Sageworks, Inc. v. Creatore
ORDER denying 6 Motion to Dismiss for Failure to State a Claim; denying 91 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 23 Motion to Dismiss Counterclaims for Failure to State a Claim. Defendant's counterclaims for libel per se and libel per quod are DISMISSED and defendant's counterclaim for indemnification is DISMISSED WITHOUT PREJUDICE. Signed by US District Judge Terrence W. Boyle on 2/15/2017. (Stouch, L.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
RONALD M. CREATORE,
This cause comes before the Court on defendant's motions to dismiss plaintiffs claims
and plaintiffs motion to dismiss defendant's counterclaims. The appropriate responses and
replies have been filed and the motions are ripe for ruling. For the reasons discussed below,
defendant's motions are denied and plaintiffs motion is granted in part.
Plaintiff filed this action against defendant, a former employee, in Wake County Superior
Court alleging claims for violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, the
Electronic Communications Privacy Act, 18 U.S.C. § 2511, and the Computer Related Crimes
Act, N.C. Gen. Stat. § 14-458(a), as well as for breach of contract, misappropriation of trade
secrets, unfair and deceptive trade practices, and breach of fiduciary duty. Defendant,
proceeding prose, removed plaintiffs complaint to this Court on the basis of its federal question
jurisdiction. 28 U.S.C. §§ 1331; 1441.
Plaintiff alleges that defendant was hired by plaintiff in May 2014 as Vice President of
Operations & Finance and that defendant's employment was terminated in November 2014 for
poor performance. Plaintiff alleges that upon his hiring as an employee defendant executed a
business protection agreement in which defendant agreed to keep plaintiffs proprietary
information confidential during the term of his employment and for five years following
termination of his employment for any reason. Plaintiff alleges that defendant copied thousands
of its proprietary documents and saved them to a personal Drop box account and that defendant
also set up a fraudulent scheme to divert executive level email communications to a personal
Plaintiff filed a motion for preliminary injunction pursuant to Rule 65 of the Federal
Rules of Civil Procedure seeking the return or restraint of defendant's use or dissemination of
plaintiffs confidential information and documents containing personal information about
plaintiffs employees. A hearing was held on the motion before the undersigned and the request
for a preliminary injunction was granted. [DE 52; 54]. Plaintiff noticed an interlocutory appeal
of the preliminary injunction but subsequently voluntarily dismissed his appeal. See Sageworks
v. Creatore, No. 16-2118, (4th Cir. Oct. 25, 2016).
Defendant now proceeds in this Court though duly admitted counsel. [DE 70 & 71]. Still
pending for the Court's consideration are two motions to dismiss filed by defendant while
proceeding pro se. In his first motion, defendant seeks dismissal of plaintiffs first claim for
relief for failure to state a claim upon which relief could be granted. Fed R. Civ. P. 12(b)(6);
[DE 6]. Defendant's second motion to dismiss seeks to dismiss plaintiffs fifth and sixth claims
for relief as failing to state a claim. [DE 23]. Also pending is plaintiffs motion to dismiss
counterclaims asserted in defendant's answer for failure to state a claim. [DE 91].
Rule 8 of the Federal Rules of Civil Procedure "requires only a short and plain statement
of the claim showing that the pleader is entitled to relief' and which provides "the defendant fair
notice of what the claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S.
89, 93 (2007) (internal quotations, alterations, and citations omitted). A Rule 12(b)(6) motion
tests the legal sufficiency of the complaint. Papasan v. Allain, 478 U.S. 265, 283 (1986).
When acting on a motion to dismiss under Rule 12(b)(6), "the court should accept as true all
well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff."
Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). A complaint must allege enough
facts to state a claim for relief that is facially plausible. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007). Facial plausibility means that the facts pled "allow the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged," and mere recitals of
the elements of a cause of action supported by conclusory statements do not suffice. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). A complaint must be dismissed ifthe factual allegations do not
nudge the plaintiffs claims "across the line from conceivable to plausible." Twombly, 550 U.S.
Defendant's motions to dismiss
In his first-filed motion defendant seeks to dismiss plaintiffs claim under the Computer
Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030. The CFAA is primarily a criminal statute, but
it also provides for a private right of action for compensatory damages and equitable relief by
someone who suffers damage or loss as a result of a violation of the statute. WEC Carolina
Energy Sols. LLC v. Miller, 687 F.3d 199, 201 (4th Cir. 2012). "The CFAA is concerned with
the unauthorized access of protected computers," id at 204, and prohibits intentional access of a
computer without authorization or intentional access of a computer which exceeds authorization.
18 U.S.C. § 1030(a). In Miller, the Fourth Circuit held that an employee
accesses a computer "without authorization" when he gains admission to a
computer without approval. Similarly, we conclude that an employee "exceeds
authorized access" when he has approval to access a computer, but uses his access
to obtain or alter information that falls outside the bounds of his approved access.
Miller, 687 F.3d at 204 (internal citation omitted). Here, plaintiff has alleged that defendant both
accessed information without authorization and that he exceeded his authorized access to obtain
information. [DE 1-1], Compl. iii! 48; 88.
Defendant contends that plaintiff has failed to state a plausible CFAA claim because
plaintiff has only alleged that defendant violated the company policy or breached his contract,
and, under Miller, such facts are insufficient to bring a claim under CFAA. The claim in Miller
is distinguishable, however, as the facts alleged in that case supported only unauthorized use of
company information, not unauthorized access. See Miller, 687 F.3d at 203 (noting that the
"district court held that Appellees' alleged conduct-the violation of policies regarding the use
and downloading of confidential information--did not contravene any of these provisions [of
CFAA]" and holding that "WEC fails to allege that [defendants] accessed a computer or
information on a computer without authorization."). Unlike in Miller, plaintiff has specifically
alleged that defendant exceeded his access authorization or accessed information without
authorization. For example, plaintiff alleges that defendant engaged in a scheme to fraudulently
intercept emails from plaintiffs executive management. Compl. iii! 30-35. Although plaintiff
contends that he had unfettered access to all of plaintiffs computer systems and electronically
stored documents without limitation, [DE 31-1], such is an issue of fact better determined on
summary judgment than at the pleading stage.
The Court finds that plaintiff's has made sufficient allegations relating to defendant's
access to state a plausible claim under CFAA and provide defendant with fair notice of the claim
against him. See also Tech. Partners, Inc. v. Papaioannou, No. 3:15CV63, 2015 WL 9304562,
at *4 (W.D.N.C. Dec. 21, 2015) (where "Plaintiffs make numerous, specific allegations
concerning (1) the specific scope of Defendant's data access privileges, and (2) Defendant's
unauthorized access to Plaintiffs' computer systems that exceeded that specifically defined
scope) plaintiffs have stated a claim under CFAA). Defendant's first motion to dismiss is
In a second-filed motion to dismiss, defendant seeks to dismiss plaintiff's fifth and sixth
claims for relief for failure to state a claim. Fed. R. Civ. P. 12(b)(6). Defendant is procedurally
barred from raising subsequent 12(b)(6) defenses by the consolidation principle of Fed. R. Civ.
P. 12(g). Rule 12(g) provides that, except in circumstances not applicable here, a party must
assert all available defense or objections when making a motion under Rule 12. See, e.g.,
Stoffels ex rel., SBC Concession Plan v. SBC Commc 'ns, Inc., 430 F. Supp. 2d 642, 647 (W.D.
Tex. 2006) ("A review of the relevant authorities confirms that Rule 12(g) normally bars
successive pre-answer motions to dismiss.") (citing 5C Wright & Miller, Fed Prac. & Proc .. ,-r
Review of defendant's second motion to dismiss does not reveal any defense or objection
which would not have been available at the time of filing of his first motion to dismiss. This
motion is therefore denied.
Plaintiff's motion to dismiss counterclaims
Defendant has answered plaintiff's complaint and filed counterclaims for wrongful
termination in violation of North Carolina public policy, libel per se and libel per quad, and
court-ordered indemnification. Plaintiff has moved to dismiss each of defendant's
counterclaims for failure to state a claim upon which relief can be granted.
A claim for wrongful termination under North Carolina public policy is a "narrow
exception to North Carolina's general rule of employment at will." White v. Rite Aid ofN
Carolina, Inc., No. 5:15-CV-309-D, 2015 WL 7429996, at *2 (E.D.N.C. Nov. 20, 2015) (listing
cases holding same). Such claims have been recognized where, for example, an employee was
discharge for refusing to violate the law at the request of his employer or engaging in legally
protected activity. Ridenhour v. Int'! Bus. Machines Corp., 132 N.C. App. 563, 568 (1999). A
plaintiff must plead "specific conduct by a defendant that violated a specific expression of North
Carolina public policy." Considine v. Compass Grp. USA, Inc., 145 N.C. App. 314, 321 (2001);
see also White, 2015 WL 7429996, at *2 (plaintiff must plead a specific provision of the North
Carolina Constitution or General Statutes as providing the public policy alleged to have been
Defendant alleges that plaintiff violated North Carolina's strong public policy requiring
companies to disclose data breaches, reflected in N.C. Gen. Stat. § 75-65. Defendant alleges that
he advised plaintiff after what he has termed the "China Data Breach" occurred that plaintiff
must report the breach to its affected customers. Defendant further alleges that plaintiff refused
to report the China Data Breach and instead terminated defendant's employment "for his refusal
to ignore the China Data Breach and [his] efforts to investigate and report the China Data
Breach". [DE 89], Countercl. if 48].
Viewing the allegations in defendant's counterclaim as true as the Court must at this
stage, defendant has sufficiently stated a plausible claim for relief and put plaintiff on notice of
the claim against it. The Court thus declines to dismiss defendant's wrongful termination
Defendant's next counterclaims are for libel per se and libel per quad based on the
notification letter sent by plaintiff regarding a data breach arising from defendant's conduct.
[DE 92-1]. As it is referenced explicitly in the counterclaim, the Court may consider the
contents of the letter without converting the motion to one for summary judgment under Fed. R.
Civ. P. 56. See Am. Chiropractic Assoc. v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir.
Libel per se is "a publication which, when considered alone without explanatory
circumstances: (1) charges that a person has committed an infamous crime; (2)
charges a person with having an infectious disease; (3) tends to impeach a person
in that person's trade or profession; or (4) otherwise tends to subject one to
ridicule, contempt or disgrace."
Boyce & Isley, PLLC v. Cooper, 153 N.C. App. 25, 29 (2002) (citation omitted). "Defamatory
words to be libelous per se must be susceptible of but one meaning" which allows a court to
decide as a matter of law that the words "tend to disgrace and degrade the party". Flake v.
Greensboro News Co., 212 N.C. 780 (1938). Truth is an absolute defense to libel claims. See
Martin Marietta Corp. v. Wake Stone Corp., 111 N.C. App. 269, 276 (1993).
In pertinent part, the notification letter provides that in January 2015 plaintiff discovered
that defendant retained personal information about certain employees after his employment with
plaintiff was terminated in November 2014. [DE 92-1]. It notes that plaintiff immediately
notified federal law enforcement upon discovery of defendant's retention of information and that
the Federal Bureau of Investigation (FBI) asked plaintiff to refrain from providing notice
regarding the incident while it conducted its investigation. It identifies the types of personally
identifying information which might have been retained by defendant, as well as the steps
plaintiff had taken to remedy the situation, including notifying law enforcement and conducting
an internal investigation. The letter notes that plaintiff had made several demands to defendant
to return the information, that as of the date of the letter defendant had not returned the
information, and that plaintiff had no information regarding misuse of the personal information
by defendant. Finally, letter references the filing of the instant lawsuit and notes that "[s]ince the
discovery of this wrongdoing by [defendant], we have taken steps to place further limits and
safeguards on confidential employee information." Id.
As plaintiff correctly notes, defendant has admitted the truth of much of what is
contained in the notification letter. For example, defendant has admitted that he retained
plaintiffs documents after his employment was terminated and that the FBI conducted an
investigation. [DE 89], Answer~~ 1, 29, 31. Although the letter does in one sentence refer to
"wrongdoing" by defendant, the Court does not find that such statement tends to disgrace or
degrade defendant. The Court "must  consider the publication as a whole, looking at the
allegedly defamatory statements, within the 'four comers' of the document." Nucor Corp. v.
Prudential Equity Grp., LLC, 189 N.C. App. 731, 738 (2008). The overall tenor of the document
is not focused on defendant, but rather on alerting plaintiffs employees of a breach of the
security of their personal information. Further, "North Carolina cases have held consistently that
alleged false statements ... , calling [a former employee]'dishonest' or charging that [the
employee] was untruthful and an unreliable employee, are not actionable per se." Stutts v. Duke
Power Co., 47 N.C. App. 76, 82 (1980). The Court holds that defendant's libel per se
counterclaim is properly dismissed. As defendant concedes that he has not pled special damages
as is required for a libel per quad claim, this claim is also properly dismissed. See, e.g., id.
Defendant seeks court-ordered indemnification under N.C. Gen. Stat. § 55-8-52, which
provides that a corporation may have an obligation to indemnify a director "who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation." Defendant alleges that he has incurred
expenses related to the FBI' s investigation of his actions and the actions taken which form the
basis of plaintiffs suit. As defendant has identified no proceeding in the defense of which he
was wholly successful, his claim for indemnification is premature and is properly dismissed
For the foregoing reasons, defendant's motions to dismiss [DE 6 & 23] are DENIED.
Plaintiffs motion to dismiss counterclaims [DE 91] is GRANT IN PART and DENIED IN
PART. Defendant's counterclaims for libel per se and libel per quod are DISMISSED and
defendant's counterclaim for indemnification is DISMISSED WITHOUT PREJUDICE.
SO ORDERED, this
day of February, 2017.
UNITED STATES DISTRICT JUDGE
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