Animators at Law v. Capital Legal Solutions

Citation
Animators at Law, Inc. v. Capital Legal Solutions, LLC, 2011 WL 2022540 (E.D. Va. May 10, 2011).

Factual Background
Animators at Law, Inc. (“Animators”) is a Virginia corporation that provides litigation support services in graphics and technology. Animators brought this action against Capital Legal Solutions, LLC (“CLS”), a competing Virginia company, and two individuals formerly employed by Animators but employed by CLS at the time of this action, Tishler and Yarnoff. Animators alleges that the defendants conspired for Tishler and Yarnoff to leave Animators’ employment and to take confidential and proprietary information about Animators’ services, projects, and clients to CLS.

After defendants Tishler and Yarnoff left Animators’ employ, Animators discovered that a laptop containing sales information was missing. The laptop had in fact been retained by Tishler, and, after its return, Animators’ commenced an investigation concerning whether defendants had copied, deleted, or otherwise misused Animator’s confidential information after leaving Animators’ employment.

Animators’ investigation revealed that approximately 800 files and folders had been deleted from the laptop after defendants left Animators for CLS. To discover this information, Animators used the services of IDS pursuant to an engagement letter that specified no specific compensation for services. Animator brought suit against the defendants for a violation of the Computer Fraud and Abuse Act (CFAA), as well as other claims.

Trial Court Proceedings
The CFAA prohibits any person from “intentionally access[ing] a computer without authorization or exceed[ing] authorized access, and thereby obtain[ing]. . . information from any protected computer.” In additiona to criminal penalties, the CFAA provides that “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator.” To maintain a civil action, however, a plaintiff must show that the alleged violation caused loss aggregating at least $5,000 in value. At issue in the present case is whether the defendants were entitled to partial summary judgment with respect to plaintiff’s CFAA claim on the ground that plaintiff failed to demonstrate the requisite jurisdictional loss.

During the court proceedings, IDS invoiced Animators for $54,210 in charges, which allegedly included at least $12,257.51 worth of services related to the laptop in question, and another $7,243.90 for hosting and data charges related exclusively to the laptop. Defendants, however, disputed these amounts as qualifying as a CFAA loss because they contend that Animators never actually paid IDS for these services.

Plaintiff responds by testifying that IDS was provided with a discounted subscription to Plaintiff’s Law Prospector service in exchange for IDS’ services and that Animators obtained at least $19.501.41 in IDS services on a credit or trade basis. Animators also allege that it suffered additional damages as a result of having to switch file hosting services as a result of the defendants’ unauthorized access (from a free Dropbox account to a Box.net account for $175/month), and that Animators suffered the loss of executive time in responding to the unauthorized access by defendants.

The CFAA specifies that a qualifying “loss”:

"means any reasonable cost to any victim, including [i] the cost of responding to an offense, [ii] conducting a damage assessment, and [iii] restoring the data, program, system, or information to its condition prior to the offense, and [iv] any revenue lost, cost incurred, or other consequential damages incurred because of the interruption of service[.]"

In addition, a plaintiff must prove that the losses at issue were reasonable and that they were caused by the CFAA violation.

In denying the defendants’ motion for summary judgment, the court noted that the CFAA does not require that a qualifying loss be paid in cash. Instead, the court determined that plaintiff had presented triable issues of fact for the jury in terms of its stated damages and the value of the subscription service traded to IDS. Furthermore, while the defendants may have contested the reasonableness of such an extensive investigation, a final determination of whether plaintiff’s costs were warranted should be reserved for the jury.

Comment
The Central District of California recently addressed the issue of damages under the CFAA as well. See La Court v. Specific Media, Inc., 2011 WL 1661532 (C.D. Cal. App. Apr. 20, 2011). In La Court, the plaintiffs failed to allege any economic damages in their case, instead relying on the “damage” associated with the presence of unwanted Flash cookies on their computers. The court rejected this argument and dismissed the plaintiffs’ CFAA cause of action, in addition to the remainder of their complaint.