The U.S. District Court for the Eastern District of California recently dismissed a conspiracy claim under the federal Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030(b), even while finding a likelihood of success on the merits of plaintiff’s trade secret claims. The court found the CFAA conspiracy claim was barred by the intra-corporate conspiracy doctrine, which provides that “concerted action by officers within a single corporate entity cannot give rise to liability for conspiracy.” Cool Runnings International Inc. v. Gonzalez, et al., No. 1:21-cv-00974-DAD-HBK, 2021 WL 5331453, at *14 (E.D. Cal. Nov. 16, 2021) (citations omitted).
Plaintiff Cool Runnings International Inc. (CRI) sued three former employees and their new employer for trade secret misappropriation, breach of contract, and violations of the CFAA following the departure of the employees to a newly created company, DRC Contracting, LLC (“DRC”). CRI submitted evidence that at least one of the former employees deliberately transferred a large quantity of electronic information from his CRI laptop to an external drive around the time he left the company, and that DRC used at least some of CRI’s trade secrets to its competitive advantage.
Although the court granted CRI’s motion for a preliminary injunction on the trade secret claims, it also dismissed CRI’s CFAA conspiracy claim. The court pointed out that CRI’s conspiracy argument hinged on the assertion that one of the defendant former employees was “acting as an agent of defendant DRC when he engaged in the unauthorized downloading of plaintiff’s files.” Id. at *14. In other words, the former employee was acting within the scope of his employment for DRC and so, under the intra-corporate conspiracy doctrine, could not have conspired with his corporate employer. Id. (quoting Johnson v. Hills & Dales Gen. Hosp., 40 F.3d 837, 840 (6th Cir. 1995) (“courts have created a ‘scope of employment’ exception that recognizes a distinction between collaborative acts done in pursuit of an employer’s business and private acts done by persons who happen to work at the same place”)).
Because the court held that the conspiracy claims were barred by the intra-corporate conspiracy doctrine, the court did not reach the issue of whether such claims are subject to the heightened pleading standard under Federal Rule of Civil Procedure 9(b).
The Cool Runnings decision serves as a reminder that conspiracy claims under the CFAA are unlikely to survive where an agency relationship forms the basis of the alleged conspiracy.
Cool Runnings International Inc. v. Gonzalez, et al., No. 1:21-cv-00974-DAD-HBK, 2021 WL 5331453 (E.D. Cal. Nov. 16, 2021)