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Source Production & Equipment Co., Inc. v. Schehr

United States District Court, E.D. Louisiana

October 23, 2019

SOURCE PRODUCTION & EQUIPMENT CO., INC., ASPECT TECHNOLOGY LIMITED, SPECMED, LLC, SPEC MED INTELLECTUAL PROPERTY, LLC AND SPEC INTELLECTUAL PROPERTY, LLC
v.
KEVEN J. SCHEHR, ISOFLEX USA, ISOFLEX RADIOACTIVE LLC, RICHARD H. MCKANNAY, JR., AND JOHN DOES 1-10

         SECTION M (1)

          ORDER & REASONS

          BARRY W. ASHE UNITED STATES DISTRICT JUDGE.

         Before the Court is a motion by defendant Kevin Schehr for partial summary judgment on the Computer Fraud Abuse Act (“CFAA”), 18 U.S.C. § 1030, claims brought by plaintiffs Source Production & Equipment Co., Inc. (“SPEC”), Aspect Technology Limited (“ATL”), Specmed, LLC (“Specmed”), Spec Med Intellectual Property, LLC (“SMIP”), and Spec Intellectual Property, LLC (“SPI”) (collectively “Plaintiffs”).[1] Plaintiffs respond in opposition, [2]and Schehr replies in further support of the motion.[3] On October 10, 2019, the Court heard oral argument on the motion.[4] Having considered the parties' memoranda, the statements made at oral argument, the record, and the applicable law, the Court finds that Schehr is entitled to summary judgment dismissing Plaintiffs' CFAA claims for injunctive relief and monetary damages related to lost data, but not Plaintiffs' CFAA claim for monetary damage related to the forensic evaluation of the affected computer.

         I. BACKGROUND[5]

         This matter concerns the alleged theft of trade secrets, breaches of fiduciary duty and contract, and violation of the CFAA by a business's former employee. SPEC is a supplier of industrial medical radiography equipment and radioactive isotope materials.[6] Schehr is a former executive of SPEC, who worked at the company in various positions from 1995 until his termination on July 10, 2016.[7] When he was terminated, Schehr did not immediately return his SPEC-issued laptop, and on July 10 and 11, 2016, he downloaded many documents from that laptop onto an external hard drive.[8] On July 13 or 14, 2016, Schehr gave the laptop to his prior counsel who made a copy of the laptop on another external hard drive and then returned the laptop to SPEC on July 18, 2016.[9] Both hard drives have remained in defense counsel's possession since July 2016.[10] Plaintiffs allege that forensic analysis of the computer showed that Schehr attached two external hard drives to the laptop and subsequently deleted 5, 086 files from the laptop.[11] Since his termination, Schehr has not had access to the database on which SPEC saves its work instructions and production drawings.[12] In their amended complaint, Plaintiffs alleged that Schehr's post-termination actions involving his SPEC-issued laptop violated the CFAA.[13]

         II. PENDING MOTION

         Schehr moves for summary judgment on Plaintiffs' CFAA claims arguing that Plaintiffs cannot seek injunctive relief and their damages are limited to the cost of the post-termination forensic examination of the laptop, not including costs attributable to litigation.[14] Schehr contends that injunctive relief is unavailable to Plaintiffs because the CFAA empowers courts to enjoin a defendant from accessing a plaintiff's computer systems in the future, and Schehr undisputedly no longer has access to Plaintiffs' computer systems.[15] Schehr argues that the CFAA cannot be used as a surrogate trade-secrets statute to enjoin the use of any improperly accessed information, and even if it could, there is no evidence that Schehr has retained or used any of Plaintiffs' documents obtained from the post-termination download.[16] With respect to damages, Schehr argues that Plaintiffs have no evidence to support any monetary damages aside from the cost of the post-termination forensic examination, exclusive of litigation costs.[17]

         Plaintiffs argue that they are entitled to both injunctive and monetary relief on their CFAA claims. Although Plaintiffs concede that Schehr no longer has access to their computer systems, they argue that the CFAA should be read to enjoin the use of any information obtained as a result of a CFAA violation.[18] As to monetary damages, Plaintiffs agree that they are entitled to recover the cost of the forensic examination, but quibble with Schehr over the amount.[19]Further, Plaintiffs' argue that they should be compensated for the value of the files that Schehr allegedly deleted and made inaccessible to Plaintiffs.[20] However, Plaintiffs' counsel admitted at oral argument that Plaintiffs have no evidence demonstrating the content of the files that were allegedly deleted, the value of such information, or any concrete physical, digital, or monetary loss Plaintiffs' sustained as a result of Schehr's deleting the files.

         III. ANALYSIS

         A. Summary Judgment Standard

         Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56(c)). “Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which the party will bear the burden of proof at trial.” Id. A party moving for summary judgment bears the initial burden of demonstrating the basis for summary judgment and identifying those portions of the record, discovery, and any affidavits supporting the conclusion that there is no genuine issue of material fact. Id. at 323. If the moving party meets that burden, then the nonmoving party must use evidence cognizable under Rule 56 to demonstrate the existence of a genuine issue of material fact. Id. at 324.

         A genuine issue of material fact exists if a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996). The substantive law identifies which facts are material. Id. Material facts are not genuinely disputed when a rational trier of fact could not find for the nonmoving party upon a review of the record taken as a whole. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Equal Emp't Opportunity Comm'n v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014). “[U]nsubstantiated assertions, ” “conclusory allegations, ” and merely colorable factual bases are insufficient to defeat a motion for summary judgment. See Anderson, 477 U.S. at 249-50; Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994). In ruling on a summary judgment motion, a court may not resolve credibility issues or weigh evidence. See Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). Furthermore, a court must assess the evidence, review the facts, and draw any appropriate inferences based on the evidence in the light most favorable to the party opposing summary judgment. See Tolan v. Cotton, 572 U.S. 650, 656 (2014); Daniels v. City of Arlington, 246 F.3d 500, 502 (5th Cir. 2001). Yet, a court only draws reasonable inferences in favor of the nonmovant “when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990)).

         After the movant demonstrates the absence of a genuine dispute, the nonmovant must articulate specific facts and point to supporting, competent evidence that may be presented in a form admissible at trial. See Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998); Fed.R.Civ.P. 56(c)(1)(A) & (c)(2). Such facts must create more than “some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586. When the nonmovant will bear the burden of proof at trial on the dispositive issue, the moving party may simply point to insufficient admissible evidence to establish an essential element of the nonmovant's claim in order to satisfy its summary judgment burden. See Celotex, 477 U.S. at 322-25; Fed.R.Civ.P. 56(c)(B). Unless there is a genuine issue for trial that could support a judgment in favor of the nonmovant, summary judgment must be granted. See Little, 37 F.3d at 1075-76.

         B. Computer Fraud Abuse Act

         CFAA prohibits unauthorized access to protected computers for the purpose of obtaining information, causing damage, or perpetrating fraud. 18 U.S.C. § 1030(a)(2), (a)(4) & (a)(5). A “protected computer” is “a computer which is used in or affecting interstate or foreign commerce or communication.” Id. § 1030(e)(2)(B). Any computer connected to the internet qualifies as a “protected computer.” Complete Logistical Servs., LLC v. Rulh, 350 F.Supp.3d 512, 521 (E.D. La. 2018) (collecting cases). The CFAA provides a civil cause of action to obtain compensatory damages and injunctive or other equitable relief to “[a]ny person who suffers damage or loss by reason of a violation of [the CFAA]” if the conduct involves one of the factors set forth in subclauses (I), (II), (III), (IV), or ...


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