Condux International v. Haugum

Citation: 2008 WL 5244818 (D. Minn. Dec. 15, 2008).

Factual Background
Plaintiff, Condux International, is a Minnesota corporation that manufactures and installs tools and equipment used in the electrical utility, electrical contracting, telecommunications, and cable television industries. John Haugum, the defendant, worked for Condux in a variety of positions, most recently as the Vice President of Global Sales. As vice president, Haugum was responsible for overseeing sales and marketing for the company, and accordingly, was authorized to access “confidential business information”.

In November 2007, Haugum exchanged emails with a former Condux employee stating that he was going to resign and start his own competing business. In December 2007, Haugum requested that another employee in Condux’s information technology department send him an electronic list of Condux’s customers and their contact information. Additionally Condux claimed that Haugum downloaded over forty engineering drawings from Condux’s computer system in January 2008. Soon after these events, Haugum announced his resignation and left Condux on February 15, 2008.

Condux claimed that Haugum later attempted to delete evidence of his downloading the engineer drawings and discovered a document drafted by Haugum stating his intention to start a competing business. Condux further alleged that Haugum (1) approached one of Condux’s distributors about doing business directly with Haugum; (2) exchanged emails with a former Condux employee in May 2008 in which the former employee agreed to send Condux’s confidential business information to Haugum; and (3) “directed” the former employee to delete evidence of those emails and the accompanying transfer of confidential business information.

Trial Court Proceedings
In its complaint, Condux claimed that Haugum’s activities in obtaining the confidential business information were wrongful, that Haugum misappropriated the confidential business information for his own benefit in competition with Condux, and that Condux suffered damages as a result.

Haugum argued that Condux’s claim under the federal Computer Fraud and Abuse Act (CFAA) must be dismissed for failure to state a claim on which relief could be granted. Haugum also argued that Condux’s related state law claims must also be dismissed because, without the CFAA claim, supplemental jurisdiction in federal court to consider state law claims is lacking.

The court held that Condux was unable to allege that Haugum was “without authorization” or that he “exceeded authorized access,” and, thus, the CFAA claim for violations of sections 1030(a)(2), (a)(4), and (a)(5)(ii) and (iii) failed. The court further held that because there was no allegation of “damage” contemplated by the CFAA, the claim for a violation of section 1030(a)(5)(A)(i) likewise failed.

The court did hold that Condux’s allegations that Haugum acted wrongfully in accessing the confidential business information to later use for his own benefit may very well support other claims; indeed, they are the basis for the state law claimsCase-U.S.-CFAA]] of misappropriation of confidential business information, breach of fiduciary duties and unfair competition. But they are not allegations that will support a CFAA claim.

Having dismissed Count One (the CFAA claim), the sole count within the court’s original jurisdiction, the court declined to exercise supplemental jurisdiction over Condux’s state law claims and dismissed those claims without prejudice.