Judge Green Lights Conspiracy Theory 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 this business defamation case. And, in theory, if Tiversa wins, it could affect the traditionally bombastic tenor of the conspiracy theory community.

Who’s Who In This Business Defamation Showdown, And How Did They Become Embroiled In This Lawsuit?


Tiversa Holdings Inc (Tiversa): Tiversa is a data security company. One day, while out exploring the digital world, a Tiversa bot returned with 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. And as such, the FTC wanted Tiversa to snitch on any companies with crappy security operations. Tiversa swears, however, that they didn’t hand over the LabMD files.

Regardless, in August 2013, the FTC filed a complaint against LabMD for failing to exercise reasonable measures to ensure the security and protection 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, and the FTC launched an investigation.

Why Tech Company Tiversa Filed A Trade Libel Lawsuit

Tiversa brass weren’t impressed with Daugherty’s assertions that their company was a government henchman that dimmed on clients. 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…

As is the case in most business defamation lawsuits, upon notice of the claim, the defendant’s lawyers 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).

The Judge’s Reasoning For Not Granting The Dismissal And Letting The Business Defamation Lawsuit Move Forward

Judge Fischer, however, disagreed with the defense. She reasoned that the allegations exceeded permissible limits for hyperbole and opinion, and that given the nature of Tiversa’s business, could irrevocably damage the company’s reputation and bottom line. She pointed out that Daugherty’s comments ran the gamut from insults to allegations of criminal acts, and that many of the statements could be “capable of defamatory meaning.”

Fischer was also convinced that Tiversa would be able to present a valid argument against any “truth defense” the defendants might offer at trial since Tiversa says it inadvertently, not intentionally, accessed LabMD’s file. By accepting the plaintiff’s assertions as true (which a judge must do when deciding whether or not to flag through a suit to trial stage), Fisher waved the case through to the next step.

What To Expect Next In This Business Defamation Lawsuit

If this case isn’t settled, the next major point of contention will most likely be the determination of Tiversa’s status as a public or private entity, which will raise important actual malice issues. Under United States law, public figures have to meet a higher standard of proof in slander and libel suits than a “private” citizen. In most jurisdictions, “normal people” only have to prove that the defense was negligent in publishing the offending material, whereas “famous people” have to prove that the defense knew the statement was lie but published it regardless.

Speak With A Business Defamation Attorney Today

If you are an Internet or tech business in need of legal counsel, get in touch with Kelly / Warner Law, today. Our track record is enviable and we know the niche extremely well. And remember, not every legal action blows up into a full-fledged lawsuit. Oftentimes, issues can be resolved quickly and quietly, with just a simple letter.

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