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E-Commerce News
CFAA Liability May Not Require Loss of Service; Web-Based Newsletter is "News Media"
September 25, 2007
CFAA LIABILITY MAY NOT REQUIRE LOSS OF SERVICEIn our June 19, 2007 edition, we reported that a U.S. District Court in the Eastern District of Louisiana, had held that a finding of liability under the Federal Computer Fraud and Abuse statute (“CFAA” ) requires a showing of physical damage to a computer or actual interruption of service.
In that case, the court found that "interruption of services" is a required element of loss under the express language of the statute. Since plaintiff in that case could not demonstrate any “interruption of service,” the court denied the plaintiff's motion for a preliminary injunction as it related to the CFAA claim.
We noted in that article that “[T]he CFAA is a fairly new statute, and courts are in the process of determining its parameters. This decision limits the application of the statute in a manner that is not good for employers who are victimized by disgruntled employees.”
Well, maybe the United States District Court of the Western District of Louisiana reads the InfoLaw Newsletter. In a more recent decision, that court ruled that a plaintiff may recover lost revenue caused by computer misuse under the CFAA even if there is no interruption of service.
That court found that the CFAA's provision permitting recovery of "compensable damages" means all losses suffered from a violation, including lost revenue. Service interruption is not required. The court also included reasonable forensic costs as compensable losses under the CFAA.
The CFAA defines "loss" 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 an interruption of service.”
Seizing on the last 4 words of the definition of “loss,” the defendants argued that, because plaintiff suffered no loss of service, it could not sustain a CFAA claim. The court, however, took a broader view of the term “loss,” noting, "[I]t is presumed that 'compensatory damages' means 'damages sufficient in amount to indemnify the injured person for the loss suffered.'" "The term includes all damages other then the punitive damages or exemplary damages."
The court felt that accepting defendant’s contention that an interruption of service was required to recover any damages would lead to an "absurd result." According to the court, "[W]hen a defendant copies unauthorized data to gain a competitive edge, it makes no sense to limit the plaintiff's recovery when the lost revenue is a direct result of the defendant's misconduct." For this same reason, the court also permitted the recovery of the costs of investigation, finding such an expense a “clearly reasonable” form of loss under the statute.
Until the court of appeals weighs in, liability for CFAA violations apparently will depend on which side of the state of Louisiana the violations occur!
WEB-BASED NEWSLETTER IS "NEWS MEDIA"
A Web-based newsletter belongs to the "news media" for purposes of the federal Freedom of Information Act ("FOIA"), according to the federal district court for the Distrcit of Columbia. The court felt that, because the Web-based service did more that "just make information," it could claim that status.
The plaintiff in the case was the Center for Public Integrity, which proclaims itself an "investigative reporting organization." As part of its mission, CPI publishes an online newsletter. Its Web site is located at: www.publicintegrity.org
In the course of preparing a series of articles on public service, CPI requested information from the Department of Health and Human Services, pursuant to the FOIA statute. In its request, CPI asserted that it was part of the "news media." Under the FOIA statute, that status would relieve CPI from paying a processing fee.
HHS disputed CPI’s claimed status, contending that CPI was merely an "information broker" and not part of the news media.
The Office of Budget Management, which publishes the "Uniform FOIA Guidelines," defines the news media to include "any person actively gathering news for an entity that is organized and operated to publish or broadcast news to the public." The question for the court was whether CPI fit that definition.
The court found that CPI qualified. According to the court, "CPI, . . . gathers information of potential interest to a segment of the public, uses its editorial skills to turn the raw materials into a distinct work, and distributes that work to an audience." Because CPI provided actual "synthesis," it was more than an information clearinghouse or broker.
Based on that finding, the court ordered that HHS afford CPI the news media status.
This is one more ruling that helps qualify just who is and who is not a "journalist" in the still evolving electronic age. Most courts that have had occasion to consider the question seem to be fairly expansive in their treatment of non-mainstream media. This decision is consistent with that expansive treatment.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.