FTC Ordered to Testify Regarding Data Security Standards in LabMD Dispute

by Baker Donelson

The Federal Trade Commission (FTC) has suffered a significant setback in its ongoing dispute with LabMD, a now-closed medical laboratory that the FTC charged with failing to adopt reasonable data security practices that resulted in the exposure of the data of 10,000 patients in 2010. In a decision that has far-reaching implications for companies caught in the snares of FTC proceedings regarding the adequacy of data security practices, an administrative law judge ruled on May 1, 2014, that the FTC must submit to a deposition and provide testimony regarding the specific data security standards the FTC has published or intends to use at trial to show that LabMD's data security was inadequate.

The FTC charged LabMD with engaging in unfair trade practices in violation of Section 5(a) of the Federal Trade Commission Act by engaging in a number of data security practices that, "taken together, failed to provide reasonable and appropriate security for personal information on LabMD's computer networks," which caused, or are likely to cause, substantial injuries to consumers. The FTC claimed that LabMD, among other things, failed to have a "comprehensive data security program," did not use readily-available measures to identify risks and vulnerabilities on its computer networks, did not use "adequate measures" to prevent employees from accessing personal information, did not maintain or update its computer operating system, and did not employ readily-available measures to prevent or detect unauthorized access to personal information on LabMD's networks.

LabMD answered the FTC's complaint and denied that it had violated the FTC Act or failed to provide reasonable and appropriate security for personal information on its computer networks. LabMD then noticed a deposition of the FTC seeking testimony of, among other things, the "data security standards that have been used by the [FTC] to enforce the law under Section 5 of the Federal Trade Commission Act since 2005." During the deposition, the FTC's counsel instructed the witness not to answer questions about the data security practices allegedly breached by LabMD, but the judge granted LabMD's motion to compel that testimony. While the judge held that the FTC did not have to disclose the legal reasoning behind its decision, the judge found that the data security standards the FTC intended to rely on are "factual matters, well within the scope of permissible discovery," and relevant to LabMD's defense that its data security practices were adequate, as well as its defense that the FTC failed to provide fair notice of the data security standards that LabMD was expected to meet.

The FTC frequently brings enforcement actions against companies for failing to have in place "reasonable" practices to safeguard personal information on their computer networks. Those cases have historically been resolved through consent agreements, with no legal challenge being made to the FTC's authority to bring such actions under Section 5 of the FTC Act, which prohibits "unfair or deceptive" trade practices. However, a federal court recently affirmed the FTC's authority to bring such enforcement actions under Section 5 of the FTC Act in FTC v. Wyndham Worldwide Corp.

The deposition of the FTC in the LabMD case is expected to be conducted within 10 days pursuant to the judge's ruling. The testimony should provide important insight into the FTC's decision-making process with respect to the reasonableness of data security practices under Section 5 of the FTC Act.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.