671 F.Supp.3d 1161
D. Idaho2023Background
- Kochava, Inc. aggregates and sells historical, timestamped geolocation coordinates paired with persistent mobile advertising identifiers (MAIDs); its data set covers billions of device points (roughly every 15 minutes for many devices).
- FTC alleges Kochava’s practice enables third parties to trace device movements to and from “sensitive locations” (e.g., medical clinics, places of worship) and that this creates privacy invasions and risks of secondary harms (stigma, discrimination, violence).
- FTC sued for a permanent injunction under §13(b) of the FTC Act, alleging unfair acts or practices in violation of §5(a); Kochava moved to dismiss under Rule 12(b)(6).
- At pleading stage the court assumes FTC’s factual allegations are true and must assess whether the complaint plausibly states a §5(a) claim under the statutory §5(n) framework.
- Court: FTC plausibly alleged ongoing conduct for §13(b) purposes and adequately pleaded that injuries were not reasonably avoidable and not outweighed by countervailing benefits; but FTC failed to adequately plead the required showing of substantial injury (two theories assessed), so complaint is dismissed with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FTC has "reason to believe" under §13(b) to seek injunctive relief | FTC alleges Kochava continues to sell unrestricted historical location+MAID data; present-tense allegations show ongoing conduct | Kochava contends FTC challenges only past conduct so §13(b) injunctive power is improper | Court: FTC pleaded ongoing conduct sufficiently; §13(b) jurisdiction plausible at pleading stage |
| Whether §5(a) requires a predicate statutory/common-law violation | FTC: §5(a) liability rests on §5(n) factors; no separate predicate required | Kochava: follows LabMD — §5(a) must be grounded in statute/common law/Constitution | Court: Rejects predicate requirement; follows Ninth Circuit approach — apply §5(n) three-part test |
| Whether §5(a) requires acts to be "immoral/unethical/unscrupulous" | FTC: §5(n) governs; older moralistic test abandoned | Kochava: relies on older cases (Sperry/Spiegel) to import moral-culpability element | Court: No such element required; §5(n)’s standards control |
| Whether FTC adequately alleged "substantial injury" via risk of secondary harms | FTC: selling location+MAID creates foreseeable, significant risk third parties will identify and harm users | Kochava: asserted injuries are speculative and merely possible | Court: Allegations of possible secondary harms are too speculative—FTC must plead a likelihood/significant risk; this theory insufficiently pleaded |
| Whether FTC adequately alleged "substantial injury" as invasion of privacy | FTC: disclosure of movement to sensitive locations is a privacy injury that can be substantial | Kochava: data are non-sensitive on their face, inferences are unreliable and info is often publicly obtainable | Court: Privacy harms can be "injury" under §5(n), but here the alleged intrusion (inferences, external steps needed, unclear scope/number affected) is not severe enough as pleaded |
| Whether injuries were reasonably avoidable and outweighed by benefits | FTC: consumers lack notice of Kochava’s aggregation/sale; requested remedy is narrow (filter sensitive-location data) | Kochava: geolocation data has societal/market benefits | Court: FTC adequately alleged avoidability and that countervailing benefits do not outweigh the narrow remedial measure |
| Constitutional challenges (separation of powers, nondelegation, major questions) | FTC: §13(b) enforcement and §5(a) are lawful; removal severability preserves enforcement even if removal protection invalid | Kochava: removal protections render §13(b) unconstitutional; §5(a) is unconstitutionally vague/overbroad delegation | Court: Rejected challenges — Ninth Circuit precedent upholds §13(b); severability/precedent (Humphrey’s/Free Enterprise/Seila guidance) means suit may proceed; nondelegation/major-questions doctrines inapplicable here |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard: complaint must state a plausible claim to survive dismissal)
- F.T.C. v. Sperry & Hutchinson Co., 405 U.S. 233 (1972) (historical treatment of "unfair" practice; older FTC moral-culpability framing)
- F.T.C. v. Neovi, Inc., 604 F.3d 1150 (9th Cir. 2010) (applies §5(n) three-part unfairness test and recognizes substantial-risk theory of injury)
- LabMD, Inc. v. F.T.C., 894 F.3d 1221 (11th Cir. 2018) (held §5(a) unfairness must be grounded in existing law; Eleventh Circuit approach rejected here)
- Wyndham Worldwide Corp. v. F.T.C., 799 F.3d 236 (3d Cir. 2015) (interpreting §5(n) limitations and use of public policy as evidence)
- Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020) (Supreme Court guidance on removal power and limits of Humphrey’s Executor)
- Humphrey's Executor v. United States, 295 U.S. 602 (1935) (upheld for-cause removal for multi-member independent agencies)
- Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010) (severability and removal-clause jurisprudence)