Dhi Grp., Inc. v. David W. Kent, Jr. Single Integrated Operations Portal, Inc., CIVIL ACTION NO. H-16-1670

DHI GROUP, INC., F/K/A DICE HOLDINGS, INC. AND RIGZONE.COM, INC., Plaintiffs, v. DAVID W. KENT, JR. SINGLE INTEGRATED OPERATIONS PORTAL,INC. D/B/A OILPRO AND OILPRO.COM, ESTEVAN DUFRIN,MATTHEW KENT, BRYAN ROBINS, JEREMY ANTONINI, AND JOHN DOE NOS. 1-10, Defendants.

CIVIL ACTION NO. H-16-1670

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 3, 2017

MEMORANDUM AND RECOMMENDATION

Pending before the court¹ is Defendant Bryan Robins' ("Robins") Motion to Dismiss (Doc. 33). The court has considered the motion, Plaintiffs' response (Doc. 48), Robins' reply (Doc. 54), all other relevant filings, and the applicable law. For the reasons set forth below, the court RECOMMENDS that Robins' motion to dismiss be GRANTED in PART and DENIED in PART.

I. Case Background

Plaintiffs filed a complaint on June 10, 2016, alleging violations of the Computer Fraud and Abuse Act ("CFAA"), the Stored Wire and Electronic Communications and Transactional Records AccessAct ("SCA"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Texas Uniform Trade Secrets Act ("TUTSA"), the Texas Harmful Access by Computer Act ("THACA"), the Texas Theft Liability Act ("TTLA"), as well as claims for misappropriation of confidential information, conversion, trespass to chattels, fraud, breach of fiduciary duty, unfair competition, tortious interference with present and prospective business relationships, civil conspiracy, and aiding and abetting.²

A. Factual Background

The following factual account is derived from Plaintiffs' live complaint.

1. The Creation of Rigzone

Defendant David Kent created a website called Oceandril Data Services in 2000 where users could offer oil and gas equipment for sale.³ The name of the website was later changed Rigzone.com and it began offering other services, including job postings for the oil and gas industry in the Houston and Gulf Coast Region.⁴

DHI Group ("DHI") purchased Rigzone.com, Inc. ("Rigzone") (collectively, "Plaintiffs") for fifty-one million dollars in August 2010; David Kent received approximately thirty-five milliondollars from the sale due to his seventy-percent ownership stake.⁵ The sale included Rigzone's website and assets.⁶ Other defendants, including Matthew Kent, Robins, and Jeremy Antonini ("Antonini") also received a portion of the sale proceeds and continued to work for Rigzone after the sale.⁷ DHI later acquired two other job posting websites, World Wide Worker and Oil Careers, in an effort to provide a single platform for professionals in the energy industry under the name Rigzone.⁸

Members of Rigzone were given a username and password, and after logging in, they could create a profile, upload their resume, and apply for jobs.⁹ Once a member uploaded a resume, it was given a unique number, and each profile was stored in Rigzone's member database.¹⁰ Recruiters and employers would pay Rigzone to have direct access to Rigzone members about job opportunities.¹¹ Only those who paid to use Rigzone's database had access to it.¹² Rigzone also generated revenue by selling advertisement space onits website.¹³ In order to safeguard the information contained in its member database, Rigzone invested in a variety of security measures, including password protection for employee computers and the hiring of computer specialists to update its security measures regularly.¹⁴ Former employees of Rigzone were not permitted to access Rigzone's internal computer system.¹⁵

2. Sale of Rigzone and Launch of Oilpro

In January 2012, David Kent's consulting agreement expired, and he created Single Integrated Operations Portal, Inc. ("SIOPCO"), which became Oilpro's parent company.¹⁶ After the expiration of his non-compete clause, David Kent publicly launched Oilpro on October 1, 2013.¹⁷

Oilpro was able to start up with a large membership base because David Kent accessed, without permission, Rigzone's computer system, including its member database, after he sold it to DHI.¹⁸ This software backdoor to Rigzone's computer system allowed David Kent to view the private resumes on Rigzone's site without itsknowledge.¹⁹ Additionally, David Kent persuaded a Rigzone employee to make a backup copy of Rigzone's database and instructed another employee to download a backup copy to an external hard drive.²⁰ These copies disappeared after David Kent left Rigzone.²¹

Rigzone soon began losing employees to Oilpro.²² Estevan Dufrin ("Dufrin") began working for Oilpro in December 2013, one month after he left Rigzone's employment.²³ Matthew Kent, David Kent's brother and a former vice president of sales for Rigzone before and after it was acquired by DHI, was also hired by Oilpro.²⁴ As vice president of sales, Plaintiffs allege that Matthew Kent was familiar the inner workings of the Rigzone member database, the details of Rigzone's relationships with employers and recruiters, and the methodology that Rigzone used to grow its membership.²⁵

Robins worked for Rigzone as a vice president of sales, prior and subsequent to its acquisition by DHI.²⁶ He was later hired by Oilpro as head of advertising sales.²⁷ Plaintiffs allege that basedon Robins' employment at Rigzone, he understood the methodology of Rigzone's advertising sales and would have known that the swift membership growth of Oilpro was unrealistic and was not acquired by legitimate means.²⁸ Robins "had the experience, skills, position, opportunity, and motive to support, assist, and participate with David Kent, Oilpro, and others in the illegal and tortious conduct" and he "worked closely with David Kent" at Oilpro.²⁹

Antonini became chief of technology for Oilpro after leaving Rigzone, where he had served as vice president of technology prior and subsequent to DHI's acquisition of Rigzone.³⁰ Antonini was well versed in Rigzone's technology and, along with David Kent, was the "most familiar with the code for Rigzone."³¹

The former employees from Rigzone, including Antonini, Robins, Dufrin, and Matthew Kent, became partial owners of Oilpro.³² Aside from David Kent, the employees of Oilpro owned around fifteen percent of the company.³³

3. Hacking of Plaintiffs' Information

Several different rounds of hacks took place from late 2013through 2016.

a. First Round of Hacks

David Kent accessed Rigzone's member database on February 6, 2014.³⁴ Rigzone learned of potential hacking on February 26, 2014, when one of Rigzone's members told Rigzone's customer service that she had received an email solicitation from Oilpro.³⁵ Rigzone conducted a review that showed that no Oilpro employee accessed the profile through an authorized account.³⁶

As a result of this hacking, two DHI employees created fake accounts with information only accessible through Rigzone's member database to track potential future hacking.³⁷ These two fake members received email solicitations on April 14, 2014, from Oilpro asking them to create Oilpro profiles.³⁸ Rigzone determined that no Oilpro employee viewed these profiles by using Rigzone's website and no Rigzone user had looked at both profiles.³⁹ On April 14, 2014, other Rigzone members received email solicitations from Oilpro to become members.⁴⁰ Oilpro obtained these email addressesby accessing 13,000 profiles in Rigzone's member database between April 4, 2014, and April 6, 2014.⁴¹

Rigzone checked its computer systems and determined that from October 17, 2013, through April 15, 2014, 100,000 suspect hypertext transport protocol ("HTTP") requests⁴² went out to Rigzone's member database through the internet.⁴³ These HTTP requests sought resumes from the Rigzone member database by "direct[ing] the [database] to give the user access to specific resumes" and were created by capitalizing on Rigzone's unique source code.⁴⁴ Only the creators of the source code, including David Kent, knew its particulars.⁴⁵ These HTTP requests came frequently and accessed a large volume of resumes, indicating that they were carried out by a computer program, not by manual inputs.⁴⁶

The HTTP requests originated from twenty-three different IP addresses, twenty-two of which were registered to UK Dedicated Servers Limited ("UK DSL"), a company that conceals its customers' IP addresses.⁴⁷ One of David Kent's email addresses maintained anaccount with UK DSL, and this email address received information from UK DSL near the time of these first hacks.⁴⁸ The other IP address that was not registered with UK DSL was registered to SIOPCO, Oilpro's parent company.⁴⁹ On February 6, 2014, February 7, 2014, April 3, 2014, and April 15, 2014, the dates of the HTTP requests, some of the concealed IP addresses logged into a social media account of David Kent.⁵⁰

These first hacks resulted in access of information from 98,000 resumes of Rigzone members which led to an increase in the use of Oilpro's website, including by Rigzone members whose profiles were hacked by Oilpro.⁵¹ On April 24, 2014, David Kent reached out to DHI stating that he had received an investment offer and that he built Oilpro with a potential future acquisition by DHI in mind.⁵² DHI declined to buy Oilpro or provide investment funds at that time.⁵³

b. Hacks of Google Analytics Data

Google Analytics provides information for websites, "including (1) number of visits to the website, (2) number of new users, (3)pages viewed per visit, and (4) average duration of each visit."⁵⁴ Google Analytics users must log into their accounts via a password.⁵⁵ Plaintiffs maintained a Google Analytics account protected by a password.⁵⁶

Dufrin, who left Rigzone on November 27, 2013, accessed Plaintiffs' Google Analytics account and sent the information to David Kent.⁵⁷ David Kent sent Dufrin an email on January 20, 2015, asking how the Oilpro Google Analytics data compared to their "friend's site."⁵⁸ In response, Dufrin accessed Plaintiffs' Google Analytics account and forwarded to David Kent specific private information about Rigzone's website, including page views.⁵⁹

On June 10, 2015, Dufrin sent an email to David...