IP Law Daily, TRADE SECRETS—E.D. Mo.: CFAA claim dismissed, but trade secrets claims move forward against former employees, (Jun 6, 2022)

By Kevin M. Finson, J.D.

Summary judgment was granted on a claim under the Computer Fraud and Abuse Act because it was not alleged that the defendants accessed anything they were not allowed to access.

A short-term loan business failed to establish as a matter of law that former employees violated the Computer Fraud and Abuse Act because there was no allegation that the employees had accessed information they were not authorized to access, the U.S. District Court in St. Louis has held. The trade secrets the defendants had allegedly accessed were documents which they were allowed access as part of their employment. The loan business pleaded sufficient facts to state claims for misappropriation of trade secrets and related claims (Pinebrook Holdings, LLC v. Narup, June 2, 2022, Schelp, M.).

PH Financial Services, LLC (PH) was in the business of short-term lending. Aaron Narup and Steve Reuter were employees of PH, working as an IT supervisor and title loan specialist, respectively. Both signed confidentiality agreements. PH and it's co-plaintiffs sued Reuter and his co-defendants (there were 17 named parties in all, and they had both business and family ties) basically alleging that Reuter, while an employee of PH, directed resources to and pursued business opportunities for his own lending businesses which copied all of PH's confidential business techniques and strategy, making claims for misappropriation of trade secrets, violation of the Computer Fraud and Abuse Act (CFAA), and many state law claims including breach of the duty of loyalty, conversion, and unjust enrichment. The defendants collectively moved for summary judgment.

Trade secrets. Defendants argued that they should be granted summary judgment because the trade secrets claimed were broad and vague. The court held that given the nature of the allegations, that the defendants essentially copied the entire business of the plaintiffs including all confidential information, it was appropriate for PH to describe its secrets in broad terms. Summary judgment was denied.

CFAA. The court began by finding that this case, in which the defendants were employees who were authorized to access PH's computer systems, should be analyzed on whether they exceed their authorization. The court said was unable to find any evidence that the scope of the authorization was limited in any way. It appeared that the actual claim was not that Narup and Reuter accessed information that they were not authorized to access, but rather that they misappropriated information to which they were properly allowed access. This was not within the prohibition of the CFAA, so the court granted summary judgment on this count.

The court denied summary judgment on the remaining counts, noting that there were clear factual disputes on each one and that the moving party largely failed to identity any law that would support judgment as a matter of law as to any claim.

The Case is No. 4:19-cv-01562-MTS.

Attorneys: Burton D. Garland, Jr. (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.) for Pinebrook Holdings, LLC, PH Financial Services, LLC and Dandridge Holdings, LLC. Joe D. Jacobson (Jacobson Press P.C.) for Aaron Narup.

Companies: Pinebrook Holdings, LLC; PH Financial Services, LLC; Dandridge Holdings, LLC

Cases: TechnologyInternet TradeSecrets MissouriNews