Virginia Business Litigation Lawyer Blog

What kind of expense amounts to a "loss" under the Computer Fraud and Abuse Act (CFAA), and did a Virginia litigation-support company incur the required minimum of $5,000 in losses when it investigated an alleged breach of its computer systems, retaining the services of both an attorney and a computer forensics company to aid with the investigation? That was the issue recently before Judge T.S. Ellis III of the Eastern District of Virginia, who held that the investigative activities could support a CFAA claim, even if the expenses were not paid in cash.

The issue was particularly important to the plaintiff, Animators at Law, a graphics and technology litigation support company, because of the 13 claims it brought against two former employees and a competitor, all but the CFAA claim were based on state law, meaning that without it, there would be no basis for federal-court jurisdiction.

The CFAA provides for a civil action against anyone who intentionally gains access to a computer without authorization and obtains information from it. The CFAA has a minimum jurisdictional requirement of $5,000 in losses. Animators at Law claimed that its former employees conspired with a competitor to leave Animators' employment and join the competitor, taking with them confidential and proprietary information about Animators' services, projects, and clients.

When Ken Lopez, the president of Animators at Law, suspected that one of his company's laptops had been accessed without authorization, he brought in an outside company to engage in a forensic analysis of the laptop. Evidence produced during the litigation showed that Animators received services valued at $19,501.41 or more in connection with investigating the unauthorized access. However, Animators did not actually pay the contractor for its services, prompting the defendants to move for summary judgment on the basis that the $5,000 jurisdictional threshold had not been met. Animators countered that it provided services to the contractor in exchange for its forensic services, as a form of barter.

The court found that it "would be passing strange" if the contractor had spent over 60 hours analyzing Animators' data without any expectation of payment in some form. At a minimum, the court ruled, there was a triable issue of fact as to whether the services were provided on credit or in trade, given that there was an existing business relationship between Animators and the contractor. Because the CFAA does not require losses to be paid for in cash, this was sufficient to survive summary judgment.

In a memorandum opinion dated April 27, 2011, United States District Judge T.S. Ellis, who sits in the Alexandria Division of the Eastern District of Virginia, taught plaintiff Stephanie Holmes that it was not a good idea to change her story multiple times during her deposition. Finding that she had "perpetrated a fraud on the court," Judge Ellis affirmed the magistrate judge's recommendation to strike Holmes's claim for compensatory damages for pain and suffering.

Holmes, who had worked as a stocker at a Wal-mart in Alexandria, Virginia, for four years, filed a complaint with the Equal Employment Opportunity Commission (EEOC), alleging that Walmart had failed to make reasonable accommodations for her hearing impairment. She alleged that Walmart had refused to provide her with an interpreter and with comprehensive notes of meetings and instructions, all of which she needed to perform her job properly. She sought compensation for pecuniary losses, an injunction, punitive damages, and back pay.

The EEOC filed suit on Holmes's behalf. During Holmes's deposition in 2010, Walmart's attorneys asked her about whether she had received any treatment from a mental health provider for emotional distress caused by her employment at Walmart. First, she said, "I don't need therapy, and I don't see doctors." Then she said she saw a therapist just once in 2007. She later changed her story again and said she saw one doctor three times a week from March 2004 through February 2005. Finally, at the end of her deposition, she acknowledged that she had received therapy for anxiety and depression in a 13-year period from 1994 to 2007 and that some of the treatment related to her work at Walmart.

Walmart moved to dismiss Holmes's entire complaint on the grounds that she had lied in her deposition and had failed to provide relevant documents in discovery. Rather than dismiss the complaint in its entirety, however, Judge Ellis decided that the appropriate course was to affirm the recommendation of the magistrate judge to strike only Holmes's claim for pain and suffering damages.

Judge Ellis found that Holmes's untruths at her deposition "prevented Walmart from adequately preparing its defense, particularly its defense against her claim for compensatory damages for pain and suffering." Accordingly, the appropriate action was to strike that claim. Judge Ellis noted that although a federal judge has the inherent power to dismiss a case in its entirety, the U.S. Court of Appeals for the Fourth Circuit "has emphasized that courts must exercise this authority with restraint."

"The partial dismissal ordered here must stand as a beacon to warn and deter others from engaging in similar conduct," Judge Ellis wrote.

A Pennsylvania school district violated two female middle school students' First Amendment rights when it punished them for attending school while wearing breast cancer awareness bracelets that bore the slogan "I (heart) Boobies! KEEP A BREAST." That was the ruling of U.S. District Judge Mary McLaughlin of the Eastern District of Pennsylvania on April 12, 2011, in a high-profile case that pitted free-speech rights and public-health efforts against the need to enforce discipline and promote order in public schools. Judge McLaughlin granted a temporary injunction enjoining the school from enforcing its "no bracelet" policy.

The United States Supreme Court had previously held that students don't shed their First Amendment protections at the schoolhouse door, but it had also ruled that educators have the right to ban lewdness and to preserve a learning environment. The school district's lawyers argued that the "boobies" bracelets were lewd and vulgar, and that even if they weren't, they should be banned because they substantially disrupted the work and discipline of the school. At the injunction hearing, school principals testified that they viewed the term "boobies" as "an impermissible double entendre about sexual attraction to breasts." The court disagreed, reasoning that the statements needed to be examined in context.

The bracelets are distributed nationwide by the Keep A Breast Foundation, a nonprofit that promotes awareness of breast cancer by women under 30. The girls, Brianna Hawk and Kayla Martinez, testified that they did not intend to express a sexual message by wearing the bracelets to school. Both of their mothers gave them permission to wear the bracelets, and they did so on the school's designated breast cancer awareness day.

"If the phrase 'I (heart) Boobies!' appeared in isolation and not within the context of a legitimate, national breast cancer awareness campaign, the school district would have a much stronger argument," Judge McLaughlin wrote. All the bracelets contained the web address of the foundation, which provides information on breast cancer detection and prevention, the judge noted.

As far as the use of the term "boobies," Judge McLaughlin concluded that rather than being a "lewd and vulgar" term, it simply matched its intended audience's vocabulary. The bracelets were directed to a target audience of teenage girls, and the students testified that "boobies" is the word that they generally use to refer to their breasts. Thus, the phrase is a shorthand way of expressing the importance of breast cancer awareness and of breast health, the judge concluded.