United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
E. Chang Judge
Hill and Riana Lynn are co-founders of a company called
FoodTrace. After their business relationship soured, Hill
brought this lawsuit against Lynn. His complaint alleges a
variety of federal and state-law claims on his own behalf and
on behalf of FoodTrace. See generally, R. 40, Am.
Compl. Lynn moves to dismiss four of these claims
for failure to state a claim upon which relief can be
granted. R. 49, Mot. Dismiss. For the reasons stated below,
the motion is denied as to Counts 1 (the CFAA), 9 (fraud),
and 4 (unjust enrichment), but granted as to Count 6 (the
shareholder derivative claim).
purposes of the motion to dismiss, the Court accepts as true
the factual allegations in the Amended Complaint.
Erickson v. Pardus, 551 U.S. 89, 94 (2007). In
Summer 2014, Lynn approached Hill about developing a business
venture, specifically a company called FoodTrace. Am. Compl.
¶¶ 10-15. Hill agreed to assist by coding a
software application that would form the basis of the
business, in exchange for an equity share in FoodTrace.
Id. ¶¶ 15-16. Hill began work on the code
and constructed an application using GitHub, a software
development platform. Id. ¶ 21.
devoted a lot of time to working on FoodTrace, and by
December 2014 Hill and Lynn began to discuss having Hill
leave his day job in order to work fulltime at FoodTrace.
Id. ¶¶ 24-33. In January 2015, Hill agreed
to quit his other job and work exclusively for FoodTrace.
Id. ¶ 35. Instead of receiving salary or wages,
Hill and Lynn agreed that Hill would receive a 22.671% equity
share in FoodTrace. Id. ¶ 36. At some point,
Lynn presented Hill with a draft contract that incorrectly
listed him as having only a 15% interest in FoodTrace.
Id. ¶ 39. Lynn told Hill that she would fix the
mistake and return a clean copy to Hill, but she never did,
and Hill never signed a written agreement. Id.
¶ 40. Even so, Hill did eventually resign from his
trading job and began to work full-time for FoodTrace.
Id. ¶¶ 44-45.
trouble was on the horizon. By the summer of 2015, Lynn had
begun to be more and more absent from FoodTrace's office,
and was often out of contact with Hill for long periods of
time, despite his many attempts to contact her. Id.
¶¶ 51-52. Lynn (who handled the payroll) stopped
paying FoodTrace's employees, which, not surprisingly,
caused them all to quit. Id. ¶¶ 57-62.
Despite these problems, Hill continued to work on FoodTrace,
and attempted to reach out to Lynn for input on business
decisions, but Lynn was not responsive. Id.
¶¶ 63-67. Eventually, Hill and Lynn both decided
that they should sell FoodTrace, but Lynn did not communicate
well with Hill about the process of selling FoodTrace.
Id. ¶¶ 80-82. Because of the plan to sell
FoodTrace, Hill got a new job in February 2016. Id.
between Hill and Lynn continued to decline. Around August
2016, Lynn cut off Hill's access to the FoodTrace email
systems. Id. ¶ 91. During this time, Lynn
accessed Hill's GitHub account, downloaded
FoodTrace's computer code, deleted the code from GitHub,
and deleted the history of edits made to the code.
Id. ¶¶ 93-95. Hill immediately tried to
contact Lynn to find out what was happening, but Lynn never
responded. Id. ¶ 96.
August 2017, Hill saw an announcement stating that FoodTrace
had been sold for $14 million. Id. ¶ 100. Hill
was not informed of a sale, and never received any profits
from the sale. Id. ¶¶ 101-103. Hill
alleges that Lynn misappropriated the share of the profits to
which he was entitled for her own benefit. Id.
¶ 103. According to Hill, Lynn sold or dissolved
FoodTrace in order to prevent Hill from recovering his fair
share of FoodTrace's profits. Id. ¶ 104.
Hill also asserts that Lynn used FoodTrace's funds for
her own personal expenses. Id. ¶ 155.
motion under Rule 12(b)(6) challenges the sufficiency of the
complaint to state a claim upon which relief may be granted.
Hallinan v. Fraternal Order of Police Chi. Lodge No.
7, 570 F.3d 811, 820 (7th Cir. 2009). “[W]hen
ruling on a defendant's motion to dismiss, a judge must
accept as true all of the factual allegations contained in
the complaint.” Erickson, 551 U.S. at 94. A
“complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 570). These
allegations “must be enough to raise a right to relief
above the speculative level.” Twombly, 550
U.S. at 555. And the allegations that are entitled to the
assumption of truth are those that are factual, rather than
mere legal conclusions. Iqbal, 556 U.S. at 679. The
complaint is sufficient only if it gives enough factual
detail to “present a story that holds together.”
Swanson v. Citibank, 614 F.3d 499, 404 (7th Cir.
first claim against Lynn is that Lynn violated the Computer
Fraud and Abuse Act (often referred to as the CFAA), 18
U.S.C. § 1030, by accessing Hill's GitHub account
and deleting FoodTrace's code. Although the CFAA
“is primarily a criminal anti-hacking statute, ”
Section 1030(g) “provides a civil remedy for any person
who suffers damage or loss due to a violation of §
1030.” Fidlar Techs. v. LPS Real Estate Data
Solns., Inc., 810 F.3d 1075, 1079 (7th Cir. 2016).
succeed on the CFAA claim, Hill would need to prove a loss of
at least $5, 000 in a one-year period. Lynn argues that
Hill has not pled a loss of $5, 000, and asserts that the
CFAA claim must be dismissed on that basis. R. 50, Def. Mem.
at 3. That argument is rejected. Hill alleges that he has
been damaged by Lynn's deletion of the code “in
excess of $75, 000.” Am. Compl. ¶ 126.
Specifically, Hill lost out because the code was deleted and
sold without any profits being distributed to Hill.
Id. Although there is not much explanation for the
$75, 000 figure, the allegations in the complaint are enough
for a plausible inference that the code was worth at least
that much, and indeed much more. FoodTrace was reportedly
sold for ...