Mitchell Enterprises, Inc. et al v. Mr. Electric Corp. et al

Filing 57

MEMORANDUM DECISION AND ORDER Defendants' Motion for Summary Judgment (Docket No. 34 ) is GRANTED in its entirety. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

MITCHELL ENTERPRISES, INC., d/b/a
MITCHELL ELECTRIC, an Idaho corporation,
DANNY G. MITCHELL and TERESA A.
MITCHELL, husband and wife, Idaho residents,
Plaintiffs,
v.

Case No. CV 11-0537-REB
MEMORANDUM DECISION AND
ORDER RE: DEFENDANTS’
MOTION FOR SUMMARY
JUDGMENT
(DOCKET NO. 34)

MR. ELECTRIC CORP., a Texas corporation, THE
DWYER GROUP, a Texas corporation, and DOES
1-10, inclusive,
Defendants.

Currently pending before the Court is Defendants’ Motion for Summary Judgment
(Docket No. 34). Having carefully considered the record, heard the oral argument of counsel,
and otherwise being fully advised, the Court enters the following Memorandum Decision and
Order:
I. GENERAL BACKGROUND
1.

Plaintiff Mitchell Electric is a family-owned and family-operated electrical

contractor that specializes in renovations and troubleshooting in the Treasure Valley area of
Idaho. See Compl., ¶ 11 (Docket No. 2). Mitchell Electric has provided electrical contractor
services in the Treasure Valley since 1969. See id. Mitchell Electric’s current owners and
operators are Plaintiffs Danny and Teresa Mitchell. See id.
2.

In the early-to mid-1990's, Mitchell Electric developed a copyrighted software

system to manage all aspects of its business records, including customer lists, contact
MEMORANDUM DECISION AND ORDER - 1

information, employee personnel files, time sheets, inventory, project bids, invoices, sales
documents, and financial statements. See id. at ¶ 12.
3.

In 2007, Mitchell Electric began to develop an upgraded version of its software

with the intention of marketing it to other service providers. See id. at ¶ 13. According to
Mitchell Electric, the original and upgraded versions of the software (collectively, the “Mitchell
Dispatch Software”), along with the proprietary business information it contained (the “Data”),
“served as the lifeblood of Mitchell Electric’s business success.” Id.
4.

In the same 2007 year, Mitchell Electric explored the possibility of becoming a

franchisee of Defendant Mr. Electric. See id. at ¶¶ 14 & 15; see also Defs.’ U.F. No. 4 (Docket
No. 34, Att. 2); Pls.’ Stmt. of Disputed Facts No. 4 (Docket No. 53, Att. 1). Since 1994, Mr.
Electric has offered franchises which sell, service, and repair electrical systems, equipment,
components, and supplies, including installation, upgrades, and remodeling for residential and
commercial customers. See Defs.’ U.F. No. 1 (Docket No. 34, Att. 2); Pls.’ Stmt. of Disputed
Facts No. 1 (Docket No. 53, Att. 1).
5.

On October 26, 2007, Mitchell Electric and Mr. Electric entered into a Franchise

Agreement under which Mitchell Electric became Mr. Electric’s franchisee in Ada County and
Canyon County, Idaho. See Compl., ¶ 16 (Docket No. 2). Mitchell Electric claims that the
Franchise Agreement (1) permitted Mitchell Electric to continue to own and develop the
Mitchell Dispatch Software and the Data as a separate business opportunity, and (2) permitted
Mitchell Electric to utilize the Mitchell Dispatch Software and the Data for its business
operations rather than Mr. Electric’s ZWARE software (a database system designed for Mr.

MEMORANDUM DECISION AND ORDER - 2

Electric franchisees and customized for use in Mr. Electric’s franchise system). See id. at ¶¶ 15
& 17; see also Defs.’ U.F. No. 7 (Docket No. 34, Att. 2); Pls.’ Stmt. of Disputed Facts No. 7
(Docket No. 53, Att. 1) .
6.

Also on October 26, 2007, Mitchell Electric and Mr. Electric executed a ZWARE

License and Maintenance Agreement (the “ZWARE Agreement”), whereby Mitchell Electric
agreed to license the ZWARE software from Mr. Electric and to cooperate in installing and
supporting the ZWARE software on Mitchell Electric’s computer network. See Compl., ¶ 18
(Docket No. 2); see also Defs.’ U.F. No. 7 (Docket No. 34, Att. 2); Pls.’ Stmt. of Disputed Facts
No. 7 (Docket No. 53, Att. 1). Even so, Mitchell Electric insists that, at the time the parties
executed the ZWARE Agreement, Mr. Electric assured Mitchell Electric that, although Mr.
Electric required each franchisee to install the ZWARE software on its computer network,
Mitchell Electric could nonetheless use the Mitchell Dispatch Software and the Data to conduct
its business operations rather than the ZWARE software. See Compl., ¶ 19 (Docket No. 2).
Soon thereafter, the ZWARE software was installed on Mitchell Electric’s computer network.
See Defs.’ U.F. No. 9 (Docket No. 34, Att. 2).1
7.

On August 23, 2009, Mitchell Electric met with Mr. Electric, expressing

frustrations about various aspects of the franchise relationship and explained that Mitchell
Electric was experiencing financial difficulties due to Mr. Electric’s alleged inadequate support
and pricing structure. See Compl., ¶ 20 (Docket No. 2); see also Ans., ¶ 20 (Docket No. 11).

1

Mitchell Electric disputes this fact, however, in doing so, states only that Mr. Electric
assured Mitchell Electric that Mitchell Electric could continue to use the Mitchell Dispatch
Software for its business operations. See Pls.’ Stmt. of Disputed Facts No. 9 (Docket No. 53,
Att. 1). In other words, Mitchell Electric does not seem to actually dispute that the ZWARE
software was eventually installed on Mitchell Electric’s computer network.
MEMORANDUM DECISION AND ORDER - 3

8.

Later on August 23, 2009, Mrs. Mitchell attempted to remotely access Mitchell

Electric’s computer from a home computer. See Compl., ¶ 21 (Docket No. 2). Mitchell Electric
claims that,
Upon doing so, [Mrs. Mitchell] noticed unusual activity in Mitchell
Electric’s computer network and observed what appeared to be the
copying of certain Mitchell Electric computer files from some other
remote location. Subsequently, the Mitchells not only lost all access
to the Mitchell Electric computer network and the Mitchell Dispatch
Software and the Data, but they also found that the Mitchells’ home
computers, including the personal computers of the Mitchells’ five
children, had seemingly crashed.
Id. In turn, on either August 23, 2009 or August 24, 2009, Mitchell Electric contacted Mr.
Electric to ask if Mr. Electric’s system had been compromised in a way that might explain the
difficulties the Mitchells were experiencing with their office and home computers. See id. at
¶ 22; see also Answer, ¶ 22 (Docket No. 11). Mr. Electric responded that its computer network
had not been compromised. See id.
9.

Thereafter, Mitchell Electric retained the services of a computer forensics

company to evaluate Mitchell Electric’s computer network and the Mitchells’ home computers.
See Compl., ¶ 23 (Docket No. 2).
10.

Mitchell Electric claims that on November 5, 2009, the forensics company (1)

“reported that the ZWARE software had attempted to connect to all thirteen hard drives in
Mitchell Electric’s and the Mitchells’ computer network, and the investigation also uncovered
numerous link files in the server that referenced ZWARE, Mr. Electric, and [Defendant] Dwyer
Group,” and (2) “concluded that Defendants had utilized the ZWARE software to gain
unauthorized access to Mitchell Electric’s and the Mitchells’ computers.” Id. at ¶ 24.
10.

Claiming damages owing to Mr. Electric’s allegedly “unlawful acts,” Plaintiffs

filed a Complaint on November 4, 2011, asserting the following claims against Defendants: (1)
MEMORANDUM DECISION AND ORDER - 4

violation of the Computer Fraud and Abuse Act (“CFAA”) (Count 1); (2) violation of the Idaho
Trade Secrets Act (“ITSA”) (Count 2); (3) conversion (Count 3); and (4) tortious interference
with prospective economic advantage (Count 4). See id. at ¶¶ 25-53.2
11.

Defendants deny the allegations. In the pending Motion for Summary Judgment,

Defendants argue that:
[P]laintiffs have failed to establish a genuine dispute of material fact
on elements essential to their claims entitling Defendants to judgment
as a matter of law on all claims stated in the Complaint. Plaintiffs
have failed to produce any evidence to establish (a) that Defendants
gained unauthorized access to Plaintiffs’ computer network (or any
specific computer) or (b) that, even assuming arguendo Defendants’
unauthorized access, that Defendants (i) caused any damage to the
computers or data contained on the computers, (ii) converted, used,
disclosed, or otherwise misappropriated any data or software
contained on the computers, or (iii) actually interfered with or caused
any harm to any potential or actual economic relationship or
expectation of Plaintiffs.
Mot. for Summ. J., p. 2 (Docket No. 34).
II. DISCUSSION
A.

Summary Judgment Standard
Summary judgment is appropriate where a party can show that, as to any claim or

defense, “there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). One of the principal purposes of the
summary judgment “is to isolate and dispose of factually unsupported claims . . . .” Celotex
Corp. v. Catrett, 477 U.S. 317, 323-34 (1986). It is “not a disfavored procedural shortcut,” but is

2

Apparently, Plaintiffs have clarified that, while Count 1 is brought by all Plaintiffs,
Counts 2, 3, and 4 are brought by Plaintiff Mitchell Electric only. See Mem. in Supp. of MSJ, p.
11, n.7 (Docket No. 34, Att. 1). For ease of reference, the term “Plaintiffs” is a collective
reference within this Decision, unless otherwise indicated.
MEMORANDUM DECISION AND ORDER - 5

instead the “principal tool[ ] by which factually insufficient claims or defenses [can] be isolated
and prevented from going to trial with the attendant unwarranted consumption of public and
private resources.” Id. at 327. “[T]he mere existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported motion for summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). There must be a genuine dispute
as to any material fact – a fact “that may affect the outcome of the case.” Id. at 248.
The evidence must be viewed in the light most favorable to the non-moving party, and
the Court must not make credibility findings. See id. at 255. Direct testimony of the nonmovant must be believed, however implausible. See Leslie v. Grupo ICA, 198 F.3d 1152, 1159
(9th Cir. 1999). On the other hand, the court is not required to adopt unreasonable inferences
from circumstantial evidence. See McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).
The Court must be “guided by the substantive evidentiary standards that apply to the
case.” Liberty Lobby, 477 U.S. at 255. If a claim requires clear and convincing evidence, the
question on summary judgment is whether a reasonable jury could conclude that clear and
convincing evidence supports the claim. See id.
The moving party bears the initial burden of demonstrating the absence of a genuine
dispute as to material fact. See Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (en
banc). To carry this burden, if the nonmoving party bears the burden of persuasion at trial, the
moving party need not introduce any affirmative evidence (such as affidavits or deposition
excerpts) but may simply point out the absence of evidence to support the nonmoving party’s
case. See Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).
This shifts the burden to the non-moving party to produce evidence sufficient to support a
jury verdict in her favor. See Devereaux, 263 F.3d at 1076. The non-moving party must go
MEMORANDUM DECISION AND ORDER - 6

beyond the pleadings and show “by her [ ] affidavits, or by the depositions, answers to
interrogatories, or admissions on file” that a genuine dispute of material fact exists. See Celotex,
477 U.S. at 324.
However, the court is “not required to comb through the record to find some reason to
deny a motion for summary judgment.” Carmen v. San Francisco Unified Sch. Dist., 237 F.3d
1026, 1029 (9th Cir. 2001) (quotation omitted). Instead, the “party opposing summary judgment
must direct [the court’s] attention to specific triable facts.” S. Cal. Gas Co. v. City of Santa Ana,
336 F.3d 885, 889 (9th Cir. 2003).
B.

Plaintiffs’ CFAA Claim (Count 1) is Time-Barred
In addition to their substantive arguments attacking Plaintiffs’ CFAA claim, Defendants

contend that the claim is procedurally barred by the applicable statute of limitations. See Mem.
in Supp. of MSJ, pp. 5-6 (Docket No. 34, Att. 1).
The CFAA contains a two-year statute of limitations period. It begins on “the date of the
act complained of or the date of the discovery of the damage.” 18 U.S.C. § 1030(g). “Damage”
is defined as “any impairment to the integrity or availability of data, a program, a system, or
information.” 18 U.S.C. § 1030(e)(8). Defendants argue that Plaintiffs were aware of the
damage to their computer network (and even suspected Defendants and/or the ZWARE software
to be the cause of that damage) as of August 23 or 24, 2009 – more than 26 months before filing
their Complaint on November 4, 2011. See id. at p. 6 (“On this evidentiary record, there can be
no genuine dispute that Plaintiffs’ filed their action under the CFAA beyond the Act’s limitations
period. Their CFAA claim is time-barred.”). In response, Plaintiffs do not deny that, on or

MEMORANDUM DECISION AND ORDER - 7

around August 23, 2009, they suspected that their computer network was compromised in some
way. See Pls.’ Stmt. of Disputed Facts No. 10 (Docket No. 53, Att. 1) (not disputing that “act
complained of” for purposes of CFAA occurred on August 23, 2009). However, they submit that
their CFAA claim did not actually “accrue” until November 5, 2009, when they received the first
computer forensics report detailing the damage to its computer network, the Mitchell Dispatch
Software, and the Data. See Opp. to MSJ, p. 4 (Docket No. 53). In other words, Plaintiffs take
the position that a later-alleged date reflecting their discovery of the “details of damage” should
control the date the statute of limitations begins to run on their CFAA claim.
Plaintiffs’ argument that the statute of limitations only began to run upon a forensic
confirmation of their behalf of damage, rather than the date that such apparent damage became
known to them is without merit. They admit that the act complained of – Mr. Electric’s alleged
intrusion of Defendants’ computers – occurred more than two years before they filed this
lawsuit. Their argument, however, would add an otherwise unexpressed layer to the statute’s
description of the statute of limitations – one that contemplates a more developed level of
knowledge surrounding the discovery of claimed damage. To be clear, the CFAA requires a
plaintiff to file suit within two years of discovering “‘any impairment to the integrity or
availability of data, a program, a system, or information.’” Clark Street Wine and Spirits v.
Emporos Sys. Corp., 754 F. Supp. 2d 474, 486 (E.D.N.Y. 2010) (quoting 18 U.S.C.
§ 1030(e)(8)). Through their Complaint, Plaintiffs admit that the genesis of their CFAA claim
began around August 23, 2009 when they first became aware of problems with their computer
network, including unauthorized file copying, loss of computer access, and system crashes. See

MEMORANDUM DECISION AND ORDER - 8

Compl., ¶¶ 21 & 22 (Docket No. 2).3 There is no requirement that the damage be confirmed by
some sort of independent forensic examination. To add such a requirement would create a
wandering line in the application of the statute of limitations, a line that would only be set if and
when a party obtained such a separate or independent confirmation. That is not required to
constitute the “discovery” of “damage” under the CFAA. The fact that Defendants were not
exactly aware of whom or what caused the damage as of August 24, 2009 is immaterial, when
considering that such detail is unequivocally not required under the CFAA to trigger its two-year
limitations period. See, e.g., Higgins v. NMI Enters., Inc., 2013 WL 4525635, *10-11 (E.D. La.
2013) (“There is no mention [in the CFAA] that a plaintiff must know the alleged perpetrator for
the statute of limitations to begin. . . . . Here, Smith knew of unauthorized access to the
computer system, which prompted Smith to initiate an internal investigation . . . . Thus, it is
clear that Smith had an ‘awareness of an unauthorized access into [Thundervision’s] computer
system,’ which began the statute of limitations period more than two years before this action was
filed.”).
Plaintiffs identified what they alleged to be (1) an unauthorized access into their
computer system that (2) caused corresponding damage, before November 4, 2009.
Accordingly, their CFAA claim against Defendants, even if otherwise viable, is time-barred
under the CFAA’s statute of limitations. Defendants’ Motion for Summary Judgment is granted
in this respect.4
3

Even disregarding August 23, 2009's factual backdrop, Plaintiffs go on to admit that
they then retained the services of a computer forensics company to address the issue. See
Compl., ¶ 23 (Docket No. 2). Though it is unclear when this actually took place, it is reasonable
to assume it happened well before November 4, 2009 (two years before the Complaint’s
November 4, 2011 filing) given the computer forensics company’s November 5, 2009 report
back to Defendants. See id. at ¶ 24.
4

Given the Court’s dismissal of Plaintiffs’ CFAA claim on statute of limitations
grounds, there is no need to consider Defendants’ other arguments concerning whether Plaintiffs
have properly stated a CFAA claim.
MEMORANDUM DECISION AND ORDER - 9

C.

Defendants are Entitled to Summary Judgment on Plaintiffs’ ITSA Claim (Count 2)
The parties agree that, to prevail on a claim for misappropriation of trade secrets under

the ITSA, a plaintiff must show that (1) it owned a trade secret; (2) the defendant acquired,
disclosed, or used that trade secret through improper means, and (3) the defendant’s actions
damaged the plaintiff. See Northwest Bec-Corp v. Home Living Serv., 41 P.3d 263, 268 (Idaho
2002); Basic American, Inc. v. Shatila, 992 P.2d 175, 183 (Idaho 1999); see also I.C. § 48801(2); Compare Mem. in Supp. of MSJ, p. 12 (Docket No. 34, Att. 1), with Opp. to MSJ, pp.
12-13 (Docket No. 53). Defendants argue that “there is no evidence that Defendants acquired,
disclosed, or used the Mitchell Dispatch Software or any information, data, or other possible
trade secret material belonging to Mitchell Electric.” Mem. in Supp. of MSJ, p. 11 (Docket No.
34, Att. 1).
In response, Plaintiffs do not identify evidence that Defendants either disclosed or used
the alleged trade secrets; rather, Plaintiffs submit that “[t]here is evidence that Defendants
acquired the [Mitchell Dispatch Software] and the data contained therein.” Opp. to MSJ, p. 13
(Docket No. 53). According to Plaintiffs, that evidence is circumstantial, and takes the form of
the following:
•

“Mitchell Electric had never experienced any significant computer issues,
problems, or unusual activity before becoming a Mr. Electric franchisee and
permitting ZWARE to be installed on its computer network.” Id. (citing Pls.’
Stmt. of Disputed Facts No. 13 (Docket No. 53, Att. 1)).

•

“After ZWARE was installed, Teresa Mitchell and Danny Mitchell
personally witnessed files being copied with no input commands when
Teresa Mitchell remotely logged onto her work computer on August 23,
2009.” Id.

•

“A folder that had never been seen by Teresa Mitchell or Danny Mitchell
entitled ZWARE.zip inexplicably appeared on the desktop of Teresa

MEMORANDUM DECISION AND ORDER - 10

Mitchell’s work computer and it contained a Quickbooks file with Mitchell
accounting data and employee information.” Id.
•

“A unique, unprecedented browser link appeared in the browser history of
Teresa Mitchell’s work computer.” Id. at pp. 13-14.

•

“Mitchell had never before utilized ZWARE in any form or fashion.” Id.

The Court has carefully considered these factual allegations. However, even accepting
such facts and any related reasonable inferences in favor of Plaintiffs, such evidence does not
establish a prima facie case of Defendants’ “acquisition” of Plaintiffs’ trade secrets, as those
terms are used in the ITSA. In other words, none of this evidence points toward Defendants
actually coming into possession of Plaintiffs’ claimed trade secrets through improper means or
otherwise.
Seemingly recognizing this obstacle, Plaintiffs go on to identify additional circumstantial
evidence that could be construed as suggestive of Defendants’ ultimate acquisition of Plaintiffs’
trade secrets:
•

“ZWARE possesses the capability to do everything witnessed by Teresa and
Danny Mitchell, and the lone changed variable prior to the unusual activity
and damage was the installation of ZWARE on Mitchell’s computers.” Id.
at p. 14.

•

“ZWARE has the ability to create .zip files, just like the ZWARE.zip file that
inexplicably appeared on the desktop of Teresa Mitchell’s work computer.”
Id.

•

“The copy of ZWARE installed on Mitchell’s computers was ‘pointed’ at
Mitchell’s Quickbooks file.” Id.

•

“ZWARE has the capability to communicate with and send a query to
Quickbooks, to search for Quickbooks data and transmit files through a file
transfer protocol.” Id.

•

“Not only does ZWARE have these capabilities, the Quickbooks files located
in the ZWARE.zip file that inexplicably appeared on the desktop of Teresa

MEMORANDUM DECISION AND ORDER - 11

Mitchell’s work computer directly interacted with ZWARE and the
Quickbooks files were modified during that interaction.” Id.
•

“Additionally, ZWARE contains components called ‘NES2.’ NES2 opens
a port for purposes of remote access to a computer. Significantly, NES2
opens TCP, or remote access, ports and attempts to run a ‘send’ and ‘receive’
transmit function about once a minute. This transmit function packages files
from the computer on which it is installed and attempts to send them to a
remote server. It appears that NES2 ‘is able to automatically transfer files
online without the user’s direct intervention.’” Id.

At first blush, these circumstances reflect an argument that, owing to Mr. Electric’s
ZWARE software system’s capabilities, a material issue of fact exists as to whether Defendants
acquired Plaintiffs’ alleged trade secrets. However, these circumstances do not exist in isolation;
when examined more closely, the inferences to be drawn therefrom lose their persuasive sway in
establishing a material issue of fact. To begin, in support of their opposition to dismissal of their
ITSA, Plaintiffs rely almost exclusively upon Dylan Evans’ June 12, 2013 Declaration and
attached reports. See id; see also Pls.’ Stmt. of Disputed Facts No. 13 (Docket No. 53, Att. 1)
(citing Evans Decl (Docket No. 53, Att. 5)). But Mr. Evans’ reports are not as conclusive on the
issue of Defendants’ liability as Plaintiffs would have this Court believe.
For example, while Mr. Evans’ July 24, 2012 report states that the ZWARE software
“has the capability to search for Quickbooks data and transmit files through FTP” and “has the
capability to create .zip files, backup Quickbooks data, and that the particular copy installed on
the Mitchell Electric network was pointed to the company Quickbooks file,” he goes on to
concede that these actions/functions require manual/user intervention – “that is, it does not
happen without a user first logging in and then clicking the corresponding button.” 7/24/12 Rpt.,

MEMORANDUM DECISION AND ORDER - 12

attached as Ex. C to Evans Decl. (Docket No. 53, Att. 9).5 Relevant here, Mr. Evans ultimately
concludes in no uncertain terms that:
No automatically-executing component of the ZWARE software was discovered to
be present on the Mitchell Electric network, including the NES2 Components, nor
was unauthorized external remote access software detected.
Id. (emphasis added). The point here is that the circumstances offered to suggest that
Defendants acquired (and, in turn, misappropriated) Plaintiffs’ trade secrets paint an incomplete
picture. It is apparently true that the ZWARE software has the capacity to perform in a certain
way that could contribute to complications within a computer network system, so long as
specific preconditions are satisfied; yet, on the ultimate question of whether Defendants and the
ZWARE software bear any responsibility for Plaintiffs’ alleged damages, Mr. Evans defers –
even when he had multiple opportunities to say so.6
Mr. Evans’ deposition testimony confirms as much, when in response to Defendants’
counsel’s questions concerning allegations made in Plaintiffs’ Complaint, he testified:
Q:

Okay. Do you have an understanding in your discussions, either by e-mail
or otherwise, with any of the Plaintiffs, either Ms. or Mr. Mitchell of Mr.

5

Mr. Evans’ August 29, 2012 report similarly states that ZWARE’s ability to access
Quickbooks company files requires manual intervention. See 8/29/12 Rpt., attached as Ex. D to
Evans Decl. (Docket No. 53, Att. 10) (“ZWARE will not automatically interact with Quickbooks
unless a user clicks a series of buttons within ZWARE.”). Likewise, Mr. Evans’ April 18, 2012
report states that the NES2 components need to be “extracted from an archive and then installed
separately.” 4/18/12 Rpt., attached as Ex. B to Evans Decl. (Docket No. 53, Att. 7).
6

Mr. Evans’ June 12, 2013 report offers an “alternative explanation” to what allegedly
took place with Plaintiffs’ computer network system – the presence of ActMon/malware. See
6/12/13 Rpt., attached as Ex. E to Evans Decl. (Docket No. 53, Att. 11). Notably, however, the
June 12, 2013 report altogether avoids attributing the ActMon presence to Defendants or the
ZWARE software. Separately, even though posited as an “alternative explanation,” Mr. Evans
determined that “[t]here is no evidence to conclude that ActMon directly caused any of the
behavior or data destruction reported by Mrs. Mitchell . . . .” Id.
MEMORANDUM DECISION AND ORDER - 13

Dixon or any of the lawyers for the Plaintiffs in this case, that that issue you
just mentioned is at issue in this case, whether there was some unauthorized
access to the Mitchells’ computers?
A:

Yes, I understand that’s an issue in this case.

Q:

Okay. Do you also understand that another issue in this case is whether or
not there was any loss or destruction of data as a result of that kind of
unauthorized access to those computers?

A:

Yes.

Q:

Okay. Let me ask you this: Do you believe that there’s any evidence that
there was unauthorized access by any of the defendants in this case?

A:

No, I do not.

Q:

Is there any evidence, to your understanding, that there were any data that
has been lost or destroyed as a result of some unauthorized access by the
Defendants in this case?

A:

Could you rephrase that?

Q:

You bet I could. You’ve indicated you don’t believe there’s any evidence of
an unauthorized access event by the Defendants; correct?

A:

Correct.

Q:

So you therefore, I assume, would agree with me that there is also no
evidence that you’re aware of that data on the Mitchells’ computers was lost
or destroyed as a result of that kind of access event?

A:

That’s correct.

Q:

You don’t know of such evidence?

A:

I found none.

Evans Dep. at pp. 26-27, attached as Ex. KAC-7 to Cameron Decl. (Docket No. 39, Att. 9). Mr.
Evans went on to agree with Defendants’ expert, Jerry Hatchett, that the Complaint’s reference
at paragraphs 24 to an alleged forensics investigation/report finding that the ZWARE software

MEMORANDUM DECISION AND ORDER - 14

gained unauthorized access (or exceeded any authorized access) to Mitchell Electric’s and the
Mitchells’ computers (see supra), was not an opinion that he (Evans) shared:
Q:

Okay. Now, if we’d just go back to Mr. Hatchett’s report . . . . I think that
you mentioned that [paragraph] 24 [of the Complaint] that Mr. Hatchett
quotes . . ., it includes some findings, those are not your findings, I think is
what you said; is that right?

A:

That’s correct.

Q:

Okay. He then says that he can only assume . . . “that the above passage,”
and he’s talking about that paragraph 24 from the Complaint, “is referring to
a report other than the Evans Report, or else there’s been a gross
misinterpretation and presentation of the essence of the Evans Report.
Specifically, I find nothing in the Evans Report that substantiates [paragraph]
24 from the Complaint.” Would you agree with him on that?

A:

I would.

Q:

You would?

A:

Yes.

Q:

Okay. He also indicates, the last sentence of that same paragraph we were
just reading, it says, “In fact, I would opine that Mr. Evans quite carefully
states that at each step of the process that he cannot conclude that anything
suspect took place.” Would you agree with that statement?

A:

I would.

Id. at pp. 31-32. Later, Mr. Evans candidly testified that he disagreed with Plaintiffs’ subjective
belief that Defendants and its ZWARE software accessed and damaged Plaintiffs’ computer
network system:
Q:

Okay. Did you know or come to know during the course of your work on
this matter that Ms. Mitchell has an opinion about the two questions we
talked about, that is, the access event and data destruction as a result of the
access event?

A:

Yes, I am aware of her opinion.

MEMORANDUM DECISION AND ORDER - 15

Q:

What are her opinions?

A:

She believes that unauthorized access was gained to her computer.

Q:

And as a result she believes data was destroyed or lost?

A:

Correct.

Q:

Okay. Whether intentionally or unintentionally as a result of the activity of
the Defendants; correct?

A:

Correct.

Q:

And you disagree with both of those opinions?

A:

I do. . . . .

Q:

And just to be clear, “I do,” you do disagree?

A:

I do disagree.

Q:

Okay. And that disagreement is a result of your own independent analysis
in this case?

A:

Correct.

Id. at pp. 37-38. At its core, Mr. Evans sided with Mr. Hatchett (Defendants’ expert) vis à vis
Defendants’ alleged liability:
Q:

Okay. [Mr. Hatchett] then says [at paragraph 9 of his report], “To date I have
seen nothing to indicate anything nefarious has occurred.” Do you agree
with that?

A:

Yes.[7]

Q:

He also says, “I see no evidence suggesting that defendants used ZWARE to

7

To be fair, Mr. Evans subsequently stated in his June 12, 2013 report that “[n]efarious
activity was indeed being performed on the Mitchell network,” due to ActMon and the entity that
installed ActMon. See 6/12/13 Rpt., attached as Ex. E to Evans Decl. (Docket No. 53, Att. 11)
(discussed supra). Regardless, Mr. Evans never suggests that Defendants or the ZWARE
software are associated with this “alternative explanation.” See supra.
MEMORANDUM DECISION AND ORDER - 16

gain unauthorized access to Plaintiffs’ systems or data.” Do you agree with
that?
A:

Yes.

Q:

“Or to cause damage to Plaintiffs’ systems or data.” Do you agree with that
as well?

A:

Yes.

Q:

Okay. He also says, “Moreover, I do not see any findings or conclusions by
Plaintiffs’ own expert that establish such activity.” Do you agree with that?

A:

Yes.

Q:

He also says the following . . ., “But I have seen nothing to suggest any
intentional cause of such a corruption as opposed to a routine failure of
technology, the likes of which happen countless times per day in the
computing universe.” Do you agree with that?

A:

I do.

Id. at pp. 41-42. Simply put, Mr. Evans’ opinions do not support Plaintiffs’ allegation that
Defendants’ acquired and/or misappropriated their trade secret information. Further, Mr. Evans’
opinions do nothing to cut against Mr. Hatchett’s expert opinion to the contrary.
To that end, Mr. Hatchett unequivocally opines that his analysis (incorporating Mr.
Evans’ own testimony and reports) indicates that there is no evidence (1) “to support the
allegations that Defendants and/or ZWARE committed any unauthorized access, querying,
gathering, or intrusion activity on any of Plaintiffs’ computers,” or (2) “that Defendants caused
any damage to or unauthorized transmission of Plaintiffs’ data.” Hatchett Decl., ¶¶ 10 & 12
(Docket No. 37); see also 3/20/13 Rpt. (Docket No. 37, Att. 10) (“I found absolutely no evidence
in the forensic record (or the reports and testimony of Plaintiffs’ expert, for that matter) that
Defendants caused damage to or theft of any of Plaintiffs’ data.”). Mr. Hatchett does not stop

MEMORANDUM DECISION AND ORDER - 17

there, he goes on to say: “[A]fter considering the totality of the evidence available in this case, I
cannot presently recall investigating another case in which such serious allegations have been
made, pursued, and maintained notwithstanding and despite an utter dearth of supporting
evidence.” Hatchett Decl., ¶ 9 (Docket No. 37); see also 3/20/13 Rpt. (Docket No. 37, Att. 10).
Mr. Hatchett then attributes the situation (and the very continued existence of this litigation) to
Plaintiffs’ apparent inability to acknowledge the facts:
When deposed, Plaintiffs’ expert and each of the technology-related witnesses who
examined the computers and the alleged damage[8] . . . agreed with my position that
there is no evidence of any intrusion having taken place in the [Mitchell Data
Universe] or that Defendants caused any damage to or unauthorized transmission of
Plaintiffs’ data. Despite this position from their own expert and hired technicians,
Plaintiffs continue to insist that the evidence does exist.
Although Mrs. Mitchell testified that she is not a technical person – and her
testimony bears that concession out as accurate – she contradicts her own experts and
continues to drive this process forward based on data and artifacts that she obviously
has no understanding of, and many of which she is personally responsible for
creating. When Mrs. Mitchell is asked to point out the evidence that not one of five
involved technologists was able to find, it becomes obvious that virtually any
reference to Defendants or to ZWARE anywhere within the [Mitchell Data Universe]
is considered by her to be evidence of malfeasance by Defendants, no matter how
unconnected, remote, routine, or expected the reference is. As noted above,
however, that viewpoint finds absolutely no support in the evidence or the
conclusions reached by both me and Plaintiffs’ own expert, Dylan Evans.

8

Defendants argue that “[t]he individuals and/or companies who authored the ‘reports’
referenced and relied in paragraphs 23 through 27 of the Complaint have fully and completely
recanted any allegation or inference in such reports charging Defendants with unlawful access
and/or causing any damage to Plaintiffs’ computers or data.” Defs.’ U.F. No. 17 (Docket No. 34,
Att. 2) (citing G2 Research/Goldston Dep. at pp. 40-48, 73, 76-78, 81-84, 98-99, attached as Ex.
KAC-8 to Cameron Decl. (Docket No. 39, Att. 10); Intermountain Network Solutions Dep. at pp.
58, 62-64, 98-99, attached as Ex. KAC-9 to Cameron Decl. (Docket No. 39, Att. 11); Virtual IT
Dep. at pp. 90-93, 110-12, 116, 141-43, 146-48, attached as Ex. KAC-10 to Cameron Decl.
(Docket No. 39, Atts. 12 & 13)). In response, Plaintiffs simply state that such facts are disputed,
while referring back to Mr. Evans’ June 12, 2013 Declaration and attached reports. See Pls.’
Stmt. of Disputed Facts No. 17 (Docket No. 53, Att. 1). This is not enough to dispute that
certain allegations in Plaintiffs’ Complaint may no longer accurately apply.
MEMORANDUM DECISION AND ORDER - 18

3/20/13 Rpt. (Docket No. 37, Att. 10). Importantly, Mr. Hatchett’s opinions as to Defendants’
alleged liability are unrebutted by anyone with the appropriate level of expertise.
With all this in mind, whatever circumstantial evidence may have originally existed in
support of a claim that Defendants’ misappropriated Plaintiffs’ trade secrets is not just rebutted,
but effectively eviscerated, when contrasted against the more developed, direct, and expert-based
evidence in the record.9 Even if the great bulk of the evidence obtained through the experts
could be viewed to be disputed by the factual assertions coming from Plaintiffs themselves, no
reasonable minds could differ upon the answer to that dispute, and therefore there is no genuine
issue of material fact. Hence, without stating here that Plaintiffs have no claim at all for their
alleged damage, there is a failure of evidence to support a claim under the ITSA. Defendants’
Motion for Summary Judgment is granted in this respect.10
D.

Defendants are Entitled to Summary Judgment on Plaintiffs’ Conversion Claim
(Count 3)
“Generally, conversion is any distinct act of dominion wrongfully exerted over another’s

personal property in denial or inconsistent with his or her rights therein depriving him or her of
possession, permanently or for an indefinite time.” Med. Recovery Servs., LLC v. Bonneville

9

Additionally, with respect to any argument that Plaintiffs never experienced significant
computer issues before becoming a Mr. Electric franchisee and having the ZWARE software
installed on its computer network, it should be pointed out that ZWARE was installed in
November 2007 – nearly two years before the events of August 23, 2009. See Reply in Supp. of
MSJ, p. 2, n.2 (Docket No. 55).
10

Given the Court’s dismissal of Plaintiffs’ ITSA claim given the absence of evidence
that Defendants acquired/misappropriated Defendants’ trade secrets, it need not address
Defendants’ other argument that Defendants suffered no damage by the alleged
misappropriation.
MEMORANDUM DECISION AND ORDER - 19

Billing, 2013 WL 20474, *2 (Idaho Ct. App. 2013) (citing Schlieff v. Bistline, 15 P.2d 726, 728
(Idaho 1932)). Actual possession of the property by the owner is not necessary; all that is
required is either title to the property or a “right to possess the property at the time of the
conversion.” W. Idaho Prod. Credit Ass’n v. Simplot Feed Lots, Inc., 678 P.2d 52, 54 (1984).
Defendants argue that Plaintiffs “cannot make a prima facie case for conversion because there is
no evidence that Defendants ever acquired or used the Mitchell Dispatch Software or related
business data.” Mem. in Supp. of MSJ, p. 14 (Docket No. 34, Att. 1).
In response, Plaintiffs contend that “[t]here is evidence that Defendants took possession
and converted the [Mitchell Dispatch Software] and the data contained therein.” Opp. to MSJ, p.
16 (Docket No. 53). To support such a contention, Plaintiffs offer the exact same evidence
(indeed, presented verbatim) that they did to oppose Defendants’ efforts to dismiss Plaintiffs’
ITSA claim – essentially, that the ZWARE software has the capability of exercising dominion
over Defendants’ computer network system. See id. at pp. 16-17.
For the same reasons that Plaintiffs cannot show that Defendants acquired and/or
misappropriated their trade secrets (see supra), they likewise cannot show that Defendants
converted the Mitchell Dispatch Software or the Data for its own use. Defendants’ Motion for
Summary Judgment is granted in this respect.11
E.

Defendants are Entitled to Summary Judgment on Plaintiffs’ Tortious Interference
with Prospective Economic Advantage Claim (Count 4)
Plaintiffs’ claim for tortious interference with a prospective economic advantage requires

proof of: (1) the existence of a valid economic expectancy, (2) Defendants’ knowledge of the

11

Given the Court’s dismissal of Plaintiffs’ conversion claim, and the reasons for doing
so, it need not address Defendants’ other argument that Defendants suffered no damage by the
alleged conversion.
MEMORANDUM DECISION AND ORDER - 20

expectancy, (3) intentional interference inducing termination of the expectancy, (4) the
interference was wrongful by some measure beyond the fact of the interference itself, and (5)
Plaintiffs’ resulting damage whose expectancy has been disrupted. See Cantwell v. City of
Boise, 191 P.3d 205, 216 (Idaho 2008); Commercial Ventures, Inc. v. Rex M. & Lynn Lea Family
Trust, 177 P.3d 955, 964 (Idaho 2008). Defendants argue that Plaintiffs cannot show (1) that
Mitchell Electric had a valid prospective economic expectancy with which Defendants
interfered; (2) Defendants actually interfered with any business relationship, customer, or
potential customer of Mitchell Electric; or (3) that Defendants’ alleged conduct caused it any
actual harm or damages. See Mem. in Supp. of MSJ, p. 16 (Docket No. 34, Att. 1).
In response, Plaintiffs contend, in part, that “[t]here is evidence that Defendants
“interfered with the [Mitchell Dispatch Software] and the data contained therein.” Opp. to MSJ,
p. 18 (Docket No. 53). To support such a contention, Plaintiffs again put forward the exact same
evidence (indeed, presented verbatim) offered to oppose Defendants’ efforts to dismiss
Plaintiffs’ ITSA and conversion claims – essentially, that the ZWARE software has the
capability of interfering with Defendants’ computer network system. See id. at pp. 18-19.
For the same reasons that Plaintiffs cannot show that Defendants either acquired and/or
misappropriated their trade secrets or converted the Mitchell Dispatch Software or the Data for
its own use (see supra), they likewise cannot show that Defendants actually interfered with the
Mitchell Dispatch Software or its Data so as to induce the termination of any alleged economic
expectancy – even assuming such an expectancy’s existence. Defendants’ Motion for Summary
Judgment is granted in this respect.12

12

Given the Court’s dismissal of Plaintiffs’ tortious interference with prospective
economic advantage claim based upon the lack of evidence of actual interference with any
alleged economic expectancy, it need not address Defendants’ other argument that Defendants
had no valid economic expectancy and suffered no damage by the alleged interference.
MEMORANDUM DECISION AND ORDER - 21

III. ORDER
For the foregoing reasons, IT IS HEREBY ORDERED THAT Defendants’ Motion for
Summary Judgment (Docket No. 34) is GRANTED in its entirety.
DATED: April 7, 2014

Honorable Ronald E. Bush
U. S. Magistrate Judge

MEMORANDUM DECISION AND ORDER - 22