LabMD loses lawsuit accusing FTC of conspiring in hacking

(Reuters) – A federal judge has dismissed a lawsuit by defunct medical testing company LabMD Inc accusing the U.S. Federal Trade Commission of aiding a data security company in an illegal “shakedown.”

U.S. District Judge Michael Brown in Atlanta ruled Thursday that the 2021 lawsuit was filed too late, and was barred by the government’s sovereign immunity.

The FTC declined to comment. A lawyer for LabMD did not immediately respond to a request for comment.

The allegations in the case go back to 2008, when Pennsylvania-based Tiversa Holding Corp told Georgia’s LabMD that it had found a document containing patient information on a peer-to-peer network and offered its services to address the leak.

LabMD claimed that Tiversa itself hacked LabMD’s files using tools it obtained after being hired by federal investigators to go after child pornography. It said that Tiversa fabricated evidence that LabMD data had been stolen by a third party and had spread across the internet, and passed the fabricated evidence on the FTC, which launched an investigation.

LabMD further claimed that the FTC knew or should have known about the false evidence, and was participating in a “shakedown” with Tiversa.

Tiversa, which was acquired by corporate intelligence firm Kroll Inc in 2017, has flatly denied all of these allegations.

The FTC’s case against LabMD was ultimately dismissed for reasons unrelated to LabMD’s claims, but LabMD went out of business in the course of defending the case.

LabMD and its CEO, Michael Daugherty, have been pressing their shakedown conspiracy allegations in several lawsuits, including a now-dismissed case against two FTC attorneys filed in 2015, and a defamation lawsuit against Tiversa, which was recently revived by an appeals court.

LabMD also filed an administrative complaint with the FTC in September 2020, and filed its case against the agency in the Georgia court after that complaint was rejected.

Brown said in Thursday’s order that the case against the government must be time-barred because it made essentially the same claims as the 2015 lawsuit against the FTC lawyers, meaning LabMD knew of the alleged conduct by 2015. Tort claims against the…