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From Antitrust Law Daily, January 20, 2015

Cancer lab could not challenge denial of dismissal of FTC administrative action

By Greg Hammond, J.D.

An Atlanta-based laboratory that conducts cancer-detection testing services for doctors could not challenge an FTC order denying dismissal of claims that the laboratory violated the FTC Act by failing to prevent unauthorized access to its patient information. In affirming the lower court’s order dismissing the claims for lack of subject matter jurisdiction, the U.S. Court of Appeals in Atlanta determined that the FTC’s order was not a “final agency action” (LabMD, Inc. v. FTC, January 20, 2015, Martin, B.).

Background. The FTC filed an administrative complaint against LabMD in 2013, alleging that the company failed to reasonably protect the security of consumers’ personal data, including medical information. After LabMD’s motion to dismiss was denied by the Commission, it filed suit in the federal district court in Atlanta, alleging: (1) the FTC administrative action against LabMD was arbitrary and capricious in violation of the Administrative Procedure Act (APA), because the Commission has no authority to regulate protected health information; (2) the action was ultra vires and exceeded its statutory authority; (3) the FTC’s application of Section 5 to LabMD’s security protocols violated the Due Process Clause of the U.S. Constitution because it did not provide fair notice or access to a fair tribunal and a hearing; and (4) the FTC violated LabMD’s First Amendment right to free speech. The Commission moved to dismiss, which the district court granted and LabMD appealed.

Finality of agency action. In support of its appeal, LabMD argued that the Commission’s administrative complaint and order denying the motion to dismiss were sufficiently final to confer subject-matter jurisdiction over its APA claim. The appellate court disagreed, finding that the denial of a motion to dismiss, by definition, ensured that the proceeding would continue to a later, final order, and a complaint was “just an initial document.” In addition, the court concluded that no direct and appreciable legal consequences flowed from the documents, and no rights or obligations had been determined because the agency proceeding was still ongoing.

The constitutional and ultra vires claims were also properly dismissed, the court concluded, as they were intertwined with the APA claim, and should therefore only be heard upon completion of the agency proceedings. The court consequently affirmed the lower court’s order dismissing the case for lack of subject-matter jurisdiction, noting that the FTC is “best suited to develop the factual record, continue to evaluate its position on the issues, and apply its expertise to complete the proceeding,” allowing for a “more robust appellate review by this Court when the action concludes.”

The case number is 14-12144.

Attorneys: Reed Darrow Rubinstein (Dinsmore & Shohl, LLP) for LabMD, Inc. Mark B. Stern, U.S. Department of Justice, for FTC.

Companies: LabMD, Inc.

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