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E. R. James Real Estate Services, LLC, et al v. Steve Spinell

October 26, 2011

E. R. JAMES REAL ESTATE SERVICES, LLC, ET AL., PLAINTIFFS,
v.
STEVE SPINELL, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court is Defendants' Motion to Dismiss Plaintiffs' Complaint under Rule 12(b)(6) and Motion to Strike Plaintiffs' request for attorney's fees. For the reasons that follow, the Court grants the Motion to Dismiss Count I as to Defendant Martini; denies the Motion to Dismiss Count I as to the remaining Defendants; denies the Motion to Strike Plaintiffs' request for attorneys fees; and denies the Motion to Dismiss Counts II--VI with regard to all Defendants.

I. INTRODUCTION

Plaintiffs here are E. R. James Real Estate Services, LLC; Edward R. James Partners, LLC; Edward R. James Homes, LLC; and E. R. James Realty, LLC ("Services," "Partners," "Homes," and "Realty," respectively, or collectively the "Companies"). The Companies allege that several of their former employees, on company resources and company time, founded a competing business and stole customers from Services. When they resigned in concert, Defendants allegedly took physical files, deleted incriminating e-mails, and otherwise "sabotaged" their computers.

Defendants have moved to dismiss the Complaint under FED. R. CIV. P. 12(b)(6) on a variety of grounds. As to Count I, they object that the Computer Fraud and Abuse Act (the "CFAA") cannot apply to Defendant Martini. As to the remaining counts, Defendants allege that, as separate entities, Plaintiffs cannot (a) each assert harms that accrued only to Services, and (b) treat the Defendants as Services employees when they were employed by other Plaintiffs.

II. LEGAL STANDARD

In evaluating a motion to dismiss under Rule 12(b)(6), this Court accepts as true all well-pleaded facts in Plaintiffs' Complaint and draws all possible inferences in their favor. Cole v. Milwaukee Area Tech. College Dist., 634 F.3d 901, 903 (7th Cir. 2011). Under FED. R. CIV. P. 8(A)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." To satisfy this requirement, Plaintiffs need not allege "detailed factual allegations," but must offer more than "labels and conclusions" or "a formulaic recitation of the elements of the cause of action[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Naked assertion[s] devoid of further factual enhancement" will not suffice -- that is, a Complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009).

III. DISCUSSION

A. Count I -- Computer Fraud and Abuse Act

In Count I, Plaintiffs claim that Defendants deleted e-mails and other computer files in violation of the CFAA, 18 U.S.C. § 1030. "To state a civil claim for a violation of the CFAA, a plaintiff must allege: 1) damage or loss; 2) caused by; 3) a violation of one of the substantive provisions set forth in § 1030(a); and 4) conduct involving one of the factors in § 1030(c)(4)(A)(i)(I)--(V)." 18 U.S.C. § 1030(g); Cassetica Software, Inc. v. Computer Scis. Corp., No. 09 C 0003, 2009 WL 1703015, at *3 (N. D. Ill. June 18, 2009). Count I is pled under the damages rule of § 1030(c)(4)(A)(i)(I), which requires economic damages in excess of $5,000 in one year.

In the Complaint, Plaintiffs allege violations of § 1030(a)(5)(A) and (C). Subsection (A) prohibits "knowingly caus[ing] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally caus[ing] damage without authorization, to a protected computer." Subsection (C) prohibits "intentionally access[ing] a protected computer without authorization, and as a result of such conduct, caus[ing] damage and loss."

The CFAA defines many of these statutory terms. To be "protected," a computer must be used in interstate commerce or communication. Id. § 1030(b)(2)(B). A user "exceeds authorized access" if she permissibly accesses a computer, but then obtains or alters information she should not. Id. § 1030(e)(6). "Damage" is only harm to the "integrity or availability" of data, information, a system or a program. Id. § 1030(e)(8). Absconding with confidential information is not "damage" unless the theft impairs the underlying data. Mintel Intern. Group, Ltd. v. Neergheen, No. 08 C 3939, 2010 WL 145786, at *9 (N. D. Ill. Jan. 12, 2010).

Similarly, "loss" is limited to the victims' costs in responding to, assessing, and repairing damage, plus consequential damages from related service interruptions. 18 U.S.C. § 1030(b)(11). Thus, economic costs unrelated to the actual computer system are not covered. Cassetica, 2009 WL 1703015, at *4. Accordingly, Plaintiffs must allege facts connecting their claimed losses to the unlawful use of the computer system, and not just to wrongful conduct. See CustomGuide v. CareerBuilder, LLC, --- F. Supp.2d ---, 2011 WL 3809768, at *4-5 (N. D. Ill. Aug. 24, 2011).

Plaintiffs claim that Defendant Spinell told the others to delete e-mails related to their scheme, and then delete them again from the "deleted items" folder; this made the files hard to retrieve. They also claim that Defendants Pitcher, Martorano, and Lifka took "additional steps . . . to sabotage the company computers" before quitting. Compl. at ΒΆ 23. Although the Seventh Circuit has questioned whether pressing "delete" can be a "transmission" under subsection (A), it intimated that conduct similar to these allegations could violate subsection (C). ...


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