Gap Props. v. Cairo

OPINION

KEVIN MCNULTY, UNITED STATES DISTRICT JUDGE

Gap Properties, LLC (“Gap”) and several related entities own real property. They contracted with John Cairo and his management company, Azur Management Company, LLC, (together, “the Cairo Defendants”) to manage those properties. In this action, Gap and some related entities allege that the Cairo Defendants breached their contract, defrauded Gap, and misappropriated money from Gap. The Cairo Defendants have filed a second amended counterclaim and third-party complaint (“2AC”) alleging that Gap and other Gap-related entities breached various agreements and obligations. Gap, along with Gap Properties Management, LLC; 5218 Atlantic Avenue Associates, LLC; English Creek Corporate Center, LLC; Falcon Center Complex, LLC; QIOC, LP; 204 Grand Street, LLC; and 106 York Street, LLC (collectively, “Counterclaim Defendants”) now move to dismiss the 2AC.

I. Background^[1]

Anthony and Antoinette Petrocelli were a couple with real estate assets, and they developed a relationship with Cairo to manage those assets. (2AC ¶¶ 1-2.)^[2] Cairo first formed Gap Properties, LLC, to manage the Petrocellis' real estate, and Cairo and Azur managed Gap while receiving some of its profits. (Id. ¶¶ 28-34.) Cairo and Azur also created separate limited liability companies or limited partnerships to hold specific properties (the “special purpose entities”), which were in turn managed by Gap and owned by the Petrocelli family trust. (Id. ¶¶ 4, 26, 33, 41.)

Azur and Gap had multiple agreements with each other over the years. This case primarily concerns the Management Agreement, into which Azur and Gap entered in February 2013, after Anthony Petrocelli's death. (Id. ¶¶ 29-40.) Under the Management Agreement, Azur would manage Gap properties and fulfill Gap's management responsibilities for the special purpose entities. (Id. ¶ 41.) In return, Gap agreed to pay Azur (1) $ 153, 000 annually, (2) premiums on a life insurance policy, and (3) 30% of the net proceeds from sales of Gap properties. (Id. ¶¶ 42-44.) Gap also entered into agreements with the special

purpose entities, in which they essentially agreed to reimburse Gap for the management service fees which Gap would owe Azur under the Management Agreement (the “special funding agreements”). (Id. ¶ 45.)

The Management Agreement provided that Azur was entitled to the agreed compensation through September 2017. (Id., Ex. D, ¶1.) Nonetheless, through 2017 and 2018, the Cairo Defendants continued to provide management services to Gap and worked to sell Gap properties for a profit, at Antoinette Petrocelli's direction. (Id. ¶¶ 53-55.) Accordingly, the Cairo Defendants allege that the Agreement's term was “extended by the agreement and/or conduct of the parties.” (Id. ¶ 52.)

In mid-2018, Antoinette Petrocelli died, and Neil Petrocelli (who is Antoinette and Anthony's nephew) replaced her as co-trustee. (Id. ¶ 52.) Gap then informed Azur that it was ending any agreement for Azur to provide management services to Gap and the special purpose entities. (Id. ¶ 58.) The Cairo Defendants now allege, inter alia, that Gap wrongfully failed to pay them management fees and Azur's portion of the profits from sales of Gap properties. (Id. ¶¶ 53, 62.)

A. Procedural History

In November 2019, Gap, a related management entity (Gap Properties Management, LLC), and three of the special purpose entities sued the Cairo Defendants. (DE 1 ¶¶ 24-44.) The Cairo Defendants answered the complaint and filed a counterclaim and third-party complaint, adding four other special purpose entities as third-party defendants. (DE 10.) The Cairo Defendants amended that pleading in April 2020. (DE 24.) The amended counterclaim was dismissed in part on September 17, 2020. (DE 40, 41.) The Cairo Defendants filed the 2AC on November 25, 2020. (DE 54.) Plaintiffs now move to dismiss the 2AC. (DE 106.)^[3]

II. Standard of Review

A motion to dismiss a counterclaim or third-party claim is analyzed under the same standards as an ordinary Rule 12(b)(6) motion to dismiss a complaint. Bank of Hope v. Chon, Civ. No. 14-1770, 2017 WL 39554, at *2 (D.N.J. Jan. 4, 2017) (collecting cases); see generally Fed.R.Civ.P. 12(b)(6) (providing for dismissal for failure to state a “claim”).

Federal Rule of Civil Procedure 8(a) does not require that a pleading contain detailed factual allegations. Nevertheless, “a [party's] obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (Rule 8 “requires a ‘showing' rather than a blanket assertion of an entitlement to relief.” (citation omitted)). Thus, the factual allegations must be sufficient to raise a claimant's right to relief above a speculative level, so that a claim is “plausible on its face.” Twombly, 550 U.S. at 570; see also W. Run Student Hous. Assocs., LLC v. Huntington Nat'l Bank, 712 F.3d 165, 169 (3d Cir. 2013). That facialplausibility standard is met “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability requirement' . . . it asks for more than a sheer possibility.” Id.

Rule 12(b)(6) provides for the dismissal of a counterclaim or third-party claim if it fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. See Animal Sci. Prods., Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the pleading are accepted as true and all reasonable inferences are drawn in favor of the Azur and Cairo. N.J. Carpenters & the Trs. Thereof v. Tishman Constr. Corp. of N.J., 760 F.3d 297, 302 (3d Cir. 2014).

III. Discussion

Plaintiffs move to dismiss six of the Cairo Defendants' claims in the 2AC. I address them in turn.

a. 18 U.S.C. § 1030 Claim (Count Eight)

The 2AC asserts for the first time a claim under the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030. “In broad strokes, the CFAA prohibits an individual from intentionally or knowingly accessing a protected computer, without authorization, to cause damage or commit fraud.” Buchanan v. Ingram Content Grp., No. 20-CV-2421, 2021 WL 4199324, at *2 (D.N.J. Sept. 14, 2021). Plaintiffs argue that this CFAA claim should be dismissed because it (1) fails to plead that the Computers are “protected computers”; (2) fails to sufficiently plead damages; and (3) was filed beyond the statute of limitations. (Pl. Brf. at 8.)

Count Eight alleges that Gap and the Special Purpose Entities are in possession of and have accessed a Vostro computer tower and Dell Laptop (“the Computers”) belonging to the Cairo Defendants. (2AC ¶¶ 147, 151.) The 2AC alleges that Gap and the Special Purpose Entities accessed the files, data, and information on the Computers without the Cairo Defendants' knowledge or consent. (2AC ¶ 152.)

First, the CFAA applies only to “protected computers.” The CFAA defines a protected computer as an “electronic . . . or other high speed data processing device which is used in or affecting interstate or foreign commerce or communication[.]” Grisafi v. Sony Elecs. Inc., Civil Action No. 18-8494 (JMV) (JBC), 2019 WL 1930756, at *7 (D.N.J. Apr. 30, 2019) (citing 18 U.S.C. §§ 1030(e)(1), (e)(2)(B)). The Cairo Defendants have alleged that the Computers “maintained an internet connection and were engaged in interstate commerce.” (2AC ¶ 159.). That allegation that the Computers maintained an internet connection and are in interstate commerce is sufficient to plausibly plead that the Computers are “protected computers” within the meaning of the CFAA. See Grisafi v. Sony Elecs. Inc., Civil Action No. 18-8494 (JMV) (JBC), 2019 WL 1930756, at *7 (D.N.J. Apr. 30, 2019)

(finding that a computer connected to, and used to access, the Internet is a "protected computer" under the CFAA) (United States v. Trotter, 478 F.3d 918, 921 (8th Cir. 2007) (finding the same); United States v. Roque, No. 12-540, 2013 WL 2474686, at *2 (D.N.J. June 6, 2013) (finding the same)). Plaintiffs note that the computers are only alleged to have “maintained an internet connection, ” not to have actually accessed the internet. I find the latter to be a reasonable inference from the former. Moreover, the Cairo Defendants were engaged in the business of managing multiple properties. The Counterclaim Defendants are properties and businesses located in different states, including at least New Jersey and Pennsylvania. (2AC ¶¶ 18-25.) It is reasonable to infer the Computers were used to manage those properties and were therefore used in or affecting interstate commerce.

Second, the CFAA specifies that a civil action can only be brought if the conduct involves one of five factors. 18 U.S.C. § 1030(g). The Cairo Defendants argue that this requirement is satisfied because they suffered a loss during any 1-year period aggregating at least $5, 000 in value. 18 U.S.C. §§ 1030(g); 1030(c)(4)(1)(i)(I)^[4]. “Loss” is defined under the CFAA as “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the...