LabMD was the first company to refuse a “consent order” and fight back against FTC. After hearing the evidence and reviewing the legal arguments, Chief Judge Chappell decisively rejected FTC’s claims, issuing a decision that will protect small businesses from future government abuses.

The following are some key excerpts of his decision:

“Section 5(n) of the FTC Act states that “[t]he Commission shall have no authority to declare unlawful an act or practice on the grounds that such act or practice is unfair unless [1] the act or practice causes or is likely to cause substantial injury to consumers [2] which is not reasonably avoidable by consumers themselves and [3] not outweighed by countervailing benefits to consumers or to competition.” 15 U.S.C. § 45(n). Complaint Counsel has failed to carry its burden of proving its theory that Respondent’s alleged failure to employ reasonable data security constitutes an unfair trade practice because Complaint Counsel has failed to prove the first prong of the three-part test – that this alleged unreasonable conduct caused or is likely to cause substantial injury to consumers.”

“First, with respect to the 1718 File, the evidence fails to prove that the limited exposure of the 1718 File has resulted, or is likely to result, in any identity theft-related harm, as argued by Complaint Counsel. Moreover, the evidence fails to prove Complaint Counsel’s contention that embarrassment or similar emotional harm is likely to be suffered from the exposure of the 1718 File alone. Even if there were proof of such harm, this would constitute only subjective or emotional harm that, under the facts of this case, where there is no proof of other tangible injury, is not a “substantial injury” within the meaning of Section 5(n).”

“At best, Complaint Counsel has proven the “possibility” of harm, but not any “probability” or likelihood of harm. Fundamental fairness dictates that demonstrating actual or likely substantial consumer injury under Section 5(n) requires proof of more than the hypothetical or theoretical harm that has been submitted by the government in this case. Accordingly, the Complaint is DISMISSED.”

Click here to read the full ruling.

To speak to a legal expert from Cause of Action about the decision, please contact Geoff Holtzman at Geoff.holtzman@causeofaction.org or call 703-405-3511

Cause of Action is a government accountability organization committed to ensuring that decisions made by federal agencies are open, honest, and fair.

 

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Clean Energy Manufacturer Scores Victory In Fight For Economic Fairness

Settlement stipulates that Delaware’s renewable energy program must even the playing field for out-of-state companies

FOR IMMEDIATE RELEASE: October 21, 2015

 MEDIA CONTACT: Geoff Holtzman | geoff.holtzman@causeofaction.org | 703-405-3511

WASHINGTON – Today, Cause of Action is pleased to announce that a federal court in Delaware has approved a settlement agreement between our client, FuelCell Energy, Inc., and Delaware Governor Jack Markell and Delaware state utility officials regarding the state’s Renewable Energy Portfolio Standards Act (REPSA).

Under the terms of the settlement, Delaware’s Public Service Commission (DPSC) must now allow competition across state lines with respect to fuel cell manufacturers, in compliance with the commerce clause of the United States Constitution.

Cause of Action Executive Director Daniel Epstein issued the following statement:

“Today is a great day, not only for clean energy manufacturers, but for innovators and entrepreneurs everywhere who wish to compete on an even playing field. This settlement should send a message to government officials that fair interstate competition is a cornerstone of the U.S. Constitution. Cause of Action is proud to have played a role in reaching this agreement, and we will continue to fight hard in the name of economic fairness.”

BACKGROUND:

In a 2012 complaint filed in the United States District Court for the District of Delaware, Connecticut-based FuelCell Energy alleged that it was disadvantaged by the DPSC‘s special tariff awarded under REPSA to an in-state energy manufacturer and the associated State financial support for establishing in-state manufacturing that was offered to only one select company by the Governor of Delaware, without any prior public notice or bidding process.

FuelCell Energy, a global fuel cell company that designs, manufactures, installs, operates and services efficient and affordable stationary fuel cell power plants, argued that Delaware’s Renewable Energy Portfolio Standards Act, which was amended in 2011, violated the commerce clause of the United States Constitution, which prohibits state laws that discriminate against out-of-state competition.

Under REPSA, the State of Delaware only allowed bids on a State fuel cell project from a fuel cell company that agreed to establish manufacturing in the State, and the State provided financial incentives to support construction of the manufacturing facility, resulting in a sole-source contract rather than a competitively bid contract.

In April 2014, the District Court permitted FuelCell Energy to proceed with its constitutional claim.

The settlement agreement that we are announcing today will level the playing field for all out-of-state fuel cell manufacturers wishing to compete for business in the state of Delaware. Prior to this settlement, out-of-state fuel cell power plant manufacturers were prohibited from bidding on REPSA-funded incentives for fuel cell power generation projects, a violation of constitutional prohibitions on state-legislated discrimination against out-of-state businesses.

Cause of Action is a non-profit, nonpartisan strategic oversight organization committed to ensuring that government decision-making is open, honest, and fair.

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Cause of Action Teams With Demand Progress To De-Politicize Federal Spending Decisions

Oversight organizations call on Office of Management and Budget to enforce pro-transparency Executive Order

FOR IMMEDIATE RELEASE: October 7, 2015

Cause of Action Media Contact: Geoff Holtzman | geoff.holtzman@causeofaction.org | 703-405-3511

Demand Progress Media Contact: Daniel Schuman | daniel@demandprogress.org | 202-577-6100

WASHINGTON – Today, nonprofit government accountability organizations Cause of Action and Demand Progress are petitioning the Office of Management and Budget to uphold an executive order that ensures American taxpayers are protected from government spending on wasteful earmarks.

Cause of Action and Demand Progress have penned a letter to OMB Director Shaun Donovan, asking that his agency issue a rule that will ensure Executive Order 13457, Protecting American Taxpayers From Government Spending on Wasteful Earmarks, is enforced. This executive order was intended to curb abusive earmarking and politically pressured discretionary spending, but a Cause of Action investigation has found that the order has not been widely enforced.

CLICK HERE TO READ THE FULL LETTER

Cause of Action Executive Director Daniel Epstein issued the following statement:

“Cause of Action’s research shows that for years, federal agencies have been ignoring a binding executive order designed to protect taxpayer dollars from being misused. Our organizations believe that Washington has a duty to the public to ensure that federal discretionary spending decisions are transparent and merit-based.”

Demand Progress Policy Director Daniel Schuman issued the following statement:

“The administration must add a measure of transparency to earmark requests received by executive branch agencies. Federal spending decisions should be made on merit and in the sunshine. There already is an executive order on the books that addresses secret calls and letters by Congress and special pleaders. It is time to enforce it.”

Cause of Action’s examination of federal discretionary spending through Freedom Of Information Act records and federal databases has revealed that OMB’s current efforts to ensure that discretionary grant decision-making is transparent and merit-based are ineffective. As a result, political appointees and others can use federal tax dollars to reward political allies and appease powerful interests.

Cause of Action and Demand Progress feel that this demonstrates a need for OMB to act in order to restore transparency and accountability. Therefore, the organizations are petitioning OMB to issue, at a minimum, a memorandum that does the following:

1. Confirms that Executive Order 13457 binds discretionary agency spending;

2. Affirms that it is prohibited to allocate discretionary funds in response to congressional requests outside of a transparent, merit-based decision-making process, and that agencies are not obligated to fund such requests;

3. Recognizes that congressional and non-congressional entities and individuals can and do exert pressure on discretionary spending decision-making on federal projects, programs, contracts, and grants;

4. Requires executive departments and agencies to make available to the public records of all written and oral communications from any source that references: (1) earmarks previously enacted into law, (2) earmarks referenced in congressional reports or materials, or (3) discretionary funds not yet awarded, if the agency is “pressured informally to show special favor to certain parties or interests in the course of agency decision-making;”

5. Directs executive departments and agencies to make records of these communications publicly available through their respective websites within 30 days of receiving such communications.

Cause of Action is a non-profit, nonpartisan strategic oversight organization committed to ensuring that government decision-making is open, honest, and fair.

Demand Progress is a national grassroots group with more than two million affiliated activists who fight for basic rights and freedoms needed for a modern democracy.

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Media Contact: Geoff Holtzman | geoff.holtzman@causeofaction.org | 703-405-3511

WASHINGTON — In a significant victory for transparency advocates, a federal judge today ordered the IRS to turn over potential requests that the White House may have made to the agency in search of private taxpayer information.

Judge Amy Berman Jackson of the United States District Court for the District of Columbia wrote that the IRS cannot hide behind taxpayer confidentiality laws, known as section 6103 of the tax code, in order to refuse to say whether those records may exist.

Cause of Action Executive Director Dan Epstein issued the following statement in response to today’s ruling:

“As we have said all along, this administration cannot misinterpret the law in order to potentially hide evidence of wrongdoing. No administration is above the law, and we are pleased that the court has sided with us on this important point.”

In her opinion, Judge Berman Jackson wrote:

“Congress amended section 6103 in 1976 ‘in the wake of Watergate and White House efforts to harass those on its ‘enemies list,’’ in order to ‘restrict[] government officers and employees from revealing ‘any return’ or ‘return information,’’ and its ‘core purpose’ is to ‘protect[] taxpayer privacy.’

“So, this Court questions whether section 6103 should or would shield records that indicate that confidential taxpayer information was misused, or that government officials made an improper attempt to access that information.

“The IRS argues that ‘section 6103’s definition of ‘return information’ . . . makes no distinction based on the purpose for which a person might seek disclosure of the documents.’ But accepting this argument would require a finding that even requests for return information that could involve a violation of section 6103 constitute ‘return information’ that is exempt from disclosure under FOIA Exemption 3 and section 6103.

“The Court is unwilling to stretch the statute so far, and it cannot conclude that section 6103 may be used to shield the very misconduct it was enacted to prohibit.”

BACKGROUND

Cause of Action filed a Freedom of Information Act request with the Treasury Inspector General for Tax Administration (“TIGTA”) and the Internal Revenue Service (“IRS”) to discover any records of an investigation into whether unauthorized officials at the White House may have illegally accessed private taxpayer information.

We sent this FOIA after TIGTA admitted that it had launched such a review in response to a letter from six Republican senators. However, TIGTA’s forthcoming report was never released to the senators or the public.

Our FOIA request to both agencies was then divided into two separate FOIA lawsuits; one against the IRS and one against TIGTA. The court’s holding today requires the IRS to go back and search for records that it previously tried to shield from disclosure.

WASHINGTON – Today, in a watershed victory for government transparency and accountability, the D.C. Circuit Court rejected a lower court’s limited reading of the Freedom of Information Act (FOIA). The Court’s opinion is one of the most important transparency decisions in decades.

CLICK HERE TO READ THE COURT’S OPINION

Marking a victory for Cause of Action, a government oversight group committed to limiting the abuse of federal power, the Court rejected the Federal Trade Commission’s (FTC) attempt to block Cause of Action from obtaining access to documents by improperly charging fees. Instead, the Court remanded for reconsideration of Cause of Action’s status as a representative of the news media and its request as being one in the public interest.

Cause of Action Executive Director Dan Epstein issued the following statement:

“Today’s decision is the most significant court ruling for the news media in over a quarter-century and represents a major victory in the fight to make the federal government more transparent. As a result of this ruling, the ability of federal agencies to deny fee waivers in order to stifle the release of information has been significantly limited. We, together with our partners from the Reporters Committee, are hopeful that this decision spurs a new era of greater public access to information.”

FOIA fees have been notoriously abused by agencies to prevent startup – and even well-established – nonprofit news media organizations from obtaining government documents under fair treatment and without prohibitive fees. Notably, the Court pointed out today that fee waiver determinations are subject to judicial review, establishing that the law treats nonprofit and new media organizations equally with traditional news organizations, like newspapers and broadcast media.

Background:

In 2011, Cause of Action sought records under the FOIA from the FTC, stating we were interested in the requested documents to “inform the public about a threat to the First Amendment rights.” Cause of Action said that because we are “a nonprofit educational organization with no commercial purpose,” we are entitled to a public-interest fee waiver.

The FTC denied our request for waiver of fees in the public interest. We responded to FTC’s denial, stating FTC was incorrect and demonstrated why our request was in the public interest. Cause of Action argued that alternatively, we should be granted a fee waiver as a member of the news media.

The FTC refused, saying Cause of Action was not a news media organization entitled to a fee waiver because we had not proven we could disseminate information. The FTC gave us 100 pages without charge, pursuant to agency policy, and withheld the rest of the production pending Cause of Action’s payment of fees. Our organization refused to pay the fee and made two subsequent FOIA requests to the FTC, and received the same response each time. During that process, the FTC released 300 pages of information without charge, but withheld the rest until we paid.

Cause of Action sought review of the FTC’s decision in the United States District Court for the District of Columbia in 2012, challenging both the FTC’s decision to withhold some of the responsive records as exempt from disclosure and its denial of Cause of Action’s applications for fee waivers. The District Court ruled in favor of the FTC, and Cause of Action, joined with amici the Daily Caller News Foundation and the Reporter’s Committee for Freedom of the Press, appealed to the United States Court of Appeals for the District of Columbia, which issued today’s opinion.