Ozone Solutions, Inc. v. Hoekstra, C19-4009-LTS
| Decision Date | 19 August 2019 |
| Docket Number | No. C19-4009-LTS,C19-4009-LTS |
| Parties | OZONE SOLUTIONS, INC., Plaintiff, v. TRAVIS HOEKSTRA and MICHAEL ROZEBOOM, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
This case is before me on a motion (Doc. No. 20) to dismiss by defendant Travis Hoekstra and a motion (Doc. No. 23) to dismiss by defendant Michael Rozeboom. Plaintiff Ozone Solutions, Inc. (Ozone) has filed resistances (Doc. Nos. 24, 25). I find that oral argument is not necessary. See Local Rule 7(c).
Ozone filed its complaint (Doc. No. 1) and a motion (Doc. No. 2) for temporary restraining order (TRO) and preliminary injunction on March 14, 2019. The complaint invokes federal question jurisdiction pursuant to 28 U.S.C. § 1331, alleging claims arising under the Computer Fraud and Abuse Act (CFAA) and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over state law claims. See Doc. No. 1 at 1.
Ozone alleges that Hoekstra was employed by Ozone as an IT Network Administrator and Ozone Application Specialist from approximately January 2014 until January 10, 2019. Id. at 2. He was responsible for managing and maintaining Ozone's server systems and backups; planning and building its computer network infrastructure; managing and maintaining workstations, laptops, tablets and software; engaged in sales and customer service; and worked with customer installations of Ozone's equipment. Id. Ozone alleges that its computers and networks utilize log-in credentials and passwords to protect information contained on its computers and servers. Employee access to confidential and proprietary information is limited by virtue of the permissions that are associated with their log-in credentials. Id. As IT Network Administrator, Hoekstra had access to the entirety of Ozone's computer network, computers and servers. Id. at 3.
Rozeboom was employed by Ozone as a Sales Application Engineer from approximately 2008 through November 2018. Id. He signed a Noncompete, Nonsolicitation and Confidentiality Agreement (Agreement) with Ozone.1 Ozone has records reflecting ongoing communications and solicitations between Rozeboom and Ozone customers. Id.
In the days leading up to Hoekstra's final day of employment, Ozone alleges that Hoekstra downloaded numerous files and sent himself numerous emails containing confidential and proprietary customer information, product plans and specifications, product cost and pricing information and vendor information. Id. On his final day of employment, Ozone alleges Hoekstra took a laptop computer belonging to Ozone, which is believed to contain files downloaded from Ozone's network and server. Id.
Hoekstra later obtained employment with Global Aquaculture Supply Company, LLC (Global). Global manufactures and provides various aquacultural products, including, but not limited to, ozone equipment with application relating to aquaculture. Id. Ozone alleges that Hoekstra has disclosed to employees of Ozone that he and Rozeboom have met with customers of Ozone with the intention of diverting business to entities other than Ozone. Id. at 4.
Ozone alleges the following claims:
See Doc No. 1.
I held a hearing on the motion for TRO and preliminary injunction on March 21, 2019. I orally granted Ozone's motion for a TRO at the hearing and memorialized it in an order (Doc. No. 14) the following day. I reserved ruling on the preliminary injunction. See Doc. No. 14. The parties later agreed to extend the term of the TRO and continue the hearing on the motion for preliminary injunction to a later date if necessary. See Doc. No. 22.
Hoekstra and Rozeboom move to dismiss the action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Hoekstra alternatively moves to dismiss Count I for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). I will address the jurisdictional arguments first.
Rule 12(b)(1) provides for a pre-answer motion to dismiss "for lack of subject-matter jurisdiction." Fed. R. Civ. P. 12(b)(1). As the Eighth Circuit Court of Appeals has explained:
"The existence of subject-matter jurisdiction is a question of law that this court reviews de novo." ABF Freight Sys., Inc. v. Int'l Bhd. of Teamsters, 645 F.3d 954, 958 (8th Cir. 2011). The party seeking to invoke federal jurisdiction . . . carries the burden, which may not be shifted to another party. Great Rivers Habitat Alliance v. FEMA, 615 F.3d 985, 988 (8th Cir. 2010).
Jones v. United States, 727 F.3d 844, 846 (8th Cir. 2013); accord Key Med. Supply, Inc. v. Burwell, 764 F.3d 955, 961 (8th Cir. 2014) (). Dismissal for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) may be permissible on the basis of a defense or exception to jurisdiction. See, e.g., Herden v. United States, 726 F.3d 1042, 1046 (8th Cir. 2013).
Where a party limits its attack to the face of the complaint, the attack is a "facial challenge" to subject matter jurisdiction. Jones, 727 F.3d at 846 (citing BP Chems. Ltd. v. Jiangsu Sopo Corp., 285 F.3d 677, 680 (8th Cir. 2002)). On a "facial challenge," "'the court restricts itself to the face of the pleadings, and the non-moving party receives the same protections as it would defending against a motion brought under Rule 12(b)(6).'" Id. (quoting Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990)). Those protections include treating the complainant's factual allegations as true and dismissing only if it appears beyond doubt that the complainant can prove no set of facts in support of its claim that would entitle it to relief. Osborn, 918 F.2d at 729 & n.6.
By contrast, on a "factual challenge," a party makes a factual challenge to the district court's jurisdiction pursuant to Rule 12(b)(1), "'no presumptive truthfulness attaches to the [complainant's] allegations, and the existence of disputed material facts will not preclude [the court] from evaluating . . . the merits of the jurisdictional claims.'" Iowa League of Cities v. EPA, 711 F.3d 844, 861 (8th Cir. 2013) (quoting Osborn, 918 F.2d at 729-30 & n. 6). Where the challenge is factual, "the district court is entitled to decide disputed issues of fact with respect to subject matter jurisdiction." Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). "[T]he court may look beyond the pleadings and '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.'" Khoury v. Meserve, 268 F. Supp. 2d 600, 606 (D. Md. 2003) (emphases added) (citation omitted). The court "may regard the pleadings as mere evidence on the issue and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Velasco v. Gov't of Indon., 370 F.3d 392, 398 (4th Cir. 2004). A plaintiff carries the burden of establishing subject matter jurisdiction. Jones v. Gale, 470 F.3d 1261, 1265 (8th Cir. 2006); Hoekel v. Plumbing Planning Corp., 20 F.3d 839, 840 (8th Cir. 1994) (per curiam), Nucor Corp. v. Neb. Pub. Power Dist., 891 F.2d 1343, 1346 (8th Cir. 1989).
Hoekstra appears to be making a factual challenge, as he references exhibits offered on the motion for a TRO and preliminary injunction. See Doc. No. 20-1 at 2. He argues this court lacks subject matter jurisdiction because the alleged violations of the CFAA2 must involve a "protected computer." See Doc. No. 20-1 at 4. A "protected computer" is defined in relevant part as a computer "which is used in or affecting interstate or foreign commerce or communication." 18 U.S.C. § 1030(e)(2)(B). Hoekstra argues the complaint and affidavits submitted at the hearing on the TRO allege that two computers are involved. Id. The first is a work computer at the job site and the second is a laptop that Hoekstra allegedly kept.
Hoekstra argues the only alleged transmission of information was from a work computer at Ozone's facility in Sioux County, Iowa, to Hoekstra's personal computer in Sioux County, Iowa. Id. He contends that the merely transmitting an email via the Internet cannot satisfy the "interstate or foreign commerce or communication" element, especially when both the originating and receiving computers are in the same state. Id. at 4-5. He cites a Senate Report stating the following:
Throughout its consideration of computer crime, the Committee has been especially concerned about the appropriate scope of Federal jurisdiction in this area. It has been suggested that, because some States lack comprehensive computer crime statutes of their own, the Congress should enact as sweeping a Federal statute as possible so that no computer crime is potentially uncovered. The Committee rejects this approach and prefers instead to limit Federal jurisdiction over computer crime to those cases in which there is a compelling Federal interest, i.e., where computers of the Federal Government or certain financial institutions are involved, or where the crime itself is interstate in nature. The Committee is convinced that this approach strikes the appropriate balance between the Federal Government's interest in computer crime and the interests and abilities of the States to proscribe and punish such offenses.
Id. at 5 (quoting S. Rep. 99-432, 4, 1986 U.S.C.C.A.N. 2479, 2482). Hoekstra argues that all of the alleged actions took place in Iowa and the only arguable "interstate" element is the transmission of...
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