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Federal Trade Commission v. Wyndham Worldwide Corp.

United States District Court, D. New Jersey

April 7, 2014

FEDERAL TRADE COMMISSION, Plaintiff,
v.
WYNDHAM WORLDWIDE CORPORATION, et al., Defendants

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For FEDERAL TRADE COMMISSION, Plaintiff: ALLISON MICHELLE LEFRAK, KATHERINE ELIZABETH MCCARRON, KEVIN HYLAND MORIARTY, KRISTIN KRAUSE COHEN, LEAD ATTORNEY, FEDERAL TRADE COMMISSION, WASHINGTON, DC; ANDREA VANINA ARIAS, JAMES ALAN TRILLING, JOHN ANDREW KREBS, JONATHAN ELI ZIMMERMAN, LISA NAOMI WEINTRAUB SCHIFFERLE, FEDERAL TRADE COMMISSION, WASHINGTON, DC.

For WYNDHAM WORLDWIDE CORPORATION, WYNDHAM HOTELS AND RESORTS, LLC, Wyndham Hotel Management Incorporated, Defendant: JENNIFER A. HRADIL, LEAD ATTORNEY, JUSTIN TAYLOR QUINN, GIBBONS, PC, NEWARK, NJ.

Amicus: International Franchise Association: RACHEL L. WEINER, WILMER CUTLER PICKERING HALE & DORR LLP, WASHINGTON, DC.

Amicus: Chamber of Commerce of the United States: SEAN MICHAEL MAROTTA, LEAD ATTORNEY, HOGAN LOVELLS U.S. LLP, WASHINGTON, DC.

Amicus: TechFreedom, International Center for Law & Economics, Ph.D Paul H. Rubin, Esquire Todd J. Zywicki, Esquire Justin (Gus) Hurwitz: RACHEL JANE GALLAGHER, STEPHEN M. ORLOFSKY, BLANK ROME LLP, PRINCETON, NJ.

Amicus: PUBLIC CITIZEN, INC., Chris Jay Hoofnagle: JEHAN ASLAM PATTERSON, LEAD ATTORNEY, PUBLIC CITIZEN LITIGATION GROUP, WASHINGTON, DC.

Amicus: CHARLES LEE THOMASON, PRO SE, Columbus, OH.

For MASTERCARD INTERNATIONAL INCORPORATED, Interested Party: JACQUELINE GAIL VEIT, LEAD ATTORNEY, GOLENBOCK, EISEMAN ASSOR BELL & PESKOE LLP, NEW YORK, NY.

OPINION

Page 607

Esther Salas, United States District Judge.

I. Introduction

The Federal Trade Commission (the " FTC" ) brought this action under Section 5(a) of the Federal Trade Commission Act (the " FTC Act" ), 15 U.S.C. § 45(a), against Wyndham Worldwide Corporation (" Wyndham Worldwide" ), Wyndham Hotel Group, LLC (" Hotel Group" ), Wyndham Hotels and Resorts, LLC (" Hotels and Resorts" ), and Wyndham Hotel Management, Inc. (" Hotel Management" ) (collectively, " Wyndham" or " Defendants" ). The FTC alleges that Wyndham violated Section 5(a)'s prohibition of " acts or practices in or affecting commerce" that are " unfair" or " deceptive."

Specifically, the FTC alleges that Defendants violated both the deception and unfairness prongs of Section 5(a) " in connection with Defendants' failure to maintain reasonable and appropriate data security for consumers' sensitive personal information." (D.E. No. 28, First Amended Complaint for Injunctive and Other Equitable Relief (" Compl." ) ¶ ¶ 1, 44-49). Hotels and Resorts moves to dismiss the FTC's complaint under Federal Rule of Civil Procedure 12(b)(6). (D.E. No. 91-1, Motion to Dismiss by Defendant Wyndham Hotels & Resorts LLC (" HR's Mov. Br." ) at 6).[1] Its motion to dismiss raises the following three issues.

First, Hotels and Resorts challenges the FTC's authority to assert an unfairness claim in the data-security context. Citing recent data-security legislation and the FTC's public statements, Hotels and Resorts likens this action to FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000). It declares that, under Brown & Williamson, the FTC does not have the authority to bring an unfairness claim involving data security. As explained below, however, the Court rejects this challenge to the FTC's authority because the circumstances here differ from those in Brown & Williamson.

Second, Hotels and Resorts asserts that the FTC must formally promulgate regulations before bringing its unfairness claim. It contends that, without promulgating such regulations, the FTC violates fair notice principles. But precedent instructs that agencies like the FTC need not formally issue regulations. The Court, therefore, rejects Hotels and Resorts' contention that the FTC must issue regulations before bringing its unfairness claim.

Third, Hotels and Resorts argues that the FTC's allegations are pleaded insufficiently to support either an unfairness or deception claim. Hotels and Resorts asserts that the FTC fails to plead certain elements of each of these claims and fails to otherwise satisfy federal pleading requirements. As detailed below for both the unfairness and deception claims, the Court disagrees.

Having resolved each of these issues in favor of the FTC, the Court DENIES Hotels and Resorts' motion to dismiss.

II. Factual Background[2]

Wyndham Worldwide is in the hospitality business. (Compl. ΒΆ ...


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