Daugherty et al v. Adams et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM with Brief In Support

N.D. Ga.September 12, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION MICHAEL J. DAUGHERTY and LABMD, INC., Plaintiffs, v. JOEL P. ADAMS, et al., Defendants. Case No. 1:16-cv-02480-LMM TIVERSA HOLDING CORP.’S SPECIAL APPEARANCE AND MOTION TO DISMISS Defendant, Tiversa Holding Corp. (“Tiversa”), by and through its undersigned counsel, hereby moves the Court to enter an Order dismissing with prejudice Counts III, IV, V, and VI of the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). In support of its Motion, Tiversa respectfully relies upon, and incorporates by reference, its Brief in Support, which is filed contemporaneously herewith. Respectfully submitted this 12th day of September, 2016. /s/ Nathan A. Wood Nathan A. Wood Georgia Bar No. 637904 Case 1:16-cv-02480-LMM Document 64 Filed 09/12/16 Page 1 of 3 2 MCGUIREWOODS LLP Suite 2100, Promenade 1230 Peachtree Street, N.E. Atlanta, GA 30309-3534 Telephone: 404-443-5500 Telecopier: 404-443-5599 nwood@mcguirewoods.com Jarrod D. Shaw (pro hac admission pending) MCGUIREWOODS LLP EQT Plaza 625 Liberty Avenue 23rd Floor Pittsburgh, PA 15222 (412) 667-6000 jshaw@mcguirewoods.com Counsel for Defendant Tiversa Holding Corp. Case 1:16-cv-02480-LMM Document 64 Filed 09/12/16 Page 2 of 3 3 CERTIFICATE OF SERVICE AND COMPLIANCE WITH LOCAL RULE 5.1 I hereby certify that on this 12th day of September, 2016, I electronically filed the foregoing, which has been prepared using 14-point Times New Roman font, with the Clerk of Court using the CM/ECF system, which will automatically send email notification of such filing to the attorneys of record. /s/ Nathan A. Wood Nathan A. Wood Georgia Bar No. 637904 MCGUIREWOODS LLP Suite 2100, Promenade 1230 Peachtree Street, N.E. Atlanta, GA 30309-3534 Telephone: 404-443-5500 Telecopier: 404-443-5599 nwood@mcguirewoods.com Case 1:16-cv-02480-LMM Document 64 Filed 09/12/16 Page 3 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION MICHAEL J. DAUGHERTY and LABMD, INC., Plaintiffs, v. JOEL P. ADAMS, et al., Defendants. Case No. 1:16-cv-02480-LMM TIVERSA HOLDING CORP.’S BRIEF IN SUPPORT OF SPECIAL APPEARANCE AND MOTION TO DISMISS Nathan A. Wood Georgia Bar No. 637904 MCGUIREWOODS LLP Suite 2100, Promenade 1230 Peachtree Street, N.E. Atlanta, GA 30309-3534 Telephone: 404-443-5500 Telecopier: 404-443-5599 nwood@mcguirewoods.com Jarrod D. Shaw (pro hac admission pending) MCGUIREWOODS LLP EQT Plaza 625 Liberty Avenue 23rd Floor Pittsburgh, PA 15222 (412) 667-6000 jshaw@mcguirewoods.com Counsel for Defendant Tiversa Holding Corp. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 1 of 43 i TABLE OF CONTENTS Page I. Introduction ...................................................................................................... 1 II. Factual Background ......................................................................................... 3 A. The Dismissed Georgia Action ............................................................. 3 B. The Pennsylvania Action ...................................................................... 5 C. The Second Filed Action ....................................................................... 7 III. Argument ....................................................................................................... 10 A. This Court Has Already Ruled It Lacks Personal Jurisdiction Over Tiversa and Therefore The Matter Warrants Dismissal Because Res Judicata Applies ...........................................................................10 1. Res Judicata Standard .................................................................... 10 2. The Identity Of Causes Of Action Are The Same In This Case and The Dismissed Georgia Action ...................................... 11 3. The Identity Of The Parties Or Their Privies Are The Same ....... 14 4. There Was A Previous Adjudication On The Merits By A Court Of Competent Jurisdiction.................................................. 16 B. Plaintiffs' Claims Against Tiversa are Barred by the Statute of Limitations ...........................................................................................18 1. The Georgia RICO Claims are Untimely Because The Pennsylvania Action Already Ruled As Such .............................. 18 2. The CFAA and Georgia Computer Crimes Act Are Time-Barred ................................................................................... 22 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 2 of 43 ii C. Each of Plaintiffs' Claims Against Tiversa Fails On The Merits ........24 1. The Georgia RICO Claims (Counts III and IV) Fail Because They Do Not Adequately Allege Tiversa Is The Direct Cause of Defendants' Harm .......................................................... 25 2. The CFAA Claim Fails ................................................................. 31 3. The Georgia Computer Crimes Act Must Be Dismissed .............. 35 IV. Conclusion ..................................................................................................... 35 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 3 of 43 iii TABLE OF AUTHORITIES Page(s) Cases Am. Ass’n of Cab Cos., Inc. v. Parham, 661 S.E.2d 161 (Ga. App. 2008) .................................................................. 25, 26 Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) ................................................................................ 25, 26, 27 Boone v. Kurtz, 617 F.2d 435 (5th Cir. 1980) .............................................................................. 17 Brantley v. Muscogee Cty. Sch. Dist., No. 4:10-CV-77(CDL), 2011 WL 3706567 (M.D. Ga. Aug. 24, 2011) ....................................................................................................... 25, 26, 31 Brown & Williamson Tobacco Corp. v. Gault, 627 S.E.2d 549 (Ga. 2006) ................................................................................. 15 Caswell v. Caswell, 290 S.E.2d 171 (Ga. App. 1982) ........................................................................ 15 Cochran Mill Associates v. Stephens, 648 S.E.2d 764 (Ga. App. 2007) .................................................................. 19, 21 Crowe v. Elder, 723 S.E.2d 428 (Ga. 2012) ........................................................................... 11, 16 Cutler v. Hayes, 818 F.2d 879 (D.C. Cir. 1987) ............................................................................ 17 Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927 (E.D. Va. 2010) ................................................................. 33 Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) .................................................................... 23 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 4 of 43 iv Elkadrawy v. Vanguard Grp., Inc., 584 F.3d 169 (3d Cir. 2009) ............................................................................... 19 Gonsalvez v. Celebrity Cruises Inc., 750 F.3d 1195 (11th Cir. 2013) .......................................................................... 18 Hemi Grp., LLC v. City of New York, N.Y., 559 U.S. 1 (2010) .............................................................................. 26, 29, 30, 31 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ............................................................................................ 26 Johnson v. Girl Scouts of the USA, No. 1:13-CV-01293-SCJ-RGV, 2013 WL 11328165 (N.D. Ga. Sept. 13, 2013) ........................................................................................ 13, 14, 16 Koziara v. City of Casselberry, 239 F. Supp. 2d 1245 (M.D. Fla. 2002) .............................................................. 14 Lilly v. Heard, 761 S.E.2d 46 (Ga. 2014) ............................................................................. 14, 15 Loud Records LLC v. Minervini, 621 F. Supp. 2d 672 (W.D. Wis. 2009) .............................................................. 33 Morast v. Lance, 807 F.2d 926 (11th Cir. 1987) ............................................................................ 26 Motown Record Co., L.P. v. Kovalcik, No. CIV. 07-CV-4702, 2009 WL 455137 (E.D. Pa. Feb. 23, 2009) .................. 33 N.A.A.C.P. v. Hunt, 891 F.2d 1555 (11th Cir. 1990) .......................................................................... 10 N. Ga. Elec. Membership Corp. v. City of Calhoun, Ga., 989 F.2d 429 (11th Cir. 1993) ...................................................................... 17, 20 Neely v. City of Riverdale, 681 S.E.2d 677 (Ga. Ct. App. 2009) ................................................................... 13 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 5 of 43 v Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995) ...................................................................................... 19, 20 Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209 (11th Cir. 1999) .......................................................................... 17 Riding Films, Inc. v. White, No. 2:13-CV-00046, 2014 WL 3900236 (S.D. Ohio Aug. 11, 2014) ................................................................................................................... 33 Roberts v. Porter, Davis, Saunders & Churchill, 389 S.E.2d 361 (Ga. App. 1989) ........................................................................ 15 Rose v. Town of Harwich, 778 F.2d 77 (1st Cir. 1985) ................................................................................. 20 SCQuARE Int’l, Ltd. v. BBDO Atlanta, Inc., 455 F. Supp. 2d 1347 (N.D. Ga. 2006) ............................................................... 35 Simpson v. Sanderson Famrs, Inc., 744 F.3d 702 (11th Cir. 2014) ...................................................................... 24, 26 Stockton v. Lansiquot, 838 F.2d 1545 (11th Cir. 1988) .......................................................................... 12 Universal Express, Inc. v. U.S. S.E.C., 177 F. App’x 52 (11th Cir. 2006) ....................................................................... 27 Vereen v. Everett, No. 1:08-CV-1969-RWS, 2009 WL 901007 (N.D. Ga. Mar. 31, 2009) ................................................................................................................... 13 Volk v. Zeanah, No. 6: 08-CV-094, 2010 WL 318261 (S.D. Ga. Jan. 25, 2010) ......................... 34 Williams v. Mohawk Indus., Inc., 465 F.3d 1277 (11th Cir. 2006) .......................................................................... 27 Williams Gen. Corp. v. Stone, 614 S.E.2d 758 (Ga. 2005) ................................................................................. 25 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 6 of 43 vi Yates Paving & Grading Co. v. Bryan Cnty., 625 S.E.2d 851 (Ga. Ct. App. 2007) ................................................................... 13 Restatement (Second) of Judgments § 20 ................................................................ 17 O.C.G.A. § 9-12-40 ............................................................................................ 13, 15 O.C.G.A. § 16-9-93 .................................................................................... 4, 8, 23, 35 13 O.C.G.A. § 16-4-4 ............................................................................................... 25 13 O.C.G.A. § 16-14-4 ..................................................................................... 7, 8, 25 13 O.C.G.A. § 16-14-6 ............................................................................................. 25 13 O.C.G.A. § 16-14-8 ............................................................................................. 18 16 C.F.R. § 3.11(a) ................................................................................................... 28 18 U.S.C. § 1030 .................................................................................. 4, 8, 22, 32, 34 18 U.S.C. §§ 1962 .............................................................................................. 5, 7, 8 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 7 of 43 I. INTRODUCTION This is Plaintiff LabMD, Inc.’s (“LabMD”) third attempt to bring a meritless lawsuit against Tiversa Holding Corp. (“Tiversa”). LabMD’s first attempt occurred over four (4) years ago when it filed a complaint in Georgia (the “Dismissed Georgia Action”) relating to events that began in May 2008. The Dismissed Georgia Action was essentially the same as the instant action-that in May 2008, Tiversa allegedly stole a patient records file from LabMD, referred to as the “1718 File,” and then used that file to purportedly extort LabMD. Similar to the Complaint here, the Dismissed Georgia Action outlined an alleged “pattern and practice” by Tiversa, and asserted, among other claims, violations of the Computer Fraud and Abuse Act (“CFAA”) and Georgia Computer Crimes Statute. That case was dismissed after the Court held it lacked personal jurisdiction over Tiversa. This is LabMD’s attempt to re-litigate the issues previously decided. LabMD’s second bite of the apple occurred last year when it filed a complaint in the Western District of Pennsylvania (the “Pennsylvania Action”), which again contained nearly identical allegations of a “pattern and practice” by Tiversa with respect to Tiversa’s alleged theft of the 1718 File. The Federal RICO and conversion claims in that case were dismissed with prejudice. The remaining Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 8 of 43 2 claims, dismissed without prejudice with leave to amend, were pled in an amended complaint, and a motion to dismiss those claims is pending. Now, eight years later, LabMD and Michael J. Daugherty (collectively, “Plaintiffs”) allege the same claims once again. Specifically, Plaintiffs bring claims against Tiversa under Georgia RICO (Counts III and IV), CFAA (Count V) and the Georgia Computer Crimes Statute. (Count VI). Based on the lengthy litigation history, the deficiencies in Plaintiffs’ complaint readily come into focus. First, as this Court has already ruled (notwithstanding Plaintiffs’ failed efforts to disturb that ruling), this Court lacks jurisdiction over Tiversa. As a result, Plaintiffs’ complaint warrants dismissal under the res judicata doctrine. The issue has been ruled upon and Plaintiffs do not get a chance to re-litigate the issue simply because they do not like their prior results. Separately and independently, this action warrants dismissal because the claims against Tiversa are time-barred. Once again, the litigation history between the parties makes this an easy analysis because there is ample support for the Court to hold that that Plaintiffs’ claims are untimely. That was the conclusion of Judge Mark Hornak when he previously dismissed LabMD’s Federal RICO claim as untimely. The claims here should suffer the same fate. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 9 of 43 3 Lastly, Plaintiffs’ claims against Tiversa also fail to adequately state a claim. Here, the claims under Georgia RICO (Counts III and IV) fail because Tiversa was not the direct cause of Plaintiffs’ alleged damages. Rather, Plaintiffs’ alleged damages arose directly from a Federal Trade Commission’s (“FTC”) administrative investigation and enforcement action. Indeed, LabMD admits this critical fact, therefore conceding that it cannot pursue its claims under guiding Supreme Court precedent. Likewise, Plaintiffs’ claims under CFAA and the Georgia Computer Crimes Act (Counts IV and V) fail because Tiversa could not “steal” a publicly-available file, and the Complaint does not meet the statutory requirements for bringing a civil claim under the CFAA. Accordingly, Tiversa respectfully requests that these claims be dismissed with prejudice. II. FACTUAL BACKGROUND To adequately address the claims now asserted by Plaintiffs, a summary of the prior and pending litigation is set forth herein. With this context, it is apparent that the instant matter is Plaintiffs’ attempt to re-litigate meritless claims already dismissed by this Court and currently pending in another jurisdiction. A. The Dismissed Georgia Action Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 10 of 43 4 Litigation between these parties began in 2011 when LabMD initiated litigation against, among others, Tiversa, by filing a Complaint in the Superior Court of Fulton County, Georgia. Tiversa removed the case to federal district court. LabMD, Inc. v. Tiversa, Inc., Civil Action No. 1:11-cv-4044-LMM, Dkt. 1 (cited as “Dismissed Georgia Action”). In its Complaint, LabMD brought causes of action for, inter alia, violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Georgia computer crimes statute, O.C.G.A. §16-9-93. Id. at Dkt. 1-1. Each of these claims arose out of Tiversa’s alleged download of a 1,718 page document (“1718 File”) that was created and stored by LabMD. Id. LabMD claimed that Tiversa intentionally accessed LabMD’s computers and networks to download the 1718 File without authorization. Id. Tiversa moved to dismiss the complaint for lack of personal jurisdiction, which the Court granted. LabMD, Inc. v. Tiversa, Inc., No. 11-cv-4044, 2012 WL 12542448 (N.D. Ga. Aug. 15, 2012) (attached and hereinafter cited to as Ex. A) The Eleventh Circuit later affirmed this ruling. LabMD, Inc. v. Tiversa, Inc., 509 F. App’x 842 (11th Cir. 2013) (attached and hereinafter cited to as Ex. B). Years later, in January 2016, LabMD filed a Rule 60(d)(3) Motion for Relief from Judgment and a Motion for Discovery to reopen the Dismissed Georgia Action. Dismissed Georgia Action, Dkts. 33 and 34. In its effort to reopen the case, Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 11 of 43 5 LabMD alleged that it discovered evidence of purported fraud on the Court by Tiversa’s counsel at that time. Id. The Court ultimately denied LabMD’s motion. LabMD, Inc. v. Tiversa, Inc., No. 1:11-CV-4044-LMM, 2016 WL 3695381, at *6 (N.D. Ga. May 13, 2016) (attached and hereinafter cited to as Ex. C). B. The Pennsylvania Action LabMD continued its litigation campaign when it filed essentially the same litigation in the Western District of Pennsylvania in January 2015. LabMD, Inc. v. Tiversa Holding Corp., et al., Civil Action No. 2:15-cv-92, Dkt. 1 (cited as “Pennsylvania Action”). The original Complaint asserted claims for common law conversion, defamation, tortious interference with business relations, fraud, negligent misrepresentation, and civil conspiracy, as well as violations of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c) and (d). Id. The causes of action centered again on LabMD Inc.’s allegations that Defendants, including Tiversa, hacked LabMD Inc.’s computer systems to obtain personal identifying information and personal health information to “scare” LabMD Inc. into using Tiversa’s services to fix the issue that Tiversa itself created by allegedly causing the data security breach. Id. LabMD further claims that once it refused Tiversa’s services, Tiversa reported LabMD to the FTC for failed data Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 12 of 43 6 security protocols and for allowing personal confidential information to be accessed. Id. Upon Defendants’ Motion to Dismiss, id. at Dkts. 34, 35, Chief Magistrate Judge Maureen P. Kelly issued a Report and Recommendation wherein she recommended that the Motion be granted. LabMD, Inc. v. Tiversa Holding Corp., No. 15-92, 2015 WL 1213043, at *1 (W.D. Pa. Mar. 17, 2015) (attached and hereinafter cited to as Ex. D). LabMD objected, Pennsylvania Action at Dkt. 73, and Defendants responded, id. at Dkt. 74. On January 8, 2016, Judge Mark R. Hornak issued a Memorandum Order adopting Chief Magistrate Judge Kelly’s Report and Recommendation, thereby granting Defendants’ Motion to Dismiss and dismissing the conversion and RICO claims with prejudice because the claims were untimely. Id. at Dkt. 115. The remaining claims were dismissed without prejudice and with leave to amend. Id. LabMD moved for reconsideration of this ruling, switching tactics and arguments from its earlier briefing in an effort to save its claims. LabMD, Inc. v. Tiversa Holding Corp., No. 2:15-CV-92, 2016 WL 693014, at *3 (W.D. Pa. Feb. 22, 2016) (attached and hereinafter cited to as Ex. E). In analyzing the motion to reconsider, the Court established some of the key dates that led to the litigation. Specifically, the Court references a September 30, 2010 correspondence from Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 13 of 43 7 LabMD to Tiversa, wherein LabMD explicitly references the 1718 File and alleged “crimes” of Tiversa. Id. at 4. The Court denied LabMD’s Motion, noting that the Motion was LabMD’s “second (or third) bite at the apple after its arguments were not accepted before.” Id. at 5. On February 12, 2016, LabMD Inc. filed an Amended Complaint in the Pennsylvania Action, attempting to reassert the defamation, tortious interference with existing and prospective business relationships, fraud, negligent misrepresentation, and civil conspiracy claims. Pennsylvania Action, Dkt. 125. Defendants thereafter filed a Motion to Dismiss, which remains pending. Id. at Dkt. 137. Shortly after this action was initiated, Tiversa filed a Motion requesting that the Western District of Pennsylvania, as the first-filed court, enjoin Plaintiffs from prosecuting the Second Filed Action. Id. at Dkt. 158. That Motion, filed on September 7, 2016, likewise remains pending. C. The Second Filed Action On July 8, 2016, Plaintiffs filed the instant action (the “Second Filed Action”) against Tiversa and various other Defendants. Dkt. 1. In the Complaint, LabMD asserts four causes of action against Tiversa: violations of the federal and Georgia RICO statutes, 18 U.S.C. §§ 1962(c) and 1962(d) O.C.G.A. §§ 16-14-4 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 14 of 43 8 and 16-14-4(c), respectively, the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Georgia computer crimes statute, O.C.G.A. § 16-9-93(g). Id. Many of these causes of action were also asserted in the Amended Complaint in the Pennsylvania action. Compare id. with Pennsylvania Action, Dkt. 125. The claims in this Second Filed Action once again center on allegations that Tiversa “stole” the 1718 File from LabMD and then offered to return the file for a fee. Dkt. 1. LabMD makes the same allegations related to Tiversa’s proprietary technologies, the 1718 File, and alleged collusion with the FTC. Id. In fact, the allegations alleged in the instant matter are the same arguments and new allegations that LabMD asserted in their Motion to Reopen the Dismissed Georgia Action. Compare id.; with Ex. E.1 To support the causes of action in the instant Complaint, Plaintiffs allege that in 2008 and 2009 Tiversa compiled a list of companies that refused Tiversa’s services after Tiversa alleged to have found confidential files on the peer-to-peer (“P2P”) network. Dkt. 1, ¶89. Plaintiffs continue by alleging that in 2008, Tiversa “hacked” into computers stored at LabMD and downloaded the 1,718 File. Id. ¶¶ 150-152. Plaintiffs further allege that on May 13, 2008, Tiversa reported to LabMD that Tiversa had found the 1718 file and LabMD “[i]mmediately” 1 Tiversa has filed concurrently herewith a Motion to Dismiss, Transfer, or Stay Pursuant to the First Filed Rule, which is incorporated herein by reference. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 15 of 43 9 investigated, discovering that a billing computer had P2P software installed. Id. ¶¶ 174-75. While setting forth the continued dialogue between the parties, Plaintiffs explicitly admit that the FTC approached Tiversa regarding companies with data breaches and on January 19, 2010, the FTC informed LabMD that it would be investigating LabMD’s information security practices. Id. ¶ 212. Moreover, by September 30, 2010, LabMD sent Tiversa correspondence requiring the return of the 1718 File.2 Id. ¶ 321; Ex. Q. Throughout the Complaint, Plaintiffs attempt to feign ignorance of their claims at issue until the filing of the instant Complaint; however, the September 30, 2010 Correspondence attached to their Complaint demonstrates Plaintiffs’ purported knowledge of the facts that formed the basis of the Dismissed Georgia Action, the Pennsylvania Action, and the instant matter. The Correspondence notes that LabMD had conducted an investigation into the “abuse and misappropriation of LabMD’s property that may have involved any number of legal infractions…” Id. 2 In the Pennsylvania Action, Judge Mark R. Hornak noted that the September 30, 2010 correspondence to Tiversa specifically mentioned the conversion of the 1718 File and concluded that the statute of limitations for the LabMD’s claims began to run, at the latest, as of the date of the letter. Ex. E, p. 4. Despite that ruling, LabMD and Daugherty attempt, in the instant matter, to persuade this Court that it still remained ignorant of their claims as of September 30, 2010 even though that correspondence clearly demonstrates their awareness of the matters at issue in the instant Complaint. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 16 of 43 10 LabMD now attempts to assert the same causes of action on the same facts because it was defeated in each earlier action. As discussed in more detail below, Plaintiffs’ claims are barred by res judicata and the statute of limitations. Even if the claims were not barred by these doctrines, the claims fail to state a claim for which relief can be granted. III. ARGUMENT A. This Court Has Already Ruled It Lacks Personal Jurisdiction Over Tiversa and Therefore The Matter Warrants Dismissal Because Res Judicata Applies. As explained more fully in Section II, supra, the issue of this Court’s personal jurisdiction over Tiversa has been fully litigated. Left undisturbed from that determination is the Court’s conclusion that it lacks jurisdiction over Tiversa. Consequently, under the res judicata doctrine, Plaintiffs’ claims here against Tiversa are precluded because the Court in the Dismissed Georgia Action and the Eleventh Circuit have already held that this Court lacks personal jurisdiction over Tiversa. 1. Res Judicata Standard With respect to the doctrine of res judicata, a federal district court must apply the law of the state in which it sits. N.A.A.C.P. v. Hunt, 891 F.2d 1555, 1560 (11th Cir. 1990). Georgia’s res judicata statute provides that: Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 17 of 43 11 [a] judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies as to all matters put in issue or which under the rules of law might have been put in issue in the cause wherein the judgment was rendered until the judgment is reversed or set aside. O.C.G.A. § 9-12-40. There are three requirements for the application of res judicata: (1) identity of the cause of action; (2) identity of the parties or their privies; and (3) a previous adjudication on the merits by a court of competent jurisdiction. Crowe v. Elder, 723 S.E.2d 428, 430-31 (Ga. 2012). The doctrine serves to “prevent the re-litigation of claims which have already been adjudicated, or which could have been adjudicated, between identical parties or their privies in identical causes of action.” Id. at 430. Even if some new factual allegations have been made, some new relief has been requested, or a new defendant has been added, the doctrine still applies. Id. (citation and quotation omitted). Each of these elements is addressed, in turn. 2. The Identity of Causes of Action Are The Same In this Case and The Dismissed Georgia Action As to the first element, a cause of action is defined as “the entire set of facts which give rise to an enforceable claim.” Id. at 430 (quotations omitted). Two different claims may constitute an identical cause of action if they are based on the same allegations of misconduct. See id. at 430-31 (holding that res judicata barred Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 18 of 43 12 a suit for breach of contract when a previous suit for fraud, based on the same facts and same allegations of misconduct, had been dismissed). Therefore, res judicata prohibits a party from recasting the same alleged conduct into a new cause of action by asserting a new theory of recovery. See id. at 431. Upon review of the Complaints brought in the Dismissed Georgia Action, it is without question that the claims in the instant matter constitute the same cause of action. Dismissed Georgia Action Dkt. 1-1; Second Filed Action, Dkt. 1. Indeed, the factual predicate of LabMD’s claims in each of the actions is virtually identical. Thus, “[the two] suits ‘could have been’ initially pursued in either state or federal court without any variation in the presentation of facts or evidence.” Stockton v. Lansiquot, 838 F.2d 1545, 1546 (11th Cir. 1988) (alteration in original) (citations omitted). Each suit is premised on LabMD’s allegations of damages sustained as a result of Tiversa’s actions with respect to the 1718 File. Irrespective of the “new” (and voluminous) paragraphs in the Second Filed Action Complaint, there are no additional facts asserted which occurred subsequent to the events, acts, and omissions that actually go to the core claims, which gave rise to the commencement of the Dismissed Georgia. Compare Dismissed Georgia Action Dkt. 1-1; Second Filed Action, Dkt. 1. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 19 of 43 13 Put simply, the present action “simply states an alternate theory of recovery arising from the same wrong, it does not state a separate cause of action.” Johnson v. Girl Scouts of the USA, No. 1:13-CV-01293-SCJ-RGV, 2013 WL 11328165, at *7 (N.D. Ga. Sept. 13, 2013), report and recommendation adopted, No. 1:13-CV- 1293-SCJ, 2013 WL 11328166 (N.D. Ga. Nov. 18, 2013), aff’d, 596 F. App’x 797 (11th Cir. 2015) (citation omitted); see also Vereen v. Everett, No. 1:08-CV-1969- RWS, 2009 WL 901007, at *3 (N.D. Ga. Mar. 31, 2009) (claims barred by res judicata under Georgia law, where “a comparison of the allegations in the [state and federal complaints] ... show[s] that all of the previous litigation arises from the same nucleus of operative facts.”). Lastly, the Second Filed Action is still barred by res judicata, regardless of the fact that LabMD has asserted “new” claims here. It is not dispositive that LabMD raised “new” issues-rather, the question is whether plaintiff could have raised the issue. Johnson, 2013 WL 11328165 at * 4 (citing Neely v. City of Riverdale, 681 S.E.2d 677, 679 (Ga. Ct. App. 2009); Yates Paving & Grading Co. v. Bryan Cnty., 652 S.E.2d 851, 854 (Ga. Ct. App. 2007) (Res judicata bars litigation of “matters that ... could have been litigated in [the] previously- adjudicated action.”); O.C.G.A. § 9-12-40 (res judicata precludes “matters put in issue or which ... might have been put in issue”). There is no question that LabMD Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 20 of 43 14 had the option of bringing some or all of these claims in this very Court in 2011. As explained more thoroughly in the statute of limitations analysis herein, LabMD has had knowledge of the facts giving rise to the claims since at least as early as September 2010. Judge Hornak pointed out as much in his ruling on the Motion for Reconsideration in the Pennsylvania Action with respect to the conversion claim. LabMD, Inc., 2016 WL 693014, at *2 (“The Court concludes that the conversion claim was established by September 30, 2010 letter (which specifically mentioned conversion of the “1718 file”) so the statute of limitations began to run then.”). Because LabMD failed to “articulate[]its intentions from the outset” is of no consequence. Koziara v. City of Casselberry, 239 F. Supp. 2d 1245, 1258 (M.D. Fla. 2002) (citations omitted). It failed to do so when it had the chance, and therefore its claims here are barred by res judicata. See Johnson, 2013 WL 11328165, at *7 (dismissing claims which concern the same subject matter as her claims brought in first action). 3. The Identity Of The Parties Or Their Privies Are The Same. The second element provides that, with respect to the “identity of the parties or their privies,” a “privy” is “one who is represented at trial and who is in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right.” Lilly v. Heard, 761 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 21 of 43 15 S.E.2d 46, 50 (Ga. 2014) (quotations omitted). “Privity may be established if the party to the first suit represented the interests of the party to the second suit.” Brown & Williamson Tobacco Corp. v. Gault, 627 S.E.2d 549, 552 (Ga. 2006) (quotations and alteration omitted). Res judicata still applies if new parties were added to the subsequent suit where the new parties’ alleged liability “is predicated on the same operative facts and acts of misconduct which were the subject of the original suit.” Caswell v. Caswell, 290 S.E.2d 171, 172 (Ga. App. 1982). A strict “identity” of parties is not necessary, as a judgment in the state of Georgia binds parties and their privies. O.C.G.A. § 9-12-40 (“A judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies ....”). “Privity may ... be established if the party to the first suit represented the interests of the party to the second suit.”). Brown, 627 S.E.2d at 552 (citation and internal marks omitted); Roberts v. Porter, Davis, Saunders, & Churchill, 389 S.E.2d 361, 364 (Ga. App. 1989) (“[P]arties include privies, usually defined as all persons who are represented by parties and claim under them, the term privity denoting a mutual or successive relationship to the same rights of property, but not different rights in the same property.”) (citations and internal marks omitted) (emphasis in original). Res judicata clearly applies here with respect to Tiversa. It was a defendant Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 22 of 43 16 in each action, and LabMD was a plaintiff in each action. That Daugherty is a plaintiff here and not in the prior litigation is a distinction without a difference. Daugherty is the sole shareholder, president, and CEO of LabMD. Second Filed Action, Dkt. 1, ¶ 19. Essentially, Daugherty is LabMD. Therefore, there is clear privity between LabMD and Daugherty, and their interests with respect to this litigation are entirely congruent. See Johnson, 2013 WL 11328165, at *8. 4. There Was A Previous Adjudication On The Merits By A Court Of Competent Jurisdiction. The third res judicata requirement mandates that there be a prior adjudication on the merits by a court of competent jurisdiction. Crowe, 723 S.E.2d at 431. Even if it would not have had jurisdiction over the subsequent claim arising out of the same cause of action, a court has competent jurisdiction for purposes of res judicata when it had competent jurisdiction over the originally litigated claim. Id. (stating that even if a subsequent claim was outside the authority of the original court, “[the plaintiff] chose the forum, and therefore, was bound by its limitations and not immune from the subsequent application of res judicata to a later attempt to revive a cause of action based upon the same facts.”). Id. Plaintiffs are precluded from bringing claims against Tiversa in this Court, because this Court previously considered whether the Tiversa Defendants were Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 23 of 43 17 subject to personal jurisdiction in Georgia. Exs. A, C. The Court held that it could not exercise jurisdiction over Tiversa. Id. LabMD even tried to appeal and in a separate filing overturn this judgment. Dismissed Georgia Action at Dkts. 25, 31- 34. Both of these efforts failed. Exs. B, C. Because the Dismissed Georgia action was based on the same allegations asserted in the instant matter and nothing has changed to require a new analysis, the issue of personal jurisdiction as to Tiversa has already been decided, and the claims against Tiversa are precluded. Moreover, it is well-established that a dismissal due to lack of personal jurisdiction acts as res judicata for the jurisdictional issue. Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209, 1221 (11th Cir. 1999); N. Ga. Elec. Membership Corp. v. City of Calhoun, Ga., 989 F.2d 429, 432-33 (11th Cir. 1993) (finding that when first suit adjudicated the jurisdictional issue, it barred re-litigation of the jurisdictional question). Therefore, dismissal of a complaint for lack of jurisdiction adjudicates the court’s jurisdiction, and “a second complaint cannot command a second consideration of the same jurisdictional claims.” Id. at 433 (citing Boone v. Kurtz, 617 F.2d 435, 436 (5th Cir. 1980); see also Cutler v. Hayes, 818 F.2d 879, 888 (D.C.Cir. 1987) (standing may not be re-litigated); Restatement (Second) of Judgments § 20, cmt. b illus. 1 (1982) (valid final judgment for lack of jurisdiction or improper venue bars relitigation of the issues actually litigated). Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 24 of 43 18 Accordingly, the dismissal of Plaintiff's complaint in the Dismissed Georgia Action was a final adjudication on the merits, and the instant action is therefore barred by res judicata. B. Plaintiffs’ Claims Against Tiversa are Barred by the Statute of Limitations.3 “A Rule 12(b)(6) dismissal on statute of limitations grounds is appropriate if it is apparent from the face of the complaint that the claim is time-barred.” Gonsalvez v. Celebrity Cruises Inc., 750 F.3d 1195, 1197 (11th Cir. 2013) (internal quotations omitted), cert. denied, 135 S.Ct. 58 (2014). Here, Plaintiffs allege that Tiversa is liable for violations of Georgia RICO (Count III), Georgia RICO Conspiracy (Count IV), CFAA (Count V), and the Georgia Computer Crimes Act (Count VI). For the reasons set forth below, all of these claims are time-barred and subject to dismissal. 1. The Georgia RICO Claims Are Untimely Because The Pennsylvania Action Already Ruled As Such. Plaintiffs’ Georgia RICO claims (Counts III and IV) are governed by a five (5) year statute of limitations. See 13 O.C.G.A. § 16-14-8 (“Notwithstanding any other provision of law, a criminal or civil action or proceeding under this chapter may be commenced up until five years after the conduct in violation of a provision 3 Tiversa includes its arguments without waiver of it position that this Court lacks personal jurisdiction of Tiversa. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 25 of 43 19 of this chapter terminates or the cause of action accrues.”). The five-year statute of limitation begins “when the plaintiff discovers, or reasonably should have discovered, that he has been injured and that his injury is part of a pattern.” Cochran Mill Associates v. Stephens, 648 S.E.2d 764, 770 (Ga. App. 2007). The “injury” that triggers the five-year limitations period is “the economic loss sustained by the plaintiff as a result of the defendant’s alleged wrongful conduct.” Id. (internal quotations omitted). Here, there is an easy path to determine when the statute of limitations applied. Specifically, in analyzing LabMD’s Federal RICO claims against Tiversa in the Pennsylvania Action, Judge Hornak explicitly held that the RICO claim accrued in 2010, more than six years after the instant suit was filed. Ex. E, p. 8. As explained in Magistrate Judge Kelly’s Report and Recommendation, by 2010, “LabMD knew of the injury it claims to have suffered and the parties who caused that injury even if it did not then know the precise methods used or motivation behind the injury.” Ex. D, p. 16. Since a Court has already explicitly ruled that Plaintiffs’ federal RICO claims are untimely, Plaintiffs’ Georgia RICO claims, which are based on essentially the same conduct, simply cannot survive here. See Elkadrawy v. Vanguard Grp., Inc., 584 F.3d 169, 173 (3d Cir. 2009) (quoting Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 228 (1995) (“The rules of finality . . Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 26 of 43 20 . treat a dismissal on statute-of-limitations grounds . . . as a judgment on the merits.”); N. Ga. Elec. Membership, 989 F.2d at 433 (citing Rose v. Town of Harwich, 778 F.2d 77, 79-80 (1st Cir. 1985), cert. denied, 476 U.S. 1159 (1986) (statute of limitations ruling barred right, not merely remedy)). Moreover, an independent analysis of the statute of limitations injury further confirms that LabMD’s claims are untimely. Here, the “injury” that began the five-year limitation period was the economic loss that Plaintiffs allegedly sustained as a result of Tiversa’s alleged “theft” of the 1718 File in 2008. Dkt. l ¶ 218. Plaintiffs specifically identify this “injury” in their Complaint as the FTC’s investigation and prosecution of LabMD, which “lasted over three and a half years and all but destroyed LabMD.” Id. ¶¶ 216-218. Plaintiffs also suggest that Tiversa somehow exercised some control over the FTC, alleging that “the FTC would not have investigated or prosecuted LabMD but for Tiversa’s theft of the 1718 File, Tiversa’s Publicly Available Lie and Tiversa’s Fraudulent Statements Regarding Disclosure, Source, Spread and Bad Actors about LabMD.” Id. ¶ 218. Here, Plaintiffs were aware of this “injury” as early as January 19, 2010, when the FTC “informed LabMD that the FTC had begun a non-public inquiry into LabMD’s cybersecurity practices.” Id. ¶ 212. And, as evidenced by the Letter attached as Exhibit Q to Plaintiffs’ Complaint, Plaintiffs knew, or reasonably Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 27 of 43 21 should have known, by September 30, 2010 at the latest, of their suspicions that this so-called “injury” resulted from Tiversa’s alleged “pattern of racketeering.” Cochran Mill Associates, 648 S.E.2d at 770. In particular, in the September 30, 2010 Letter, LabMD informed Tiversa that it was “investigating the abuse and misappropriation of LabMD’s property that may have involved any number of legal infractions, possibly including but not limited to, theft, conversion, extortion, trespass, privacy infringement, copyright infringement, computer crime, and misappropriation of trade secrets.” Dkt. 1, Ex. Q at 1 (emphasis added). The Letter then went on to ask Tiversa a number of investigative questions, including “what are and have been the financial, business, or other relationships between you and/or Tiversa and/or the FTC?” Id. at 2. The Letter also asked Tiversa to “identify and disclose the identity of any and all communications you have had with … the FTC.” Id. at 3. Ultimately, LabMD concludes the letter by requesting a response within 30 days, declaring: “LabMD takes a very dim view of this abuse of its property. This is a serious investigation that may involve many stages.” LabMD also copied its outside counsel on the September 30, 2010 letter. Id. LabMD’s allegations in its previous actions likewise highlight Plaintiffs’ awareness of both their injury and that their injury was allegedly part of a pattern. In particular, LabMD alleged in the Dismissed Georgia Action that Defendants Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 28 of 43 22 continually financially benefited from downloading the 1718 File from third parties based on various activity that occurred between May 2008 and October 2009. Dismissed Georgia Action, Dkt. 1-1, ¶ ¶ 52-71, 99. Likewise, in the Pennsylvania Action, LabMD alleged that it reviewed an article dated February 23, 2010, wherein Tiversa was quoted relating to the FTC’s investigation of LabMD, inferring that Tiversa was the reason for the FTC’s investigation. See Pennsylvania Action, Dkt. 1, Ex. H. Accordingly, given the overwhelming factual record gleaned from Plaintiffs’ own filings, Plaintiffs were not only aware of their “injury” but also actually accused Tiversa of being the source of said injury in September 2010-more than the five (5) year ago-making Counts III and IV time-barred on the face of the Complaint and subject to dismissal. 2. The CFAA and Georgia Computer Crimes Act Are Time- Barred. Plaintiffs allege that Tiversa violated the CFAA and the Georgia Computer Crimes Act when it allegedly downloaded the 1718 File from LabMD’s computer system. Dkt. 1, ¶¶ 153, 174, 219, 521-24, 525-29. These claims are also barred by the applicable statute of limitations. The CFAA expressly provides that no action may be brought “unless such action is begun within 2 years of the date of the act complained of or the date of the discovery of the damage.” 18 U.S.C.A. § 1030(g); Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 29 of 43 23 see also Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) (dismissing CFAA claim as untimely when claim was not filed within 2 years of knowledge of the facts leading to the claim). The Georgia Computer Crimes Act expressly provides that a civil action under this section “must be brought within four years after the violation is discovered or by exercise of reasonable diligence.” O.C.G.A. §. 16-9-93(g)(4). The analysis in this case is straightforward: LabMD knew of its claims because it already brought them once in the Dismissed Georgia Action. In particular, in 2011, LabMD brought a CFAA claim against Tiversa, alleging, inter alia, that Tiversa intentionally accessed “LabMD’s computers and networks and downloaded the 1,718 File without authorization.” Dismissed Georgia Action, Dkt. 1-1, ¶ 106. Likewise, LabMD brought a claim against Tiversa under the Georgia Computer Crimes Act, by using a “computer network to search for, download, open and disseminate the 1,718 File” without authorization. Id. at ¶ 122. Accordingly, it defies logic for Plaintiffs to now argue that these claims just recently accrued. Setting aside that LabMD long ago asserted these claims, the complaint on its face confirms that Plaintiffs were aware of the security breach as early as May 13, 2008. Dkt. 1, ¶ 174. In fact, LabMD alleges that it immediately started an Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 30 of 43 24 investigation in May 2008 and determined that the 1718 File was inadvertently available on one of its computers because P2P software had been installed on a LabMD computer. Id. at ¶ 175. At the very latest, Plaintiffs were aware of the act and any alleged damages no later than September 30, 2010, when LabMD sent Tiversa correspondence alleging that Tiversa abused, misappropriated, and/or stole LabMD’s property. Dkt. 1, ¶ 212, Ex. Q. Therefore, the statute of limitations for CFAA and the Georgia Computer Crimes Act expired, at the absolute latest, in 2012 and 2014, respectively-years before the instant litigation was filed. C. Each Of Plaintiffs’ Claims Against Tiversa Fails On The Merits. Even if Plaintiffs’ claims against Tiversa were not barred by res judicata or the statute of limitations, each fails to state a claim under Fed. R. Civ. P. 12(b)(6). “Specifically, to survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 708 (11th Cir. 2014) (internal quotations omitted). “The plausibility standard is met only where the facts alleged enable the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A “complaint must present sufficient factual matter, accepted as true, to raise a right to relief above the speculative Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 31 of 43 25 level.” Id. Here, Plaintiff has not alleged plausible claims against Tiversa. 1. The Georgia RICO Claims (Counts III and IV) Fail Because They Do Not Adequately Allege Tiversa Is The Direct Cause of Defendants’ Harm. Plaintiffs claim that Tiversa is liable for violations of Georgia RICO, 13 O.C.G.A. § 16-14-4 (Count III) and Georgia RICO Conspiracy, 13 O.C.G.A. § 16- 4-4(c) (Count IV). However, both claims fail, as Plaintiffs have not plausibly pled a proximate-causal link between Tiversa’s alleged conduct and the FTC’s investigation and prosecution of LabMD. The Georgia RICO statute provides that “a person who is injured ‘by reason of’ a party's violation of RICO ‘shall have a cause of action for … actual damages.’” Am. Ass'n of Cab Cos., Inc. v. Parham, 661 S.E.2d 161, 166 (Ga.App. 2008) (emphasis added) (quoting 13 O.C.G.A. § 16-14-6(c)). “Georgia courts employ the Anza ‘proximate cause’ standard to determine whether a plaintiff's injury is ‘by reason of’” a RICO predicate act. Brantley v. Muscogee Cty. Sch. Dist., No. 4:10-CV-77(CDL), 2011 WL 3706567, at *8 (M.D. Ga. Aug. 24, 2011) (citing Am. Ass’n of Cab Cos., Inc. v. Parham, 661 S.E.2d 161, 166-67 (Ga. App. 2008); see also Williams Gen. Corp. v. Stone, 614 S.E.2d 758, 760 (Ga. 2005) (“Because the Georgia RICO Act was modeled after the federal statute, this Court has found federal authority persuasive in interpreting the Georgia RICO statute and Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 32 of 43 26 we do so again.); Morast v. Lance, 807 F.2d 926, 933 (11th Cir. 1987) (“Georgia's RICO statutes are essentially identical to the federal RICO statutes”). Under Anza, “a plaintiff seeking to prove injury ‘by reason of’ a RICO predicate act must show that the predicate act was the proximate cause of his injury.” Parham, 661 S.E.2d at 166-67 (emphasis added) (citing Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 456-457 (2006)). In other words, “a civil RICO plaintiff must always establish a proximate-causal, ‘direct relation’ between the injury and injurious conduct at issue.” Simpson, 744 F.3d at 712 (citing Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992)). To meet this requirement, “a RICO defendant’s misconduct must have been a substantial factor in the sequence of responsible causation.” Id. (internal quotations omitted). “[A] plaintiff must indisputably show that a defendant's racketeering activity was more than merely a ‘but for’ cause of harm.” Id. (internal quotations and citations omitted). Consequently, Plaintiffs’ Georgia RICO claims must be dismissed because Plaintiffs “have failed to allege that they were injured ‘by reason of’ [Tiversa’s] alleged pattern of racketeering activity.” Brantley, 2011 WL 3706567, at *7; see also Hemi Grp., LLC v. City of New York, N.Y., 559 U.S. 1, 17-18 (2010) (RICO “is limited by the ‘requirement of a direct causal connection’ between the predicate Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 33 of 43 27 wrong and the harm.”); Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1287 (11th Cir. 2006) (per curiam) (“Anza makes clear that courts should scrutinize proximate causation at the pleading stage and carefully evaluate whether the injury pled was proximately caused by the claimed RICO violations.”). According to Plaintiffs, their “injuries” were the harm that they suffered by virtue of the FTC’s investigation and enforcement action. See Dkt. 1, ¶ 216 (“[T]he FTC’s investigation of LabMD lasted over three and a half years and all but destroyed LabMD.”). While the Complaint suggests Tiversa was somehow responsible for the FTC’s investigation or enforcement action, id., ¶ 218, Plaintiffs allege no facts indicating the FTC was part of the alleged enterprise or that Tiversa exercised any control over the FTC in any manner. To the contrary, Plaintiffs have actually conceded that their injuries resulted from the FTC’s prosecution of LabMD-not any conduct of Tiversa. See In the Matter of LabMD, Inc., Docket No. 9357, Respondent LabMD, Inc.’s Application for Stay of Final Order, at 5, Aug. 30, 2016 (“In January 2014, LabMD was forced to wind down its operations because of FTC’s prosecution and destruction of the company.”) (emphasis added).4 Moreover, the Plaintiffs attempt to attribute the entire FTC investigation 4 LabMD’s Application for Stay is attached hereto as Exhibit F. The Court may take judicial notice of the application, as it is a matter of public record. See Universal Express, Inc. v. U.S. S.E.C., 177 F. App’x. 52, 53-54 (11th Cir. 2006) Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 34 of 43 28 to Tiversa’s conduct alleging “the FTC would not have investigated or prosecuted LabMD but for Tiversa’s theft of the 1718 File, Tiversa’s Publicly Available Lie and Tiversa’s Fraudulent Statements Regarding Disclosure, Source, Spread and Bad Actors about LabMD.” Id. ¶ 218. Setting aside the conclusory statement regarding Tiversa’s power to create an FTC investigation, the legal process to which the FTC adheres elements any such contention. Specifically, the FTC Rules require an affirmative vote by the Commission before a complaint can be issued. 16 C.F.R. § 3.11(a). Regardless of how Plaintiffs choose to characterize the FTC, Plaintiffs cannot directly connect Tiversa’s alleged activities and Plaintiffs’ alleged injury at the hands of the FTC and its commissioners vote to pursue LabMD. Moreover, even if Tiversa did somehow have power to cause the FTC to investigate and prosecute LabMD, the FTC, in its enforcement action, found that it was LabMD’s own data protection failures-not any acts of Tiversa-that led to the exposed sensitive patient information and resultant investigation and enforcement action. In particular, the FTC found the following: We also find that LabMD’s security practices were unreasonable, lacking even basic precautions to protect the sensitive consumer information maintained on its computer system. Among other things, it failed to use an intrusion detection system or file integrity monitoring; neglected to monitor traffic coming across its firewalls; (Court could take judicial notice of complaint filed in SEC enforcement proceeding without converting a motion to dismiss into a motion for summary judgment). Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 35 of 43 29 provided essentially no data security training to its employees; and never deleted any of the consumer data it had collected. These failures resulted in the installation of file-sharing software that exposed the medical and other sensitive personal information of 9,300 consumers on a peer-to-peer network accessible by millions of users. LabMD then left it there, freely available, for 11 months, leading to the unauthorized disclosure of the information. In the Matter of LabMD, Inc., Docket No. 9357, Opinion of the Commission, at 1, July 29, 2016 (emphasis added) (“The Opinion of the Commission”) (attached and hereinafter cited to as Ex. G). This finding conclusively cuts off any purported “harm” Tiversa allegedly caused. As the FTC held, it was LabMD’s data security practices that were unreasonable. With this context, the Supreme Court’s decision in Hemi brings explains why LabMD’s claim fails. In Hemi, a city filed a lawsuit under federal RICO, alleging that a cigarette vendor failed to file the required customer information with the state. Hemi, 559 U.S. at 4. The Supreme Court found that the city’s alleged injury-lost tax revenue-was not caused “by reason of” vendor’s alleged fraud (not filing information), but instead by their customers’ failure to pay their taxes. Id. at 11. The Court did not allow the city to rely on “[m]ultiple steps” between the alleged fraud and the asserted injury or the “independent actions” of third parties. Id. at 15. Accordingly, because the city’s “injuries here were not caused directly by the alleged fraud, and thus were not caused ‘by reason of’ it. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 36 of 43 30 The City … ha[d] no RICO claim.” Id. at 18. A similar conclusion must be drawn here. Like in Hemi, because Plaintiffs alleged injuries were not caused directly by the alleged fraud (turning the file over to the FTC), and instead were caused by the FTC’s vote to pursue LabMD along with the FTC’s conclusion that LabMD had lax data security, Plaintiffs have no RICO claim. The Opinion of the Commission explains: There is no evidence that Tiversa acted as an “agent” or “adjunct” to the FTC in obtaining the 1718 file, much less that anyone at the FTC “exercised coercive power” compelling Tiversa to do so. Consequently, even granting that Tiversa was financially motivated to obtain confidential information, there was nothing improper about Commission staff’s receipt of the information via a civil investigative demand in a law enforcement matter. Ex. G, p. 32. Moreover, none of the alleged “predicate” acts actually supports the direct causal link necessary to support Plaintiff’s RICO allegation. Here, the predicate acts, as alleged against Tiversa, include the following allegations: forgery, computer crimes, identity fraud, perjury, witness tampering, and racketeering activity. Dkt. 1 ¶¶ 493-514. It is entirely unclear how these acts could have directly caused Plaintiffs’ alleged injury-the FTC investigation-when the majority of such acts took place after the investigation had already begun. Indeed, the Opinion of the Commission addresses and dismantles any such argument that Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 37 of 43 31 the purported predicate acts were the “direct casual connection,” Hemi, 559 U.S. at 18, when it highlights that the FTC did not rely on Tiversa or any evidence provided by Tiversa in their appeal or briefing before the ALJ. Ex. G, p. 31. As a result, Plaintiffs’ theory would require the Court to take “[m]ultiple steps,” sometimes back in time, to connect the FTC investigation (an investigation which concluded after the FTC’s admission that it was not relying on Tiversa) with the so-called cause (a finding that LabMD did not have adequate security) and therefore Plaintiffs’ claims must be rejected. See Hemi, 559 U.S. at 15. Accordingly, since Plaintiffs fail to demonstrate the direct relationship between Tiversa’s alleged misconduct and the FTC’s investigation and enforcement action, as required to state a claim under Georgia RICO, these claims fail and should be dismissed.5 2. The CFAA Claim Fails. Plaintiffs also fail to allege the requisite elements for a civil claim under the CFAA. Plaintiffs claim that Tiversa violated the CFAA when it downloaded “to an electronic storage device data files from LabMD’s computer system for a reason it knew it was not authorized.” Dkt. 1, ¶¶ 521-524. More specifically, throughout 5 “Since Plaintiffs’ … Complaint fails to state a substantive RICO claim, Plaintiffs’ RICO conspiracy claims also fail.” Brantley, 2011 WL 3706567, at *8. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 38 of 43 32 the Complaint, Plaintiffs allege that Tiversa violated the CFAA when it allegedly “stole” the 1718 File. Id. at ¶ 219.6 This claim fails because: (1) Tiversa could not “steal” a file that was publicly available, and (2) it does not fit a statutory requirement for bringing a civil claim under the CFAA. First, a violation of CFAA occurs only if the information is gained “without authority” or by “exceeding authority.” 18 U.S.C. § 1030(a)(1-4). In the instant matter, Tiversa did not obtain any information by “exceeding authority” or “without authority” as the 1718 File was a publicly available document on a P2P network. Indeed, Plaintiffs explicitly admit that one of their billing computers contained P2P software. Dkt. 1, ¶ 175. Likewise, as described above, the FTC, in its enforcement action, found that it was the “installation of file-sharing software” that exposed the 1718 File on a P2P network and led “to the unauthorized disclosure of the information.” Ex. G, p. 31 (“First, the record does not show that Tiversa, whatever its motives, unlawfully obtained the 1718 file; LabMD made the file freely available for public viewing through LimeWire.”) 6 Plaintiffs make several allegations throughout their complaint regarding companies unrelated to this matter such as Tiversa violated the CFAA when it allegedly hacked the files of Coca-Cola (¶ 235), Papa-John’s (¶ 247), Logisticare (¶ 259), Franklin (¶ 271), GMEA (¶ 283), and the Open Door Clinic ( ¶289). Tiversa submits that these allegations are immaterial allegations that should be stricken under Fed. R. Civ. P. 12(f). Indeed, many of the allegations in the complaint warrant a similar result. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 39 of 43 33 Courts addressing the issue of documents obtained on P2P networks have consistently held that files located on P2P networks, like the 1718 File, cannot be accessed “without authorization” or by “exceeding the authorization given” because the files are located in public, shared folders and are thus publicly available.” See, e.g. Motown Record Co., L.P. v. Kovalcik, No. CIV. 07-CV-4702, 2009 WL 455137, at *3 (E.D. Pa. Feb. 23, 2009) (dismissing CFAA claim; finding that because the accessed files were located in a shared folder on a P2P network, “[n]o authorization was needed since the files accessed were accessible to the general public.”); Loud Records LLC v. Minervini, 621 F. Supp. 2d 672, 678 (W.D. Wis. 2009); Cvent, Inc. v. Eventbrite, Inc. 739 F. Supp. 2d 927, 932-933 (E.D. Va. 2010) (granting defendant’s motion to dismiss CFAA claim because plaintiff could not establish that defendant “exceeded its authority” by accessing publicly available data); Riding Films, Inc. v. White, No. 2:13-CV-00046, 2014 WL 3900236, at *5 (S.D. Ohio Aug. 11, 2014) (same). Plaintiffs allege in the Complaint that the 1718 File was on a computer that contained P2P software, Dkt. 1, ¶ 175, which means that the 1718 File was a publicly available document. Accordingly, Tiversa (and any other person or entity) could not have exceeded authority by accessing the 1718 File, and therefore the CFAA claim must be dismissed for failure to state a claim. Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 40 of 43 34 Second, the claim fails because Plaintiffs do not allege the existence of the statutory requirement for bringing a civil claim under the CFAA. A civil claim may only be asserted under the CFAA if the conduct involves one of the factors set forth in subclauses (I),(II),(III),(IV) or (V) of subsection (c)(4)(A)(i). Relevant here, the only potentially applicable subclass is subclause I, which provides: loss to 1 or more persons during any 1-year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value. 18 U.S.C. § 1030(c)(4)(A)(i). While the Complaint contains conclusory allegations regarding damage suffered by Plaintiffs, it is devoid of any factual allegations regarding this purported damage or the amount thereof. Further, given that the conduct at issue simply involves allegations regarding the copying of a single file, the Complaint contains no allegations from which this Court could reasonably identify LabMD’s alleged loss or infer whether such a loss exceeded $5,000 during any one year period. Accordingly, Count V should be dismissed for failure to state a claim. See Volk v. Zeanah, No. 6;08CV094, 2010 WL 318261, *4 (S.D. Ga. Jan. 25, 2010) (dismissing the plaintiff’s CFAA claim for failure to allege facts sufficient to show that damages or loss exceed $5000 statutory requirement). Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 41 of 43 35 3. The Georgia Computer Crimes Act Must Be Dismissed. Much like the CFAA claim, a plaintiff must demonstrate that a defendant used a computer or computer network “with knowledge that such use is without authority” to state a claim under the Georgia Computer Crimes Statute. See O.C.G.A § 16-9-93(a)-(c); SCQuARE Int’l, Ltd. V. BBDO Atlanta, Inc., 455 F. Supp. 2d 1347, 1368 (N.D. Ga. 2006) (“[a]lthough there is a question whether defendant appropriated plaintiff’s intellectual property, there is no allegation that the appropriation was achieved by the unauthorized use of a computer. Section 16- 9-93(a) is thus inapplicable.”). Accordingly, Plaintiffs’ claim under the Georgia Computer Crimes Statute, fails for the same reason as Plaintiffs’ CFAA claim- namely, Tiversa could not, as a matter of law, access publicly available information “without authority.” IV. CONCLUSION For the foregoing reasons, Defendant Tiversa Holding Corp. respectfully requests that the Court enter an order dismissing Counts III, IV, V, and VI, and grant such further relief as the Court deems just and proper. Respectfully submitted this 12th day of September, 2016. /s/ Nathan A. Wood Nathan A. Wood Georgia Bar No. 637904 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 42 of 43 36 CERTIFICATE OF SERVICE AND COMPLIANCE WITH LOCAL RULE 5.1 I hereby certify that on this 12th day of September, 2016, I electronically filed the foregoing, which has been prepared using 14-point Times New Roman font, with the Clerk of Court using the CM/ECF system, which will automatically send email notification of such filing to the attorneys of record. /s/ Nathan A. Wood Nathan A. Wood Georgia Bar No. 637904 Case 1:16-cv-02480-LMM Document 64-1 Filed 09/12/16 Page 43 of 43 EXHIBIT A Case 1:16-cv-02480-LMM Document 64-2 Filed 09/12/16 Page 1 of 11 AO 72A (Rev.8/82) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION LabMD, Inc., Plaintiff, v. Tiversa, Inc., a Pennsylvania Corporation, et al., Defendants. : : : : : : : : : : CIVIL ACTION NO. 1:11-cv-04044-JOF ORDER This matter is before the court on Defendants’ motions to dismiss [3, 5]. I. Background A. Procedural History On October 19, 2011, Plaintiff, LabMD, Inc., filed suit against Defendants, Tiversa, Inc., Trustees of Dartmouth College, and M. Eric Johnson, in the Superior Court of Fulton County, Georgia. Plaintiff alleges Defendants Tiversa and Johnson violated the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Georgia Computer Systems Protection Act, O.C.G.A. § 16-9-90 et seq. Plaintiff also brings claims for trespass and conversion against all Defendants. On November 23, 2011, Defendants removed the case to this court. That same day, Defendants M. Eric Johnson and Trustees of Dartmouth College filed a motion to dismiss. Defendant Tiversa filed its motion to dismiss on November 30, 2011. B. Facts Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 1 of 106 2480 64 2 9 2 6 2 1 AO 72A (Rev.8/82) 1 LabMD and Defendants disagree on exactly how peer-to-peer networks operate. For the purposes of a motion to dismiss, the court will accept the version presented in LabMD’s affidavit. See Pl.’s Resp., Exh. A. LabMD consulted with Scott Moulton, a computer forensic specialist, to determine how peer-to-peer networks share files. Mr. Moulton explained that peer-to-peer networks, such as those used by Defendants, require the computers on the network to have software installed on them. The software allows users on the network to search for files on other users’ computers. When a user seeks to download a file, the peer-to-peer network opens a Transmission Control Protocol/Internet Protocol port at the site where the file is located. 2 The court presumes “dangerous data” means data containing confidential and sensitive information. 2 The following facts are drawn from Plaintiff’s Complaint. In April 2009, Defendant Johnson, in concert with Defendants Tiversa and Dartmouth, published an article entitled Data Hemorrhages in the Health-Care Sector (“Johnson Paper”). Compl. ¶ 37. The Johnson Paper was based upon activities conducted in collaboration with Tiversa, who had developed technology that monitored global peer-to-peer networks1 in real time. Id. ¶ 38. According to the Johnson Paper, Johnson and Tiversa initially searched peer-to-peer networks looking for files from the top ten publicly traded health-care firms and randomly gathered a sample of shared files related to health care. Id. ¶ 40. Johnson and Tiversa used the data downloaded during the initial search to search for computer files on computer hosts where Defendants had previously “found other dangerous data.”2 Id. ¶ 45. During a second search, Johnson and Tiversa found a 1,718-page document containing patient social security numbers, insurance information, and treatment codes (“1,718 File”). Id. ¶ 46. The 1,718 File was created and stored on a LabMD computer and Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 2 of 106 2480 64 2 9 2 6 3 1 AO 72A (Rev.8/82) 3 In his Affidavit, Scott A Moulton stated, “In connection with my forensic work on this matter, I have not found any evidence that the May 13 file exists on any other computer other than the LabMD computer where the file was saved.” See Exhibit A, Response to Motion to Dismiss. 3 was the personal property of LabMD, Inc. Id. ¶¶ 48-50. Defendants accessed LabMD’s computers and networks, which must have been connected to the peer-to-peer network, and downloaded the 1,718 File.3 Id. ¶¶ 106-108. LabMD alleges that between July 13-27, 2009, Tiversa and Johnson continued to search for, download, and open computer files from 25 top medical research institutions. Id. ¶¶ 63-64. LabMD also asserts that between September 23-October 7, 2009, Tiversa and Johnson opened computer files from medical research institutions. Id. ¶ 71. On May 13, 2008, Robert Boback, CEO of Tiversa, called LabMD and informed it that he was in possession of a computer file containing patient social security numbers and the file belonged to LabMD. Id. ¶¶ 72-73. Over the next few months, Tiversa solicited business from LabMD seven times. Id. ¶¶ 84-94. Tiversa first downloaded the 1,718 File on February 5, 2008, but informed LabMD that other people continued to search for it in the wake of other information breaches. Id. ¶¶ 81-94. In response to the sixth solicitation, LabMD directed Tiversa to LabMD’s attorneys. Id. ¶ 95. On September 30, 2010, LabMD demanded return of the 1,718 File from Defendants Tiversa, Johnson, and Dartmouth. Id. ¶¶ 96-98. LabMD alleges that Defendants Johnson and Dartmouth continue to financially benefit from the use of the 1,718 File and from Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 3 of 106 2480 64 2 9 2 6 4 1 AO 72A (Rev.8/82) 4 Prior to 2005, many courts interpreted Georgia’s Long-Arm Statute as conferring personal jurisdiction to the maximum extent allowed by the due process clause of the federal 4 searching for computer files containing confidential information from third parties. Id. ¶¶ 99-102. None of the Defendants have returned the 1,718 File to LabMD. Id. ¶ 151. C. Contentions Defendants argue that they are not subject to personal jurisdiction under the Georgia Long-Arm Statute. Defendants assert that they have not regularly conducted business in Georgia, nor have they committed a tort within the state. Furthermore, Defendants maintain that they have not done any acts in Georgia that are sufficient to establish minimum contacts and thus personal jurisdiction. However, LabMD responds that Defendants committed a tort in Georgia by downloading files located on computers within the state, or alternatively caused injury in Georgia and regularly solicited business in Georgia through a phone call and several emails. II. Discussion “‘A federal court sitting in diversity undertakes a two-step inquiry in determining whether personal jurisdiction exists: the exercise of jurisdiction must (1) be appropriate under the state long-arm statute and (2) not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution.’” Diamond Crystal Brands, Inc. v. Food Movers Intern., Inc., 593 F.3d 1249, 1257-58 (11th Cir. 2010) (quoting United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009)).4 Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 4 of 106 2480 64 2 9 2 6 5 1 AO 72A (Rev.8/82) Constitution. Following this interpretation, courts often passed over the long-arm analysis entirely and conflated it with the due process inquiry. See Diamond Crystal Brands, 593 F.3d at 1258 n.8 (listing cases). In 2005, however, the Georgia Supreme Court clarified the reach of the statute and made it clear that trial courts must undertake two inquiries: One under the long-arm statute and another under due process. LabMD’s assertion that “the court can pass over the long-arm analysis entirely and conflate it with, or collapse it into, the due process inquiry” is thus an incorrect statement of the law. Pl.’s Resp., D.E. [17], at 11-12. 5 The Georgia Long-Arm Statute provides that a Georgia court may exercise personal jurisdiction over a nonresident defendant if it (1) transacts any business within this state; (2) commits a tortious act or omission within this state; or (3) commits a tortious injury in this state caused by an act or omission outside this state if the tortfeasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state. O.C.G.A. 9-10-91. The long-arm statute thus requires that an out-of-state defendant do certain acts within Georgia before it can be subjected to personal jurisdiction. ATCO Sign & Lighting Co., v. Stamm Mfg., Inc., 298 Ga. App. 528, 529 (2009) (citing Gust v. Flint, 257 Ga. 129, 130 (1987)). LabMD argues that Defendants are subject to personal jurisdiction in Georgia under subsections (2) and (3) of the statute. A. Tortious Act Within Georgia Defendants are subject to personal jurisdiction in this court if they “commit[ted] a tortious act or omission within” Georgia. O.C.G.A. 9-10-91(2). LabMD alleges Defendants used peer-to-peer software to open a Transmission Control Protocol/Internet Protocol port Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 5 of 106 2480 64 2 9 2 6 6 1 AO 72A (Rev.8/82) 6 on plaintiff’s computer in Georgia. LabMD asserts that the opening of this port on its computer is the same as physically being at the host site to take action on the file. Thus, according to LabMD, the physical location of Defendants when they were conducting the search and downloading the file off the peer-to-peer network is irrelevant, because the accessing and downloading of files took place in the forum state. Georgia courts have not specifically dealt with personal jurisdiction in the context of peer-to-peer file sharing, but have established precedent in similar contexts. In Huggins v. Boyd, the Georgia Court of Appeals addressed whether personal jurisdiction existed over a South Carolina resident who had stalked a Georgia resident by sending harassing emails to her, her friends, and her colleagues. 304 Ga. App. 563, 563 (2010). Although the offense of stalking is deemed to occur at the place where the communication is received (Georgia), the court found that the conduct giving rise to the offense occurred at the physical place where the defendant typed in and sent his e-mails. Id. at 565. The court held that the defendant did not engage in any conduct in Georgia when he sent e-mails from out of state. In so ruling, the court relied heavily on Anderson v. Deas, 273 Ga. App. 770 (2005). There, the court similarly found personal jurisdiction lacking under subsection (2) of the long-arm statute where a defendant stalked a Georgia woman by calling her from his out-of-state home. “Although the injurious consequences would have been felt in Georgia, it is undisputed that [the defendant] never came to Georgia so as to commit an act here. Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 6 of 106 2480 64 2 9 2 6 7 1 AO 72A (Rev.8/82) 7 Therefore, applying the Long Arm Statute as interpreted in Gust . . ., we agree with the trial court that [plaintiff] has alleged no acts by [the defendant] giving the Georgia courts personal jurisdiction over him . . . .” Id. at 772. Similarly, here, it is undisputed that Defendants never came to Georgia and that all of Defendants’ conduct giving rise to this lawsuit took place outside the state of Georgia. Following the logic of Huggins and Anderson, the court finds that Defendants did not commit a tortious act within Georgia. To hold otherwise would be to subject peer-to-peer network users to personal jurisdiction in every state. This holding is buttressed by the findings of numerous other courts around the country. See, e.g., Millennium TGA v. Doe, No. 10 C 5603, 2011 WL 7444064 (N.D. Ill. Sept. 26, 2011) (finding that simply participating in a peer-to-peer network does not confer personal jurisdiction); DigiProtect USA Corp. v. Does, No. 10 Civ. 8759(TPG), 2011 WL 1466073 (S.D.N.Y. Apr. 13, 2011) (finding there was not personal jurisdiction over peer-to-peer network users who did not have an internet account in the forum state); On The Cheap, LLC v. Does 1-5011, No. C10-4472 BZ, 2011 WL 4018258 (N.D. Cal. Sept. 6, 2011) (“The problem with this theory is that since plaintiff could have filed this lawsuit in any state, the logical extension would be that everybody who used [peer-to-peer] software such as BitTorrent would subject themselves to jurisdiction in every state.”). B. Tortious Injury in Georgia Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 7 of 106 2480 64 2 9 2 6 8 1 AO 72A (Rev.8/82) 5 LabMD appears to argue that O.C.G.A. § 9-10-91(3) only requires the “solicitation of business.” Pl.’s Resp., D.E. [17], at 11 (“As O.C.G.A. § 9-10-91(3) is separated by “or,” either a persistent course of conduct or solicitation of business is enough to establish personal jurisdiction.”). The text of the entire statute, however, makes clear that the word “regularly” modifies “solicits business.” See O.C.G.A. § 9-10-91(3) (“Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct . . . in this state.”). 8 To exercise jurisdiction under subsection (3) of Georgia’s Long-Arm Statute, the court must find that the Defendants committed a tortious injury in the state caused by their conduct outside the state and that Defendants regularly conduct or solicit business in Georgia. Here, Defendants do not dispute whether they caused injury in the state but instead attack LabMD’s allegations that they regularly conduct or solicit business in Georgia. LabMD contends that Tiversa is subject to personal jurisdiction under subsection (3) because it solicited business from LabMD after downloading the 1,718 file. More specifically, LabMD points to Tiversa’s phone call on May 13, 2008, informing LabMD that it had the 1,718 file, and eight follow-up emails regarding Tiversa’s services. LabMD urges that these contacts are sufficient to establish personal jurisdiction over Defendant Tiversa.5 As to Defendants Trustees of Dartmouth College and Johnson, LabMD argues they acted in concert with Tiversa such that they are co-conspirators subject to personal jurisdiction to the same extent as Tiversa. Tiversa avers that it has no customers in Georgia, does not provide any services in Georgia, and has derived no revenue from business activities in Georgia. Tiversa argues that Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 8 of 106 2480 64 2 9 2 6 9 1 AO 72A (Rev.8/82) 9 one telephone contact and eight email contacts do not rise to the level of “regularly” soliciting business in Georgia. The court agrees. These limited contacts between Tiversa and LabMD - one telephone call and eight emails - are insufficient to establish that Tiversa regularly solicits business in Georgia. The word “regular” is defined as “recurring, attending, or functioning at fixed or uniform intervals.” WEBSTER’S NEW COLLEGIATE DICTIONARY 992 (9th ed. 1990). It implies a pattern of behavior. There is no evidence of any pattern of Tiversa soliciting business from Georgia businesses and residents. There is no evidence that Tiversa contacts Georgia businesses and residents every few weeks or months or even once a year to attract new clients. This is not surprising, given the fact that Tiversa has no Georgia clients and derives no business from Georgia. Thus, the court finds that it does not have personal jurisdiction over Tiversa, and consequently the Trustees of Dartmouth College and Johnson, under subsection (3) of the long-arm statute. III. Conclusion For the foregoing reasons, the court holds that it does not have personal jurisdiction over Defendants. The court GRANTS Defendants’ motions to dismiss [3, 5]. IT IS SO ORDERED this 15th day of August, 2012. S/ J. Owen Forrester J. OWEN FORRESTER SENIOR UNITED STATES DISTRICT JUDGE Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 9 of 10Case 1:16-cv-02480-L Docu ent 64-2 Filed 09/12/16 Page 10 of 11 AO 72A (Rev.8/82) 10 Case 1:11-cv-04044-LMM Document 23-1 Filed 08/15/12 Page 10 of 106 2480 64 2 9 2 6 1 1 EXHIBIT B Case 1:16-cv-02480-LMM Document 64-3 Filed 09/12/16 Page 1 of 10 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ____________________________ No. 12-14504 Non-Argument Calendar ____________________________ D. C. Docket No. 1:11-cv-04044-JOF LABMD, INC., Plaintiff-Appellant, versus TIVERSA, INC., a Pennsylvania Corporation, TRUSTEES OF DARTMOUTH COLLEGE, M. ERIC JOHNSON, Defendants-Appellees. ____________________________ Appeal from the United States District Court For the Northern District of Georgia ____________________________ (February 5, 2013) Before CARNES, BARKETT, and EDMONDSON, Circuit Judges. Case: 12-14504 Date Filed: 02/05/2013 Page: 1 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 1 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 2 f 10 2 PER CURIAM: LabMD, Inc., a Georgia corporation, appeals the dismissal of its diversity lawsuit for lack of personal jurisdiction over Defendants Tiversa, Inc. (a Pennsylvania corporation), Trustees of Dartmouth College (a New Hampshire college), and M. Eric Johnson (a New Hampshire resident). No reversible error has been shown; we affirm. LabMD’s complaint arose out of an article written by Johnson -- a Dartmouth professor -- entitled “Data Hemorrhages in the Health-Care Sector.” Johnson worked in collaboration with Tiversa, a company that monitors global peer-to-peer network searches and provides peer-to-peer intelligence and security services.1 In preparing the article, Johnson and Tiversa searched peer-to-peer networks looking for computer files containing data that could be used potentially to commit medical or financial identity theft. As part of their search, Johnson and Tiversa found a 1,718-page document that contained patient social security numbers, insurance information, and treatment codes (the “1,718 File”). LabMD 1Peer-to-peer networks allow users to place shared computer files in folders that are open for other users to search via the internet. Case: 12-14504 Date Filed: 02/05/2013 Page: 2 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 2 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 3 f 10 3 alleges that the 1,718 File was created and stored on a LabMD computer and was the personal property of LabMD. Tiversa later called LabMD to notify LabMD that it had discovered the 1,718 File. That same day, Tiversa sent LabMD three emails following up on the phone call and offering its intelligence and security services to LabMD. Over the next two months, Tiversa sent six more emails soliciting business from LabMD. LabMD filed this lawsuit against Defendants in the Superior Court of Fulton County, Georgia, asserting claims for trespass, conversion, and violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Georgia Computer Systems Protection Act, O.C.G.A. § 16-9-90. Defendants removed the case to the District Court for the Northern District of Georgia. The district court later granted Defendants’ motions to dismiss, concluding that it lacked personal jurisdiction over Defendants under Georgia’s long-arm statute, O.C.G.A. § 9-10-91. We review de novo a district court’s dismissal of a complaint for lack of personal jurisdiction. Horizon Aggressive Growth, L.P. v. Rothstein-Kass, P.A., 421 F.3d 1162, 1166 (11th Cir. 2005). “A plaintiff seeking the exercise of personal jurisdiction over a nonresident defendant bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction.” Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249, 1257 (11th Cir. 2010). Case: 12-14504 Date Filed: 02/05/2013 Page: 3 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 3 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 4 f 10 4 To determine whether personal jurisdiction exists over a nonresident defendant, we must decide whether the exercise of jurisdiction is appropriate under the state’s long-arm statute. Georgia’s long-arm statute provides that Georgia courts may exercise personal jurisdiction over a nonresident defendant if, among other things, the nonresident “(2) [c]ommits a tortious act or omission within [Georgia]” or “(3) [c]ommits a tortious injury in [Georgia] caused by an act or omission outside [Georgia] if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in [Georgia].” O.C.G.A. § 9-10-91(2), (3). We interpret and apply Georgia’s long-arm statute “in the same way as would the Georgia Supreme Court.” Diamond Crystal Brands, Inc., 593 F.3d at 1258. LabMD contends that Defendants are subject to personal jurisdiction under subsection (2) of Georgia’s long-arm statute because Defendants used peer-to-peer software to open a Transmission Control Protocol/Internet Protocol port on a LabMD computer that was located physically in Georgia. Because Defendants caused a port to open on the Georgia computer being searched, LabMD contends that Defendants’ tortious act took place in Georgia even though Defendants were outside Georgia when they searched for and downloaded the 1,718 File. Case: 12-14504 Date Filed: 02/05/2013 Page: 4 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 4 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 5 f 10 5 For purposes of personal jurisdiction under Georgia’s long-arm statute, Georgia courts have ruled that -- when a defendant uses the telephone or email to contact a Georgia resident -- defendant’s conduct occurs at the place where defendant speaks into the telephone or types and sends his email. See Anderson v. Deas, 279 Ga. App. 892, 893-94 (Ga. Ct. App. 2006) (no personal jurisdiction existed over a defendant who made harassing telephone calls to a Georgia resident from another state); Huggins v. Boyd, 304 Ga. App. 563, 565 (Ga. Ct. App. 2010) (concluding -- based on Anderson -- that no personal jurisdiction existed over a nonresident defendant who emailed Georgia residents). For the long-arm statute, we see no meaningful distinction between the technology used to place telephone calls or send emails and the technology used in peer-to-peer file sharing. In all cases, the technology causes the transmission of information along telephone or electronic lines between an out-of-state defendant and a Georgia resident. See Anderson, 279 Ga. App. at 893-94; Huggins, 304 Ga. App. at 565. That peer-to-peer software causes a port to open on another computer is not unique: telephone calls also require a connection to the receiving phone line before the transmission of information can occur. The conduct giving rise to Defendants’ alleged offense occurred where Johnson and Tiversa used computers to access the 1,718 File. Because Johnson and Tiversa used computers outside of Georgia, Defendants are not subject to personal jurisdiction under subsection (2). Case: 12-14504 Date Filed: 02/05/2013 Page: 5 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 5 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 6 f 10 6 LabMD also contends that Defendants are subject to personal jurisdiction under subsection (3) of Georgia’s long-arm statute. LabMD argues that Tiversa “regularly solicited business” in Georgia because, over the course of two months, Tiversa made one phone call to LabMD once and sent nine emails offering Tiversa’s services.2 Georgia’s long-arm statute “requires that an out-of-state defendant must do certain acts within the State of Georgia before he can be subjected to personal jurisdiction.” Gust v. Flint, 257 Ga. 129, 130 (Ga. 1987). In determining whether a nonresident defendant may be subject to personal jurisdiction under subsection (3), Georgia courts consider many factors including -- but not limited to -- whether a defendant (1) regularly does business or solicits business within Georgia; (2) engages in a persistent course of conduct within Georgia; (3) derives substantial revenue from services rendered within Georgia; (4) has employees located within Georgia; or (5) is authorized to do business in Georgia. Id. at 129 (no personal jurisdiction existed over nonresident defendant who advertised in a trade paper, negotiated a sale over the phone, and accepted a deposit check from a Georgia resident); ETS Payphone v. TK Indus., 236 Ga. App. 713, 715-16 (Ga. Ct. App. 1999) (no personal jurisdiction existed over nonresident defendant who 2LabMD also argues that, as co-conspirators, Johnson and Dartmouth are subject to personal jurisdiction to the same extent as Tiversa. Because no personal jurisdiction exists over Tiversa, LabMD cannot show that Johnson or Dartmouth are subject to personal jurisdiction under subsection (3). Case: 12-14504 Date Filed: 02/05/2013 Page: 6 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 6 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 7 f 10 7 visited Georgia once and negotiated a contract via telephone, mail, and fax). Other factors weighing against a finding of personal jurisdiction are when a defendant’s contact with Georgia is limited to a single business transaction and when that transaction is conducted via telephone. See Gust, 257 Ga. at 129. Tiversa is not registered to do business in Georgia, has no employees or customers in Georgia, derives no revenue from business activities in Georgia, owns no Georgia property, and pays no Georgia taxes. Tiversa’s contact with Georgia consisted of one phone call and nine emails to LabMD. Such contact is not enough under Georgia law to subject Tiversa to personal jurisdiction in Georgia courts. See Gust, 257 Ga. at 130; ETS Payphone, 236 Ga. App. at 715-16. LabMD also argues that personal jurisdiction exists over Tiversa because Tiversa maintains a website that is accessible to Georgia residents. But Tiversa’s website merely advertises Tiversa’s services, does not offer products or services for purchase online, and does not target Georgia residents. Thus, Tiversa’s website does not subject Tiversa to personal jurisdiction in Georgia’s courts. See Smith v. Air Ambulance Network, 207 Ga. App. 75, 75 (Ga. Ct. App. 1993) (explaining that the “mere placement of advertisements in Georgia would be insufficient to authorize the exercise of personal jurisdiction” under Georgia’s long-arm statute). And, although Tiversa’s business involves the global searching of computer Case: 12-14504 Date Filed: 02/05/2013 Page: 7 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 7 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 8 f 10 8 networks, this circumstance alone is also not enough to establish personal jurisdiction. LabMD failed to demonstrate personal jurisdiction under Georgia’s long- arm statute. We need not decide anything else in this case. AFFIRMED. Case: 12-14504 Date Filed: 02/05/2013 Page: 8 of 8 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 8 of 9Case 1: 6-cv-02 80-LM Document 64-3 il 9/12/ 6 9 f 10 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ELBERT PARR TUTTLE COURT OF APPEALS BUILDING 56 Forsyth Street, N.W. Atlanta, Georgia 30303 John Ley Clerk of Court February 05, 2013 For rules and forms visit www.ca11.uscourts.gov MEMORANDUM TO COUNSEL OR PARTIES Appeal Number: 12-14504-AA Case Style: LabMD, Inc. v. Tiversa, Inc., et al District Court Docket No: 1:11-cv-04044-JOF Enclosed is a copy of the court's decision filed today in this appeal. Judgment has this day been entered pursuant to FRAP 36. The court's mandate will issue at a later date in accordance with FRAP 41(b). The time for filing a petition for rehearing is governed by 11th Cir. R. 40-3, and the time for filing a petition for rehearing en banc is governed by 11th Cir. R. 35-2. Except as otherwise provided by FRAP 25(a) for inmate filings, a petition for rehearing or for rehearing en banc is timely only if received in the clerk's office within the time specified in the rules. Costs are governed by FRAP 39 and 11th Cir.R. 39-1. The timing, format, and content of a motion for attorney's fees and an objection thereto is governed by 11th Cir. R. 39-2 and 39-3. Please note that a petition for rehearing en banc must include in the Certificate of Interested Persons a complete list of all persons and entities listed on all certificates previously filed by any party in the appeal. See 11th Cir. R. 26.1-1. In addition, a copy of the opinion sought to be reheard must be included in any petition for rehearing or petition for rehearing en banc. See 11th Cir. R. 35-5(k) and 40-1 . Counsel appointed under the CRIMINAL JUSTICE ACT must file a CJA voucher claiming compensation for time spent on the appeal no later than 60 days after either issuance of mandate or filing with the U.S. Supreme Court of a petition for a writ of certiorari (whichever is later). Pursuant to Fed.R.App.P. 39, costs taxed against appellant. The Bill of Costs form is available on the internet at www.ca11.uscourts.gov For questions concerning the issuance of the decision of this court, please call the number referenced in the signature block below. For all other questions, please call Eleanor M. Dixon, AA at (404) 335-6172. Sincerely, JOHN LEY, Clerk of Court Reply to: Jeff R. Patch Phone #: 404-335-6161 OPIN-1A Issuance of Opinion With Costs Case: 12-14504 Date Filed: 02/05/2013 Page: 1 of 1 Case 1:11-cv-04044-LMM Document 29 Filed 02/05/13 Page 9 of 9Case 1: 6-cv-0248 -LM Document 64-3 il 9/12/ 6 10 of 10 EXHIBIT C Case 1:16-cv-02480-LMM Document 64-4 Filed 09/12/16 Page 1 of 17 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ORDER This matter comes before the Court on Plaintiff’s Rule 60(d)(3) Motion for Relief from Judgment [33] and Motion for Discovery [34].1 After a review of the record and due consideration, the Court enters the following Order. I. Background Defendant Tiversa, Inc. (“Tiversa”) provides peer-to-peer file monitoring and data breach remediation services to corporations, government agencies, and individuals using technology to scan for and protect against data exposure. Dkt. No. [1-1] at 5-6. In 2008, Tiversa downloaded a 1,718-page document that was created and stored by Plaintiff LabMD, Inc. (“LabMD”). That document (“1718 File” or “File”) included personally identifiable information (“PII”) and protected 1 Plaintiff’s Motions do not pertain to Defendants Trustees of Dartmouth College or M. Eric Johnson. : LABMD, INC., : : Plaintiff, : : v. : CIVIL ACTION NO. : 1:11-CV-4044-LMM TIVERSA, INC., TRUSTEES OF : DARTMOUTH COLLEGE, and : M. ERIC JOHNSON, : : Defendants. : Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 1 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 2 of 17 2 health information (“PHI”) such as the Social Security numbers, insurance information, and treatment codes of LabMD patients. Id. at 12. Tiversa’s CEO, Robert Boback, called LabMD to inform it of the File’s discovery and to solicit business from LabMD. Id. at 17-18. Boback claimed the File was discovered on a peer-to-peer file sharing network and downloaded from an unknown source, the identity of which could be discovered by engaging Tiversa’s professional services. Id. at 18-19. Over the next few months, Tiversa sent several emails to LabMD to solicit its business, offering to provide investigation and remediation services. Id. at 19-24. LabMD did not engage Tiversa’s services, and ultimately sued Tiversa for violations of the Computer Fraud and Abuse Act and Georgia law. Id. at 25- 32. LabMD initiated this action in the Superior Court of Fulton County, Georgia on October 19, 2011, id. at 2, and it was subsequently removed to this Court. Dkt. No. [1]. LabMD alleged Tiversa intentionally searched the internet and computer networks for files containing PII and PHI, and intentionally accessed LabMD’s computers and networks to download the 1718 File without authorization. Dkt. No. [1-1] at 16, 25. According to LabMD, Tiversa was subject to personal jurisdiction in Georgia under subsections (2) and/or (3) of the Georgia long-arm statute, which permits the exercise of jurisdiction over a nonresident defendant if it: (2) Commits a tortious act or omission within this state . . . ; Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 2 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 3 of 17 3 (3) Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state. O.C.G.A. § 9-10-91. In November 2011, Tiversa moved to dismiss for lack of personal jurisdiction arguing the download of the 1718 File occurred in Pennsylvania, not Georgia, and that it had not engaged in any other acts or omissions in Georgia, conducted any business in Georgia, or in any way availed itself of jurisdiction in Georgia. Dkt. No. [5] at 1. In support of its motion, Tiversa submitted the Declaration of Mr. Boback (“Boback Declaration”) attesting to Tiversa’s lack of contact with Georgia. Dkt. No. [8-1]. Relying in part on this declaration, the Court found that the Georgia long-arm statute was not satisfied because, under subsection (2), the tortious act did not occur within Georgia since the file was downloaded from Pennsylvania, and under subsection (3), Tiversa did not regularly conduct or solicit business in Georgia. Dkt. No. [23-1]. On August 15, 2012, the Court granted Tiversa’s motion and dismissed the case without prejudice. Id. The Eleventh Circuit affirmed that decision in an opinion dated February 5, 2013. Dkt. No. [29]. Since that time, LabMD claims it has discovered evidence that Mr. Boback’s Declaration, Tiversa’s motion to dismiss, and Tiversa’s appellate briefing contained false statements regarding Tiversa’s contacts with Georgia and the circumstances surrounding the download of the 1718 File. Dkt. No. [33-1] at Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 3 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 4 of 17 4 3-5. LabMD moved to reopen this case, which the Court granted, and now seeks relief from the judgment pursuant to Federal Rule of Civil Procedure 60(d)(3), alleging Tiversa committed fraud on this Court and the Eleventh Circuit. Id. LabMD also seeks discovery in aid of its Rule 60(d)(3) motion. Dkt. No. [34]. II. Legal Standards A federal court’s power to investigate whether a judgment was obtained by fraud on the court is an inherent and broad power. Univ. Oil Prods. Co. v. Root Refining Co., 328 U.S. 575, 580 (1946). Federal Rule of Civil Procedure 60, which provides avenues for relief from judgment, places no limitations on the court’s power to “set aside a judgment for fraud on the court.” FED. R. CIV. P. 60(d)(3). A motion based upon fraud on the court is not barred by laches or unclean hands, and there is no time limitation for setting aside a judgment. See Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 245-46 (1944) abrogated on other grounds by Std. Oil. Co. v. United States, 429 U.S. 17, 18 n.2 (1976); 11 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2870, at 575 (3d ed. 2012) (citing Martina Theatre Corp. v. Schine Chain Theatres, Inc., 278 F.2d 798, 801 (2d Cir. 1960)). The “fraud on the court” referenced in Rule 60(d)(3) is distinct from fraud between the parties, subject to Rule 60(b)(3), in that the latter does not threaten public injury and therefore requires a lower standard to prove. S.E.C. v. ESM Grp., Inc., 835 F.2d 270, 273 (11th Cir. 1988) (quoting Travelers Indemnity Co. v. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 4 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 5 of 17 5 Gore, 761 F.2d 1549, 1552 (11th Cir. 1985) (per curiam)). Rather, “fraud on the court” is defined as: Embracing only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases that are presented for adjudication, and relief should be denied in the absence of such conduct. Id. at 273 (quoting Gore, 761 F.2d at 1551). Fraud on the court is narrowly construed, and is found only in exceptional cases “where the fraud vitiates the court’s ability to reach an impartial disposition of the case before it.” Davenport Recycling Assocs. v. C.I.R., 220 F.3d 1255, 1262 (11th Cir. 2000). This includes “only the most egregious misconduct, such as bribery of a judge or members of a jury, or the fabrication of evidence by a party in which an attorney is implicated.” Rozier v. Ford Motor Co., 573 F.2d 1332, 1338 (5th Cir. 1978) (citations omitted). Conduct such as “nondisclosure to the court of facts allegedly pertinent to the matter before it, will not ordinarily rise to the level of fraud on the court.” Id. To show fraud on the court under Rule 60(d)(3), the majority of circuits have held that the movant must show “(1) an intentional fraud; (2) by an officer of the court; (3) which is directed at the court itself; and (4) in fact deceives the court.” Herring v. United States, 424 F.3d 384, 386 (3d Cir. 2005); United States v. Buck, 281 F.3d 1336, 1342 (10th Cir. 2002); Cobell v. Norton, 334 F.3d 1128, 1150 (D.C. Cir. 2003); United States v. MacDonald, No. 97-7297, 1998 WL 637184, at *4 (4th Cir. Sept. 8, 1998). The Sixth Circuit, however, has held that Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 5 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 6 of 17 6 fraud on the court may be either “intentionally false, willfully blind to the truth, or in reckless disregard of the truth.” Rodriguez v. Schwartz, 465 F. App’x 504, 509 (6th Cir. 2012). Regardless of which elements are required to prove fraud on the court, they “must be supported by clear, unequivocal and convincing evidence. Booker v. Dugger, 825 F.2d 281, 283 (11th Cir. 1987). “Conclusory averments of the existence of fraud made on information and belief and unaccompanied by a statement of clear and convincing probative facts which support such belief” will not suffice. Id. at 284. If the Court does not determine that LabMD has met its burden to establish fraud on the court under Rule 60(d)(3), LabMD then requests that the Court allow discovery to further explore its fraud claims. Although the Eleventh Circuit has not addressed post-judgment discovery in the context of Rule 60(d)(3), other circuits have held that courts may permit discovery to unearth evidence of fraud on the court. Such discovery has only been permitted where there is at least some showing of fraud. Duhaime v. John Hancock Mut. Life Ins. Co., 183 F.3d 1 (1st Cir. 1999) (requiring “some showing that a fraud actually has occurred”); Pearson v. First NH Mortg. Corp., 200 F.3d 30, 35 (1st Cir. 1999) (holding the court has the discretion to permit discovery proceedings “once the record evidence demonstrates a ‘colorable’ claim of fraud”). Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 6 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 7 of 17 7 III. Analysis LabMD argues Tiversa committed fraud on this Court and the Eleventh Circuit through its motion to dismiss and appellate brief. Specifically, LabMD contends the Boback Declaration supporting Tiversa’s motion to dismiss contained two false statements (“Boback Statements”): (1) “Tiversa does not regularly solicit business in Georgia,” and (2) “Neither Tiversa nor any of its employees or agents have ever conducted any business in Georgia, engaged in a persistent course of conduct in Georgia or derived any revenue from the rendition of services in Georgia, and particularly in any way related to the allegations of LabMD.” Dkt. No. [33-1] at ¶¶ 22-23 (quoting Dkt. No. [8-1] ¶¶ 10, 15). LabMD also alleges Tiversa’s attorneys from the law firm of Pepper Hamilton, Eric Kline and John Hansberry (“Pepper Hamilton Attorneys”), made false statements in Tiversa’s reply brief in support of its motion to dismiss and in its appellate brief. Id. ¶¶ 30-33. In the reply brief, LabMD takes issue with two statements (“Pepper Hamilton Statements”): (1) “Tiversa’s only solicitation of business to date in the state of Georgia consists of the one phone call and eight emails to LabMD described in the Complaint,” and (2) “Here, it is undisputed that Tiversa did not hack any computers, did not somehow target LabMD or even know where LabMD and its servers were located when it downloaded the 1,718 File.” Id. ¶¶ 30-31 (quoting Dkt. No. [19] at 6, 8 n.4). LabMD complains of similar statements in Tiversa’s appellate brief. Id. ¶ 32. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 7 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 8 of 17 8 LabMD alleges the Boback Statements and the Pepper Hamilton Statements were known by the Pepper Hamilton Attorneys to be false at the time they were made and were intended to mislead the Courts. Id. ¶¶ 17-18, 26, 33. LabMD contends that at the time the Boback and Pepper Hamilton Statements were made to the Court, “Kline knew that Tiversa had substantially more business solicitations, contacts and conduct in the State of Georgia than the one phone call and handful of emails referenced.” Id. at 4. Further, LabMD argues that a Tiversa employee did hack into a LabMD computer to download the 1718 File, quickly confirmed that the computer he hacked was located in Atlanta, and subsequently downloaded 18 other files from LabMD’s computer. Id. at 5. Tiversa responds that LabMD’s allegations are unsupported by the evidence. Dkt. No. [41] at 29-38. But even if LabMD could support these allegations with evidence, Tiversa asserts that the alleged conduct is insufficient to constitute fraud on the Court. Id. at 48-50. Finally, Tiversa argues that even if LabMD could show fraud on the court, it would be harmless error because this Court still would not have personal jurisdiction over Tiversa. Dkt. No. [41] at 50- 55. LabMD claims it has proof that the Pepper Hamilton Attorneys knew the Boback Statements and the Pepper Hamilton Statements were false at the time they were made. In 2009, Eric Kline incorporated a company known as The Privacy Institute on Tiversa’s behalf and at Tiversa’s direction. Dkt. No. [33-1] ¶ 36. The Privacy Institute was set up to conceal its connection with Tiversa. Id. ¶ Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 8 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 9 of 17 9 37. Mr. Kline represented The Privacy Institute as outside counsel from its inception until its dissolution in 2013. Id. ¶¶ 38-39. Specifically, Mr. Kline represented The Privacy Institute and Tiversa in various dealings with the Federal Trade Commission (“FTC”), including a civil investigative demand served on Tiversa by the FTC. Id. ¶¶ 40-41. Tiversa produced documents to the FTC through The Privacy Institute. Id. ¶ 42. LabMD believes Mr. Kline reviewed and was fully aware of the contents of all documents produced by The Privacy Institute to the FTC in 2009, including Exhibits J and K. Id. ¶ 43. According to LabMD, Exhibit J is a spreadsheet containing a list of companies that Tiversa reported to the FTC for allegedly allowing PII and PHI to be available on peer-to-peer networks (the “List”). Id. ¶ 44. The List was compiled by Tiversa from Incident Record Forms Tiversa created for the purpose of soliciting business from those companies, among others. Id. ¶ 45. The List contains the names of at least six companies located in Georgia, their current locations, and the dates Tiversa created the Incident Record Forms for each company. Id. ¶ 46. The only companies included on the List were those that (1) refused to do business with Tiversa in response to its solicitations, and (2) Tiversa intended to solicit business from again after those companies received warning letters from the FTC. Id. ¶ 47. Tiversa actively solicited business from all six Georgia companies in 2008 or 2009, before it sent the List to the FTC. Id. ¶ 48. After the FTC received the List, it publicized its findings, contacted every company, opened investigations for several of them, and prosecuted at least two Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 9 of 16Case 1: 6-cv-02 80-LM Document 6 -4 il 9/ 2/ 10 of 17 10 of the companies, including LabMD. Id. ¶ 49. LabMD believes Tiversa actively solicited business from the other five Georgia companies in 2009 and 2010, after the FTC sent warning letters to them. Id. ¶ 50. Exhibit K is another document produced to the FTC by Tiversa through The Privacy Institute in 2009. Id. ¶ 53. According to LabMD, this document shows that at the time Tiversa filed its motion to dismiss, it knew that on February 25, 2008, it downloaded the 1718 File directly from a LabMD computer with an IP address of 64.190.82.42. Id. That IP address is located in Atlanta, Georgia. Id. LabMD also points to other evidence that the Boback Statements and the Pepper Hamilton Statements were false. A former Tiversa employee, Richard Wallace, testified under oath2 in another action that he located the 1718 File in Atlanta and downloaded it, then used a browse host function to cause LabMD’s computer to show him other files, and proceeded to download those files from LabMD’s computer as well. Dkt. No. [33-14] at 1372-73. Mr. Wallace testified that Mr. Boback instructed him to make it appear as though the 1718 File was found in locations other than Georgia. Id. at 1369-70. Mr. Wallace also testified that the List was the master list Tiversa used to cold-call people, and that Mr. Boback contacted a lot of the people on the List after turning it over to the FTC. Id. at 1452-53. 2 Tiversa argues that Mr. Wallace’s testimony is inadmissible hearsay. Dkt. No. [41] at 41-42. The Court need not address this issue since it is declining to grant LabMD’s Rule 60(d)(3) Motion. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 10 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 11 of 17 11 “To prove fraud on the court under Rule 60(d)(3), the movant must show “(1) an intentional fraud; (2) by an officer of the court; (3) which is directed at the court itself; and (4) in fact deceives the court.” Herring, 424 F.3d at 386. The evidence presented suggests that the Boback Statements and the Pepper Hamilton Statements could be false, and that Mr. Boback may have known that Tiversa had more contacts with Georgia than it disclosed. But it is not enough that the statements are false; there must be “egregious misconduct . . . or the fabrication of evidence by a party in which an attorney is implicated.” Rozier, 573 F.2d at 1338 (emphasis added). To prove fraud on the court, LabMD must show that Tiversa’s counsel knew that the Boback Statements and the Pepper Hamilton Statements were false. Id. Even if the Court assumes that (1) Exhibits J and K are evidence that Tiversa had more contacts with Georgia than it represented to this Court, (2) Mr. Kline reviewed Exhibits J and K as part of the Privacy Institute’s production of documents to the FTC, and (3) Mr. Kline understood those documents to evidence Tiversa’s contacts with Georgia,3 the Court still cannot conclude that LabMD has shown, by clear and convincing evidence, “an intentional fraud . . . by an officer of the court.” Id. LabMD fails to prove that an officer of this Court was involved in the alleged fraud. 3 The Court acknowledges Tiversa’s argument that the evidence does not support these assumptions. Dkt. No. [41] at 44-48. But because the Court denies LabMD’s Rule 60(d)(3) Motion on other grounds, it need not address these issues. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 11 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 2 of 17 12 LabMD acknowledges that Tiversa’s counsel of record in this action was John Hansberry, an attorney in the Pittsburgh office of Pepper Hamilton. Id. ¶ 17. However, LabMD argues that Eric Kline, of the same office, also represented Tiversa in this case “although not as counsel of record.” Id. ¶ 18. LabMD cites to the transcript of a hearing in a related case in the Western District of Pennsylvania, arguing that Tiversa’s current attorney, Jarrod Shaw, admitted that both Mr. Kline and Mr. Hansberry represented Tiversa in this action. Id. at 11-12. LabMD also notes that “[u]nder the law of partnerships, knowledge and actions of one partner are imputed to all others.” Id. at 12 n.11 (citing Henkels & McCoy, Inc. v. Adochio, No. 94-3958, 1997 WL 5268, at *6 (E.D. Pa. Jan. 6, 1997)). Tiversa responds that Mr. Kline did not represent Tiversa in this case, and that Mr. Shaw misspoke when he stated as much in the Western District of Pennsylvania hearing. Dkt. No. [41] at 46-47. According to Tiversa, Mr. Kline never entered an appearance in this matter, and has never appeared in this Court or any other court in the Eleventh Circuit. Id. Further, Tiversa argues that an attorney is only an “officer of the court” if he actually participates in the litigation, and LabMD offers no such evidence of Mr. Kline’s participation. Id. at 47 (citing Van de Kamp v. Goldstein, 555 U.S. 335, 342 (2009)). LabMD replies that if Mr. Shaw’s disclosure of Mr. Kline’s involvement in this action was truly a mistake, he would have filed a declaration or affidavit from Mr. Kline. Dkt. No. [45] at 9. The failure to do so, LabMD contends, shows that Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 12 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 13 of 17 13 Mr. Kline represented Tiversa in this action. Id. Further, LabMD notes that Tiversa did not respond to its argument that Mr. Kline’s knowledge is imputed to Mr. Hansberry. Id. LabMD argues that discovery is needed to determine whether Mr. Hansberry had actual knowledge, in addition to his imputed knowledge, of Tiversa’s contacts with Georgia. Id. In the hearing held in the Western District of Pennsylvania on July 21, 2014, that court asked Mr. Shaw, “Who was involved previously for Pepper [Hamilton]?” Dkt. No. [33-5] at 2. Mr. Shaw responded “Eric Kline, Your Honor, and John Hansberry represented Tiversa in the action that was filed against Tiversa by LabMD in the Northern District of Georgia.” Id. The court then asked if “[t]hey were out of the Philly office?” and Mr. Shaw answered “John Hansberry, I believe, is out of the Pittsburgh office. Eric Kline is most certainly out of the Pittsburgh office.” Id. This exchange, which Mr. Shaw contends was a misstatement, does not amount to clear and convincing evidence that Mr. Kline represented Tiversa in this action or was otherwise an officer of this Court. To be an officer of the court for purposes of Rule 60(d)(3), an attorney must have some participation in the underlying litigation. See Herring, 424 F.3d at 390 (finding Rule 60(d)(3) applicable to conduct of lawyers that “did not represent the United States in the litigation sought to be reopened . . . [but] they did represent the United States Air Force’s claim of privilege over a document central to that litigation.”); Pumphrey v. K.W. Thompson Tool Co., 62 F.3d 1128, 1130-31 (9th Cir. 1995) (holding that defendant’s vice president and general counsel was an Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 13 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 14 of 17 14 officer of the court for purposes of Rule 60(d)(3), though he did not enter an appearance in the case or sign any documents filed with the court, he “participated significantly” in the litigation by attending trial on defendant’s behalf, gathering information to respond to discovery requests and framing the answers, and participating in the videotaping of a video introduced at trial). Here, LabMD’s evidence does not show that Mr. Kline actually participated in the litigation of this case. Without such evidence, LabMD cannot prove that any misrepresentations in this litigation were made “by an officer of the court.” Herring, 424 F.3d at 386. Mr. Hansberry, as counsel of record for Tiversa in this action, is an officer of this Court and the Eleventh Circuit. See, e.g., Herring, 424 F.3d at 390. Thus, to show fraud on the court, LabMD must prove that Mr. Hansberry made representations concerning Tiversa’s contacts with Georgia that were intentionally false, id. at 386, or at the very least, “willfully blind to the truth, or in reckless disregard of the truth.” Rodriguez, 465 F. App’x at 509.4 But LabMD does not allege that Mr. Hansberry had actual knowledge of Tiversa’s contacts with Georgia. Instead, LabMD argues Mr. Kline’s knowledge should be imputed to Mr. Hansberry. Dkt. No. [33-1] at 12 n.11; Dkt. No. [45] at 9. At the hearing on this matter, LabMD conceded that imputed knowledge is not enough to meet the high standard for fraud on the court. And in its reply brief, LabMD recognizes 4 The Court does not decide whether the intentional fraud standard of the Third, Fourth, Tenth, and D.C. Circuits, or the Sixth Circuit’s willful blindness/reckless disregard standard applies. See supra p. 5. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 14 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 15 of 17 15 that it needs discovery to determine whether Mr. Hansberry had actual knowledge of Tiversa’s contacts with Georgia. Dkt. No. [45] at 9. Thus, based on the allegations and evidence before it, the Court concludes that LabMD has not proved by clear and convincing evidence that Tiversa committed a fraud on the court. LabMD also moves for limited discovery to determine the extent of the Pepper Hamilton Attorneys’ knowledge regarding Tiversa’s various contacts with Georgia. Dkt. No. [34-1] at 2-3. LabMD seeks leave to depose and serve subpoenas duces tecum on Mr. Boback, the Pepper Hamilton Attorneys, individuals associated with The Privacy Institute, and Rule 30(b)(6) designees from Tiversa, Pepper Hamilton, and the law firm of Morgan, Lewis and Bockius. Id. at 3. Based on the foregoing analysis of LabMD’s Rule 60(d)(3) Motion, the Court finds that LabMD has demonstrated some evidence of possible fraud. Duhaime, 183 F.3d at 7 (requiring “some showing that a fraud actually has occurred” for discovery in aid of a motion attacking a final judgment). Thus, the Court will permit limited discovery, though not to the extent requested by LabMD. Instead, LabMD may serve ten (10) written interrogatories on John Hansberry of Pepper Hamilton within thirty (30) days of the date of this Order. Such interrogatories, objections, and responses thereto shall comply with Federal Rule of Civil Procedure 33 and are limited to the Rule 60(d)(3) issues. If the parties have disputes regarding these interrogatories, counsel are instructed to Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 15 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 16 of 17 16 follow the Standing Order’s requirements for handling discovery disputes. See Dkt. No. [38]. IV. Conclusion Based on the foregoing, LabMD’s Rule 60(d)(3) Motion for Relief from Judgment [33] is DENIED with the right to re-file. LabMD’s Motion for Discovery [34] is GRANTED IN PART and DENIED IN PART, such that LabMD may serve ten (10) written interrogatories on John Hansberry within thirty (30) days of the date of this Order. IT IS SO ORDERED this 12th day of May, 2016. Case 1:11-cv-04044-LMM Document 49 Filed 05/13/16 Page 16 of 16Case 1:16-cv-02 80-LMM Document 6 -4 Filed 09/12/16 Page 17 of 17 EXHIBIT D Case 1:16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 1 of 19 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA LABMD, INC., ) Plaintiff, ) ) vs. ) Civil Action No. 15-92 ) ) Judge Mark R. Hornak/ TIVERSA HOLDING CORP. formerly ) Chief Magistrate Judge Maureen P. Kelly known as TIVERSA, INC.; ROBERT J. ) BOBACK; M. ERIC JOHNSON; DOES ) 1-10, ) Re: ECF Nos. 34 and 36 Defendants. ) REPORT AND RECOMMENDATION I. RECOMMENDATION Plaintiff LabMD, Inc., a Georgia corporation, (“LabMD”) has filed this civil action asserting claims for conversion, defamation, tortious interference with business relations, fraud, negligent misrepresentation, civil conspiracy and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The claims arise out of an alleged shakedown scheme executed by Defendant Tiversa, Inc., a Pennsylvania corporation, (“Defendant Tiversa”), Defendant Robert J. Boback, a Pennsylvania resident, (“Defendant Boback”), and Defendant M. Eric Johnson, currently a Tennessee resident, (“Defendant Johnson”).1 Some claims are raised only against Defendants Tiversa and Boback (collectively, “the Tiversa Defendants”). 1 Defendants Does 1-10 are identified in the Complaint as “as-yet unidentified individuals or entities that actively participated in and/or materially benefitted from the illicit conduct detailed herein” who would “be substituted with the proper names of these individuals or entities as they become available.” ECF No. 1 ¶ 10. No such substitution has been made and these defendants obviously have not been served with the Complaint. Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 1 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 2 of 19 For the following reasons, it is respectfully recommended that the Motions to Dismiss presently before the Court, filed by the Tiversa Defendants and Defendant Johnson, ECF Nos. 34 and 36, respectively, be granted. II. REPORT A. FACTUAL AND PROCEDURAL BACKGROUND Litigation between the parties commenced in a Georgia state court action filed by LabMD in October 2011. That case was removed to the United States District Court for the Northern District of Georgia where it was dismissed for lack of personal jurisdiction. LabMD, Inc. v. Tiversa, Inc., 509 F. App’x 842 (11th Cir. 2013)(affirming the dismissal).2 The instant iteration of this litigation was commenced via a Complaint filed by LabMD with this Court on January 21, 2015. ECF No. 1. LabMD filed a RICO Case Statement on February 18, 2015. ECF Nos. 18, 19. On March 24, 2015, the Tiversa Defendants filed a Motion to Dismiss Plaintiff’s Complaint and a brief in support thereof. ECF Nos. 34, 35. On March 31, 2015, Defendant Johnson filed a Motion to Dismiss and a brief in support thereof. ECF Nos. 36, 37. On June 1, 2015, LabMD filed responses in opposition to both Motions to Dismiss. ECF Nos. 63, 64. The Tiversa Defendants filed a Reply in Support of their Motion to Dismiss on June 24, 2015. ECF No. 68. Defendant Johnson filed a Reply in Support of his 2 Tiversa also filed an action in this Court against LabMD pleading state law claims for defamation, slander per se, commercial disparagement and trade libel. Tiversa Holding Corp. v. LabMD, Inc., No. 13-1296 (W.D. Pa. Sept. 5, 2012). On November 4, 2014, Judge Nora Barry Fischer dismissed Tiversa’s action for lack of diversity jurisdiction upon the addition of Richard Edward Wallace, a Pennsylvania resident, as a named defendant. (ECF No. 84). Tiversa is now pursuing its claims in a separate consolidated action in the Pennsylvania Court of Common Pleas of Allegheny County, at GD-14-16497. Also pending and arising out of the subject matter of this action is an administrative action commenced by the Federal Trade Commission, In the Matter of LabMD, Inc., No. 9357 (F.T.C.). LabMD has unsuccessfully challenged the FTC’s action in multiple federal actions. LabMD, Inc. v. Federal Trade Comm’n, No. 1:13-cv-1787 (D.D.C. Nov. 14, 2013); LabMD, Inc. v. Federal Trade Comm’n, No. 13- 15267-F (11th Cir. Feb. 18, 2014); LabMD, Inc. v. Federal Trade Comm’n, No. 1:14-cv-00810-WSD, aff’d 776 F.3d 1275 (11th Cir. 2015). 2 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 2 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 3 of 19 Motion to Dismiss on June 24, 2015. ECF No. 69. The Motions to Dismiss are now ripe for consideration. The allegations in the Complaint describe the shakedown scheme as one in which Defendants conspired to infiltrate LabMD’s computer systems and, upon gaining access, created a data security breach in LabMD’s computer files. ECF No. 1 ¶ 4. Through this breach, Defendant Tiversa obtained a 1718-page file containing confidential patient health-related data (“the 1718 File”). Id. ¶ 20. With this file as proof of a breach, Defendant Tiversa then offered to sell LabMD services to remedy the breach. Id. When LabMD refused to purchase Defendant Tiversa’s services, Defendants turned to the Federal Trade Commission (“FTC”) and reported that due to LabMD’s failed data security protocols, confidential patient health and personal information was disseminated on peer-to-peer networks for unbridled use by identity thieves. Id. ¶ 22. LabMD contends that Defendants then retaliated against LabMD’s refusal to purchase Tiversa’s services by including references to the 1718 File in publications authored by Defendant Johnson relative to health care “data breaches.” Id. ¶ 21. LabMD alleges that as a result of Defendants’ conduct, the FTC initiated a public and wide-ranging investigation of LabMD, leaving it “an insolvent shell of a company.” Id. ¶ 1. B. STANDARD OF REVIEW Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Dismissal of a complaint or portion of a complaint is warranted under Federal Rule of Civil Procedure 12(b)(6) when a claimant fails to sufficiently state a claim upon which relief can be granted. Avoiding dismissal under Rule 12(b)(6) requires that the complaint to provide “enough factual matter (taken as true)” to suggest the required elements of the claim presented while providing the 3 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 3 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 4 of 19 defendant with fair notice of the grounds upon which the claim rests. Phillips v. County of Allegheny, 515 F. 3d 224, 233, 234 (3d Cir. 2008). The pleader must “‘nudge his or her claims across the line from conceivable to plausible.’” Id. (quoting Bell Atlantic Co. v. Twombly, 550 U.S. 544 at 570 (2007)). In assessing the merits of a claim subject to a motion to dismiss, a court must accept all alleged facts as true and draw all inferences gleaned therefrom in the light most favorable to the non-moving party. Phillips, 515 F. 3d at 228 (citing Worldcom, Inc. v. Graphnet, Inc., 343 F. 3d 651, 653 (3d Cir. 2003)). A pleading party need not establish the elements of a prima facie case at this stage; the party must only “put forth allegations that ‘raise a reasonable expectation that discovery will reveal evidence of the necessary element[s].’” Fowler v. UPMC Shadyside, 578 F. 3d 203, 213 (3d Cir. 2009) (quoting Graff v. Subbiah Cardiology Associates, Ltd., 2008 WL 2312671 (W.D. Pa. June 4, 2008)). C. DISCUSSION As to each of LabMD’s claims, Defendants argue in the pending Motions to Dismiss that: (1) the claim is time-barred due to the expiration of the statute of limitations; and (2) the claim is substantively deficient. A discussion of these arguments, as necessary, for each claim follows. 1. Count I: Conversion (All Defendants) a. LabMD claims LabMD’s Complaint alleges that in 2008, the Tiversa Defendants contacted LabMD and represented that Defendant Tiversa had obtained the 1718 File. ECF No. 1 ¶ 20. On September 20, 2010, LabMD demanded the return of the 1718 File from Tiversa. ECF No. 1 ¶ 35; ECF No. 35-2 ¶ 96. It had not been returned as of the October 19, 2011, the date of the filing of the Georgia lawsuit. ECF No. 1 ¶ 35; ECF No. 35-2 ¶ 151. 4 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 4 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 5 of 19 The Complaint also alleges that Defendant Johnson published a paper in 2009 which included an excerpt from the 1718 File. ECF No. 1 ¶ 28. LabMD demanded return of the 1718 File from him on September 30, 2010. ECF No. 1 ¶ 35; ECF No. 35-2 ¶ 97. It had not been returned as of the date of the filing of the October 19, 2011, Georgia lawsuit. ECF No. 1 ¶ 35; ECF No. 35-2 ¶ 151. b. Statute of Limitations Both the Tiversa Defendants and Defendant Johnson raise the statute of limitations as a basis to dismiss the conversion claims. The United States Court of Appeals for the Third Circuit has consistently held that a statute of limitations defense may be raised by a motion under Rule 12(b)(6) "only if 'the time alleged in the statement of a claim shows that the cause of action has not been brought within the statute of limitations.'" Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002)(quoting Hanna v. U.S. Veterans' Admin. Hosp., 514 F.2d 1092, 1094 (3d Cir. 1975)). Indeed, "'[i]f the bar is not apparent on the face of the complaint, then it may not afford the basis for a dismissal of the complaint under Rule 12(b)(6).'" Robinson, 313 F.3d at 135 (quoting Bethel v. Jendoco Constr. Corp., 570 F.2d 1168, 1174 (3d Cir. 1978)). The Pennsylvania statute of limitations for conversion is two years. 42 Pa. Cons. Stat. § 5524(3). “The classic definition of conversion under Pennsylvania law is ‘the deprivation of another's right of property in, or use or possession of, a chattel, or other interference therewith, without the owner's consent and without lawful justification.’” L.B. Foster Co. v. Charles Caracciolo Steel & Metal Yard Inc., 777 A.2d 1090, 1095 (Pa. Super. Ct. 2001)(quoting McKeeman v. Corestates Bank, N.A., 751 A.2d 655, 659 n.3 (Pa. Super. Ct. 2000)). The timeline asserted by LabMD in the Complaint establishes the existence of the elements of LabMD’s conversion claims, at the latest, by the filing of the Georgia action in 5 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 5 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 6 of 19 October 2011. Accordingly, it is apparent on the face of the relevant pleadings that the applicable two-year statute of limitations had run long before the filing of the instant Complaint in January 2015. In opposing the Motions to Dismiss, LabMD asserts that the statute of limitations was equitably tolled when it timely asserted its rights in the wrong forum, i.e., Georgia. In Pennsylvania, the doctrine that LabMD that seeks to invoke is codified in a “savings statute” which provides that, in certain situations: If a civil action or proceeding is timely commenced and is terminated, a party, or his successor in interest, may, notwithstanding any other provision of this subchapter, commence a new action or proceeding upon the same cause of action within one year after the termination and any other party may interpose any defense or claim which might have been interposed in the original action or proceeding. 42 Pa. Cons. Stat. § 5535(a)(1)(emphasis added). The Georgia action was terminated on February 5, 2013, when the United States Court of Appeals for the Eleventh Circuit affirmed the district court’s dismissal of the case for lack of personal jurisdiction. LabMD, Inc. v. Tiversa, Inc., 509 Fed. App’x 842. In accordance with the Pennsylvania savings statute, LabMD had one year - until February 5, 2014 - to commence a new action. LabMD did not file the instant Complaint until January 21, 2015, more than one year after the termination of the Georgia action. Therefore, the Pennsylvania savings statute does not “save” the conversion claims. As such, LabMD’s conversion claims (Count I) against Defendants should be dismissed with prejudice as time-barred. c. Substantive Deficiency In light of the fact that the conversion claims are clearly time-barred, the remaining substantive bases for the Motions to Dismiss these claims do not need to be addressed. 6 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 6 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 7 of 19 2. Count II: Defamation (All Defendants) a. LabMD claims In its Complaint, LabMD alleges: 36. Defendants have published false and defamatory statements about LabMD to third parties (“the Defamatory Statements”), including statements that refer to LabMD’s trade and profession that were calculated to injure it therein and were disparaging words productive of special damage which flows naturally therefrom. 37. The Defamatory Statements have severely damaged LabMD’s brand, reputation, and goodwill. ECF No. 1 ¶¶ 36, 37. Nowhere in the Complaint does LabMD specifically identify any of said “Defamatory Statements” that form the basis for its defamation claims. b. Statute of Limitations As set forth below, the failure of LabMD to identify any of the “Defamatory Statements” and assert the requisite elements of a defamation claim renders it impossible for the Court to consider the timeliness of these claims. c. Substantive Deficiency Defendants argue that LabMD’s failure to identify the alleged defamatory statements in the Complaint is fatal to its defamation claims. Under the relevant Pennsylvania statute, the elements of a defamation claim are as follows: (a) Burden of plaintiff. -- In an action for defamation, the plaintiff has the burden of proving, when the issue is properly raised: (1) The defamatory character of the communication. (2) Its publication by the defendant. (3) Its application to the plaintiff. (4) The understanding by the recipient of its defamatory meaning. (5) The understanding by the recipient of it as intended to be applied to the plaintiff. (6) Special harm resulting to the plaintiff from its publication. 7 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 7 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 8 of 19 (7) Abuse of a conditionally privileged occasion. (b) Burden of defendant. -- In an action for defamation, the defendant has the burden of proving, when the issue is properly raised: (1) The truth of the defamatory communication. (2) The privileged character of the occasion on which it was published. (3) The character of the subject matter of defamatory comment as of public concern. 42 Pa. Con. Stat. § 8343. A plaintiff is not required to plead “the precise defamatory statements” or “specifically name the person who made the statement,” as long its defamation count “provides sufficient notice to defendants.” Rishell v. RR Donnelley & Sons Co., 2007 WL 1545622, *3 (E.D. Pa. May 24, 2007) (citations omitted). However, LabMD’s failure is not one of degree of specificity; there is simply no identification whatsoever of the “Defamatory Statements.” In response to the Motions to Dismiss the defamation claims, LabMD argues that it has identified the statements with sufficient particularity, citing to a list of twelve specific alleged defamatory communications it provides in its Opposition to the Tiversa Defendants’ Motion to Dismiss. ECF No. 63 at 16. However, a complaint may not be modified by a brief in opposition to a motion to dismiss. Pennsylvania ex rel. Zimmerman v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988). Accordingly, there is not sufficient notice to Defendants in the Complaint of the basis for LabMD’s claims. It is thus recommended that the defamation claims (Count II) be dismissed without prejudice to file an amended complaint as to this count. 3. Count III: Tortious Interference with Business Relations (All Defendants) a. LabMD claims In Count III of the Complaint, LabMD alleges that: 8 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 8 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 9 of 19 49. By engaging in the above described misconduct, Defendants have substantially harmed and/or seriously jeopardized LabMD’s reputation and goodwill in the healthcare industry and its existing and prospective business relationships with patients, referral sources, and others. 50. Defendants knew or should have known that the above described misconduct would substantially harm and/or seriously jeopardize LabMD’s reputation and goodwill in the healthcare industry and its existing and prospective business relationships with patients, referral sources, and others. ECF No. 1 ¶¶ 49, 50. b. Statute of Limitations As fully explained below, LabMD fails to allege sufficient facts to establish the plausibility of these claims. Therefore, it is impossible for the Court to evaluate the timeliness of these claims. c. Substantive Deficiency Initially, it is worth noting that “tortious interference with business relations” is not truly a tort claim in Pennsylvania. However, "Pennsylvania recognizes both interference with existing contractual relations and interference with prospective contractual relations as branches of the tort of interference with contract." Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 530 (3d Cir. 1998) (citing U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914, 925 (3d Cir.1990)). Although they are distinct, the two types of torts share essentially the same elements. Brokerage Concepts, Inc, 140 F.3d at 529. These elements include: 1. the existence of a contractual, or prospective contractual relation between [the plaintiff] and a third party; 2. purposeful action on the part of the defendant, specifically intended to harm the existing relation, or to prevent the prospective relation from occurring; 3. The absence of a privilege or justification on the part of the defendant; 4. the occasioning of actual legal damage as a result of the defendants' conduct; and 5. for prospective contracts, a reasonable likelihood that the relationship would have occurred but for the interference of the defendant. 9 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 9 of 18Case 1:16-cv- 2480-LMM Document 64-5 Filed 09/12/16 Page 10 of 19 Id. at 530 (citing Pelagatti v. Cohen, 536 A.2d 1337, 1343 (Pa. Super. Ct. 1988); Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 471 (Pa. 1979); Birl v. Philadelphia Elec. Co., 167 A.2d 472, 474 (Pa. 1960)). In the Motions to Dismiss, Defendants argue that these claims are substantively deficient in that LabMD fails to allege facts in support of the first and second requisite elements of this cause of action. First, Defendants argue that no contractual relationship is alleged. The Tiversa Defendants notably cite to Marci's Fun Food, LLC v. Shearer's Foods, Inc., 2010 WL 3982290, *12 (W.D. Pa. Oct. 8, 2010), where allegations of “relationships” with unidentified “customers” were found to be insufficient to establish any type of contractual relationship. Upon review of the relevant portions of the Complaint, it is clear that LabMD’s allegations suffer from a similar insufficiency. Despite LabMD’s argument to the contrary, bald references to “patients,” “customers” and “referral sources” cannot support its claims. Second, Defendants also point out that the Complaint lacks any factual allegations to show “purposeful action” taken by Defendants, “specifically intended to harm the existing relation, or to prevent the prospective relation from occurring.” Brokerage Concepts, Inc., 140 F.3d at 530. In the Complaint, LabMD characterizes the motivations behind Defendants’ conduct as “for the purpose of commercial[] benefit[],” ECF No. 1 ¶ 3, the solicitation of business from LabMD, id. ¶ 20, the bolstering of Defendant Johnson’s report, id. ¶ 21, and retaliation (by providing the 1718 File to Defendant Johnson and to the FTC), id. ¶¶ 21, 22. Although these allegations may support LabMD’s allegation that Defendants acted “improperly, without privilege, purposely, and with malice and intent to injure LabMD,” id. ¶ 52, they do not 10 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 10 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 11 of 19 suggest that the actions were done with the specific intent to harm existing or prospective contractual relationships, as required to sustain a claim for interference with contract. In light of LabMD’s failure to allege facts in support of the requisite elements of an interference claim, it is recommended that the tortious interference with business relations claims (Count III) be dismissed without prejudice to file an amended complaint as to this count. 4. Count IV: Fraud (the Tiversa Defendants) a. LabMD Claims LabMD alleges in Count IV that the Tiversa Defendants are liable for fraud. LabMD asserts that, in order to induce it to obtain Tiversa’s services, the Tiversa Defendants made knowingly false statements concerning how they had obtained the 1718 File and the extent to which third parties were downloading copies of the 1718 File. ECF No. 1 ¶¶ 55-56. b. Statute of Limitations As discussed below, no plausible claim of fraud is set forth in the Complaint. Thus, a statute of limitations analysis is not necessary. c. Substantive Deficiency The specific elements of a fraud claim in Pennsylvania are: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance. Gibbs v. Ernst, 647 A.2d 882, 889 (Pa. 1994) (citations omitted). In other words, “[f]raud is composed of a misrepresentation fraudulently uttered with the intent to induce the action undertaken in reliance upon it to the damage of its victim.” Thomas v. Seaman, 304 A.2d 134, 11 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 11 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 12 of 19 137 (Pa. 1973). It is important to note, Federal Rule of Civil Procedure 9(b) requires that fraud be pled with particularity. In their Motion to Dismiss, the Tiversa Defendants assert that LabMD fails to provide factual support for the second, third and fifth required elements of fraud. As the Tiversa Defendants explain: . . . [LabMD] alleges that Tiversa made the allegedly fraudulent representation “for the purposes of soliciting its business, specifically to try to persuade [LabMD] to use Tiversa’s ‘Incidence Response Services.’” Complaint, ¶ 20. The only way Plaintiff can prevail on its theory is if [LabMD] actually engaged Tiversa’s services - the action which Tiversa allegedly intended to induce. However, the Complaint makes it abundantly clear that this allegedly desired result did not occur as [LabMD] did not engage Tiversa’s services. Id. Thus, [LabMD] has failed to plead any reliance on the statements, warranting dismissal of the claim. ECF No. 35 at 21. Essentially, the Tiversa Defendants argue that there can be no claim of fraud where there is no transaction. In Plaintiff’s Opposition, LabMD does not specifically respond to this argument. Instead, LabMD asserts that the Tiversa defendants “implicitly conceded the materiality of the misrepresentation by using it to attempt to induce LabMD to purchase Tiversa’s services.” ECF No. 63 at 26. LabMD also asserts that it spent significant time and money attempting to remedy the reported data breaches. Id. Finally, LabMD reiterates its allegations concerning the Tiversa Defendants’ intent to mislead in making the misrepresentation. Id. Pennsylvania courts have held that “[a] misrepresentation is material when it is of such a character that if it had not been made, the transaction would not have been entered into.” Delahanty v. First Pa. Bank, N.A., 464 A.2d 1243, 1252 (Pa. Super. 1983). Because no transaction was entered into by Defendant Tiversa and LabMD, any false representation made by the Tiversa Defendants could not have been “material to the transaction at hand.” Gibbs, 647 12 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 12 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 13 of 19 A.2d at 889. Thus, it appears that LabMD cannot make out a plausible claim for fraud. Accordingly, it is recommended that the fraud claims (Count IV) be dismissed with prejudice. 5. Count V: Negligent Misrepresentation (The Tiversa Defendants) a. LabMD Claims The basis for LabMD’s negligent misrepresentation claims is essentially the same as the basis for its fraud claims. LabMD alleges that the Tiversa Defendants made statements they knew or should have known were false concerning how they had obtained the 1718 File and the extent to which third parties were downloading copies of the 1718 File. ECF No. 1 ¶¶ 62-63. b. Statute of Limitations As discussed below, no plausible claim of negligent misrepresentation is set forth in the Complaint. Thus, no statute of limitations analysis is necessary. c. Substantive Deficiency The Tiversa Defendants move to dismiss these claims on grounds similar to those asserted in opposition to the fraud claims. Specifically, they argue LabMD failed to allege any material misrepresentation of fact. LabMD does not substantively respond to this argument. ECF No. 63 at 26-27. In Pennsylvania, a claim for negligent misrepresentation has the following elements: Negligent misrepresentation requires proof of: (1) a misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter ought to have known its falsity; (3) with an intent to induce another to act on it; and; (4) which results in injury to a party acting in justifiable reliance on the misrepresentation. Bortz v. Noon, 729 A.2d 555, 561 (Pa. 1999)(citations omitted). Therefore, negligent misrepresentation, like fraud, requires a misrepresentation of a material fact. As set forth above, the allegations in LabMD’s Complaint are insufficient to establish this element. No 13 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 13 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 14 of 19 representation made by the Tiversa Defendants could have been material to the transaction at hand where no transaction was entered into by Defendant Tiversa and LabMD. Accordingly, it is recommended that the negligent misrepresentation claims (Count V) be dismissed with prejudice. 6. Count VI: Civil Conspiracy (All Defendants) a. LabMD Claims LabMD alleges that Defendants have a common design and purpose to benefit commercially from misrepresentations about data security breaches and that they acted in concert to harm LabMD through conversion of LabMD’s property, defamation relating to LabMD’s trade and profession and interference with LabMD’s business relations. ECF No. 1 ¶¶ 70-71. b. Statute of Limitations Due to the deficiency identified below, no analysis of the statute of limitations is necessary. c. Substantive Deficiency Defendants argue, inter alia, that where the underlying claims against them are untenable, so, too, are LabMD’s claims for civil conspiracy. In light of the fact that the civil conspiracy claims are based upon the claims for conversion, defamation and interference with business relations, all of which have been assessed by this Court to be unsupported, these claims are similarly unsupported. Nix v. Temple University, 596 A.2d 1132, 1137 (Pa. Super. 1991) (holding that where there is no cause of action for an act, there can be no cause of action for conspiracy to commit the act). Thus, it is recommended that the civil conspiracy claims (Count VI) be dismissed without prejudice to file an amended complaint as to this count. 14 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 14 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 15 of 19 7. Counts VII and VIII: RICO (All Defendants) a. LabMD Claims LabMD alleges violations of 18 U.S.C. § 1962(c) and (d). These subsections set forth the following activities prohibited by RICO: (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 18 U.S.C. § 1962. LabMD’s RICO claims against Defendants allege the existence of an enterprise, the activities of which affect interstate commerce and the purpose of which is to commercially benefit from misrepresentations about data privacy and security breaches to “unsuspecting consumers, government agencies, the media, and the public.” ECF No. 1 ¶ 79. LabMD alleges that Defendants conspired to deprive LabMD of its assets and property through the illegal use of interstate mails and interstate wires. Id. ¶ 82. In its RICO statement, in a response to the directive to “List the alleged victims [of the RICO violations] and how each victim has been allegedly injured,” LabMD described its injury as follows: . . . Defendants’ scheme has been financially devastating to LabMD, including by causing the FTC’s investigation and enforcement action against it. As a direct consequence of the FTC’s proceedings, including the attendant adverse publicity and the administrative burdens that were imposed on LabMD to comply with the FTC’s demands for access to current and former employees and the production of thousands of documents, LabMD’s insurers cancelled all of the insurance coverage for LabMD and its directors and officers, and LabMD lost virtually all of its patients, referral sources, and workforce, which had included around 40 15 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 15 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 16 of 19 full-time employees. Consequently, LabMD was effectively forced out of business by January 2014, and it now operates as an insolvent entity that simply provides records to former patients. In addition, Defendants have published false and fraudulent statements about LabMD to third parties, including statements that refer to LabMD’s trade and profession that were calculate to injure it therein and were disparaging words productive of special damages which flows naturally therefrom. ECF No. 19 at 6. b. Statute of Limitations Defendants argue that LabMD’s RICO claims are time-barred because the claims accrued, at the latest, in 2010. In response, LabMD argues that it did not have notice of the claims until April 2, 2014, “when Defendants’ lies to LabMD, the FTC, and the Oversight Committee were first exposed.” ECF No. 63 at 19. The statute of limitations for a civil RICO claim is four years. Rotella v. Wood, 528 U.S. 549, 552 (2000). The statute begins to run when the plaintiff knew or should have known of the injury. Id. at 553, 554. According to LabMD’s allegations in the Complaint, the Tiversa Defendants’ “misrepresentations caused the FTC to investigate LabMD and to bring an enforcement action against it in 2010.” ECF No. 1 ¶ 22. At that point, LabMD knew of the injury it claims to have suffered and the parties who caused that injury even if it did not then know the precise methods used or motivation behind the injury. It is apparent from the face of the relevant pleadings that the instant Complaint, filed in 2015, was filed more than four years after the identified 2010 event. Accordingly, it is recommended that the RICO claims (Counts VII and VIII) be dismissed with prejudice as time-barred. 16 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 16 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 17 of 19 c. Substantive Deficiency In light of the fact that the RICO claims are clearly time-barred, the remaining bases for the Motions to Dismiss these claims do not need to be addressed. D. CONCLUSION For the foregoing reasons, it is respectfully recommended that the Motions to Dismiss, ECF Nos. 34 and 36, be GRANTED as follows. As to Count I, Conversion, the Motions to Dismiss, ECF Nos. 34 and 36, should be GRANTED with prejudice. As to Count II, Defamation, the Motions to Dismiss, ECF Nos. 34 and 36, should be GRANTED without prejudice to file an amended complaint as to this count. As to Count III, Tortious Interference with Business Relations, the Motions to Dismiss, ECF Nos. 34 and 36, should be GRANTED without prejudice to file an amended complaint as to this count. As to Count IV, Fraud, the Motion to Dismiss, ECF No. 34, should be GRANTED with prejudice. As to Count V, Negligent Misrepresentation, the Motion to Dismiss, ECF No. 34, should be GRANTED with prejudice. As to Count VI, Civil Conspiracy, the Motions to Dismiss, ECF Nos. 34 and 36, should be GRANTED without prejudice to file an amended complaint as to this count. As to Counts VII and VIII, RICO violations, the Motions to Dismiss, ECF Nos. 34 and 36, should be GRANTED with prejudice. 17 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 17 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 18 of 19 In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Local Rule 72.D.2, the parties are permitted to file written objections in accordance with the schedule established in the docket entry reflecting the filing of this Report and Recommendation. Failure to timely file objections will waive the right to appeal. Brightwell v. Lehman, 637 F.3d 187, 193 n. 7 (3d Cir. 2011). Any party opposing objections may file their response to the objections within fourteen (14) days thereafter in accordance with Local Civil Rule 72.D.2. Respectfully submitted, /s/ Maureen P. Kelly MAUREEN P. KELLY CHIEF UNITED STATES MAGISTRATE JUDGE Dated: August 17, 2015 cc: The Honorable Mark R. Hornak United States District Judge All Counsel of Record Via CM-ECF 18 Case 2:15-cv-00092-MRH-MPK Document 70 Filed 08/17/15 Page 18 of 18Case :16-cv-02480-LMM Document 64-5 Filed 09/12/16 Page 19 of 19 EXHIBIT E Case 1:16-cv-02480-LMM Document 64-6 Filed 09/12/16 Page 1 of 12 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA LABMD, INC., Plaintiff, v. TIVERSA HOLDING CORP. formerly known as TIVERSA, INC.; ROBERT J. BOBACK; M. ERIC JOHNSON; DOES 1- 10 Defendants. ) ) ) ) ) ) ) ) ) ) ) ) Civil Action No. 2:15-cv-92 Judge Mark R. Hornak MEMORANDUM OPINION Mark R. Hornak, United States District Judge On January 8, 2016 this Court issued a Memorandum Order, ECF No. 115, that largely adopted Chief Magistrate Judge Kelly’s Report and Recommendation (“R&R”), ECF No. 70, and dismissed LabMD’s Complaint in its entirety. Specifically, as to the Tiversa Defendants, Counts I, VII, and VIII were dismissed as time barred and Counts II, III, IV, V, and VI were dismissed on substantive grounds; as to Defendant Johnson, Counts I, II, III, VII, and VIII were dismissed as time barred and Count VI was dismissed on substantive grounds. 1 LabMD has now filed a Motion for Reconsideration, ECF No. 117, which the parties have exhaustively briefed, ECF Nos. 118, 122, 123, 124. That Motion chiefly argues that: (1) the application of the Pennsylvania Savings Statute, 42 Pa. Cons. Stat. § 5535, to the RICO claims was reversible error; (2) under Jewelcor, Inc. v. Karfunkel, 517 F.3d 672 (3d Cir. 2008), the 1 Counts I, VII, and VIII were dismissed with prejudice as to all Defendants and Counts II and III were dismissed with prejudice as to Defendant Johnson only. All other counts were dismissed without prejudice and leave to amend was granted. An Amended Complaint has now been filed. ECF No. 126. Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 1 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 2 of 12 2 Pennsylvania Savings Statute does not apply to any claims here; (3) equitable tolling 2 applies because LabMD mistakenly initiated this suit in the wrong forum; and (4) the discovery rule and/or equitable tolling preclude dismissal of claims against Defendant Johnson on timeliness grounds. Upon review of the papers and relevant legal and decisional authorities, the Court concludes that application of the Pennsylvania Savings Statute was in error. That conclusion, however, does not change the ultimate outcome of the Court’s previous ruling. For the reasons stated below, LabMD’s Motion for Reconsideration will be denied. I. STANDARD OF REVIEW Motions for reconsideration are appropriate only “to correct manifest errors of law or fact or to present newly discovered evidence.” Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). Such a motion will “only be granted if the moving party demonstrates (1) an intervening change in the controlling law; (2) the existence of new evidence that was unavailable when the court issued its order; or (3) the need to correct a clear error of law or fact to prevent a manifest injustice.” Peerless Ins. Co. v. Pa. Cyber Charter Sch., 19 F. Supp. 3d 635, 651 (W.D. Pa. 2014). “The moving party bears a heavy burden to demonstrate that an order should be reconsidered,” and rearguing or re-litigating old matters or expressing disagreement with the earlier ruling are inappropriate bases for such a motion. Wonderland Nurserygoods Co. v. Thorley Indus., LLC, No. 12-196, 2014 WL 2608117, at *1 (W.D. Pa. June 11, 2014). 2 While equitable tolling may not be “generally amenable to resolution on a Rule 12(b)(6) motion,” Cunningham et al. v. M&T Bank Corp. et al., No. 15-1412, slip op. at 2 (3d Cir. Feb. 19, 2016) (citing In re Cmty. Bank of N. Va., 622 F.3d 275, 301-02 (3d Cir. 2010)), this issue is not so fact-bound as to preclude consideration here. Equitable tolling in this case primarily turns on set dates-when statements were published, when a suit was filed, when that suit was terminated, etc.-so it is really just a matter of navigating a calendar and doing simple math. Based on the uncontradicted evidence that LabMD itself has put into the record, dealing with equitable tolling at this juncture makes good sense. That this is a motion for reconsideration, with a different judicial calculus than a regular motion to dismiss also weighs in favor of deciding the issue now, rather than punting until after some discovery that will not in any event change that calendar and the court docket information. Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 2 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 3 of 12 3 II. DISCUSSION Count I: Conversion Count I was dismissed as time-barred as to all Defendants. ECF No. 115, at 1. This Court adopted the R&R’s analysis and conclusion as to this Count in full. The R&R invoked the Pennsylvania Savings Statute, 42 Pa. Cons. Stat. § 5535(a)(1), and determined that it gave LabMD one year from the termination of the Georgia action to file this suit in this Court. ECF No. 70, at 6. Because it concluded that the Georgia action ended on February 5, 2013 and this action was not filed until January 21, 2015, the R&R concluded that the Savings Statute did not save this action. Upon further review, the Court now concludes that its application of the Savings Statute was in error. The Third Circuit in Jewelcor, Inc. v. Karfunkel, 517 F.3d 672 (3d Cir. 2008) held that the Savings Statute does not apply unless the “civil action is commenced in and terminated by a Pennsylvania state court,” id. at 675. While the Circuit’s holding was somewhat anticipatory, see id. at 676 n.4, it is binding on this Court. Thus, the Court concludes the Pennsylvania Savings Statute has no application here. LabMD urges that this conclusion compels a reversal of the Court’s dismissal. ECF No. 118, at 5, 10. LabMD says that without the Savings Statute, it had until October 6, 2015 to file this case. Id. at 10. The Court does not agree. First, LabMD’s argument rests on a tortured understanding of the Savings Statute. The purpose of that statute is to give parties more time to file, irrespective of the statute of limitations. See 42 Pa. Cons. Stat. § 5535(a)(1). LabMD so recognized in its earlier briefs. ECF No. 63, at 16 (applying the Savings Statute here “would toll the statute of limitations not only during the pendency of the Georgia Action, but for a year after its termination.”). Simply put, Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 3 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 4 of 12 4 LabMD had all along been urging this Court to apply the Savings Statute it now says the Court must ignore. But contrary to LabMD’s current argument, that would in no way shorten the statute of limitations. Nevertheless, the Court’s consideration of Jewelcor compels it to disregard the Savings Statute. According to LabMD, this means that the time it spent mistakenly litigating in Georgia (by its count, 719 days) is equitably tolled and its current conversion claims are timely. ECF No. 118, at 10. But that argument fails to account for the pronouncement of Pennsylvania state law the Third Circuit cited in Jewelcor: “an action in one state does not toll the running of the statute in another state.” Jewelcor, 517 F.3d at 675 (citing Royal-Globe Ins. Co. v. Hauck Mfg. Co., 335 A.2d 460, 462 (Pa. Super. Ct. 1975). As the Jewelcor Court noted, Pennsylvania law provides the rule of decision on this point, and this is the state of the law in situations where the Savings Statute does not apply, like this one. So no tolling, equitable or otherwise is appropriate under Pennsylvania law. 3 So then, the Court must determine anew when the statute of limitations on the conversion claim ran. The Court concludes that the conversion claim was established by September 30, 2010 letter (which specifically mentioned conversion of the “1718 file”) so the statute of limitations began to run then. Three hundred eighty-four (384) days elapsed from when the elements of LabMD’s conversion claim accrued until the filing of the Georgia action. 4 The R&R as adopted noted that the Georgia action terminated on February 5, 2013 when the Eleventh Circuit affirmed the district court’s dismissal. ECF No. 70, at 6. LabMD now argues that the Georgia action 3 Equitable tolling is just that-equitable. The Court finds no basis in the record to exercise is discretion to essentially give an equitable break to a party who waited nearly two years after its first action was over to file here. 4 The R&R as adopted by this Court stated that the elements of the conversion claim were established “at the latest, by the filing of the Georgia action in October 2011.” ECF No. 70, at 5-6. That statement was not, and is not, an explicit finding of when the statute of limitations began to run. Rather, LabMD received the benefit of the doubt as to the latest possible date that a conversion claim could be said to have been established. Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 4 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 5 of 12 5 actually terminated when the period for filing a petition for a writ of certiorari ran: October 6, 2013. ECF No. 118, at 3. But Jewelcor’s forecast of Pennsylvania law leads the Court to conclude that the Georgia action did not toll the two year statute of limitations, so LabMD had until September 30, 2012 to file its claim here. That it did not do. Further, even if the Georgia action did toll the statute of limitations, and accepting LabMD’s new and improved termination date of October 6, 2013 as the one, true, correct date (which the Court does here only to dispose of LabMD’s argument), the conversion claim is still time barred. LabMD would have had 730 days total (two years) to file the claim. Three hundred and eighty-four of those days ticked by before it filed the Georgia action. Therefore, after October 6, 2013 it would have had 346 more days to file in this Court (or until roughly September 17, 2014). It did not file this action until January 21, 2015. The claim is time barred. Finally, we can’t forget that consideration of the Savings Statute in the R&R came at LabMD’s urging. See ECF No. 63, at 15-16. So to the extent it wishes to now have a do-over, LabMD has waived any argument premised on the application (or more precisely, the non- application) of the Savings Statute. Motions for reconsideration are not to be “used to present new legal theories or arguments which could have been made in support of the first motion.” Payne v. Deluca, No. 02-1927, 2006 WL 3590014, at *2 (W.D. Pa. Dec. 11, 2006) (Hardiman, J.). The Motion for Reconsideration will be denied as to Count I. Count II: Defamation Count II was dismissed on substantive grounds as to the Tiversa Defendants and dismissed as time barred as to Defendant Johnson. ECF No. 115, at 1-2. Because the Motion for Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 5 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 6 of 12 6 Reconsideration raises only statute of limitations issues, the dismissal of this Count as to the Tiversa Defendants will not be disturbed. As to Defendant Johnson, LabMD argues that “[t]he Court’s ruling fails to account for the discovery rule or any equitable estoppel or equitable tolling of the statute of limitations.” 5 ECF No. 118, at 11. In the absence of any citation to authority, LabMD charges that it would be reversible error to “altogether reject [those] equitable doctrines.” Id. As an initial matter, the Court dismissed this claim as to Defendant Johnson with prejudice because it determined that the allegedly defamatory statements occurred in April 2009 and on February 23, 2010. ECF No. 115, at 1-2. The statute of limitations for defamation under Pennsylvania law is one year. 42 Pa. Cons. Stat. § 5523. Therefore, the absolute latest the defamation claim could be filed was February 23, 2011. 6 The Georgia action was filed in October 2011. Therefore, the claims were time barred then and there, and no amount of equitable anything saves them. The Motion for Reconsideration will be denied as to Count II against Defendant Johnson. Count III: Tortious Interference with Business Relations Count III was dismissed on substantive grounds as to the Tiversa Defendants and dismissed as time barred as to Defendant Johnson. ECF No. 115, at 2. Because the Motion for Reconsideration raises only statute of limitations issues, the dismissal of this Count as to the Tiversa Defendants will not be disturbed. 5 This argument reflects the smorgasbord approach to pleading and argument that pervades a number of LabMD’s papers. 6 This conclusion also renders the discovery rule inapplicable because that rule has to do when the limitations period begins to run, rather than events that can stop the clock once it starts running. See Cunningham, No. 15-1412, slip op. at 11. Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 6 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 7 of 12 7 As with Count II, LabMD argues that at least one of the discovery rule or equitable estoppel or equitable tolling applies to Count III. But also like Count II, the statute of limitations on tortious interference claims that are based on alleged defamatory statements is one year under Pennsylvania law. Evans v. Phila. Newspapers, Inc., 601 A.2d 330, 334-35 (Pa. Super. Ct. 1991). The tortious interference claims against Defendant Johnson are unquestionably based on his alleged defamatory statements that occurred, as discussed above, in April 2009 and February 2010. Thus, this count too was time barred when the Georgia action was filed and it remains time barred here. 7 The Motion for Reconsideration will be denied as to Count III against Defendant Johnson. Count IV: Fraud Count IV was dismissed based on substantive deficiencies and leave to amend was granted. ECF No. 115, at 2-3. The Motion for Reconsideration does not raise any argument that the substantive dismissal was in error so the Motion for Reconsideration will be denied as to this Count. Count V: Negligent Misrepresentation Count V was dismissed based on substantive deficiencies and leave to amend was granted. ECF No. 115, at 3. The Motion for Reconsideration does not raise any argument that the substantive dismissal was in error so the Motion for Reconsideration will be denied as to this Count. 7 Moreover, it is plain that the discovery rule does not apply where the defamation was not done in a manner meant to conceal the subject matter of the defamation. Barrett v. Catacombs Press, 64 F. Supp. 2d 440, 446 (E.D. Pa. 1999). Johnson’s statements were published in Computerworld magazine and an academic article. Despite there being deep recesses of the academy into which the most fervently interested person dares not wander, such publications cannot by any measure be said to conceal the subject matter of the defamation. Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 7 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 8 of 12 8 Count VI: Civil Conspiracy Count VI was dismissed based on substantive deficiencies and leave to amend was granted. ECF No. 115, at 3. The Motion for Reconsideration does not raise any argument that the substantive dismissal was in error so the Motion for Reconsideration will be denied as to this Count. Counts VII and VIII: RICO Counts VII and VIII were dismissed as time barred as to all Defendants. ECF No. 115, at 3. Notwithstanding its prior positions, LabMD argues now that the Pennsylvania Savings Statute does not apply, and as discussed above, the Court agrees. LabMD, however, mischaracterizes what Chief Magistrate Judge Kelly concluded and what this Court adopted. In fact, the federal four year statute of limitations was the foundation of the holding. ECF No. 70, at 17 (“The statute of limitations for a civil RICO claim is four years.”) (citing Rotella v. Wood, 528 U.S. 549, 552 (2000)); ECF No. 115, at 3 (“the Report and Recommendation is adopted in full”). So even without the Savings Statute adding an additional year of time to file, the federal four year statute of limitations would have expired sometime in 2014 (four years after the claim accrued in 2010). This action was not filed until January 2015, so it is time barred. But LabMD’s arguments are not really about federal statutes of limitations preempting state law or the application of the Savings Statute at all. Instead they rely, as they must, on tolling during the pendency of the Georgia action. See ECF No. 118, at 7. Following a long exegesis of the salutary purposes of equitable tolling, LabMD eventually gets to the rub: “the Court should not treat any of the applicable statutes of limitations as if they were strict statutes of repose with no consideration of the facts or equitable principles.” Id. at 8. This argument has the Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 8 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 9 of 12 9 rare qualities of both hitting the nail on the head but completely missing the board with the same swing of the hammer. First, the federal four year RICO statute of limitations is surely subject to equitable tolling because it is, after all, a statute of limitations. See CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014). But equitable tolling is an equitable remedy-filing in the wrong forum does not guarantee a party tolling as a matter of right. As the Third Circuit recently reaffirmed, equitable tolling “can rescue a claim otherwise barred as untimely by a statute of limitations when a plaintiff has been prevented from filing in a timely manner due to sufficiently inequitable circumstances.” Cunningham et al. v. M&T Bank Corp. et al., No. 15-1412, slip op. at 7 (3d Cir. Feb. 19, 2016) (citing Santos ex rel. Beato v. United States, 559 F.3d 189, 197 (3d Cir. 2009)). However, it is “an extraordinary remedy which should be extended only sparingly,” id. (citing Hedges v. United States, 404 F.3d 744, 751 (3d Cir. 2005)). Further, the purposes of statutes of limitations-requiring “diligent prosecution of known claims” and “preventing surprises through [plaintiffs’] revival of claims that have been allowed to slumber”-strongly counsel against equitable tolling here. See Waldburger, 134 S. Ct. at 2183. Indeed, equitable tolling requires LabMD to demonstrate reasonable diligence in pursuit of their claims, meaning that they “must establish that [they] pursued the cause of [their] injury with those qualities of attention, knowledge, intelligence and judgment which society requires of its members for the protection of their own interests and the interests of others.” Cunningham, No. 15-1412, slip op. at 8 (internal alterations and quotation marks omitted). It took LabMD nearly two years after the Georgia action was done, done, done to file this one. LabMD has offered no compelling reason for the delay and such delinquency is certainly not “reasonably diligent prosecution.” Moreover, the RICO claims were not even asserted in the Georgia action, so Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 9 of 11Case :16-cv-02480-LMM Document 64-6 Filed 09/1 16 Page 10 of 12 10 despite the years of antagonistic, belligerent litigation between these parties, equitable tolling is inappropriate because statutes of limitations are also meant “to protect defendants from claims of which they have not received notice within a reasonable time after they accrued.” See Advanced Power Sys., Inc. v. Hi-Tech Sys., Inc., 801 F. Supp. 1450, 1456 n.6 (E.D. Pa. 1992). Simply put, a prior lawsuit that did not even include these claims would not act to “equitably toll” the long period of delay in their assertion here. The bottom line is that even giving LabMD’s position a generous benefit of the doubt, the Court should not equitably toll these statutes of limitations. LabMD’s Motion is most accurately characterized as an attempted second (or third) bite at the apple after its arguments were not accepted before. But it is plain that there was no intervening change in the law, no fundamental misunderstanding of the law or the facts, and no new evidence that changes, or should change, the result of the involved dismissal Order. It would appear to the Court that by this Motion for Reconsideration, LabMD decided to switch its position on the Savings Statute, and then essentially rehash slightly repackaged arguments as to everything else. Not only is that wholly inconsistent with the high and exacting standard for reconsideration, it also runs counter to the obligations of the Court and the parties under Rule 1 of the Federal Rules of Civil Procedure. In short, this has gone on long enough. 8 8 Jones v. United States, 135 S. Ct. 8, 9 (2014) (Scalia, J., dissenting from denial of certiorari). Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 10 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 11 of 12 11 III. CONCLUSION LabMD’s Motion for Reconsideration is DENIED. s/ Mark R. Hornak Mark R. Hornak United States District Judge Dated: February 22, 2016 cc: All counsel of record Case 2:15-cv-00092-MRH-MPK Document 129 Filed 02/22/16 Page 11 of 11Case 1:16-cv- 2480-LM Document 64-6 Filed 09/12/16 Page 12 of 12