Opinion
C.A. No. 2017-0439-TMR
06-28-2018
Laser Tone Business Systems, LLC, a Delaware Limited Liability Company, Plaintiff, v. Delaware Micro-Computer LLC, a Delaware Limited Liability Company, Printit Solutions, LLC, a Delaware Limited Liability Company, Alex J. Farling, and Justin McGinnis, Defendants, And Justin McGinnis Cross Claim Defendant/Third Party Plaintiff v. Steve Martin, Third-Party Defendant.
ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT
WHEREAS, in its Verified Complaint filed June 8, 2017 (the "Complaint"), Plaintiff Laser Tone Business Systems, LLC ("Laser Tone") brought claims against Defendant Justin McGinnis ("McGinnis") for (1) violations of Delaware's misuse of computer system information statute codified in 11 Del. C. § 935 ("Section 935"); and (2) breach of contract;
WHEREAS, on June 28, 2017, McGinnis brought Counterclaims against (1) Laser Tone and Third-Party Defendant Steve Martin ("Martin")—Laser Tone's principal—for breach of contract for unpaid wages; and (2) Martin for defamation;
WHEREAS, Laser Tone and Martin (together, "Movants") have moved for partial summary judgment as to (1) their claim against McGinnis for his purported violations of Section 935; and (2) McGinnis's Third-Party Counterclaims against Martin for defamation and breach of contract;
NOW, THEREFORE, THE COURT HEREBY FINDS AND ORDERS:
1. The Court has reviewed the parties' briefs, supporting submissions, and the applicable law.
2. The Motion for Partial Summary Judgment is DENIED.
3. "There is no 'right' to a summary judgment." Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002) (quoting Anglin v. Bergold, 565 A.2d 279 (Del. 1989) (TABLE)). Summary judgment is appropriate only where the moving party demonstrates that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Twin Bridges Ltd. P'ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 2007) (citing Ct. Ch. R. 56(c)). When the movant carries that burden, the burden shifts to the nonmoving party "to present some specific, admissible evidence that there is a genuine issue of fact for a trial." Deloitte LLP v. Flanagan, 2009 WL 5200657, at *3 (Del. Ch. Dec. 29, 2009). On any application for summary judgment, "the Court must view the evidence in the light most favorable to the non-moving party." Merrill v. Crothall-American, Inc., 606 A.2d 96, 99 (Del. 1992) (citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970)). "Summary judgment must be denied 'if there is any reasonable hypothesis by which the opposing party may recover, or if there is a dispute as to a material fact or inferences to be drawn therefrom.'" Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 1998 WL 731660, at *2 (Del. Ch. Oct. 9, 1998) (quoting Seagraves v. Urstadt Prop. Co., 1996 WL 159626, at *3 (Del. Ch. Apr. 1, 1996)).
4. Movants seek summary judgment as to their claim that McGinnis violated Section 935. Section 935 provides that a person commits "the computer crime of misuse of computer system information when:"
Movants also request injunctive and monetary relief resulting from McGinnis's purported violations of Section 935. I do not discuss Movants' request because they are not entitled to summary judgment as to this claim.
(1) As a result of accessing or causing to be accessed a computer system, the person intentionally makes or causes to be made an unauthorized display, use, disclosure or copy, in any form, of data residing in, communicated by or produced by a computer system;
(2) That person intentionally or recklessly and without authorization:
a. Alters, deletes, tampers with, damages, destroys or takes data intended for use by a computer system,
whether residing within or external to a computer system; or
b. Interrupts or adds data to data residing within a computer system;
(3) That person knowingly receives or retains data obtained in violation of paragraph (1) or (2) of this section; or11 Del. C. § 935. At least four material factual disputes preclude entry of summary judgment in Movants' favor on the Section 935 claims.
(4) That person uses or discloses any data which that person knows or believes was obtained in violation of paragraph (1) or (2) of this section.
5. First, the parties dispute the date that McGinnis resigned and lost his authorization to access Laser Tone's computer system. Movants assert that McGinnis resigned on February 16, 2017 when he "walked out of Laser Tone's office" but do not otherwise provide any evidence that McGinnis resigned on that date. Pl. & Third-Party Defs.' Reply Br. 21. McGinnis points out that Martin acknowledged in an email sent February 27 that McGinnis continued to perform certain job-related tasks, including providing a "hot list" of customers seeking certain services from Laser Tone, until February 23. Def. McGinnis's Answering Br. 22.
6. Second, the parties dispute the scope of McGinnis's authorization as part of his job at Laser Tone to copy certain customer data. Movants assert that Laser Tone's employee handbook "makes clear that McGinnis was not permitted to copy Laser Tone's customer data[.]" Pl. & Third-Party Defs.' Opening Br. 18. But, as McGinnis argues, the handbook does not contain any outright prohibition against copying customer data and instead merely provides that such data must be "maintained privileged [sic] or with strict confidentiality." Id. at 8 (quoting id. at Ex. 1). McGinnis also contends that "his activities were required by Laser Tone," and "us[ing] Laser Tone's computer system" was "part of his role as a sales person [from February 16 to February 23, 2017.]" Def. McGinnis's Answering Br. 1.
7. Third, the parties dispute the times that McGinnis accessed Laser Tone's computer system and supposedly copied certain customer data. Movants rely on a report by Laser Tone's expert witness Stephen Bunting (the "Bunting Report") to show that McGinnis accessed Laser Tone's computer system at various times from February 13 to February 22, 2017, and copied customer data. Pl. & Third-Party Defs.' Opening Br. Ex. 2. But the Bunting Report is facially inconsistent. It indicates that McGinnis copied customer data when he was not logged into Laser Tone's computer system. Id. at 13-14, 19. In addition, because there is a material factual dispute as to when McGinnis resigned and whether his copying of customer data was prohibited while he was still an employee of Laser Tone, it is conceivable that McGinnis was allowed to access Laser Tone's computer system and copy the customer data during those times.
8. Fourth and finally, the parties dispute the assertion by McGinnis's former co-Defendant Alex J. Farling ("Farling") that data retained "in [McGinnis's] possession" on former co-Defendant Delaware Micro-Computer LLC's ("Del-Micro") server "appear[] to include Laser Tone data[.]" Def. McGinnis's Answering Br. 24 (quoting Third-Party Def. Martin Aff. Ex. 3, at 14-15). Movants rely on Farling's assertion that data on Del-Micro's server "appear to include Laser Tone data" to show that McGinnis retained Laser Tone's customer data. Third-Party Def. Martin Aff. Ex. 3, at 14-15. But Farling only states that the data on Del-Micro's server "appears" to be Laser Tone data. Further, the data found by Farling has not been produced and is not relied upon in this Motion. "More troubling still, the[] [data] w[as] supposedly [copied by McGinnis]—per Mr. Farling—in the early morning hours of February 14, 2017, at a time when Mr. Bunting does not claim that Mr. McGinnis was logged in[.]" Def. McGinnis's Answering Br. 24.
9. Thus, because McGinnis raises factual disputes as to Movants' claim, the Motion for Partial Summary Judgment as to this claim is DENIED.
10. Movants also move for summary judgment as to McGinnis's Third-Party Counterclaim against Martin for defamation. To state a claim for defamation, a plaintiff must plead that (1) "the defendant made a defamatory statement," (2) "concerning the plaintiff," (3) "the statement was published," and (4) "a third party would understand the character of the communication as defamatory." Agar v. Judy, 151 A.3d 456, 470 (Del. Ch. 2017) (quoting Doe v. Cahill, 884 A.2d 451, 463 (Del. 2005)). A communication is defamatory "if it tends to so harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." Id. (quoting Spence v. Funk, 396 A.2d 967, 969 (Del. 1978)). "Under Delaware law there is no liability for defamation when a statement is determined to be substantially true." Riley v. Moyed, 529 A.2d 248, 253 (Del. 1987) (citing Gannett Co., Inc. v. Re, 496 A.2d 553, 557 (Del. 1985)). McGinnis alleges in his Counterclaim that Martin sent a letter on May 10, 2017, to one of Laser Tone's customers, which states that "McGinnis stole company confidential information." Def. McGinnis's Answering Br. 20 (quoting id. at Ex. 6). Movants argue that this claim should be dismissed because "the assertions in Martin's May 10 letter were true and, therefore, do not give rise to a defamation claim." Id. McGinnis disputes the veracity of Movants' "wrongful theft accusation" and argues that Defendants do not otherwise dispute McGinnis's defamation claim. Def. McGinnis's Answering Br. 31-32. For the reasons discussed above, I cannot determine that Movants' claim that McGinnis "stole company confidential information" is "substantially true." Riley, 529 A.2d at 253 (citing Gannet Co., 486 A.2d at 557. Thus, because there is a genuine issue of material fact, Movants' Motion for Partial Summary Judgment as to this claim is DENIED.
McGinnis also alleges for the first time in his answering brief to Movants' motion for partial summary judgment that Laser Tone defamed him in a January 17, 2018 letter its counsel sent to McGinnis's new employer. I cannot consider this letter because it was not addressed in McGinnis's June 28, 2017 Counterclaims. See MCG Capital Corp. v. Maginn, 2010 WL 1782271, at *5, n.17 (Del. Ch. May 5, 2010) (citing Orman v. Cullman, 794 A.2d 5, 28 (Del. Ch. 2002)) ("any attempt contained within [briefs] to plead new facts or expand those contained in the complaint will not be considered"). --------
11. Finally, Movants seek summary judgment as to McGinnis's Third-Party Counterclaim against Martin for breach of contract. In order to allege a breach of contract, a plaintiff must show the existence of a contract, a breach of the contractual obligations, and damages to the plaintiff as a result of the breach. Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554, at *6 (Del. Ch. Nov. 19, 2013) (citing Bakerman v. Sidney Frank Imp. Co., 2006 WL 3927242, at *19 (Del. Ch. Oct. 10, 2006)). McGinnis brought his Counterclaim for breach of contract against Martin for unpaid wages. Movants assert that they are entitled to summary judgment because McGinnis has not alleged that any contract between the parties existed. Pl. & Third-Party Defs.' Reply Br. 20-21 ("McGinnis has not [] identified an employment contract between himself and Laser Tone"). "Likewise, McGinnis has not attached, nor produced, copies of his payroll records[.]" Id. at 21. McGinnis does not appear to contest that the parties had no formal, written contract, and instead points to his affidavit which states that his "final check" from Laser Tone "omitted commissions of $2,456.83 . . . [and] two additional days of payment, at a salary of $157.69 per day [based on an annual salary of $41,000]." McGinnis Aff. ¶¶ 14, 17-19. Even if McGinnis fails to allege that a contract existed between the parties, this does not preclude recovery under other theories such as quantum meruit. See, e.g., WNYH, LLC v. AccuMED Corp., 2018 WL 2448105, at *10 (Del. Ch. May 31, 2018). Thus, Movants' Motion for Partial Summary Judgment is DENIED as to this claim.
12. For the reasons stated herein, Movants' Motion for Partial Summary Judgment is DENIED.
/s/ Tamika Montgomery-Reeves
Vice Chancellor
Dated: June 28, 2018