Cent. Bank & Trust v. Smith

• Decision Date: 31 August 2016
• Docket Number: Case No. 15–CV–115–ABJ
• Parties: CENTRAL BANK & TRUST, Plaintiff, v. Frank SMITH, Mark Kiolbasa, Michelle Thomas, and Farmers State Bank, Defendants.
• Court: U.S. District Court — District of Wyoming

215 F.Supp.3d 1226

CENTRAL BANK & TRUST, Plaintiff,

v.Frank SMITH, Mark Kiolbasa, Michelle Thomas, and Farmers State Bank, Defendants.

Case No. 15–CV–115–ABJ

United States District Court, D. Wyoming.

Signed August 31, 2016

Chad S. Caby, Lewis Roca Rothgerber LLP, Denver, CO, for Plaintiff.

Timothy Michael Stubson, Crowley Fleck, Casper, WY, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

ALAN B. JOHNSON, UNITED STATES DISTRICT JUDGE

The defendants' Motion to Dismiss (Doc. No. 9), the memorandum thereto (Doc. No. 10), the plaintiff's Brief in Opposition to Defendants' Motion to Dismiss (Doc. No. 13). and the defendants' Reply Brief in Support of Defendants' Motion to Dismiss (Doc. No. 15) are before the Court. After reviewing the parties' submissions, the pleadings, the applicable law, and being fully advised, the Court finds that the defendants' Motion to Dismiss (Doc. No. 9) should be GRANTED for the reasons stated below.

This case concerns whether the individual defendants, who were previously employees of the plaintiff, are liable for stealing clients and proprietary business information under federal and state law. First, the Court will give a factual background, discussing the relationship between the plaintiff and the defendants. Next, the Court will present the standard of review, followed by an analysis of the law and facts as to the motion to dismiss. Finally, the Court will conclude by dismissing this case.

BACKGROUND¹

Central Bank & Trust, the plaintiff, is a bank with its principle place of business in Lander, Wyoming. In 2008, Frank Smith, defendant, began working for Central Bank & Trust as its Chief Financial Officer. Smith's main job responsibilities were supervising and managing Central Bank & Trust's operations and financials for the Wyoming market. In 2009, in its acquisition of Bank of Wyoming, Central Bank & Trust acquired Michelle Thomas as its Assistant Cashier and Compliance Officer. The plaintiff's allegations do not address Thomas's job responsibilities. In 2010, Mark Kiolbasa joined Central Bank & Trust as the President of its Cheyenne branch. Kiolbasa's main job responsibilities were supervising the branch and monitoring an active commercial, agricultural, and personal loan portfolio totaling approximately $17.5 million.

Central Bank & Trust stores its electronic information on secure servers, which are kept under lock and key at Central Bank & Trust's Lander office. Only a select group of employees have physical access to the servers. Central Bank & Trust uses a number of electronic security protocols, including user passwords and different levels of restricted viewing rights for employees. Central Bank & Trust grants various levels of access to its electronic information based on each particular employee's responsibilities. Each employee accesses the secured information by using a user name and password to log into his or her computer.

Smith, Thomas, and Kiolbasa enjoyed nearly unfettered access to Central Bank & Trust's company information, which was electronically stored on its secured computer networks. Included in Central Bank & Trust's company information are customer details, balance sheets, income statements, overdraft reports, and new loan reports. Central Bank & Trust considers all of this information to be confidential, proprietary, and trade secret. Being as such, Central Bank & Trust alleges that this information is valuable in its industry.

When Smith, Kiolbasa, and Thomas were hired, they received a copy of Central Bank & Trust's Employee Handbook. Each executed an acknowledgement, agreeing to abide by the policies within the Employee Handbook. One policy in the handbook requires the employees to hold customer information in the strictest confidence.

On July 11, 2012, Thomas resigned her employment with Central Bank & Trust. A year and a half later, on December 23, 2013, Smith and Kiolbasa, presented a business plan to farmers State Bank, a Wyoming bank with its principal place of business located in Pine Bluffs, Wyoming. Under the plan, Smith and Kiolbasa would leave Central Bank & Trust, purchase an interest in farmers State Bank with Thomas, and begin working for Farmers State Bank. Farmers State Bank is one of Central Bank & Trust's direct competitors.

In June of 2014, six months after presenting the farmers State Bank business plan, Smith and Kiolbasa, while still employed by Central Bank & Trust, created three internet-based file transfer and storage sites, which functioned as electronic drop boxes. Smith. Thomas, and Kiolbasa transferred voluminous amounts of electronic information from Central Bank & Trust's computer system to these three drop boxes, one of which was labeled farmers State Bank. In July of 2014, Kiolbasa emailed John Gross, President of Farmers State Bank's holding company, a list of potential customers, including customers of Central Bank & Trust.

On September 10, 2014, Central Bank & Trust received notice that Kiolbasa had uploaded over one hundred megabytes of electronic data to one of the drop box accounts. Central Bank & Trust's information technology personnel informed Smith about the situation. Smith told them that Kiolbasa's uploading was work-related. The next day, September 11, 2014, Kiolbasa resigned. The day after that, on September 12, 2014, Smith and Kiolbasa signed a stock purchase agreement through which Smith, Thomas, and Kiolbasa gained a controlling interest in Farmers State Bank in exchange for around $700,000. Approximately six months later, on March 18, 2015, Smith resigned.

Central Bank & Trust alleges that Smith, Thomas, and Kiolbasa are currently employed and own an interest in Farmers State Bank. Smith, Thomas, and Kiolbasa took the information acquired from Central Bank & Trust to Farmers State Bank and allegedly used the information to steal business from Central Bank & Trust. Central Bank & Trust claims that within three weeks of Kiolbasa leaving, Farmers State Bank acquired eighteen accounts receivable from Central Bank & Trust that were worth more than $4.3 million. Central Bank & Trust asserts that the defendants continue to use this information to obtain business advantages.

On July 23, 2015, the plaintiff filed its Complaint (Doc. No. 1). The defendants filed their Motion to Dismiss (Doc. No. 9) and memorandum thereto (Doc. No. 10) on September 23, 2015. On October 12, 2015, the plaintiff filed its Brief in Opposition to Defendants' Motion to Dismiss (Doc. No. 13), contesting the motion to dismiss. On October 20, 2015, the defendants filed their Reply Brief in Support of Defendants' Motion to Dismiss (Doc. No. 15).

STANDARD OF REVIEW

In Ashcroft v. Iqbal , the Supreme Court of the United States articulated a two-step approach for district courts to use when considering a motion to dismiss under Fed. R. Civ. P. 12(b)(6). 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). First, "a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id.Iqbal clarified that "the tenet that a court must accept as true all of the allegations contained in a complaint 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." Id. at 678, 129 S.Ct. 1937.

Second, "[w]hen 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, 129 S.Ct. 1937. The Court has slated that "[t]o 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. at 678, 129 S.Ct. 1937. "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. Plausibility lies somewhere between possibility and probability; a complaint must establish more than a mere possibility that the defendant acted unlawfully but the complaint does not need to establish that the defendant probably acted unlawfully. See id. "Determining 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." Id. at 679, 129 S.Ct. 1937.

DISCUSSION

The plaintiff's Complaint (Doc. No. 1) contains four counts arising under federal law and six counts involving state law claims. The defendants contend that the four federal counts are legally impossible under these facts, requiring their dismissal. The defendants assert that the six state law claims therefore fall to the wayside, given the lack of diversity in this case. The plaintiff asserts otherwise, explaining that the Tenth Circuit is yet to decide the legal issue arising under the federal counts. The plaintiff contends that the current circuit split should be resolved in its favor. The plaintiff argues that, even if the federal claims must be dismissed, the state law claims deal with an important federal interest. This Court does not agree with the plaintiff's final argument, so jurisdiction in this case rests solely on this Court's interpretation of whether the plaintiff states claims for relief under the Computer Fraud and Abuse Act and the Stored Communications Act.

I. Central Bank & Trust does not state a claim for relief under the Computer Fraud and Abuse Act, because there are no alleged facts supporting the legal conclusion that the defendants acted "without authorization" or "exceed[ed] authorized access" when acquiring Central Bank & Trust's electronic information.

In the Complaint (Doc. No. 1), Central Bank & Trust alleges three claims under the Computer Fraud and Abuse Act. The first count alleges liability under 18 U.S.C. § 1030(a)(2)(A) and (C), which...