Wyndham Petitions Third Circuit to Reject FTC Data Security Order

by Sanjay Ibrahim on February 26, 2015

in Commercial Litigation

Wyndham Petitions Third Circuit to Reject FTC Data Security OrderIn its ongoing litigation with the Federal Trade Commission (“FTC”) that the agency lacks authority to regulate the data security practices of private companies, Wyndham Worldwide Corp. has asked the Third Circuit to consider a recent ruling by the Eleventh Circuit that it lacked jurisdiction in a parallel dispute between the FTC and a Georgia medical testing laboratory.

Wyndham exercised its right under Rule 28(j) that allows parties to cite relevant supplemental rulings that occur after briefs have been filed to send a letter to the Third Circuit, bringing its attention to the January 20, 2015 ruling in LabMD Inc. v. Federal Trade Commission, case number 14-12144, in the U.S. Court of Appeals for the Eleventh Circuit.

In that ruling, the Eleventh Circuit affirmed a Georgia district court’s decision that it lacked jurisdiction to decide whether the FTC had exceeded its authority by bringing an administrative proceeding against the Georgia medical lab for failing to protect private health data by not having reasonable data security measures in place. The circuit court ruled that it lacked jurisdiction because the administrative proceeding was still ongoing.

In the case before the Third Circuit — FTC v. Wyndham Worldwide Corp. et al., Case No. 14-3514 — the FTC alleges that Wyndham violated Section 5 of the FTC Act by failing to maintain reasonable and appropriate security measures to protect private consumer information, leading to three data breaches and more than $10.6 million in fraud losses.

Wyndham argued that the FTC lacks the statutory authority to regulate the data security practices of private companies and filed a motion to dismiss. In April 2014, a New Jersey district court denied that motion, saying that “the motion to dismiss demands that this court carve out a data-security exception to the FTC’s authority and that the FTC publish regulations before filing an unfairness claim in federal court.”

The Third Circuit is scheduled to hear oral arguments in the dispute on March 3, 2015.

PIB Law represents national banks, retailers, reinsurers, insurers, mortgage lenders and financial services companies from its offices in New Jersey, New York City, Boston, Chicago, Orange County, San Antonio and Philadelphia. For more information, contact PIB Law at 908-725-9700.

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