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RN Entertainment, LLC v. Clement

United States District Court, M.D. Tennessee, Nashville Division

May 6, 2019

DAVID CLEMENT, et al., Defendants.



         Pending before the Court is Defendants' Joint Partial Motion to Dismiss. (Doc. No. 41.) RN Entertainment, LLC (“RN”) has responded in opposition, to which Defendants have replied. (Doc. Nos. 52, 53.) For the reasons stated below, the motion will be granted in part and denied in part.

         I. First Amended Verified Complaint

         On March 25, 2019, RN filed a First Amended Verified Complaint (the “Complaint”). (Doc. No. 36.) In the Complaint, RN avers that it owns and operates a fleet of luxury tour buses that it rents or leases to individual musicians or touring companies. (Id. at 3-4.) RN also owns one “crew coach, ” designed to carry a musician's road crew, that it also rents and leases. (Id. at 4.) To the extent that musicians need additional crew coaches, RN rents or leases additional crew coaches from third-parties and supplies the rented crew coaches to the customer. (Id.)

         RN alleges that, after working as a coach driver for more than a decade, it promoted David Clement to General Manager. (Id. at 5.) As General Manager, Clement was responsible for business development, customer relations, and managing RN's tours. (Id.) Clement worked out of RN's Lebanon, Tennessee office, where he also managed RN's Tennessee employees. (Id.) Shortly after hiring Clement, RN hired Cathy Preiss as the leasing agent and bookkeeper for the Lebanon, Tennessee office. (Id. at 6.) Clement and Preiss were familiar with one another as they were both previous employees of a third-party competitor. (Id.)

         According to the Complaint, in their roles, Clement and Preiss had access to RN's confidential and proprietary business information (i.e., financials, customer lists and prospects, and business development materials). (Id.) In June 2013, Clement, with RN's approval, formed On The Road, LLC (“On the Road”) for the purpose of securing a motor vehicle carrier license for RN's business use. (Id.) Two years later, in 2015, RN acquired its own motor vehicle carrier license, eliminating the need for On the Road's existence. (Id. at 7.) RN offered to buy On the Road from Clement, but Clement refused. (Id.) RN then insisted that Clement dissolve On the Road, and Clement represented that he would do so. (Id.)

         Two years later, in 2017, Clement and Preiss began using On the Road (which had not been dissolved) as a vehicle to operate a competing tour bus rental company. (Id. at 8-9.) RN alleges that Clement and Preiss rented coaches from third-parties and then supplied those third-party tour bus rentals to customers through On the Road. (Id.) Further, it is alleged that Clement and Preiss used RN's Lebanon, Tennessee office staff as On the Road employees. (Id.) Critically, RN alleges that Clement and Preiss used its proprietary customer information and other financials to build their business and siphon customers from RN to On the Road. (Id. at 9-10.)

         Given that On the Road was nested inside RN, the two companies were inextricably intertwined in a variety of ways. For example, Clement and Preiss's On the Road email addresses were created and maintained within RN's GoDaddy email account. (Id. at 10.) Similarly, RN alleges that Clement and Preiss used virtually all of its electronic devices (laptops, phones, applications) to operate On the Road. (Id. at 10-11.) Eventually, Clement and Preiss allegedly converted the Lebanon office into On the Road's place of business. (Id. at 11.) Clement and Preiss would use RN's fleet to lure customers in, then, once a deal was in place with On the Road, they would rent or lease coaches from third-parties to supply customers. (Id.) Essentially, as alleged in the Complaint, although both Clement and Preiss were RN employees, they ran a simultaneously competing business using proprietary information gained from RN as well as the company's employees and other resources. (Id. at 12.) There are no allegations of any contractual employment relationship.

         Subsequently, in February 2019, RN discovered these activities and promptly terminated both Clement and Preiss. (Id. at 13.) After they were terminated, Clement and Preiss allegedly began interfering with and obstructing access to RN's email and web-hosting services. (Id.) Specifically, Clement and Preiss moved or deleted emails from RN's GoDaddy account and failed to turn over passwords to RN's email and web-hosting servers, effectively depriving it from accessing its website and email archives. (Id. at 13-14.) RN also alleges that Clement made false, denigrating statements about RN to vendors and customers. (Id. at 14-15.) As a result, RN brings claims for: (1) violation of the Computer Fraud and Abuse Act (“CFAA”); (2) civil conspiracy in violation of the CFAA; (3) intentional interference with business relationship; (4) unfair competition; (5) breach of fiduciary duty; (6) civil conspiracy; and (7) disparagement. (Id. at 15-23.) Clement, Preiss, and On the Road then filed the instant joint motion. (Doc. No. 41.)

         II. Defendants' Joint Partial Motion to Dismiss

         In the Joint Partial Motion to Dismiss, Defendants first argue that RN's CFAA claims must be dismissed because the claims fail to include any factual allegation that RN suffered “damage” as that word is defined in the CFAA. (Doc. No. 42 at 4.) Further, Defendants contend that RN fails to show how Preiss or Clement lacked authorization to access the proprietary information. (Id.)

         Rather, Defendants contend that the Complaint merely alleges that Clement and Preiss used RN's computers and information to operate a competing business (i.e., that they used the information they were authorized to access for an allegedly unauthorized purpose), which is insufficient to state a claim under the CFAA. (Id.) Defendants also assert that RN's breach of fiduciary duty, unfair competition, and civil conspiracy claims are preempted by the Tennessee Uniform Trade Secrets Act (“TUTSA”). (Id. at 4-7.) Moreover, Defendants argue that RN's civil conspiracy claim: (1) lacks an underlying predicate tort; and (2) fails pursuant to the intracorporate immunity doctrine. (Id. at 6.)

         RN responds in opposition, first arguing that its CFAA claim is well-pled because it alleges both damage that satisfies the statutory definition and conduct that violates the statute. (Doc. No. 52 at 3.) RN maintains that Defendants' use of its computers and proprietary information to operate a competing business and obstruction of web-hosting and email access after Clement and Preiss's termination was in violation of the CFAA. (Id. at 3-6.) RN also contends that these actions give rise to a CFAA conspiracy claim. (Id. at 6.) Further, RN argues that its state common law claims are not preempted by the TUTSA because that statute only preempts trade secret claims, which are not asserted. (Id. at 7-9.) Finally, RN argues that its civil conspiracy claim is sufficient because it alleges that Clement and Preiss conspired against it and includes allegations of multiple qualifying predicate torts. (Id. at 9-10.)

         III. Standard of Review

         In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the Court must view the complaint in the light most favorable to the plaintiff, accepting all well-pleaded factual allegations as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim.” Fed.R.Civ.P. 8(a)(2). However, the plaintiff must allege sufficient facts to show that the claim is “plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007).

         “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). A plaintiff must plead more than “labels and conclusions, ” “a formulaic recitation of the elements of a cause of action, ” or “naked assertions devoid of further factual enhancement.” Id. (quoting Twombly, 550 U.S. at 555, 557). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         IV. Computer Fraud and Abuse Act

         The CFAA prohibits certain conduct involving unauthorized access to computers. See 18 U.S.C. § 1030(a)(1)-(a)(7). Although the CFAA is primarily a criminal statute, it also permits “[a]ny person who suffers damage or loss by reason of a violation of this section [to] maintain a civil action against the violator to obtain ...

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