Sebrite Agency, Inc. v. Platt

• Decision Date: 07 August 2012
• Docket Number: Case No. 11–CV–3526 (PJS/SER).
• Citation: 884 F.Supp.2d 912
• Parties: SEBRITE AGENCY, INC., Plaintiff, v. Arthur PLATT; Denise Wishcop; John Doe; and Jane Doe, Defendants.
• Court: U.S. District Court — District of Minnesota

884 F.Supp.2d 912

SEBRITE AGENCY, INC., Plaintiff,

v.Arthur PLATT; Denise Wishcop; John Doe; and Jane Doe, Defendants.

Case No. 11–CV–3526 (PJS/SER).

United States District Court,

D. Minnesota.

Aug. 7, 2012.

Martin D. Kappenman and Gregory L. Peters, Seaton, Peters & Revnew, P.A., for plaintiff.

Andrew T. Jackola, Andrew T. Jackola, PLC, and Charles A. Horowitz, Mansfield Tanick & Cohen, PA, for defendants.

MEMORANDUM OPINION AND ORDER

PATRICK J. SCHILTZ, District Judge.

Plaintiff Sebrite Agency, Inc. (“Sebrite”) is a small insurance agency located in Minnetonka, Minnesota. Defendant Arthur Platt worked as an agent for Sebrite. Defendant Denise Wishcop is Platt's girlfriend. Platt was fired by Sebrite in 2011, after Sebrite learned that Platt had established a competing agency for the purpose of stealing Sebrite's clients. It does not appear that Platt was successful in permanently diverting any significant amount of business from Sebrite. It also appears that Sebrite will have trouble recovering damages from Platt, as he has few assets. Sebrite has nevertheless sued Platt and Wishcop.

“This Court has repeatedly criticized the filing of ‘kitchen-sink’ or ‘shotgun’ complaints—complaints in which a plaintiff brings every conceivable claim against every conceivable defendant.” Gurman v. Metro Housing and Redevelopment Auth., 842 F.Supp.2d 1151, 1153 (D.Minn.2011). In Sebrite's case, the Court's criticism fell on deaf ears, as its amended complaint against Platt and his girlfriend contains 14 counts, many of which seem to serve no practical purpose. See Am. Compl. [ECF No. 32]. Defendants now move to dismiss 6 of those 14 counts: Count I (breach of employment agreement); Count III (tortious interference with contract and with prospective business advantage); Count VII (conversion); Count VIII (civil liability for theft); Count IX (Computer Fraud and Abuse Act (“CFAA”)); and Count XII (Racketeer Influenced and Corrupt Organizations Act (“RICO”)). See Defs. Reply Mem. [ECF No. 39].

For the reasons that follow, the Court dismisses Sebrite's two federal claims and declines to exercise supplemental jurisdiction over Sebrite's 12 state-law claims.

A. Standard of Review

Defendants move to dismiss Sebrite's amended complaint under Fed.R.Civ.P. 12(b)(6).¹ But both parties have submitted—and ask this Court to consider—numerous materials outside of the amended complaint, including lengthy affidavits, emails, and other documents. See, e.g., ECF Nos. 35–37, 41. The Court declines to consider this evidence and thereby convert defendants' motion to dismiss into one for summary judgment, especially given that this case is in its infancy, the parties have engaged in no discovery, and many of the disputes will clearly turn on the credibility of witnesses. See Evans v. McDonnell Aircraft Corp., 395 F.2d 359, 361 (8th Cir.1968); see alsoFed.R.Civ.P. 12(d).

Under Fed.R.Civ.P. 12(b)(6), a court must accept as true a complaint's factual allegations and draw all reasonable inferences in the plaintiff's favor. Aten v. Scottsdale Ins. Co., 511 F.3d 818, 820 (8th Cir.2008). Although the plaintiff's factual allegations need not be detailed, they must be sufficient to “raise a right to relief above the speculative level” and to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In assessing a claim's plausibility, the Court may disregard any allegation that is conclusory. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) (holding that “conclusory” allegations “are not entitled to the assumption of truth”).

The parties are familiar with the facts, so they will not be repeated here.

B. Count IX (CFAA)

The CFAA forbids any person “knowingly and with intent to defraud” to “access[ ] a protected computer without authorization, or exceed[ ] authorized access, and by means of such conduct further[ ] the intended fraud and obtain [ ] anything of value....” 18 U.S.C. § 1030(a)(4). The CFAA is primarily a criminal statute, but it provides a civil remedy to those who are injured by a violation of the statute. See18 U.S.C. § 1030(g).

Sebrite alleges that Platt, in furtherance of his fraudulent scheme to steal Sebrite's clients, accessed Sebrite's computers “without authorization” or “in excess of authorization” in violation of the CFAA. See Am. Compl. ¶¶ 71–77. According to Sebrite, Platt furthered his fraudulent scheme by “forward [ing] emails containing confidential company information for no less than seventy-four (74) of Sebrite's clients to the e-mail account he and Wishcop shared.” Am. Compl. ¶ 75.

Sebrite does not dispute, however, that, as Vice President of Insurance Sales, Platt was authorized to access all of the confidential information on Sebrite's computers. See Am. Compl. ¶ 10 (“As additional consideration for entering into the Employment Agreement, Sebrite agreed to provide and provided to Platt valuable training and access to substantial, confidential and proprietary information....”). In other words, Platt did not access computers or databases that he was forbidden to use. But Sebrite contends that, when an employer such as Sebrite gives an employee such as Platt authority to access information on the employer's computers, that authority is implicitly conditioned on the employee using the information to further the employer's business. When an employee uses an employer's computer in some other manner—in Platt's case, to steal clients—then, Sebrite argues, the employee has acted “without authorization” or “in excess of authorization” in violation of the CFAA.

As the parties recognize, the federal courts have disagreed about whether the CFAA is violated when a person who has authority to “access[ ] a protected computer” misuses the information that he or she obtains.² This Court previously endorsed the narrower interpretation of the CFAA, holding that the misuse or misappropriation of confidential information stored on a computer to which the defendant has authority to access does not give rise to liability. See Xcedex, Inc. v. VMware, Inc, No. 10–CV–3589 (PJS/JJK), 2011 WL 2600688, at *4–5 (D.Minn. June 8, 2011), adopted by2011 WL 2581754, at *1 (D.Minn. June 30, 2011). The Eighth Circuit still has not directly addressed this question, and nothing in the cases decided since Xcedex has persuaded the Court to change its mind.³ The Court continues to believe that the narrower interpretation of the CFAA is more consistent with statutory text, legislative history, and the rule of lenity. See Walsh Bishop, 2012 WL 669069, at *3. Moreover, the broader interpretation would transform just about every state-law claim for misappropriation of trade secrets into a federal lawsuit, see Condux, 2008 WL 5244818, at *6, not to mention expose employees who violate their employers' computer-use restrictions to criminal liability, see Nosal, 676 F.3d at 861–62. The Court continues to believe that, if Congress meant to so vastly expand the jurisdiction of the federal courts, Congress would have been much more explicit.

Under the Court's interpretation of the CFAA, Sebrite's allegation that Platt improperly used confidential information that he had authority to access fails to state a claim under 18 U.S.C. § 1030(a)(4). Count IX is therefore dismissed.

C. Count XII (RICO)

Section 1962(c) of Title 18 makes it “unlawful for any person employed by or associated with any enterprise engaged in ... interstate ... commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.” Despite this broad language, “RICO ‘does not cover all instances of wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating organized, long-term, habitual criminal activity.’ ” Crest Const. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir.2011) (quoting Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir.2006)). Although RICO is a criminal statute, § 1964(c) provides a civil remedy for any person “injured in his business or property by reason of a violation of” the law's substantive provisions.

To plead a viable RICO claim for damages, a plaintiff must allege “ ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.’ ” Wisdom v. First Midwest Bank of Poplar Bluff, 167 F.3d 402, 406 (8th Cir.1999) (quoting Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). The elements of a RICO claim must be pleaded with respect to each individual defendant, see Craig Outdoor Adver., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1027 (8th Cir.2008), and with particularity under Fed.R.Civ.P. 9(b), see Crest Const. II, 660 F.3d at 353.

Because Sebrite fails to allege that either Platt or Wishcop conducted an enterprise through a pattern of racketeering activity, the Court dismisses Count XII.

1. Enterprise

An enterprise, for purposes of RICO, “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). Sebrite alleges an association-in-fact enterprise consisting of Platt, Wishcop, and other individuals to be named later (“Platt Enterprise”). See Am. Compl. ¶ 100.

“An association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose.” Boyle v. United States, 556 U.S. 938, 946, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009). Under longstanding Eighth Circuit precedent, an alleged RICO enterprise must also have “an ascertainable structure distinct from the conduct of a pattern of racketeering.” Crest Const. II, 660 F.3d at 354 (quoting United States v. Lee, 374 F.3d 637, 647 (8th Cir.2004)); see also United...