A Federal District Court recently refused to dismiss a complaint for lack of subject matter jurisdiction because, among several state law claims, the plaintiff – the individual defendant’s former employer – also asserted a claim under the Federal Computer Fraud and Abuse Act (CFAA).
In NouvEON Tech. Partners, Inc. v. McClure, No. 3:12-CV-633-FDW-DCK, 2013 U.S. Dist. LEXIS 29208 (March 5, 2013), a North Carolina Federal District Court denied defendants’ Rule 12(b)(1) motion to dismiss, for lack of subject matter jurisdiction, a myriad of state law claims filed by NouvEON against its former employee (McClure) and her new employer (Smarter Systems). Defendants argued that the state law claims did not belong in Federal Court because the complaint only contained a single federal claim – alleging violation of the CFAA – and pled it only against McClure. The Court was persuaded, however, that because NouvEON alleged Smarter Systems was vicariously liable for McClure’s conduct in violating the CFAA, and because the complaint specifically incorporated by reference into the state law claims all of the factual allegations supporting the federal claim, all the claims should be resolved in one federal judicial proceeding.
One week after resigning from NouvEON, McClure began working for Smarter Systems. NouvEON alleged that McClure’s duties at Smarter Systems violated a non-compete agreement she entered into with NouvEON prior to leaving the company, and that McClure misappropriated confidential information by accessing NouvEON’s database after she left NouvEON. NouvEON further alleged that McClure accessed the confidential information at the direction of Smarter Systems, in order for her new employer to gain a competitive advantage over NouvEON.
NouvEON’s complaint alleged McClure and Smarter Systems committed computer trespass under North Carolina statute and violated North Carolina’s Unfair and Deceptive Trade Practices Act, and accused both defendants with civil conspiracy and unjust enrichment. The complaint also alleged that McClure violated the CFAA and committed conversion, and that Smarter Systems tortiously interfered with McClure’s contract and was vicariously liable.
The Court’s Decision
The North Carolina Federal District Court ruled that although the state claims substantially predominated over the federal claim, all allegations in the complaint concerned the “same core of operative facts.” Therefore, the Court, guided by the “principles of judicial economy, convenience, and fairness to litigants,” exercised its discretion to retain supplemental jurisdiction under 28 U.S.C. § 1367 over NouvEON’s state law claims.
The Court’s decision presents employers who prefer to litigate trade secret, restrictive covenant and related state law claims against their former employees (and perhaps their new employers) in federal court a potential means of doing so (when diversity jurisdiction does not exist). By pleading a valid CFAA claim, employers can satisfy the federal question jurisdiction requirement for litigating in Federal Court.
For answers to questions regarding non-competition, trade secrets, and other related matters, as well as litigation and the protection of business information please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.
Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.