Joseph v. Carnes

108 F.Supp.3d 613

Andrew Joseph, Isamu Fairbanks, Ian Doughty, and Martin Craig, Plaintiffs,

v.Lisa Carnes, Gregory Pease, Rick Jacobs, and Chris Hamilton, Defendants.

Case No. 13–cv–2279

United States District Court, N.D. Illinois, Eastern Division.

Signed June 4, 2015

Dean A. Dickie, Ryan Christopher Williams, Akerman LLP, James William McConkey, Katelyn Taylor Quimby, Kathleen Elizabeth Koppenhoefer, Miller, Canfield, Paddock and Stone, P.L.C., Chicago, IL, for Plaintiffs.

Peter Ordower, Law Offices of Peter Ordower, Chicago, IL, Steven Joseph Rotunno, Kubasiak, Fylstra, Thorpe & Rotunno P.C., Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

JOHN W. DARRAH, United States District Court Judge

Plaintiffs Andrew Joseph, Isamu Fairbanks, Ian Doughty, and Martin Craig filed suit against Defendants Lisa Carnes, Gregory Pease, Rick Jacobs, and Chris Hamilton on March 26, 2013, alleging two counts: a civil cause of action under the Stored Communications Act (the "SCA"), 18 U.S.C. § 2701 ; and civil conspiracy. The parties stipulated to dismissal of Count II, the civil conspiracy count, with prejudice. Defendants have now moved for summary judgment on Count I. For the reasons set forth below, Defendants' Motion for Summary Judgment [109] is denied.

LOCAL RULE 56.1

Local Rule 56.1(a)(3) requires the moving party to provide "a statement of material facts as to which the party contends there is no genuine issue for trial." Ammons v. Aramark Uniform Servs., 368 F.3d 809, 817 (7th Cir.2004). Local Rule 56.1(b)(3) requires that "[a]ll material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party." Id. Local Rule 56.1(b)(3)(C) permits the nonmovant to submit "any additional facts that require the denial of summary judgment...." To overcome summary judgment, "the nonmoving party must file a response to each numbered paragraph in the moving party's statement." Schrott v. Bristol–Myers Squibb Co., 403 F.3d 940, 944 (7th Cir.2005). In the case of any disagreement, the nonmoving party must reference affidavits, parts of the record, and other materials that support his stance. Id. A nonmovant's "mere disagreement with the movant's asserted facts is inadequate if made without reference to the specific supporting material." Smith v. Lamz, 321 F.3d 680, 683 (7th Cir.2003). If the nonmovant's response only provides extraneous or argumentative information, the response will fail to constitute a proper denial of the fact, and the fact will be admitted. See Graziano v. Vill. of Oak Park, 401 F.Supp.2d 918, 936 (N.D.Ill.2005). Legal conclusions or otherwise unsupported statements, including those that rely upon inadmissible hearsay, will be disregarded. Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir.1997). If the responding party fails to comply with Rule 56.1, its "additional facts may be ignored, and the properly supported facts asserted in the moving party's submissions are deemed admitted." Gbur v. City of Harvey, Illinois, 835 F.Supp.2d 600, 606–07 (N.D.Ill.2011). Substantial compliance is not enough; parties must strictly comply with the rule. See Ammons, 368 F.3d at 817.

BACKGROUND

The following facts are taken from the parties' statements of undisputed material facts submitted in accordance with Local Rule 56.1.

Fairbanks, LLC ("Fairbanks LLC") is an Illinois limited liability company. (Def's. 56.1(a)(3), ¶ 1.) Fairbanks has five members who hold a 20 percent ownership interest: Plaintiffs Isamu Fairbanks and Andrew Joseph and Defendants Lisa Carnes, Rick Jacobs, and Gregory Pease. (Id. at ¶ 2.) Defendant Chris Hamilton is a Fairbanks employee. (Id. at ¶ 4.) Plaintiff Martin Craig is a venture capitalist with no formal relationship to Fairbanks. (Id. at ¶ 5.)

Since 2005, Fairbanks LLC's e-mail system has been hosted by123Together.com ("123Together"). (Id. at ¶ 19.) Fairbanks LLC's members and employees use Microsoft Outlook to send, receive, view, and store emails sent or received from their Fairbanks email addresses. (Pl's. 56.1(b)(3), ¶ 89.) Fairbanks LLC is the subscriber to the e-mail service and not the individuals who use the e-mail system. (Def's. 56.1(a)(3), ¶ 20.) One of the archive settings built into the e-mail system is called "Archiving for Compliance." (Id. at ¶ 26.) Email administrators have the capability to enable the archiving process and the capability to purchase email services. (Id. at ¶¶ 27–28.) The archiving function transfers e-mails to an archival email database provided by 123Together through a third company, Sonian. See (Id. at ¶ 29.) The communications can then be searched by those with access privileges. See (Id. at ¶ 30.) At some point, Pease asked Hamilton if Fairbanks had an archiving system. (Id. at ¶ 35.) After learning that archiving was not activated, Hamilton reported to Pease on how to enable archiving and what it would cost. (Id. at ¶ 36.) Pease directed Hamilton to activate the service and selected the type of archiving service. (Id. at ¶ 37.) Hamilton activated the archiving service on October 26, 2012. (Id. at 39.)

Once the archiving service was activated, email administrators had the ability to search communications company-wide after being designated "Search Admin Plus" ("SAP"). (Id. at 40.) Defendants Carnes, Hamilton and Pease were given SAP privileges. (Id. at ¶ 43.) Pease and Carnes asked Hamilton how to do a search. (Id. at ¶ 43.) Carnes then searched and reviewed copies of emails sent or received by Plaintiffs through their Fairbanks LLC e-mail addresses. (Id. at ¶ 56.)

LEGAL STANDARD

Summary judgment will be granted where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. Courts are required to view all facts and make reasonable inferences "in the light most favorable to" the nonmoving party. Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). A genuine dispute of material facts exists where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party has the initial burden of establishing that there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To overcome a motion for summary judgment, "[t]he nonmoving party must point to specific facts showing that there is a genuine issue for trial." Stephens v. Erickson, 569 F.3d 779, 786 (7th Cir.2009). The nonmovant must show "that a reasonable jury could return a verdict for the nonmoving party." Pugh v. City of Attica, Ind., 259 F.3d 619, 625 (7th Cir.2001) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ).

ANALYSIS

A violation of the SCA occurs when an individual: "(1) intentionally accesses without authorization a facility through which an electronic communication service is provided; or (2) intentionally exceeds an authorization to access that facility; and thereby obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage." 18 U.S.C. § 2701(a). "The SCA provides a private cause of action for unauthorized, intentional access to communications held in electronic storage." Maremont v. Susan Fredman Design Grp., Ltd., No. 10 C 7811, 2014 WL 812401, at *6 (N.D.Ill. Mar. 3, 2014) (citing Shlahtichman v. 1–800 Contacts, Inc., 615 F.3d 794, 803 (7th Cir.2010) ).

Authorization

There are exceptions to liability if the conduct is authorized: "(1) by the person or entity providing a wire or electronic communications service; (2) by a user of that service with respect to a communication of or intended for that user; or (3) [as provided] in section 2703, 2704 or 2518 of this title." 18 U.S.C. § 2701(c). A "user" is defined as "any person or entity who uses an electronic communication service and is duly authorized by the provider of such service to engage in that use." See 18 U.S.C. §§ 2711(1) and 2510(13) (emphasis added). "Authorization to access a ‘facility’ can be given by the entity providing the electronic communications service, which includes a private employer that provides email service to its employees." Shefts v. Petrakis, No. 10–CV–1104, 2011 WL 5930469, at *6 (C.D.Ill. Nov. 29, 2011). It is undisputed that Fairbanks LLC itself had the right to access Plaintiffs' e-mail accounts. What is in dispute is whether Defendants were authorized by Fairbanks LLC to access Plaintiffs' e-mail accounts.

"Compliance archiving" was enabled by Hamilton on October 26, 2012. (Def.Exh. 28.) As of August 9, 2013, Isamu Fairbanks, Pease, Carnes, and Hamilton had "Search Admin PLUS Privilege." (Def.Exh. 28.) According to the Amended and Restated Operating Agreement of Fairbanks LLC: "The management of the Company shall be exclusively by Members.

All Company decisions shall be decided by Members holding a Majority Interest ..." (Pl. Exh. A at p. 11.) The Operating Agreement also states that: "The Members shall, jointly, have all powers available under Illinois law, including, but not limited to: ... (d) the power to enter into contracts on behalf of the Company." (Pl. Exh. A at p. 12.)

Defendants argue that adding the archiving feature was not the formation of a new contract and that the feature could be effectuated by pressing a button. However, the records of 123Together indicate that the first bill reflecting the ability to search company-wide e-mail of all users was on November 1, 2012. (Def's. Exh. 22 at 64:9–19.) Before that was enabled, no e-mail administrator for Fairbanks LLC could access the archived information with respect to the company-wide e-mail. (Def's. Exh. 22 at 64:20–24.) The archived information was made searchable for no extra cost. (Def's. Exh. 22 at 73:2–4.) Defendants make the argument that email administrators have the...