Court Opinion

ID: 4161521
Source: CourtListenerOpinion
Date Created: 2017-04-19 19:03:31.583274+00
Date Added: 2024-06-11T14:12:28.635512
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 16-1387

                       GREGORY P. TURNER,

                     Plaintiff, Appellant,

                               v.

 HUBBARD SYSTEMS, INC., f/k/a Jim Hubbard and Associates, Inc.,

                      Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

       [Hon. George A. O'Toole, Jr., U.S. District Judge]

                             Before

                 Torruella, Thompson, Kayatta,
                        Circuit Judges.

     Gregory P. Turner on brief for appellant.
     Bethany P. Minich, Daniella Massimilla, and Litchfield Cavo
LLP on brief for appellee.

                         April 19, 2017
            THOMPSON, Circuit Judge.      The relevant facts in this

case are few.     Appellant Gregory Turner is a sole practitioner

whose   Massachusetts    law   practice   is   focused   on   recovering

delinquent accounts.    Appellee Hubbard Systems, Inc. ("HSI") is a

Delaware software corporation that develops, markets, and sells a

debt collection software program titled "Collection Partner."         In

December 1992, Turner entered into a rent-to-own agreement with

HSI in which he was granted a temporary rental license for the use

of Collection Partner.     After making some initial payments and a

deposit, Turner was to make monthly payments until he paid off the

remaining balance for the software, at which time he would be given

a permanent license.     Turner made the final installment payment

sometime in 1996, and the parties agree that thereafter Turner

owned a permanent license to the software.

            HSI also provides monthly software maintenance services.

Turner's rent-to-own agreement made clear that maintenance service

fees would be charged every month and that such fees were "separate

and apart from the monthly software license fee rental payment[s]"

that Turner was required to make in order to gain a permanent

license to the software.

            In late April 2011, HSI sent Turner a new license key to

reflect an update in the software.        That license expired on May

31, 2011.   On June 1, 2011 Turner informed HSI that his Collection

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Partner software was not working.1              Before noon that same day, HSI

sent Turner a new license key that permitted him access to the

software.     Turner's license and access to the Collection Partner

software has remained uninterrupted since the new license key was

sent on June 1, 2011.

             The following year, Turner filed suit alleging that HSI

violated the Computer Fraud and Abuse Act ("CFAA" or "the Act")

when it issued a license key that expired on May 31, 2011, despite

the fact that he owned a permanent license to the Collection

Partner    software.      Turner       also   alleged     state   law   claims     of

conversion, intentional (or negligent) infliction of emotional

distress, and unfair and deceptive practices in violation of

Massachusetts      General     Laws    Chapter    93A.     The    district      court

accepted     and     adopted     the     magistrate       judge's     report      and

recommendation, granted HSI's motion for summary judgment, and

denied Turner's motion to strike portions of HSI's motion as

"beyond the scope of the pleadings."              In addition to objecting to

the   magistrate     judge's    report,       Turner   also   filed     motions    to

supplement     the     record,        certify     legal    questions       to     the

      1Turner argues that HSI sent him the April license key set
to expire at the end of May 2011 in an attempt to collect on his
late maintenance fees.    HSI argues that the failure to update
Turner's license key was "[d]ue to administrative oversight or
error" and that it "never intended for the license key that was
sent to [Turner] to expire." These arguments are of no consequence
to our analysis in this case.

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Massachusetts    Supreme   Judicial   Court,   and   appeal   one   of   the

magistrate judge's management orders before the district court

judge.   The district court judge denied all these additional

motions in their entirety.

             Turner appeals the district court's order adopting the

magistrate judge's report and recommendation, denying Turner's

motion to strike, and granting HSI's motion for summary judgment.2

                               Discussion

             "We review a district court's grant of summary judgment

de novo," viewing the facts in the light most favorable to the

nonmovant.     Burke v. Town of Walpole, 405 F.3d 66, 75 (1st Cir.

2005) (citing Valente v. Wallace, 332 F.3d 30, 32 (1st Cir. 2003)).

"We review the denial of [a motion to strike a motion for summary

judgment] for abuse of discretion."      FDIC v. Kooyomjian, 220 F.3d
10, 16 (1st Cir. 2000); see also Dodi v. Putnam Cos., No. 95-2266,

1996 WL 489998, at *2 (1st Cir. Aug. 28, 1996) ("We review the

district court's decision to strike for abuse of discretion.").

             A brief review of the relevant statutory framework may

prove helpful here.    Congress enacted the CFAA in 1984 to address

the problems of computer crime and hacking.          Pub. L. No. 98-473,

     2 Although Turner also appeals the district court's refusal
to consider evidence that was not part of the summary judgment
record, the lack of developed argumentation in his brief renders
this basis for appeal waived. See United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990).

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98 Stat. 2190; see also WEC Carolina Energy Sols. LLC v. Miller,

687 F.3d 199, 201 (4th Cir. 2012).         Originally a criminal statute,

in 1986 the Act was expanded to include a civil action component

as well.   Pub. L. No. 99-474, 100 Stat. 1213 (codified as amended

at 18 U.S.C. § 1030); Miller, 687 F.3d at 201.            Under the civil

action provision, "[a]ny person who suffers damage or loss by

reason of a violation of [18 U.S.C. § 1030] may maintain a civil

action against the violator to obtain compensatory damages and

injunctive relief or other equitable relief." 18 U.S.C. § 1030(g).

The term "damage" is defined as "any impairment to the integrity

or availability of data, a program, a system, or information" and

the term "loss" is defined as "any reasonable cost to any victim,

including the cost of responding to an offense, conducting a damage

assessment,     and    restoring   the     data,    program,   system,   or

information to its condition prior to the offense, and any revenue

lost,   cost   incurred,   or   other    consequential   damages   incurred

because of interruption of service." 18 U.S.C. § 1030(e)(8), (11).

The phrase "compensatory damages" is not explicitly defined in the

statute.

           We, however, have held that not any damage or loss is

compensable.    Ef Cultural Travel BV v. Explorica, Inc., 274 F.3d
577, 585 (1st Cir. 2001) ("We do not hold, however, that any loss

is compensable.       The CFAA provides recovery for 'damage' only if

it results in a loss of at least $5,000.           We agree with the court

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in In re Doubleclick Inc. Privacy Litigation, 154 F. Supp. 2d 497

(S.D.N.Y. 2001), that Congress could not have intended other types

of loss to support recovery unless that threshold were met.

Indeed, the Senate Report explicitly states that 'if the loss to

the victim meets the required monetary threshold,' the victim is

entitled to relief under the CFAA.     S. Rep. 104-357, at 11.   We

therefore conclude that expenses of at least $5,000 resulting from

a party's intrusion are 'losses' for purposes of the 'damage or

loss' requirement of the CFAA.").

          Turner asserts that HSI violated § 1030(a)(5)(A) of the

CFAA.3   Under § 1030(a)(5)(A), a person violates the CFAA by

"knowingly caus[ing] the transmission of a program, information,

code, or command, and as a result of such conduct, intentionally

caus[ing] damage without authorization, to a protected computer."

18 U.S.C. § 1030(a)(5)(A).   Maintenance of a civil action under 18

U.S.C. § 1030(a)(5)(A) also requires one of the five factors

outlined in § 1030(c)(4)(A)(i)(I)-(V): namely,

          (I) loss to 1 or more persons during any 1-
          year period . . . aggregating at least $ 5,000
          in value;

          (II) the modification or impairment, or
          potential modification or impairment, of the

     3 Turner's complaint does not make clear which provision of
the CFAA he is alleging that HSI violated.      However, in his
memorandum before the magistrate judge opposing HSI's motion for
summary judgment, he argued that HSI violated 18 U.S.C.
§ 1030(a)(5)(A).

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            medical examination, diagnosis, treatment, or
            care of 1 or more individuals;

            (III) physical injury to any person;

            (IV) a threat to public health or safety; [or]

            (V) damage affecting a computer used by or for
            an entity of the United States Government in
            furtherance of the administration of justice,
            national defense, or national security.

(emphasis added); see also 18 U.S.C. § 1030(c)(4)(B)(i), (g) ("A

civil action for a violation of [18 U.S.C. § 1030] may be brought

only if the conduct involves 1 of the factors set forth in

subclauses [subclause] (I), (II), (III), (IV), or (V) of subsection

(c)(4)(A)(i).").

            Here, the parties agree that the only possible basis for

Turner's civil action is found under § 1030(c)(4)(A)(i)(I), which

is limited to economic damages and requires a loss of at least

$5,000.     18 U.S.C. § 1030(g) ("Damages for a violation involving

only conduct described in subsection (c)(4)(A)(i)(I) are limited

to economic damages.").     HSI argues that Turner fails to meet this

$5,000 requirement.       Turner appears to argue that he meets the

$5,000    requirement    because      he   suffered    prospective   damages

amounting     to   at   least   his     "prospective    annual   income   of

$150,000.00."      Turner argues further that while his "damages may

be limited by admissible evidence of intervening factors such as

where a plaintiff mitigates his damages," HSI is barred from

arguing that he failed to meet the $5,000 requirement because "HSI

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had not pled that as a result of mitigation Turner could not meet

the statutory threshold of $5,000.00."      Unfortunately for Turner,

he erroneously confuses his failure to meet a statutory requirement

with the affirmative defense of mitigation.

          On appeal, Turner presents no evidence that he has in

fact suffered losses in the amount of $5,000.            As the district

court noted, the only plausible damages identified by Turner (his

expenses and lost income for the hours when the system was down on

June 1, 2011 and any fees he paid HSI for amounts owed for

maintenance service fees) do not reach the $5,000 threshold and

therefore foreclose his CFAA claims.4       Turner attempts to bypass

this fatal defect by claiming that he is entitled to damages he

would have suffered if his access to the Collection Partner

software had never been restored.        As the district court noted,

however, Turner's assertions are "counterfactual and thus absurd."

          Because the CFAA contains no definition of the phrase

"compensatory damages" we assume that the "plain and ordinary

meaning" of the term applies.     Yershov v. Gannett Satellite Info.

Network, Inc., 820 F.3d 482, 487 (1st Cir. 2016).          Consequently,

compensatory   damages   are   "[d]amages   sufficient    in   amount   to

indemnify the injured person for the loss suffered" or "actual

     4 Turner never disputed the defendant's calculation of his
business expenses and presented no alternative calculation either
before the district court or here on appeal that he suffered any
losses other than those identified above.

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damages."        Black's Law Dictionary (10th ed. 2014).                            "Actual

damages"    is     further    defined         as   "[a]n    amount       awarded      to   a

complainant to compensate for a proven injury or loss; damages

that repay actual losses."          Id.       Prospective damages are "[f]uture

damages    that,    based     on   the    facts     pleaded       and   proved      by   the

plaintiff, can reasonably be expected to occur."                        Id.

            Even if we assume that the CFAA provided for prospective

damages as a form of compensatory damages, such damages would not

be   measured      by     hypothetical        losses     based     on    counterfactual

assertions, but only by losses that reasonably could be expected

and proven.       Turner has not, and cannot, demonstrate reasonably

expected    damages       amounting      to    $5,000.       In    fact,      the    record

demonstrates       that    Turner's      access     to     the    Collection        Partner

software was restored after only a few hours and his access has

remained uninterrupted since its restoration.                      Turner persists on

appeal that he is entitled to all damages he would have experienced

if he was never given a new license key on June 1, 2011 and his

access to the Collection Partner software was never restored.

Unfortunately for Turner, prospective damages do not encompass

what he would have lost had the facts been different.                         And Turner

has not demonstrated how a brief lapse in access to the Collection

Partner software could reasonably be expected to result in damages

totaling his yearly salary or any other imaginary damages he has

dreamed up.

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          Lastly, Turner moved to strike HSI's motion for summary

judgment and certain supporting documents, arguing that the motion

was "based on two unpled affirmative defenses: mitigation and

mistake" that were "outside the scope of the pleadings."          The

district court correctly dismissed these arguments for the same

reasons discussed above -- a $5,000 threshold requirement for

Turner's CFAA claim is not synonymous with an affirmative defense.

Accordingly, the district court did not abuse its discretion in

denying Turner's motion to strike.       Any reference by HSI to

Turner's failure to meet the $5,000 requirement was not barred --

Turner was required to demonstrate that he met the $5,000 damages

threshold regardless of the affirmative defenses asserted by HSI.

          Without a federal claim to stand on, in a last-ditch

effort to restore his state law claims of conversion, intentional

(or negligent) infliction of emotional distress, and unfair and

deceptive business practices in violation of Massachusetts General

Laws Chapter 93A, Turner argues that these state law claims satisfy

the requirements for diversity jurisdiction and were thus properly

before the district court.     The district court found that while

the parties were indisputably diverse, Turner failed to establish

the necessary $75,000 amount in controversy. See 28 U.S.C. § 1332.

Turner points us to no evidence that he meets the amount in

controversy   necessary   to   sustain   federal   jurisdiction    --

therefore, the district court correctly dismissed those claims.

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CE Design Ltd. v. Am. Econ. Ins. Co., 755 F.3d 39, 43 (1st Cir.

2014) ("The burden is on the federal plaintiff to establish that

the minimum amount in controversy has been met." (citing Abdel-

Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012))).

                             Conclusion

          For   the   foregoing    reasons,   we   affirm   the   district

court's grant of HSI's motion for summary judgment and denial of

Turner's motion to strike.

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