PhoneDog v. Kravitz

Citation
PhoneDog v. Kravitz, 2011 WL 5415612 (N.D. Cal. Nov. 8, 2011) (full-text).

Factual Background
PhoneDog is an “interactive mobile news and reviews web resource,” that offers its visitors reviews of mobile products and services, as well as information to compare prices. Prior to this action, Kravitz was an employee of PhoneDog, working as a product reviewer and video blogger. As part of his duties, Kravitz was provided with a “company” Twitter account (“@PhoneDog_Noah”) and was tasked with distributed various work-related content through that account. While employed by PhoneDog, Kravitz’ Twitter account generated approximately 17,000 followers.

When Kravitz decided to leave PhoneDog, the Plaintiff requested the return of the Twitter account. However, rather than returning the account, Kravitz changed the name to “@noahkravitz” and retained the account.

Trial Court Proceedings
PhoneDog filed a complaint for (1) misappropriation of trade secrets; (2) intentional interference with prospective economic advantage; (3) negligent interference with prospective economic advantage; and (4) conversion.

Kravitz’ filed a motion to dismiss for lack of subject matter jurisdiction and a motion to dismiss for failure to state a claim.

Amount in Controversy
PhoneDog’s complaint alleges that Kravitz’ unauthorized use of the Twitter account (and other confidential information associated with the account, namely the information pertaining to followers) caused $340,000.00 in damages. Kravitz’ motion to dismiss argues that PhoneDog is unable to meet the jurisdictional minimum of the court ($75,000) because “PhoneDog cannot establish that it is entitled to any monetary recovery because it does not have competent proof that is has ownership or right to possession over the Account or the followers.” Kravitz’ contention is based on the Twitter Terms of Service that asserts that all Twitter accounts are the exclusive property o Twitter and not an individual user. To the contrary, PhoneDog argues that the industry standard is to value each follower at $2.50/month – for the relevant period of 8 months then, and the 17,000 followers at issue, PhoneDog’s damages are $340,000. PhoneDog also offers an alternative method of valuation based on the number of followers, the number of tweets, the content of those tweets, etc.

In denying Kravitz’ motion to dismiss for lack of subject matter jurisdiction, the court noted that the question of damages was intertwined with factual and legal issues raised by PhoneDog’s claims. In light of that determination, and the fact that PhoneDog had alleged damages in its complaint that exceeded $75,000, the court denied Kravitz’ motion.

Misappropriation
PhoneDog’s claim for misappropriation was based on Kravitz’ use and retention of the Twitter account, the associated password and login information, and the corresponding followers. Kravitz, however, argues that the identity of followers and the account password do not constitute trade secrets under the California Uniform Trade Secrets Act (“UTSA”). Specifically, Kravitz argues that “[t]he followers of the Account are not secret because they are and have been publicly available for all to see at all times.” Kravitz further contends that the account password does not possess any actual or potential independent economic value under the UTSA.

In denying Kravitz’ motion to dismiss for failure to state a claim as to misappropriation, the court determined that an evaluation of whether the password and follower information are trade secret is beyond the scope of the pleadings and that such a challenge should be more properly raised at summary judgment on a fully-developed evidentiary record.

Interference with Prospective Economic Advantage
To prevail on a claim for intentional interference with prospective economic advantage, PhoneDog was required to establish (1) an economic relationship between the plaintiff and some third party with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts, apart from the interference itself, by defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of defendant. CRST Van Expedited v. Werner Enter., Inc., 479 F.3d 1099, 1108 (9th Cir. 2007).

Similarly, to prevail on a claim of negligent interference with prospective economic advantage, PhoneDog was required to establish the same economic relationship with a third party and knowledge by the defendant of that relationship, as well as negligence that caused damage to the plaintiff in that the relationship was actually interfered with or disrupted. It is well established that the tort of interference does not protect “potential” relationships that are “at most a hope for an economic relationship and a desire for a future benefit.” Westside Ctr. Assoc. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 527 (1996).

PhoneDog’s argument for interference was not well defined in the complaint and could have been interpreted as relating to its customers, the visitors to its website, or the followers on Kravitz’ Twitter account. Because PhoneDog was unable to establish an actual economic relationship that Kravitz either was aware of, or interfered with in some way, the motion to dismiss was granted as to both interference claims.

Conversion
To establish a claim for conversion, a plaintiff must show (1) ownership of a right to possession of property; (2) wrongful disposition of the property right of another; and (3) damages. See G.S. Rasmussen & Assoc. v. Kalitta Flying Serv., 958 F.2d 896, 906 (9th Cir. 1992). While Kravitz argued that PhoneDog was not the actual owner of the account, merely a licensee from Twitter, the court agreed with PhoneDog that it was the party who had registered the account, granted Kravitz the right to use the account, and the party that requested the return of the account after Kravitz’ employment ended. As a result, the court denied Kravitz’ motion to dismiss with respect to the claim of conversion.