Frees, Inc. v. McMillian, No. 05-1979, 2007 WL 2264457 (W.D. La. August 6, 2007)
Plaintiff Frees, Inc. filed suit against two of its former employees, McMillan and Pierceall for, among other things, violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. 1030. Frees alleged that McMillian and Pierceall loaded Frees proprietary data onto their new employer’s computers, which they then used to develop and market products in competition with Frees. Frees also alleged that McMillian deleted data from the Frees computers before he left its employment. This alleged conduct resulted in Frees expending more than $16,000 to various consultants and forensics investigators. Frees did not suffer any interruption of service.
McMillan and Pierceall moved for partial summary judgment. They argued that Frees had not alleged “loss” as defined under the CFAA, and in the alternative, that Frees could not recover lost profits absent an interruption of service. The court denied the motion.
“Loss” under the CFAA
Frees had argued that the “loss” it suffered was the fees it paid the consultants and forensics investigators it had to hire because of the deletion of data from its computer systems. The defendants argued that these expenditures were not cognizable as “loss” under the statute. The court rejected that argument, citing to a number of cases from around the country holding that the costs associated with investigating possible damage to a computer system are considered “loss.” Citing to E.F. Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 585 (1st Cir.2001) the court observed that a finding of “loss” is not lessened simply because no damage occurred.
No interruption of service
The defendants contended that lost revenues were not compensable damages in the case because there was not an interruption of computer service. They argued that the phrase “any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service” was not only a jurisdictional threshold, but also a limitation on the types of recoverable damages. 18 U.S.C. § 1030(e)(11). Frees rejected that contention, arguing that a plaintiff is entitled to recover ordinary “compensatory damages” once the jurisdictional threshold has been met.
Recognizing that the federal circuits are split on this issue, the court sided with Frees. The court found that the terms “damage” and “loss,” appearing in the CFAA, are terms of art used to define a jurisdictional threshold. They do not control or limit what damages are available in a civil action if the substantive and threshold standards are not met. Rather, the court found, Congress used the terms “compensatory damages” and “economic damages” in the CFAA to define the scope of recovery.
Merle Norman Cosmetics, Inc. v. Labarbera, No. 07-60811, 2007 WL 2254932 (S.D.Fla. August 03, 2007)
Cosmetics purveyor Merle Norman sued defendant Labarbera in a Florida federal court, alleging state law claims for tortious interference with contract, civil conspiracy, and deceptive and unfair trade practices. Merle Norman alleged that Labarbera worked in conjunction with an authorized Merle Norman studio owner to obtain cosmetics which she later resold on eBay.
Labarbera moved to dismiss under FRCP 12(b)(6), arguing that the “first sale doctrine” protected her right to resell products she had lawfully acquired in the stream of commerce. Merle Norman responded that the first sale doctrine should not apply, as the doctrine only protects defendants for claims of intellectual property infringement. In this case, Merle Norman argued, the defendant was not merely reselling the products, but was engaged in tortious conduct with the authorized studio owner.
The court agreed with Merle Norman and denied the motion to dismiss. Quoting Bulova Corp. v. Bulova Do Brasil Com. Rep. Imp. & Exp. Ltd., 144 F.Supp.2d 1329, 1331-1332 (S.D.Fla.2001), it observed that “[c]ourts have limited this doctrine to cases where there is no other conduct of infringement or where the defendant is not culpable for anything more than mere reselling of a product.” The court went on to observe that “the point at this early stage of this litigation is that the First Sale Doctrine has not been accepted as a complete defense to tortious interference and civil conspiracy claims.”
View the opinion below (or click through if it’s not showing up in the RSS feed):
Last week’s rumors are confirmed — Google is in the closing stages of a $100 million deal to purchase Feedburner. What great news for this terrific Chicago company. And congratulations to my friend Rick Klau, who has been on board with Feedburner for a couple years as VP of Publisher Services, and who no doubt has been an instrumental force in the company’s success. Wow.
MySpace has successfully defended itself in a negligence suit arising from the assault of a minor girl by a 19-year-old man she met on the site. Invoking the immunity provisions of the Communications Decency Act at 47 U.S.C. §230, the U.S. District Court for the Western District of Texas held that the suit must be dismissed, as the plaintiffs sought to hold MySpace liable as a publisher of third-party content.
Julie Doe, the anonymous minor plaintiff, lied about her age (saying she was 18 when in fact she was only 13) when she signed up for a MySpace account. Later she met a 19-year-old man on the site, and the two started talking by telephone. They met-up in person, and Doe was assaulted.
Julie and her mother sued MySpace, claiming that it failed to take adequate precautions to protect Julie from the attack. MySpace raised 47 U.S.C. §230 as a defense in its motion to dismiss. That section provides, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”
As so many courts have done before, the court in this case adopted the rationale of the watershed Zeran v. America Online, Inc., 129 F.3d 327 (4th Cir. 1997). Zeran held that “[b]y its plain language, Section 230 creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.”
The plaintiffs had asserted that their case was based not on MySpace’s posting of third-party content, but rather on MySpace’s failure to institute safety measures to protect minors. The court rejected this “disingenuous” argument:
It is quite obvious that the underlying basis of Plaintiffs’ claims is that, through posting on MySpace, [the assailant] and Julie Doe met and exchanged personal information which eventually led to an in-person meeting and the sexual assault of Julie Doe…. No matter how artfully Plaintiffs seek to plead their claims, the Court views Plaintiffs’ claims as directed toward MySpace in its publishing, editorial, and/or screening capacities.
The court found additional grounds to dismiss the negligence claim in that MySpace had no duty to prevent the assault from occurring. Citing to Texas law, the court observed that “[a]s a general rule, a person has no legal duty to protect another from the criminal acts of a third person or control the conduct of another.”
Further, the court rejected the plaintiffs’ argument that it was foreseeable minors could be injured by the criminal acts of adult MySpace users:
To impose a duty under these circumstances for MySpace to confirm or determine the age of each applicant, with liability resulting from negligence in performing or not performing that duty, would of course stop MySpace’s business in its tracks and close this avenue of communication, which Congress in its wisdom has decided to protect.
With this holding, the court declined to accept Plaintiffs’ argument that the duty of a premises owner should extend to a website as a “virtual premises.”
Doe v. MySpace, Inc., No. 06-983 (W.D. Tex. Feb. 13, 2007)
I’m quite excited to have become the Legal Correspondent for the Internet television show Viral which is produced by Veoh Networks. The second season is underway with Episode 9, which is embedded in this post. (You must have Flash installed.) In this episode, I simply introduce myself and talk about what’s to come in the next few episodes law-wise.
I know, I know — there’s plenty of room for improvement. I did the filming myself, so the audio needs some help [but Kris has agreed to help with that] and I’ve got to figure out the lighting. But it’s going to be a lot of fun. Stay tuned.
On February 23, I’m speaking at a seminar hosted by the John Marshall Law School here in Chicago on the topic of copyright law and online video sharing sites (like YouTube). [More info on this seminar]
There is a lot going on with these kinds of sites lately, and it’s hard to keep up with all the developments. But I’d like to give a presentation that is up-to-date and thorough. And I’m asking for your help with that.
If you’re a del.icio.us user, from now until February 23, if you come across any interesting news story or blog post about YouTube, Revver, Grouper, Veoh, or any other video sharing site, would you kindly tag it with “icyoutube“? (The ic stands for Internet Cases.)
And by the way, if don’t use del.icio.us, why on earth not? For more information, read this classic exposition on the virtues of the king of all social bookmarking sites.
This collaboration thing could be pretty useful. Thanks for your help.
If you’ve been reading this weblog for any time at all, you’ll know that it’s unusual for me to depart too far from topics dealing purely with the law. But the soul of “Internet law,” at least for now, is comprised in large part of the principles underlying Web 2.0. With that notion comes the challenge of how to deal with an Internet that is increasingly collaborative. Denise Howell directed me to the video embedded below, which was created by Michael Wesch, an obviously insightful professor of anthropology at Kansas State University. It’s an entertaining little video that explores the technological underpinnings of the modern Internet and leaves us with some poignant questions about how as a civilized society we need to deal with issues like copyright, governance, privacy, family, and ourselves.
[If you’re viewing this post in an RSS reader and the video doesn’t show up, click through so that you can see it.]