Opinion
NO. 02-876
March 28, 2002
ORDER AND REASONS GRANTING TEMPORARY RESTRAINING ORDER
Before the Court is a Motion for Temporary Restraining Order filed by the plaintiff Ingenix, Inc. ("Ingenix"), pursuant to Rule 65(b) of the Federal Rules of Civil Procedure, seeking orders of this Court: (1) prohibiting the defendant Claude Lagalante ("Lagalante") from using or disclosing any of the plaintiffs business, customer, pricing and marketing information provided by it to Lagalante when he was employed by Ingenix; (2) directing the defendant to immediately return to Ingenix its property, documents, and business records in the custody and control of Lagalante; and (3) prohibiting Lagalante from soliciting and/or accepting business from any customer or prospective customer of Ingenix, whose identity was learned by Lagalante while employed by Ingenix, or learned or obtained through use of the Ingenix laptop computer provided to the defendant while employed by Ingenix. The matter was set for an expedited oral hearing on Wednesday, March 27, 2002, at 9:30 a.m.
I. PROCEDURAL BACKGROUND
On March 25, 2002, Ingenix filed a Complaint for Injunctive and Other Relief [Rec.Doc. No. 1] against Lagalante, alleging jurisdiction pursuant to 28 U.S.C. § 1331 and 1332, claiming: (1) fraudulent, abusive, and knowing misappropriation of computer files and proprietary information of Ingenix, and deleting same belonging to Ingenix without its prior authorization, causing damages in excess of $5,000.00, all in violation of 18 U.S.C. § 1030 (a)(4) and (a)(5)(C); (2) breach of confidentiality agreements; (3) knowing misappropriation of trade secrets, business and financial information with intent to disclose same for the defendant's own personal financial gain in violation of the Louisiana Trade Secrets Act, La.Rev.Stat. Sections 51:1431 et seq., and the Louisiana Uniform Trade Practices Act and Consumer Protection Law, La.Rev. Stat. Sections 51:1401 et seq. (4) breach of fiduciary duty as Ingenix's Director of Sales for the southern region of the United States; and (5) conversion. In addition, after trial on the merits, plaintiff seeks damages for such wrongful conduct, as well as attorney's fees, costs and expenses incurred in connection with the litigation of this action.
II. FACTUAL BACKGROUND
The defendant Lagalante is the former Southern Regional Sales Director of Ingenix, who resigned on February 15, 2002, to become Vice President of Sales for Solucient, Inc. ("Solucient"), a direct competitor of Ingenix. Plaintiff Ingenix, a subsidiary of UnitedHealth Group ("UHG"), is a health care information company that provides businesses with health care information and resources necessary to their corporate clients' decisions affecting the improvement of the quality of health care for employees, a lower the cost of providing medical care to employees, and to increase the productivity of their workforce through better health, inter alia.
While employed by Ingenix, Lagalante was responsible for generating employer prospects and generating new business to those prospects in the Southern Territory, which covers eleven southern states. During his tenure at various UHG subsidiary companies from March of 1995 until he most recently resigned, Lagalante signed no fewer than four confidentiality agreements aimed at protecting the propriety information and trade secrets of Ingenix, giving them a competitive edge in their market area. Lagalante was privy to Ingenix's marketing and pricing strategies, detailed information regarding a number of its significant customers, to wit: (1) March 31, 1995 Confidentiality and Non-Solicitation Agreement with UHG [Exhibit "B" to Sealed Affidavit of Michael Maluccio]; (2) April 10, 1995 agreement set forth in the employee handbook [Exhibit "D" to Maluccio Affidavit]; (3) February 13, 1996 agreement [Exhibit "B" to Maluccio Affidavit]; and (4) October 31, 1997 Confidentiality Agreement with Proamerica Managed Care, a UHG company [Exhibit "F" to Maluccio Affidavit]. Lagalante was employed by UHG's subsidiary Ingenix from December of 1998 until his February 15, 2002 resignation.
Five days after Lagalante's February 15, 2002 resignation, a review conducted of various e-mail messages on Ingenix s server revealed one dated February 10, 2002 from Lagalante to a manager at Solucient. The subject of the Lagalante February 10, 2002 message clearly concerns an offer by him to provide what he, at least, believed to be confidential and proprietary customer and marketing information concerning accounts Lagalante was in the process of soliciting for Ingenix (i. e., six companies allegedly capable of boosting sales of services to a total of over $2 million in potential contract values). Ingenix reminded Lagalante, in writing immediately after discovering the e-mail, of his continuing obligation to protect and not disclose confidential, proprietary or trade secret protected information. Apparently, Lagalante officially began working for Solucient soon after he resigned his position with Ingenix.
Ingenix also sought the return of its laptop computer and other property. In the days following his resignation, numerous courier contacts dispatched by Ingenix to the home of: Lagalante for the purpose of retrieving the laptop computer and other materials belonging to Ingenix proved unavailing. It was not until February 23, 2002, more than a week after his resigijation, that Lagalante returned materials and the laptop via courier service to Ingenix.
Forensic examination of Lagalante's Ingenix laptop computer indicates that, within a few hours of the time that he called Ingenix to tender his resignation, the defendant downloaded approximately 127 Ingenix documents or power point presentations, which the plaintiff submits were likely copied on to another device and were all related either to prospective customers, including the six companies referenced in Lagalante's February 10, 2002 e-mail to Solucient, regarding a "funnel" of prospective clients (i.e., sensitive information). Investigation further revealed that seven documents were accessed after his resignation, during a February 21, 2002 visit to Solucient in Chicago. Moreover, forensic investigation confirmed that Lagalante deleted approximately 26 documents around the time of his resignation, all relating to six major prospects. At this point in time, Ingenix estimates its damage or loss in a number of ways, including the expense of the forensic investigation of breach of its computer data, so as to determine what was lost so that it can somehow recapture the lost information. Ingenix estimates damages in the effort to recoup lost computer data at approximately $7,000.00.
Ingenix does not seek enforcement of the various confidentiality and noncompetition agreements executed by Lagalante in favor of UHG and other UHG subsidiaries in the years leading up to his employment with Ingenix. Instead, plaintiff takes aim at the more obvious and likely successful claim pursuant to federal law, the computer fraud and abuse claims, as well as breach of trust, further claiming violation of Louisiana's uniform trade secrets and unfair competition laws.
Essentially, Ingenix submits that the evidence it has amassed to date readily demonstrates its substantial likelihood of success on the merits at the very least as to his claims under federal law, and that submissions to date demonstrate a substantial threat of irreparable harm in terms of loss of good will, inter alia, and that the harm already sustained and threatened harm in the absence of injunctive relief far outweighs any injury to the defendant in granting injunctive relief Ingenix submits that a preliminary injunction enjoining further violations will not disserve the public interest.
At the oral hearing conducted at 11:00 A.M. on Wednesday, March 27, 2001, the defendant challenged the jurisdiction of the Court, noting that plaintiff has failed state a civil claim for damages and injunctive relief pursuant to the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030 (a)(4) and (a)(5)(A), since Ingenix has not and cannot establish "damage" to a protected computer in excess of $5,000; and the amount in dispute does not support diversity jurisdiction. The defendant further submits that his conduct in the days leading up to his resignation and thereafter cannot be construed to as either wrongful or violations of Louisiana's laws proscribing misappropriation of trade secrets and unfair trade practices, inter alia.
For the following reasons, the Court GRANTS plaintiffs request for a temporary restraining order on the basis of the record, the three exhibits adduced during the hearing and the argument of counsel.
III. ANALYSIS A. Federal Question Jurisdiction
There is no need for the Court to address every element of the plaintiffs claims pursuant to the CFAA, 18 U.S.C. § 1030 (a)(4) and (a)(5)(C). Lagalante's jurisdictional challenge concerns the "requisite" damage element, his argument being that the plaintiff has not incurred cognizable damages under the CFAA, and thus this Court should dismiss the matter for lack of subject matter jurisdiction. Essentially, the defendant argues that it remains for the Court to determine, at the outset, whether the plaintiff has established in excess of $5,000 in statutorily defined "damage" under the CFAA, 18 U.S.C. § 1030 (e)(8), 1030(g). Lagalante highlights statutory language defining the term "damage" — i.e., "any impairment to the integrity or availability of data, a program, a system, or information that causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals" — and argues that the $5,000 worth of "damage" must reflect sums representing economic damage "to a protected computer." See 18 U.S.C. § 1030a(5)(A), 1030(e)(8) and 1030(g).
A federal question claim may only be dismissed for lack of subject matter jurisdiction if:
(1) the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction, or (2) such a claim is wholly insubstantial or frivolous. The absence of, as opposed to an arguable, cause of action does not implicate subject-matter jurisdiction. However, that does not diminish the requirement that the district court satisfy itself, as a threshold matter, that Article III jurisdiction has been established.
See Holy Cross College, Inc. v. Louisiana High School Athletic Association, 632 F.2d 1287, 1289 (5th Cir.), reh'g denied, 636 F.2d 314 (5th Cir. La. 1981); and Alden v. Allied Adult Child Clinic, L.L.C., 171 F. Supp.2d 647 (E.D. La.) (Barbier, J.) (noting that jurisdiction is not defeated by the possibility that the plaintiffs allegations might fail to state a viable cause of action on which the plaintiff could recover and reiterating the rule, that "where the plaintiff has clearly attempted to state a federally-based cause of action and the allegations are not 'clearly concocted for the sole purpose of obtaining federal jurisdiction' or 'wholly insubstantial or frivolous,' the Court has subject matter jurisdiction over the claims").
See Bell v. Hood, 327 U.S . 678, 682, 66 S.Ct. 773, 776 (1946) (observing that "jurisdiction . . . is not defeated . . . by the possibility that averments might fail to state a cause of action on which petitioners could actually recover," and that instead, "the district court has jurisdiction if 'the right of the petitioners to recover under their complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another,'" unless the claim "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial"); Oneida Indian Nation of N.Y. v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 777 (1974) (Dismissal for lack of subject matter jurisdiction because of inadequacy of the federal claim is proper only when the claim claim is "so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy."); and Romero v. International Terminal Operating Co., 358 U.S. 354, 359, 79 S.Ct. 468, 473 (1974). See also Steel Company v. Citizens for a Better Environment, 523 U.S. 83, 118 S.Ct. 1003 (1998) (holding that EPCRA section providing that district court "has jurisdiction in actions brought under" subsection authorizing certain civil actions does not render elements of cause of action under referenced subsection jurisdictional, however, the court may not decide a cause of action before resolving whether it has Article III jurisdiction, and then, remanding the cause of action with instructions to dismiss the complaint for the reason that the plaintiffs failed to satisfy the redressability requirement for standing).
See Mansfield, C. L.M.R. Co. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511 (1884) (noting early on in the jurisprudence that the requirement that subject matter jurisdiction be established as a threshold matter "spring[s] from the nature and limits of the judicial power of the United States" and is "inflexible and without exception").
The plaintiff in this case has clearly stated a claim under the CFAA, 18 U.S.C. § 1030 (a)(4) and 1030a(5)(C). The troublesome language upon which Lagalante's jurisdictional argument rests appears in § 1030a(5)(A), which provides that whoever:
(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer; . . .
(C) intentionally accesses a protected computer site without authorization, and a result of such conduct, causes damage; . . .
shall be punished . . . .
18 U.S.C. § 1030a(5)(A) and (C) (emphasis added). Lagalante's challenge to federal question jurisdiction focuses on the dangling participle "to a protected computer" reiterated above, and completely misses the mark, i.e., the comma preceding the participial phrase, inter alia. More to the point, Lagalante contends that the actions of Ingenix are outside of the scope of the CFAA because the plaintiff cannot establish the requisite amount of statutory damages (i.e., greater than $5,000 to a protected computer).
For purposes of a civil suit for damages, "the term 'damage' means any impairment to the integrity or availability of data, a program, a system, or information that . . . causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals; . . . . Id. at § 1030(e)(8)(A) (emphasis added). For purposes of the plaintiffs claims in the case at bar, it is clear that the damage threshold is unambiguously defined as any impairment to the integrity or availability of data that causes a greater than $5,000 loss to the plaintiff. It is noteworthy that there is no comma between the terms "loss" and "to the plaintiff" in subsection 1030(e)(8)(A).
18 U.S.C. § 1030 (g) provides: "Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief Damages for violations involving damage as defined in (e)(8)(A) are limited to economic damages . . . ." Id at § 1030(g) (emphasis added).
To interpret statutory terms, the Court looks first to the plain language of the statute, examining the statute as a whole, including its design, object and policy. The Fifth Circuit explained that the courts should "follow the plain meaning of the statute unless it would lead to absurd consequences. If the statutory language is susceptible of more than one reasonable interpretation, the district court should look beyond the statutory text and examine the legislative history to discern Congressional intent. "In statutory construction not only do we consider the whole law, even when the language is plain, but we also consider whether the plain language contravenes the drafter's intent."
See New York Life Insurance Co. v. Deshotel, 142 F.3d 873, 885 (5th Cir. 1998).
Kennedy v. Texas Utilities, 179 F.3d 258, 261 (5th Cir. 1999) (construing the scope of the immunity provision of the flood control act, 33 U.S.C. § 702c).
See UniRoyal Chemical Co., Inc. v. Deltech Corp., 160 F.3d 238 146 (5th Cir. 1998) (construing CERCLA, which is not a paradigm of clarity); see also Crandon v. U.S., 494 U.S. 152, 110 S.Ct. 997, 1001 (1990) (noting that to the extent that language of a criminal statute or history is uncertain as to the ambit of the statute's coverage, the rule of lenity is appropriately applied).
In Re Compuadd Corp., 137 F.3d 880, 883 (5th Cir. 1998).
The issue of precisely what constitutes "damage or loss" within the meaning of the CFAA is hardly settled and has not been addressed by the Fifth Circuit or the Supreme Court. There are two schools of thought, however. This Court considers the rationale set forth in In Re America Online, Inc., 168 F. Supp.2d 1359 (S.D. Fla. 2001), the better reasoned approach, which more closely comports with the canons of statutory construction discussed above. In determining whether the parties' dispute as to whether the $5000 damage must be to a computer or can be established as a sum of injuries to various individuals, the district court in In Re America Online, Inc., readily recognized the source of the confusion (i.e., "the dangling participle 'to a protected computer'"). Pertinent portions of the In re Online America, Inc. decision which support this Court's opinion are reiterated below:
In Re America Online, Inc., 168 F. Supp.2d 1359, 1372 (S.D. Fla. 2001).
Because Congress' intent behind use of the term "to a protected computer" is ambiguous, resort to legislative history is proper. See Young v. Community Nutrition Inst. 476 U.S. 974, 980 (1986) (finding that use of dangling participle within a statutory provision rendered the statute ambiguous).
AOL does not take into account the uncertainty that arises from Congress' placement of the phrase "to a protected computer" withing § 1030(a)(5). As a result, its argument proceeds from the premise that the statutory language is unabiguous. AOL cites two cases in support of its argument that Congress' intent as to the damages threshold is clear. In Thurmond v. Compaq Comp. Corp., 171 F. Supp.2d 667 (E.D. La. 2001), a Texas district court held that the $5,000 aggregated loss must be to no more than one computer. A district court in New York arrived at the same conclusion in In re Doubleclick Inc., Privacy Litig., 154 F. Supp.2d 497 (S.D.N.Y. 2001), where it found, without significant analysis, that the CFAA requires at least $5,000 in damage to a particular computer. The Thurmond court stated that damages could not be aggregated amongst individual plaintiffs. . . . It also relied on Attorney General Janet Reno's statement that "we may need to strengthen the Computer Fraud and Abuse Act by closing a loophole [which would] escape [from] punishment if no individual computer sustained over $5,000 workth of damage." Thurmond, at 680-81.
The cases cited by AOL are unpersuasive for several reasons. . . . Most importantly, in Thurmond and Doubleclick, the courts found the statutory language to be clear, ignored the comma that precedes "to a protected computer," and overlooked the fact that the phrase was a dangling participle. Although Thurmond found the language to be unambiguous, it nevertheless cited to "legislative history" to support its finding. In truth, the court did not rely on legislative history. Instead, it looked to the Attorney General's statements, which are not a reliable indication of what both Houses of Congress intended when they adopted the statutory language in question.
The legislative history of the CFAA actually contravenes AOL's argument. . . . [T]he CFAA has been increasingly broadened by Congress. Consumers who use a computer for residential purposes are among those the CFAA seeks to protect. . . . $5000 is far more than the average price of a home computer.
* * *
That the CFAA specifically defines damage in terms of aggregation lends further support to consumers' position that their injuries can be aggregated to meet the $5,000 threshold. See Florida Dept. of Banking and Fin. v. Goard of Gov. of the Fed Reserve Sys., 800 F.2d 1534, 1536 (11th Cir. 1986) ("It is an elementary precept of statutory construction that the definitional section of a statute controls the construction of that term wherever it appears throughout the statute. In summary, Lagalante has provided this Court with no legislative history or case law that would allow this Court for jurisdictional purposes to ignore the plaintiffs claims for damage well in excess of $5000 for loss caused to it by the defendant's alleged wrongful conduct, involving his unauthorized deletion of computer data, documents, and/or programs, inter alia.B. Injunction Standard
A district court may issue a temporary restraining order or preliminary injunction only upon considering: (1) the likelihood of success on the merits; (2) the potential for irreparable harm if the is denied; (3) the balance of relevant impositions vis a vis plaintiff and defendant; and (4) the effect (if any) of the court's ruling on the public interest. Any injunctive relief is considered "an extraordinary and drastic remedy, not to be granted routinely, but only when the movant, by clear showing, carries the burden of persuasion."
See EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 580 (1st Cir. 2001) (agreeing with the district court that appellees will likely succeed on the merits of their CFAA claim under 18 U.S.C. § 1030 (a)(4) and affirming the preliminary injunction order); Harris County, Texas v. Carmax Auto Superstores Inc., 177 F.3d 306, 312 (5th Cir. 1999); Plains Cotton Cooperative Association v. Goodpasture Computer Service, Inc., 807 F.2d 1256, 1259 (5th Cir.), cert. denied, 484 U.S. 821, 108 S.Ct. 80 (1987).
Carmax Auto Superstores Inc., 177 F.3d at 312 (citing White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir 1989)).
Each of the enumerated factors must be considered to determine whether, on balance, they collectively favor granting the injunction. However, if the plaintiff fails to carry its burden as to any one of these four factors, injunctive relief cannot be granted. The Court's determination as to each of the four elements are mixed questions of fact and law, reviewable under the clearly erroneous standard.
See Enterprise International, Inc. v. Corporacion Estatal Petrolera Ecautoriana, 762 F.2d 464, 472 (5th Cir. 1985).
See Carmax Auto Superstores Inc., 177 F.3d at 312 (noting the ultimate issue, however, is whether the district court abused its discretion in granting preliminary injunctive relief).
1. Likelihood of Success on the Merits
Counts I and II of the complaint charge violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq. ("CFAA"), the stated purpose of which is to punish computer fraud. Count I alleges a violation of 18 U.S.C. § 1030 (a)(4), which provides that whoever:
knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any one year period . . . shall be punished as provided in subsection (c) of this section.Id. As to Count I, Ingenix need only establish that: (1) the defendant knowingly accessed a computer either without authorization or exceeding his authorization; (2) that he did so with the intent to defraud; (3) that by means of such conduct the plaintiff suffered loss or damage of greater than $5,000.
See 18 U.S.C. § 1030 (a)(4), 1030(e)(8)(A) 1030(g); see also Shurgard Storage Centers, Inc. v. Safeguard Self Storage, 119 F. Supp.2d 1121, 1125 (W.D. Wa. 2000) (citing United States v. Czubinski, 106 F.3d 1069, 1078 (1st Cir. 1997) noting that CFAA's use of the term "fraud"simply means wrongdoing and does not require proof of the common law elements of fraud).
Count II of plaintiffs complaint alleges a violation of 18 U.S.C. § 1030 (a)(5)(C), which provides that whoever "intentionally accesses a protected computer site without authorization, and as a result of such conduct, causes damage" violates the Act. Id. As to Count II, Ingenix need only establish that: (1) the defendant intentionally accessed a computer without authorization; (2) as a result of the defendant's access, the defendant caused the impairment of the integrity or availability of the data, program, system or information; and (3) the impairment of the data, program, system or information resulted in losses to Ingenix totaling at least $5,000 in value at any time during a one-year period. See 18 U.S.C. § 1030 (a)(5)(C), 1030 (e)(8)(A) 1030(g).
The legislative history set forth in the 1996 Senate Report reiterated below makes manifest the broad meaning and scope, that Congress intended that the CFAA have, to wit:
The Court acknowledges that the focus of the 1996 Senate Report is § 1030(a)(2). However, the broad meaning and scope of the terms "protected computer" and "without authorization" discussed in that report are utilized in other sections of the CFAA at issue in this case.
The [CFAA] facilitates addressing in a single statute the problem of computer crime, rather than identifying and amending every potentially applicable statute affected by advances in computer technology. As computers continue to proliferate in businesses and homes and new forms of computer crimes emerge, Congress must remain vigilant to ensure that the [CFAA] is up-to-date and provides law enforcement with the necessary legal framework to fight computer crime.* * * The proposed subsection 1030(a)(2)(C) is intended to protect against interstate or foreign theft of information by computer. . . . This subsection would ensure that the theft of intangible informatiQn by the unauthorized use of a computer is prohibited in the same way theft of physical items are protected. In instances where the information stolen is copyrighted, the theft may implicate certain rights under the copyright laws. The crux of the offense under subsection I 030(a)(2)(C), however, is the abuse of the computer to obtain information. Those who improperly use computers to obtain other types of information — such as financial records, nonclassified Government information, and information of nominal value from private individuals or companies — face only misdemeanor penalties, unless the information is used for commercial advantage, private financial gain or to commit any criminal act or tortious conduct. For example, individuals who intentionally break into, or abuse their authority to use, a computer and thereby obtain information of minimal value of $5,000 or less, would be subject to a misdemeanor penalty. The crime becomes a felony if the offense was committed for the purposes of commercial advantage or private financial gain, for purposes of committing any criminal or tortious act in violation of the laws of the United States or any State, or if the value obtained exceeds $5,000.
S. Rep. No. 104-357, at 5, 7-8 (emphasis added). It is pellucid that the statute was intended to punish those who illegally use computers for commercial advantage.
On the record before this Court, there is no question but that Lagalante accessed Ingenix's computer without authorization. A fair reading of the February 10, 2002 e-mail to Solucient admits Lagalante's aim was to take advantage of what he believed was sensitive marketing information, Ingenix programs, and Ingenix prospects, and take the fruits of his and others' labor at Ingenix to Solucient, its direct competitor.
Plaintiff makes no allegation of misconduct on the part of Solucient, which is not a party to these proceedings.
Forensic investigation conducted at the behest of the plaintiff demonstrates unauthorized access to proprietary information of a sensitive nature, as well as the destruction or deletion of certain possibly valuable information and data, all of which was intangible property of Ingenix. The sealed Maluccio affidavit and supporting documents sufficiently demonstrate the likelihood of success on the merits as to the plaintiffs CFAA claims stated in Counts One and Two of the Complaint against Lagalante. The passage of the legislative history reiterated above makes clear that the CFAA was intended to encompass such conduct likely undertaken by the present defendant.
Evidence in the form of broad confidentiality agreements executed by the defendant argue in favor of knowing and intentional conduct. Forensic confirmation regarding the postemployment manipulation of the computer and likely impairment of the integrity of Ingenix's marketing data base is uncontroverted to date.
Lagalante's February 10, 2002 e-mail to Solucient is particularly damning. It states: "I have intimate knowledge and understanding of the employer market." The e-mail further speaks in terms of "a funnel that may add value," cautions that "sharing this information is a bit sensitive because it is competitive," and then notes that to the best of the defendant's knowledge, "Solucient is not competing on these opportunities" yet. [Exhibit "G" to Maluccio Affidavit]. Clearly, regardless of the true value of such information, Mr. Lagalante believed he was in possession of valuable proprietary data which he could use to benefit his new employer.
Going to the issue of "loss or damage," documents or computer data accessed and copied by Lagalante include several detailing specific Ingenix efforts targeted at major prospective clients, reflect precise contract terms and pricing offered, and the services offered by Ingenix to the significant prospect. See Maluccio Affidavit at paragraph 22, and Exhibit "K". Also, the cost of a complete investigation to determine the extent of the computer breach and recapture deleted information is estimated at approximately $7,000. Forensic investigation submitted to date has revealed that approximately 26 Ingenix documents were deleted from the company's computer by the defendant. The loss of information relates to both prospective Ingenix customers and its current customer base.
In re America Online Inc., 168 F. Supp.2d 1359, 1379 (S.D. Fla. 2001) (observing that the typical item of value in CFAA cases is usually data, in other areas, customers and paid subscribers have been found to be a thing of value); see also America Online, Inc. v. LCGM, Inc., 46 F. Supp.2d 444, 450 (E.D. Va. 1998) (finding that loss of reputation and goodwill constituted damages under 18 U.S.C. § 1030(a)(5)); and CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015, 1023 (S.D. Oh. 1997) (finding that damage to plaintiffs businesses renutation and goodwill affected property interest and constituted actionable injury for trespass and chattels claim).
Suffice it to say, there is ample evidence that, rather than properly surrendering Ingenix's property to it contemporaneously with his resignation, Lagalante knowingly and without authority not only retained such material, but likely accessed Ingenix's computer, impaired the integrity of Ingenix's data base by deleting various documents, inter alia, and thereby caused loss in excess of $5,000 to Ingenix.
See El Cultural Travel BJj 274 F.3d at 584 (noting the detriment, deprivation and disadvantage in having to expend substantial sums of money to assess the extent of the damage caused by unauthorized access and holding that Congress's use of the disjunctive "damage or loss," confirms that it anticipated recovery in cases involving other than pure physical damage).
2. Substantial Threat of Irreparable Injury
The central inquiry in deciding whether there is a substantial threat of irreparable harm to the plaintiff is whether the plaintiffs injury could be compensated by money damages. City of Meridian v. Algernon Blair, Inc., 721 F.2d 525. 529 (5th Cir. 1983). However, Ingenix asserts that Lagalante's wrongful conduct has caused and will continue to cause irreparable harm to its customer goodwill and sales, particularly considering the potential loss of competitive advantage. Irreparable harm exists "even where economic rights are involved, when the nature of those rights makes establishment of the dollar value of the loss . . . especially difficult or speculative."Defendant had unauthorized possession and use of the Ingenix computer, which computer stored confidential information. Lagalante is presently employed by the plaintiffs direct competitor. Ingenix has adequately demonstrated that it has suffered damage, and will continue to suffer if Lagalante's wrongful activities are not enjoined. Ingenix has also established that the damage in terms of loss of good will may be permanent rather than temporary, and may not be recovered and/or cured. Ingenix has met its burden as to this element and has sufficiently proven its loss and substantially threatened loss of goodwill and loss of sales, via disclosure of its confidential material, as well as the threatened loss of its competitive advantage, all of which constitute irreparable harm within the meaning of the applicable law.
See Register Coin v. Verio, Inc., 126 F. Supp.2d 238, 253 (S.D.N.Y. 2000) (holding "use"of computer data for mass marketing purposes violated CFAA, and thus subsequent use of that data has caused and will cause irreparable harm); America Online, Inc., 46 F. Supp.2d at 448 (finding that the defendant's bulk solicitation of AOL customers through e-mail was actionable); and Cyber Promotions, Inc. v. America Online, Inc., 948 F. Supp. 436, 437 (E.D. Pa. 1996) (granting temporary restraining order where the defendant sent unsolicited e-mail advertisements to ISP's subscribers).
3. Relative Harm
The threat of injury to Ingenix in not granting injunctive relief clearly outweighs the threat of injury that injunctive relief may portend for Lagalante. By contrast, granting injunctive relief against the defendant will simply require fair competition in light of likely past wrongful conduct. The Court specifically finds that enforcing the Computer Fraud and Abuse Act will not cause undue hardship or prevent Lagalante from earning a living.4. Public Interest
Finally, Ingenix has met its burden of demonstrating that granting the preliminary injunction will not be inconsistent with or disserve the public interest. Giving force to the protection of laws promotes the purpose of encouraging fair trade, competition, and innovation. Given that the nature of the injunctive relief provided is temporary, any potential to stifle innovation is fleeting and the burden of injunctive relief properly rests on the defendant in light of the record. It is important to note that the plaintiff need not show that the injunction will serve the public interest.
Lagalante requests that this Court narrowly draw the injunctive decree, noting that he has returned information downloaded from Ingenix's.computer. He further asserts that he should not be enjoined from utilizing information leamed during his employment with Ingenix, which is not proprietary. The Court here notes that the undisputed facts that the defendant (1) retained Ingenix's computer for a significant period of time (rather than surrendering it forthwith upon resignation), (2) immediately went to work for a direct competitor, and then (3) downloaded and deleted information from Ingenix computer after leaving its employ, militates in favor of finding that Lagalante is not operating in his present position solely from memory and experience. In deed, were this the case, he either would have returned the laptop computer upon resignation, or at least, had no occasion to ever access information it contained.
Accordingly, the Court enters the following temporary restraining order against the defendant Claude Lagalante pursuant to Fed.R.Civ.P. 65 (b), reserving all rights of the defendant with respect to asserting defenses regarding the federal and state claims, to wit:
Considering that temporary injunctive relief was warranted on the basis of the federal claims, the Court does not address the plaintiffs state claims, or defenses to said claims, and defers ruling with respect to those issues to a later date.
IT IS ORDERED that Claude Lagalante is prohibited from using or disclosing any of Ingenix's business, customer, pricing and marketing information, that is not made readily available to the public;
IT IS FURTHER ORDERED that Claude Lagalante is prohibited from contacting, soliciting or accepting business from any customers or prospects of Ingenix, which customers and prospects were the subject of computer data and information accessed by the defendant either without authorization, or in excess of his authorization, just prior to and immediately after leaving his employment with Ingenix;
IT IS FURTHER ORDERED that as security, Ingenix shall post a surety bond in the amount of $10,000.00 within five (5) business days of the date of the entry of this Temporary Restraining order, reserving unto the defendant the right, if necessary, to revisit the issue at the time of the Preliminary Injunction Hearing; and
IT IS FURTHER ORDERED that a hearing with respect to the plaintiffs Motion for Preliminary Injunction is set for Wednesday, April 10, 2002 at 9:30 A.M. Defendant shall file a response to the plaintiffs motion on or before Thursday, April 4, 2002. Any written reply shall be filed on or before Monday, April 8, 2002. Both the plaintiff and the defendant shall file a list of witnesses that they will call to testify at the hearing on Tuesday, April 9, 2002, the day prior to the scheduled hearing.