Yoder & Frey Auctioneers, Inc., et al vs. John Doe

Filing 35

MEMORANDUM OPINION denying Motion to dismiss (Related Doc # 23 ). Judge David A. Katz on 6/14/11.(G,C)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION

YODER & FREY AUCTIONEERS, INC.,
et al.,
Plaintiff,

Case No. 3:10 CV 1590

-vsMEMORANDUM OPINION
EQUIPMENTFACTS, LLC,
Defendant.
KATZ, J.
This matter is before the Court on Defendant EquipmentFacts, LLC’s Motion to Dismiss
the first claim of the First Amended Complaint (Doc. No. 23), the Opposition of Plaintiffs Yoder
& Frey Auctioneer’s, Inc. (“Yoder”) and RealTimeBid.Com, LLC (“RTB”) (Doc. No. 30), and
Defendant’s Reply (Doc. No. 31). The Court notes federal question jurisdiction under 28 U.S.C.
§1331, supplemental jurisdiction under 28 U.S.C. §1367, and proper venue under 28 U.S.C.
§1391. For the reasons stated below, the motion will be denied.
I. BACKGROUND
The following facts are taken from the First Amended Complaint (Doc. No. 17).
Yoder is an Ohio auction company that derives a substantial portion of its business from a
yearly heavy equipment auction conducted in Florida. Though the auction is conducted in person
and in the presence of the equipment, Yoder has also provided online services to its buyers and
sellers for several years.
Until January 2008, Yoder had contracted with Defendant (a New Jersey LLC) to run the
online bidding service. After terminating the relationship, Yoder hired RTB to maintain the online

auction services for the 2010 auction. Online access to the 2010 auction was not open to the
public; a potential participant must apply and satisfy both Plaintiffs.
Plaintiffs allege that Defendant obtained unauthorized access to the 2010 online auction
system, using an administrative identification and password, and posted negative comments on the
system chat board. Later, Defendant falsely registered for the online auction using the name of a
Yoder customer who was registered for the auction in general. Further, Plaintiffs allege,
Defendant used this fraudulent registration to place bids in the auction, placed the winning bid on
over one million dollars worth of equipment, and failed to pay on those winning bids.
Plaintiffs brought this suit because of the incident, raising violation of the Computer Fraud
and Abuse Act (“CFAA”), 18 U.S.C. §1030, common law fraud and trespass to chattels, and
breach of contract.1 Defendant moved for dismissal of the first claim of Plaintiffs’ First Amended
Complaint, the CFAA count and also the only federal law count.2
II. MOTION TO DISMISS STANDARD
Fed.R.Civ.P. 12(b)(6) provides for dismissal of a lawsuit for “failure to state a claim upon
which relief can be granted.” Courts must accept as true all of the factual allegations contained in
the complaint when ruling on a motion to dismiss. Erickson v. Pardus, 127 S.Ct. 2197, 2200
(2007); Thurman v. Pfizer, Inc., 484 F.3d 855, 859 (6th Cir. 2007). To survive a motion to

1

The breach of contract claim, relating to the failure to pay on the fraudulent bids, was added in the
First Amended Complaint.
2

Defendant suggests that if the Court dismisses the CFAA count, the Court should decline
continued supplemental jurisdiction over the remaining state law claims. Plaintiffs, perhaps
realizing that the parties are diverse, asked for leave to amend their complaint in the case the
Court dismisses the CFAA count.
2

dismiss under Rule 12(b)(6), “even though a complaint need not contain ‘detailed’ factual
allegations, its ‘factual allegations must be enough to raise a right to relief above the speculative
level on the assumption that all the allegations in the complaint are true.’” Ass'n of Cleveland Fire
Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007) (quoting Twombly, 550
U.S. at 555).
Conclusory allegations or legal conclusions masquerading as factual allegations will not
suffice. Twombly, 550 U.S. at 555 (stating that the complaint must contain something more than
“a formulaic recitation of the elements of a cause of action”). A complaint must state sufficient
facts to, when accepted as true, state a claim “that is plausible on its face.” Iqbal, 129 S.Ct. at
1949 (explaining that the plausibility standard “asks for more than a sheer possibility that a
defendant has acted unlawfully” and requires the complaint to allow the court to draw the
reasonable inference that the defendant is liable for the alleged misconduct).
In conjunction with this standard, the Court is cognizant that Fed. R. Civ. P. 8(a)(2)
“requires only ‘a short and plain statement of the claim showing that the pleader is entitled to
relief.’ Specific facts are not necessary; the statement need only ‘give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests.’” Erickson v. Pardus, 127 S.Ct. 2197,
2200 (2007) (citing Twombly, 550 U.S. at 596); see also Sensations, Inc. v. City of Grand Rapids,
526 F.3d 291, 295-96 (6th Cir 2008). The Court “may consider the Complaint and any exhibits
attached thereto, public records, items appearing in the record of the case and exhibits attached to
defendant's motion to dismiss so long as they are referred to in the Complaint and are central to
the claims contained therein.” Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th
Cir. 2008).

3

III. ANALYSIS
In its Motion to Dismiss, Defendant raises only Plaintiffs’ allegation of “loss” under the
CFAA. With limited exceptions, any civil suit under this primarily criminal statute has to prove
“loss” as defined in the statute of at least $5000. 18 U.S.C. §1030(g), (c)(4)(A)(i)(I) (civil suit
authorized under subsection (g) if one of the factors in subsection (c)(4)(A)(i)(I)-(V) satisfied).
Further, Defendant contests only whether Plaintiffs allege a “loss” at all without attacking the
allegation as to amount.
The CFAA defines “loss” 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)(11) (emphasis added). Plaintiffs allege such consequential damages due to lost
commissions from the failed auction on the items for which Defendant allegedly submitted the
winning bid and the cost of making whole the sellers of those items.
The parties disagree over whether “interruption of service” only covers large scale
sabotage, such as crashing a website or a computer, or whether it can include the smaller scale
sabotage at issue here, where Defendant allegedly assumed the identity of another in order to cast
fraudulent bids at a site devoted to an auction.3 The statute does not define “interruption of
service.” Case law provides little further hint, essentially leaving the Court with a question of first
impression.
3

If Defendant objected to the type, rather than scale, of the sabotage alleged, the Court would have
to consider whether Plaintiffs’ auction website was in service if Defendants submitted fraudulent
winning bids for every item in the auction.
4

Defendant relies most heavily on a case decided in this district by Judge Zouhary which
found no loss. Am. Family Mut. Ins. Co. v. Rickman, 554 F.Supp.2d 766 (N.D. Ohio 2008). It
claims that case is “virtually identical” to this case. (Doc. No. 23-1 at 1). Because that case
involved misappropriation of information by a departing employee, rather than fraudulent access
to a commercial website, the Court is not convinced. Id. at 771. While Judge Zouhary held that
the CFAA requires “interruption of service” for consequential “losses,” his holding addressed the
absence of such assertion, not the parameters of “interruption of service.”
Almost every other case Defendant relies upon to show that the allegations do not involve
an “interruption of service” also involves misappropriation of information, rather than disruption
of operations. See ReMedPar, Inc. v. AllParts Medical, LLC, 683 F.Supp.2d 605, 614 (M.D.
Tenn. 2010) (plaintiff “has not alleged any disruption in its service”); Oil States Skagit Smatco,
LLC v. Dupre, 2010 WL 2605748 at *3 (E.D. La.) (“the losses alleged by the plaintiffs are not
revenue lost because the plaintiffs' computers were damaged or inoperable, but were incurred due
to the manner in which the defendants used the data afterwards”); Andritz, Inc. v. S. Maint.
Contractor, LLC, 626 F.Supp.2d 1264, 1266 (M.D. Ga. 2009) (misappropriation of “Plaintiff's
trade secrets and proprietary information” rather than “impairment to its computer system”); Jet
One Group, Inc. v. Halcyon Jet Holdings, Inc., 2009 WL 2524864 at *7 (E.D.N.Y) (“Defendants
obtained ‘confidential and proprietary information’ and used such information to Plaintiff's
detriment-while not connecting this detriment to any ‘impairment’ to its computer system”); ES &
H, Inc. v. Allied Safety Consultants, Inc., 2009 WL 2996340 at *4 (E.D. Tenn.) (“Plaintiff has not
alleged any disruption in its service”); Cohen v. Gulfstream Training Acad., Inc., 2008 WL
961472 at *3-4 (S.D. Fla.) (“copying of files for ... use to begin a competing company ... did not

5

cause an interruption of service”); Cenveo Corp. v. CelumSolutions Software GMBH & Co., 504
F.Supp.2d 574, 581 (D. Minn. 2007) (“the Amended Complaint is devoid of allegations that
Wilker's access caused an interruption in service”); L-3 Commc’ns Westwood Corp. v.
Robicharux, 2007 WL 756528 at *4 (E.D. La.) (“There is no allegation that there was ... an
interruption of service in this case”). Defendant also thinks that cases stating that destruction of
data (again, by exiting employees) satisfies “loss” imply that the alleged actions in this case did
not cause a “loss.” See Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting, LLC,
600 F.Supp.2d 1045 (E.D. Mo. 2009); B & B Microscopes v. Armogida, 532 F. Supp.2d 744
(W.D. Pa. 2007). Not only are those cases factually distinct because they involve former
employees and misappropriation, they only speak to the effect of deletion, not disruption.
Because Defendant’s case law fails to demonstrate to the Court anything related to the type
of disruption Plaintiffs allege, the Court will look for guidance to the legislative history of 18
U.S.C. §1030(e)(11). In describing the definition of “loss” for the CFAA, the record specifically
invokes “responding to a computer hacker” as the proper scope of the definition. 147 Cong. Rec.
S10990-02, 20 (2001). Black’s Law Dictionary 780 (9th ed. 2009) defines “to hack” as “to
surreptitiously break into the computer, network, servers, or database of another person or
organization.” Here, Plaintiffs allege that Defendant surreptitiously (by pretending to be a
particular Yoder customer) gained access to the auction website.
Given the legislative history, the language of the statute, and the paucity of case law at
issue, the Court finds that Defendant’s alleged intentional disruption of even a portion of the
online auction through surreptitiously submitted false bids interrupted the service of that site.
While the online auction was not totally thwarted, a number of individual online transactions

6

were. As such, the auction website did not provide service to either Plaintiffs or the buyers and
sellers in the auction while Defendants allegedly submitted false winning bids.
Finally, Defendant raises the rule of lenity, noting that the CFAA is primarily a criminal
statute. However, the rule of lenity only applies in the face of a “grievous ambiguity or
uncertainty.” Barber v. Thomas, 130 S.Ct. 2499, 2511 (2010) (internal quotation marks omitted).
Because Defendant allegedly falsified its identity to access the auction website and intentionally
disrupted the operation of that website, the Court finds no grievous ambiguity or uncertainty. It is
clear that Defendant’s alleged actions were illicit, even if whether and how they were illegal is
not.
IV. CONCLUSION
For the reasons discussed herein, Defendant’s Motion to Dismiss (Doc. No. 23) is hereby
denied.
IT IS SO ORDERED.
s/ David A. Katz
DAVID A. KATZ
U. S. DISTRICT JUDGE

7