NJ district court certifies two issues for interlocutory appeal in FTC v. Wyndham

In April, Judge Esther Salas denied Wyndham’s motion to dismiss the FTC’s complaint stemming from what the FTC alleges were unreasonable data security practices that put consumers at risk of harm. The FTC’s complaint was brought under Section 5 of the FTC Act, and Wyndham had challenged their authority to enforce data security as well as their enforcement in the absence of previously promulgated rules or regulations.  Wyndham subsequently moved to certify the Order for interlocutory appeal.  Yesterday, Salas granted that motion over the FTC’s opposition. There was no oral argument on the motion and Salas had denied the application of amici to brief on the issue, saying that their assistance was not needed by the court in resolving Wyndham’s motion to certify.

Wyndham is seeking to appeal two of the three main issues they had raised in their motion to dismiss. From the court’s memorandum opinion and order:

In its motion, Hotels and Resorts seeks interlocutory appellate review of the Court’s Order concerning the following two legal issues relating to the FTC’s unfairness count: “(1) whether Congress has delegated to the Federal Trade Commission . . . generalized statutory authority to regulate data security practices; and (2) if so, whether the FTC has provided regulated entities adequate notice of what data-security practices are required.” (WHR’s Motion to Certify at 1). Hotels and Resorts, therefore, does not seek to certify the Court’s Order relating to the FTC’s deception count or the sufficiency of pleading for both the unfairness and deception counts. Furthermore, Hotels and Resorts does not seek a stay pending interlocutory appellate review. (D.E. No. 197, Reply in Support of Defendant’s Motion to Certify Order Denying Motion to Dismiss (ECF. No. 182) for Interlocutory Appeal at 3 (“WHR’s Reply”) at 2).

After reviewing the two issues of controlling law raised by Wyndham’s motion and considering the standards for granting certification of the order, Judge Salas writes:

The Court recognizes that “interlocutory certification should be used sparingly and that the District Court should serve as a diligent gatekeeper to prevent premature and piecemeal appeals.” Bais Yaakov of Spring Valley, 2013 WL 663301, at *5. But the circumstances here appear sufficiently exceptional to justify certification for interlocutory appellate review.

In so concluding, the Court has carefully considered its April 7, 2014 Opinion, the parties’ voluminous submissions and lengthy arguments concerning Hotels and Resorts’ motion to dismiss, the absence of precedent directly addressing the pure questions of law at issue here, the procedural posture of the instant action, the standard for granting interlocutory appellate review under 28 U.S.C. § 1292(b), and, importantly, the nationwide significance of the issues in this action — which indisputably affect consumers and businesses in a climate where we collectively struggle to maintain privacy while enjoying the benefits of the digital age.

So the two questions certified for appeal are:

(1) Whether the Federal Trade Commission can bring an unfairness claim involving data security under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a); and

(2) Whether the Federal Trade Commission must formally promulgate regulations before bringing its unfairness claim under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a);

Neither of the above will likely surprise anyone following the case. So now let’s see what happens at the appellate level.

h/t, Eric Goldman

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