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Wachter, Inc. v. Cabling Innovations, LLC

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

May 7, 2019

WACHTER, INC., Plaintiff,
v.
CABLING INNOVATIONS, LLC, et al., Defendants.

          MEMORANDUM OPINION

          ELI RICHARDSON UNITED STATES DISTRICT JUDGE.

         Plaintiff Wachter, Inc. filed this action against Defendants Brian Pitts, Megan Pitts, Josh Estes, and Cabling Innovations, LLC, asserting nine causes of action. Before the Court is Defendants' Motion to Dismiss (Doc. No. 21), supported by an accompanying brief (Doc. No. 18). Plaintiff filed a response (Doc. No. 23), and Defendants replied (Doc. No. 28). For the below-stated reasons, Defendants' motion will be granted in part and denied in part.

         ALLEGED FACTS [1]

         Wachter, Inc. (hereinafter “Plaintiff”), a Kansas corporation registered to do business in the state of Tennessee, is a national provider of infrastructure services, communications equipment, and technical support. (Doc. No. 1 at ¶¶ 1, 14). Plaintiff's services include on-site wired and wireless network infrastructure, telephone and structured cabling, design, installation, and electrical services. (Id. at ¶ 15).

         On September 13, 2010, Plaintiff hired Brian Pitts as an Account Project Manager to manage multi-client complex projects in Nashville, Tennessee. (Id. at ¶¶ 16-17). On December 5, 2011, Plaintiff promoted Mr. Pitts to Local Business Unit Manager. (Id. at ¶ 18). As Local Business Unit Manager, Mr. Pitts' responsibilities included leading, coaching, and managing Plaintiff's Nashville office; managing projects; and monitoring profits and losses for the business unit. (Id. at ¶ 19). On September 20, 2017, Plaintiff promoted Mr. Pitts to Local Business Account Manager and he was responsible for seeking and maintaining new customer opportunities. (Id. at ¶¶ 20-21). On July 22, 2013, Plaintiff hired Josh Estes as a foreman to manage projects for customers. (Id. at ¶¶ 23-24).

         As part of their employment, Plaintiff provided Mr. Pitts and Mr. Estes with an email account and access to Plaintiff's computer system which contained certain confidential and trade secret information including, but not limited to, pricing and other financial data; customer lists; customer requirements; customer contacts; and other nonpublic business information about Plaintiff, its customers, and suppliers. (Id. at ¶ 26). As a condition of their employment, Mr. Pitts and Mr. Estes signed [Plaintiff's] Employee Handbook, which contains a Conflict of Interest policy that provides, in part, as follows:

Employees have an obligation to conduct business within guidelines that prohibit actual or potential conflicts of interest. . . .
An actual or potential conflict of interest occurs when an employee is in a position to influence a decision that may result in a personal gain for that employee or for a relative as a result of Wachter's business dealings. . . .
Personal gain may result not only in cases where an employee or relative has a significant ownership in a firm with which [Plaintiff] does business, but also when an employee or relative receives any kickback, bribe, substantial gift, or special consideration as a result of any transaction or business dealings involving [Plaintiff].

(Id. at ¶ 27). The Employee Handbook also contains a confidentiality policy that provides, in part:

No one is permitted to remove or make copies of any [of Plaintiff's] records, reports or documents without prior management approval. Disclosure of confidential information could lead to termination, as well as other possible legal action.

(Id. at ¶ 28).

         During the course of their employment with Plaintiff, Mr. Estes and Mr. Pitts accessed their email accounts provided by Plaintiff and Plaintiff's computer system to review and obtain data for their own personal benefit and/or for the benefit of Cabling Innovations.[2] (Id. at ¶ 29). Mr.

         Pitts forwarded emails from his Plaintiff-provided email account to his personal and/or Cabling Innovations email account, Mr. Estes, and Megan Pitts (Mr. Pitts' spouse) without Plaintiff's authorization. (Id. at ¶¶ 9, 30-31). The following are examples of how Mr. Pitts used the information he obtained through his employment with Plaintiff to bid for/obtain work on behalf of Cabling Innovations:

• In February 2017, Mr. Pitts utilized Plaintiff's resources and confidential information to recommend contracting work with Cabling Innovations to Plaintiff's customer.
• In November 2017, Mr. and Ms. Pitts utilized Plaintiff's resources and confidential information to submit a bid to Plaintiff's customer on behalf of Cabling Innovations for work at the eMIIDS project.
• In February 2018, Mr. Pitts utilized Plaintiff's resources and confidential information to submit a bid to Plaintiff's customer on behalf of Cabling Innovations for work at the Medhost project.
• In March 2018, Mr. Pitts and Mr. Estes utilized Plaintiff's resources and confidential information to obtain and perform work for Plaintiff's customer on behalf of Cabling Innovations at the E|Spaces Chattanooga project.
• In April 2018, Mr. Pitts utilized Plaintiff's confidential information to submit a bid to Plaintiff's customer on behalf of Cabling Innovations for work at the MDF project.

(Id. at ¶ 32). The work obtained from Plaintiff's customers would have not been obtained by Cabling Innovations but for Mr. Pitts' sharing of Plaintiff's confidential information. (Id. at ¶ 33). Also during Mr. Pitts' employment, he expensed to Plaintiff entertainment expenses he claimed were for the benefit of Plaintiff's customer, when the expenses were actually for the benefit of Mr. Pitts and/or Cabling Innovations. (Id. at ¶ 34). Plaintiff terminated Mr. Pitts on April 27, 2018. (Id. at ¶ 22). Mr. Estes resigned on February 2, 2018. (Id. at ¶ 25).

         LEGAL STANDARD

         For purposes of a motion to dismiss, the Court must take all of the factual allegations in the complaint as true as the Court has done above. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. 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. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 679. A legal conclusion, including one couched as a factual allegation, need not be accepted as true on a motion to dismiss, nor are mere recitations of the elements of a cause of action sufficient. Id. at 678; Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010); Abriq v. Hall, 295 F.Supp.3d 874, 877 (M.D. Tenn. 2018). Moreover, factual allegations that are merely consistent with the defendant's liability do not satisfy the claimant's burden, as mere consistency does not establish plausibility of entitlement to relief even if it supports the possibility of relief. Iqbal, 556 U.S. at 678.

         In determining whether a complaint is sufficient under the standards of Iqbal and its predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. Identifying and setting aside such allegations is crucial, because they simply do not count toward the plaintiff's goal of showing plausibility of entitlement to relief. As suggested above, such allegations include “bare assertions, ” formulaic recitation of the elements, and “conclusory” or “bald” allegations. Id. at 681. The question is whether the remaining allegations-factual allegations, i.e., allegations of factual matter-plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard of Fed.R.Civ.P. 8 and thus must be dismissed pursuant to Rule 12(b)(6). Id. at 683.

         ANALYSIS

         I. Count I: Violations of the Computer Fraud and Abuse Act (against Mr. Pitts, Mr. Estes, and Cabling Innovations)

         In Count I, Plaintiff alleges the action of Mr. Pitts, Mr. Estes, and Cabling Innovations are violations of the Computer Fraud and Abuse Act (“CFAA”). 18 U.S.C. § 1030, et seq. 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 compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C. § 1030(g).

         Plaintiff asserts these Defendants violated 18 U.S.C. § 1030(a)(2)(C), which prohibits “intentionally access[ing] a computer without authorization or exceed[ing] authorized access, and thereby obtain[ing] . . . information from any protected computer”; and Section (a)(5)(A) and (a)(5)(B), which provides for liability on the part of any person who:

(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer;
(B) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage;

18 U.S.C. § 1030(a)(5). The foregoing sections of the CFAA describe two types of claims: “access” claims and “transmission” claims. Such claims require that Defendants' access or transmission, respectively, of Plaintiff's data be without authorization. ReMedPar, Inc. v. AllParts Med., LLC, 683 F.Supp.2d 605, 609 (M.D. Tenn. 2010) (“Thus, for all civil claims under the CFAA, a plaintiff must show that the defendant's access to the protected computer was either ‘without authorization' or that it ‘exceed[ed] authorized access.'” (citation omitted)). Defendants contend Plaintiff's CFAA claim fails because Plaintiff has not pled that Defendants accessed a computer without authorization.

         i.Without Authorization/Exceeds Authorized Access

         Defendants argue that, even when the factual allegations regarding the CFAA are accepted as true, these facts do not give rise to an entitlement to relief because Plaintiff granted Mr. Pitts and Mr. Estes computer access.

         In response, Plaintiff correctly argues that the CFAA does not expressly define the term “without authorization” and some courts have “found that an employee may access an employer's computer ‘without authorization' where it utilizes the computer to access confidential or proprietary information that he has permission to access, but then uses that information in a manner that is inconsistent with the employer's interest.” (Doc. No. 23 at 6 (citing Frees, Inc. v. McMillan, No. 3:06-cv-307, 2007 WL 708593, at *2 (E.D. Tenn. Mar. 5, 2007) and Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121, 1126 (W.D. Wash. 2000))).

         The Sixth Circuit has not addressed whether an employee's misuse or misappropriation of an employer's computer-accessible business information is “without authorization” when an employer has given the employee permission to access such information. But other district courts in this circuit have adopted a narrow approach, holding that there is no violation of the CFAA if an employer has given an employee access to a computer and the employee subsequently misuses data or confidential information obtained on the computer. See Royal Truck & Trailer Sales & Serv., Inc. v. Kraft, No. 18-10986, 2019 WL 1112387, at *3 (E.D. Mich. Mar. 11, 2019); see also ReMedPar, Inc., 683 F.Supp.2d at 610 (no CFAA violation when defendant “had access . . . for the purpose of performing his job while he was still an employee, and for performing the tasks he undertook as an independent contractor[.]”); Black & Decker (US), Inc. v. Smith, 568 F.Supp.2d 929, 935-36 (W.D. Tenn. 2008); Am. Family Mut. Ins. Co. v. Rickman, 554 F.Supp.2d 766, 771 (N.D. Ohio 2008) (“The [CFAA] was not meant to cover the disloyal employee who walks off with confidential information. Rather, the statutory purpose is to punish trespassers and hackers[.]”).

         Although there is a split of authority on this issue, the weight of authority appears to be that there cannot be a CFAA violation where an employee has lawful access to his computer. See Scheper v. Daniels, No. 1:10-CV-385, 2011 WL 13228113, at *2 (S.D. Ohio June 1, 2011) (collecting cases). In Scheper, referring to courts that have adopted this narrow approach, the court explained:

Generally speaking, these courts have reasoned that the according to its plain terms, the CFAA's reference to “without authorization” and “exceeds authorized access” means that the defendant did not have permission to access the information within the computer from the outset, i.e., the defendant was a hacker, and that the statute was not meant ...

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