Spec Simple, Inc. v. Designer Pages Online LLC

56 Misc.3d 700

54 N.Y.S.3d 837

SPEC SIMPLE, INC., Plaintiff,

v.DESIGNER PAGES ONLINE LLC and FXFOWLE Architects LLP, Defendants.

Supreme Court, New York County, New York.

May 10, 2017.

Peter Brown & Associates PLLC, for plaintiff.

The Adams Law Firm LLC, for DPO.

Satterlee Stephens LLP, for FXFOWLE.

SHIRLEY WERNER KORNREICH, J.

Motion sequence numbers 001 and 002 are consolidated for disposition.

Defendants Designer Pages Online LLC (DPO) and FXFOWLE Architects, LLP (FXFOWLE) separately move,¹ pursuant to CPLR 3211, to dismiss the amended complaint (the AC). Plaintiff Spec Simple, Inc. (plaintiff or Spec Simple) opposes the motions. Defendants' motions are granted in part and denied in part for the reasons that follow.

I. Factual Background & Procedural History

As this is a motion to dismiss, the facts recited are taken from the AC (see Dkt. 11)² and the documentary evidence submitted by the parties.

Plaintiff, founded in 1992, operates databases used by "the architectural, interior design, engineering, facility management and furniture professions." AC ¶ 1. It alleges:³

In the period before widespread Internet access, most professional design firms invested in large and expensive libraries of catalogues and reference material to support their design professionals. The largest firms maintained costly staffs and librarians devoted to keeping this rapidly changing volume of information current. Searching for specific classes of information was often laborious and time-consuming. The innovative Internet-accessible website and database systems and services created by Spec Simple were designed to utilize the unique database search capabilities of computers to locate comprehensive listings of products for design professionals rapidly, and with the minimum of effort. The features of the Spec Simple system are uniquely designed to access and organize the information relating to the products offered for sale to the architectural, interior design, engineering and facilities management industries from around the world. The product information has been collected and organized for 23,000 companies located in the United States, and approximately forty other countries.

In the two decades since its founding, Spec Simple's efforts have been directed to developing the unique and proprietary structure, sequence and organization for its user interface, website and database systems and services, including its functions and features, and for the organization of the information provided to its customers Spec Simple's password-protected databases, which it calls virtual libraries, consist of information gathered from third parties (primarily product vendors and dealers) (collectively the "Virtual Library") through expenditure of significant time and expense over the past twenty years. Spec Simple has organized the information in its Virtual Library to make it easily searchable and user friendly through a variety of innovative features. The Virtual Library is available for the exclusive use of authorized users who must subscribe to the Spec Simple service.

Spec Simple routinely implements security procedures to protect its proprietary information from misuse by employees and third parties. Internally, employee access is limited by passwords and restrictions relating to employee functions. For third parties, access to the Virtual Library is restricted to subscribers of Spec Simple's services who have entered into written subscription agreements. Generally, Spec Simple's subscribers pay a monthly usage fee and a monthly maintenance fee. Each individual user employed by a subscriber is given a unique password.

Subscribers to Spec Simple's services are given the opportunity to customize the system's functions, features and Virtual Library data accessible by the subscriber's employees based on the type of work performed by the customer. This customization creates efficiency for the users and fosters customer loyalty to the subscriber business. A competitor with access to these custom features and insights into the customer's requirements would have the ability to undermine Spec Simple's business relationship with its subscribers. The Virtual Library is one of Plaintiff's primary and most valuable assets and it is a significant part of Spec Simple's competitive advantage in the marketplace.

In addition, Spec Simple maintains a staff of information specialists who have responded to the unique needs and specific inquiries of its subscribers and users for over twenty years, through features such as the "Ask the Librarian" feature. These unique questions and answers provide solutions to a broad array of designer issues. This singular collection of user inquires reflects the specific concerns and problems facing design professionals. Spec Simple has curated this collection of original, proprietary information and has made it a key feature of the Spec Simple site.

To further support its subscribers and users, Spec Simple offers a private communication service. (the "Spec Simple Email System"). The Spec Simple Email System allows users to directly communicate via email with vendors listed in the Virtual Library to obtain confidential price quotes, product specifications, private meetings with vendors and vendor literature and materials. The same Spec Simple Email System permits private communications among users in the same subscriber firm, particularly to obtain vendor ratings or recommendations. These company-wide notes assist a company in maintaining quality and design standards in its work. As part of the "Ask a Librarian" service, users can also employ the Spec Simple Email System to submit confidential inquiries to Spec Simple's data "librarians," who assist users conducting more complex searches. All of the above communications are stored on Spec Simple's web servers as part of the Spec Simple Email System.

In its current iteration, the Spec Simple website offers certain basic information, with no customer support, in the "free" portion of the website available to the public via the Internet. Subscribers to the Spec Simple service obtain access to the Virtual Library in a fashion similar to lawyers using the WestLaw or LexisNexis service. Each unique user is provided access to the site via a custom password which is confidential to that individual. Users are instructed not to share the password or give unauthorized parties access to the Spec Simple site.

AC ¶¶ 18–29 (paragraph numbering and some breaks omitted).

DPO is a company that competes with plaintiff (i.e., like Westlaw competes with Lexis). FXFOWLE is an architectural firm. FXFOWLE is a former client of plaintiff. It is a current client of, and has an ownership interest in, DPO. In this action, plaintiff claims that while FXFOWLE was its client, in violation of the parties' contract and two federal statutes, FXFOWLE illicitly provided plaintiff's proprietary information in plaintiff's database to DPO (which, as noted, FXFOWLE has an ownership interest in) to facilitate unfair competition.

FXFOWLE began using plaintiff's services in 2009. On August 14, 2014, plaintiff's founder, Suzanne Swift, noticed while reviewing a usage report that Lauren Zailyk, an employee of FXFOWLE, conducted approximant 1,000 searches in plaintiff's system on that day. Swift found this to be highly unusual for a single user on a single day. "On closer examination of the logs, including the Internet protocol ("IP") addresses of the accessing computers, Ms. Swift quickly determined that the 1000 queries came from multiple computers located around the world." AC ¶ 39. The next day, on August 15, 2014, Erica Godun, another FXFOWLE employee, admitted to Swift that she had given "Zailyk's Spec Simple username and password to Jake Slevin, [DPO's] Chief Executive Officer, so that he ‘could take a look around.’ " AC ¶ 40. Plaintiff alleges that "[a]s a result of the 1000 searches, [DPO] downloaded for its own benefit large portions of Spec Simple's Virtual Library and/or information or emails stored in Spec Simple's Email System." AC ¶ 42. Plaintiff further alleges that DPO used this information to "lure away Spec Simple's clients." AC ¶ 43.

Plaintiff commenced this action by filing its original complaint on May 28, 2015, and filed the AC on June 29, 2016. Plaintiff asserts seven causes of action, numbered here as in the AC: (1) violation of the Computer Fraud and Abuse Act (the CFAA), 18 U.S.C. § 1030, asserted against both defendants; (2) violation of the Stored Communications Act (the SCA), 18 U.S.C. § 2701, asserted against both defendants;⁴ (3) breach of contract (an October 1, 2013 agreement), asserted against FXFOWLE; (4) breach of contract (the terms of service of plaintiff's website), asserted against both defendants; (5) misappropriation of confidential information, asserted against both defendants; (6) unjust enrichment, asserted against DPO; and (7) violation of General Business Law (GBL) § 349 (unfair and deceptive trade practices), asserted against DPO. Defendants filed the instant motions to dismiss the AC on September 29, 2016. Defendants seek dismissal of all claims except the breach of contract claims.⁵ The court reserved on the motions after oral argument. See Dkt. 31 (2/22/17 Tr.).

II. Discussion

A. Legal Standard

On a motion to dismiss, the court must accept as true the facts alleged in the complaint as well as all reasonable inferences that may be gleaned from those facts. Amaro v. Gani Realty Corp., 60 A.D.3d 491, 876 N.Y.S.2d 1 (1st Dept.2009) ; Skillgames, LLC v. Brody, 1 A.D.3d 247, 250, 767 N.Y.S.2d 418 (1st Dept.2003), citing McGill v. Parker, 179 A.D.2d 98, 105, 582 N.Y.S.2d 91 (1st Dept.1992) ; see also Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362, 366, 670 N.Y.S.2d 973, 694 N.E.2d 56 (1998). The court is not permitted to assess the merits of the complaint or any of its factual allegations, but may only determine if, assuming the truth of the facts alleged and the inferences that can be drawn from them, the...