United States Court of Appeals, District of Columbia Circuit
Michael J. Daugherty and LabMD, Inc., Appellees
Alain H. Sheer, in his individual capacity and Ruth T. Yodaiken, in her individual capacity, Appellants Does 1-10, in their individual capacities, Appellees
January 9, 2018
from the United States District Court for the District of
Columbia (No. 1:15-cv-02034)
R. Walters, Attorney, U.S. Department of Justice, argued the
cause for appellants. With him on the briefs were Jessie K.
Liu, U.S. Attorney, and Mark B. Stern, Attorney.
W. Hawkins argued the cause and filed the brief for
Patrick J. Massari and Michael Pepson were on the brief for
amicus curiae Cause of Action Institute in support of
Before: Pillard and Wilkins, Circuit Judges, and Sentelle,
Senior Circuit Judge.
WILKINS, CIRCUIT JUDGE
case requires us to decide whether two Federal Trade
Commission attorneys are immune from suit for their conduct
during an enforcement action against a medical-records
company after the company's CEO publicly criticized the
FTC about their investigation, where the company's
data-security practices made patient records available over
public file-sharing. Because "qualified immunity
protects all but the plainly incompetent or those who
knowingly violate the law, " Mullenix v. Luna,
136 S.Ct. 305, 308 (2015) (internal quotation marks omitted),
the answer is yes. 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.
Inc. is a small medical-services company in Fulton County,
Georgia, owned by Michael Daugherty.LabMD maintained personal
information about thousands of patients, including
information covered by the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA").
2008, data-security company Tiversa Holding Corporation
notified LabMD that Tiversa located a LabMD PDF file with
personal information about 9, 300 patients on LimeWire, a
peer-to-peer file-sharing application. Tiversa was able to
access and download this file, known as the "1718 File,
" through its data-monitoring technologies that run a
prodigious number of searches across file-sharing networks.
Tiversa also informed LabMD that the 1718 File had
"spread, " meaning that other users searched for
and downloaded the file on various peer-to-peer networks.
LabMD determined that the 1718 File was on LimeWire because
the application was installed on a LabMD billing computer,
and the company removed LimeWire immediately. LabMD employees
searched for the 1718 File on other networks, but did not
find it. Plaintiffs-Appellees allege that Tiversa's
actions were a sales tactic to attempt to persuade LabMD to
purchase Tiversa's data-breach-remediation services.
the FTC. On January 19, 2010, LabMD CEO Daugherty received a
letter from Alain Sheer, an FTC enforcement attorney,
informing LabMD that the FTC was investigating LabMD's
information-security practices, because "[a]ccording to
information [they] ha[d] received, a computer file (or files)
from your computer network is available to users on a
peer-to-peer file sharing ('P2P') network."
Compl. ¶ 115. According to Plaintiffs-Appellees, Sheer
knew about the 1718 File only because Tiversa contacted the
FTC to suggest an investigation, another Tiversa strategy for
pressuring companies to retain their services.
the next three and a half years, FTC attorneys Sheer and Ruth
Yodaiken investigated Daugherty and LabMD regarding the
company's data-security practices that allowed the 1718
File to be available on LimeWire. During this period,
Daugherty publicly criticized the FTC, Sheer, and Yodaiken
regarding the conduct of the investigation. On September 7,
2012, the Atlanta Business Chronicle quoted Daugherty
describing the FTC's investigation as "a fishing
expedition" that was "beating up on small
business." Compl. ¶ 128. An FTC paralegal
downloaded the article and sent it to Sheer, Yodaiken, and
others not named. Id. ¶ 129. Daugherty and
LabMD allege that "[a]fter reading Daugherty's
quote, Sheer and Yodaiken ramped up their investigative
efforts against Daugherty and LabMD." Id.
¶ 130. However, it is not alleged what this
"ramp[ing] up" entailed. On July 19, 2013,
Daugherty posted on the internet a "trailer" for
his book, The Devil Inside the Beltway, which
details his experience with the FTC investigation into LabMD.
Three days later, Sheer informed LabMD's attorney that
the investigation team had recommended an enforcement action
against LabMD to the Commission, which would make the
decision about ...