Thurmond v. Compaq Computer Corp.

• Decision Date: 15 March 2001
• Docket Number: No. 1:99CV0711(TH/WR).,1:99CV0711(TH/WR).
• Citation: 171 F.Supp.2d 667
• Parties: Charles THURMOND, and Hal LaPray, Plaintiffs, On Behalf of Themselves and All Others Similarly Situated. v. COMPAQ COMPUTER CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Texas

171 F.Supp.2d 667

Charles THURMOND, and Hal LaPray, Plaintiffs, On Behalf of Themselves and All Others Similarly Situated. v. COMPAQ COMPUTER CORPORATION, Defendant.

No. 1:99CV0711(TH/WR).

United States District Court, E.D. Texas, Beaumont Division.

March 15, 2001.

Wayne A. Reaud, Reaud Law Firm, Beaumont, TX, Gilbert Irvine Low, Gary Neale Reger, Orgain Bell & Tucker, Beaumont, TX, L. DeWayne Layfield, Beaumont, TX, Charles Silver, Austin, TX, for Steven J. Goode, Hal LaPray.

George Michael Jamail, Wayne A. Reaud, Reaud Law Firm, Beaumont, TX, Gilbert Irvine Low, D. Allan Jones, Jack Potter Carroll, Gary Neale Reger, Orgain Bell & Tucker, Beaumont, TX, L. DeWayne Layfield, Beaumont, TX, Charles

Silver, Austin, TX, for Tracy D. Wilson, Jr., Alisha Seale Owens.

Frank G. Jones, Fulbright & Jaworski, Houston, TX, for Toshiba America Information Systems, Inc.

Carl A. Parker, Parker & Parks, LLP, Port Arthur, TX, Barbara Wrubel, Sheila L. Birnbaum, Skadden Arps Slate Meagher & Flom LLP, New York City, Robert Quentin Keith, Keith Weber & Mosty, Johnson City, TX, David J. Beck, Beck Redden & Secrest LLP, Houston, TX, for Compaq Computer Corp.

MEMORANDUM OPINION AND ORDER GRANTING SUMMARY JUDGMENT ON SECTION 1030 DAMAGES¹

HEARTFIELD, District Judge.

I. INTRODUCTION

Before the Court are: (1) Defendant Compaq Computer Corporation's Motion to Dismiss Plaintiffs' Fourth Amended Original Complaint for Lack of Subject Matter Jurisdiction and Failure to State a Claim (Doc. No. 283); (2) Defendant Compaq Computer Corporation's Motion to Dismiss Plaintiffs' Fifth Amended Complaint for Lack of Subject Matter Jurisdiction and Failure to State a Claim (Doc. No. 368); (3) Defendant Compaq Computer Corporation's Supplement to its Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim or, alternatively, Compaq's Motion for Summary Judgment on Plaintiffs' Claim under the Computer Fraud and Abuse Act (Doc. No. 428); and (4) Defendant Compaq Computer Corporation's Motion for Summary Judgment on Plaintiffs' Breach of Warranty Claims and 1030 Damages (Doc. No. 389.)² Having considered the arguments of counsel, the summary judgment evidence, and the applicable law, the Court finds that neither Charles Thurmond, Hal LaPray, Tracy D. Wilson, Jr., nor Alisha Seale Owens has offered sufficient evidence of "damage" to maintain a claim under the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030.

II. BACKGROUND AND PROCEDURAL HISTORY

On October 31, 1999, Plaintiffs Charles Thurmond and Hal LaPray filed this class action lawsuit on behalf of themselves and all others similarly situated against Compaq Computer Corporation ("Compaq").³ In their class complaint, Plaintiffs allege Compaq "designed, sold, manufactured, transmitted or created" certain computers that contain floppy diskette controllers ("FDC") with infected FDC microcode. (Doc No. 353 at 1.) What is an FDC?

The FDC directs the transfer of data from the floppy disk drive to the computer's memory and vice versa. For example, each time the Court saves this opinion to floppy disk the data travels along the computer's bus system to the FDC.⁴ The FDC then writes the data to a designated location on a floppy disk ("write operation"). "If a defective FDC is made to wait a few microseconds too long, the FDC can write the delayed data as the first byte of the next physically adjacent data sector of a floppy diskette and destroy or `zero out' the remainder of the data in that sector or transfer an incorrect number of bytes." (Id. at 10.) Plaintiffs term this condition a "boundary error." (See id.) The likelihood of boundary errors increased with the advent of multitasking computers; this in turn "aggravated the severity of the problem caused by infected FDCs." (Id.) Ordinarily, the FDC will detect delays ("underruns" or "overruns") during a write operation, and trigger a flag that notifies the control program to rewrite the data correctly. In this case, Plaintiffs allege the defective FDCs in certain Compaq computers are incapable of detecting boundary errors. (See id.) Plaintiffs allege Compaq's "infected FDCs instead verify erroneous results without an error status, resulting in the storage of corrupt data or the destruction of data without notice to the control program or operating system and without the operator's knowledge." (Id. at 9.)

In February, 2000, Compaq released a software patch ("SoftPaq") to remedy the alleged boundary errors caused by defective FDCs. (See id. at 15.) The SoftPaq was made available to computer owners by either internet download, CD ROM, image installation, or warranty service, and at least one Plaintiff actually installed the patch. (See id. at 16.) However, Plaintiffs allege the SoftPaq does not cure the defective FDCs, but instead, corrupts data and degrades computer performance. (See id. at 15.)

Plaintiffs maintain they suffered damages as a result of Compaq "distributing, selling, or otherwise transmitting" allegedly infected FDCs and the SoftPaq. (Id. at 20.) Moreover, Plaintiffs allege Compaq's conduct violates the CFAA, 18 U.S.C. § 1030. (See id.) Based on these allegations, Plaintiffs bring this civil action and request monetary damages as provided by 18 U.S.C. § 1030(g). (See id.)⁵ In addition, Plaintiffs seek a declaratory judgment that Compaq's conduct violates 18 U.S.C. § 1030. (See id. at 23.) Finally, Plaintiffs assert state law claims for breach of contract, breach of warranty, and revocation of acceptance under U.C.C. § 2-608. (See id. at 21-23.)

On January 28, 2000, Compaq filed Defendant Compaq Computer Corporation's Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim. (Doc. No. 11.) In its initial motion, Compaq argued that Plaintiffs' claim under the CFAA could not support federal subject matter jurisdiction. The Court disagreed and denied Compaq's motion on February 28, 2000. (Doc. No. 71.) Further, the Court noted "Compaq's `motion to dismiss' raises matters outside the pleadings and is, in fact, a premature motion for summary judgment." (Id.)

Months later, Compaq filed Defendant Compaq Computer Corporation's Motion to Dismiss Plaintiffs' Fourth Amended Original Complaint for Lack of Subject Matter Jurisdiction and Failure to State a Claim. (Doc. No. 283.) Plaintiffs subsequently amended their complaint (see Doc. No. 353), at which time Compaq filed Defendant Compaq Computer Corporation's Motion to Dismiss Plaintiffs' Fifth Amended Original Complaint for Lack of Subject Matter Jurisdiction and Failure to State a Claim. (Doc. No. 368.)⁶ In its new motions, Compaq urges the Court to reconsider its earlier denial of Compaq's Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim.⁷ Again, Compaq argues Plaintiffs' CFAA claim cannot support federal subject matter jurisdiction. In the alternative, Compaq moves the Court to dismiss Plaintiffs' federal claim on the merits. Additionally, Compaq filed Defendant Compaq Computer Corporation's Motion for Summary Judgment on Plaintiffs' Breach of Warranty Claims and Section 1030 Damages. (Doc. No. 389.) In its motion, Compaq urges the Court to grant summary judgment on Plaintiffs' section 1030 claim since Plaintiffs cannot satisfy the requisite "damage" element of 18 U.S.C. § 1030(a)(5)(A). (See id.) For the reasons discussed below, the Court grants Compaq's Motion for Summary Judgment on Section 1030 Damages.

III. JURISDICTION AND VENUE

The Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1331 since Plaintiffs' civil action arises under the laws of the United States — specifically, 18 U.S.C. § 1030. Furthermore, the Court may exercise supplemental jurisdiction over Plaintiffs' state law claims under 28 U.S.C. § 1367(a). Venue is proper in the Eastern District of Texas pursuant to 28 U.S.C. § 1391, because a substantial portion of the events giving rise to Plaintiffs' claims occurred in this judicial district and Compaq does business in this judicial district.

IV. LEGAL STANDARDS

A. FED. R. CIV. P. 12(b)(1)

A district court's federal question jurisdiction is limited to cases arising under the Constitution, a federal law, or a treaty. 28 U.S.C. § 1331. However, "[i]t is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); accord Strain v. Harrelson Rubber Co., 742 F.2d 888, 889 (5th Cir.1984). "Ordinarily, where a jurisdiction issue is separable from the merits of a case, the court may determine jurisdiction by the standards of a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction." Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). In such cases, the district court may dismiss a plaintiff's claim based on: (1) the complaint alone; (2) the complaint supplemented by undisputed facts in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts. Clark v. Tarrant County, Texas, 798 F.2d 736, 741 (5th Cir.1986) (citing Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981)).

However, where issues of jurisdiction and substance are intertwined "[t]he relatively expansive standards of a 12(b)(1) motion are not appropriate." Roberts, 812 F.2d at 1177.⁸ Why? As the Supreme Court instructed in Bell v. Hood: "Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy." 327 U.S. 678, 682-83, 66 S.Ct. 773, 90 L.Ed. 939 (1946). Therefore, if federal jurisdiction and the merits of a plaintiff's claim are intertwined, then the district court should not dismiss...