Civil Action No. 2021-2227
D.D.C.Aug 10, 2023Background
- CoStar operates a subscription commercial real estate database and licensed access to Leon Capital until CoStar terminated the license for alleged competitive use.
- CoStar alleges Leon Capital (1) continued to access the database after termination using credentials from former employers, (2) downloaded CoStar content and used it in violation of the License Agreement and Terms of Use, and (3) continued unauthorized access after suit was filed.
- Original complaint sought accelerated contract payments (later paid), damages, and injunctive relief for breach of the License Agreement and Terms of Use; it also asserted CFAA and alternative unjust enrichment/fraud claims.
- The Court previously dismissed the licensing-payment claim as moot but allowed CoStar to amend to pursue damages and injunctive relief; Leon Capital moved to partially dismiss the amended complaint.
- Leon Capital’s renewed motion argued (1) it is not a competitor so did not breach the License Agreement, (2) injunctive relief is improper because the license is terminated, and (3) CoStar failed to plead a cognizable CFAA “loss.”
- The Court denied dismissal on the competitor and injunctive-relief arguments but granted dismissal of the CFAA claim for failure to plausibly allege a statutory loss; the Court directed Leon Capital to disclose the citizenship of its LLC members for diversity jurisdiction purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Leon Capital was a "competitor" breaching the License Agreement | Leon Capital had an investment/operational relationship with CREXi, a CoStar competitor, making it an indirect competitor and breaching the License | CoStar’s SEC 10-K does not list Leon Capital as a competitor; Court should take judicial notice and reject competitor theory | Court held CoStar plausibly alleged indirect competitor status; declined to resolve factual dispute on 10-K at this stage (motion denied) |
| Whether injunctive relief for breach of the terminated License Agreement is available | CoStar seeks injunction to stop ongoing use of data obtained unlawfully before termination and to prevent irreparable harm from continued misuse | Leon Capital contends no imminent irreparable harm can flow from a terminated contract so injunction is improper | Court held injunctive relief could be sought to prevent continued use of unlawfully obtained content and declined to limit requested relief (motion denied) |
| Whether CoStar alleged a cognizable "loss" under the CFAA sufficient to maintain a civil claim | CoStar alleges costs investigating/blocking access and that unauthorized access corrupted subscriber-traffic data, causing business losses exceeding $5,000 | Leon Capital argues CoStar alleges no technological harm, interruption, or data corruption sufficient to show CFAA loss | Court held CoStar failed to plead a statutory "loss": no interruption of service or technological harm shown and subscriber-data impairment was inadequately pleaded (CFAA claim dismissed) |
| Whether federal jurisdiction remains after dismissal of CFAA claim (diversity) | CoStar asserted diversity jurisdiction exists (CoStar: DE/DC; Leon: TX) | Leon Capital is an LLC; Court must know members’ citizenship to assess complete diversity | Court ordered Leon Capital to file LLC-members’ citizenship to permit diversity-jurisdiction determination |
Key Cases Cited
- Van Buren v. United States, 141 S. Ct. 1648 (2021) (CFAA focuses on technological harms typical of hacking)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (court must ensure subject-matter jurisdiction exists)
- Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365 (1978) (complete diversity requirement)
- Atchley v. AstraZeneca UK Ltd., 22 F.4th 204 (D.C. Cir. 2022) (caution against judicial notice of complex disputed facts)
- Sparrow v. United Air Lines, Inc., 216 F.3d 1111 (D.C. Cir. 2000) (treat complaint allegations as true for 12(b)(6) review)
- Stewart v. Nat’l Educ. Ass’n, 471 F.3d 169 (D.C. Cir. 2006) (court may consider attached/incorporated documents on a motion to dismiss)