FTC Lawyers Entitled to Immunity from Suit Over Data Breach Probe

It doesn’t matter why lawyers from the Federal Trade Commission investigated the security practices of a medical records company so long as there was an actual security breach, the U.S. Court of Appeals for the District of Columbia Circuit said June 1.

The FTC lawyers are entitled to qualified immunity in a lawsuit by Michael Daugherty and LabMD Inc., seeking damages and claiming they escalated an ongoing investigation because they wanted to punish Daugherty, the company’s CEO, for publicly criticizing them, the court said.

“Even if the FTC attorneys sought to retaliate for the public criticism, their actions do not violate any clearly established right absent plausible allegations that their motive was the but-for cause of the commission’s enforcement action, the court said in an opinion by Judge Robert Leon Wilkins.

A data security company seeking LabMD’s business tracked down and disclosed that information about more than 9,000 patients was available to the public. This prompted the investigation.

During the investigation, Daugherty has filed several lawsuits attacking the proceedings.

The Department of Justice represented Sheer and Yodaiken. James W. Hawkins represented Daugherty and LabMD.

The case is Daugherty v. Sheer, 2018 BL 193803, D.C. Cir., No. 17-5128, 6/1/18.

To contact the reporter on this story: Alisa Johnson in Washington at ajohnson@bloomberglaw.com

To contact the editor responsible for this story: C. Reilly Larson at rlarson@bloomberglaw.com