Daugherty v. Sheer
248 F. Supp. 3d 272
| D.D.C. | 2017Background
- LabMD (owned by Michael Daugherty) was investigated by FTC staff (Sheer, Yodaiken, Settlemyer) after a 2008 report that patient data was available on a peer-to-peer network; LabMD removed the file‑sharing program and disputes about the file’s spread followed.
- Plaintiffs allege Tiversa (a private cybersecurity firm) fabricated or misrepresented evidence and colluded with FTC staff to withhold exculpatory information; the FTC investigation and discovery requests continued and escalated after Daugherty publicly criticized the FTC in 2012–2013.
- FTC filed an administrative complaint in August 2013; an ALJ dismissed the complaint in November 2015, and the FTC reversed that dismissal in a July 2016 Opinion.
- Plaintiffs filed this Bivens suit (Nov. 20, 2015) against three FTC employees alleging First, Fourth, and Fifth Amendment violations, plus a civil conspiracy claim and seeking monetary damages.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6), raising Thunder Basin jurisdictional preclusion, statute of limitations, failure to state claims, and sovereign/qualified immunity defenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction (FTC review) | Bivens tort claims against individual FTC employees are collateral to the FTC administrative scheme and thus properly litigated in district court | FTC process channels initial review to the agency; Thunder Basin and Jarkesy counsel dismissal for claims related to agency proceedings | Court: Plaintiffs’ Bivens claims are collateral and not precluded; court has jurisdiction because plaintiffs seek money damages the FTC cannot award and dismissal would foreclose meaningful judicial review |
| First Amendment (retaliation) | Daugherty’s public criticism was protected speech; investigatory escalation and recommendation to bring enforcement shortly after criticism show causation and retaliatory motive | Claims are time‑barred or precluded by agency process; immunity defenses | Court: Plausible First Amendment retaliation pled as to Sheer and Yodaiken (not Settlemyer); statute of limitations avoided under continuing‑tort theory; immunity not resolved at motion to dismiss |
| Fourth Amendment (unreasonable search/seizure) | Plaintiffs allege unlawful investigative acts during FTC probe | Defendants argue no factual basis pleaded for search/seizure claim | Court: Dismissed—Complaint lacks factual allegations to state a Fourth Amendment claim |
| Fifth Amendment procedural due process | Plaintiffs allege loss of business/profession and insufficient process during the investigation/enforcement | Defendants argue FTC proceedings provided process and plaintiffs point to administrative remedies | Court: Procedural due process claim dismissed for failure to specify the deprived interest and how process was lacking |
| Fifth Amendment substantive due process | Alleged use of falsified evidence and oppressive discovery deprived plaintiffs of rights | Defendants argue conduct not conscience‑shocking | Court: Dismissed—allegations, even if wrongful, do not meet conscience‑shocking standard |
| Civil conspiracy | Plaintiffs allege agreement among FTC staff and Tiversa to harm LabMD | Defendants contend allegations are conclusory and lack meeting‑of‑minds detail | Court: Dismissed—pleading fails to allege specific facts showing an agreement |
| Immunity (absolute/qualified) | Plaintiffs argue officials are not immune for retaliatory conduct | Defendants assert absolute immunity for prosecutorial/charging functions and qualified immunity generally | Court: Absolute immunity claim denied without prejudice (insufficient factual record on Sheer’s role); qualified immunity denied at this stage for First Amendment claims (right clearly established), but factual development required to resolve immunity fully |
Key Cases Cited
- Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (establishing framework for agency preclusion of district court review)
- Jarkesy v. SEC, 803 F.3d 9 (D.C. Cir.) (analyzing agency‑first review and collateralness in SEC administrative context)
- Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (recognizing an implied damages remedy against federal officers)
- Harlow v. Fitzgerald, 457 U.S. 800 (establishing modern qualified immunity standard)
- Saucier v. Katz, 533 U.S. 194 (setting the two‑step qualified immunity analysis later refined by Pearson)
- Pearson v. Callahan, 555 U.S. 223 (clarifying discretionary sequencing of qualified immunity prongs)
- Ashcroft v. al‑Kidd, 563 U.S. 731 (defining clearly established law for qualified immunity)
- County of Sacramento v. Lewis, 523 U.S. 833 (defining the conscience‑shocking standard for substantive due process)