When the Federal Trade Commission on Monday confirmed it was investigating Facebook for privacy violations, it sounded awfully familiar.

Didn't the FTC look into that in 2011? And didn't Facebook say it was very sorry (without admitting it did anything wrong) and promise it would never do such a thing again?

But there's one big—as in trillion-dollar—difference this time around.

In 2011, the feds didn't fine Facebook for violating Section 5 of the FTC Act, which bans unfair or deceptive conduct, for the simple reason that the FTC lacks the authority to impose monetary penalties for such wrongdoing. The social networking site allegedly violated its privacy commitments to hundreds of millions of users.

But the company, represented then by Gibson, Dunn & Crutcher partners M. Sean Royall and S. Ashlie Beringer (who went on to take an in-house job at Facebook) did sign a 20-year consent decree.

The maximum penalty for violating a final FTC order is gigantic—currently, $40,000 per violation per day.

The question now, as Facebook faces intense scrutiny for alleged privacy violations by Cambridge Analytica: Did the company violate that 2011 decree?

The stakes are enormous. Cambridge Analytica allegedly accessed personal information from something like 50 million Facebook users. Multiply that by $40,000 each, for who knows how many days, and it tops $2 trillion, at least in theory.

Ooof.

To an outside observer, it certainly looks like the consent decree was violated.

Researcher Aleksandr Kogan allegedly created an app, “This Is Your Digital Life,” designed to collect data surreptitiously from people who took the quiz as well as their friends—information which was later sold and used by the Trump campaign.

The FTC consent decree states that Facebook “shall not misrepresent in any manner, expressly or by implication, the extent to which it maintains the privacy or security of covered information, including, but not limited to… the steps Respondent takes or has taken to verify the privacy or security protections that any third party provides.”

But in a little-noticed dissent, then FTC commissioner Thomas Rosch flagged a loophole.

Writing in 2012 when the order actually became final, the former Latham & Watkins partner, who died in 2016, noted that “while I hope that the majority is correct in their assertion that the consent order covers the deceptive practices of Facebook as well as the applications ('apps') that run on the Facebook platform, it is not clear to me that it does.”

He continued, “In particular, I am concerned that the order may not unequivocally cover all representations made in the Facebook environment (while a user is 'on Facebook') relating to the deceptive information sharing practices of apps about which Facebook knows or should know.”

In other words, exactly what seems to have happened with Cambridge Analytica.

But it wasn't just the threat of monetary penalties that was supposed to keep Facebook in line.

Per the consent decree, Facebook was periodically also supposed to “obtain independent, third-party audits certifying that it has a privacy program in place that meets or exceeds the requirements of the FTC order.”

But what's the point of imposing an audit regime if the auditors miss exactly what they're supposed to find?

Also, where was Erin Egan? The former co-chair of Covington & Burling's global privacy and data security practice joined Facebook as chief privacy officer for policy in conjunction with the FTC settlement. She was supposed to stop violations like this from occurring.

It's disappointing to see how ineffective the FTC's remedies now look.

Still, there may be another form of rough justice. Because even if Facebook can show it didn't technically violate the consent decree, the FTC isn't the company's only legal problem.

Already, Pomerantz LLP filed the first of what is sure to be many securities class actions, alleging that Facebook “made false and/or misleading statements and/or failed to disclose that: (i) Facebook violated its own purported data privacy policies by allowing third parties to access the personal data of millions of Facebook users without the users' consent.”

Facebook's stock has dropped from a high of about $185 on March 19 to $160 at the close of trading on Monday.

 

In a Bad Spot, Some Good News for Abbvie (and Paul Weiss)

The first time a jury heard Jesse Mitchell's bellwether suit alleging the testosterone replacement drug AndroGel caused his heart attack, the result was disastrous for drugmaker AbbVie: $150 million in punitive damages.

By that measure, Monday's verdict was a big improvement: $3 million in punitive damages and $200,000 in compensatory damages.

In December, U.S. District Judge Matthew Kennelly in Chicago vacated the first verdict as “logically incompatible” and the result of “confusion or misunderstanding regarding the causation requirement.”

That meant AbbVie and its lawyers from Paul, Weiss, Rifkind, Wharton & Garrison led by David Bernick had another crack at arguing that AbbVie adequately described AndroGel and did not cause the plaintiff's injury.

On Monday, the jury found AbbVie was not strictly liable, and also rejected the plaintiff's fraudulent misrepresentation claim, but sided with him on the negligence claim.

About 6,000 lawsuits are pending over testosterone therapy replacement drugs, most of them against AbbVie.

In October of 2017, AbbVie was hit with a $140 million verdict—almost all of it in punitive damages—after another man who used the drug suffered a heart attack. That verdict is also under review.

However, a federal jury in Chicago on Jan. 26 found AbbVie was not liable for an Arizona man's pulmonary embolism in a case tried by Kirkland & Ellis partner James Hurst.

 

Lateral Watch

Trial lawyer Jeffrey Tsai, who led the state attorneys general team for Alston & Bird, has jumped to DLA Piper in San Francisco.

A former senior attorney in the California Attorney General's Office under then-AG Kamala D. Harris, Tsai said, “DLA Piper offers a unique opportunity for me to assist clients both internationally and domestically. Companies from here and abroad doing business in the United States are under increasing scrutiny by state attorney generals and their federal counterparts.”

For more, see DLA Piper Snags Alston & Bird's State Attorneys General Lead in California

 

What I'm Reading

After MTO's #MeToo Snafu, Orrick Touts End of Arbitration Agreements

“Orrick has decided that we will no longer require any employees, including associates, to sign any arbitration agreements.”

Judge Aaron Persky Loses Appellate Bid to Block Recall Effort

The judge who sentenced ex-Stanford University swimmer Brock Turner to six months jail time for a sexual assault conviction will face a recall vote in June.

Weisbrod Matteis & Copley Heads to Mississippi

The plaintiffs-side litigation shop is expanding its practice representing natural disaster victims in insurance recovery actions.

Former SGs Clement, Verrilli Duel at DC Circuit in Religious Discrimination Fight

The titans clash over whether the Washington, D.C., public transit system's refusal to run a religious advertisement is a First Amendment violation.

Justices Won't Review $380M 'Cy Pres' Agreement That Noel Francisco Held His Nose Over

It's a win for Joseph Sellers of Cohen Milstein Sellers & Toll.

Olivia de Havilland Loses in Appeal Over Docudrama Portrayal

Oh c'mon, you live to be 101 and then have to put up with some docudrama playing fast and loose with your life? (Also, who knew she was still alive?)

 

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