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David Slays Goliath As LabMD Defeats The Federal Trade Commission

November 16, 2015 by

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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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Filed Under: Press Release, Media

We Were In Federal Court Today on Behalf of Our Client, Rhea Lana Riner. Here’s What We Argued

November 2, 2015 by

Today, Cause of Action presented oral argument before the U.S. Court of Appeals for the D.C. Circuit in the case of Rhea Lana, Inc. v. Department of Labor (Case No. 15-5014).

Rhea Lana is an organizer of children’s clothing consignment events; it was founded by a stay-at-home mother in Conway, Arkansas and has since expanded into a franchise with 80 locations in 24 states. In Rhea Lana’s business model – consistent with other businesses in the consignment industry – consignors provide items to be sold, and have the option of “volunteering” at the sales event. Participating in the sale in that way helps ensure that consigned items sell, and consignors who choose to do so have the opportunity to shop early in order to get the best deals. What Rhea Lana provides is the organization, branding, and technology to help consignors make their sales.

Notwithstanding the obvious benefits of this arrangement for all concerned, the Department of Labor sent Rhea Lana a letter determining that the model violates the Fair Labor Standards Act (FLSA): specifically, that the participating consignors are actually Rhea Lana employees entitled to minimum wage and overtime. Although the agency did not initiate an enforcement action, it encouraged Rhea Lana’s consignors to sue for back wages (none did) and threatened Rhea Lana with civil monetary penalties if Rhea Lana doesn’t conform to the agency’s views. Rhea Lana filed suit under the APA seeking injunctive and declaratory relief, but to make matters worse, the district court dismissed the complaint for lack of any reviewable “final agency action.”

On appeal, Cause of Action has argued that the Department of Labor’s decision is indeed final and reviewable. First, the agency’s decision changes Rhea Lana’s legal status. In order to extract civil monetary penalties from Rhea Lana in a future enforcement action, the agency must prove that Rhea Lana either (1) is a repeat FLSA offender, or (2) violated the statute willfully.  See 29 CFR 578.3. Under the text of the agency’s regulations, notice from the agency has an important legal role in satisfying those requirements. Notice from the agency is an element of repeatedness, which the letter facially appears to satisfy.  Furthermore, notice will allow the agency to argue that Rhea Lana acted willfully not just factually, but as a matter of law. By sending Rhea Lana a letter, the agency thus created legal liabilities that wouldn’t have existed otherwise – one of the hallmarks of reviewable agency action. See, e.g., Sackett v. EPA, 132 S. Ct. 1367 (2013). Second, as the Supreme Court also recently reaffirmed in Sackett, when an agency demands a party’s compliance, the party can go to court instead of waiting for the hammer of enforcement to drop.

We await the Court of Appeals’ decision. If we are successful, the case will return to the district court for consideration on the merits of Rhea Lana’s claim that the Fair Labor Standards Act allows businesses and individuals to collaborate for their mutual benefit.

Filed Under: Blog

Weekly Rundown 10-30-2015

October 30, 2015 by

Cause of Action in the News:

Daily Caller – The Daily Caller Sues The State Department For A Variety Of Clinton Email Records

Cause of Action is representing The Daily Caller in a lawsuit over five Freedom of Information Act requests that have gone ignored by the State Department.  Our suit states “Defendant has dragged its feet, refused to provide substantive updates on the status of the requests, and, through its delay, prevented Plaintiff’s access to the requested records and effectively denied it expedited processing,”

“The material being sought here is not complicated to understand yet, for whatever reason the State Department has failed to process these FOIA requests in a timely manner, as required by law.  Whether requests have come from big news agencies or organizations like mine, this State Department has repeatedly shown an inability to produce basic information regarding the emails belonging to the former Secretary of State,” said Cause of Action Executive Director Dan Epstein.

In Other News:

Watchdog.org – Double-dose of EPA regulations will make your bank account scream

According to a white paper by the Independence Institute the Environmental Protection Agency’s Clean Power Plan will be billions higher in cost for power and gas.  The research concluded that by 2020 the cost of electricity and gas in a given household will go up an average of $680.00.  All of this cost will result in no environmental change, as admitted by Gina McCarthy, current EPA administrator.

Daily Signal – Lois Lerner Won’t Be Facing Criminal Charges. Here Are the Problems With the ‘Investigation’ That Cleared Her.

Although the Department of Justice has decided to end its investigation into Lois Lerner and her email scandal they have failed to erase all doubt.  In the letter the DOJ sent to the House of Representatives they explain the results of their investigation, but fail to determine criteria for which organizations needed closer watching, among other unresolved issues.

The Hill – Five states sue over EPA’s ozone

The Environmental Protection Agency is being sued by five states because of the newly stated ozone limits. EPA administrator Gina McCarthy has said that every state but California should be able to comply to the new ozone standards by 2025.  However, Arizona Attorney General Mark Brnovich says that “reducing the ozone standards to 70 parts per billion will be nearly impossible for Arizona to attain.” AG Brnovich is leading the charge in the lawsuits against the EPA.

Breitbart – HILLARY CLINTON CHANGES DEFINITION OF ‘WORK-RELATED EMAIL’

Statements made by former Secretary of State Hillary Clinton have led to questions of what her definition of a work related email is. Mrs. Clinton said “Well, if you are talking about Mr. Blumenthal, which I assume you are, he had some that I didn’t have, and I had some that he didn’t have. And he — I was under no obligation to make any of his emails available unless I decided they were work-related.”  This seems to contradict a previous statement from Mrs. Clinton where she said she had turned over all emails “that could possibly have been work related,” which should include any emails from an advisor personal friend or not.

Forbes – IRS Joins FBI, DEA & Other Federal Agencies With Access To Cellphone Surveillance Technology

For years now the IRS has had in its possession a Stingray, a device that can capture cell phone data such as location and identifying information without needing a warrant.  A recent Freedom of Information Act request revealed an invoice of $70,000 for the purchase of a HailStorm, a more powerful Stingray, and training for its use.  The IRS has not explained how they utilize the device and now make a list with 12 other federal agencies who own such technology.

Filed Under: News, Media

Weekly Rundown 8-6-2015

August 6, 2015 by

Cause of Action in the News

The Hill – A case study in pay-to-play cronyism

“News flash: Government subsidies and special-interests go hand in hand.” This is how executive director of Cause of Action, Daniel Epstein, starts in his latest Op-Ed.  He goes on to explain in a little more detail how the Department of Energy has shown favoritism, specifically in regard to the “Advanced Technology Vehicle Manufacturing Loan Program.”  Our lawsuit against the Department of Energy is an attempt to prevent such irresponsible use of the American people’s tax dollars.

Washington Free Beacon – Cause of Action Sues State for Clinton Records Failure

In a continued push for government accountability, Cause of Action is suing Secretary of State Kerry and the National Archivist for their failure to perform their duty to make certain that the emails of former Secretary Clinton were not deleted. We believe this lack of transparency does not benefit the American people and should not be allowed to continue.

Washington Examiner – State Dept. blocked FOIA, congressional requests at Obama’s request dozens of times

Requests from Cause of Action to the State Department go unanswered because the State Department needs to get approval from the White House.  The State Department has denied sending documents because they are considered “White House Equities”, a vague description that allows the White House to prevent the turnover of documents that may be embarrassing to the administration.  When Cause of Action requested proof that the documents were sent to the White House, not the documents themselves, the State Department would not provide anything as simple as a cover letter.

In other news:

NY Post – FBI investigation of Hillary’s emails is ‘criminal probe’

Sources say that the investigation into Hillary Clinton’s personal server is more serious than originally portrayed.  While Clinton’s people brush off the FBI inquiry the NY Post source claims “It’s definitely a criminal probe. I’m not sure why they’re not calling it a criminal probe.” As serious as this seems to be, nothing has been heard from the Clinton camp.

Washington Post – Inspectors general to Congress: Allow us access to records to help us root out corruption

The Department of Justice has decided that the inspectors general who need to look at what they consider sensitive law enforcement information must ask for approval from the agency they are investigating.  The Council of Inspectors General has reached out to congress for help in removing this obstacle.  The council explains that the inability to work outside of the knowledge of the investigated agencies could lead to delays and the inability to gather all relevant information.  In addition, the Inspectors General fear that the decision by the Justice Department may discourage whistleblowers from coming forward.

Filed Under: News, Media

Federal Judge Issues Landmark Ruling on Cronyism in Energy Loan Guarantee Program

July 15, 2015 by

Ruling marks the first time a court has allowed a claim under the Administrative Procedure Act on the basis of cronyism or political favoritism in federal discretionary spending.

In response to a legal complaint filed by Cause of Action (CoA), a federal judge has declared that U.S. Department of Energy discretionary spending tainted by alleged cronyism and political favoritism is subject to legal challenge.

Read the Opinion Here

Read the Order Here

Cause of Action represents XP Vehicles (XPV) and Limnia, two green energy companies that were denied loans and a loan guarantee in favor of politically-connected corporations.

XPV is a now-dissolved company that had applied for a loan under the DOE’s Advanced Technology Vehicle Manufacturing (ATVM) Loan Program in order to manufacture a lightweight, energy-efficient sport utility vehicle. XPV partnered with Limnia, a company that developed an energy storage system to power XPV’s proposed vehicle. Limnia had applied for an ATVM loan, as well as a loan under DOE’s Section 1703 Loan Guarantee Program (LGP).

The ATVM Loan Program is designed to provide direct loans to manufacturers of energy-efficient vehicles, while the LGP allows the agency to guarantee loans for advanced technology projects that result in the avoidance or reduction of air pollutants. This is the same program that awarded Solyndra $535 million in taxpayer funds.

During and after the loan application process, XPV and Limnia learned that these loan programs were being run for the benefit of politically-connected insiders.  For example, DOE provided application assistance to Tesla and Fisker that it refused to provide to XPV and Limnia (and others), and then large taxpayer-funded loans. A member of Tesla’s board, who was also a bundler during President Obama’s campaigns, was on a key DOE advisory board, and another bundler who was a Tesla investor and advisor had a primary role in the DOE’s Loan Program Office. In addition, individuals tied to Fisker had made large donations to the Obama campaign and other Democratic causes.  Also, there were emails suggesting that the DOE’s review of a loan applicant was sped up as a result of pressure from then-House Majority Leader Steny Hoyer; that the White House made an effort to encourage DOE to hasten review of another loan application; and that DOE bent its own rules to play favorites. CoA also relied upon two Government Accountability Office reports about these programs that highlighted the potential for abuse.

Judge Ketanji Brown Jackson on the United States District Court for the District of Columbia agreed with CoA, ruling that Limnia has adequately alleged that the DOE’s denials of Limnia’s ATVM Loan Program and LG Program applications were the result of arbitrary and capricious agency action in violation of the APA.

Judge Jackson has thereby allowed Limnia’s claims to proceed. This is significant because prior to this ruling, no court had ever held that cronyism or political favoritism could result in a grant or loan program being administered in an arbitrary and capricious manner.

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

“When politicians and agencies allow companies to purchase government access, the basic foundation of our free market economy is compromised. For the first time, a federal district court has confirmed there is a legal remedy when cronyism influences federal administrative discretionary spending. This groundbreaking opinion establishes that the government owes everyone – not just Presidential campaign donors – a fair shake when awarding government funds. Judge Ketanji Brown Jackson’s common-sense judgment that government decisions tainted by cronyism and political favoritism are ‘arbitrary and capricious’ is a victory for individuals and businesses everywhere.”

Filed Under: Press Release Tagged With: ,

New Documents Show How FTC Lobbied Sen. Jay Rockefeller To Kill FOIA Reform

May 13, 2015 by

By: Daniel Epstein

Cause of Action led the charge to uncover the information

Yesterday, MuckRock.com released documents obtained through the Freedom of Information Act (FOIA) showing how the Federal Trade Commission (FTC), at the direction of FTC Chairwoman Edith Ramirez, lobbied former U.S. Sen. Jay Rockefeller to hold up FOIA reform legislation late last year.

Sen. Rockefeller is the former chairman of the Senate Commerce Committee – the committee charged with FTC oversight.

Shawn Musgrave at MuckRock.com requested the documents at the suggestion of our organization—Cause of Action, a group that works tirelessly to make the federal government more open and transparent.

While the revelation may come as a shock to some, cronyism and opacity at the FTC is nothing new to us. Prior to yesterday, our organization released documents exposing both the close relationship between the FTC and Sen. Rockefeller, as well as the FTC’s opacity when it comes to FOIA requests.

The documents obtained by MuckRock.com show not only how the FTC lobbied aggressively against transparency reform, but also reflect the heights to which FTC’s opacity – and Sen. Rockefeller’s acquiescence – reach. In fact, Jeanne Bumpus, the FTC’s congressional liaison, used a non-government email account to lobby the FTC: ftcexchange.com.

This isn’t the first case of a government official using a non-government email address to conduct official government business. It is, however, yet another example of how this administration’s “commitment…to usher in a new era of open Government” was little more than lip service.

The FTC Used Sen. Rockefeller As Its Personal Hit Man

Last year, Cause of Action alleged that Sen. Rockefeller was a pawn for the FTC. We produced documents showing that Sen. Rockefeller’s own chief of staff negotiated with Chairwoman Ramirez concerning former House Oversight Committee Chairman Darrell Issa’s investigation into the FTC, an investigation initiated in response to the FTC’s aggressive and fraudulent battle with the cancer detection company LabMD.

In an effort to silence our organization, the FTC motivated Sen. Rockefeller to publicly attack us in a letter to Congressman Issa.

What the documents uncovered yesterday confirm is that the FTC and Sen. Rockefeller shared an extremely cozy relationship whereby the FTC would use the senator as a proxy to fight its battles to kill FOIA reform and to attack us.

Filed Under: Blog Tagged With: ,

Weekly Rundown 5-8-2015

May 8, 2015 by

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CNN Money: Whistleblower accuses cybersecurity company of extorting clients – Cause of Action’s fight against the FTC continued on Tuesday… Read More

Law 360: Analyst Backs LabMD In FTC Row, Alleges Fraud At Tiversa — “LabMD Inc. on Tuesday scored a major hit in its data security fight with the Federal Trade Commission after a former analyst at the cybersecurity firm Tiversa Inc. testified that his company lied to the agency about the extent of LabMD’s data leaks after the medical testing firm turned down its services… According to LabMD’s attorney Reed Rubinstein… the testimony marked a “remarkable day” in the case and vindicated the company’s assertion that “the FTC action was based on manufactured evidence.” At the close of the hearing Tuesday, Rubenstein announced that LabMD will seek a criminal investigation against the Tiversa…” Read More

Epoch Times: EB-5 Visa Limits May Slow Flow of China’s Elite to US – Cause of Action will not allow public officials to take advantage of the EB-5 visa program… Read More

Fox News: Clinton agrees to testify this month before House committee on Benghazi, private emails — “Democratic presidential candidate Hillary Clinton has agreed to testify on Capitol Hill this month about two controversial issues when she was secretary of state — the fatal terror attacks in Benghazi, Libya, and using a private server and emails for official business, her attorney said Tuesday…” Read More

Washington Times: IRS still targeting tea party: Nine groups awaiting agency approval — “Nine tea party groups were still awaiting IRS approval for nonprofit status nearly two years after the political targeting program was exposed, the inspector general said in a report Thursday that, despite hiccups, claimed the tax agency has generally done a good job of cleaning up its act…” Read More

Filed Under: Media, News Tagged With: , ,