Fiber Systems Intern., Inc. v. Roehrs
2006 U.S. App. LEXIS 29098, 470 F.3d 1150, 80 U.S.P.Q. 2d (BNA) 1902 (2006)
Rule of Law:
The Computer Fraud and Abuse Act (CFAA) authorizes a civil cause of action for unauthorized computer access with intent to defraud under § 1030(a)(4), provided the conduct involves one of the factors in § 1030(a)(5)(B), such as a loss aggregating at least $5,000. Additionally, under Texas law, falsely accusing a person of the specific crime of theft constitutes defamation per se.
Facts:
- FSI, a manufacturer of fiber-optic connectors, underwent a struggle for control between majority shareholder Michael Roehrs and a minority group led by his brother, Daniel Roehrs.
- A settlement allowed Michael Roehrs to buy out the minority owners, resulting in the termination of the individual defendants' employment.
- Upon their departure, the individual defendants allegedly accessed FSI computers to download and copy confidential business information and trade secrets.
- The defendants subsequently formed new competing companies, Applied Optical Systems (AOS) and Opteconn.
- Following the separation, FSI (through Michael Roehrs and other agents) communicated with customers and filed a police report accusing the defendants of being 'thieves' and 'crooks' who stole intellectual property.
- FSI sent letters to government supply centers alleging that the new companies (AOS and Opteconn) were distributing stolen proprietary information.
- FSI incurred costs related to data recovery and forensic analysis of the computers used by the defendants.
Procedural Posture:
- FSI sued the defendants in the U.S. District Court for the Eastern District of Texas under the CFAA, and defendants counterclaimed for defamation.
- The District Court granted partial summary judgment dismissing FSI's claim for injunctive relief.
- The District Court granted partial summary judgment dismissing the defendants' counterclaim regarding defamation of the corporate defendants.
- The case proceeded to a jury trial on the remaining claims.
- The jury found three individual defendants violated CFAA § 1030(a)(4) causing $36,000 in loss, but the District Court entered a take-nothing judgment, ruling the statute created no civil cause of action for that subsection.
- The jury found FSI liable for defaming the individual defendants and awarded compensatory and punitive damages.
- The District Court denied FSI's motion for judgment as a matter of law and motion for a new trial regarding the defamation verdict.
- FSI appealed the adverse judgments to the Fifth Circuit Court of Appeals, and Defendants cross-appealed the summary judgment regarding corporate defamation.
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Issue:
Does the Computer Fraud and Abuse Act create a civil cause of action for unauthorized access with intent to defraud under § 1030(a)(4), and do statements accusing former employees of being 'thieves' constitute defamation per se under Texas law?
Opinions:
Majority - King
Yes, the CFAA creates a civil cause of action for fraud-based violations, and false accusations of theft are defamation per se. The court reasoned that the plain language of § 1030(g) allows a civil action for a violation of 'this section' (referring to the whole statute) provided there is a qualifying harm, such as $5,000 in loss. The statute does not limit civil suits solely to subsection (a)(5) merely because it references the damage thresholds listed in (a)(5)(B). Regarding defamation, the court applied Texas law, noting that while vague insults like 'crook' might sometimes be non-defamatory, explicitly calling someone a 'thief' or accusing them of stealing property unambiguously imputes criminal conduct. Consequently, the district court erred in ruling that no civil claim existed for the CFAA violation and in granting summary judgment on the corporate defamation claims where specific allegations of theft were made.
Analysis:
This decision is significant for two primary reasons. First, it clarifies the scope of the Computer Fraud and Abuse Act (CFAA) in the Fifth Circuit, firmly establishing that civil liability is not limited to cases of computer damage (hacking/viruses) under subsection (a)(5), but extends to data theft and fraud under subsection (a)(4), provided the monetary loss threshold is met. This expands the utility of the CFAA for employers suing former employees who misappropriate data. Second, it reinforces the strict nature of defamation per se in Texas. It distinguishes between general disparagement (calling someone a 'crook' in a general sense) and specific imputations of crime (calling someone a 'thief' regarding specific property), holding that the latter requires no proof of actual damages. The court also highlighted that corporate entities can be defamed if the statements impute criminal conduct to the corporation itself.
