United States v. Nosal

930 F. Supp. 2d 1051, 2013 WL 978226, 2013 U.S. Dist. LEXIS 34208
District Court, N.D. California·Decided March 12, 2013·No. No. CR-08-0237 EMC·Published·Cited by 8 cases

Opinion

ORDER DENYING DEFENDANT’S MOTION TO DISMISS

(Docket Nos. 274, 276)

EDWARD M. CHEN, District Judge.

I. INTRODUCTION

Pending before the Court is Defendant’s motion- to dismiss three counts of violating the Computer Fraud and Abuse Act (“CFAA”). Docket No. 274, 276.1 The superseding indictment in this case included eight counts for violations of the CFAA related to unauthorized access of a computerized database of his former employer, Korn/Ferry. The indictment also included several counts for misappropriation, theft of trade secrets, and conspiracy that are not the subject of this motion. Judge Patel previously dismissed five of the counts for violations of the CFAA. Docket No. 135. The government appealed the dismissal to the Ninth Circuit. A panel of three judges reversed the dismissal, but upon en banc review, the Ninth Circuit affirmed Judge Patel’s opinion. Defendant now argues that the Ninth Circuit’s en banc opinion clarified the application of the CFAA in a way that now requires dismissal of the remaining CFAA counts, which were not addressed on the appeal. Since the hearing on this motion, the government has secured a second superseding indictment adding additional factual detail to two of the CFAA counts.2

[1054] II. FACTUAL & PROCEDURAL BACKGROUND

The original indictment in this case was filed on April 10, 2008. Docket No. 1. The first superseding indictment was filed on June 28, 2008. Docket No. 42. The superseding indictment brings various charges against Defendant, including eight charges of violating the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030(a), for aiding and abetting his co-conspirators in securing unauthorized access to a protected computer with intent to defraud and obtain something of value. Id. ¶ 21 (counts 2-9). The following facts are taken from the first superseding indictment.

Defendant is a former employee of Korn/Ferry, an executive search firm headquartered in Los Angeles with offices in San Francisco and Redwood City, California. Superseding Indictment (“SI”) ¶¶ 1-2. The company is a leading provider of executive recruitment services, assisting companies to fill executive and other high level positions. SI ¶ 1. Defendant worked for Korn/Ferry from approximately April 1996 until October 2004. SI ¶ 2. When he ceased his employment with the firm, he entered into Separation and General Release Agreement, and an Independent Contractor Agreement with Korn/Ferry. SI ¶ 2. In these agreements, he agreed to serve as an independent contractor to Korn/Ferry from November 1, 2004 through October 15, 2005. SI ¶ 2. He also agreed not to perform executive search or related services for any other entity during the term of his contract. SI ¶ 2. In return, he received compensation in the amount of $25,000 per month. SI ¶ 2. Despite these agreements, Defendant began to set up his own rival executive search firm with the assistance of three other current or former Korn/Ferry employees, Becky Christian, J.F., and M. J. SI ¶¶ 3-5. J.F. was Defendant’s assistant while he was a Korn/Ferry employee, and continued to be employed by Korn/Ferry after Defendant’s departure. SI ¶ 4. M.J. was a Korn/Ferry employee until approximately March of 2005. SH5.

Christian, who is also named as a defendant in the superseding indictment, was employed by Korn/Ferry from approximately September 1999 to approximately January 2005. SI ¶ 3. After leaving Korn/Ferry, she set up an executive search firm known as Christian & Associates, though she was in fact working with Defendant to set up his executive search firm. SI ¶ 3. Christian generally retained 20% of the revenues from the searches the two conducted, while Defendant retained 80%. SI ¶ 3.

Korn/Ferry maintained the “Searcher” database, a proprietary database of executives and companies. SI ¶ 6. Using the “Custom Report” feature of the database, Korn/Ferry employees were able to created targeted reports on executives, companies, and prior search engagements Korn/Ferry had conducted for clients. SI ¶ 6. The database was also capable of producing “source lists,” or candidate lists, which were provided to client companies with regards to a particular position they were trying to fill. SI ¶ 8. Korn/Ferry had built up the information contained in the Searcher database over many years, and considered it to be one of the most comprehensive databases of its kind in the world. SI ¶ 7.

Korn/Ferry took a number of steps to preserve the confidential nature of the Searcher database, including controlling electronic access to the database, and controlling physical access to the servers on which it was stored. SI ¶ 9. Korn/Ferry employees received unique user names and passwords that allowed them to access the company’s computer systems, including the Searcher Database. SI ¶ 9. These passwords were intended for use by [1055] employees only. SI ¶ 9. All Korn/Ferry employees, including Defendant, entered into agreements explaining the proprietary nature of the Searcher database, and restricting the use of the database and related information to legitimate company business. SI ¶ 10. Defendant executed such an agreement on or about April 26, 1996. SI ¶ 10.

Korn/Ferry also explicitly noted the confidential and proprietary nature of the information from the Searcher database on reports and in the computer logon process. SI ¶ 11. All custom reports generated from the database had the phrase “Korn/Ferry Proprietary and Confidential” written across the top. SI ¶ 11. When an individual logged on to the Korn/Ferry computer system, the following notification was displayed

This computer system and information it stores and processes are the property of Korn/Ferry. You need specific authority to access any Korn/Ferry system or information and to do so without the relevant authority can lead to disciplinary action or criminal prosecution....

SI ¶ 11.

The superseding indictment alleges that Defendant, along with co-conspirator Christian and others, “did steal, and without authorization knowingly take by fraud, artifice, and deception, trade secrets from Korn/Ferry’s computer system, including source lists.” SI ¶ 15. The indictment alleges that individual co-conspirators and others obtained these source lists and other trade secrets by using their own Korn/Ferry usernames and passwords pri- or to and upon termination, and that they did so without authorization and in excess of authorization. SI ¶ 16. Defendant and co-conspirators also obtained trade secrets from Korn/Ferry’s computer system by using, either directly or through J.F., J.F.’s Korn/Ferry username and password, and that this was done without authorization and in excess of authorization. SE ¶ 17. The specific factual allegations related to the various CFAA counts in the first superseding indictment are as follows:

A. Count 2

During the fourth quarter of 2004, just prior to the end of her employment with Korn/Ferry, Christian downloaded custom reports from the Searcher database containing over 3000 records. SI ¶ 19j. She took copies of these reports with her when she left the firm. SI ¶ 19j.

B. Count 3

Free access — add to your briefcase to read the full text and ask questions with AI

United States v. Nosal, 930 F. Supp. 2d 1051, 2013 WL 978226, 2013 U.S. Dist. LEXIS 34208 (N.D. Cal. 2013).

930 F. Supp. 2d 1051 (United States v. Nosal) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

NOWAK v. XAPO, INC.
N.D. California, 2020
Ticketmaster L.L.C. v. Prestige Entm't W., Inc.
315 F. Supp. 3d 1147 (C.D. California, 2018)
United States v. David Nosal
828 F.3d 865 (Ninth Circuit, 2016)
United States v. Nosal
844 F.3d 1024 (Ninth Circuit, 2016)
NovelPoster v. Javitch Canfield Group
140 F. Supp. 3d 938 (N.D. California, 2014)