Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-07-01007/USCOURTS-ca10-07-01007-0/pdf.json

Parties Involved:
Triad Consultants, Inc.
Appellant
Jeffrey A. Wiggins
Appellee

Document Text:

After examining the briefs and appellate record, this panel has determined *

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument. This order and judgment is

not binding precedent, except under the doctrines of law of the case, res judicata,

and collateral estoppel. It may be cited, however, for its persuasive value

consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED

United States Court of Appeals

Tenth Circuit

September 17, 2007

Elisabeth A. Shumaker

Clerk of Court

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

TRIAD CONSULTANTS, INC.,

a Colorado corporation,

Plaintiff-Appellant,

v.

JEFFREY A. WIGGINS,

an individual,

Defendant-Appellee.

No. 07-1007

(D.C. No. 06-CV-1771-PSF-MEH)

(D. Colo.)

ORDER AND JUDGMENT

*

Before PORFILIO, ANDERSON, and BALDOCK, Circuit Judges.

Triad Consultants, Inc., appeals from the district court’s judgment in favor

of Triad’s former employee, defendant Jeffrey Wiggins. The district court

dismissed with prejudice Triad’s Computer Fraud and Abuse Act (CFAA) claim,

see 18 U.S.C. § 1030, first under Fed. R. Civ. P. 12(b)(6) and, alternately, under

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Fed. R. Civ. P. 56. The court declined to exercise supplemental jurisdiction over

Triad’s state-law claims and denied its motion for a preliminary injunction. Triad

appeals only the dismissal of the CFAA claim. We have jurisdiction under

28 U.S.C. § 1291 and affirm the district court’s dismissal of the CFAA claim

under Rule 12(b)(6).

Background

Because the parties are familiar with the facts, we summarize only the

pertinent allegations of the complaint, which we must take as true for purposes of

deciding this appeal under Rule 12(b)(6). Triad provides computer programming

and information technology services as well as recruiting and placement services

for computer, data processing, and communications professionals. Wiggins was

President and Chief Operating Officer of Triad at the time of his discharge. Part

of his responsibilities included creating and safeguarding backup tapes of Triad’s

computer system, which involved removing a backup tape from the premises each

day. Each backup tape contained all of Triad’s electronically stored trade secrets

and proprietary and confidential information.

On July 28, 2006, Triad terminated Wiggins’s employment, escorted him

out of the office, and reminded him that he was obligated to return any Triad

property in his possession. On August 18, a former Triad network administrator,

Jeff Martin, informed the company that Wiggins asked him to break into Triad’s

network server and copy or download computer files, which he refused to do. On

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August 29, Martin informed Triad that Wiggins asked him to restore a backup

tape that Wiggins had in his possession. Restoration would convert the data into

a usable format. Martin agreed with Triad to accept the tape from Wiggins and

return it to Triad. Wiggins, however, informed Martin that he found someone

else to restore the tape, one of Triad’s consulting partners. Martin passed this

information along to Triad, which then contacted its consulting partner and

recovered the tape on September 1.

Triad then filed this action on September 7, 2006. In addition to the

foregoing allegations, Triad also alleged that it believed that other backup tapes

might be missing. In its CFAA claim, Triad asserted that Wiggins, knowingly

and with intent to defraud, and without authorization or in excess of his

authorization, accessed Triad’s computers and appropriated confidential and

proprietary business information, and attempted to use the information for his

personal benefit, all of which led to losses of at least $5,000. Triad also asserted

state-law claims and moved for a preliminary injunction. Wiggins answered the

complaint and asserted state-law counterclaims relating to compensation he

alleged Triad owed him. He also moved to dismiss the CFAA claim for failure to

state a claim on which relief can be granted and asked the district court to decline

to exercise supplemental jurisdiction over Triad’s state-law claims. Attached to

his motion was a copy of an affidavit dated September 21, 2006, that he had sent

to Triad along with a second backup tape and two other items.

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The CFAA is a criminal statute, but under the portions of 18 U.S.C. § 1030 1

relevant to Triad’s CFAA claim, whoever “knowingly and with intent to defraud,

accesses a protected computer without authorization, or exceeds authorized

access, and by means of such conduct furthers the intended fraud and obtains

anything of value” may be liable in a civil action to any person who as a result

suffers “loss to 1 or more persons during any 1-year period . . . aggregating at

least $5,000 in value.” 18 U.S.C. § 1030(a)(4), (a)(5)(B)(I), (g).

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The district court held two hearings on the motions, heard testimony, and

received evidence. At the conclusion of the second hearing, the court issued an

oral ruling. As to the CFAA claim, the court first applied Rule 12(b)(6)’s

standard and concluded that the complaint failed to allege two essential elements

of a CFAA violation under 18 U.S.C. § 1030(a)(4): that Wiggins exceeded his

authorized access and that he obtained something of value. Regarding access, 1

the court noted that the complaint alleged that Wiggins was authorized to possess

the backup tapes. As to whether or not Wiggins obtained anything of value, the

court noted that the complaint set forth a sequence of facts showing that he never

obtained any information from the tapes.

In the alternative the court treated the motion to dismiss as one seeking

summary judgment under Rule 56, as it had earlier advised the parties it might do,

and granted the motion as to the CFAA claim on the grounds that Triad had not

incurred any damage or loss by reason of a violation of the statute, see 18 U.S.C.

§ 1030(g), and that in any event Triad’s expenditure of more than $22,000

investigating the matter was not a loss arising from a course of conduct related to

Wiggins’s actions, as required by 18 U.S.C. § 1030(a)(5). The court declined to

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exercise supplemental jurisdiction over Triad’s state-law claims, denied its

motion for a preliminary injunction, and dismissed Wiggins’s counterclaims

without prejudice. Triad appealed.

Discussion

On appeal, Triad takes issue only with the district court’s dismissal of its

CFAA claim. We affirm on the basis of the district court’s dismissal under

Rule 12(b)(6) and need not reach its alternate dismissal under Rule 56. We

review de novo a district court’s dismissal under Rule 12(b)(6). See Ridge at Red

Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). In doing so,

“we assume the truth of the plaintiff’s well-pleaded factual allegations and view

them in the light most favorable to the plaintiff.” Id. (quotation omitted). We

must determine “whether the complaint contains ‘enough facts to state a claim to

relief that is plausible on its face.’” Id. (quoting Bell Atl. Corp. v. Twombly,

127 S. Ct. 1955, 1974 (2007)). Thus, “the complaint must give the court reason

to believe that [Triad] has a reasonable likelihood of mustering factual support for

[its] claims.” Ridge at Red Hawk, L.L.C., 493 F.3d at 1177.

We need not decide whether Wiggins “accesse[d] a protected computer

without authorization, or exceed[ed] authorized access,” or furthered a fraudulent

intent by doing so. 18 U.S.C. § 1030(a)(4). Nor need we determine whether the

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The statute defines “computer” as “an electronic, magnetic, optical, 2

electrochemical, or other high speed data processing device performing logical,

arithmetic, or storage functions, and includes any data storage facility or

communications facility directly related to or operating in conjunction with such

device, but such term does not include an automated typewriter or typesetter, a

portable hand held calculator, or other similar device.” 18 U.S.C. § 1030(e)(1).

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backup tapes fall within the statutory definition of a computer. Instead, we will 2

assume these elements of the claim and focus on the district court’s determination

that Triad failed to allege sufficient facts to show that Wiggins “obtain[ed]

anything of value.” Id.

We are not persuaded by Triad’s argument that the tapes themselves,

without access to the information they contained, were “anything of value.” Triad

has pointed to no case, and we have found none, where obtaining that sort of

value—the value of a storage medium apart from the value of any information it

contains—was sufficient to state a claim under the CFAA. To the contrary, in

each of the CFAA cases discussed in Triad’s briefs, access to information was

central to the claimed violation—the information was either deleted, used to

compete, or given to a competitor. See Int’l Airport Ctrs., L.L.C. v. Citrin,

440 F.3d 418, 419 (7th Cir. 2006) (employee deleted information prior to

quitting); ViChip Corp. v. Lee, 438 F. Supp. 2d 1087, 1092 (N.D. Cal. 2006)

(same); Nexans Wires S.A. v. Sark-USA, Inc., 319 F. Supp. 2d 468, 469-70, 471,

(S.D.N.Y. 2004) (competitor induced copying and deletion of information by

plaintiff’s former employees, then used copied information); Pac. Aerospace &

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In a footnote to its appellate brief, Triad notes that no discovery had 3

occurred in this case when the district court issued its oral ruling, and contends

that it has not conceded that Wiggins failed to obtain any information from the

tapes. See Aplt. Opening Br. at 16, n.13. But Triad’s reluctance to concede the

(continued...)

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Elecs., Inc. v. Taylor, 295 F. Supp. 2d 1188, 1193, 1196 (E.D. Wash. 2003)

(former employees used information gleaned from employer’s computer to

compete); Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc.,

119 F. Supp. 2d 1121, 1123, 1127 (W.D. Wash. 2000) (plaintiff’s former

employee gave information to competitor); C.H. Robinson Worldwide, Inc. v.

Command Transp., LLC, No. 05-C-3401, 2005 WL 3077998, at *2-4 (N.D. Ill.

Nov. 16, 2005) (unpublished) (former employees used information to compete).

Instead, we find persuasive the reasoning of the First Circuit, that CFAA

“value is relative to one’s needs and objectives.” United States v. Czubinski,

106 F.3d 1069, 1078 (1st Cir. 1997). In Czubinski, the court required the

government to show that the information was valuable to the defendant. Id.; see

also id. at 1078-79 (discussing CFAA’s legislative history supporting view that

the statute was meant to protect information as opposed to mere unauthorized

access). Similarly here, the value of the tapes to Wiggins (and to Triad, for that

matter) lay in the information the tapes contained, not in the physical objects

themselves. Because Triad alleged no facts showing that Wiggins accessed the

information on either tape, it cannot establish one of the elements of a claim

under § 1030(a)(4), that Wiggins obtained “anything of value.” See P.C. 3

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(...continued) 3

point is based on nothing more than pure speculation and runs contrary to

(1) Triad’s allegations regarding the first tape, which showed that Triad recovered

the tape before Wiggins could get someone to restore the data; and (2) Triad’s

own testimony at the motions hearing, namely, that it had examined the tapes but

could not show that any information had been accessed, see Aplt. App., Vol. II

at 299. Although we, like the district court, do not consider matters outside the

complaint under Rule 12(b)(6), the district court stated that it could not “find that

discovery is going to change [the] determination as to [Triad’s CFAA claim].” 

Id. at 245. Thus, we conclude that the district court properly based its dismissal

on Rule 12(b)(6) without providing an opportunity for discovery or amendment of

the complaint regarding either tape. Moreover, the district court noted that at the

time of its oral ruling, the case had been pending for three months and Triad had

not served any discovery requests on Wiggins. Id., Vol. I at 234.

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Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d

504, 509 (3d Cir. 2005) (affirming denial of preliminary injunctive relief under

CFAA where plaintiffs did not know, had not shown, and could not show “what

information, if any, was taken” by former employee who accessed computer

without authorization).

Triad’s reliance on United States v. Willis, 476 F.3d 1121 (10th Cir. 2007),

is misplaced. In Willis, decided two months after the district court’s oral ruling in

this case, we addressed an argument by a criminal defendant that the offense with

which he was charged under a different subsection of the CFAA, § 1030(a)(2)(C),

required proof of an intent to defraud under § 1030(a)(4). We pointed out several

differences between the elements of the two subsections, among them that (a)(4)

requires only that a person “obtain anything of value,” but that (a)(2)(C) requires

a person to obtain “information.” Id. at 1126. But this distinction was not

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necessary to our disposition of the case; rather, what mattered for our purposes in

Willis was that the government was not required to prove fraudulent intent in

order to obtain a conviction under subsection (a)(2)(C). Id. And as we explained

above, the backup tapes themselves do not constitute “anything of value” for

purposes of a claim under subsection (a)(4) in this case absent access to the

information they contain.

Conclusion

We conclude that Triad failed to allege sufficient facts to state a CFAA

claim that is plausible on its face. See Twombly, 127 S. Ct. at 1969; Ridge at Red

Hawk, L.L.C., 493 F.3d at 1177. The judgment of the district court is

AFFIRMED.

Entered for the Court

John C. Porfilio

Circuit Judge

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