Reynolds & Reynolds Company v. Superior Integrated Solutions, Inc.
Filing
37
ENTRY AND ORDER GRANTING REYNOLDS MOTION TO DISMISS (Doc. 29 ) AND OVERRULING SISs EMERGENCY MOTION FOR A PRELIMINARY INJUNCTION (Doc. 28 ). Signed by Judge Thomas M Rose on 6/6/2013. (kf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
THE REYNOLDS & REYNOLDS
COMPANY,
Case No. 1:12-cv-848
Plaintiff,
Judge Thomas M. Rose
-vSUPERIOR INTEGRATED SOLUTIONS,
INC.,
Defendant.
______________________________________________________________________________
ENTRY AND ORDER GRANTING REYNOLDS’ MOTION TO DISMISS
(Doc. #29) AND OVERRULING SIS’s EMERGENCY MOTION FOR A
PRELIMINARY INJUNCTION (Doc. #28)
______________________________________________________________________________
Now before the Court is a Motion To Dismiss Defendant Superior Integrated Solutions,
Inc.’s (“SIS’s”) Amended Counterclaims brought by Plaintiff Reynolds & Reynolds Company
(“Reynolds”). (Doc. #29.) Reynolds seeks to dismiss SIS’s Amended Counterclaims pursuant to
Fed. R. Civ. P. 8 and 12(b)(6).
Count I of SIS’s Amended Counterclaim is for tortious interference with contractual
relationships. Count II is for violation of Section 1 of the Sherman Antitrust Act. Count III is for
violation of Section 2 of the Sherman Antitrust Act and Count IV is for violations of the
Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030, et seq. In addition to damages for
each Count, SIS seeks temporary and permanent injunctive relief.
Reynolds’ Motion To Dismiss is now fully briefed and ripe for decision. A relevant
factual background based upon SIS’s Amended Counterclaim will first be set forth. This will be
followed by the relevant legal provisions and an analysis of Reynolds’ Motion.
RELEVANT FACTUAL BACKGROUND
The Parties
Reynolds is an Ohio Corporation with its principal place of business in Kettering, Ohio.
(Am. Countercl. ¶ 2.) SIS is a New Jersey corporation with its principal place of business in
Edison, New Jersey. (Id. at ¶ 1.)
Reynolds owns and operates a proprietary dealer management system (“DMS”). (Id. at ¶
9.) Reynolds provides its DMS, called ERA,1 through direct contracts with retail automotive
dealers throughout the country. (Id. at ¶ 5.) “Reynolds is the largest provider of DMS to auto
dealers… occupying a large percentage of the market.” (Id.) Approximately 40% of the auto
dealers served by SIS use Reynolds’ ERA. (Id. at 22.)
SIS develops and provides software that integrates third-party applications with DMSs,
including Reynolds ERA. (Id. ¶ 10.) SIS derives approximately 40% of its revenue by
integrating third-party applications with ERA. (Id. at ¶ 23.)
DMS
A DMS allows auto dealers to efficiently organize and utilize numerous types of
information that is necessary to operate their business, such as customer information, inventory
information and finance and insurance information. (Id. at ¶ 6.) Other companies, sometimes
referred to as third-party application providers, sell software and other technology products to
dealerships that use the dealers’ information that is kept on the dealers’ DMS. (Id. at ¶ 7.)
When the dealerships use Reynolds’ ERA, the software provided by the third-party
application providers must be integrated with ERA in order to function in an optimal fashion.
1
SIS’s Amended Counterclaim refers to ERA as “Reynolds-brand DMS.”
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(Id. at ¶ 9.) SIS develops and provides integration software that allows this integration to occur.
(Id. at 10.)
Reynolds also provides integration of third-party applications with its ERA. (Id. at ¶ 11.)
In addition, Reynolds permits third parties, including third-party integrators, access to its ERA if
the third-party is willing to become “Reynolds certified for an exorbitant fee.”2 (Id. at 12.)
Reynolds’ Agreements With ERA Customers
This Court may take notice of the contracts between Reynolds and its ERA customers
referenced in SIS’s Amended Counterclaim for purposes of this Motion To Dismiss because
these contracts are mentioned in the Amended Counterclaim and are central to SIS’s allegations.
See Rondigo, L.L.C. v. Township of Richmond, 641 F.3d 673, 681 (6th Cir. 2011).
Reynolds’ auto-dealership customers agree to certain prohibitions on integration of thirdparty applications when the customers license Reynolds’ ERA. (Reynolds Response To
Emergency Motion (doc. # 30), Ex. A-2.) When they sign up for ERA, customers typically agree
to prohibitions on connecting third-party applications to ERA. (Id.) The customers also agree to
prohibitions on allowing third-party integrators that are not licensed by Reynolds, like SIS, to
interface with ERA. (Id.) Finally, the customers agree to permit Reynolds to access the systems
obtained from Reynolds and to access the auto dealer’s business data. (Id.)
Relationship Background
Reynolds is, according to SIS, restricting data access of third-party vendors offering
services to the auto dealers to force the auto dealers to purchase similar products being offered
2
To become certified, integrators enter into a Reynolds Interface Agreement (“RIA”) with
Reynolds.
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by Reynolds. (Id. at 14.) Thus, according to SIS, Reynolds is, in effect, eliminating the purchase
options of the auto dealers and preventing them from choosing the best available services. (Id. at
15.) Finally, according to SIS, Reynolds recently intensified its efforts to prevent auto dealers
from using third-party vendor services, and is using information that Reynolds wrongfully
acquired from the internal SIS support site to actively interfere with the interface between SIS’s
integration software and ERA that is on auto dealers’ computers. (Id. at 19.)
All of SIS’s business relationships depend on, among other things, SIS’s ability to
integrate its customers’ software applications with SIS’s customers’ DMS. (Id. at 24.) Thus,
“Reynolds current interference with the use of SIS’s integration software is causing, and will
continue to cause, SIS to lose its corporate goodwill in the marketplace….” (Id. at 25.) Finally,
“the auto dealers have been led to believe that they cannot do business with SIS or third-party
application providers, or that if they do their data security will be compromised.” (Id. at 27.)
Prior Litigation
Reynolds and SIS were parties to a lawsuit previously adjudicated in this Court, case no.
3:09-cv-314 (the “2009 Case”).3 Therein, in a Complaint filed on August 18, 2009, SIS claimed
that Reynolds had begun terminating SIS’s rights under an RIA and sought declaratory
judgment, injunctive relief and damages for various alleged torts. (2009 Case, doc. #1.) The
Court declined to enter a temporary restraining order or a preliminary injunction on September
23, 2009. (Doc. #26.) On October 12, 2009, the Court ordered Reynolds to place SIS’s VOC
3
Although not mentioned in SIS’s Amended Counterclaim, the Court may take judicial
notice of proceedings previously before it.
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entries back into the appropriate VOC file4 and to further refrain from removing any SIS code
from dealer systems without dealer approval. (Doc. #37.) On October 13, 2009, Reynolds
reported to the Court that it had moved the VOC entries back into the appropriate files and that it
expects that the SIS integration product will remain disabled due to changes Reynolds made to
its own ERA software code. (Doc. #38.) Reynolds and SIS resolved this lawsuit by entering into
a stipulated settlement agreement, and agreed to dismissal of the lawsuit with prejudice. (Doc.
#61.)
Relevant Procedural Background
Reynolds filed its initial Complaint in this matter on November 1, 2012. (Doc. #1.) SIS
answered on January 17, 2013. (Doc. #16.) Reynolds amended its Complaint on February 7,
2013, (doc. #22), and SIS amended its Counterclaim on February 29, 2013 (doc. #25).
Reynolds’ initial Motion To Dismiss SIS’s Counterclaim was filed on February 7, 2013.
(Doc. # 21.) After being declared moot because SIS filed its Amended Counterclaim (doc. #27),
Reynolds renewed this Motion To Dismiss on March 25, 2013 (doc. #29).
SIS’s initially filed an Emergency Motion for a Preliminary Injunction on February 25,
2013. (Doc. #24.) After being declared moot because SIS filed its Amended Counterclaim (doc.
#27), SIS renewed this Motion on March 5, 2013 (doc. #28).
RELEVANT LEGAL PROVISIONS
Reynolds seeks dismissal of SIS’s Amended Counterclaim pursuant to Fed. R. Civ. P. 8
and 12(b)(6). Pursuant to Rule 8(a)(2) a pleading must contain a “short and plain statement of
4
The VOC file is a computer file that enables the underlying computer operating system
to locate executable files and data files.
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the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78
(2009)(quoting Fed. R. Civ. P. 8(a)(2)). This pleading requirement does not require detailed
factual allegations but it does require more than an unadorned accusation. Id. at 678.
To survive a motion to dismiss, a complaint or counterclaim must contain sufficient
factual allegations, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at
678 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). A claim is plausible on
its face when the plaintiff pleads factual allegations that allows the court to draw the reasonable
inference that the defendant is liable for the alleged misconduct. Id. Finally, while a court must
accept all of the factual allegations in a or counterclaim as true, a court need not accept legal
conclusions couched as factual allegations as true. Id.
Rule 12(b)(6) provides a defense to a claim for relief. Under this Rule, a claim upon
which relief cannot be granted may be dismissed.
ANALYSIS
Section 1 and 2 of the Sherman Antitrust Act
Reynolds first argues that SIS has not stated a plausible claim under Section 1 or 2 of the
Sherman Antitrust Act because SIS has not alleged facts supporting an antitrust injury to a
relevant market, because SIS has not alleged facts supporting antitrust standing and because SIS
has not alleged facts supporting market power by Reynolds. SIS responds that it has sufficiently
alleged an antitrust injury, that it has sufficiently alleged that it is a proper plaintiff in this action
and that it has sufficiently alleged facts regarding Reynolds’ market power.
Antitrust Injury To a Relevant Market
Section 1 of the Sherman Antitrust Act prohibits conspiracies to restrain trade. Static
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Control Components, Inc. v. Lexmark International, Inc., 697 F.3d 387, 401 (6th Cir. 2012).
"Section 2 of the Sherman [Antitrust] Act prohibits the illegal monopolization of a market." Id.
Protecting competition is the sine qua non of antitrust laws. Wee Care Child Center, Inc.
v. Lumpkin, 680 F.3d 841, 847 (6th Cir. 2012). "To prove injury, the key inquiry is whether
competition - not necessarily a competitor - suffered as a result of the challenged business
practice." Id. (citing CBC Companies., Inc. v. Equifax, Inc., 561 F.3d 569, 571-72 (6th Cir.
2009)). Thus, showing adverse effects suffered only by an individual competitor does not
establish an antitrust injury. Id. (citing Care Heating & Cooling, Inc. v. American Standard, Inc.,
427 F.3d 1008, 1014-15 (6th Cir. 2005)). To show antitrust injury, a plaintiff must show not only
injury to itself but to a relevant market. Brown Shoe Co. v. United States, 370 U.S. 294, 320
(1962).
Thus, to allege that an antitrust defendant has injured competition, a plaintiff must first
identify the market in which competition has allegedly been injured. Arnold v. Petland, No.
2:07-cv-01307, 2009 WL 816327 at *5 (S.D. Ohio Mar. 26, 2009). In this case, SIS alleges that
the relevant market is the ERA third-party application aftermarket. SIS further alleges that it is a
competitor within that market because it provides integration services to third-party application
providers that need to integrate with ERA.
Reynolds first argues that this market is implausible for at least two reasons: (1) SIS
addresses none of the factors in the Sixth Circuit’s “reasonable interchangeability” standard
which requires evaluating geography, product use, quality, description and consumer sensitivity
to price levels at which they elect substitutes for the defendant’s product or service; and (2) the
suggestion of a single-brand Reynolds “aftermarket” ignores the fact that there is substantial
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competition in the primary DMS market.
The Sixth Circuit has found the “reasonable interchangeability” standard to be the
essential test for determining the relevant product market. Worldwide Basketball and Sport
Tours, Inc. v. National Collegiate Athletic Association, 388 F.3d 955, 961 (6th Cir. 2004). The
"reasonable interchangeability" standard requires that the relevant product market consists of the
tying5 product and all reasonably interchangeable products. Shamrock Marketing, Inc. v.
Bridgestone Bandag, LLC, 775 F. Supp.2d 972, 981 (W.D. Ky. 2011). “Reasonable
interchangeability” may be determined by (1) the product uses, i.e. whether the substitute
products or services can perform the same function, and/or (2) consumer response, i.e. consumer
sensitivity to price levels at which they elect substitutes for the defendant’s products or services.
Worldwide Basketball, 388 F.3d at 961.
In this case, SIS’s Amended Counterclaim says nothing about whether there are any
substitute products or services in the ERA third-party application aftermarket. Also, SIS’s
Amended Counterclaim says nothing about consumer sensitivity to price levels at which they
elect substitutes for Reynolds’ products or services. Thus, SIS’s has not pled sufficient facts
from which the Court may determine whether SIS has identified a satisfactory relevant market.
In addition. SIS’s definition of a relevant market is not satisfactory because SIS’s
definition does not consider whether there is substantial competition in the primary DMS market.
5
The type of violation of Section 1 claimed by SIS in its Amended Counterclaim is called
"tying." A tying arrangement is "an agreement by a party to sell one product but only on the
condition that the buyer also purchases a different (or tied) product, or at least agrees that he will
not purchase that product from any other supplier." Arnold , 2009 WL 816327 at *4 (citing
Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451, 461 (1992)).
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In other words, SIS’s definition of the relevant market as the ERA third-party application
aftermarket does not consider whether there is substantial competition for DMS products in the
first place.
Even if SIS has successfully alleged a relevant market for antitrust purposes, which it has
not, SIS has not alleged an antitrust injury. In fact, in its Amended Counterclaim, SIS
acknowledges that any third-party application provider that wishes to do so can choose to either
have Reynolds integrate their product or become certified by Reynolds to install their own
product.
SIS says little about the amount of fees Reynolds’ charges to become certified other than
the vague statement that these fees are “exorbitant.” Further, SIS does not provide supporting
facts for its conclusory assertion that Reynolds is limiting the options of the dealers and
preventing them from choosing the best available services. Finally, SIS’s Amended
Counterclaim does not identify any third-party application provider that has been forced out of
the ERA third-party application provider aftermarket.
SIS argues that it has sufficiently alleged that Reynolds’ anti-competitive actions have
harmed not only SIS, but also competition within the relevant market. Assuming that SIS has
defined a “relevant market” for antitrust purposes, this argument is not supported by SIS’s
Amended Counterclaim.
SIS argues that it is a competitor in the relevant market in that it provides integration
services to third-party application providers. However, SIS has not defined the relevant market
as integration services and SIS has not pled that it is a third-party application provider. Thus, SIS
is not a competitor in the relevant market defined in its Amended Counterclaim.
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Finally, while SIS has alleged that Reynolds’ anti-competitive actions have harmed
competition within the relevant market, SIS has provided no substantive factual allegations in
support of this assertion. SIS’s Amended Counterclaim includes no factual allegations of specific
third-party application providers that have been harmed by Reynolds’ alleged anti-competitive
actions.
SIS’s Amended Counterclaim fails to plausibly allege a “relevant market” or an antitrust
injury. Thus, SIS’s antitrust counterclaims are dismissed for this reason alone. But, there is more.
Antitrust Standing
Private parties, such as SIS, may bring an action for violations of Section 1 or Section 2
of the Sherman Antitrust Act. Static Control, 697 F.3d at 401. However, to bring a claim, a
private party must demonstrate that it has standing. Id. at 402.
Standing in an antitrust case is more onerous than the conventional Article III standing.
Id. As with Article III standing, when a court finds at the pleading stage that the plaintiff does
not have antitrust standing, the complaint or counterclaim is dismissed as a matter of law. Id.
Antitrust standing is generally determined by balancing five factors: (1) the causal
connection between the antitrust violation and harm to the plaintiff and whether that harm was
intended to be caused; (2) the nature of the plaintiff's alleged injury including the status of the
plaintiff as a consumer or competitor in the relevant market; (3) the directness or indirectness of
the injury, and the related inquiry of whether the damages are speculative; (4) the potential for
duplicative recovery or complex apportionment of damages; and (5) the existence of more direct
victims of the alleged antitrust violation. Id. (citing Southhaven Land Co., Inc. v. Malone &
Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir. 1983)).
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One of the purposes of antitrust standing is to ensure that the antitrust plaintiffs allege
injuries on market competition and not on individual competitors. Shamrock Marketing, 775 F.
Supp.2d at 978 (citing Tennessean Truckstop, Inc. v. NTS, Inc., 875 F.2d 86, 88 (6th Cir. 1989)).
However, claimants who are not direct players in the relevant market may have standing if their
injury is "inextricably intertwined" with the injury sought to be inflicted. Static Control, 697
F.3d at 404. Yet, the "inextricably intertwined" exception is narrow. Id. This exception was not
designed to give standing to claimants whose injuries are a tangential byproduct of monopolistic
conduct in a related market. Id. To satisfy this exception, the plaintiff must show that the
defendants "manipulated or utilized [the plaintiff] as a “fulcrum, conduit or market force” to
injure competitors in the relevant product and geographic markets. Id.
In this case, SIS’s Amended Counterclaim indicates that SIS is not a competitor or
consumer in the relevant market that SIS has defined. SIS indicates that it is a third-party
application integrator, not a third-party application provider. Finally, SIS’s Amended
Counterclaim does not directly address all of the five factors the Court is to consider.
Therefore, because SIS is not a direct player in the relevant market defined by SIS, SIS’s
standing to bring its antitrust counterclaims turns on whether the “inextricably intertwined”
exception applies. However, SIS has not made sufficient factual allegations in its Amended
Counterclaim to indicate that Reynolds manipulated or used SIS as a “fulcrum, conduit or market
force” to injure competitors in the relevant product market.
There would be more direct victims of Reynolds alleged antitrust activity than SIS who
presumably have standing to sue Reynolds and they are not present in this case. Thus, if the
Court were to find that SIS’s conclusory allegations that Reynolds is “limiting the options of
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dealers” or “monopolizing” the Reynolds-brand DMS application aftermarkets were true, SIS’s
antitrust counterclaims would still be dismissed because the proper plaintiffs would be the
dealers or the third-party application providers who are alleged to be direct victims.
In sum, SIS has not plausibly pled that it has standing to sue Reynolds for the alleged
antitrust violations. SIS’s antitrust claims may be dismissed for this reason alone. But, there is
more.
Reynolds’ Market Power
SIS brings a “tying” counterclaim under Section 1 and a “monopolization” claim under
Section 2. Both require SIS to plead that Reynolds has market power.
Section 1 Counterclaim
A party, such as SIS here, making a claim of illegal "tying" must show that; (1) the seller
has appreciable economic power in the tying product market: (2) the tying arrangement affects a
substantial volume of commerce in the tied market; (3) the seller has a direct economic interest
in the sale of the tied product; and (4) the party has suffered antitrust injury as a result of the
tying arrangement. Shamrock Marketing, 775 F. Supp.2d at 980 (citing CTUnify, Inc. v. Nortel
Networks, Inc., 115 F. App'x 831, 834 (6th Cir. 2004)).
Thus, an antitrust party must show that the seller has sufficient market power to force the
tying of other products to the purchase of the tying product. Arnold, 2009 WL 816327 at *7. The
seller must have some special ability, usually called market power, to force a purchaser to do
something that the purchaser would not do in a competitive market. Id.
The existence of market power is ordinarily inferred from the seller’s possession of a
predominant share of the market. PSI Repair Services, Inc. v. Honeywell, Inc., 104 F.3d 811,
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817-18 (6th Cir. 1997) (a thirty-percent share of the market, standing alone, provides an
insufficient basis from which to infer market power). However, there can be no market power
that arises solely from contractual rights that consumers knowingly and voluntarily give to the
defendant. In re Apple & AT & TM Antitrust Litigation, 596 F. Supp.2d 1288, 1305 (N.D. Cal.
2008).
In this case, although SIS’s Amended Counterclaim identifies an alleged relevant market,
it does not specifically identify the tied product and the tying product. The relevant market,
according to SIS, is the aftermarket of third-party applications designed to integrate with
Reynolds ERA at auto dealerships. SIS goes on to argue that Reynolds is using its market power
to restrain this aftermarket. Giving SIS the benefit of the doubt, the Court will assume that the
tying product is Reynolds’ ERA and the tied product is third-party applications.
SIS has not pled that Reynolds has market power in this market. First, regarding the tying
product, the auto dealers have a choice as to which, if any, DMS they use. The closest SIS’s
Amended Counterclaim gets to discussing Reynolds’ market power regarding the tying product
is to allege that approximately 40% of the auto dealers that the third-party application providers
that are SIS’s customers work with use Reynolds’ ERA. SIS’s Amended Counterclaim also
alleges that Reynolds occupies “a large percentage of the market” for DMS “throughout the
country.” Thus, SIS has not plausibly pled facts showing that Reynolds has appreciable
economic power in the tying product market.
Second, regarding the tied product, SIS has not pled that Reynolds has a direct economic
interest in the third-party applications. Even if the Court were to assume that the tied product
was integration of the third-party applications, Reynolds does not require that the auto dealers
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use Reynolds to do this integration. In addition to performing integration itself, Reynolds
licenses others to do so. SIS’s allegation that Reynolds charges an “exorbitant fee” to license
others does not satisfy the plausibility requirement.
In sum, SIS has not plausibly identified a tying product or tied product. Even if
reasonable assumptions are made regarding what are the tying and tied products, SIS has not
plausibly pled that Reynolds has appreciable economic power in the product market or that
Reynolds has a direct economic interest in the tied product.
Section 2 Counterclaim
A claim under Section 2 requires a plausible pleading of (1) possession of monopoly
power in the relevant market and (2) the wilful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a superior product, business
acumen or historic accident. State Control, 697 F.3d at 402. Thus, SIS must plausibly plead that
Reynolds possessed monopoly power in the alleged relevant market of the aftermarket of thirdparty applications that can integrate with Reynolds’ ERA.
As more fully discussed above, SIS has not plausibly pled that Reynolds has monopoly
power in SIS’s alleged relevant market. SIS’s pleading indicates that there are many participants,
other than Reynolds, in that relevant market.
SIS cites In re Apple, 596 F. Supp.2d 1288, as support for its argument that it has
successfully alleged a relevant market and that the aftermarket of third-party applications that
can integrate with Reynolds’ ERA is wholly dependent upon a primary market that is restrained
by Reynolds. However, this support is misguided for at least two reasons. First, in the case cited,
there were undisclosed terms which the purchasers were not aware of when the phones were
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purchased. That is not the case here. SIS has not pled that Reynolds changed the terms of its
agreements with ERA purchasers after ERA was purchased. Second, the primary market here is
not restrained by Reynolds. DMS users can contract for DMS from whomever they choose,
Reynolds ERA being one of the options.
Conclusion
In sum, SIS has not plausibly pled that Reynolds violated either Section 1 or Section 2 of
the Sherman Antitrust Act. Those two Counterclaims must be dismissed.
The CFAA
SIS asserts that Reynolds is violating the CFAA by interfering with the interface between
ERA and SIS’s integration software located on the computers owned by the auto dealerships.
SIS also asserts that this conduct is not authorized by the auto dealers.
The CFAA creates liability for accessing a protected computer without authorization or
exceeding authorized access.” In re iPhone Application Litigation, 844 F. Supp.2d 1040, 1064
(N.D. Cal. 2012). The CFAA is primarily a criminal statute, and authorizes a civil action only
for certain enumerated conduct. Id. at 1065.
To bring a civil action, a plaintiff must show that one of the following applies:
(I) loss to one or more persons during any one-year period aggregating at least
$5,000 in value;
(II) the modification or impairment, or potential modification or impairment, of
the medical examination, diagnosis, treatment, or care of one 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 U. S. Government
in furtherance of the administration of justice, national defense or national
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security.
Id. "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)(11).
"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).
In this case, SIS asserts that it is alleging a violation of 18 U.S.C. § 1030(a)(5)(a).
However, 18 U.S.C. § 1030(g) does not authorize SIS to bring a civil action pursuant to 18
U.S.C. § 1030(a)(5)(a). Further, if SIS’s Amended Counterclaim were to be considered to be a
civil action brought pursuant to 18 U.S.C. § 1030, SIS has not plausibly pled any of the
necessary elements.
Therefore, SIS has not plausibly pled that Reynolds violated the CFAA or that SIS is
entitled to civil relief. This Counterclaim must be dismissed.
Tortious Interference With Contract
SIS alleges that Reynolds interfered with SIS’s contractual relationships with third-party
application providers. Reynolds interfered, according to SIS, by interfering with SIS’s
integration software, blocking the third-party application providers’s access to the data on ERA
and notifying auto dealers that their data security would be compromised if the auto dealers
permitted SIS to institute and manage automated access.
Under Ohio law, a cause of action for tortious interference with contract occurs when
"…one who, without a privilege to do so, induces or otherwise purposely causes a third party not
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to enter into, or continue, a business relationship with another, or perform a contract with
another." Wright v. MetroHealth Medical Center, 58 F.3d 1130, 1138 (6th Cir. 1995) (citing
Smith v. Klein, 492 N.E.2d 852 (Ohio Ct. App. 1985)). The elements of tortious interference with
contract are: (1) the existence of a contract; (2) the wrongdoer's knowledge of the contract; (3)
the wrongdoer's intentional procurement of the contract's breach; (4) lack of justification; and (5)
resulting damages. Kenty v. Transamerica Premium Insurance Co., 650 N.E.2d 863, 866 (Ohio
1995). Regarding privilege or justification, "one is privileged to purposely cause another not to
perform a contract with a third person where he in good faith is asserting a legally protected
interest of his own, which he believes will be impaired or destroyed by the performance of the
contract." Wright, 58 F.3d at 1139 (citing Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals,
Inc., 862 F.2d 597, 601 (6th Cir. 1988)).
SIS’s Amended Counterclaim does not plausibly plead all of these elements. For
example, SIS pleads that certain contracts exist but does not identify specifically who the
contract may be with or identify any of the terms of these alleged contracts. Also, SIS does not
plead how these contracts have been breached and does not plead damages in the form of which
of the alleged contracts were lost. Finally, SIS does not plead that Reynolds lacked justification
to intentionally interfere. Because SIS’s Amended Counterclaim does not plausibly plead a
tortious interference with contract claim, it must be dismissed.
SUMMARY
SIS’s Amended Counterclaim does not contain sufficient factual allegations, accepted as
true, to state a claim to relief that is plausible on its face. In addition, civil relief cannot be
granted on SIS’s Counterclaim for violation of the CFAA. Therefore, Reynolds’ Motion To
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Dismiss (doc. #29) is GRANTED. SIS’s Amended Counterclaim is DISMISSED.
At the end of its Response, SIS asserts that if its Amended Counterclaim requires more
factual detail, SIS should be granted leave to amend. At this time, the Court, not having seen any
proposed revised or new counterclaims, will not grant leave to amend. However, SIS may file a
motion to file an amended counterclaim if it wishes. If made, the Court will consider the motion
and any objections thereto.
Finally, SIS has sought an Emergency Preliminary Injunction on its Amended
Counterclaim. The dismissal of SIS’s Amended Counterclaim renders SIS’s Emergency Motion
for Preliminary Injunction (doc. #28) moot. Finally, the hearing date for the Preliminary
Injunction hearing previously set is vacated.
DONE and ORDERED in Dayton, Ohio this Sixth Day of June, 2013.
s/Thomas M. Rose
_______________________________
THOMAS M. ROSE
UNITED STATES DISTRICT
JUDGE
Copies furnished to:
Counsel of Record
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