FTC Says Walmart Opinion Backs Its Opposition to Kochava Motion to Dismiss

The March 27 opinion from U.S. District Judge Manish Shah for Northern Illinois in Chicago in FTC v. Walmart (docket 1:22-cv-3372) supports the FTC’s opposition to Kochava’s motion to dismiss the agency’s privacy complaint for failure to state a claim, said the agency’s notice of supplemental authority Monday (docket 2:22-cv-00377) in U.S. District Court for Idaho. Shah denied in part Walmart’s motion to dismiss an FTC enforcement action.

The FTC seeks a permanent injunction enjoining Kochava from acquiring consumers’ geolocation data and selling it in a format that allows entities to track their movements to sensitive locations (see 2302210038). Kochava contends there’s no way to determine whether a particular individual is at a particular place using the device identifier and geolocation data that Kochava sells to third parties.

The Chicago case involves telemarketers who conned consumers into sending money using Walmart’s services. The FTC alleges Walmart knew it was processing fraudulent money transfers and failed to do enough to protect consumers. Shah’s partial denial of Walmart’s motion to dismiss allows the FTC “to proceed on a theory of liability under Section 5 of the FTC Act,” said its notice.

Shah dismissed without prejudice the FTC’s Telemarketing Sales Rule claim, plus the agency's Section 5 claim because it was "predicated on a violation of the TSR," said the notice. Shah’s “reasoning with respect to the TSR theory of liability is not applicable” to the FTC’s case against Kochava because the FTC doesn’t allege Kochava violated the TSR, it said.

Kochava “appears to have relied heavily on Walmart’s briefing in drafting its own motion to dismiss the FTC’s Section 5 claim in this matter,” said the notice. Similar to Walmart, Kochava moved to dismiss the FTC’s case by arguing the agency “failed to plead a violation of public policy” and failed to plead that Kochava’s conduct “was immoral, unethical, oppressive, or unscrupulous,” it said.

Kochava, like Walmart, also argued the FTC hasn’t alleged “an ongoing or imminent violation of the FTC Act,” said the notice. Both also argued the FTC’s action violates the due process clause, and that the FTC’s makeup is unconstitutional, it said. Shah “addressed and rejected each of these arguments,” it said.

Shah’s opinion “supports the FTC’s argument that Kochava’s motion to dismiss should be denied,” said the notice. The FTC recognizes that Shah’s opinion in the Walmart case isn’t binding on the Idaho court, but the agency believes the court “may find its discussion informative and its reasoning persuasive,” it said.