Simmonds Equipment LLC v. GGR International, Inc.
Filing
12
MEMORANDUM OPINION AND ORDER granting in part and denying in part 6 MOTION to Dismiss for Lack of Jurisdiction, granting 9 Request for Leave to Amend Complaint. Amended Complaint due by 9/28/2015. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SIMMONDS EQUIPMENT, LLC,
§
§
§
§
§
§
§
§
§
Plaintiff,
v.
GGR INTERNATIONAL, INC.,
Defendant.
CIVIL ACTION NO. H-15-0862
MEMORANDUM OPINION AND ORDER
Plaintiff,
Complaint
Simmonds Equipment LLC
(Docket
International, Inc.
Entry
1)
No.
§
against
has filed a
defendant,
GGR
("GGR"), for violations of the Computer Fraud
and Abuse Act ("CFAA"), 18 U.S.C.
Liabili ty Act
("Simmonds"),
("TTLA" ),
Texas
§
1030, et seq.; the Texas Theft
Civil
Practices
&
Remedies
Code
134.001, et seq.; and for conversion and tortious interference
with prospective business relations.
GGR's Motion to Dismiss
(Docket Entry No.6),
Pending before the court is
Under FRCP 12 (b) (6)
and
FRCP 12 (b) (1)
in which GGR seeks dismissal of Simmonds'
claims for conversion and for violation of the CFAA and the TTLA.
Simmonds' opposition to GGR's motion to dismiss contains a request
for leave to amend should the court decide to grant GGR's motion to
dismiss .1
For the reasons stated below,
the pending motion to
lPlaintiff's Opposition to Defendant's Motion to Dismiss under
FRCP 12 (b) (6) and FRCP 12 (b) (1) ("Plaintiff's Opposition"), Docket
Entry No.9, p. 2 ~ 3.
dismiss will be granted as to Simmonds' conversion claim and denied
in all other respects; and
Simmonds' request to file an amended
complaint will be granted.
I.
Factual Allegations
Simmonds alleges that on August 23,
contracts
with
Agreement. 2
GGR:
a
Website
2013,
Agreement
it executed two
and
a
Marketing
Simmonds alleges that under the Website Agreement GGR
was to design its company website via the following three-stage
process:
2013;
(1)
the design process would commence on September 1,
(2) the Website would launch by January 1, 2014; and (3) the
Website Agreement would terminate on its own terms no later than
February
process
28,
2014.
progressed
Simmonds
quickly
alleges
and
ended
that
the
early
website
with
"the
design
website
completed and final payment under the [Website] Agreement tendered
on October 10, 2013, thereby terminating the Website Agreement on
that date.,,3
Simmonds alleges that GGR "had and has no ownership
rights over the website or its content and was provided only a
limited license to utilize Simmonds' names, trademarks, logos, and
in order to design and develop the site.,,4
service marks
Simmonds alleges that the Marketing Agreement provided for GGR to
develop and implement a variety of branding, sales, and marketing
2Complaint, Docket Entry No.1, pp. 1-4
3rd. at 4
~
16.
4rd. at 3
~
13.
-2-
~~
8-21.
strategies,
and also provided for the agreement to terminate no
later than six months from its September 1,
date. 5
2013,
commencement
Simmonds alleges that "nothing in the Marketing Agreement
gave GGR any rights to or ownership interests in Simmonds' company
website;"6 but, instead, the Marketing Agreement granted GGR "only
a
limited right to use Simmonds'
marks
in connection with its
performance under the Marketing Agreement. "7
Simmonds alleges that it "quickly became dissatisfied with the
services
provided
by
GGR
under
the
Website
and
Marketing
Agreements,"8 but that it was
excited to implement a website feature heavily touted by
GGR which would enable Simmonds to create and make sales
presentations directly through the company website,
without the need to load pitches and related materials
onto external drives and launch them through PowerPoint
to similar software installed on laptop computers.9
Simmonds alleges that it
"paid GGR $40,000 under the Marketing
Agreement despite receiving virtually nothing of value.
alleges that on March 25,
Jayson Nesbitt
say
that
GGR
2014,
"10
Simmonds
GGR's Chief Operating Officer,
("Nesbitt"), e-maileditsCEO.BrianSimmonds.to
was
placing
Simmonds'
5Id. at 4 ~ 21.
6Id. at 4 ~ 19.
7Id. at 4 ~ 20.
8Id. at 4 ~ 22.
9Id. at 5 ~ 24.
lOId. at 5 ~ 27.
-3-
account
"on hold"
due
to
Simmonds'
alleged non-payment of outstanding invoices under the
Marketing Agreement.
Despite being told that Brian Simmonds was in
Colombia to make a sales presentation to a prospective customer and
would return only two days later, on March 27, 2014, Nesbitt again
e-mailed Simmonds to say that the Simmonds account was "suspended"
and that GGR had "temporarily deactivated" the Simmonds' company
website and all incorporated functionality due to the alleged nonpayment of Marketing invoices.
Simmonds alleges that it
subsequently learned that GGR's owner and CEO, Claire
Ansell, had contacted a Simmonds employee, and on the
false pretense that GGR was authorized and needed to work
on the Simmonds website, obtained the password to the
company website in order to access the site via a thirdparty hosting company and convert it for GGR's own
purposes. 11
Simmonds alleges that due to "GGR's unlawful conduct, Mr. Simmonds
was unable to make the sales presentation for which he had traveled
to Colombia, and his company lost a business opportunity of more
than $1,000,000 with a major prospective customer."12
II.
Standards of Review
Asserting that "[t]his is a breach of contract case - nothing
more, ,,13 and citing Federal Rules of Civil Procedure 12 (b) (1) and
12 (b) (6), GGR moves "to dismiss Plaintiff's sole federal claim (and
11Id. at 6 ~ 30.
12Id.
~
31.
13Motion to Dismiss under FRCP 12 (b) 6) and FRCP
("GGR's Motion to Dismiss"), Docket Entry No.6, p. 1.
-4-
12 (b) (1)
thus
federal
question
Conversion and Theft."14
jurisdiction)
and
state
law
claims
of
GGR also "moves to dismiss this case for
lack of subject matter jurisdiction as the contracts themselves
limit liability so that the amount in controversy in this case does
not rise to the $75,000.00 minimum amount to trigger diversity
jurisdiction. "15
Simmonds responds that none of its claims are
subject to dismissal, but that should the court decide otherwise,
Simmonds requests leave to file an amended complaint. 16
A.
Rule 12 (b) (I)
Federal Rule of Civil Procedure 12(b) (1) governs challenges to
the
court's
subj ect matter
jurisdiction.
"A case
is properly
dismissed for lack of subject matter jurisdiction when the court
lacks
the
case."
statutory or constitutional power
to
adj udicate
the
Home Builders Association of Mississippi, Inc. v. City of
Madison, Mississippi, 143 F.3d 1006, 1010 (5th Cir. 1998).
"Courts
may dismiss for lack of subject matter jurisdiction on anyone of
three different bases:
supplemented
complaint
by
(1) the complaint alone;
undisputed
supplemented
by
facts
in
undisputed
resolution of disputed facts."
the
(2) the complaint
record;
facts
plus
or
the
(3)
the
court's
Clark v. Tarrant County, Texas, 798
14Id.
15Id. at 2.
16Plaintiff's Opposition, Docket Entry No.9, p. 2
-5-
~
3.
F.2d 736, 741 (5th Cir. 1986).
Rule 12 (b) (1) challenges to subject
matter
two
jurisdiction come
"factual" attacks.
(5th Cir.
1981).
in
forms:
"facial"
attacks
and
See Paterson v. Weinberger, 644 F.2d 521, 523
A facial attack consists of a Rule 12 (b) (1)
motion unaccompanied by supporting evidence that challenges the
court's jurisdiction based solely on the pleadings.
Id.
A factual
attack challenges the existence of subject matter jurisdiction in
fact -- irrespective of the pleadings -- and matters outside the
pleadings -- such as testimony and affidavits -- may be considered.
Id.
Because GGR has not submitted evidence outside plaintiff's
pleadings in support of its Rule 12(b) (1) motion to dismiss,
the
motion is a facial attack; and the court's review is limited to
whether the complaint sufficiently alleges jurisdiction.
as the party asserting federal
jurisdiction,
Simmonds,
has the burden of
showing that the jurisdictional requirement has been met.
Alabama-
Coushatta Tribe of Texas v. United States, 757 F.3d 484, 487 (5th
Cir. 2014).
and
other
When facing a challenge to subject matter jurisdiction
challenges
on
the
merits,
courts
must
consider
the
Rule 12 (b) (1) jurisdictional challenge before addressing the merits
of the case.
B.
Id.
Rule 12(b) (6)
Under Rule
8
of
the
Federal
Rules
of
Civil
Procedure,
a
pleading must contain "a short and plain statement of the claim
showing that the pleader is entitled to relief."
-6-
Fed.
R.
Civ.
P. 8(a) (2).
A Rule 12(b) (6) motion tests the formal sufficiency of
the pleadings and is
"appropriate when a
defendant attacks
the
complaint because it fails to state a legally cognizable claim."
Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert.
denied sub nom Cloud v. United States, 122 S. Ct. 2665 (2002).
The
court must accept the factual allegations of the complaint as true,
view them in a light most favorable to the plaintiff, and draw all
reasonable inferences in the plaintiff's favor.
Id.
To defeat a
motion to dismiss pursuant to Rule 12(b) (6), a plaintiff must plead
"enough facts to state a claim to relief that is plausible on its
face."
Bell Atlantic
(2007).
"A claim has facial plausibility when the plaintiff pleads
factual
content
that
Corp.
v.
allows
Twombly,
the
court
127
to
S.
Ct.
draw
1955,
the
1974
reasonable
inference that the defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
S.
Ct.
at 1965).
'probability
(citing Twombly, 127
"The plausibility standard is not akin to a
requirement,'
but
it
asks
for
more
than
possibility that a defendant has acted unlawfully."
Id.
a
sheer
(quoting
Twombly, 127 S. Ct. at 1965).
"Where a complaint pleads facts that
are
a
'merely consistent with'
short
of
the
line
between
entitlement to relief. "'
Id.
defendant's liability,
possibility
and
it
'stops
plausibility
of
(quoting Twombly, 127 S. Ct. at 1966).
When considering a motion to dismiss, district courts are "limited
to the complaint, any documents attached to the complaint, and any
documents attached to the motion to dismiss that are central to the
-7-
claim and referenced by the complaint."
Lone Star Fund V (U.S.),
L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
III.
A.
Analysis
The Court Has Subject Matter Jurisdiction
Under the heading "Jurisdiction and Venue," Simmonds alleges:
5.
The Court has subject matter
dispute pursuant to 28 U. S. C.
Plaintiff brings a claim arising
related claims that form part
controversy.
jurisdiction over this
§§ 1331 and 1367 as
under federal law and
of the same case or
6.
The Court also has subject matter jurisdiction over
this dispute pursuant to 28 U.S.C. § 1332 as Plaintiff
and Defendant are citizens of different states and the
matter in controversy exceeds the sum of $75,000,
exclusive of interest and costS.17
1.
Federal Question Jurisdiction Exists Because Simmonds Has
Stated a Claim for Violation of the CFAA
GGR argues
that
Simmonds
has
failed
to
establish federal
question jurisdiction because Simmonds' only federal law claim for
violation of the CFAA,
dismissal
accessed a
defraud,"
under
Rule
18 U.S.C.
12 (b) (6)
for
"protected computer,"
obtained
1030, et seq.,
§
"anything of
failure
had
the
value"
website, or suffered a cognizable "loss."lB
to
is subject to
allege
requisite
by
that
"intent
accessing
Plaintiff responds that
~~
5-6.
1BGGR's Motion to Dismiss, Docket Entry No.6, p. 4.
19P1aintiff's Opposition, Docket Entry No.9, pp. 5-6.
-8-
to
Simmonds'
GGR's arguments have no merit. 19
17Complaint, Docket Entry No.1, p. 2
GGR
(a)
Applicable Law
In pertinent part the CFAA provides: 20
(a) Whoever (5) (B) intentionally accesses a protected computer
without authorization, and as a result of such
conduct, recklessly causes damage; or
(C) intentionally accesses a protected computer
without authorization, and as a result of such
conduct, causes damage and loss[;]
shall be punished as provided in subsection (c) of this
section.
18 U.S.C.
§
1030(a) (5) (B) and (C).
The CFAA also provides that
[a]ny person who suffers damage or loss by reason of a
violation of this section may maintain a civil action
against the violator to obtain compensatory damages and
injunctive relief or other equitable relief.
A civil
action for a violation of this section may be brought
only if the conduct involves 1 of the factors set forth
in subclauses
(I),
(II) ,
(III) ,
(IV),
or
(V)
of
subsection (c) (4) (A) (i) .
Damages for a violation
involving
only
conduct
described
in
subsection
(c) (4) (A) (i) (I) are limited to economic damages.
18 U.S.C.
§
1030 (g) .
The only factor delineated in subsection
(c) (4) (A) (i) relevant to the instant case is (I):
more persons during anyone-year period .
$ 5, 000 in value.
11
§
1030 (c) (4) (A) (i)
"loss to one or
aggregating at least
.21
2°Id. at 5 (citing 18 U.S.C. § 1030 (a) (5) (B) - (C) as the basis
for the CFAA claims asserted in this action) .
21The other factors are:
(II)
the modification or impairment, or potential
modification or impairment, of the medical examination,
diagnosis, treatment, or care of 1 or more individuals;
(continued ... )
-9-
(b)
Application of the Law to the Alleged Facts
Simmonds alleges:
46. GGR, without authorization, accessed a protected
computer in order to impair the availability of data
located thereon, namely, the Simmonds website and its
incorporated functionality.
47. GGR undertook such actions in order to extort from
Simmonds payment of allegedly past due invoices under the
Marketing Agreement.
48. GGR's actions violate The Computer Fraud and Abuse
Act, 18 U.S.C. § 1030, et seq.
49. As a direct result of GGR's unlawful conduct,
Simmonds suffered recoverable damages, including actual
damages, consequential damages, and lost profits. 22
21 ( ... continued)
(III) physical injury to any person;
(IV)
a threat to public health or safety;
(V)
damage affecting a computer used by or for an
entity of the United States Government in furtherance of
the administration of justice, national defense, or
national security.
18 U.S.C.
§
1030 (c) (4) (A) (i) (II-V)
(ii)
the modification or impairment,
or potential
modification or impairment, of the medical examination,
diagnosis, treatment, or care of 1 or more individuals;
(iii) physical injury to any person;
(iv) a threat to public health or safety; or
(v) damage affecting a computer system used by or for a
government entity in furtherance of the administration of
justice, national defense, or national security.
22Complaint, Docket Entry No. I, pp. 8-9
-10-
~~
46-49.
(1)
GGR
argues
Protected Computer
that
Simmonds
"accessed a 'protected computer.'
of
"protected computer,
has
failed
to
allege
GGR
Citing the CFAA's definition
1123
GGR argues that Simmonds
II
that
"has made no
allegation related to this element and GGR had lawful access to the
website's pages.
GGR didn't have to steal the password or act
surreptitiously - it already had lawful access.
that
GGR' s
accessed
a
argument
that
protected
Simmonds
computer
Simmonds' Complaint states:
failed
has
no
1124
to
merit
Simmonds argues
allege
that
~
because
46
GGR
of
"GGR, without authorization, accessed
a protected computer in order to impair the availability of data
located thereon, namely, the Simmonds website and its incorporated
functionality.
1125
The CFAA defines "protected computer" as "a computer- .
which is used in or affecting interstate or foreign commerce or
communication.
18
II
U.S.C.A.
§
1030(e) (2) (B).
"Pleading
specific facts that the defendant accessed a computer connected to
the internet is sufficient to establish that the accessed computer
was
F.
'protected.'"
Supp.
Trotter,
2d 671,
478
F.3d
Merritt Hawkins & Associates v.
674
(N. D.
918,
921
Tex.
2013)
(8th Cir.
Gresham,
948
(citing United States v.
2007)
(holding
that
the
23GGR's Motion to Dismiss, Docket Entry No.6, p. 4.
24Id.
25Plaintiff's Opposition, Docket Entry No.
Complaint, Docket Entry No. I, ~ 46)
-11-
9,
p.
5
(citing
accessed computer was "protected" because defendant "admitted the
computers
No.
were
07-7202,
(plaintiff
because
he
a
to
the
2008 WL 4443050,
sufficiently
internet")) .
that
connected
claimed
at
pleaded
that
Internet"))
*5
that
Becker
v.
Toca,
La.
(E.D.
i
Sept.
26,
2008)
computer
"computers
were
was
"protected"
connected
to
the
"Where a plaintiff does not allege specific facts
defendant
accessed
a
'protected
computer,'
courts
may
reasonably infer from other factual allegations that the accessed
computer was used in interstate
therefore 'protected.'"
[or foreign]
Merritt Hawkins,
(citing Quantlab Techs. Ltd.
commerce,
and is
948 F. Supp. 2d at 674
(BVI) v. Godlevsky,
719 F. Supp. 2d
766, 777 ( S . D. Tex. 2010)).
In
addition
to
pleading
that
GGR
accessed
a
"protected
computer," Simmonds has pleaded facts capable of showing that GGR
"obtained the password to the Simmonds company website in order to
access the site via a third-party hosting company and convert it
for GGR's own purposes. ,,26
Because these allegations
that GGR
accessed Simmonds' website via a third-party hosting company allege
that
the accessed computer was
connected to
the
internet,
the
allegations are factually sufficient to satisfy the requirement for
pleading that GGR accessed a
"protected computer."
GGR's
argument that Simmonds' CFAA claim should be dismissed because GGR
had lawful access to Simmonds' password and therefore did not have
to
steal
it
or act
surreptitiously
to
26Complaint, Docket Entry No. I, p. 6
-12-
obtain
~
30.
it
is
a
merits
argument not relevant for purposes of determining whether Simmonds
has stated a claim for which relief may be granted.
{2}
"Intent to Defraud" and "Obtained Anything of
Value"
Citing Scottrade,
Inc.
03537 (RJH) , 2011 WL 1226467,
v.
*
BroCo Investments,
Inc.,
10 Civ.
9 (S.D.N.Y. March 30, 2011), for its
recognition that a CFAA claim has four elements,
including that
access to a protected computer be done "knowingly and with intent
to defraud; and as a result has furthered the intended fraud and
obtained anything of value,
is
subj ect
to
dismissal
1127
GGR argues that Simmonds' CFAA claim
because
Simmonds
"has
no
evidence
to
adequately plead that there was the requisite 'intent to defraud'
or that [GGR] obtained 'anything of value' by accessing [Simmonds']
website.
1128
GGR argues that
[i]t's clear from the Complaint that no information was
appropriated, copied, obtained or stolen by Defendant and
even if the court assumes, arguendo, that everything in
Plaintiff's Complaint is true, Plaintiff's conduct does
not rise to liability under the CFAA statute. 29
This argument has no merit because the CFAA claims at issue in
Scottrade were based on subsection (a) (4) ,30 ,and although Simmonds'
27GGR's Motion to Dismiss, Docket Entry No.6, p. 3.
28Id. at 4.
30Subsection (a) (4) provides:
(a) Whoeverdefraud,
accesses
(4)
a
knowingly and with intent to
protected
computer
without
(continued ... )
-13-
Complaint does not identify the specific CFAA subsections on which
its CFAA claims are based, in response to GGR's motion to dismiss,
Simmonds
states
( a) (5) (B)
and
that
its
CFAA claims
( a) (5) (C) . 31
Neither
are based on subsections
subsection
(a) (5) (B)
nor
(a) (5) (C) requires GGR to have had an intent to defraud or to have
obtained anything of
Thus,
value
by accessing a
protected computer.
Simmonds does not need to allege facts capable of showing
that GGR had an intent to defraud or received anything of value to
allege claims based on either of these two subsections.
(3)
GGR
argues
recognized
by
Damage and Loss
that
the
Simmonds
statute.
1/32
"alleges
Asserting
no
'loss'
that
which
"the . term
is
loss
'encompasses only two types of harm:
costs to investigate and
respond
to
costs
service
interruption,'
a
computer
intrusion,
1/33
GGR
sufficiently allege either . . .
and
argues
that
associated
Simmonds
with a
"fails
to
[Simmonds] speculative allegations
of potentially losing an international business opportunity do not
30 ( • • • continued)
authorization, or exceeds authorized access, and by means
of such conduct furthers the intended fraud and obtains
anything of value.
18 U.S.C.
§
1030 (a) (4) .
31Plaintiff's Opposition, Docket Entry No.9, pp. 4-5
32GGR's Motion to Dismiss, Docket Entry No.6, p. 4.
33Id.
(quoting Quantlab, 719 F. Supp. 2d at 776-77).
-14-
~
9.
rise to the level of damages necessary to plead a CFAA violation. ,,34
This argument has no merit because Simmonds has adequately alleged
that GGR intentionally accessed a protected computer that hosted
its company website, and that as a result of that access Simmonds
suffered damage and loss of more than $5,000.00.
The CFAA defines "damage" as "any impairment to the integrity
or availability of data, a program, a system, or information," 18
u.S.C.
1030 (e) (8), and "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.
§
To assert a CFAA claim under subsection (a) (5) (B),
1030(e) (11).
Simmonds must allege that it suffered damage;
claim asserted under subsection
that
(a) (5) (C),
it suffered damage and loss.
appropriate
factor
of
the
six
Simmonds must allege
Moreover,
factors
while for a CFAA
because the only
listed
in
subsection
(c) (4) (A) (i) is factor (I), Simmonds must also allege facts capable
of establishing that the CFAA violations at issue caused a loss to
one
or
more
$5,000.00.
persons
See
during
18 U.S.C.
§
anyone-year
period
of
at
least
1030(c) (4) (A) (i) (I) and (g).
Simmonds has alleged that GGR obtained the password to its
company website,
341d.
used that password to access Simmonds'
at 4-5.
-15-
company
website
via
temporarily
a
third-party
deactivated
hosting
Simmonds'
company,
company
suspended
website
causing
and
an
interruption in the website's service that rendered Simmonds' CEO
unable to make a sales presentation in Colombia, which,
in turn,
caused Simmonds to lose a business opportunity valued at more than
$1,000,000.00. 35
Because the CFAA's definition of "damage" is "any
impairment to the integrity or availability of data, a program, a
system, or information," 18 U.S.C.
alleged
that
GGR
suspended
and
§
1030(e) (8), and Simmonds has
temporarily
deactivated
the
Simmonds' company website, Simmonds has sufficiently alleged that
GGR's actions caused it to suffer damage because these facts are
capable of proving that GGR impaired the integrity or availability
of Simmonds' data, program,
system, or information.
Because the
CFAA's definition of "loss" includes consequential damages incurred
because of interruption of service, 18 U.S.C.
§
1030(e) (11), and
Simmonds has alleged that it lost a business opportunity worth
$1,000,000.00 due to an interruption in service of its website
caused by GGR, Simmonds has sufficiently alleged that GGR's actions
caused it to suffer "loss" in an amount sufficient to satisfy the
pleading requirements for stating a CFAA claim under subsection
(a)
(5) (B)
or (a)
(5)
(C)
See Quantlab, F. Supp. 2d at 776 ("loss"
as defined under the CFAA includes costs involved with a service
interruption) .
GGR's
argument
that
Simmond's
35Complaint, Docket Entry No.1, pp. 5-6
-16-
~~
lost
29-31.
business
opportunity is too speculative to support a CFAA claim is a merits
argument that is not relevant for purposes of determining whether
Simmonds
has
stated a
claim
for
which relief
may be granted.
Simmonds need not prove its damages at this point in the case.
Fed.
R.
Civ.
P.
8 (a) (1) .
Accordingly,
See
GGR's motion to dismiss
Simmonds CFAA claims will be denied.
(c)
Conclusions
Because Simmonds has alleged facts capable of establishing a
claim for violations of the CFAA,
the court concludes that this
action is not subj ect to dismissal
for
lack of
subj ect matter
jurisdiction due to Simmonds failure to state a claim based on
federal law.
2.
Simmonds Has Not Alleged Diversity Jurisdiction
A district court has jurisdiction over civil matters "where
the matter in controversy exceeds the sum or value of $75,000,
citizens of
exclusive of interest and costs, and is between .
different States."
case
for
lack
of
28 U.S.C.
§
[diversity]
1332.
GGR "moves to dismiss this
jurisdiction
as
the
contracts
themselves limit liability so that the amount in controversy in
this case does not rise to the $75,000.00 minimum amount to trigger
di versi ty jurisdiction." 36
Because Simmonds' allegations are not
sufficient to establish that the parties are completely diverse,
the court raises this issue sua sponte.
36Id.
at 2.
-17-
See Perez v. Stephens, 784
F.3d 276,
consider
280
the
(5th Cir.
basis
of
2015)'
our
("It
own
is axiomatic
jurisdiction,
that we must
sua
sponte
if
necessary. " ) .
(a)
Simmonds Has Not Sufficiently
Parties are Diverse
A federal
citizenship.
297
diversity action requires
Alleged
that
the
complete diversity of
See Stiftung v. Plains Marketing, L.P., 603 F.3d 295,
(5th
Cir.
\ requires
2010).
that
all
"Complete
persons
on one
diversity
side
of
[of
the
citizenship]
controversy be
citizens of different states than all persons on the other side.'"
Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079-80 (5th Cir.
2008)
(quoting McLaughlin v. Mississippi Power Co., 376 F.3d 344,
353 (5th Cir. 2004)).
When one of the parties is an LLC, the LLC's
citizenship is determined by the citizenship of all of its members.
rd.
at 1080.
Citizenship is based on domicile,
individual resides and intends to remain.
i.e.,
where an
Acridge v. Evangelical
Lutheran Good Samaritan Society, 334 F.3d 444, 448 (5th Cir. 2003).
Plaintiff's Complaint identifies Simmonds as "a Louisiana limited
liability
company
organized
under
the
laws
of
the
State
of
Louisiana with its principal place of business in Louisiana,,,37 and
GGR as "a Texas corporation organized under the laws of the State
of Texas with its principal place of business in Texas.,,38
However,
the Complaint contains no mention of Simmonds' members, let alone
37rd. a t 1
Cl 1 .
1
3
38rd. at 2
~
4.
-18-
their respective states of citizenship.
Under Harvey,
542 F.3d
1077, these allegations are facially insufficient to establish the
existence of diversity jurisdiction.
(b)
Ci ting
Simmonds Has Alleged Amount in Controversy
§
8
titled
"Limitation of
Liability"
of
both
the
Website Agreement and the Marketing Agreement, GGR argues that the
court cannot properly exercise diversity jurisdiction in this case
because the "liability between the parties is contractually limited
and the amount in controversy in this case does not rise to the
minimum level to trigger diversity jurisdiction. ,,39
Quoting Helms
v.
193
Southwestern Bell Telephone Co.,
794 F.2d 188,
(5th Cir.
1983), Simmonds responds that "there is no basis for a finding that
diversity jurisdiction does not exist in this case,,40 because "Texas
courts may not enforce a contractual limitation of liability as a
defense to an intentional tort.,,41
GGR's argument that Simmonds has failed to allege an amount in
controversy sufficient to satisfy the requirements for diversity
jurisdiction has no merit.
Simmonds has alleged a claim against
GGR for tortious interference with prospective business relations,
and GGR has not sought dismissal of that claim.
Interference with
39GGR's Motion to Dismiss, Docket Entry No.6, p. 7. See also
Defendant GGR's Reply to Plaintiff's Response to Defendant's Motion
to Dismiss, Docket Entry No. 10, pp. 2-3.
4°Plaintiff's Opposition, Docket Entry No.9, p. 9
41Id.
-19-
~
21.
prospective business relations
intended
to
interfere
interference
incidental.
would
or
is
intentional
was
result,
but
if
substantially
not
if
the
the defendant
certain
that
interference
was
See Gil Ramirez Group, L.L.C. v. Houston Independent
School District,
786
F.3d 400,
417-18
(5th Cir.
2015)
(citing
Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909,
(Tex.
2013),
2001)).
and Bradford v.
Vento,
48
S.W.3d 749,
757
923
(Tex.
Because Simmonds has alleged facts capable of establishing
that GGR intended to interfere or was substantially certain that
interference would result from its accessing a protected computer
to suspend and temporarily deactivate Simmonds' company website,
the tortious interference claim asserted in this action is a claim
for an intentional tort.
See City of Houston v.
Guthrie,
332
S.W.3d 578, 593 (Tex. App. - Houston [1st Dist.] 2009, pet. denied)
("Tortious
interference
Holloway v. Skinner,
is
an
intentional
898 S.W.2d 793,
795-96
tort.").
(Tex. 1995)
See
also
(stating
that elements of claim for tortious interference with contract
include willful and intentional act of interference).
Accordingly, the court concludes that GGR may not limit its
liability pursuant to the limitation of liability clause in either
the Website Agreement or the Marketing Agreement because "Texas
courts may not enforce a contractual limitation of liability as a
defense to an intentional tort such as fraud."
193.
See
Solis
v.
Corpus Christi 1997)
policy"
for
a
party
Evans (
951
S.W.2d
44,
Helms, 794 F.2d at
50
(Tex.
App.
(finding that it would be "contrary to public
to
"prospectively contractually exculpate
-20-
itself
with
respect
to
intentional
torts")
i
Aluchem,
Inc.
v.
Sherwin Alumina, L.P., Civil Action Nos. C-06-183, C-06-210, 2007
WL 1100473, *9 (S.D. Tex. April 11, 2007)
("[S[ince AluChem brings
an intentional tort claim against the Defendants in this case,
Sherwin Alumina cannot limit its liability pursuant to the Supply
Agreement's limitation of liability clause.").
B.
Failure to State a Claim for Which Relief May be Granted
Asserting that
[i]t's clear from the Complaint that no information was
appropriated, copied, obtained or stolen by Defendant and
even if the court assumes, arguendo, that everything in
Plaintiff's Complaint is true, Plaintiff's conduct does
not rise to liability under this statute and common law
elements for Conversion, 42
GGR argues that
Plaintiff's Complaint includes no sufficiently alleged
facts that could form the basis of any successful cause
of action against Defendant for conversion or theft of
Plaintiff's website. When Plaintiff failed to pay monies
contractually due GGR, GGR blocked Plaintiff's access to
the new website GGR had created for Plaintiff. Within an
hour, Plaintiff had its original website back online and
functional.
[T] here was no conversion or theft.
Simply blocking Plaintiff's access to the website's
content does not rise to liability under either cause of
action. 43
1.
Simmonds' Conversion Claim is Subject to Dismissal
Simmonds alleges:
33. Simmonds owned, had legal possession to, and/or had
entitlement to possession of its website and incorporated
functionality.
42GGR's Motion to Dismiss, Docket Entry No.6, p. 5.
43Id. at 6.
-21-
34. GGR, unlawfully and without authorization, assumed
and exercised dominion and control over the website to
the exclusion of and/or inconsistent with Simmonds'
rights as an owner.
In particular, GGR disabled the
website and rendered it inaccessible to Simmonds and its
customers.
35. As a direct result of GGR's conversion of Simmonds'
website and Simmonds' loss of use of the website,
Simmonds suffered recoverable damages, including actual
damage, consequential damages, and lost profits.
36. Because GGR' s conduct was intentional and malicious,
Simmonds is also entitled to and seeks, exemplary
damages. 44
"Conversion is the wrongful exercise of dominion and control
over another's property in denial
of
or
inconsistent with his
rights."
Mayo v. Hartford Life Insurance Co., 354 F.3d 400, 410
(5th Cir.
2004)
(quoting Green International Inc. v.
S.W.2d 384, 391 (Tex. 1997))
Inc.,
474
S.W.2d 444,
447
Solis,
951
See also Waisath v. Lack's Stores,
(Tex.
1971)
("The
unauthorized and
wrongful assumption and exercise of dominion and control over the
personal property of another, to the exclusion of or inconsistent
with the owner's rights, is in law a conversion.").
To establish
conversion of personal property, a plaintiff must prove
(1) the plaintiff owned or had legal possession of the
property or entitlement to possession; (2) the defendant
unlawfully
and without
authorization
assumed and
exercised dominion and control over the property to the
exclusion of, or inconsistent with, the plaintiff's
rights as an owner; and (3) the plaintiff suffered
injury.
Lopez v.
pet.)
Lopez,
271 S.W.3d 780,
784
(Tex. App. -
Waco 2008,
(citing United Mobile Networks, L.P. v. Deaton,
44Complaint, Docket Entry No. I, pp. 6-7
-22-
~~
33-36.
no
939 S.W.2d
146, 147 (Tex. 1997), and Apple Imports, Inc. v. Koole, 945 S.W.2d
895,
899
(Tex.
defendant
App.
originally
-
Austin
acquired
1997,
pet.
possession
denied))
of
the
"If
the
plaintiff's
property legally, the plaintiff must establish that the defendant
refused to return the property after the plaintiff demanded its
return."
1955) .
Id.
(citing Presley v. Cooper, 284 S.W.2d 138, 141 (Tex.
In addition,
"[a]
plaintiff must prove damages before
recovery is allowed for conversion."
Deaton,
939 S.W.2d at 147
(citing Prewitt v. Branham, 643 S.W.2d 122, 123 (Tex. 1982)).
Generally, the measure of damages for conversion is the
fair market value of the property at the time and place
of conversion . . . . However, damages are limited to the
amount necessary to compensate the plaintiff for the
actual losses or inj uries sustained as a natural and
proximate result of the defendant's conversion.
Id. at 148.
"A conversion should not unjustly enrich either the
wrongdoer or the complaining party."
Id.
Simmonds argues that it has alleged a claim for conversion
under
Texas
law
because
it
has
alleged
facts
capable
of
establishing that it had entitlement to possession of its website
and incorporated functionality,
that GGR unlawfully and without
authorization assumed and exercised dominion and control over the
website to the exclusion of Simmonds'
Simmonds was inj ured as a result. 45
rights as owner,
and that
Simmonds notes that "[c] ourts
throughout the United States have recognized websites as personal
45Plaintiff's Opposition, Docket Entry No.9, pp. 7-8
-23-
~
14.
property subject to a valid conversion claim,
and a Texas court
would likely make the same ruling."46
"Texas
conversion
law
of
has
never
intangible
recognized
property
a
cause
of
in
cases
except
action
where
for
an
underlying intangible right has been merged into a document and
that document has been converted."
v.
Steinbeck,
pet.) .
See
53 S.W.3d 895,
Prewitt,
643
Express One International, Inc.
901
(Tex.
S.W.2d
at
App.
123
-
Dallas 2001,
(allowing
claim
no
for
conversion of rights conferred by a lease because the rights had
been merged into a tangible document)
F.3d 446, 456 (5th Cir. 2003)
i
Carson v. Dynegy, Inc., 344
(explaining that Texas conversion law
"concerns only physical property")
i
Neles-Jamesbury, Inc. v. Bill's
Valves, 974 F. Supp. 979, 982 (S.D. Tex. 1997)
law does
not
recognize
a
claim for
(holding that Texas
conversion of
a
trademark
because plaintiff did not allege that defendants converted any
document representing plaintiff's intangible rights)
foregoing
Texas
authority,
the
court
concludes
allegations are not sufficient to state a
Based on the
that
Simmonds'
claim for conversion
under Texas law because Simmonds alleges that GGR converted its
website, a website is intangible, and conversion applies only to
tangible property under Texas law.
The cases Simmonds has cited in
46Id. at 7 n.7 (citing Budsgunshop.com LLC v. Security Safe
Outlet, Inc., No. 5:10-CV-390-KSF, 2012 WL 1899851 (E.D. Ky.
May 23, 2012) i Meitler Consulting, Inc. v. Dooley, No. 05-2126-DJW,
2007 WL 1834008 (D. Kan. June 26, 2007); Astroworks, Inc. v.
Astroexhibit, Inc., 257 F. Supp. 2d 609, 618 (S.D.N.Y. March 12,
2003)).
-24-
support of the argument that its conversion claim is not subject to
dismissal are all inapposite because none of those cases involved
Texas law and all of them accepted without analysis that a website
constitutes personal property subject to conversion.
GGR's motion to dismiss
Simmonds
claim for
Accordingly,
conversion will be
granted.
2.
Simmonds' TTLA Claim is Not Subject to Dismissal
Simmonds alleges:
46.
Simmonds is the owner of its website and/or has
possessory rights greater than any of GGR's.
47.
Simmonds' website constitutes personal property.
48.
In accessing and disabling Simmonds' website, GGR
exercised unauthorized control over Simmonds' property,
with the intent to deprive Simmonds of it, in order to
extract from Simmonds payment of allegedly past due
invoices under the Marketing Agreement.
49.
This misconduct constitutes a violation of the Texas
Theft Liability Act ("TTLA"), Tex. Civ. Prac. & Rem. Code
§§
134.001-.005.
50.
As a direct result of GGR's misconduct, Simmonds
suffered recoverable damages, including actual damages,
consequential damages, and lost profits.
51.
Simmonds is also entitled to, and seeks, statutory
damages, costs, and attorneys' fees, as permitted under
the TTLA.
[52.] Because GGR' s conduct was malicious and/or reckless,
Simmonds is also entitled to, and seeks, exemplary
damages. 47
The TTLA provides a civil cause of action to victims of theft,
as defined by the Texas Penal Code.
See Tex.
47Complaint, Docket Entry No. I, p. 8
-25-
~~
Civ. Prac.
& Rem.
46-52 (mislabeled 41) .
Code
§§
134.001-.005.
The TTLA allows for recovery from a person
who commits "theft" -- actual damages, up to $1,000 in additional
damages, court costs, and reasonable and necessary attorney's fees.
Tex. Civ. Prac. & Rem. Code
§
134.005.
The TTLA defines "theft" as
"unlawfully appropriating property or unlawfully obtaining services
as described by Section 31.03, 31.04, 31.06, 31.07, 31.11, 31.12,
31.13
§
or
31.14,
134.002(2).
Penal
Code."
Tex.
Civ.
Prac.
& Rem.
Code
Simmonds' Complaint does not identify the specific
section of the Penal Code on which its TTLA claim is based, but in
response
pertinent
to GGR's motion to dismiss,
section of
unauthorized,
Simmonds
the TTLA allows
claims
"[a]
person
§
intentional taking of personal property,
the
with the
Such a claim is
31.03(a) of the Texas Penal Code, which provides that
commits
property wi th
intent
an
offense
to
deprive
if
he
the
unlawfully
owner
of
appropriates
property.
elements of a cause of action under the TTLA based on
are:
that
"stemming from an
intent to deprive the owner of the property.,,48
governed by
states
§
The
31.03(a)
(1) the plaintiff had a possessory right to property; (2) the
defendant unlawfully appropriated property in violation of
Texas Penal Code;
and
result of the theft.
(3)
the
the plaintiff sustained damages as a
See Dixon v. Bank of New York Mellon, Civil
Action No. 3:130CV-4235-L, 2014 WL 2991742, *4 (N.D. Tex. July 3,
2014) .
48Plaintiff's Opposition, Docket Entry No.9, p. 8
-26-
~
17.
Citing the Texas Penal Code's definitions of
§ 31.01(2)
(B) and "property" in
§ 31.01(5)
"deprive"
in
(B), Simmonds argues that
its TTLA claim is not subject to dismissal for failure to state a
claim because "[t]he TTLA is expressly violated when a wrongdoer
misappropriates property in order to extract a
reward or other
compensation from the owner, ,,49 and that its website qualifies as
"property"
because
§
31.01(5) (B)
defines
"property"
"tangible or intangible personal property.,,50
to
include
Section 31.01(2)
(B)
defines "deprive" to mean "to restore property only upon payment of
reward or other compensationi" and
§
31.01(5) (B),
which defines
"property" to include "tangible or intangible personal property."
Simmonds' allegations that it had a possessory right to its
website, that GGR unlawfully appropriated the website by exercising
control over the website by disabling it without Simmonds' consent
in order to extract from Simmonds payment of allegedly past due
invoices under the Marketing Agreement, and that Simmonds sustained
damages as a
result of GGR's appropriation of
sufficient to state a
assertion
that
claim for violation of
"[w] ithin an hour,
[Simmonds]
the website are
the TTLA.
had
its
GGR's
original
website back online and functional," is a merits argument that is
not
relevant
for purposes
of
determining whether Simmonds
stated a claim for which relief may be granted.
Accordingly, GGR's
motion to dismiss Simmonds' TTLA claim will be denied.
49Id.
~~
50Id.
~
17-18.
18.
-27-
has
IV.
Conclusions and Order
For the reasons stated in
III.A, above, the court concludes
§
that this action is not subject to dismissal for lack of subject
matter jurisdiction because Simmonds has stated a claim for which
relief may be granted based on federal law,
U.S.C.
§
1030,
but
that Simmonds has not
diversity jurisdiction under 28 U.S.C.
stated
in
§
III. B,
above,
the
court
i.e.,
18
sufficiently alleged
1332.
§
the CFAA,
concludes
For the reasons
that
Simmonds'
conversion claim is subj ect to dismissal under Federal Rule of
Civil Procedure 12(b) (6)
for failure to state a claim for which
relief may be granted, but that Simmonds' claim for violation of
the TTLA, Tex. Civ. & Rem. Code
to dismissal.
Accordingly,
12(b) (6) and FRCP 12(b) (1)
§
134.001, et seq., is not subject
GGR's Motion to Dismiss Under FRCP
(Docket Entry No.6) is GRANTED in PART
and DENIED in PART.
Because Federal Rule of Civil Procedure 15 provides for the
liberal amendment of pleadings,
Simmonds'
request for leave to
amend included in Plaintiff's opposition to Defendant's Motion to
Dismiss Under FRCP 12(b) (6) and FRCP 12(b) (1)
is GRANTED.
(Docket Entry No.9)
Simmonds may file an amended complaint within thirty
(30) days from the date of this Memorandum Opinion and Order.
SIGNED at Houston, Texas, on this 26th~' 2015.
SIM LAKE
UNITED STATES DISTRICT JUDGE
;>'
-28-
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