Court Opinion

ID: 9881164
Source: CourtListenerOpinion
Date Created: 2023-09-29 20:01:10.995139+00
Date Added: 2024-06-11T13:59:20.292846
License: Public Domain

USCA11 Case: 23-11428   Document: 27-1    Date Filed: 09/29/2023   Page: 1 of 7

                                                [DO NOT PUBLISH]
                                 In the
                United States Court of Appeals
                        For the Eleventh Circuit

                         ____________________

                              No. 23-11428
                         Non-Argument Calendar
                         ____________________

       MICHAEL J. DAUGHERTY,
                                                   Plaintiﬀ-Appellant,
       versus
       FEDERAL TRADE COMMISSION,

                                                          Defendant,

       UNITED STATES OF AMERICA,

                                                 Defendant-Appellee.

                         ____________________
USCA11 Case: 23-11428   Document: 27-1     Date Filed: 09/29/2023    Page: 2 of 7

       2                   Opinion of the Court                 23-11428

                Appeals from the United States District Court
                    for the Northern District of Georgia
                   D.C. Docket No. 1:21-cv-03526-MLB
                          ____________________

                         ____________________

                                No. 23-11431
                          Non-Argument Calendar
                         ____________________

       LABMD, INC.,
                                                    Plaintiﬀ-Appellant,
       versus
       FEDERAL TRADE COMMISSION,

                                                            Defendant,

       UNITED STATES OF AMERICA,

                                                  Defendant-Appellee.

                         ____________________
USCA11 Case: 23-11428      Document: 27-1     Date Filed: 09/29/2023     Page: 3 of 7

       23-11428               Opinion of the Court                         3

                  Appeals from the United States District Court
                      for the Northern District of Georgia
                     D.C. Docket No. 1:21-cv-03525-MLB
                            ____________________

       Before WILSON, NEWSOM, and BRASHER, Circuit Judges.
       PER CURIAM:
              Michael Daugherty and his company, LabMD, are suing the
       United States for allegedly forcing the closure of the business with
       a fraudulent civil enforcement. The district court dismissed for lack
       of subject-matter jurisdiction. Because Daugherty’s and LabMD’s
       suits are based on alleged acts of misrepresentation and deceit by
       the government, the Federal Tort Claims Act preserves the United
       States’s sovereign immunity. As a result, the district court correctly
       held that it lacked jurisdiction. So we affirm.
                                      I.

              Daugherty was the sole owner and chief executive officer of
       LabMD, a former cancer detection laboratory. Daugherty and
       LabMD say that, sometime before 2007, a U.S. Attorney hired a
       company called Tiversa to help the FBI investigate child pornogra-
       phy. As part of this partnership, law enforcement gave Tiversa ac-
       cess to a powerful program that allowed it to search peer-to-peer
       networks. But Tiversa abused it. Apparently, Tiversa used the pro-
       gram to steal private information from companies, make it seem
       like the information had been published in a breach, and then
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       4                      Opinion of the Court                23-11428

       persuade those companies to hire Tiversa to bolster their cyberse-
       curity. In short, extortion.
              One of Tiversa’s victims was LabMD. In 2008, Tiversa stole
       a file containing confidential patient information. Then Tiversa
       told LabMD that the information had been published online.
       LabMD did not take the bait. So Tiversa gave the information to
       the Federal Trade Commission, saying LabMD suffered a data
       breach. The FTC began inquiring. After LabMD continued to insist
       no such breach occurred, the FTC contemplated a civil enforce-
       ment action. As part of the action, an FTC attorney apparently told
       Tiversa that they needed proof that this data spread online. So
       Tiversa manufactured it, based on instructions that an FTC attor-
       ney allegedly provided. The FTC then publicly pursued the en-
       forcement action against LabMD. It failed. But enduring the en-
       forcement action took a financial toll, and LabMD had to cease do-
       ing business.
              Later, Dougherty and LabMD filed administrative com-
       plaints with the FTC. When that failed, they sued the FTC attorney
       and the U.S. Attorney, to no avail. Then they sued the United
       States under the FTCA, alleging negligence and negligence per se.
       Daugherty and LabMD have since conceded that some of their
       claims fail. But they still contend that part of their negligence per
       se claim, rooted in theories they argue are analogous to trespass
       and conversion, survives. The district court dismissed their com-
       plaints for lack of subject-matter jurisdiction. These timely appeals
       followed, which we consolidated.
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       23-11428                Opinion of the Court                           5

                                       II.

              We have an ongoing obligation to satisfy our jurisdiction
       and may raise any jurisdictional issue sua sponte. AT&T Mobility,
       LLC v. Nat’l Ass’n for Stock Car Auto Racing, Inc., 494 F.3d 1356, 1360
       (11th Cir. 2007). We review jurisdictional issues de novo. Id.
                                       III.

              As a sovereign, the United States enjoys immunity from suit.
       Zelaya v. United States, 781 F.3d 1315, 1321 (11th Cir. 2015) (citing
       Christian Coal. of Fla., Inc. v. United States, 662 F.3d 1182, 1188 (11th
       Cir. 2011)). But a sovereign can consent to shed its immunity. Id.
       Without such a waiver of immunity, though, we have no subject-
       matter jurisdiction to hear a case against the United States. Id. (cit-
       ing F.D.I.C. v. Meyer, 510 U.S. 471, 475–76 (1994)).
               Through the Federal Tort Claims Act, the United States gen-
       erally waived its immunity from suits in tort. Millbrook v. United
       States, 569 U.S. 50, 52 (2013) (citing Levin v. United States, 568 U.S.
       503, 506 (2013)). But it kept its immunity against, among others,
       suits arising out of certain intentional torts, including misrepresen-
       tation and deceit. See id. Therefore, if a plaintiff’s injury is based on
       misrepresentation or deceit, the government is immune. See Ze-
       laya, 781 F.3d at 1334. But if a plaintiff alleges an injury he suffered
       independent of the misrepresentation or deceit, the government is
       not immune. See Block v. Neal, 460 U.S. 289, 296–97 (1983).
             For misrepresentation, we ask “whether the essence of the
       claim involves the government’s failure to use due care in
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       6                       Opinion of the Court                   23-11428

       obtaining and communicating information.” JBP Acquisitions, LP v.
       United States ex rel. F.D.I.C., 224 F.3d 1260, 1264 (11th Cir. 2000) (ci-
       tations omitted). The test for deceit, meanwhile, is whether the es-
       sence of the claim involves intentionally false representations on
       the part of the government. See United States v. Neustadt, 366 U.S.
       696, 707 (1961).
              Daugherty and LabMD’s injuries are based on misrepresen-
       tation and deceit. Daugherty and LabMD say that enduring the
       FTC’s enforcement action shuttered the business. Those injuries
       are a direct result of the FTC publicly claiming LabMD suffered a
       breach and pursuing an enforcement action based on allegedly
       fraudulent evidence, without disclosing that the evidence was
       fraudulent.
              Daugherty and LabMD fail to allege any injury independent
       of misrepresentation and deceit. They point to no allegations in
       their complaint that they suffered an injury caused by the trespass
       and conversion of their data. They do note that the trespass and
       conversion of their data happened before the FTC’s misrepresen-
       tations. And thus, they argue, their claims for trespass and conver-
       sion are independent of the later misrepresentations by the FTC.
       However, we do not accept such “theoretical” distinctions when,
       based on the allegations, the actual underlying injuries were caused
       by the government’s misrepresentations. See Metz v. United States,
       788 F.2d 1528, 1535 (11th Cir. 1986); see Zelaya, 781 F.3d at 1336–
       38.
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       23-11428               Opinion of the Court                         7

              As the district court pointed out, in the absence of the later
       misrepresentation and deceit, Daugherty and LabMD would have
       suffered no injury, at least based on their alleged facts. Nobody
       would have heard about any breach, and their business likely
       would have continued as usual. Based on the complaint, the alleged
       trespass and conversion caused no injury independent of the al-
       leged misrepresentation and deceit. LabMD did not lose access to
       its patient files nor were those files damaged. Daugherty and
       LabMD’s alleged injury—the closure of the business—is directly at-
       tributable to the government’s misrepresentations and deceit, not
       the trespass and conversion.
              Because the essence of this appeal arises out of misrepresen-
       tation and deceit by the government, the FTCA preserves the sov-
       ereign immunity of the United States against the suit. As a result,
       the district court was correct that it has no subject-matter jurisdic-
       tion here.
                                      IV.

             For the above reasons, we AFFIRM.