United States District Court, E.D. Texas, Sherman Division
MEMORANDUM OPINION AND ORDER
L. MAZZANT UNITED STATES DISTRICT JUDGE.
before the Court is Karya Property Management, LLC and
Scarlet InfoTech, Inc. d/b/a Expedien, Inc.'s
(hereinafter “Defendants”) Motion to Dismiss
Plaintiff's Computer Fraud and Abuse Act Claims (Dkt.
#37). Having considered the motion and the relevant
pleadings, the Court finds that Defendants' Motion is
LLC (“ResMan”) is a property management software
company that “develops and delivers cloud-based
property management software and services for multifamily
property managers, owners and operators” (Dkt. #1).
ResMan's primary product is its “ResMan
Platform” (Dkt. #1). The ResMan Platform allows
ResMan's customers to use a “suite of
software” to manage, among other things, reporting,
budgeting, leasing, rent collection, portfolio views, lead
management, document storage, text messaging, maintenance
requests, accounting tasks, financial report writing, and
resident retention tracking (Dkt. #1). The ResMan Platform
has been developed over the course of “nearly a
decade” and ResMan has spent “more than $10
million on research and development” of the product
alone (Dkt. #1).
customer approaches ResMan in hopes of utilizing ResMan's
proprietary and confidential platform, the customers must
agree to the terms of ResMan's Master Subscription
Agreement (“MSA”) (Dkt. #1). Under the agreement,
the customer must “enter user-specific IDs and
passwords to access the confidential system” (Dkt. #1).
Moreover, “ResMan's customers are expressly
prohibited from providing any third party with access to the
ResMan Platform, from disclosing the contents of the ResMan
Platform, or from analyzing or using the software system to
create a competitive product, as described further
below” (Dkt. #1).
is one of the customers that has approached ResMan to utilize
the ResMan Platform. Since July 20, 2017, Karya has
“entered into no less than fourteen separate purchase
order forms with ResMan, which collectively cover 26 large
multi-unit properties (6, 226 total units) managed by Karya .
. . .” (Dkt. #1). Like every other customer that has
entered into a transaction with ResMan, Karya was required to
sign ResMan's MSA (Dkt. #1).
lawsuit concerns Karya's alleged violation of the MSA
that it signed (Dkt. #1). ResMan contends that Karya breached
the MSA contract when it granted a third-party-Expedien, LLC
(“Expedien)-access to ResMan's Platform to aid
Karya in the development of a competing product,
“Arya” (Dkt. #1). According to ResMan, Karya
allowed Expedien to have essentially unfettered access to
ResMan's Platform so that Expedien could
“investigate” the Platform and then analyze and
copy the underlying software for Karya's competing
product (Dkt. #1). To support its contentions, ResMan alleges
that the investigation:
lasted for over a year, was performed by multiple Expedien
employees from multiple locations in at least two different
countries, was performed largely internationally from India,
and comprised a detailed review of essentially the entire
ResMan Platform continuously over a long period of time.
Further, ResMan has discovered that Karya and Expedien have
disclosed ResMan User IDs and information to further
individuals and entities.
(Dkt. #1). ResMan implicitly asserts that Expedien and Karya
would have been aware that this was an explicit breach of the
MSA by pointing to Jitendra Agarwal, an employee of both
entities, who would have known of the MSA and its terms (Dkt.
#1). Finally, ResMan asserts that Expedien “submitted a
job posting in or around February 2018, shortly before it
began improperly using the ResMan User IDs, specifically
seeking and targeting an employee with experience
“designing and developing Enterprise Resource
Planning” applications and highlighting that
“[a]ny experience with Property Management Software
like ResMan will be a BIG PLUS” (Dkt. #1).
determine the breadth of Defendants alleged breaches and
“improper access, ” ResMan contends that it
“incurred substantial in-house labor and other costs
and fees . . . .” (Dkt. #1). ResMan further claims that
its investigation required over one hundred hours of labor
from its employees which resulted in costs exceeding $5, 000
(Dkt. #1). Accordingly, ResMan filed this lawsuit against
Defendants on June 3, 2019 (Dkt. #1). ResMan asserts the
following claims: (1) Breach of Contract against Karya; (2)
Tortious Interference with Contract against Expedien; and (3)
Violation of Computer Fraud and Abuse Act (CFAA), 18 U.S.C.
§ 1030(a) against Defendants (Dkt. #1). In response, on
June 25, 2019, Defendants filed a Motion to Dismiss
Plaintiff's Computer Fraud and Abuse Act Claims (Dkt.
#37). Defendants claim that ResMan's Complaint: (1) does
not suggest an “intent to defraud” as required
under the CFAA, see 18 U.S.C. §§
1030(a)(4) or (6); (2) does not “plausibly allege
that Karya ‘exceeded its authorization' to access
the software, ” see 18 U.S.C. §§
1030(a)(2) or (4); and (3) does not allege a
“cognizable ‘loss' under the CFAA”
(Dkt. #37). ResMan opposes Defendants' Motion and
contests that it has met its burden in pleading
“detailed factual allegations supporting all the
elements of ResMan's claims for violations of the
Computer Fraud and Abuse Act (“CFAA”) against
both Karya (ResMan's cusomter) and Expedien . . .
.” (Dkt. #46). The Court now considers Defendants'
Federal Rules of Civil Procedure require that each claim in a
complaint include a “short and plain statement . . .
showing that the pleader is entitled to relief.”
Fed.R.Civ.P. 8(a)(2). Each claim must include enough factual
allegations “to raise a right to relief above the
speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007).
12(b)(6) motion allows a party to move for dismissal of an
action when the complaint fails to state a claim upon which
relief can be granted. Fed.R.Civ.P. 12(b)(6). When
considering a motion to dismiss under Rule 12(b)(6), the
Court must accept as true all well-pleaded facts in the
plaintiff's complaint and view those facts in the light
most favorable to the plaintiff. Bowlby v. City of
Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court
may consider “the complaint, any documents attached to
the complaint, and any documents attached to the motion to
dismiss that are central to the 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).
The Court must then determine whether the complaint states a
claim for relief that is plausible on its face. “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the [C]ourt to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)). “But where the well-pleaded
facts do not permit the [C]ourt to infer more than the mere
possibility of misconduct, the complaint has alleged-but it
has not ‘show[n]'-‘that the pleader is
entitled to relief.'” Iqbal, 556 U.S. at
679 (quoting Fed.R.Civ.P. 8(a)(2)).
Iqbal, the Supreme Court established a two-step
approach for assessing the sufficiency of a complaint in the
context of a Rule 12(b)(6) motion. First, the Court should
identify and disregard conclusory allegations, for they are
“not entitled to the assumption of truth.”
Iqbal, 556 U.S. at 664. Second, the Court
“considers] the factual allegations in [the complaint]
to determine if they plausibly suggest an entitlement to
relief.” Id. “This standard
‘simply calls for enough facts to raise a reasonable
expectation that discovery will reveal evidence of the
necessary claims or elements.'” Morgan v.
Hubert,335 Fed.Appx. 466, 470 (5th Cir. 2009) ...