Turner v. Hubbard Systems, Inc. , 855 F.3d 10 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 16-1387
GREGORY P. TURNER,
Plaintiff, Appellant,
v.
HUBBARD SYSTEMS, INC., f/k/a Jim Hubbard and Associates, Inc.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Torruella, Thompson, Kayatta,
Circuit Judges.
Gregory P. Turner on brief for appellant.
Bethany P. Minich, Daniella Massimilla, and Litchfield Cavo
LLP on brief for appellee.
April 19, 2017
THOMPSON, Circuit Judge. The relevant facts in this
case are few. Appellant Gregory Turner is a sole practitioner
whose Massachusetts law practice is focused on recovering
delinquent accounts. Appellee Hubbard Systems, Inc. ("HSI") is a
Delaware software corporation that develops, markets, and sells a
debt collection software program titled "Collection Partner." In
December 1992, Turner entered into a rent-to-own agreement with
HSI in which he was granted a temporary rental license for the use
of Collection Partner. After making some initial payments and a
deposit, Turner was to make monthly payments until he paid off the
remaining balance for the software, at which time he would be given
a permanent license. Turner made the final installment payment
sometime in 1996, and the parties agree that thereafter Turner
owned a permanent license to the software.
HSI also provides monthly software maintenance services.
Turner's rent-to-own agreement made clear that maintenance service
fees would be charged every month and that such fees were "separate
and apart from the monthly software license fee rental payment[s]"
that Turner was required to make in order to gain a permanent
license to the software.
In late April 2011, HSI sent Turner a new license key to
reflect an update in the software. That license expired on May
31, 2011. On June 1, 2011 Turner informed HSI that his Collection
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Partner software was not working.1 Before noon that same day, HSI
sent Turner a new license key that permitted him access to the
software. Turner's license and access to the Collection Partner
software has remained uninterrupted since the new license key was
sent on June 1, 2011.
The following year, Turner filed suit alleging that HSI
violated the Computer Fraud and Abuse Act ("CFAA" or "the Act")
when it issued a license key that expired on May 31, 2011, despite
the fact that he owned a permanent license to the Collection
Partner software. Turner also alleged state law claims of
conversion, intentional (or negligent) infliction of emotional
distress, and unfair and deceptive practices in violation of
Massachusetts General Laws Chapter 93A. The district court
accepted and adopted the magistrate judge's report and
recommendation, granted HSI's motion for summary judgment, and
denied Turner's motion to strike portions of HSI's motion as
"beyond the scope of the pleadings." In addition to objecting to
the magistrate judge's report, Turner also filed motions to
supplement the record, certify legal questions to the
1Turner argues that HSI sent him the April license key set
to expire at the end of May 2011 in an attempt to collect on his
late maintenance fees. HSI argues that the failure to update
Turner's license key was "[d]ue to administrative oversight or
error" and that it "never intended for the license key that was
sent to [Turner] to expire." These arguments are of no consequence
to our analysis in this case.
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Massachusetts Supreme Judicial Court, and appeal one of the
magistrate judge's management orders before the district court
judge. The district court judge denied all these additional
motions in their entirety.
Turner appeals the district court's order adopting the
magistrate judge's report and recommendation, denying Turner's
motion to strike, and granting HSI's motion for summary judgment.2
Discussion
"We review a district court's grant of summary judgment
de novo," viewing the facts in the light most favorable to the
nonmovant. Burke v. Town of Walpole, 405 F.3d 66, 75 (1st Cir.
2005) (citing Valente v. Wallace, 332 F.3d 30, 32 (1st Cir. 2003)).
"We review the denial of [a motion to strike a motion for summary
judgment] for abuse of discretion." FDIC v. Kooyomjian, 220 F.3d
10, 16 (1st Cir. 2000); see also Dodi v. Putnam Cos., No. 95-2266,
1996 WL 489998, at *2 (1st Cir. Aug. 28, 1996) ("We review the
district court's decision to strike for abuse of discretion.").
A brief review of the relevant statutory framework may
prove helpful here. Congress enacted the CFAA in 1984 to address
the problems of computer crime and hacking. Pub. L. No. 98-473,
2 Although Turner also appeals the district court's refusal
to consider evidence that was not part of the summary judgment
record, the lack of developed argumentation in his brief renders
this basis for appeal waived. See United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990).
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98 Stat. 2190; see also WEC Carolina Energy Sols. LLC v. Miller,
687 F.3d 199, 201 (4th Cir. 2012). Originally a criminal statute,
in 1986 the Act was expanded to include a civil action component
as well. Pub. L. No. 99-474, 100 Stat. 1213 (codified as amended
at 18 U.S.C. § 1030); Miller, 687 F.3d at 201. Under the civil
action provision, "[a]ny person who suffers damage or loss by
reason of a violation of [18 U.S.C. § 1030] may maintain a civil
action against the violator to obtain compensatory damages and
injunctive relief or other equitable relief." 18 U.S.C. § 1030(g).
The term "damage" is defined as "any impairment to the integrity
or availability of data, a program, a system, or information" and
the term "loss" is defined as "any reasonable cost to any victim,
including the cost of responding to an offense, conducting a damage
assessment, and restoring the data, program, system, or
information to its condition prior to the offense, and any revenue
lost, cost incurred, or other consequential damages incurred
because of interruption of service." 18 U.S.C. § 1030(e)(8), (11).
The phrase "compensatory damages" is not explicitly defined in the
statute.
We, however, have held that not any damage or loss is
compensable. Ef Cultural Travel BV v. Explorica, Inc., 274 F.3d
577, 585 (1st Cir. 2001) ("We do not hold, however, that any loss
is compensable. The CFAA provides recovery for 'damage' only if
it results in a loss of at least $5,000. We agree with the court
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in In re Doubleclick Inc. Privacy Litigation, 154 F. Supp. 2d 497
(S.D.N.Y. 2001), that Congress could not have intended other types
of loss to support recovery unless that threshold were met.
Indeed, the Senate Report explicitly states that 'if the loss to
the victim meets the required monetary threshold,' the victim is
entitled to relief under the CFAA. S. Rep. 104-357, at 11. We
therefore conclude that expenses of at least $5,000 resulting from
a party's intrusion are 'losses' for purposes of the 'damage or
loss' requirement of the CFAA.").
Turner asserts that HSI violated § 1030(a)(5)(A) of the
CFAA.3 Under § 1030(a)(5)(A), a person violates the CFAA by
"knowingly caus[ing] the transmission of a program, information,
code, or command, and as a result of such conduct, intentionally
caus[ing] damage without authorization, to a protected computer."
18 U.S.C. § 1030(a)(5)(A). Maintenance of a civil action under 18
U.S.C. § 1030(a)(5)(A) also requires one of the five factors
outlined in § 1030(c)(4)(A)(i)(I)-(V): namely,
(I) loss to 1 or more persons during any 1-
year period . . . aggregating at least $ 5,000
in value;
(II) the modification or impairment, or
potential modification or impairment, of the
3 Turner's complaint does not make clear which provision of
the CFAA he is alleging that HSI violated. However, in his
memorandum before the magistrate judge opposing HSI's motion for
summary judgment, he argued that HSI violated 18 U.S.C.
§ 1030(a)(5)(A).
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medical examination, diagnosis, treatment, or
care of 1 or more individuals;
(III) physical injury to any person;
(IV) a threat to public health or safety; [or]
(V) damage affecting a computer used by or for
an entity of the United States Government in
furtherance of the administration of justice,
national defense, or national security.
(emphasis added); see also 18 U.S.C. § 1030(c)(4)(B)(i), (g) ("A
civil action for a violation of [18 U.S.C. § 1030] may be brought
only if the conduct involves 1 of the factors set forth in
subclauses [subclause] (I), (II), (III), (IV), or (V) of subsection
(c)(4)(A)(i).").
Here, the parties agree that the only possible basis for
Turner's civil action is found under § 1030(c)(4)(A)(i)(I), which
is limited to economic damages and requires a loss of at least
$5,000. 18 U.S.C. § 1030(g) ("Damages for a violation involving
only conduct described in subsection (c)(4)(A)(i)(I) are limited
to economic damages."). HSI argues that Turner fails to meet this
$5,000 requirement. Turner appears to argue that he meets the
$5,000 requirement because he suffered prospective damages
amounting to at least his "prospective annual income of
$150,000.00." Turner argues further that while his "damages may
be limited by admissible evidence of intervening factors such as
where a plaintiff mitigates his damages," HSI is barred from
arguing that he failed to meet the $5,000 requirement because "HSI
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had not pled that as a result of mitigation Turner could not meet
the statutory threshold of $5,000.00." Unfortunately for Turner,
he erroneously confuses his failure to meet a statutory requirement
with the affirmative defense of mitigation.
On appeal, Turner presents no evidence that he has in
fact suffered losses in the amount of $5,000. As the district
court noted, the only plausible damages identified by Turner (his
expenses and lost income for the hours when the system was down on
June 1, 2011 and any fees he paid HSI for amounts owed for
maintenance service fees) do not reach the $5,000 threshold and
therefore foreclose his CFAA claims.4 Turner attempts to bypass
this fatal defect by claiming that he is entitled to damages he
would have suffered if his access to the Collection Partner
software had never been restored. As the district court noted,
however, Turner's assertions are "counterfactual and thus absurd."
Because the CFAA contains no definition of the phrase
"compensatory damages" we assume that the "plain and ordinary
meaning" of the term applies. Yershov v. Gannett Satellite Info.
Network, Inc., 820 F.3d 482, 487 (1st Cir. 2016). Consequently,
compensatory damages are "[d]amages sufficient in amount to
indemnify the injured person for the loss suffered" or "actual
4 Turner never disputed the defendant's calculation of his
business expenses and presented no alternative calculation either
before the district court or here on appeal that he suffered any
losses other than those identified above.
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damages." Black's Law Dictionary (10th ed. 2014). "Actual
damages" is further defined as "[a]n amount awarded to a
complainant to compensate for a proven injury or loss; damages
that repay actual losses." Id. Prospective damages are "[f]uture
damages that, based on the facts pleaded and proved by the
plaintiff, can reasonably be expected to occur." Id.
Even if we assume that the CFAA provided for prospective
damages as a form of compensatory damages, such damages would not
be measured by hypothetical losses based on counterfactual
assertions, but only by losses that reasonably could be expected
and proven. Turner has not, and cannot, demonstrate reasonably
expected damages amounting to $5,000. In fact, the record
demonstrates that Turner's access to the Collection Partner
software was restored after only a few hours and his access has
remained uninterrupted since its restoration. Turner persists on
appeal that he is entitled to all damages he would have experienced
if he was never given a new license key on June 1, 2011 and his
access to the Collection Partner software was never restored.
Unfortunately for Turner, prospective damages do not encompass
what he would have lost had the facts been different. And Turner
has not demonstrated how a brief lapse in access to the Collection
Partner software could reasonably be expected to result in damages
totaling his yearly salary or any other imaginary damages he has
dreamed up.
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Lastly, Turner moved to strike HSI's motion for summary
judgment and certain supporting documents, arguing that the motion
was "based on two unpled affirmative defenses: mitigation and
mistake" that were "outside the scope of the pleadings." The
district court correctly dismissed these arguments for the same
reasons discussed above -- a $5,000 threshold requirement for
Turner's CFAA claim is not synonymous with an affirmative defense.
Accordingly, the district court did not abuse its discretion in
denying Turner's motion to strike. Any reference by HSI to
Turner's failure to meet the $5,000 requirement was not barred --
Turner was required to demonstrate that he met the $5,000 damages
threshold regardless of the affirmative defenses asserted by HSI.
Without a federal claim to stand on, in a last-ditch
effort to restore his state law claims of conversion, intentional
(or negligent) infliction of emotional distress, and unfair and
deceptive business practices in violation of Massachusetts General
Laws Chapter 93A, Turner argues that these state law claims satisfy
the requirements for diversity jurisdiction and were thus properly
before the district court. The district court found that while
the parties were indisputably diverse, Turner failed to establish
the necessary $75,000 amount in controversy. See 28 U.S.C. § 1332.
Turner points us to no evidence that he meets the amount in
controversy necessary to sustain federal jurisdiction --
therefore, the district court correctly dismissed those claims.
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CE Design Ltd. v. Am. Econ. Ins. Co., 755 F.3d 39, 43 (1st Cir.
2014) ("The burden is on the federal plaintiff to establish that
the minimum amount in controversy has been met." (citing Abdel-
Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012))).
Conclusion
For the foregoing reasons, we affirm the district
court's grant of HSI's motion for summary judgment and denial of
Turner's motion to strike.
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