Dhi Grp., Inc. v. Kent

• Decision Date: 12 July 2019
• Docket Number: Civil Action No. H-16-1670
• Citation: 397 F.Supp.3d 904
• Parties: DHI GROUP, INC., f/k/a Dice Holdings, Inc. and Rigzone.com, Inc., Plaintiffs, v. David W. KENT, Jr., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

397 F.Supp.3d 904

DHI GROUP, INC., f/k/a Dice Holdings, Inc. and Rigzone.com, Inc., Plaintiffs,

v.David W. KENT, Jr., et al., Defendants.

Civil Action No. H-16-1670

United States District Court, S.D. Texas, Houston Division.

Signed July 12, 2019

Amir Halevy, Walter Gaylord Lynch, Joseph Webster Golinkin, II, Jordan Lynch & Cancienne PLLC, Houston, TX, for Plaintiffs.

MEMORANDUM, RECOMMENDATION, AND ORDER

Nancy K. Johnson, United States Magistrate Judge

Pending before the court¹ is Plaintiffs DHI Group, Inc. f/k/a Dice Holdings, Inc. ("DHI Group") and Rigzone.com, Inc.'s ("Rigzone") (collectively, "Plaintiffs") Affirmative Motion for Partial Summary Judgment (Doc. 227), Plaintiffs' Motion for Summary Judgment on Oilpro's Counterclaims (Doc. 228), Defendants Single Integrated Operations Portal, Inc. d/b/a Oilpro and OILPRO.com's ("Oilpro") and David Kent's ("Kent") (collectively, "Defendants") Motion to Strike Plaintiffs' Expert Evelina Aslanyan ("Aslanyan") (Doc. 230), Defendants' Motion for Summary Judgment (Doc. 231), Oilpro's Motion to Strike Plaintiffs' Expert Shane Johnson ("Johnson") (Doc. 232), Plaintiffs' Motion for Attorneys' Fees (Doc. 263), and Plaintiffs' Motion to Exclude Trent Livingston ("Livingston") (Doc. 266). The court has considered the motions, the responses, all other relevant filings, and the applicable law. For the reasons set forth below, the court RECOMMENDS that Plaintiffs' Affirmative Motion for Partial Summary Judgment be DENIED , Plaintiffs' Motion for Summary Judgment on Oilpro's Counterclaims be GRANTED IN PART AND DENIED IN PART , and Defendants' Motion for Summary Judgment be GRANTED IN PART AND DENIED IN PART , and it is hereby ORDERED that Defendants' Motion to Strike Aslanyan is DENIED , Oilpro's Motion to Strike Johnson is DENIED , Plaintiffs' Motion for Attorneys' Fees is GRANTED IN PART AND DENIED IN PART , and Plaintiffs' Supplemental Motion to Exclude Livingston is DENIED .

I. Case Background²

Plaintiffs filed this lawsuit against multiple defendants alleging violations of various federal statutes as well as state-law causes of action.³ Oilpro has responded to Plaintiffs' lawsuit and filed counterclaims against Plaintiffs also alleging violations of various federal statutes and state-law causes of action.⁴

A. Factual Background

The present lawsuit concerns the sale of Rigzone, launch of Oilpro, and criminal conduct of Kent.

1. Rigzone

Rigzone offered an online platform for professionals in the oil and gas industry.⁵ On Rigzone's website, oil and gas professionals were able to create a profile and upload their resumes.⁶ When a resume was uploaded to the Rigzone website it was assigned a unique numerical identifier.⁷ These resumes were maintained in a database by Rigzone.⁸ This process allowed the Rigzone website users to apply for job openings that were posted by recruiters and employers.⁹ Additionally, recruiters and employers who paid for access to the resume database were able to directly solicit professionals who had uploaded their resumes for job opportunities, subject to the user's privacy settings.¹⁰

2. Ownership and Sale of Rigzone

Kent became the majority owner of Rigzone in 2007 when he purchased the majority interest in Rigzone from his father.¹¹ At the same time, Kent assumed the positions of President and CEO of Rigzone.¹² In August 2010, DHI Group purchased Rigzone from Kent for approximately $51 million consisting of $38 million plus a performance-based bonus that eventually equaled $13 million.¹³ The sale of Rigzone to DHI Group was memorialized in a stock purchase agreement (the "Purchase Agreement") that Kent signed.¹⁴ During the sale of Rigzone, Kent was represented by lawyers and a mergers and acquisitions firm that specialized in selling media businesses.¹⁵

3. The Purchase Agreement

The Purchase Agreement that Kent signed represented that Rigzone had "taken all necessary and otherwise reasonable steps to protect and preserve the confidentiality of all of its Trade Secrets and all use by, or disclosure to, any Person of such Trade Secrets has been pursuant to the terms of a [confidentiality agreement]."¹⁶ Kent agreed that at the time he signed the Purchase Agreement, "all reasonable steps to protect the [Rigzone] website" had been taken.¹⁷ The Purchase Agreement defined "Trade Secrets" to "mean any trade secrets or other proprietary and confidential information including ... Personal Information, customer lists, ... and data collections."¹⁸ "Personal Information" was defined as "all information or data associated with individual Persons, including customers and employees, that [was] collected by [Rigzone] in the course of its operations."¹⁹

4. Rigzone After the Sale and the Launch of Oilpro

Kent continued as the president of Rigzone for about a year following its sale.²⁰ During that time, the company took steps to improve the security of the Rigzone website, including hiring Ernst & Young to do a security audit of the website.²¹ The security audit highlighted some potential security issues that were remediated.²²

As a condition of the sale of Rigzone, Kent signed a non-compete agreement that prevented him from operating an oil and gas website until October 1, 2013.²³ On January 18, 2012, Kent started a new company called SIOPCO.²⁴ Under the umbrella of SIOPCO, Kent launched the Oilpro website on the day his non-compete agreement expired.²⁵ From the start, Oilpro operated a networking website for oil and gas professionals and competed directly with the Rigzone website.²⁶

5. Unauthorized Access of Rigzone Resume Database

Shortly after launching Oilpro, Kent began downloading copies of resumes from the Rigzone resume database through a URL, www.rigzone.com/jobs/resume.asp, that he knew of from his previous work at Rigzone.²⁷ This first round of access occurred from October 17, 2013, to April 15, 2014, and resulted in Kent's downloading of just under 100,000 resumes.²⁸

In June and July of 2015, Kent again downloaded resumes from the Rigzone resume database through a second URL, www.rigzone.com/jobs/resumes/resume_writer.asp.²⁹ For this second round of access, Kent wrote a program that automatically downloaded the resumes through the URL.³⁰ During this second round of access, Kent allegedly downloaded approximately 700,000 resumes.³¹

Kent downloaded the resumes from the Rigzone database to gain a commercial advantage for Oilpro.³² After downloading the resumes, Kent invited some of the people whose resumes he had downloaded to join Oilpro.³³

6. Criminal Charges Against Kent

On March 23, 2016, the United States brought criminal charges against Kent for the above conduct as well as other related acts.³⁴ On December 19, 2016, Kent pled guilty to a violation of the Computer Fraud and Abuse Act ("CFAA").³⁵ At his plea hearing, Kent admitted that he accessed the Rigzone resume database without authorization and took resumes for his own commercial advantage and to help Oilpro.³⁶ Kent also admitted that he expected that the resumes would allow him to increase Oilpro's membership.³⁷

7. DHI Scrapes Data from Oilpro Website

On or about June 16, 2015, DHI Group began scraping data from the Oilpro website.³⁸ The terms and conditions of Oilpro's website prohibited users from: (1) using "automated means, including spiders, robots, crawlers, agents, or the like to download data from any database of Oilpro, or from the site itself (for example, site or page scraping is prohibited)[;]" (2) "harvest[ing] or otherwise collect[ing] or stor[ing] information about others, including e-mail addresses[;]" (3) "us[ing], download[ing] or otherwise copy[ing], or provid[ing] (whether or not for a fee) to a person or entity any directory of users of the Services or other user or usage information or any portion thereof."³⁹ The parties hotly dispute whether, in June 2015, there was a link to these terms and conditions on the home page or site map of the Oilpro website.⁴⁰

B. Procedural Background

Plaintiffs commenced this action on June 10, 2016.⁴¹ On November 15, 2016, Oilpro filed its second amended answer and counterclaims.⁴² Plaintiffs filed a motion to dismiss Oilpro's counterclaims on December 5, 2016.⁴³ On April 21, 2017, the court entered a recommendation that Oilpro's counterclaims for trespass to chattels and unjust enrichment be dismissed.⁴⁴ The recommendation was adopted on October 26, 2017.⁴⁵

On July 20, 2018, Plaintiffs filed a motion to strike Livingston.⁴⁶ On October 12, 2018, Plaintiffs' filed: (1) a motion to exclude the testimony of Livingston; (2) their pending motion for partial summary judgment; and (3) their pending motion for summary judgment on Oilpro's counterclaims.⁴⁷ On the same day, Defendants filed their pending: (1) motion to strike Aslanyan; (2) motion for summary judgment; and (3) motion to strike Johnson.⁴⁸ On November 16, 2018, Defendants filed responses to Plaintiffs' motions for summary judgment.⁴⁹ On the same day, Plaintiffs filed responses to Defendants' October 12, 2018 motions.⁵⁰ On November 19, 2018, Defendants filed a response to Plaintiffs' motion to exclude Livingston.⁵¹ On November 26, 2018, Plaintiffs filed replies in support of their October 12, 2018 motions.⁵² On December 3, 2018, Defendants filed replies in support of their October 12, 2018 motions.⁵³

On March 21, 2019, the court held a hearing on Plaintiffs' motions to strike and exclude Livingston. As discussed in more detail below, on March 22, 2019, the court granted both motions in part.⁵⁴ Defendants objected to the court's order granting the motions in part, and, on May 1, 2019, the objections were overruled.⁵⁵

On April 19, 2019, Plaintiffs filed their pending supplemental motion to exclude Livingston.⁵⁶ Defendants filed a response to the supplemental motion to exclude on May 10, 2019.⁵⁷ Plaintiffs filed a reply in support of their supplemental motion to exclude on May 15, 2019.⁵⁸ Without leave of the court, Defendants filed a sur-reply to the supplemental motion to exclude on May 23,...