Antitrust Law Daily Wrap Up, PRIVACY NEWS: FTC chairwoman dodges disqualification in LabMD data breach suit, (Aug 19, 2015)

By Greg Hammond, J.D.

The FTC has thwarted LabMD, Inc.’s second attempt to disqualify Chairwoman Edith Ramirez from participating in administrative proceedings against the medical testing laboratory for failing to reasonably protect the security of consumers’ personal data, including medical information, in violation of the FTC Act. In denying LabMD’s second motion to disqualify on August 14, the Commission determined that LabMD’s latest arguments rest on essentially the same factual assertions and merely reformulates its already-rejected claims (In the Matter of LabMD, Inc., File No. 102 3099, Dkt. 9357).

The FTC issued an administrative complaint against LabMD in August 2013, alleging that the now-defunct medical testing laboratory engaged in unfair acts or practices in violation of Section 5 of the FTC Act. Specifically, the Commission claims that LabMD failed to prevent the unauthorized disclosure of consumer information from its computer systems, and that, as a result of data security failures, unauthorized third parties in two security breach incidents obtained consumer information from the company’s computer systems via peer-to-peer file-sharing application Limewire installed on a billing computer. The Sacramento Police Department also purportedly discovered identity thieves in possession of checks payable to LabMD and LabMD documents containing information of at least 500 consumers.

LabMD moved to disqualify Ramirez in April 2015, arguing that she was irrevocably tainted and compromised by her involvement in the FTC response to the U.S. House of Representatives Committee on Oversight and Government Reform investigation of Tiversa, Inc. The Commission denied the motion, and Ramirez refused to recuse herself.

In an August 6 statement responding to LabMD’s second motion to disqualify, Ramirez again declined to recuse herself, noting that LabMD’s current motion is predicated on the same essential factual assertions made in its earlier motion and is “just as baseless.” The Commission agreed, rejecting LabMD’s arguments that (1) Ramirez engaged in ex parte communications with the Oversight Committee and failed to disclose them in violation of the Administrative Procedure Act; and (2) Ramirez must be disqualified because the agency “improperly created a discrete body of secret law” when it invoked the deliberative process privilege to withhold certain agency communications.

Specifically, the Commission determined that the Oversight Committee did not focus upon, or even address, Ramirez’s decision-making process on the merits of the adjudication, and there was no evidence demonstrating the chairwoman took part in addressing the questions raised by the Oversight Committee or that she engaged in ex parte communications concerning the merits of the case. Lastly, the Commission determined that LabMD’s latter claim had no basis in fact or law, as the deliberative process privilege applies to many types of agency deliberations from officials at various levels within the agency, including recommendations for responding to congressional inquiries.

Companies: LabMD, Inc.; Tiversa, Inc.

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