In Contemporary Services Corp. v. Hartman, 2008 WL 3049891 (C.D. Cal.), the United States District Court for the Central District of California recently declined supplemental jurisdiction over state law claims removed to the court where federal jurisdiction was based solely on the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Finding that state issues substantially predominated, the court noted that the “[e]lements and facts that Plaintiffs must prove to establish their CFAA claim are different from what they must prove to establish their other claims.”
The court retained jurisdiction over the CFAA claim and remanded all of the state law claims.
Plaintiffs filed suit in state court against defendant Hartman, asserting seven claims for relief: (1) violation of the CFAA; (2) Breach of Fiduciary Duty; (3) Conversion; (4) Breach of Contract; (5) Fraud; (6) Intentional Interference with Prospective Economic Advantage; and (7) Breach of Fiduciary Duty. Defendant removed the case to federal district court. Defendant moved to remand the case to state court. Defendant also moved to dismiss several of plaintiff's claims.
Plaintiffs filed a First Amended Complaint in which they abandoned their sixth and seventh causes of action. Defendant answered and filed five counterclaims arising under state law for: (1) Unpaid Wages; (2) Waiting Time Penalties; (3) Violation of Cal. Lab. Code § 2802; (4) Indemnification under Cal. Lab Code § 2802 and Cal. Corp. Code § 317; and (5) Unfair Competition Under Cal. Bus. & Prof. Code § 17200.
Turning to plaintiffs’ motion for remand, the district court held that “[i]n all important respects, this action involves an employment dispute between the parties that has given rise to nine state law claims and counterclaims which substantially predominate over the sole federal claim.” Continuing, the court noted that all of the claims and counterclaims derived from the facts triggered by defendant's decision to leave plaintiffs' employment, including that defendant allegedly breached her fiduciary duties owed to plaintiffs by deleting work product stored on her work computer and defrauding plaintiffs by making false representations about the information contained on plaintiffs' shared drive and computer.
Defendant's counterclaims for unpaid wages and unfair competition arose from Plaintiffs' alleged conduct after defendant ended her employment.
Distinguishing the CFAA from the other claims in suit, the court noted “[T]he elements and facts that Plaintiffs must prove to establish their CFAA claim are different from what they must prove to establish their other claims.” Plaintiffs' claims for breach of fiduciary duty and breach of contract derive from the parties' rights and responsibilities under the employment contract. Plaintiffs' claim for fraud arises from Defendant's alleged misrepresentations during her employment. Defendant's counterclaims for unpaid wages and indemnification were based on Plaintiffs' conduct after defendant returned the computer and left their employment.
In contrast, to prove a CFAA claim, one must show that the computer in question was a “protected computer,” and that the conduct involved one of five categories of harm that are a necessary element of a civil action under the CFAA. As plaintiffs did here, claimants most often meet the “harm” element by alleging a loss of at least $5,000 in value. When relying on this element, under 18 U.S.C. § 1030(a)(5)(B), plaintiffs are limited to economic damages.
Finally, the court found it “[n]oteworthy that the relief Plaintiffs seek under the CFAA is not unique to that claim; Plaintiffs also seek compensatory damages and injunctive relief pursuant to all four of their state claims for relief. *** In short, even as to the array of remedies that Plaintiffs seek, their state claims predominate; indeed, rather than “trailing” the federal remedies, the state-based claims encompass additional prayers for relief, such as punitive damages.”