The following discussion is from an NP Alert and follows up on our prior exploration in this blog of Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting, LLC, et al. (E.D. Mo., No. 4:08-cv-1683).

There are two competing lines of cases relating to the Computer Fraud and Abuse Act (CFAA) and Stored Wire and Electronic Communications Act (SECA). One line of cases seeks to limit civil actions to corporate hackers (e.g., electronic trespassers). See, e.g., Int’l Ass’n of Machinists & Aero Workers v. Werner-Matsuda, 390 F.Supp.2d 479, 495 (D.Md. 2005). A contrary line of cases, exemplified by International Airport Centers, LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006), focuses on computer misconduct by employees acting “without authorization.” Based upon these competing lines of cases, the United States District Court for the Eastern District of Missouri opted to follow the “without authorization” line of cases involving insiders and disloyal employees in Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing, & Consulting, LLC.

Ronald N. Hall is the former regional sales manager for Lasco Foods, Inc. Charles Shaw is the former national and regional sales manager. Hall and Shaw terminated their employment at Lasco and formed a new company, Hall and Shaw Sales, Marketing & Consulting LLC (HSSMC), in direct competition with Lasco Foods, Inc.

A lawsuit ensued for alleged violations of the Missouri Uniform Trade Secrets Act, violations of the Computer Fraud and Abuse Act (CFAA), violations of the Stored Wire and Electronic Communications Act (SECA), and other state causes of action.

A forensic analysis of a USB storage drive revealed that Defendant Shaw had accessed, printed, and/or copied Lasco’s information from the USB drive after his authorization to access this proprietary information had been revoked. Further, it was alleged that Shaw sent proprietary Lasco documents to his home computer. In turn, Lasco alleged that, after Hall resigned, Lasco sent Hall a letter demanding that he preserve the electronic information on the company laptop computer and return the computer to Lasco. A subsequent forensic analysis performed on Hall’s laptop showed that Hall had accessed and deleted Lasco files after the termination of Hall’s employment and after Hall’s authorization to access the information had been revoked by Lasco.

The issue before the court on a third amended complaint was whether the alleged facts were sufficient to withstand a motion to dismiss the two federal statutory causes of action for the alleged violations of the CFAA, 18 U.S.C. § 1030 et seq., and the SECA, 18 U.S.C. § 2701 et seq. Specifically, defendants argued that Lasco had not pled sufficient facts to demonstrate that defendants’ actions were “unauthorized” because they were permitted electronic access to the computers as Lasco employees.

Upon consideration of the competing contentions, Judge Jean C. Hamilton of the United States District Court for the Eastern District of Missouri denied the motion to dismiss the CFAA claim because Lasco sufficiently alleged that Hall and Shaw acted “without authorization” when they obtained Lasco’s proprietary information for their own personal use and in contravention of their fiduciary duties owed to Lasco.

Likewise, the district court denied the motion to dismiss the SECA claim because the allegations showed that both Hall and Shaw intentionally accessed Lasco’s electronic files “without authorization” after they breached their duty of loyalty to Lasco and after the termination of their employment relationship with Lasco.