Judge Green Lights Trade Libel Lawsuit

cyber defamation lawsuit
Judge green lights cyber defamation lawsuit.

Federal Judge Nora Barry Fischer green lit Tiversa Holding Corp’s trade libel lawsuit against LabMD – a cancer detection facility in Georgia – and author Michael J. Daugherty. Accusations of amoral brinkmanship and government conspiracy anchor the case.

Who’s Who In This Business Defamation Showdown?


Tiversa Holdings Inc (Tiversa): Tiversa is a data security company. One day, while out exploring the ether, a Tiversa bot stumbled on a curious find — unprotected LabMD files that included the social security numbers and insurance credentials of LabMD patients. According to Tiversa, it contacted LabMD immediately to alert the medical facility of their unprotected files scattered around the Web. Tiversa also took the opportunity to offer LabMD their online data security services.


Michael J. Daugherty: Michael J. Daugherty authored “The Devil Inside the Beltway,” a non-fiction expose of (alleged) government shadiness, including digital surveillance and the cyberbullying of small businesses and medical facilities. Marketing for the book included a website and video alleging that Tiversa aided in “abusive government shakedowns” and practiced “psychological warfare.” Other marketing materials included allegations that Tiversa’s actions were tantamount to property theft.

LabMD: LabMD is a cancer detection medical facility. Tiversa discovered their unprotected files online – which included personal patient data. Since medical facilities are beholden to federal medical privacy laws, Triversa’s discovery of the LabMD files was problematic.

When Tiversa offered their services, LabMD requested a quote, but ultimately declined the proposal.

Related Third Parties

Federal Trade Commission: As part of a peer-to-peer security breach investigation, the Federal Trade Commission asked Tiversa for files containing 100 or more Social Security numbers. Basically, since Tiversa is in the business of helping security-challenged companies turn over a new leaf, the commission figured they’d know where the proverbial bodies were buried. Essentially, the FTC wanted Tiversa to snitch on companies with crappy security operations. Tiversa swears, however, that it didn’t hand over the LabMD files.

Regardless, in August 2013, the FTC filed a complaint against LabMD. The charges? Failing to exercise reasonable measures to ensure the security of sensitive patient data.

The Privacy Institute: Though it’s unclear how the file landed in their laps, an entity identified in court documents as the Privacy Institute somehow obtained a copy of the rogue LabMd files. The Privacy Institute eventually complied with a demand from the FTC for the file in question. Subsequently, the FTC launched an investigation.

Why Tech Company Tiversa Filed A Trade Libel Lawsuit

Tiversa brass weren’t impressed with Daugherty’s assertions. Nor was Team Tiversa impressed with LabMD’s seeming compliance with Daughtery’s narrative. So, the digital data security company filed a defamation lawsuit.

The Defendant’s Argument To Dismiss The Defamation Suit…

The defendant’s lawyers first filed a motion to dismiss. Though, instead of just arguing “truth,” Daugherty’s attorney also argued hyperbole (in the US, a constitutionally protected form of speech).

Judge: Business Defamation Case Will Move Forward

Judge Fischer, however, disagreed with the defense. The allegations, she reasoned, exceeded permissible limits for hyperbole and opinion — and could irrevocably damage the company’s bottom line.

Fischer also felt Tiversa would be able to present valid arguments against a “truth defense” since Tiversa inadvertently, not intentionally, accessed LabMD’s file. By accepting the plaintiff’s assertions as true, Fisher waved the case to the next step.

Speak With A Business Defamation Attorney Today

If you’re an Internet or tech business in need of legal counsel, get in touch with Kelly / Warner Law. Not every legal action grows into a full-fledged lawsuit. Often, issues can be resolved quickly and quietly, with just a simple letter.

Get in touch to start fixing the problem.

Yes, I Want to Speak with Someone about an Internet Law Issue »