Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 1 of 13
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`UNITED ST ATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`------------------------------------x
`REIS, INC. and REIS SERVICES, LLC,
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`-against-
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`Plaintiffs,
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`LENNAR
`CAPITAL:
`RIALTO
`CORP.,
`MANAGEMENT, LLC, and RIAL TO CAP IT AL:
`ADVISORS OF NEW YORK, LLC,
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`Defendants.
`- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
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`GEORGE B. DANIELS, United States District Judge:
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`MEMORANDUM DECISION
`AND ORDER
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`15 Civ. 7905 (GBD)
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`Plaintiffs Reis, Inc. and Reis Services, LLC (together "Reis") bring this action against
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`Defendants Lennar Corporation ("Lennar"), Rialto Capital Management, LLC ("Rialto"), and
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`Rialto Capital Advisors of New York, LLC ("Rialto NY") under the Computer Fraud and Abuse
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`Act ("CFAA"), 18 U.S.C. § 1030; the Copyright Act, 17 U.S.C. § 101, et seq. (Compl., ECF No.
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`1, iJiJ 41-90.) Plaintiffs also bring common law claims for fraud, breach of contract, conversion,
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`theft, misappropriation, unjust enrichment, and quantum meruit, as well as civil conspiracy and/or
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`aiding and abetting claims based on the above predicate causes of action. (Id. iii! 91-1 71.)
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`This action arises out of two separate sets of alleged data piracy by Defendants. The first
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`involves a Rialto employee's unauthorized use of Plaintiffs' proprietary database to allegedly
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`download approximately $1.6 million worth of real estate market analysis reports at the behest of
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`Lennar and its subsidiary, Rialto. (Id. iii! 4-5, 11, 31-35.) The second involves about $277,000 of
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`reports downloaded between May 2013 and August 2015 by two unknown IP addresses using the
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`credentials of database subscriber Rialto NY, another subsidiary of Lennar. (Id., iii! 6-7, 12, 36-
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`37.) Plaintiffs seek, inter alia, payment of compensatory, statutory, and punitive damages,
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`attorney's fees and expenses, as well as any other "just and proper" relief. (Id., at 29.)
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 2 of 13
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`Defendants move to dismiss the Complaint for failure to state a claim pursuant to Federal
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`Rule of Civil Procedure 12(b)(6). (Mot. to Dismiss, ECF No. 17; Defs.' Mem. in Supp. of Mot.
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`to Dismiss ("Mem."), ECF No. 18, at 1.)
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`Defendants' motion to dismiss Plaintiffs' claims under the CF AA and for secondary federal
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`copyright infringement is GRANTED. This Court declines to exercise supplemental jurisdiction
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`over Plaintiffs' remaining state law claims.
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`I.
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`FACTUAL BACKGROUND AND PROCEDURAL HISTORY
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`Defendant Lennar is a Delaware corporation based in Florida with a focus on building
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`single-family homes throughout the United States. (Mem., at 2.) Defendant Rialto, an "indirect
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`subsidiary of Lennar," is a real estate investment and asset management company headquartered
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`in Florida. (Compl. ~ 11; Mem., at 2.) Defendant Rialto NY is "an investment adviser firm and
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`is also a subsidiary of Lennar." (Mem., at 3; see also Compl. ~ 12.)
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`Plaintiffs are proprietors of a database containing detailed commercial real estate market
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`information encompassing 275 of the largest metropolitan markets in the United States. (Compl.
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`~ii 2, 19-20.) Plaintiffs compile and sell this data to real estate professionals in the form of
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`subscription plans or individual reports that "quantify and assess the risks of default and loss
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`associated with mortgages, properties, portfolios, and real-estate-backed-securities." (Id. ~~ 2-3,
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`16-17.) Plaintiffs own copyrights in a number of their reports, and those copyrights are registered
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`with the United States Copyright Office.
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`(See id. ~~ 24-25; id., Ex. A ("List of Copyrighted
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`Reports").)
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`There are various subscription levels to the database, priced according to the amount of
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`data purchased, number of licenses associated with a subscription, and frequency of its access by
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`subscribers. (Id. ~ 20.) According to Plaintiffs, since "[m Jost professional real estate investors do
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 3 of 13
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`not want to devote the resources to creating an in-house infrastructure capable of performing
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`[Reis'] work," those investors subscribe to Reis' services. (Id. ~ 17.) Plaintiffs also contend that
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`because the information in these reports is highly valuable, the database has become a target for
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`data pirates 1 and others who wish to benefit from this data without paying. (Id.~ 3.)
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`Plaintiffs allege that they protect their database with a firewall that requires secure
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`passwords tailored to the level of access a subscriber has purchased. (Id. ~ 25.) "To protect its
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`proprietary rights, Reis also relies on, among other things, restrictive license agreements" that
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`allow a company to purchase licenses for "an agreed number of employees or other users
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`associated with the company." (Id. ~~ 25-26.) Each employee receives her own login credentials-
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`a unique username and password-to access the database. (Id. ~ 26.)
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`According to Plaintiffs, users may not share passwords with anyone, not even colleagues
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`who work for the same subscriber. (Id., ii 27.) Once employment with a subscriber ends, a person
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`may not take their credentials with them to use at her new employment. (Id.) Specifically, Reis'
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`Terms of Service (''TOS") and its subscriber agreements "explicitly prohibit its licensees to 'resell
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`or transfer ... use of or access to' the Reis Database." (Id.) The TOS also states that "' [ t ]ransfer
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`or assignment of your password and user name to another individual is strictly prohibited."' (Id.;
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`Deel. of Kuangyan Huang in Supp. of Defs.' Mot. to Dismiss ("Huang Deel."), ECF No. 20, Ex.
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`A, at 2.) Plaintiffs maintain the TOS, as well as the Anti-Piracy Policy, is "prominently displayed"
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`on the database sign-in page under the heading "LEGAL" to provide users with notice that they
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`are legally bound when they agree to use the service.
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`(Id. ii 30.)
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`1 Reis' Anti-Piracy Policy defines piracy as "using our service without a license to do so, enabling or trying
`to enable a third party who is not authorized to use our service to use our service, or exceeding the scope
`of uses permitted [to] you under a license agreement between you and Reis." (Comp!. ii 29.)
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 4 of 13
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`Plaintiffs further allege that they started a general ongoing investigation of suspicious
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`access patterns as early as June 2014. (See id~~ 49, 54.) According to Plaintiffs, their Compliance
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`Group, which "investigates unusual patterns of use and other signs of possible [data] theft[,]" (id.
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`~ 3 3 ), discovered the first instance of unauthorized usage on which they base their claims against
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`Rialto and Lennar in June 2015. (Id.~~ 3, 33.) Specifically, Plaintiffs contend that between
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`December 2009 and October 2010, a Rialto employee, Harvey Lederman, used Reis database
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`credentials issued by his previous employer, GE Capital (who is not a party to this action), to log
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`in 871 times and download 4,548 Reis reports (with an alleged retail value of $1,629,948 2
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`) "in
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`support of Lennar and Rialto's business."
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`(Id ~~ 4, 32.)
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`Plaintiffs allege that during this
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`timeframe, "Lennar was in the process of launching Rialto" and announced that the 2010 fourth
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`quarter and fiscal year was marked by the "first closing of our Rialto real estate investment fund
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`with initial equity commitments of approximately $300 million (including $75 million committed
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`by us)." (Id ~ 34.) According to Plaintiffs, neither Rialto nor Lennar had legitimate access to the
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`Reis database until Rialto NY purchased a subscription in November 2010-about a month after
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`Lederman stopped downloading reports with his GE Capital-issued credentials.
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`(Id ~ 35.)
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`Therefore, Plaintiffs allege that Rialto and Lennar's intrusion into the database using Mr.
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`Lederman's GE Capital credentials was "knowing and willful because Defendants and their
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`employees knew that Lennar and Rialto were not authorized licensees of Reis ... [and] knew that
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`Lennar and Rialto had not paid for access to the Reis Database ... . "(Id.~ 38.)
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`Plaintiffs contend that their June 2015 discovery of the allegedly illegal usage led them to
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`more closely investigate the database usage associated with Rialto NY's credentials. (Id ~ 6.)
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`2 According to Plaintiffs, the alleged Joss of approximately $1.6 million is based on the individual retail value of
`each of the 4,548 reports if those reports were downloaded without a subscription. (See March 31, 2016 Oral Arg.
`Tr. ("Tr."), at 76: I 0-77: 11.)
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`4
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 5 of 13
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`According to Plaintiffs, this investigation revealed a second act of alleged piracy, this time by
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`unidentified individuals from two IP addresses-67.136.101.2 and 173.11.106.97-who accessed
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`the database through Rialto NY's credentials.
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`(Id.) These unknown users used Rialto NY's
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`credentials "to download at least 7 4 7 proprietary Reis reports," worth $277 ,412 in retail value and
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`some in which Plaintiffs own copyrights, between May 2013 and August 2015.
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`(Id. il 36.)
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`Plaintiffs therefore allege that Lennar, Rialto, and Rialto NY all "knew that the unidentified users
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`with whom [Rialto NY] shared its credentials were not authorized licensees of Reis ... [,]" in
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`violation of Rialto NY's contract with Plaintiffs, as well as Plaintiffs' Terms of Service. (Id. i!il 7,
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`38-39.)
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`II.
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`LEGAL STANDARD
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`To survive a motion to dismiss, "a complaint must contain sufficient factual matter,
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`accepted as true, to 'state a claim to relief that is plausible on its face."' As hero fl v. Iqbal, 556
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`U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The plaintiff
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`must demonstrate "more than a sheer possibility that a defendant has acted unlawfully"; stating a
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`facially plausible claim requires pleading facts that enable the court "to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Thus,
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`the factual allegations pleaded "must be enough to raise a right to relief above the speculative
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`level." Twombly, 550 U.S. at 555.
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`A district court must first review a plaintiffs complaint to identify allegations that,
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`"because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal,
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`556 U.S. at 679. The court then considers whether Plaintiffs remaining well-pleaded factual
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`allegations, assumed to be true, "plausibly give rise to an entitlement to relief." Id.; see also
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`Targum v. Citrin Cooperman & Co., LLP, No. 12 CIV. 6909, 2013 WL 6087400, at *3 (S.D.N.Y.
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 6 of 13
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`Nov. 19, 2013).
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`In deciding the 12(b)(6) motion, the court accepts the complaint's well-pleaded
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`factual allegations as true and draws all reasonable inferences in the non-moving party's favor.
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`See NJ Carpenters Health Fund v. Royal Bank of Scotland Grp., PLC, 709 F.3d 109, 119 (2d Cir.
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`2013).
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`"In deciding a motion to dismiss under Rule 12(b)(6), the court may refer 'to documents
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`attached to the complaint as an exhibit or incorporated in it by reference, to matters of which
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`judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs
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`had knowledge and relied on in bringing suit."' Fishbein v. Miranda, 670 F. Supp. 2d 264, 271
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`(S.D.N.Y. 2009), aff'd sub nom. Silverman v. Teamsters Local 210 Affiliated Health & Ins. Fund,
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`761 F.3d 277 (2d Cir. 2014) (quoting Brass v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2d Cir.
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`1993)); see also Hayes v. Coughlin, No. 87 Civ. 7401, 1991WL220963, at *l (S.D.N.Y. Oct. 16,
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`1991) ("Papers outside a complaint may be incorporated by reference into the complaint when
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`such papers are referred to within the body of the complaint.").
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`III.
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`SECONDARY COPYRIGHT INFRINGEMENT CLAIMS
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`In Counts III and IV, Plaintiffs allege contributory and vicarious copyright infringement
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`claims against Rialto NY under the Copyright Act, 17 U.S.C. § 101, et seq, based on the second
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`alleged incidence of data piracy from May 2013 and August 2015.
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`(See Compl. ~ 36.)
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`Specifically, Plaintiffs claim that Rialto NY knowingly shared valid Reis login credentials in
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`violation of its subscription agreement with the Unauthorized Doe Users, who used those
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`credentials to download "at least 7 4 7 proprietary Reis reports having a retail value of $277,412,"
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`including the nine reports to which Plaintiffs hold the copyrights. (Compl., ~~ 7, 24, 76-90.)
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`To withstand Defendants' motion to dismiss, Plaintiffs must "plead[] factual content" for
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`each element of the claim asserted such that "the court [can] draw the reasonable inference that
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 7 of 13
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`the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Neither contributory
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`nor v1canous copyright infringement can exist without an underlying finding of direct
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`infringement." Alexander v. Murdoch, No. 10 CIV. 5613, 2011WL2802899, at *17 (S.D.N.Y.
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`May 27, 2011) (dismissing claims for contributory and vicarious copyright infringement where
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`plaintiff failed to allege direct infringement); see also, Metro-Goldwyn-Mayer Studios Inc. v.
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`Grokster, Ltd., 545 U.S. 913, 930 (2005) ("One infringes contributorily by intentionally inducing
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`or encouraging direct infringement . . . and infringes vicariously by profiting from direct
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`infringement while declining to exercise a right to stop or limit it .... ")(internal citations omitted);
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`Faulkner v. Nat 'l Geographic Enters. Inc., 409 F.3d 26, 40 (2d Cir. 2005) ("[T]here can be no
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`contributory infringement absent actual infringement.").
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`Defendants argue that because "Reis cannot credibly allege that the 'unknown' 'DOE'
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`users were also 'unauthorized,' there is no primary violation of the law here." (Mem. at 24.) The
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`Complaint offers no information or facts alleging that the Doe Users were primary infringers on
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`which to base the secondary infringement claims Plaintiffs bring against Rialto NY. See Patrick
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`Collins, Inc. v. John Doe I, 945 F. Supp. 2d 367, 375 (E.D.N.Y. 2013) (finding that plaintiff had
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`"adequately pled a plausible claim of primary copyright infringement by providing sufficient
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`detail" of defendant's infringing conduct) (emphasis added) (citing John Wiley & Sons, Inc. v. Doe
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`Nos. 1-30, 284 F.R.D. 185, 189 (S.D.N.Y. 2012)). Indeed, Plaintiffs do not bring any primary
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`copyright infringement claims against any Defendant. (See Compl. ~~ 76-90.)
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`Without alleging a primary copyright infringement, Plaintiffs claims for secondary
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`infringement are deficient. See Faulkner, 409 F.3d 40; Wolk v. Kodak Imaging Network, Inc., 840
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`F. Supp. 2d 724, 750 (S.D.N.Y. 2012) ("[I]n order to hold a defendant secondarily liable someone
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`else must have directly infringed on the copyright holder's rights."); Matthew Bender & Co. v.
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 8 of 13
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`West Publ'g Co., 158 F.3d 693, 706 (2d Cir. 1998) (same) (internal citations omitted).
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`Furthermore, as Defendants state in their Reply brief, Reis has not responded to Defendants'
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`arguments regarding secondary copyright infringement. (Reply, at 10.) As Plaintiffs have failed
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`to sufficiently allege secondary copyright infringement claims against Defendants, Defendants'
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`motion to dismiss is granted as to Counts III and IV.
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`IV.
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`CFAA CLAIMS
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`The CF AA is a criminal statute that penalizes unauthorized access to protected computers
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`with intent to defraud or cause damage. See 18 U.S.C. § 1030(a). The text of the civil enforcement
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`provision, § 1030(g), provides:
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`Any person who suffers damage or loss by reason of a violation of this section may
`maintain a civil action against the violator to obtain compensatory damages and
`injunctive relief or other equitable relief. A civil action for a violation of this section
`may be brought only if the conduct involves 1 of the factors set forth in subclause[]
`(I), (II), (III), (IV), or (V) of subsection (c)(4)(A) (i). Damages for a violation
`involving only conduct described in subsection (c)(4)(A)(i)(I) are limited to
`economic damages ....
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`18 U.S.C. § 1030(g). The only potential basis for liability in this case on the facts as Plaintiffs
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`allege is subclause (I), which provides that an action may be brought if a plaintiff alleges a "loss
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`to 1 or more persons during any 1-year period ... aggregating at least $5,000 in value." 18 U.S.C.
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`§ 1030(c)(4)(A)(i)(I). Therefore, to state a claim for loss in excess of$5,000, Plaintiffs must plead
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`that Defendants: "( 1) accessed a 'protected computer'; (2) 'without any authorization or exceeding
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`its authorized access'; and (3) caused 'loss' in excess of $5,000." Liveperson, Inc. v. 2417
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`Customer, Inc., 83 F. Supp. 3d 501, 511 (S.D.N.Y. 2015) (citing 18 U.S.C. § 1030(g) referencing
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`18 U.S.C. § 1030(a)(2) and§ 1030(a)(5)).
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`As the parties do not dispute the first two elements-that the Reis database is a "protected
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`computer" as defined by the statute and that, at minimum, Lederman exceeded his authorized
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 9 of 13
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`access-the dispositive issue is whether Plaintiffs have alleged facts that allow them to meet
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`jurisdictional threshold of $5,000 of either damage or loss. See Nexans Wires SA. v. Sark-USA,
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`Inc. ("Nexans I"), 319 F. Supp. 2d 468, 472 (S.D.N.Y. 2004) (citing Theofel v. Farey-Jones, 341
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`F.3d 978, 986 n. 5 (9th Cir. 2003) amended by 359 F.3d 1066 (9th Cir. 2004)), ajf'd, Nexans Wires
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`SA. v. Sark-USA, Inc. ("Nexans IF'), 166 F. App'x 559 (2d Cir. 2006).
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`18 U .S.C. § 1030( e )(8) defines "damage" as "any impairment to the integrity or availability
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`of data, a program, a system, or information," and "loss" as:
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`[a ]ny 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.
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`18 U.S.C. § 1030(e)(l l). "Both loss and damage must relate to the victim's computer systems."
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`Liveperson, 83 F. Supp. 3d at 514 (citing Nexans I, 319 F. Supp. 2d at 477; Civic Ctr. Motors, Ltd.
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`v. Mason St. Imp. Cars, Ltd., 387 F. Supp. 2d 378, 381-82 (S.D.N.Y. 2005). This means that
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`Plaintiffs "must establish that the Defendant[ s] intended to impair the [plaintiffs'] service." In re
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`iPhone Application Litig, 844 F. Supp. 2d 1040, 1067 (N.D. Cal. 2012) (citing Czech v. Wall
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`Street on Demand, Inc., 674 F. Supp. 2d 1102, 1115 (D. Minn. 2009)).
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`The losses Plaintiffs have alleged are (1) lost retail value of the reports and (2) losses related
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`the development of their investigatory software and its deployment during 2014 and 2015 to
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`identify database piracy. (Comp!.,~~ 47, 49, 54-55.) Defendants correctly contend that Plaintiffs
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`have failed to state a claim under the CF AA because Plaintiff have not adequately alleged loss
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`cognizable under the CFAA. (Mem. at 8, 11.)
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`As to the first type of loss alleged, Plaintiffs' "lost retail value" of about $1,629,948,
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`(Comp I.~ 55), from downloaded reports is not a loss covered by the CF AA. See Schatzki v. Weiser
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 10 of 13
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`Capital Mgmt., LLC, No. 10 Civ. 4685, 2012 WL 2568973, at *3 (S.D.N.Y. Jul. 3, 2012) ('"Loss'
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`is interpreted narrowly, however, and it 'includes only costs actually related to computers."')
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`(quoting Garland-Sash v. Lewis, No. 05 Civ. 6827, 2011 WL 6188712, at *4 (S.D.N.Y. Dec. 6,
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`2011)); (see Mem. at 8; Compl. ~ 45); see also Orbit One Commc 'ns, Inc. v. Numerex Corp., 692
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`F. Supp. 2d 373, 386 (S. D. N. Y. 2010) (concluding that the CFAA does not apply to a competitive
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`injury arising from misappropriated information, but only for damage to a computing system).
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`With regard to the expenditures of "at least $5,000 in value," (Compl. ~ 47) related to
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`investigating unauthorized access to the database, Plaintiffs allege the following:
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`49. As part of the on-going investigation of Defendants' access and use of the Reis
`Database, Reis developed its own proprietary investigatory software at a cost of
`$76,364 in hourly wages of Reis developers from June 2014 through May
`2015 ....
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`54. In addition, Reis's Vice President of Product Development and Intellectual
`Property spent on average $4,900 per month of time in 2014 and 2015 using this
`investigatory software tool to identify piracy. The value of the Reis employees'
`time in investigating the Defendants' access and use of Reis's computer system
`exceeded $5,000 in one calendar year.
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`(Compl. ~~ 49, 54.)
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`While the CF AA defines loss as"[ a ]ny reasonable cost" such as the "cost of responding to
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`an offense, conducting a damage assessment, and restoring the data, program, system, or
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`information to its condition prior to the offense," Plaintiffs' allegations that they engaged in "an
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`investigation into the intrusion and a damages assessment" do not meet the l 2(b )( 6) standard for
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`two reasons. 18 U.S.C. § 1030(e)(l l). First, Plaintiffs fail to allege that they sought to "restor[e]
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`the data, program, system or information to its condition prior to the offense[,]" as required by
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`courts in this Circuit. S'ee, e.g., Fink v. Time Warner Cable, 810 F. Supp. 2d 633, 641 (S.D.N.Y.
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`2011) (holding that "losses relating to time and effort in assessing 'damage' to each computer
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`whose transmissions were interrupted" are outside of those contemplated by the scope of the
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 11 of 13
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`CF AA because the plaintiffs did not allege "that they needed to restore[] ... data, [a] program, [a]
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`system, or information to its condition prior to Defendant's conduct") (emphasis added) (internal
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`quotation marks and citation omitted). Plaintiffs merely allege that that the purpose of its
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`investigations were to "identify piracy," (see Comp. ii 54), by "identify[ing] suspicious patterns of
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`usage" and "determin[ing] whether the usage is licensed or not." (Id. iii! 51-52.)
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`It is true that
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`"physical damage to a computer is not necessary to allege damage or loss," Bose v. Interclick, Inc.,
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`No. 10 Civ. 9183, 2011WL4343517 (S.D.N.Y. Aug. 17, 2011) (internal citation omitted), nor is
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`loss "lessened merely because fortuitously no physical damage was allegedly caused to the
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`computer system or software." Kaufman v. Nest Seekers, LLC, No. 05 CV 6782, 2006 WL
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`2807177 (S.D.N.Y. Sept. 26, 2006) (internal citation omitted). However, in this case, Plaintiffs
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`make no allegations that the investigation was for the purpose of looking into any damage to data,
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`programs, or server system, other than the conclusory statement that they "expend[ ed] time,
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`money, and resources (aggregating at least $5,000 in value) to conduct an investigation into the
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`intrusion and a damages assessment." (Compl. ii 47.)
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`Second, the case law in this Circuit "requires a cost constituting a loss to be directed in
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`some way at the effects of the prior intrusion, not at those of some potential future offense." See
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`Int 'l Chauffeured Serv., Inc. v. Fast Operating Corp., No. 11 Civ. 2662, 2012 WL 1279825, at *4
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`(S.D.N.Y. Apr. 16, 2012) (citing Univ. Sports Publ'ns Co. v. Playmakers Media Co., 725 F. Supp.
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`2d 378, 388 (S.D.N. Y. 2010) (internal citation omitted)). According to Plaintiffs' allegations, Reis
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`"discovered the unauthorized usage that forms the basis of Reis' claims against Lennar and Rialto
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`in June 2015." (See Comp!. iii! 3, 33.) However, fatal to Plaintiffs complaint is that Reis spent
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`the $76,364 of hourly wage time developing "proprietary investigatory software" from June 2014
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`to May 2015 before Plaintiffs discovered Defendants alleged unauthorized usage. (See Comp., ii
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 12 of 13
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`49.) Indeed, Plaintiffs conceded as much at the March 31, 2016 oral argument. (See Oral Arg.
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`Tr., 70:20-71 :2.3
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`) The CF AA permits recovery only for "expenses incurred 'to identify and
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`address damage caused by the security breach that had already taken place,"' not prophylactic
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`costs. Cohen v. Gerson Lehrman Grp., Inc., No. 09 Civ. 4352, 2011WL4336683, at *8 (S.D.N.Y.
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`Sept. 15, 2011) (quoting University Sports Puhl 'g Co. v. Playmakers Media Co., 725 F. Supp. 2d
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`378, 388 (S.D.N.Y. 2010)).
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`Furthermore, Plaintiffs do not specify which portion of any investigatory expenses resulted
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`from Defendants' conduct. See Liveperson, 83 F. Supp. 3d at 514 ("The former does not specify
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`what portion of the over $75,000 in damages constitute either loss or damage under the Act, i.e.
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`whether $5,000 or more of the damages alleged are attributable to the CFAA claim."). Plaintiffs
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`merely allege that "Reis's Vice President of Product Development and Intellectual Property spent
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`on average $4,900 per month of time in 20 I 4 and 20 l 5 using this investigatory software tool to
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`identify piracy." (Compl. ~ 54) (emphasis added). The bald assertion that "the value of the Reis
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`employee's time in investigating the Defendants' access and use of Reis's computer system
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`exceeded $5,000 in one calendar year," (id.), in a calendar year where there were presumably other
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`purported data pirates, fails to allege which portion of these expenses were specifically due to
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`Defendants' access. See Liveperson, 83 F. Supp. 3d at 514. Plaintiffs have therefore failed to
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`allege that they have met the $5,000 jurisdictional threshold required to state a claim under the
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`CFAA.
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`3 Specifically, Plaintiff admitted the following:
`Mr. Fischer: ... [W]e have developed a software because multiple users are misusing our service.
`The Court: That is a decision you made before you even found out about this defendant.
`Mr. Fischer: Correct. To the extent that temporal issue is the key ....
`(Tr., at 70:20-71 :2.)
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`Case 1:15-cv-07905-GBD Document 40 Filed 07/05/16 Page 13 of 13
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`As Plaintiffs failed to state a claim under the CF AA, Plaintiffs' conclusory statements that
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`purport to allege Defendants' participation in a conspiracy to violate the CF AA also fail. See
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`NetApp, Inc. v. Nimble Storage, Inc., 41 F. Supp. 3d 816, 836 (N.D. Cal. 2014); PNC Mortgage v.
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`Superior Mortgage Corp., CIV. A. NO. 09-5084, 2012 WL 627995, at *4 (E.D. Pa. Feb. 27, 2012);
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`(Compl. ii 64).
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`Defendants' motion to dismiss the primary and secondary CF AA claims is GRANTED.
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`V.
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`STATE LAW CLAIMS
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`Having dismissed all claims over which it had original jurisdiction, this Court declines to
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`exercise supplemental jurisdiction over the remaining state law claims at this early stage in the
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`litigation. See 28 U.S.C. § 1367(c)(3) ("The district courts may decline to exercise supplemental
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`jurisdiction over a claim ... [if] the district court has dismissed all claims over which it has original
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`jurisdiction."); Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994) ("[T]he exercise of
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`supplemental jurisdiction is left to the discretion of the district court .... ") (citation omitted).
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`VI.
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`CONCLUSION
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`Defendant's Motion to Dismiss for failure to state a claim is GRANTED as to Plaintiffs'
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`CF AA and secondary federal copyright claims. This court declines to exercise supplemental
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`jurisdiction over plaintiffs' state law claims.
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`The Clerk of Court is directed to close the motion at ECF No. 17 and this case.
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`Dated: New York, New York
`July 5, 2016
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`SO ORDERED.
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