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Tiversa Holding Corp. v. Labmd, Inc.

United States District Court, W.D. Pennsylvania

April 21, 2014

TIVERSA HOLDING CORP. and ROBERT J. BOBACK, Plaintiffs,
v.
LABMD, INC. and MICHAEL J. DAUGHERTY, Defendants.

MEMORANDUM ORDER

NORA BARRY FISCHER, District Judge.

I. INTRODUCTION

Presently before the Court is the Motion to Dismiss (Docket No. 36) filed by LabMD, Inc. ("LabMD") and Michael J. Daugherty ("Daugherty") ( collectively, "Defendants"), pursuant to Federal Rule of Civil Procedure 12(b)(6) with respect to all claims pled in Tiversa Holding Corp. ("Tiversa") and Robert J. Boback's ("Boback") ( collectively, "Plaintiffs), First Amended Complaint of December 24, 2013. (Docket No. 31). Plaintiffs plead claims under the laws of the Commonwealth of Pennsylvania for defamation, slander per se, commercial disparagement, and trade libel, and seek in excess of $75, 000.00 in damages, as well as injunctive relief. ( Id. ). This Court exercises subject-matter jurisdiction over Plaintiff's claims pursuant to 28 U.S.C. § 1332 (diversity). For the following reasons, Defendants' Motion to Dismiss is DENIED.

II. PROCEDURAL AND FACTUAL BACKGROUND

Sometime in 2008, Tiversa - a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania, and operating as a cyber-intelligence company providing "data protection and review" for clients - happened upon a file belonging to LabMD (the "File"). (Docket No. 31 at 1-2). Tiversa had been conducting a search of peer-to-peer networks on behalf of a client, and Tiversa's search terms resulted in the discovery of the File on a computer in San Diego, California. ( Id. at 2). The File was comprised of approximately 1, 718 pages of "healthcare patient social security numbers, insurance information, and treatment codes." ( Id. ). The File was entitled "Insurance Aging" and was located on computers in Arizona, Costa Rica, and London. ( Id. at 3).

Tiversa identified LabMD as the source of the File. At that time, LabMD was a Georgia corporation, with its principal place of business in Atlanta, Georgia. (Docket No. 37 at 10). It functioned as a cancer detection facility performing testing and diagnostic services for urologists in several states. ( Id. ). Tiversa concluded that LabMD inadvertently shared the File via a peer-to-peer file-sharing program downloaded onto a LabMD computer. (Docket No. 31 at 3). Following discovery of the File, and the sensitive information contained therein, Mr. Boback contacted LabMD, and provided LabMD with a copy of the File. (Docket No. 31 at 3). Mr. Boback offered Tiversa's services to LabMD, as well. ( Id. at 3). LabMD requested a quote for the cost of Tiversa's services, but ultimately declined to engage Tiversa. ( Id. ). No further communications ensued. ( Id. ).

As a part of investigations into security breaches resulting from the use of peer-to-peer networks, the Federal Trade Commission ("FTC") "visited Tiversa, and attempted to obtain any and all non-redacted files which contained more than 100 Social Security Numbers." ( Id. at 4). Tiversa did not turn over the File. ( Id. ). An entity identified as the "Privacy Institute" received a copy of the File.[1] ( Id. ). A civil investigative demand ("CID") was subsequently issued by the FTC to the Privacy Institute, and on August 18, 2009, the Privacy Institute provided the File to the FTC.[2] ( Id. ). Following an investigation into LabMD, on or about August 29, 2013 the FTC filed an administrative complaint against the company for failure to use reasonable measures to protect the security of sensitive consumer data (i.e. the File). (Docket No. 31 at 4).

On September 24, 2013, Mr. Dougherty authored "The Devil Inside the Beltway" (the "Book"). ( Id. ). The Book was marketed as a "Shocking Expose of the U.S. Government's Surveillance and Overreach into Cybersecurity, Medicine and Small Business." (Docket No. 31 at 4-5). As part of his promotional effort for the book, Mr. Dougherty created a website that included a video "trailer" including commentary on Tiversa's interaction with LabMD with respect to the File. ( Id. at 5). Among other things, the video included allegations that Tiversa was part of a "Government Funded Data Mining & Surveillance" scheme, engaged in "Psychological Warfare, " and assisted with "Abusive Government Shakedown[s]." ( Id. ).

Other promotional material included accusations by Mr. Dougherty that Tiversa's actions constituted "property theft, " that Tiversa "came in and affected our network, " and that when LabMD declined Tiversa's services, Tiversa gave the File to federal authorities as part of its "extortion attempt." ( Id. at 5-6). Additionally, it was alleged that Tiversa did not find the File "out in cyberspace, " but "took" LabMD's property as part of a "government funded study." ( Id. at 6).

The Book itself continued similar commentary on Tiversa's conduct towards LabMD. Mr. Dougherty indicated therein that Mr. Boback was a "con artist, " that LabMD was "entrapped" by Tiversa's conduct, that Tiversa's business was a "shakedown, " that Tiversa engaged in "questionable practices, " that Tiversa "regularly contacted companies whose file they had taken in order to solicit business, " that Tiversa's use of the File constituted "theft, " that Tiversa "showed our file to Congress, " that Tiversa "took" others' property, and that Tiversa was "snooping on the internet for other people's property or sensitive data." (Docket No. 31 at 7-9).

Mr. Dougherty continued his promotional efforts for the Book following its publication, and also actively engaged in public commentary regarding his continued ill will towards Tiversa. His statements were substantially similar to the aforementioned, including statements characterizing Tiversa's actions as extortion, collusion in a government conspiracy, and illegal access of private information. ( Id. at 9-10). Tiversa twice sent letters to Mr. Dougherty on November 8, 2012 and October 17, 2013 informing Mr. Dougherty that his statements about Tiversa were false, damaging, and harmful to Tiversa, and should be halted. ( Id. at 11). Neither Mr. Dougherty nor LabMD responded to the letters. ( Id. at 11-12).

Plaintiffs thereafter filed a Complaint in this Court on September 5, 2013 against Defendants. (Docket No. 1). Plaintiff's First Amended Complaint followed on December 24, 2013, and alleged in Counts I through III that Defendants were liable for damage resulting from:

1. Defamation under 42 PA. CONS. STAT. §§ 8341, et seq;
2. Slander per se under the common law of ...

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