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Maximum Independent Brokerage, LLC v. Smith

United States District Court, N.D. Illinois, Eastern Division

October 28, 2016

MAXIMUM INDEPENDENT BROKERAGE, LLC Plaintiff,
v.
ADRIAN SMITH, et al. Defendants.

          MEMORANDUM OPINION

          Samuel Der-Yeghiayan United States District Court Judge.

         This matter is before the court on Defendant Adrian Smith's (Smith), Defendant Erich Steinhaus' (Steinhaus), Defendant Jody Oster's (Oster), and Defendant Stephen Bartell's (Bartell) (collectively referred to as “Individual Defendants”) partial motion to dismiss and Defendant Burns & Wilcox, LTD.'s (B&W) partial motion to dismiss. For the reasons stated below, Individual Defendants' partial motion to dismiss is denied and B&W's partial motion to dismiss is denied.

         BACKGROUND

         Plaintiff Maximum Independent Brokerage, LLC (Maximum) allegedly offers insurance brokerage and underwriting facilities to the construction, energy, gaming, healthcare, habitational, manufacturing, and real estate industries. From November 8, 2010 to April 4, 2016, Individual Defendants were employed by Maximum. Smith was employed as a senior vice president, Steinhaus as an account manager, Oster as an assistant vice president, and Bartell as an assistant vice president. The Individual Defendants allegedly signed at-will Employment Agreements (Agreements) with Maximum, which contained a non-solicitation covenant, non-recruitment provision, and trade secrets covenant. (Comp. Par. 11). The Agreements also allegedly contained a breach of covenant provision, which enables Maximum to enforce the terms of the Agreement by an injunction. Maximum alleges that the Individual Defendants violated the Agreement by uploading confidential information, stealing client files, and destroying data on Maximum's network. On April 4, 2016, Individual Defendants allegedly resigned their employment with Maximum. On April 4, 2016, Individual Defendants allegedly became employed by B&W. Maximum alleges that while Individual Defendants were still employed by Maximum, B&W poached the Individual Defendants and induced them to violate the terms of their Agreements. B&W is allegedly an independent wholesale insurance broker and underwriting manager in the environmental, recreation, marine, high net worth, professional, transportation and excess casualty industries.

         Maximum includes in its complaint breach of contract claims brought against Individual Defendants (Counts I-IV), misappropriation of trade secret claims brought against Individual Defendants (Counts V-VIII), a tortious interference with agreement claim brought against B&W (Count IV), a tortious interference with reasonable expectation of economic advantage (TIPEA) claim brought against B&W (Count X), claims alleging a violation of Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, brought against Individual Defendants (Count XI), and civil conspiracy claims brought against Individual Defendants and B&W (Count XII). Individual Defendants now move to dismiss Counts I, II, III, IV, and XI pursuant to Federal Rule of Civil Procedure 12(b)(6) (Rule 12(b)(6)). Individual Defendants move to dismiss the complaint in its entirety, pursuant to Federal Rule of Civil Procedure 12(b)(1) (Rule 12(b)(1)) for lack of subject matter jurisdiction. B&W moves to dismiss Counts IX, X, and XII pursuant to 12(b)(6).

         LEGAL STANDARD

         Rule 12(b)(1) requires a court to dismiss an action when it lacks subject matter jurisdiction. United Phosphorus, Ltd. v. Angus Chemical Co., 322 F.3d 942, 946 (7th Cir. 2003)(overruled on separate grounds). If the concern of the court or party challenging subject matter jurisdiction is that “subject matter jurisdiction is not evident on the face of the complaint, the motion to dismiss pursuant to Rule 12(b)(1) would be analyzed as any other motion to dismiss, by assuming for purposes of the motion that the allegations in the complaint are true.” Id.; see also Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995)(stating that when reviewing a motion to dismiss brought under Rule 12(b)(1), the court “must accept as true all well-pleaded factual allegations, and draw reasonable inferences in favor of the plaintiff”). However, if the complaint appears on its face to indicate that the court has subject matter jurisdiction, “but the contention is that there is in fact no subject matter jurisdiction, the movant may use affidavits and other material to support the motion.” United Phosphorus, Ltd., 322 F.3d at 946. For the purpose of determining subject matter jurisdiction, the court “‘may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.'” Ezekiel, 66 F.3d at 897 (quoting Capitol Leasing Co. v. Federal Deposit Insurance Corp., 999 F.2d 188, 191 (7th Cir. 1993)). The burden of proof in regards to a Rule 12(b)(1) motion is “on the party asserting jurisdiction.” United Phosphorus, Ltd., 322 F.3d at 946.

         In ruling on a motion to dismiss brought pursuant to Rule 12(b)(6), the court must draw all reasonable inferences that favor the plaintiff, construe the allegations of the complaint in the light most favorable to the plaintiff, and accept as true all well-pleaded facts and allegations in the complaint. Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th Cir. 2012); Thompson v. Ill. Dep't of Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). A plaintiff is required to include allegations in the complaint that “plausibly suggest that the plaintiff has a right to relief, raising that possibility above a ‘speculative level'” and “if they do not, the plaintiff pleads itself out of court.” E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007)(quoting in part Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)); see also Morgan Stanley Dean Witter, Inc., 673 F.3d at 622 (stating that “[t]o survive a motion to dismiss, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face, ” and that “[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”)(quoting Ashcroft v. Iqbal, 556 U.S. 662 (2009))(internal quotations omitted).

         DISCUSSION

         I. Individual Defendants Motion to Dismiss

         A. Rule 12(b)(6) Motion to Dismiss

         1. Whether Maximum has Stated a Claim Under CFAA

         Individual Defendants argue that Maximum's complaint fails to state a valid claim for relief under CFAA. CFAA provides a private right of action, stating that “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C. § 1030(g). To state a claim under CFAA, a plaintiff must only 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 of harm set forth in § 1030(c)(4)(A)(i)(I)-(VI).” Cassetica Software, Inc. v. Computer Sciences Corp., 2009 WL 1703015, at *3 (N.D. Ill. 2009); Motorola, Inc. v. Lemko Corp., 609 F.Supp.2d 760, 765 (N.D. Ill. 2009).

         In this case, Maximum alleges a violation of § 1030(a)(2)(c), which provides a remedy against an individual who “[i]ntentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains. . . (c)information from any protected computer.” 18 U.S.C. § 1030(a)(2)(c). Individual Defendants do not dispute the allegations that they intentionally accessed Maximum's protected computers. The Individual Defendants contend, however, that Maximum failed to satisfy the “damage or loss” requirement. CFAA defines the two terms, damage and loss, differently.

         a. Whether Maximum Properly Alleges Damage Under CFAA

         Individual Defendants argue that Maximum's complaint lacks sufficient allegations regarding damage to data. CFAA states that “the term ‘damage' means any impairment to the integrity or availability of data, a program, a system, or information.” 18 U.S.C. § 1030(e)(8). The Seventh Circuit has found that the statutory requirement of damage was satisfied where the defendant's acts impaired ...


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