October 27, 2021

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Wyndham Data Breach Ruling Cleared for Potential Appeal to Third Circuit

U.S. District Court Judge Esther Salas ruled on Monday that the U.S. Court of Appeals for the Third Circuit can review her conclusion that Section 5 of the Federal Trade Commission Act provides the FTC with authority to bring actions arising from companies’ data security violations.

In April of this year, Judge Salas denied Wyndham Hotels and Resorts’ motion to dismiss a FTC lawsuit that alleges that Wyndham violated the FTC Act’s prohibition against “unfair practices” by failing to provide reasonable security for its customers’ personal information. Although her order is not a final ruling and is not binding on any other judge, it received considerable attention because it was the first time that a court has weighed in on the scope of the FTC’s authority over data security and privacy matters.

Denials of motions to dismiss ordinarily are not immediately appealable, absent permission from both the district court and the court of appeals.  In her ruling on Monday, Judge Salas granted Wyndham’s motion to appeal her order to the Third Circuit.  Judge Salas reasoned that there is substantial grounds for differences of opinion on two issues: (1) whether the FTC can bring a Section 5 unfairness claim involving data security; and (2) whether the FTC must formally promulgate regulations before bringing its unfairness claim.

If the Third Circuit grants Wyndham’s Petition to Appeal, the appellate court will review the legal conclusions in Judge Salas’s April order.  If the Third Circuit denies the petition, the case will proceed in the district court.  Even if the Third Circuit denies this petition for review, it ultimately may hear an appeal of the outcome of summary judgment proceedings or a trial in this case.

© 2021 Covington & Burling LLPNational Law Review, Volume IV, Number 175
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About this Author

Repeatedly ranked as having one of the best privacy practices in the world, Covington combines exceptional substantive expertise with an unrivaled understanding of the IT industry, and of e-commerce and digital media business models in particular.  Our practice provides exceptional coverage of all of the substantive areas of privacy, including IT/technology, data security, financial privacy, health privacy, employment privacy, litigation and transactions.  One of our core strengths is the ability to advise clients on relevant privacy and data security rules worldwide,...

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