[00:00:00] Speaker 00:
Case number 17-5128, Michael J. Dougherty and Hal, versus Elaine H. Shearer in his individual capacity and Hal, appellants.

[00:00:11] Speaker 00:
Mr. Walters for the appellants, Mr. Hawkins for the appellants.

[00:00:35] Speaker 01:
May it please the court, Tice-Walters, for the defendants.

[00:00:38] Speaker 01:
Plaintiffs in this case seek money damages from two agency lawyers based on a recommendation that the FDC's commissioners initiate administrative proceedings.

[00:00:46] Speaker 01:
Plaintiffs' claims should be dismissed for two principal reasons.

[00:00:50] Speaker 01:
First, special factors preclude a Bivens remedy because the FDC Act is an alternative existing process for protecting the interests at stake.

[00:00:58] Speaker 01:
Second, plaintiff's complaint not only fails to state a First Amendment claim, it does not satisfy even the basic pleading standards of twomply and equal.

[00:01:07] Speaker 01:
As an initial matter, a Bivens remedy is not available in this new context.

[00:01:12] Speaker 01:
The FTC Act provides a statutory mechanism to vindicate the constitutional rights at issue, a mechanism which plaintiffs themselves have invoked in their pending petition for review before the Eleventh Circuit.

[00:01:24] Speaker 01:
And it's worth noting that in holding that a Bivens remedy was available here,

[00:01:30] Speaker 01:
The District Court relied almost exclusively on Justice Marshall's concurring opinion in Bush v. Lucas, which opined that a scheme could preclude a Bivens remedy only if it were specifically designed to provide full compensation.

[00:01:44] Speaker 01:
That is not the law.

[00:01:46] Speaker 01:
It was not the law then, and it is certainly not the law now in light of cases such as Schweiker v. Chilicki, this court's decisions in the Wilson case, in Spagnola, a host of others.

[00:02:03] Speaker 01:
Furthermore, even if a remedy were available, plaintiffs have not plausibly stated a First Amendment claim.

[00:02:10] Speaker 01:
There are no factual allegations supporting an inference of retaliation other than this three-day time period between one instance of criticism of the FTC's ongoing multi-year investigation and the date that plaintiffs learned that an enforcement recommendation had been made.

[00:02:31] Speaker 01:
That can't be enough to state a First Amendment claim, particularly when the criticism was of a multi-year investigation and where there's no specific allegations of animus or a change in behavior or anything else other than this temporal proximity.

[00:02:49] Speaker 03:
I'd note that they don't even allege that anyone from the FTC was aware of what had been posted on the internet.

[00:02:57] Speaker 01:
That is correct as to that trailer, Your Honor, that they say is the protected speech that caused the retaliation on which the district court relied as well.

[00:03:06] Speaker 01:
Yet another reason.

[00:03:07] Speaker 01:
They also failed to allege that the recommendation itself was made after the speech at issue, as opposed to having learned of the recommendation after the speech at issue.

[00:03:23] Speaker 01:
they haven't.

[00:03:25] Speaker 02:
Well this is a pleading standard so it would be a little bit difficult for them to have that information about what's going on internally to the FTC.

[00:03:33] Speaker 02:
They're frankly on information and belief raising inferences and they're you know employees or contractors or regulated entities are often in the situation of saying we know event A happened and in sequence followed by event B and

[00:03:50] Speaker 02:
the reason why that's enough to get us in the door for discovery is because there's a risk that if you draw inferences in their favor, that that's what happened.

[00:03:59] Speaker 01:
As to that very last point that I made, Your Honor, the failure to distinguish between the date they learned of the recommendation and the recommendation, that might be correct, although they don't even really say exactly on information and belief that the recommendation itself occurred afterwards.

[00:04:13] Speaker 01:
But it certainly doesn't help them in any way on the core pleading failure, which is

[00:04:20] Speaker 01:
The fact that the only thing they're offering is this temporal proximity between one instance of criticism of an ongoing investigation and this recommendation.

[00:04:29] Speaker 01:
I do think it makes sense.

[00:04:36] Speaker 05:
flow of your thought, I'm sure, but has the litigation arising out of the administrative proceedings concluded at this point, or is it still pending in the 11th Circuit?

[00:04:46] Speaker 01:
They're still pending, Your Honor.

[00:04:47] Speaker 01:
The case was argued quite a few months ago now, but the decision has not yet issued from the 11th Circuit.

[00:04:55] Speaker 01:
But again, in that pending proceeding, plaintiffs have raised a First Amendment argument, have asked for a vacatur of the Commission's decision on that basis.

[00:05:07] Speaker 01:
And we think that that is more than enough under this Court's precedent to preclude a Bivens remedy, and that it would make sense for this Court to address that issue here.

[00:05:16] Speaker 01:
If the Court has no further questions, I'm happy to save the remainder of time for rebuttal.

[00:05:21] Speaker 01:
That would be more helpful.

[00:05:48] Speaker 04:
Good morning, Your Honors.

[00:05:50] Speaker 04:
May it please the Court, I'm Jim Hawkins here on behalf of the appellees, Michael J. Daugherty and Lab MD.

[00:05:59] Speaker 04:
Mr. Walters did not discuss qualified immunity.

[00:06:03] Speaker 04:
I'd like to make one comment about the position of the government here.

[00:06:08] Speaker 04:
It is deeply disturbing, this is in their brief, of course, it is deeply disturbing that we have two attorneys employed by the federal government.

[00:06:18] Speaker 04:
who are now telling this court in the brief that in 2013 the law was not clear enough for them to know that retaliation for protected speech was a violation of the First Amendment.

[00:06:30] Speaker 04:
They knew that and they wanted to communicate to my client that they were going to retaliate.

[00:06:38] Speaker 04:
Reasonable inference from the complaint shows that Mr. Shear

[00:06:43] Speaker 04:
wanted Mr. Doherty and Lavende to know that criticism about the FTC and Mr. Shear would not be tolerated.

[00:06:56] Speaker 03:
Mr. Shear?

[00:06:57] Speaker 03:
Your complaint, I'm sorry, your brief, you say, quoting your complaint, because your complaint says this,

[00:07:05] Speaker 03:
that the reason for the retaliation was either the trailer for the book or their failure to sign a consent order, their refusal to sign a consent order.

[00:07:21] Speaker 03:
So even under kind of the theory of your complaint, the trailer for the book isn't a but for cause.

[00:07:31] Speaker 04:
It could be a but for cause, Your Honor.

[00:07:35] Speaker 05:
Not with that language.

[00:07:39] Speaker 05:
It's either one or the other.

[00:07:41] Speaker 04:
Well, it would not have been a legitimate justification for the filing of the enforcement action just because Mr. Daugherty and Lavende refused to sign a consent decree.

[00:07:54] Speaker 03:
Well, that wouldn't violate the First Amendment, though.

[00:07:57] Speaker 04:
No, but it's going to be for the jury to make the determination.

[00:08:00] Speaker 04:
There are so many facts at issue here.

[00:08:02] Speaker 03:
But I mean, you're pleading that there's an alternative explanation that is not unconstitutional.

[00:08:11] Speaker 04:
Your Honor, I believe that's a question of fact for the jury to make that determination.

[00:08:16] Speaker 03:
And you have not alleged in your complaint that anyone from the FTC was aware of this trailer.

[00:08:25] Speaker 03:
Right?

[00:08:26] Speaker 04:
No, Your Honor, but it is easy to reasonably infer, as the Court must, draw reasonable inferences in favor of my client.

[00:08:36] Speaker 04:
That when Mr. Shear, just three days after the promotional video was posted, at temporal proximity was just three days, told Latin D's attorneys that they had just, his staff had just recommended an enforcement action.

[00:08:53] Speaker 04:
Mr. Shear was under no obligation to say that, and I'm sure today he wished he hadn't said that.

[00:08:58] Speaker 04:
But what he was doing was communicating quite clearly, Your Honor, it's quite clearly to Lab Indy that this criticism would not be tolerated.

[00:09:06] Speaker 05:
If there's any question— What happened three days after the three-day spending?

[00:09:10] Speaker 05:
What happened at the end of those three days that you say happened in retaliation because of the publication?

[00:09:16] Speaker 04:
The, uh, Mr. Shear told Labinde's attorneys that his staff had just recommended an enforcement action.

[00:09:24] Speaker 05:
Three and a half years had passed.

[00:09:33] Speaker 05:
The final phase of it came three days after the trailer.

[00:09:37] Speaker 05:
Is that what we're supposed to believe?

[00:09:39] Speaker 04:
Yes, Your Honor, because we don't know that the final phase would ever have come.

[00:09:43] Speaker 04:
Based upon the allegations and the complaint, the misrepresentations that Mr. Shear and Ms.

[00:09:49] Speaker 04:
Yodakin made to the Federal Trade Commission, call into question whether there was ever an enforcement action to be filed.

[00:09:57] Speaker 02:
So if there was, and I recognize that that's on appeal to the 11th Circuit, and that indeed there was preliminary relief granted to your client in the 11th Circuit, is that right?

[00:10:14] Speaker 04:
I'm sorry, what's the question, Your Honor?

[00:10:15] Speaker 02:
The 11th Circuit recognized the plausibility of your client's claim on the merits already.

[00:10:19] Speaker 02:
Yes, Your Honor.

[00:10:20] Speaker 04:
They determined in the stay order that it looked to be an unreasonable interpretation and position by the FTC.

[00:10:27] Speaker 02:
If the FTC, nonetheless, and I know this is not your position and that you're litigating that, but if the FTC did have grounds to investigate, then isn't it under the Supreme Court's decision and rightly, doesn't that obviate

[00:10:44] Speaker 02:
any ability to bring a retaliation claim or at least render it not clearly established that your client could proceed with a First Amendment retaliation claim?

[00:10:56] Speaker 04:
Your Honor, we're departing from the allegations and the complaint, I know, but looking at what the 11th Circuit, what is happening in the 11th Circuit, we need to understand what happened in the FTC Administrative Court.

[00:11:08] Speaker 04:
In the FTC administrative action, a whistleblower came forward and disclosed the fact that this file was never floating in cyberspace.

[00:11:16] Speaker 02:
No, I know.

[00:11:17] Speaker 02:
I've read the record, and I know that you've raised questions about this whistleblower and about the relationship between the whistleblower and the FTC, and that that's all very much in litigation before the 11th Circuit.

[00:11:30] Speaker 02:
But I'm talking about a legal question for us in looking at the retaliation claim.

[00:11:35] Speaker 02:
If there were, from your perspective, take this as a hypothetical because I know you want to take a test, but if there were grounds for an enforcement action on the part of the FTC, then under Rightly, doesn't that obviate or at least render not clearly established a First Amendment retaliatory enforcement claim?

[00:12:01] Speaker 04:
And in Hartman v. Moore, Your Honor, this question was also addressed, where the Court actually reversed this circuit, because the circuit had held previously that if, as long as there was a retaliatory motive, it didn't have to be the sole cause.

[00:12:15] Speaker 05:
Didn't Hartman also say that for a First Amendment claim to lack,

[00:12:20] Speaker 05:
there had to be allegations of an absence of probable cause to support the underlying criminal charge in this case.

[00:12:28] Speaker 04:
That's correct, Your Honor.

[00:12:29] Speaker 05:
Now in this case, was the 1718 file available by peer to peer or not?

[00:12:37] Speaker 04:
It was not available, Your Honor.

[00:12:38] Speaker 05:
It was not available by peer to peer.

[00:12:40] Speaker 04:
It was, under the allegations, to be fair, we've said that it was inadvertently available, but there is a lot of technology... Unadvertently available is available, right?

[00:12:52] Speaker 04:
No, Your Honor, it's like having something in your home, in your... Inadvertently available is not available?

[00:12:58] Speaker 04:
Only, it's only available if somebody comes to get it, and that's what Tversa did, and they hacked it.

[00:13:04] Speaker 04:
That's the only evidence that anybody ever actually took the file.

[00:13:09] Speaker 05:
I didn't ask you whether they actually took it.

[00:13:12] Speaker 05:
I asked you whether it was available peer-to-peer.

[00:13:14] Speaker 05:
If somebody took it, it was available peer-to-peer, right?

[00:13:17] Speaker 04:
It was available peer-to-peer.

[00:13:18] Speaker 05:
They didn't even hurt me.

[00:13:19] Speaker 04:
Yes.

[00:13:20] Speaker 05:
But nonetheless, would not Hartman cut against you rather than fart you?

[00:13:24] Speaker 05:
Since in Hartman, the question that we were reversed on rightly, I'm sure the Supreme Court was correct, was that there had to be a knowledge on the part of the

[00:13:34] Speaker 05:
agents, the AUSAs in that case, that there was no probable cause.

[00:13:38] Speaker 05:
Here there would have to be a knowledge that there was no evidence of a breach of the obligations under the relevant regulation of the privacy protections of the FTC.

[00:13:55] Speaker 04:
I'm going to try and answer two questions at once because I don't believe I've answered.

[00:13:58] Speaker 05:
I got that pretty complicated before I got through.

[00:14:01] Speaker 04:
I don't think I sufficiently answered Judge Pollard's question a moment ago.

[00:14:04] Speaker 04:
The complaint was brought based upon the allegation that there was spread.

[00:14:11] Speaker 04:
That would have been needed in order for there to have possibly been significant consumer harm, which is required under 15 USC 45 N. If a tree falls in the woods and nobody hears it,

[00:14:25] Speaker 04:
It doesn't matter, and this is a quote from one of the judges in the 11th Circuit Court of Appeals wondering why there was ever any prosecution here.

[00:14:34] Speaker 04:
Now to answer Judge Pollard's question earlier, it's also important to know that after the evidence fell apart,

[00:14:43] Speaker 04:
was shredded, as Judge Toflat said, in the Eleventh Circuit.

[00:14:47] Speaker 04:
The FTC changed its position.

[00:14:51] Speaker 04:
It was not their original position that simply being available was a violation of Section 5.

[00:14:58] Speaker 04:
That was a position that they came up with later and frankly is not supported at all in the case law because there has been no consumer injury.

[00:15:07] Speaker 04:
No matter what theory

[00:15:09] Speaker 04:
The FTC may have had about availability.

[00:15:13] Speaker 04:
In the absence of substantial consumer injury, they had no basis for bringing the case to begin with.

[00:15:22] Speaker 03:
I want to go back to temporal proximity.

[00:15:27] Speaker 03:
Singletary and all of the cases that it cites, Mitchell's, Cone's, O'Neill, all involved instances where there was a letter from a lawyer or a letter from the plaintiff to a supervisor or the company or the city who employed the employee.

[00:15:50] Speaker 03:
or a notice of appeal was filed or an EEO complaint was made.

[00:15:57] Speaker 03:
So there was a communication that was directed either to the defendant or the defendant's organization or to the EEO office that presumably the defendant could become aware that the complaint was made.

[00:16:16] Speaker 03:
Here, you're asking us to say that temporal proximity is sufficient where there is a posting on the internet.

[00:16:25] Speaker 03:
And we are to presume, I mean, retaliation doesn't work unless they know that this posting was on the internet.

[00:16:34] Speaker 03:
Retaliation doesn't work unless they know that a complaint was made, that the letter was filed, that the EEO claim was made.

[00:16:42] Speaker 03:
Why in the world should we stretch the temporal proximity precedent to say that as long as there's temporal proximity to any random thing that's posted on the internet, we can presume that temporal proximity, that that's causation.

[00:17:06] Speaker 04:
Your Honor, it is in the record in this case, and it is on the public record that in response, excuse me, the day of the publication of that video, 75 different users from the Federal Trade Commission looked at the website.

[00:17:23] Speaker 03:
Where's that in your complaint?

[00:17:24] Speaker 04:
That's not in the complaint, Your Honor, but the court can take judicial notice of that.

[00:17:28] Speaker 03:
And Your Honor, how can we take, wait a second, we can take judicial notice of that?

[00:17:32] Speaker 03:
We're reviewing the motion to dismiss.

[00:17:34] Speaker 04:
That's correct, Your Honor.

[00:17:35] Speaker 04:
You have the ability, as the trial court had the ability, to take public documents, to take judicial notice of public documents.

[00:17:43] Speaker 03:
If the court is concerned about the... Doesn't that turn it into a motion for summary judgment?

[00:17:48] Speaker 03:
I mean, what's your... Not necessarily, Your Honor.

[00:17:53] Speaker 03:
Not if it's... Was that request made below?

[00:17:55] Speaker 04:
No, the court didn't look at that, Your Honor.

[00:17:58] Speaker 03:
Did you ask the court to look at that below?

[00:18:00] Speaker 04:
No, we did not.

[00:18:01] Speaker 03:
So why should we look at it now?

[00:18:04] Speaker 04:
The court has the ability to take traditional notice of public documents.

[00:18:08] Speaker 05:
The court is... In reviewing a motion to dismiss?

[00:18:10] Speaker 04:
In a motion to dismiss, Your Honor, yes.

[00:18:12] Speaker 04:
We cited cases to that effect in our brief, and in fact, the government cited, the FTC attorneys cited cases to that effect in their brief.

[00:18:20] Speaker 02:
I mean, I would think at least your argument is that you look at a complaint in the light most favorable to the plaintiff, and you draw plausible inferences there from, without actually taking notice of who at the FTC may have looked at this video,

[00:18:33] Speaker 02:
It's an inference one can draw from what's pleaded in your favor that some people did look at it, given the time proximity.

[00:18:42] Speaker 02:
But I am still troubled by what I see as a legal obstacle to your claim, which is that this was an investigation that had been going on for some years.

[00:18:52] Speaker 02:
And it may, in the end, have proved

[00:18:55] Speaker 02:
baseless, it may be in the end that in the 11th Circuit you win, but if the members of the FTC staff however benighted their belief that this was public, you know, that this information had been, LabMD's information had been carelessly made public, if they believed that and they had reason to go on and investigate and enforce based on that, you have no retaliation claim.

[00:19:22] Speaker 04:
Your Honor, the allegations in the complaint are that the attorneys at issue knew that there had been no spread, knew that there had been no consumer harm, and misrepresented those facts to the FTC.

[00:19:36] Speaker 02:
They also, I thought they were saying, and they indeed are still defending in the 11th Circuit based on an idea that a different modicum of harm or risk is sufficient from what you're arguing.

[00:19:49] Speaker 04:
That did not occur until

[00:19:53] Speaker 04:
after Judge Chapelle, the administrative law judge, dismissed the claim against LabMD.

[00:20:02] Speaker 04:
That was a new argument that was raised.

[00:20:05] Speaker 04:
It was not at the beginning of their case.

[00:20:07] Speaker 02:
Well, first, they think there's harm because they actually have a different understanding of the facts.

[00:20:11] Speaker 02:
And then they're like, OK, maybe it looks like it was only Tversa that had been the one that had access to it.

[00:20:20] Speaker 02:
Still, this is a risk.

[00:20:21] Speaker 02:
These are people who are not preventing this kind of hacking of their files.

[00:20:28] Speaker 02:
And so their legal theory,

[00:20:32] Speaker 02:
narrows focuses adapts as the facts develop as as yours does but their view as they're going along is there's a reason to go after this company and if that's the case.

[00:20:48] Speaker 02:
Then I just haven't heard you deal with the precedents that you have to say to clearly establish right here.

[00:20:54] Speaker 02:
And we have this rightfully case that says, well, you know, there's a enforcement action that's going on and there is a ground for it.

[00:21:06] Speaker 02:
even if it's unsuccessful, that vitiates a retaliation claim.

[00:21:10] Speaker 04:
That is the correct holding of the case, Your Honor.

[00:21:14] Speaker 04:
But here, there's a serious question from the allegations in the complaint, whether the FTC had any reason to bring this because the recommendations that were made by the attorneys at issue contained false and fraudulent information.

[00:21:34] Speaker 04:
Whether the FTC has a separate ground, independent of the retaliation, Your Honor, is of course a question, but it's a question that cannot be answered based upon this complaint, based upon the allegations that we have here, cannot be decided at this point in time by the Court.

[00:21:51] Speaker 02:
I agree, but I think that cuts against you.

[00:21:55] Speaker 02:
The fact that it can't be decided whether they have a separate ground, you know, they thought they had a ground, and they were proceeding on that basis, and if they have that, then... We don't know that they have a separate ground at the time the complaint was filed.

[00:22:09] Speaker 04:
I'd say you're making the factual point.

[00:22:10] Speaker 04:
As a factual matter, correct.

[00:22:13] Speaker 04:
Exactly.

[00:22:14] Speaker 04:
Did I answer your honest question?

[00:22:15] Speaker 02:
I think you did.

[00:22:16] Speaker 02:
I think you did.

[00:22:17] Speaker 02:
I mean, your position has to be not only that they lose, but that their position was frivolous.

[00:22:23] Speaker 02:
It was frivolous.

[00:22:24] Speaker 02:
And in bad faith.

[00:22:25] Speaker 04:
And in bad faith.

[00:22:26] Speaker 04:
and relying upon an entity that took, that hacked a file in violation of the HIPAA laws, and it was a crime for the company to even take the file in the first place.

[00:22:38] Speaker 04:
The FTC went after the wrong party.

[00:22:41] Speaker 04:
But those are issues to be decided, Your Honor, beyond the pleadings.

[00:22:47] Speaker 04:
Thank you.

[00:22:48] Speaker 04:
I know I'm way beyond my time.

[00:22:50] Speaker 04:
Any further questions?

[00:22:52] Speaker 04:
I think we're... Questions from the bench, like manna from heaven, please.

[00:22:55] Speaker 04:
Thank you.

[00:22:58] Speaker 02:
Mr. Walters will give you two minutes for a bottle.

[00:23:07] Speaker 01:
Thank you, Your Honors.

[00:23:09] Speaker 01:
We're of course happy to take any questions, but I thought it might be helpful just to discuss briefly why it is that the special factors analysis precludes the Bivens remedy here.

[00:23:20] Speaker 01:
And I think part of that is illustrated by the discussion that we've just been having about the merits of the 11th Circuit proceeding.

[00:23:29] Speaker 01:
That underscores both how strange it would be to have these simultaneous proceedings running.

[00:23:35] Speaker 01:
The danger of an inconsistent resolution by the court.

[00:23:38] Speaker 01:
That's absolutely right, Your Honor.

[00:23:40] Speaker 01:
And of course, as those proceedings suggest, there is a remedy available.

[00:23:46] Speaker 01:
If, in fact, the proceedings were not supported, and LabMD did not, as it claims, violate the FTC Act, they can obtain vacatur of the order.

[00:23:58] Speaker 01:
And that should be more than enough under precedent to preclude a Bivens remedy here.

[00:24:04] Speaker 01:
and would also, of course, opiate.

[00:24:07] Speaker 05:
You're not abandoning the theory of qualified immunity.

[00:24:11] Speaker 01:
No, Your Honor.

[00:24:12] Speaker 01:
And it is worth pointing out that plaintiffs would like to rest on the broad general proposition that government employees cannot retaliate based on speech.

[00:24:22] Speaker 01:
That's, of course, true.

[00:24:24] Speaker 01:
But the rightful court and this court in Ducore both made clear that that broad general proposition does not defeat the claim of qualified immunity.

[00:24:33] Speaker 01:
What you need is something more specific to the factual circumstances at hand.

[00:24:38] Speaker 01:
And plaintiffs still haven't come forward with a single case that is even remotely analogous to this recommendation of an administrative proceeding.

[00:24:48] Speaker 02:
Do they need a case or isn't it enough that if they, and I'm not sure they've alleged this, but if they allege not only that the enforcement action is baseless, but that it's frivolous and in bad faith from the beginning.

[00:25:01] Speaker 02:
Does that take it outside of rightfully and decor?

[00:25:04] Speaker 01:
That would help with the probable cause issue if they had specific allegations that, if taken as true, would show that there was a lack of probable cause.

[00:25:14] Speaker 01:
They'd still, I think, have to have something involving recommendation of an administrative proceeding.

[00:25:19] Speaker 02:
I mean, the cases they rely on are... I'm not sure when you're in the realm of intentional misconduct.

[00:25:25] Speaker 02:
I mean, that's why, as you know, as a government attorney, they clearly established right

[00:25:33] Speaker 02:
feature of a qualified immunity doesn't really get you very far in cases that hinge on an invidious intent or a malign intent, a retaliatory intent.

[00:25:43] Speaker 01:
I do think that they would need something more than that, which is why the court in due course rejects the broad general proposition that retaliation on the basis of protected speech is sufficient to defeat the claim for qualified immunity.

[00:25:57] Speaker 01:
As Your Honor suggests, to hold otherwise would

[00:25:59] Speaker 01:
Basically the shade qualified immunity in this context again.

[00:26:03] Speaker 01:
We're not it's not key to our case whether or not That is the ground that this court wants to discuss.

[00:26:11] Speaker 01:
Thank you.

[00:26:13] Speaker 02:
Thank you