Court grants stay in FTC v. LabMD

The Court of Appeals for the Eleventh Circuit has granted LabMD’s request for a stay of FTC’s final order in FTC v. LabMD.

From the opinion:

First, it is not clear that a reasonable interpretation of § 45(n) includes intangible harms like those that the FTC found in this case. As the FTC Opinion said, § 45(n) is a codification of the FTC’s 1980 Policy Statement on Unfairness. That Policy Statement notably provided that the FTC “is not concerned with . . . merely speculative harms,” but that “[i]n most cases a substantial injury involves monetary harm” or “[u]nwarranted health and safety risks.” Id. “Emotional impact and other more subjective types of harm, on the other hand, will not ordinarily make a practice unfair.” Id. The FTC Opinion here also relied upon the legislative history of § 45(n). But the Senate Report that the FTC relied on also says that “[e]motional impact and more subjective types of harm alone are not intended to make an injury unfair.” S. Rep. No. 103-130, 1993 WL 322671, at *13 (1993). Further, LabMD points out that what the FTC here found to be harm is “not even ‘intangible,’” as a true data breach of personal information to the public might be, “but rather is purely conceptual” because this harm is only speculative. LabMD has thus made a strong showing that the FTC’s factual findings and legal interpretations may not be reasonable.

Second, it is not clear that the FTC reasonably interpreted “likely to cause” as that term is used in § 45(n). The FTC held that “likely to cause” does not mean “probable.” Instead, it interpreted “likely to cause” to mean “significant risk,” explaining that “a practice may be unfair if the magnitude of the potential injury is large, even if likelihood of the injury occurring is low.” The FTC looked to different dictionaries and found different definitions of “likely.” It is through this approach that it argues its construction is correct, considering the statute’s context as a whole. Even respecting this process, our reading of the same dictionaries leads us to a different result. The FTC looked to dictionary definitions that say “likely” means “probable” or “reasonably expected.”Reliance on these dictionaries can reasonably allow the FTC to reject the meaning of “likely” advocated by LabMD, that is, a “high probability of occurring.” However, we read both “probable” and “reasonably expected,” to require a higher threshold than that set by the FTC. In other words, we do not read the word “likely” to include something that has a low likelihood. We do not believe an interpretation that does this is reasonable.

And there’s more.

The statements in the opinion do not, of course, how the court will rule on the issues, but it’s nice to see the court recognize that LabMD has raised some serious issues and that the FTC’s interpretation is not necessarily reasonable.



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