Law360: LabMD Rips 11th Circ. For Refusing FTC Data Security Suit

Read the full story: Law360

The Eleventh Circuit’s refusal to weigh in on a complaint from the Federal Trade Commission accusing LabMD Inc. of failing to safeguard patient information unlawfully shifts the balance of power between agencies and courts, the company recently said in a request for an en banc rehearing…


Reed Rubinstein, an attorney for LabMD and senior vice president of litigation at nonprofit Cause of Action, told Law360 on Wednesday that his client shouldn’t have to wait for the FTC proceeding to play out when there’s no doubt about its outcome.


“If the process is going to result in an outcome that is, for all intents and purposes, predetermined, what is the justification for requiring a person or a company to have to go through that process in order to obtain judicial review?” Rubinstein asked.

Cause of Action Challenges FTC in Court for Obstructing Transparency


CONTACT: Geoff Holtzman, 703-405-3511,

Cause of Action Challenges FTC in Court for Obstructing Transparency

Agency Threatens the Integrity of FOIA, Conduct Part of a Larger Pattern

WASHINGTON – Cause of Action (CoA), a government oversight group, today will argue before the United States Circuit Court for the District of Columbia that the Federal Trade Commission (FTC) improperly denied CoA’s request to be treated as a news media organization and for fee waivers under the Freedom of Information Act (FOIA). The Reporters Committee for Freedom of the Press, the Washington Post, National Public Radio, and the Daily Caller News Foundation, among others, filed a “friend of court” brief in support of CoA.

Cause of Action’s Executive Director Dan Epstein said: “This Administration pledged openness and transparency, yet FTC has done the reverse. President Obama has said regarding FOIA that ‘democracy requires accountability and accountability requires transparency.’ But by obstructing FOIA disclosure and by playing games with media status and fee waivers to reward friends and to punish critics, FTC has crippled transparency and obstructed accountability.”

“FTC’s desire to chill criticism appears to explain what occurred here. Upholding FTC’s ‘weaponization’ of FOIA will empower agencies to selectively define what is and isn’t ‘media’, thereby blocking transparency and significantly reducing the federal government’s accountability to all Americans.”

CoA filed three separate FOIA requests between 2011 and 2012 for information on FTC regulation of social media authors and bloggers. CoA advised FTC this information was for an article and investigative report because blogger regulations “justify close scrutiny.” FTC denied CoA information access, news media requestor status and fee waivers. At the same time, FTC granted fee waivers to the AFL-CIO, the Environmental Defense Fund and the Marin Institute. According to Mr. Epstein, “FTC’s desire to chill criticism appears to explain what occurred here.”

FTC’s conduct reflects a larger pattern of government games with FOIA. For example, in 2009, the White House Counsel required all government agencies to submit FOIA disclosures involving “White House equities” for political pre-review. In 2013, a study by the Competitive Enterprise Institute revealed that the Environmental Protection Agency granted fee waivers to politically favored groups in 75 out of 82 cases, but denied 14 of 15 requests for fee waivers by Agency critics during the same period of time. In 2014, AP’s Washington Bureau Chief said FOIA “is under siege” and that “Requests are now routinely forwarded to political appointees.”

To learn more about Cause of Action’s work on this case, please click here.

WHAT: Arguments in Cause of Action v. Federal Trade Commission

WHERE: United States Circuit Court for the District of Columbia

WHEN: TODAY, January 13, 2015 at 9:30 am 

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Geoff Holtzman at


Law360: Tiversa Can’t Attack Future Witness In LabMD Fight With FTC

Read the full story: Law360

The order pointed out that the judge had already rejected a motion by the FTC in July for permission to develop evidence to rebut Wallace’s expected testimony because he had yet to testify, and that Tiversa’s “attempt at anticipatory rebuttal” suffered from a similar defect.


Cause of Action, which is representing LabMD in the administrative proceeding, praised the administrative law judge’s decision to disregard Tiversa’s notice.


“All along we’ve wanted the truth to come out about the FTC’s actions against LabMD,” Cause of Action said in a statement provided to Law360 on Thursday.

Law360: Tiversa Attacks LabMD Witness’ Claims In Data Security Row

Read the full story: Law360

Reed Rubinstein, the senior vice president of litigation at Cause of Action, which is representing LabMD in the administrative proceeding, responded to Tiversa’s motion in a statement provided to Law360 on Monday.


“It’s clear that Tiversa does not want Mr. Wallace to testify, but all we’ve wanted since we began this case is for the facts and the truth to come out about the FTC’s overreach against LabMD,” Rubinstein said.

Computerworld: Congressman calls for halt to FTC breach probe amid claims of ‘corporate blackmail’

Read the full story: Computerworld

Government watchdog Cause of Action, (CoA) which has taken up LabMD’s defense, welcomed the House Oversight Committee investigation demand for an investigation into its relationship with Tiversa.


“The House Oversight Committee’s investigation should send a message to federal agencies, the President and the courts that the arbitrary abuse of administrative power will not go unchecked,” Cause of Action’s executive director Dan Epstein said. “This is why it has investigated and litigated for LabMD to stop the FTC from arbitrarily expanding and abusing its power by victimizing an entrepreneur who did nothing wrong.”


The CoA contends that there is no evidence that the FTC has taken steps to independently authenticate Tiversa’s claims.

Briefing Book: Federal Trade Commission v LabMD

LabMD Briefing Book by CauseOfAction

Congress Questions FTC’s Evidence Against LabMD

FOR IMMEDIATE RELEASE                                                                                                   

June 12, 2014


 Congress Questions FTC’s Evidence Against LabMD

WASHINGTON – On June 11, 2014 Congress’s chief watchdog, the House Committee on Oversight and Government Reform, advised the Federal Trade Commission (FTC) that the information the FTC obtained from Tiversa, Inc. is “false,” “incomplete” and “inaccurate.”   The Committee also said that it expected the FTC to “cooperate fully” with any subsequent document requests or transcribed interviews with FTC employees.

Cause of Action, a government accountability and transparency organization, has been defending LabMD, an Atlanta-based cancer-detection lab, in an ongoing Federal Trade Commission enforcement action alleging that LabMD’s data security, though not in violation of applicable HIPAA regulations, is unreasonable.

The FTC commenced its four and one-half year assault against LabMD based on information it obtained from Tiversa, Inc. Tiversa is a company claiming to specialize in peer-to-peer network security.

The FTC obtained confidential LabMD patient information from Tiversa in 2009 by way of a sham corporation located in the home of Tiversa’s CEO’s uncle Although Tiversa had a strong commercial interest in the FTC’s commencement of enforcement proceedings, there is no evidence that the FTC took any steps to authenticate Tiversa’s claim that LabMD patient files had been found in multiple places on a peer-to-peer network.  As the FTC and Tiversa were both aware, the unauthorized taking of patient files from a Georgia workstation, by peer-to-peer software or by any other means, is a crime under Georgia law.

To date, the FTC has refused to make public the full nature and extent of its relationship with Tiversa.

According to Dan Epstein, Cause of Action’s Executive Director, “the House Oversight Committee’s investigation should send a message to federal agencies, the President and the courts that the arbitrary abuse of administrative power will not go unchecked.  Cause of Action exists to hold accountable those who so choose to abuse their office.  This is why it has investigated and litigated for LabMD to stop the FTC from arbitrarily expanding and abusing its power by victimizing an entrepreneur who did nothing wrong.  The Committee’s action, and the record of testimony before the Administrative Law Judge and Judge Duffey in the U.S. District Court in Georgia, all lead to a single conclusion:  That the FTC – including its commissioners and staff attorneys – must be stopped.”

Excerpts from today’s hearing before the Chief Administrative Law Judge Michael Chappell of the FTC as well as statements from FTC Commissioner J. Thomas Rosch and U.S. District Court Judge William Duffey all point to the dangers or the FTC relying upon unauthenticated evidence as the basis for targeting LabMD:

Commissioner J. Thomas Rosch from his dissent on June 21, 2012 to the FTC’s denial of LabMD’s request to quash civil investigative demands against the company:

Specifically, I am concerned that Tiversa is more than an ordinary witness, informant, or “whistle-blower.” It is a commercial entity that has a financial interest in intentionally exposing and capturing sensitive files on computer networks, and a business model of offering its services to help organizations protect against similar infiltrations. Indeed, in the instant matter, an argument has been raised that Tiversa used its robust, patented peer-to-peer monitoring technology to retrieve the 1,718 File, and then repeatedly solicited LabMD, offering investigative and remediation services regarding the breach, long before Commission staff contacted LabMD. In my view, while there appears to be nothing per se unlawful about this evidence, the Commission should avoid even the appearance of bias or impropriety by not relying on such evidence or information in this investigation.

Judge William Duffey, from the May 7, 2014 United States District Court Northern District of Georgia hearing in LabMD v. FTC:

THE COURT: But the assistant director has just said that there will be evidence presented before a judicial officer, I guess an administrative law judge, in which somebody will state these nine thousand individuals — information about  individuals in a single record was accessed by an outside source through a file-sharing program that had been installed on LabMD’s computers. You are going to say that there is no evidence of that —that that ever happened, and you are going to believe that you are right, and the FTC, although sometimes I wonder if they are — just how compelling their evidence is, that they are going to claim that they are right, and somebody will make a determination of whether there has been a breach or not. Then the question is — and I do find this — and I think I know enough about this, and I learned a lot from the CID hearing — is that the FTC is going to go into the business of monitoring and investigating and regulating security breaches and that they have decided I think to do that within what they believe is their administrative authority, because I think they went to Congress and Congress wouldn’t authorize that for whatever reason, whether it’s politics or not. But I think there has been no amendment to Section 5 to specifically allow that. But they are taking the position that they have the authority to do that.

During that same hearing, Mr Schoshinski, an attorney representing the FTC, stated:

THE COURT: So sitting here today, you have no idea where the documents came from, whether they came from LabMD or some other source? Is that a fair thing to say?

MR. SCHOSHINSKI: No. We believe they were LabMD’s documents.

THE COURT: Well, they might have been LabMD’s documents, but you don’t know how they got into the possession of the two individuals that you tried to contact that pled guilty to this offense?

MR. SCHOSHINSKI: That’s correct, Your Honor.

THE COURT: So you have no information to establish how those documents were obtained; is that right?

MR. SCHOSHINSKI: That’s correct, Your Honor.

THE COURT: And you are still proceeding on this claim?

MR. SCHOSHINSKI: Yes, Your Honor, because the claim is not concerning that incident alone. It’s concerning —

THE COURT: All right. But are you still proceeding on that claim?

MR. SCHOSHINSKI: We are proceeding on that evidence, Your Honor.

THE COURT: And that evidence relates to other claims, because you have other documents that were found in other places?

MR. SCHOSHINSKI: That evidence relates to the potential injury suffered by consumers as a result of exposure of this information.

THE COURT: Are you serious about that last response?

MR. SCHOSHINSKI: Yes, Your Honor, I am.

THE COURT: So you don’t know where the documents came from, you don’t know how these people got the possession of it, you don’t know whether they originated from LabMD or some other place, but you are going to use that to show that, because they committed identity theft, that certain individuals were damaged by documents, the source of which you don’t even know?

MR. SCHOSHINSKI: Yes, Your Honor.

THE COURT: Holy cow.

From the June 12, 2014 proceedings before the Administrative Law Judge Chappell at the FTC. The “letter” referenced below is a June 11, 2014 letter from the House Oversight Committee to the FTC found here. Ms. VanDruff, counsel representing the FTC, stated:

JUDGE CHAPPELL:  Ms. VanDruff, what part of this letter do you think is not relevant to this proceeding? Stand up and address that question immediately.  I just read paragraph 2.  I want to hear from you.

MS. VANDRUFF:  Your Honor, I didn’t say it wasn’t relevant, Your Honor.  And Mr. Sherman is also copied on this letter and it is Mr. Sherman who raised the issue of Mr. Wallace this morning.  To the extent that Mr. Sherman believed that this letter was relevant to Your Honor’s —

JUDGE CHAPPELL:  You would agree this letter refers to the 1718 File.

MS. VANDRUFF:  Absolutely, Your Honor.

JUDGE CHAPPELL:  In black-and-white, it’s right there.  You would agree it refers to testimony being accurate or not regarding this case.

MS. VANDRUFF:  Yes, Your Honor.  I made no representation to the contrary.

JUDGE CHAPPELL:  Yet you didn’t talk about the letter until I asked you; is that correct?

MS. VANDRUFF:  Your Honor.

JUDGE CHAPPELL:  Until this lady brought it up.

MS. VANDRUFF:  The issue that Your Honor —

JUDGE CHAPPELL:  Were you going to sit there and not tell me about this letter?  Were you going to do that if I hadn’t asked you?  That’s what I want to know.

MS. VANDRUFF:  Your Honor, I was prepared address this letter today.  Mr. Wallace is not our witness, nor is Mr. Boback, and so if it was in the interest of — I don’t know.

JUDGE CHAPPELL:  You don’t think in the interest of truth this information should be disclosed to this court in this proceeding?

MS. VANDRUFF:  I was not withholding the information, Your Honor.

JUDGE CHAPPELL:  We’re trying to get to the truth here, aren’t we?

MS. VANDRUFF:  Of course we are.

JUDGE CHAPPELL:  You don’t think this letter touches on this matter in truth on this matter that we’re having a trial.  You were not going to bring up this letter; is that correct?

MS. VANDRUFF:  No, Your Honor, that is not what I said.  No.  That is not the position of the government, of course not.

JUDGE CHAPPELL:  Then you had plans to offer this letter because it’s relevant?  Is that what you’re doing?

MS. VANDRUFF:  Excuse me, Your Honor?

JUDGE CHAPPELL:  You had plans to offer this as an exhibit?

MS. VANDRUFF:  Your Honor, I don’t think that it is admissible for any purpose in this matter because it is hearsay.  Nonetheless, I think it’s appropriate in the context of Ms. Dickie’s representations to the court regarding Mr. Wallace and the conduct of the committee for Your Honor to have been advised about the current state of the committee’s investigation.

JUDGE CHAPPELL:  This is a letter to the head of the FTC.

MS. VANDRUFF:  Correct.

JUDGE CHAPPELL:  Talking about fundamental matters in this proceeding about truth or veracity, fundamental matters of a source that’s been very helpful to the government I might add in its case based on what I’ve heard.  I’m very disappointed this was not brought to my attention by the government.  Go ahead.

MS. VANDRUFF:  I apologize, Your Honor.  Thank you.