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Porters Building Centers, Inc. v. Lumber

United States District Court, W.D. Missouri.

October 2, 2017

PORTERS BUILDING CENTERS, INC., Plaintiff,
v.
SPRINT LUMBER, et al., Defendants.

          ORDER AND OPINION (1) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; AND (2) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          ORTRIE D. SMITH, SENIOR JUDGE

         Pending are Plaintiff's Motion for Summary Judgment (Doc. #263), and Defendants' Motion for Summary Judgment (Doc. #265). For the following reasons, both motions are granted in part and denied in part.

         I. BACKGROUND[1]

         Plaintiff is a family owned business providing building supplies and lumber to commercial contractors and homebuilders. Its stores are located in Kearney, Cameron, and Laurie, Missouri; and Elwood, Kansas. In 2003, Defendants Jerry Downey and Ray Meng began working for Plaintiff. Defendants Jess Reynolds and Sheila Higdon began working for Plaintiff in 2007 and 2010, respectively. These individuals worked at Plaintiff's Elwood store, and were at-will employees.

         In late April 2016, Downey, Higdon, Reynolds, and Meng (“former employees”) resigned from their employment with Porters. On May 2, 2016, they began working for Defendant Sprint Lumber, Inc. Sprint Lumber sells lumber and building materials to commercial builders from its locations in St. Joseph and Platte City, Missouri. Defendant Scott Laderoute is president and owner of Sprint Lumber.

         Beginning in December 2015, there were several communications between Downey and Laderoute about Downey leaving Plaintiff to work for Sprint Lumber. Later on, those discussions included Reynolds, Higdon, and others employed by Plaintiff. Prior to resigning from Plaintiff, the former employees communicated with several customers they serviced at Plaintiff regarding their impending move to Sprint Lumber. They also provided Sprint Lumber credit applications to many of those customers.

         In May 2016, Plaintiff filed this lawsuit and sought a temporary restraining order, which was denied. Docs. #1-2, 8. In October 2016, Plaintiff filed a motion for preliminary injunction. Doc. #116. After a hearing, the Court denied Plaintiff's motion for preliminary injunction. Doc. #194.

         During the pendency of this lawsuit, Plaintiff amended its complaint twice. In its Second Amended Complaint, Plaintiff alleges the following claims: (1) violation of the Computer Fraud and Abuse Act, (2) violation of the Sherman Antitrust Act, [2] (3) computer tampering, (4) violation of the Missouri Uniform Trade Secrets Act, (5) breach of duty of loyalty, (6) tortious interference with business expectancy, (7) trespass, and (8) civil conspiracy. Doc. #109. Downey asserts four counterclaims: (1) violation of 18 U.S.C. § 2701, (2) violation of 18 U.S.C. § 2511, (3) invasion of privacy, and (4) trespass to chattels. Doc. #122. Plaintiff now moves for summary judgment on the counterclaims alleged by Downey, and Defendants move for summary judgment on all of Plaintiff's remaining claims.

         II. STANDARD

         A moving party is entitled to summary judgment on a claim only if there is a showing that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Williams v. City of St. Louis, 783 F.2d 114, 115 (8th Cir. 1986). “[W]hile the materiality determination rests on the substantive law, it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Wierman v. Casey's Gen. Stores, 638 F.3d 984, 993 (8th Cir. 2011) (quotation omitted). The Court must view the evidence in the light most favorable to the non-moving party, giving that party the benefit of all inferences that may be reasonably drawn from the evidence. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588-89 (1986); Tyler v. Harper, 744 F.2d 653, 655 (8th Cir. 1984). A party opposing a motion for summary judgment “may not rest upon the mere allegations or denials of the…pleadings, but…by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e).

         III. DISCUSSION

         A. Defendants' Motion for Summary Judgment (1) Computer Fraud and Abuse Act (Count I)

         For its Computer Fraud and Abuse Act (“CFAA”) claims, Plaintiff alleges Downey, without authorization, deleted emails from his work email account, which contained confidential information, trade secrets, and customer contact information. Doc. #109, at 15-16. Plaintiff alleges Higdon, without authorization, deleted confidential information, trade secrets, and customer contact information on the cell phone provided to her by Plaintiff. Id. Plaintiff contends Sprint Lumber and Laderoute “affirmatively participated in and conspired” with Downey and Higdon. Id. Defendants argue they are entitled to summary judgment because Downey and Higdon did not act without authorization and/or did not act in excess of their authorization, and Plaintiff has not established loss.

         The CFAA allows a private party to bring a civil action for damages caused by computer fraud. 18 U.S.C. § 1030(g). To assert a civil action under the CFAA, a plaintiff must establish the defendant (1) accessed a protected computer, (2) without authorization or exceeding authorized access, and (3) caused loss in excess of $5, 000. 18 U.S.C. §§ 1030(a)(4), 1030(c)(4)(A)(i)(I). The parties' discussions address only the second and third elements, conceding Plaintiff met the first element.

         The CFAA does not define the term “without authorization” or “authorization, ” but defines “exceeds authorized access” as “access to a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled to obtain or alter.” 18 U.S.C. § 1030(e)(6). The parties concede courts are split in interpreting both phrases, particularly when applying the CFAA to an employee who accesses an employer's computer with permission prior to termination, and uses that information to benefit a competitor. Doc. #265, at 65-69; Doc. #291, at 103-08; see also InfoDeli, LLC v. W. Robidoux, Inc., No. 15-364-BCW, 2016 WL 6921623, at *6 (W.D. Mo. Mar. 7, 2016) (noting courts are split on the CFAA definitions but declining to adopt a definition when considering a motion to dismiss).

         Some courts hold an individual acts without authorization whenever he, without his employer's knowledge, “acquires adverse interest or if he is otherwise guilty of a serious breach of loyalty.” Int'l Airport Ctrs., LLC v. Citrin, 440 F.3d 418, 421 (7th Cir. 2006) (citation omitted); see also United States v. Rodriguez, 628 F.3d 1258, 1263-64 (11th Cir. 2010); P.C. Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore LLC, 428 F.3d 504, 510-11 (3d Cir. 2005); Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121, 1124-25 (W.D. Wash. 2000). Other courts apply a more narrow view, finding “without authorization” applies to outsiders' or hackers' conduct, and does not apply to individuals, such as employees, who have permission to access the computer. See WEC Carolina Energy Sols. LLC v. Miller, 687 F.3d 199, 203-07 (4th Cir. 2012); LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1132-35 (9th Cir. 2009); US Bioservices Corp. v. Lugo, 595 F.Supp.2d 1189, 1192-95 (D. Kan. 2009); Shamrock Foods Co. v. Gast, 535 F.Supp.2d 962, 964-65 (D. Ariz. 2008).

         The Eighth Circuit has not decided whether the CFAA imposes civil liability on employees who access information with permission but with improper purpose. Several district courts in the Eighth Circuit have decided this particular issue. The Eastern District of Missouri, Southern District of Iowa, District of Nebraska, and Western District of Arkansas adopted the broader interpretation to cover actions by an employee who, although given access to an employer's computers, utilizes information from the computers for personal use, in contravention of the employee's duty of loyalty, or to aid unlawful competition. Lasco Foods, Inc. v. Hall & Shaw Sales, Mktg., & Consulting, LLC, No. 08CV1683, 2009 WL 3523986, at *4 (E.D. Mo. Oct. 26, 2009) (stating a CFAA claim was sufficiently pled when the former employees were alleged to have “acted without authorization” by obtaining the plaintiff's information for “personal use and in contravention of their fiduciary duty”); NCMIC Fin. Corp. v. Artino, 638 F.Supp.2d 1042, 1060-61 (S.D. Iowa 2009) (finding the defendant's “actions in accessing NCMIC's computer system to send e-mails aiding his unlawful competition… and to obtain NCMIC's customer spreadsheet” was “without authorization”); Ervin & Smith Advert. & Pub. Relations, Inc. v. Ervin, No. 8:08CV459, 2009 WL 249998, at *7-8 (D. Neb. Feb. 3, 2009) (finding the defendants' authorization terminated once they destroyed the agency relationship by appropriating protected information); Nilfis-Advance, Inc. v. Mitchell, No. 05-5179, 2006 WL 827073, at *2 (W.D. Ark. Mar. 28, 2006) (finding the plaintiff sufficiently pled a CFAA violation by alleging the defendant emailed company files to a personal computer for the purpose of misappropriation).[3]

         This Court is persuaded by the Seventh Circuit's reasoning in Citrin, and the decisions issued by the majority of district courts in the Eighth Circuit. In Citrin, Judge Posner found an employee's authorization to access a computer “terminated when…he resolved to destroy files that incriminated himself and other files that were the property of his employer, in violation of the duty of loyalty that agency law imposes on an employee.” 440 F.3d at 420 (citations omitted). Although noting the difference between “without authorization” and “exceeding authorized access” is “paper thin, ” Judge Posner concluded the employee's breach of duty of loyalty terminated his agency relationship, and thus, his computer access was terminated. Id. at 420-21. “Violating the duty of loyalty, or failing to disclose adverse interests, voids the agency relationship.” Id. at 421 (quoting State v. DiGiulio, 835 P.2d 488, 492 (Ariz.Ct.App. 1992)); see also Restatement (Second) of Agency § 112 cmt. b (1958) (stating an agent who acquired an interest adverse to the principal or acts for another principal “should realize that the principal would not desire him to continue to act”). Applying this standard, the Court finds Plaintiff may bring CFAA claims against Downey and Higdon. The Court finds genuine issues of material fact exist with regard to these claims, and thus, Defendants' summary judgment motion on the CFAA claims against Higdon and Downey is denied.

         With regard to Meng and Reynolds, Plaintiff admitted Meng and Reynolds did not tamper with its computers. Doc. #265, at 19; Doc. #286-1, at 5; Doc. #291, at 28. Thus, Defendants' motion for summary judgment on Plaintiff's CFAA claims against Meng and Reynolds is granted.

         The Court is left with Plaintiff's CFAA claims against Sprint Lumber and Laderoute. Plaintiff alleges Sprint Lumber and Laderoute affirmatively participated in and conspired with Downey and Higdon to violate the CFAA. The parties failed to address this particular claim. Although it is doubtful the CFAA permits a civil conspiracy claim, the Court must deny Defendants' motion for summary judgment on Plaintiff's CFAA claim against Sprint Lumber and Laderoute.

         (2) Missouri Computer Tampering Act (Count III)

         Defendants seek summary judgment on Plaintiff's Missouri Computer Tampering Act (“MCTA”) claims, and Plaintiff's claim for punitive damages under the MCTA.

         (a) Substantive Claims under the MCTA

         Plaintiff alleges Downey and Higdon violated the MCTA by (1) affirmatively and without authorization, deleting, altering, and/or destroying company data and confidential information on Plaintiff's computing and mobile devices, and (2) disclosing and taking company data and confidential information from the computing and mobile devices. Doc. #109, at 18-19. Plaintiff also contends Sprint Lumber and Laderoute conspired with Downey and Higdon to perform these acts, and Sprint Lumber and Laderoute received, retained, and/or used the data and confidential information obtained by Downey and Higdon. Id. Defendants argue entitlement to summary judgment because Downey and Higdon were authorized to access, delete, and/or alter information on Plaintiff's computers and cell phones.

         The owner of a computer system may bring a civil action against any person who violates the MCTA. Mo. Rev. Stat. § 537.525.1 (2016). A person violates the MCTA by “knowingly and without authorization or without reasonable grounds to believe he has such authorization” does one of the following:

(1) Modifies or destroys data or programs residing or existing internal to a computer, computer system, or computer network: or (2) Modifies or destroys data or programs or supporting documentation residing or existing external to a computer, computer system, or computer network; or (3) Discloses or takes data, programs, or supporting documentation, residing or existing internal or external to a computer, computer system, or computer network; (4) Discloses or takes a password, identifying code, personal identification number, or other confidential information about a computer system or network that is intended to or does control access to the computer system or network; (5) Accesses a computer, a computer system, or a computer network, and intentionally examines information about another person; (6) Receives, retains, uses, or discloses any data he knows or believes was in violation of this subsection.

Mo. Rev. Stat. § 569.095.1 (2016); see also W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 20 (Mo. banc 2012). The Court finds genuine issues of material fact exist with regard to Plaintiff's MCTA claims against Downey, Higdon, Sprint Lumber, and Laderoute. Therefore, Defendants' summary judgment motion on these particular claims is denied. However, similar to the CFAA claims, Plaintiff admitted Meng and Reynolds did not tamper with Plaintiff's computers, and therefore, Defendants' summary judgment motion on Plaintiff's MCTA claims against Meng and Reynolds is granted.

         (b) Punitive Damages under the MCTA

         Defendants seek summary judgment on Plaintiff's claim for punitive damages under the MCTA. Plaintiff concedes the MCTA does not provide for punitive damages, but argues punitive damages are available because Defendants committed intentional torts. The MCTA allows for recovery of “compensatory damages, including any expenditures reasonably and necessarily incurred by the owner or lessee to verify the computer system…or data was not altered, damaged, or deleted by the access, ” and reasonable attorneys' fees. Mo. Rev. Stat. § 537.525(1)-(2). The statute does not allow for recovery for punitive damages. Plaintiff fails to cite any case finding otherwise. Defendants' summary judgment motion on Plaintiff's request for punitive damages under the MCTA is granted.

         (3) Missouri Uniform Trade Secrets Act (Count IV)

         For its Missouri Uniform Trade Secrets Act (“MUTSA”) claims, Plaintiff alleges Defendants disclosed and used Plaintiff's trade secrets without consent. Defendants argue the information and data at issue does not rise to the level of trade secrets.

         To demonstrate a misappropriation of trade secrets, one must show: “(1) a trade secret exists, (2) the defendant misappropriated the trade secret, and (3) the plaintiff is entitled to either damages or injunctive relief.” Cent. Tr. & Inv. Co. v. Signalpoint Asset Mgmt., LLC, 422 S.W.3d 312, 320 (Mo. banc 2014).[4] A “trade secret” includes but is not limited to “technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, or process, that”:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain ...

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