Pub. 13 2018-2019 Issue 2

NEBRASKA BANKERS ASSOCIATION 15 Counselor’s Corner — continued on page 16 It remains to be seen whether the Eleventh Circuit precedent will become generally useful to banks facing enforcement actions. Bankers are perhaps justifiably reluctant to pick fights with their regulators, so a test of this precedent in a banking enforcement action may be some time in coming. that defies comprehension.” Int’l Longshoremen’s Ass’n, Local 1291 v. Phila. Marine Trade Ass’n , 389 U.S. 64, 76, 88 S. Ct. 201, 208 (1967). Being held in contempt and sanctioned pursuant to an insufficiently specific injunction is therefore a denial of due process. In the case at hand, the cease and desist order contains no prohibitions. It does not instruct LabMD to stop committing a specific act or practice. Rather, it commands LabMD to overhaul and replace its data-security program tomeet an indeterminable standard of reasonableness. This command is unenforceable. To elaborate, the court imagined what would take place if the FTC sought to enforce its order. In such a situation, the FTC would make a motion in a U.S. district court for an order requiring LabMD to show cause why it should not be held in contempt for violating the cease and desist order. The FTCwould presumably allege that LabMD’s information security program failed to implement some specific safeguard and that such omis- sion meant the program was not reasonably designed. At the show cause hearing, LabMD would call an expert to testify that the particular safeguard in question was not a necessary part of a reasonably designed information security program. The FTC would call its own expert who would disagree. Because, however, the order did not mention the particular safeguard or contain any meaningful standard to inform the court of what constitutes a “reasonably designed” data security program, the court would have no choice but to conclude that the FTC had not proved LabMD’s alleged violation of the order. If the court held otherwise and ordered the safeguard to be implemented, the court would have effectively (and improperly) modified the order and opened the door to future modifications. In the Eleventh Circuit’s view, this would have the practical effect of putting the district court in the position of managing LabMD’s business in accordance with the FTC’s wishes. It would be as if the FTC was LabMD’s chief executive officer and the court was its operating officer. According to the Eleventh Circuit: It is self-evident that this micromanaging is beyond the scope of court oversight contemplated by injunction law. This all serves to show that an injunction identical to the FTC cease and desist order at issue would be unenforceable under a district court’s contempt power. Because the standards governing the coercive enforcement of injunctions and cease and desist orders are the same, it follows that the Commission’s cease and desist order is itself unenforceable.