AXTS Inc. v. GY6vids

Filing 26

ORDER: Radian's motion to dismiss 16 GY6's counterclaims for breach of contract (confidentiality) and intentional interference with economic relationships are denied. Radian's motion to dismiss 16 GY6's fourth counterc laim under the CFAA is granted and that claim is dismissed with prejudice. Well after the filing of Radian's reply, counsel for GY6 moved to withdraw 24 . Good cause exists and that motion is granted. The clerk shall mail a copy of this opinion to GY6's registered agent listed on certificate of service attached to the motion to withdraw. GY6 is granted 60 days to find substitute counsel. In the meantime, this matter is stayed. Signed on 10/24/2018 by Judge Michael J. McShane. (cp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

AXTS INC., d/b/a Radian Weapons, an
Oregon corporation;
Case No. 6:18-cv-00821-MC
Plaintiff,
v.

OPINION AND ORDER

GY6VIDS LLC, a Texas limited liability
Company,
Defendant.
_____________________________
MCSHANE, Judge:
Plaintiff AXTS Inc. (Radian) manufactures firearms and firearm accessories in Redmond,
OR. They hired Defendant GY6vids LLC (GY6) to promote their products on a YouTube
channel. Radian brings claims of fraud and unlawful trade practices against GY6 who, in turn
asserts five counterclaims: (1) breach of contract (failure to pay); (2) breach of contract
(confidentiality); (3) intentional interference with economic relations; (4) a civil action under the
Computer Fraud and Abuse Act (18 U.S.C. § 1030(g)) (CFAA); and (5) attorney fees. Radian
moves to dismiss counterclaims two through four.
Because the facts alleged do not support a claim under the CFFA, Radian’s motion is
GRANTED as to the fourth counterclaim. That claim is DISMISSED with prejudice. Radian’s
motion is DENIED with respect to the remaining counterclaims.
1 – OPINION AND ORDER

BACKGROUND1
GY6 is a video production company with a focus on firearms related content. Def.’s
Answer, Affirmative Defenses, and Countercls. (Answer) at 51, ECF No. 15. In August of 2017,
Josiah Underwood, Radian’s Director of Operations, contacted Andrew Boetjer, GY6’s CEO, to
discuss the possibility of Radian sponsoring a GY6 video. Id. ¶¶ 52-53. Mr. Underwood
proposed that GY6 create a promotional video featuring a Radian product to appear in front of a
GY6 video. Id. ¶ 53.
GY6 and Radian then signed a contract stating that Radian would pay $0.03 per view for
the first six months that Radian posted the video to YouTube. Id. ¶ 54. GY6 alleges that it agreed
to the discounted price of $0.03 per view with the hope that it would lead to more business with
Radian in the future. Id. The contract also contained a confidentiality clause that restricted the
ability of the parties to discuss the terms of the contract with third parties. Id. ¶ 59.
GY6 created a 30-second video that promoted Radian and attached it to a video GY6
posted to YouTube on October 1, 2017. Id. ¶ 60. The video was viewed 527,208 times in its first
month of release. Id. ¶ 65. GY6 sent Radian an invoice for $15,816.24 for the first month, which
Radian paid. Id. GY6 then sent Radian an invoice for $42,442.29 for the second month’s
1,414,743 views. Id. ¶¶ 66, 70. Radian did not pay the second invoice. Id. On December 14,
2017, an attorney representing Radian sent GY6 a letter asserting that the contract was void and
unenforceable. Id. ¶ 71.
On February 5, 2018, GY6’s counsel sent a demand letter seeking damages for Radian’s
failure to pay under the contract. Id. ¶ 74. Counsel for Radian maintained that the contract was
“void and unenforceable.” Id. GY6 then experienced a rapid uptick in “dislikes” of its YouTube
1

At the motion to dismiss stage, I accept the allegations of the non-moving party, here GY6, as true.

2 – OPINION AND ORDER

videos. Id. ¶ 75. GY6’s videos had received fewer than 50,000 aggregate dislikes in the six years
that it had posted content to YouTube prior to its contract dispute with Radian. Id. On February
20, 2018, GY6’s videos received nearly 19,000 dislikes. Id. One month later, GY6’s videos
received approximately 4,000 dislikes in a single day. Id. Specifically, GY6 alleges that Radian,
“directly or indirectly, coordinated and executed a cyberattack on GY6vids’ YouTube channel
by causing an excessive number of dislikes to appear on GY6vids’ videos, and by obscuring
[Radian] as the source of those dislikes.” Id. ¶ 77. In response to the influx of dislikes, GY6
removed the video, and others, from public availability. Id. ¶ 78.
On April 6, 2018, Radian filed the complaint in this matter and the marked increase in
dislikes of GY6’s content stopped. Id. ¶ 76. Radian alleges that GY6 breached its contractual
obligations when it removed the video sponsored by Radian from public availability. Id. ¶ 78.
GY6 alleges that Radian “orchestrated its cyberattack against GY6vids for the improper purposes
of harming GY6vids and evading its debts.” Id. ¶¶ 77-78. In addition to the claims discussed
below, GY6 alleges that Radian breached the contract by refusing to pay $.03 per view for the
second month’s views, or any later views. Radian does not move to dismiss that claim.
STANDARDS
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must contain
sufficient factual matter that “state[s] a claim to relief that is plausible on its face.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual
allegations allow the court to infer the defendant’s liability based on the alleged conduct.
Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the
mere possibility of misconduct.” Id. at 678.

3 – OPINION AND ORDER

While considering a motion to dismiss, the court must accept all allegations of material
fact as true and construe those facts in the light most favorable to the non-movant. Burget v.
Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the court is “not
bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at
555. If the complaint is dismissed, leave to amend should be granted unless “the pleading could
not possibly be cured by the allegation of other facts.” Doe v. United States, 58 F.3d 494, 497
(9th Cir. 1995).
DISCUSSION
Radian moves to dismiss the following counterclaims: (2) breach of contract
(confidentiality); (3) IIER; and (4) a civil claim under the CFAA. I address each in turn.
1. Second Counterclaim-Breach of Contract (Confidentiality)
GY6’s second counterclaim alleges that Radian breached its contract with GY6 when it
revealed confidential information to the public. Answer ¶¶ 59, 91-93, ECF No. 15. GY6 alleges:
Further, because the Agreement included sensitive terms, including the
discounted rate requested by [Radian], the Agreement included strict
confidentiality provisions. In relevant part, the Agreement stated “Details and
conditions in this contract are stated as a ‘NO QUOTE DEAL,’ none of which
will be discussed to outside third parties at any point in time. If the need does
arise to discuss these details to a third party, notification will be provided to each
party of this contract. This contract is only to be discussed between the below
signed representatives of [AXTS] and the CEO of GY6vids LLC.”
Answer ¶ 59, ECF No. 15.
Although Radian reserves its right to challenge GY6’s allegation that the contract was
intended to be confidential, it does not move to dismiss on that ground. Instead, Radian merely
argues that “GY6 alleges no facts to support its claim to more than $5 million in damages.”
Resp., 18, ECF No. 16. The harm, if any, will be determined at summary judgment or trial. At
4 – OPINION AND ORDER

this stage, it is enough that GY6 alleges the contract contained a strict confidentiality provision,
that GY6 agreed to “the discounted rate requested by [Radian]” in the hope it would lead to more
profitable business with Radian in the future, that Radian disclosed the agreement to the public,
and that financial harm to GY6 followed the disclosure. The purpose of the confidentiality
provision, after all, is to protect GY6 in its negotiations with other clients. To what extent any
breach impacted such negotiations will be assessed during discovery.
Radian’s motion to dismiss GY6’s second counterclaim for breach of contract
(confidentiality) is DENIED.
2. Third Counterclaim-Intentional Interference with Economic Relations
GY6 alleges that Radian committed the tort of Intentional Interference with Economic
Relations when it employed improper means to institute a “cyberattack” on GY6’s YouTube
channel. GY6 claims that Radian’s motive behind the attack was to avoid paying its debts to
GY6 and to harm GY6. Answer ¶ 98, ECF No. 15. In order to make out a claim for tortious
interference, GY6 must allege facts to support the following elements:
(1) the existence of a professional or business relationship (which could include,
e.g. a contract or a prospective economic advantage, (2) intentional interference
with that relationship, (3) by a third party, (4) accomplished through improper
means or for an improper purpose, (5) a causal effect between the interference and
damage to the economic relationship and (6) damages.
McGanty v. Staudenraus, 321 Or. 532, 535-36 (1995).
First, GY6 alleges the existence of business relationships, both current and prospective,
with YouTube, its users, sponsors, and advertisers. Answer ¶ 97, ECF No. 15. At the motion to
dismiss stage, I assume the truth of GY6’s allegation that it had existing or prospective business
relationships that were harmed by Radian’s “cyberattack.”

5 – OPINION AND ORDER

Second, while GY6 cuts close to the line of mere conclusory pleading, its allegation that
Radian intentionally interfered with its business relationships is plausible. Id. ¶ 98. Radian knew
that GY6 derived income from sponsorships. Mot. to Dismiss at 2, ECF No. 16. It is plausible to
infer that Radian knew that inundating GY6’s videos with dislikes would negatively impact the
ranking metrics for GY6’s YouTube channel and would subsequently harm GY6’s relationships
with its sponsors.
Third, Radian’s status as a third party to GY6’s relationships with YouTube, its users,
and its sponsors, can be readily inferred from facts pled. Answer ¶ 99, ECF No. 15.
Fourth, GY6 alleges sufficient facts to support an intentional interference claim via an
improper purpose theory. Under an improper purpose theory, GY6’s allegation that Radian
intended to cause it harm, while again skirting close to the line of conclusory allegation, satisfies
the requirement that Radian’s purpose was, “to inflict injury on the plaintiff ‘as such.’” Sharma
v. Providence Health & Servs.-Oregon, 289 Or. App. 644, 668 (2018) (quoting Nw. Nat. Gas
Co., 328 Or. at 498 ). Despite being facially conclusory, because the allegation that Radian
wished to harm GY6 is plausible in light of other facts pled—e.g. the breakdown in the parties’
contractual relationship—GY6’s claim under an improper purpose theory is cognizable. See
Answer at 1-2, ECF No. 15.2 Additionally, one may plausibly infer that a purpose in bombarding
an advertising-driven page with thousands of dislikes is to inflict financial harm on the promoter
of the page. These allegations therefore differ from those merely alleging that an actor operates

2

“AXTS Inc. (d/b/a “Radian Weapons”) agreed to pay GY6vids LLC for a sponsorship on GY6vids’ popular YouTube
channel. AXTS specifically requested a sponsorship on a video with the potential for “high viewership.” After
GY6vids fully performed, and the video went viral, AXTS refused to pay. In a phone conversation after the video
had amassed nearly 2 million views, AXTS’s Director of Operations agreed that GY6vids had “upheld” its obligations
but that AXTS “made a mistake” in entering the agreement because it could not afford to pay the amounts owed.
Regrettably, AXTS has engaged in increasingly desperate tactics to avoid paying this unambiguous debt. . . .”
Answer at 1-2, ECF No. 15.

6 – OPINION AND ORDER

in a way consistent with its own economic interest. See Top Service Body Shop, Inc. v. Allstate
Ins. Co., 283 Or. 201, 212 (1978) (en banc) (acts “wholly consistent with [defendant’s] pursuit of
its own business purposes as it saw them” do not satisfy improper purpose element)).
Fifth, GY6 alleges sufficient facts to support the existence of a causal link between
Radian’s interference and damage to GY6’s existing and prospective economic relationships.
GY6 argues that Radian’s “cyberattack” on its YouTube channel negatively impacted its
economic relationships with existing and prospective sponsors, YouTube, and consumers of its
content. Id. ¶¶ 99-100. It is plausible to infer that Radian’s coordinated campaign to dislike
GY6’s videos would negatively impact GY6’s economic relationships and its ability to monetize
content. Existing sponsors may discontinue monetary support out of a desire to not be associated
with unpopular content. Likewise, potential sponsors may choose to go elsewhere with their
marketing dollars.
Sixth, GY6 alleges $2,000,000 in damages as a result of Radian’s intentional
interference. Id. ¶ 101. This is an ambitious claim without specific information linking a loss in
revenue to the alleged interference. However, at the motion to dismiss stage, the analysis is
whether defendant is plausibly liable for the misconduct alleged. Elizabeth Retail Properties LLC
v. KeyBank Nat. Ass’n, 83 F. Supp. 3d 972, 983 (D. Or. 2015). At this stage, the court presumes
that Radian coordinated a massive campaign to dislike GY6’s videos. If Radian’s goal in
disliking GY6’s videos was to harm GY6 “as such” and avoid its contractual obligations, then it
would have acted with an improper purpose. The specific amount of GY6’s damages, if any, will
be determined later. Radian’s motion to dismiss GY6’s third counterclaim is DENIED.
///
///
7 – OPINION AND ORDER

3. Fourth Counterclaim-Computer Fraud and Abuse Act (18 U.S.C. § 1030)
GY6’s fourth counterclaim is an innovative cause of action under the CFAA. The CFAA
is primarily a criminal statute that was enacted to give the federal government a means to
prosecute hacking. United States v. Nosal, 676 F.3d 854, 858 (9th Cir. 2012). However, the
CFAA does provide for civil liability under certain narrow circumstances. 18 U.S.C. § 1030(g).
One such instance is when an individual knowingly accesses a protected computer “without
authorization” or “exceeding authorization” with intent to defraud. 18 U.S.C. § 1030(a)(4). GY6
alleges that Radian accessed GY6’s YouTube account, which is hosted on protected computers,
without or in excess of authorization in order to dislike videos GY6 posted for public viewing.3
Typically, when a plaintiff files a civil action under the CFAA, it alleges that it
experienced economic damages when its own computers were accessed without or in excess of
authorization. See, e.g., Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058, 1066 (9th Cir.
2016); Craigslist Inc. v. 3Taps Inc., 964 F. Supp. 2d 1178, 1180 (N.D. Cal. 2013); LVRC
Holdings LLC v. Brekka, 581 F.3d 1127, 1128 (9th Cir. 2009). GY6’s claim differs in that it
alleges it was harmed when Radian accessed a protected computer that was owned by a third
party, i.e., YouTube, without or in excess of authorization.
Radian did not access a protected computer without authorization. To access a protected
computer without authorization is to use a computer without any permission to do so, or after
permission has been revoked. Brekka, 581 F.3d at 1135. But GY6 does not allege that Radian
lacked or needed permission to access its publically available videos hosted on YouTube’s
computers. GY6 does not support, and indeed could not support, its conclusory allegation that,
3

According to the CFAA, a protected computer is a computer, “which is used in or affecting interstate or foreign
commerce or communication, including a computer located outside the United States that is used in a manner that
affects interstate or foreign commerce or communication of the United States[.]” 18 U.S.C. § 1030(e)(2)(B).

8 – OPINION AND ORDER

“[Radian] knowingly accessed GY6vids’ [sic] YouTube account without . . . authorization [.]”
Accordingly, for its CFAA claim to survive a motion to dismiss, GY6 must properly allege that
Radian accessed a protected computer in excess of authorization. This it fails to do.
The CFAA defines the term “exceeds authorization” to mean, “access[ing] a computer
with authorization and [using] such access to obtain or alter information in the computer that the
accesser is not entitled . . . to obtain or alter[.]” 18 U.S.C. § 1030(e)(6). The standard CFAA
claim in this context is an employee who uses a company computer to steal valuable information.
GY6’s claim differs in that the only violation appears to be a violation of YouTube’s terms of
service.4 A violation of the terms of use of a website does not constitute access in excess of
authorization under the CFAA. Nosal, 676 F.3d at 863-64; see also Facebook, Inc., 844 F.3d at
1067 (“[A] violation of the terms of use of a website—without more—cannot establish liability
under the CFAA.”). Thus, GY6’s claim that Radian violated YouTube’s terms of use and
therefore exceeded authorization is not cognizable under the CFAA.
Because the alleged access concerns GY6’s publically available YouTube channel,
Radian did not access a protected computer without authorization. And even if Radian violated
YouTube’s terms of use, it did not access a protected computer in excess of authorization under
the CFFA. Accordingly, Radian’s motion to dismiss GY6’s claim under the CFAA is
GRANTED.
CONCLUSION
Radian’s motion to dismiss GY6’s counterclaims for breach of contract (confidentiality)
and intentional interference with economic relationships are DENIED. Radian’s motion to

4

As noted above, because YouTube and promoters such as GY6 actively seek viewers and their comments, GY6
cannot argue that Radian lacked permission to comment on the videos.

9 – OPINION AND ORDER

dismiss GY6’s fourth counterclaim under the CFAA is GRANTED and that claim is dismissed
with prejudice.
Well after the filing of Radian’s reply, counsel for GY6 moved to withdraw. ECF No. 24.
Good cause exists and that motion is GRANTED. The clerk shall mail a copy of this opinion to
GY6’s registered agent listed on certificate of service attached to the motion to withdraw. GY6 is
granted 60 days to find substitute counsel. In the meantime, this matter is stayed.
IT IS SO ORDERED.
DATED this 24th day of October, 2018.
_______/s/ Michael J. McShane________
Michael McShane
United States District Judge

10 – OPINION AND ORDER