LAS VEGAS (Legal Newsline) - The Federal Trade Commission has been taken to court and now is going to court in a dispute with MGM that has the agency's chair in an awkward position.
MGM says the FTC is violating its fundamental rights with a probe of its responses to cyberattacks, one of which occurred while FTC chair Lina Khan was a guest at one of its Las Vegas properties
MGM's motion to quash a civil investigative demand from the FTC says Khan must recuse herself, as she is both a potential civil plaintiff and a potential witness. It has refused to comply with the CID, leading the FTC to file its own petition June 17.
It asks the Nevada federal court to force MGM to respond to its questions as it seeks to find out whether it violated the FTC Act, the Safeguard Rule and the Red Flags Rule.
"The materials and information requested by the CID are needed in connection with an investigation into whether MGM's information security practices - including its identity theft detection, prevention and mitigation practices, and representations about those practices - involve unfair or deceptive acts or practices," the petition says.
The CID seeks information about MGM's corporate structure, operational control and information security practices. For the Red Flags Rule, it asks whether MGM obtains consumer reports with credit transactions, advances funds and has developed a trained staff on identity theft prevention measures.
The cyberattack occurred in September and has had significant finanial implications for MGM, the company says. It is cooperating with the FBI to bring those responsible to justice, it adds.
The situation was exacerbated when Khan and an unnamed senior aide were guests at one of MGM's Las Vegas properties during the attack.
Reports claim that Khan was asked to write her credit card information on paper due to the incapacitated IT systems.
Following this incident, the FTC launched an investigation into MGM's data security practices. The FTC issued a Civil Investigative Demand (CID) seeking more than 100 categories of information from MGM.
The casino operator alleges that some requests appear directly derived from Khan's personal experience during the attack.
"As the most high-profile person involved in the events at issue - and the only such person widely identified by name in press reports - Chair Khan is both a potential civil plaintiff and a potential witness," MGM's motion says.
The company said in February it faces 15 private class actions and asks to disqualify Khan because of her personal involvement.
The FTC denied both MGM's motion to quash and disqualify Khan, which MGM says deprived it of its Fifth Amendment rights.
"The order relies on the Commission's position that its Rules of Practice do not allow for recusal of Commissioners except from administrative litigation," the motion says.
"As a result, in cases like this one, the Commission refuses to entertain petitions to recuse Commissioners from other aspects of FTC proceedings, such as ruling on Petitions to Quash.
"This categorical refusal to hear petitions to recuse or disqualify - even in extreme cases like this one - violates the Due Process Clause of the Fifth Amendment."
MGM calls it a "pattern of unconstitutional conduct."