275 F. Supp. 3d 1332
S.D. Fla.2017Background
- TracFone and Simply Wireless (Simply) entered a written 2007 agreement under which TracFone provided phones bundled with $15 promotional PINs for resale; parties later expanded dealings and exchanged orders/invoices.
- TracFone alleges Simply sold many promotional PINs separately (over 173,000), profiting millions and causing customer complaints and reputational/financial harm to TracFone.
- TracFone filed a Third Amended Complaint (TAC) asserting CFAA claims (unauthorized access, intent to defraud, trafficking in password information), unjust enrichment, breach of an implied-in-fact agreement, breach of the implied covenant of good faith and fair dealing, and an accounting.
- Magistrate Judge Turnoff recommended denying dismissal of CFAA counts 1–3, unjust enrichment, implied-in-fact contract, and accounting; recommended granting dismissal of the implied covenant claim (count 6).
- District Judge Moreno adopted the Report & Recommendation, granting the motion to dismiss in part (count 6) and denying in part, and allowed TracFone leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Simply exceeded authorization and caused damage under CFAA §1030(a)(5)(C) (Count 1) | Simply sold PINs outside bundles, enabling unauthorized access to TracFone’s systems and causing reputational and revenue losses | Simply had authorization to access TracFone systems and TAC fails to plead statutory “loss” | Denied dismissal: pleadings sufficiently allege exceeding authorization and losses (reputation, lost customers, future revenues) |
| Whether Simply accessed/caused access with intent to defraud under CFAA §1030(a)(4) (Count 2) | Selling unbundled PINs was knowing, fraudulent conduct that obtained value for Simply | No lack of authorization and failure to allege obtaining “anything of value” | Denied dismissal: TAC alleges knowing conduct, profit to Simply, and resulting harm |
| Whether trafficking in password information under CFAA §1030(a)(6) (Count 3) | PINs are passwords; trafficking them to consumers for profit constitutes trafficking that affected interstate commerce | TracFone provided PINs, so sale cannot be trafficking; PINs merely allow system access regardless of sale method | Denied dismissal: TAC alleges knowing trafficking of PINs to customers resulting in unauthorized system access |
| Whether unjust enrichment claim is barred by existence of express contract (Count 4) | Simply retained benefits by selling no-cost PINs; unjust enrichment pled in the alternative | Express 2007 agreement addresses PIN value, so equitable claim is unavailable | Denied dismissal: unjust enrichment may be pled alternatively and TAC alleges benefit conferred and retention without payment |
| Whether an implied-in-fact contract claim survives (Count 5) | Parties’ course of conduct and communications established an implicit agreement to sell PINs only in bundles | Such an implied term is unenforceable restraint on trade; parol evidence bars adding omitted terms; no consent alleged | Denied dismissal: factual disputes and course-of-dealing plausibly plead an implied-in-fact agreement |
| Whether breach of implied covenant of good faith and fair dealing is viable (Count 6) | TAC alleges conduct breaching covenant under the parties’ relationship | No express contract term was identified requiring PINs be sold only in bundles; claim duplicates contract claims | Granted dismissal: claim fails because TAC does not allege breach of an express contractual term |
| Whether accounting claim is warranted | Complex transaction and lack of records prevent TracFone from calculating damages; accounting is necessary | TracFone has documents; accounting unnecessary; other claims fail so complexity is lacking | Denied dismissal: TAC alleges sufficiently complex transactions and inadequate remedy at law, justifying accounting |
| Whether TracFone’s demand for interest, consequential damages, and costs should be stricken | Damages and prejudgment interest are permissible under Florida and federal law and CFAA cost provisions | Agreements preclude such remedies; requests are immaterial | Denied: motion to strike is disfavored; damages/interest/costs may be recoverable |
Key Cases Cited
- United States v. Rodriguez, 628 F.3d 1258 (11th Cir. 2010) (access limited to a particular purpose can be exceeded, creating unauthorized access under the CFAA)
- In re AOL, Inc. Version 5.0 Software Litig., 168 F. Supp. 2d 1359 (S.D. Fla. 2001) (losses under CFAA may include reputational harm and costs responding to an offense)
- T-Mobile USA, Inc. v. Terry, 862 F. Supp. 2d 1121 (W.D. Wash. 2012) (selling devices or credentials that enable unauthorized access can constitute trafficking under the CFAA)
- Burger King Corp. v. Weaver, 169 F.3d 1310 (11th Cir. 1999) (Florida law recognizes an implied covenant of good faith and fair dealing but limits its application where it would contravene express contract terms)
- Zaki Kulaibee Establishment v. McFliker, 771 F.3d 1301 (11th Cir. 2014) (accounting requires either a sufficiently complicated transaction and inadequate legal remedy or a fiduciary relationship)