In an Initial Decision, Chief Administrative Law Judge D. Michael Chappell dismissed charges in a Federal Trade Commission complaint against medical testing laboratory LabMD, Inc., which alleged that LabMD violated the FTC Act by failing to employ reasonable and appropriate measures to prevent unauthorized access to consumers’ personal
LabMD’s introduction to the FTC began with a phone call from a cyber security firm, Tiversa, who in 2008 claimed to have to have found a LabMD file online containing patient information.
When LabMD’s owner, Michael Daugherty, requested additional detail surrounding the circumstances of how Tiversa discovered its file, he was told Tiversa would provide it once LabMD signed a service agreement for upwards of $400 per hour with Tiversa to mitigate the data breach.
The only issue…there was no data breach.
After performing its forensic analysis, LabMD was confident the patient file had never left its Atlanta headquarters and informed the cyber security firm they would not be entering into any agreements. In fact, whistleblower testimony given by a former Tiversa employee during the FTC trial proved LabMD was correct.
Unfortunately, Tiversa didn’t just go away, they went away mad. The cyber security firm turned over the patient file to the FTC, who in turn used it as the basis to file a complaint against LabMD in 2013.
So seven and a half years after the Tiversa call, LabMD has been vindicated and the FTC’s complaint against the company dismissed. However, this is not the end of LabMD’s story; it has only just begun.
On November 24, 2015, the FTC filed its notice to appeal the ‘initial ruling’ by the Administrative Law Judge dismissing the complaint against the laboratory.
The FTC must file its appeal by December 23, 2015, after which LabMD will be given time to file a rebuttal. Sometime in 2016, a three-member panel made up of FTC commissioners will hear the appeal and make the ‘final’ ruling in the FTC’s case against LabMD.
Given the FTC has lost exactly ZERO of said appeals over the past twenty years, and Julie Brill, one member of the usually four member ‘unbiased’ panel recused herself from the case for prejudging LabMD as guilty prior to the trial’s onset, the assumption is the panel will overrule the ALJ’s decision.
Yes, LabMD won, but at what cost?
The Atlanta-based cancer detection laboratory was forced to shut its doors, employees lost their jobs, and LabMD piled up approximately $4 million in attorney fees to fight the federal government behemoth over something that never occurred.
LabMD’s story shines a spotlight on everything wrong with government today, and this writer wonders why more aren’t reporting it.