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Penrose Computer Marketgroup, Inc. v. Camin

January 22, 2010

PENROSE COMPUTER MARKETGROUP, INC., D/B/A CYBERCITY, PLAINTIFF,
v.
DOUGLAS J. CAMIN, DEFENDANT.



The opinion of the court was delivered by: Thomas J. McAVOY Senior United States District Judge

DECISION and ORDER

Plaintiff, Cybercity, ("Plaintiff"), former employer of Defendant, Douglas Camin, ("Defendant"), brought the instant action alleging: (1) violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030; (2) violation of the Stored Communication Act ("SCA"), 18 U.S.C. § 2701; (3) breach of contract; (4) breach of the fiduciary duties of good faith and duty to preserve good will; (5) misappropriation of trade secrets; (6) tortious interference with contractual relations; (7) tortious interference with prospective economic relations; (8) unfair competition; and (9) tortious interference with prospective business advantage, arising from Defendant's actions while employed by Plaintiff. See Docket No. 1 paragraph 1. Defendant filed this motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) alleging that Plaintiff failed to sufficiently plead: (1) a cognizable loss under the CFAA, 18 U.S.C. § 1030; (2) a claim under the SCA, 18 U.S.C. § 2701; (3) breach of contract; (4) misappropriation of trade secrets; (5) breach of fiduciary duty or unfair competition; and (6) tortious interference with contract or tortious interference with prospective economic advantage. See Docket No. 10.

I. FACTS

Plaintiff "is a full service provider of end-to-end computer services in the greater-Binghamton area, including information technology development, solutions, maintenance, repair, training, Web Site Design, Web Site Hosting, and hardware, software, and office supply products." See Docket No. 1 at paragraph 4. Defendant was employed by Plaintiff from October 4, 2004 until he was terminated on July 7, 2008. Id. at paragraph 6. Defendant signed a Non-Disclosure Agreement as a condition of his employment. Id. at paragraph 15.

"At the time of his termination, Defendant was employed as the Director of Technical Services." Id. at paragraph 7. Pursuant to this position, Defendant was "responsible for the management of all computer services provided by [Plaintiff] to its clients, and the design, support and maintenance of [Plaintiff's] computer network and infrastructure, including security functions and policies implemented to protect company and client resources." Id. at paragraph 13. He "served as the primary interface between Plaintiff and its customers for the sale and provision of customized computer services, solutions or designs" and was "integral in, and took the lead on, all aspects of the development, testing, roll-out and servicing of [Plaintiff's] customized and confidential computer services, solutions or designs." Id. at paragraph 21.

Alexander Penrose ("Penrose") is the founder, sole shareholder, President, and Chief Executive Officer of Plaintiff. Id. at paragraph 3. In 2007, Penrose was approached by Integrated Computer Solutions ("ICS"), a local competitor, regarding a potential purchase or merger between the two companies. Id. at paragraph 27. A meeting was scheduled for July 7, 2008 to discuss this transaction. Id. at paragraph 28. In anticipation of this meeting, Penrose prepared a confidential presentation and shared it only with Plaintiff's accountant. Id. at paragraph 29. Defendant accessed this presentation through Penrose's email account and emailed it to another of Plaintiff's employees. Id. at paragraph 32 and 33. Defendant then personally met with ICS, disclosing that he was aware of the potential transaction, and proposed that ICS make a deal with Defendant instead. Id. at paragraph 34. Following this meeting, ICS cancelled its meeting with Penrose and no transaction between the two companies has transpired. Id. at paragraph 37 and 39. Plaintiff terminated Defendant for this behavior. Id. at paragraph 41. Defendant then deleted his entire Exchange Email record archive, which destroyed his client contact history. Id. at paragraph 33 and 38.

Following his termination, Defendant helped found Avant IT Consulting, Inc. ("Avant IT") and began competing directly against Plaintiff. Id. at paragraph 43. Several of Plaintiff's key clients have "discontinued their relationship with [Plaintiff] and engaged Avant IT, including, but not limited to, Olum's, Lourdes Health Care System, Newman Development Group LLC, Clintwood Pharmacy, GHS Federal Credit Union and Susquehanna Community Schools." Id. at paragraph 46.

On August 7, 2009 Plaintiff commenced the instant action against Defendant alleging that Defendant violated both his common law and statutory obligations, and the express terms of the Non-Disclosure Agreement. Id. at paragraph 1. On October 16, 2009 Defendant filed this motion to dismiss. Plaintiff opposes the motion, arguing that it has sufficiently pled all causes of action, and withdraws its cause of action for tortious interference with existing contracts. See Docket No. 13.

Alternatively, Plaintiff contends that, "to the extent the Court concludes that the pleading of any claim is deficient, the Court should grant leave to re-plead." See Docket No. 10. Plaintiff cites to Fed. R. Civ. P. 15(a) which provides that "[a] party may amend the party's pleading once as a matter of course at any time before the responsive pleading is served." Plaintiff notes that "Defendant's Motion to Dismiss is not a 'responsive pleading' within the meaning of Rule 15(a)". Barbara v. New York Stock Exch., Inc., 99 F.3d 49, 56 (2d Cir. 1996).

II. STANDARD OF REVIEW

To survive a motion to dismiss, the plaintiff must provide "the grounds upon which his claim rests through factual allegations sufficient 'to raise a right to relief above the speculative level.'" Camarillo v. Carrols Corp., 518 F.3d 153, 156 (2d Cir. 2008) (citations omitted). Plaintiff's factual allegations must be sufficient to give the defendant "fair notice of what the claim is and the grounds upon which it rests." Camarillo, 518 F.3d at 156 (citing Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007)). When ruling on a motion to dismiss, "the court must accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor." Burns v. Trombly, 624 F. Supp.2d 185, 196 (N.D.N.Y. 2008)(citing Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir. 1994)). The Second Circuit has recently held, however, that "'although a court must accept as true all of the allegations contained in a complaint,' that 'tenet' 'is inapplicable to legal conclusions,' and '[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.'" Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)).

The Second Circuit went on to hold that "whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Harris, 572 F.3d at 72 (citing Ashcroft, 129 S.Ct. at 1950). Review is "limited to the facts asserted within the four corners of the complaint, the documents attached to the complaint as exhibits, and any documents incorporated in the complaint by reference." Medtech Prods. v. Ranir, LLC, 596 F. Supp.2d 778, 802 (S.D.N.Y. 2008) (citing McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 190 (2d Cir. 2007); see Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)(citing Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989)) (the court may review documents integral to the Complaint upon which the plaintiff relied in drafting his pleadings, as well as any documents attached to the Complaint as exhibits and any statements or documents incorporated into the Complaint by reference.).

III. DISCUSSION

a. Computer Fraud and Abuse Act

Defendant alleges that Plaintiff failed to sufficiently plead a cognizable loss under CFAA, 18 U.S.C. § 1030, and therefore the claim should be dismissed. "The CFAA, in relevant part, provides a private federal cause of action against a person who 'intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains... information from any protected computer.'" Jet One Group, Inc. v. Halcyon Jet Holdings, Inc., 2009 WL 2524864, at *5 (E.D.N.Y. Aug. 14, 2009) (citing 18 U.S.C. § 1030)(a)(2)). Subsection (g) of the CFAA, the civil remedy at issue in this case, states:

Any 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. A civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in subclauses (I), (II), (III), (IV) or (V) of subsection (c)(4)(A)(i).

The only relevant subsection, (c)(4)(A)(i)(I), applies to "loss to 1 or more persons during any 1-year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value."*fn1 Therefore, Plaintiff's complaint must allege "loss aggregating at least $5,000 in value" to survive Defendant's motion to dismiss. See 18 U.S.C. § 1030(c)(4)(A)(i)(I).

Defendant argues that "[t]he complaint does not plead any... facts from which it might be inferred that [Plaintiff] incurred losses as that term is defined in the statute. The statute defines loss as "any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage*fn2 assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service." 18 U.S.C. § 1030(e)(11) (footnote added). This has been interpreted to mean "any remedial costs of investigating the computer for damage, remedying the damage and any costs incurred because the computer cannot function while or until repairs are made." Nexans Wires S.A. v. Sark-USA, Inc., 319 F. Supp.2d 468 (S.D.N.Y. 2004), aff'd Nexans Wires S.A. v. SarkUSA, Inc., 166 Fed. Appx. 559 (2d Cir. 2006); see also Tyco Int'l Inc. v. John Does, 2003 WL 21638205 (S.D.N.Y. July 11, 2003) ("CFAA allows recovery for losses beyond mere physical damage to property, the additional types of damages awarded by courts under the Act have generally been limited to those costs necessary to assess the damage caused to the plaintiff's computer system or to resecure the system in the wake of a hacking attack."); EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 584-85 (1st Cir. 2001) (awarding costs of assessing damage).

Here, the Complaint alleges that Defendant "intentionally accessed the secure, protected computers of [Plaintiff] or other protected computers without authorization or exceeding his authorization, and thereby obtained information from those protected computers," and he did so "in furtherance of the intended fraud, obtained the valuable... proprietary trade secrets and confidential information... which have a value exceeding five thousand dollars" and "as a result... recklessly caused damage and loss to the secure, protected computers of [Plaintiff]" in excess of $5,000. See Docket No. 1 at paragraphs 48-53. Additionally the complaint states, "Cybercity has incurred substantial damages and/or losses, due to [Defendant's] unauthorized access of [Plaintiff's] protected computers and unauthorized removal, possession, and impairment of [Plaintiffs's] electronic files and documents, including, without limitation, the costs of investigating [Defendant's] actions and assessing the damage they caused." See Docket No. 1 at paragraph 40 (emphasis added). Because Plaintiff has alleged ...


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