Judge Hands FTC Major Defeat

An administrative law judge within the Federal Trade Commission dealt the agency a major blow this week when he dismissed a lawsuit accusing a medical company of insufficient data security. The case had focused on a nearly 2,000-page LabMD report that contained personal information, including social security numbers, for about 9,300 patients. That report was discovered on a peer-to-peer file sharing network in 2008 by online security firm Tiversa. Tiversa attempted to sell LabMD its security services, and when LabMD declined Tiversa reported it to the FTC. But in dismissing the case, Judge D. Michael Chappell said the FTC had failed to prove that LabMD’s handling of information had caused, or was likely to cause, substantial harm to customers. Some observers believe the ruling may encourage other companies to take a stronger stance when faced with FTC enforcement actions.