Another District Court Dismisses a CFAA Claim for Failure to Allege Jurisdictional Loss

Failure to allege proper “loss” under the Computer Fraud and Abuse Act (“CFAA”) continues to bedevil plaintiffs filing CFAA civil actions. The latest case decided this week, Devine v. Kapasi, 2010 WL 2293461 *4 (N.D. Ill. June 7, 2010), dismissed a CFAA claim on the ground that it did not allege that the Defendants’ actions “”caused … loss to 1 or more persons during any 1-year period … aggregating at least $5,000 in value.” § 1030(c)(4)(A)(i)(I).

One of the Plaintiffs, Jeff Devine, and one of the Defendants, Sabir Kapsi, each owned 50% of a computer-services company called Geus Technology, Inc. After Devine bought out Kapsi’s interest in the company Kapsi without authorization entered Devine’s Server that belonged to Devine as a result of their buy out agreement and “deleted or otherwise transferred from the Devine Solutions network” “more than 2000 files and 350 file folders containing electronically stored information and communications.” Id. *2.

The Defendants claimed that “Plaintiffs could not possibly have sustained at least $5,000 in losses as a result of the actions alleged in the complaint” because as “a technology company, . . . it [Devine Solutions] would have an information back-up system to ensure that the costs associated with any data loss remained minimal–indeed, it would not be acting reasonably if it did not,” and ‘[t]hus, $5,000 could not be a “reasonable cost.” Id. *5. The court held that the defendants’ claim “is premature” and dismissed the CFAA claim without prejudice, allowing the plaintiffs to amend their complaint to “attempt to cure the defects in their allegations of loss under the CFAA.” Id.

This is just another of the many recent court decisions that have dismissed CFAA claims for failure to allege or prove the $5,000 in loss required to provide subject matter jurisdiction for a CFAA claim. In my next National Law Journal column which is due out the end of this month I will survey the law on “loss” and provide guidance on the pitfalls to avoid in drafting and prosecuting a civil CFFA action.