Andrea R. Wood, United States District Judge.
This case arises from a soured business relationship between Plaintiff Svanaco, Inc., also known as Americaneagle.com ("Svanaco"), and Defendant Marty Gilman, Inc. ("MGI"). Svanaco creates, hosts, and maintains business websites. In 2012, MGI, a seller of sports equipment, retained Svanaco to design and redevelop its website. The parties disagree about which of them is at fault but do not dispute that by 2015, Svanaco had not delivered a completed website and MGI had not paid the full balance due under the contract. In October 2015, MGI retained Defendant Jonathan Brand as an independent consultant and informed him of its dispute with Svanaco. Over the course of the next few months, Brand launched various attacks against Svanaco on the internet; for example, Brand created more than a dozen websites with "americaneagle" in the URL, posted negative reviews about Svanaco on third-party websites, and launched distributed denial-of-service attacks to disrupt traffic on Svanaco's websites.
Svanaco is an Illinois corporation that, under the trade name americaneagle.com, creates, hosts, and maintains general and ecommerce websites for businesses and governmental bodies. (MGI's Resp. to Svanaco's Statement of Material Facts ("MGI's RSMF") ¶ 1, Dkt. No. 207.) Svanaco has created websites for clients such as the National Football League Hall of Fame and the Chicago Bears professional football team. (Pl.'s L.R. 56.1(b)(3)(A) Resp. to Def. MGI's L.R. 56.1(a)(3) Statement of Undisputed Material Facts ("Pl.'s RSMF") ¶ 79, Dkt. No. 206.) MGI is a Connecticut corporation that, under the trade name Gilman Gear, sells sports equipment and related products. (MGI's RSMF ¶ 2.) In 2012, Svanaco and MGI entered into a contract ("Agreement") under which Svanaco would design and redevelop MGI's website for $50,000. (Id. ¶¶ 7-8.) Under the terms of the Agreement, MGI would pay Svanaco in three equal payments: the first payment of $16,667 was due at the time of signing, the second payment was due upon completion of the Project Plan and Graphics, and the final payment would be due upon launch of the website. (Id. ¶ 8; see also MGI's RSMF Ex. 8.) MGI made the first two payments to Svanaco, but the parties came to a serious disagreement before MGI submitted the third payment. (MGI's RSMF ¶ 9.)
To complete the website, Svanaco required certain product information from MGI, such as the pricing, color options, and stock keeping unit ("SKU") numbers of MGI's products. (Id. ¶¶ 13, 31.) But MGI never provided a completed spreadsheet of this information to Svanaco as requested. (Id. ¶¶ 28-30.) The parties disagree about who is responsible for MGI's failure to provide the information to Svanaco. According to Svanaco, it is standard practice for the customer to provide such information, but MGI repeatedly refused to do so despite multiple requests and reminders, causing a significant delay. (Id. ¶ 15.) However, according to MGI, Svanaco was responsible for devoting 55 hours to importing product information to the website or otherwise helping MGI with this task but only spent 6.5 hours doing so. (Id. ¶¶ 16, 24-25; Pl.'s RSMF ¶ 11.) Svanaco, in turn, claims its staff spent almost 55 hours on related tasks such as creating the product information spreadsheet, training
On June 30, 2014, Svanaco presented a "beta website for testing and training" to MGI. (MGI's RSMF ¶ 32.) Svanaco claims it had completed all programming work for MGI's website by then, and MGI could fully test the website's functionality through the beta website. (Id. ¶ 38.) Svanaco also claims the website contained a product import tool that would allow MGI to import its product information without further assistance by Svanaco. (Id. ¶¶ 36-37.) By contrast, MGI claims the beta website was incomplete and had multiple issues; for example, it did not link to MGI's Facebook page or Twitter, was missing the home page with welcome text and audio, and had no company profile page, no banner ads for the various categories of equipment, and no subpages. (Id. ¶ 32.) Thus, according to MGI, the website could not be tested or evaluated in any meaningful way. (Id. ¶ 37.) Svanaco also sent MGI an invoice for the third and final payment around the same time it provided the beta website, which MGI did not pay. (Pl.'s RSMF ¶ 23.) MGI accuses Svanaco of attempting to use the beta website to obtain the third and final payment from MGI, with no intention of completing the website. (Id. ¶ 22.)
On May 8, 2015, Svanaco sought payment of $8,666.66 to resume work on the website and told MGI that payment was due within 30 days of the beta website delivery. (Id. ¶ 27.) Then, on May 18, 2015, Svanaco requested payment of $8,000 to "continue work on this project," informing MGI that it had spent over 700 hours working on the website. (Id.) MGI refused to pay, and in June 2015, Neil Gilman, MGI's CEO, stated that he would "post [the beta website] online and invite comment from people who are expert [sic] in web development." (Id. ¶ 28.)
In October 2015, Gilman posted various public advertisements seeking a web designer. (Id. ¶ 30.) On October 11, 2015, Brand contacted Gilman via email. (Id.) Brand and Gilman had never met or had any contact prior to this point. (Id. ¶ 31.) On October 13, 2015, Gilman interviewed Brand and offered him $900. (Id.) According to MGI, Gilman hired Brand as an independent consultant to review the beta website and determine whether it reflected 700 hours of work. (Id.) Gilman did not hire Brand as an employee nor did Gilman provide him with any equipment. (Id. ¶¶ 56-57.) Gilman gave Brand a copy of Svanaco's business proposal and several emails containing passwords and links to access the beta website. (Id. ¶ 32.) After Brand accessed the beta website, he told Gilman that based on what he had seen, it would be difficult for Svanaco to argue that it had worked for more than 5-10 hours on it. (Id. ¶ 33.)
Gilman asked Brand if Svanaco could be "shamed" into repaying his money. (Id. ¶ 34.) According to MGI, Gilman meant (and Brand understood him to mean) that Svanaco would be presented with "truthful statements" about how little time had been spent on the beta website. (Id. ¶ 34.) Brand replied, "yes, they can be shamed," and sent Gilman a link to a website Brand had created, americaneaglereviews.com. (MGI's Resp. to Svanaco's L.R. 56.1(b)(3)(A) Statement of Additional Facts ("MGI's RSAF") ¶ 9, Dkt. No. 220.) Brand also invited Gilman to make "comments/edits" to his website. (Id. ¶ 11.) MGI claims Gilman did not click the link but does not dispute that he later asked Brand, "has this gone live yet? Why is it that American Eagle hasn't reached out to me if this is on the web?" and "Are they
On October 28, 2015, Brand met with Gilman and MGI's financial administrator, Nadine Parker, to "go over [his] work" and obtain the $900 payment. (Pl.'s RSMF ¶ 35.) Brand did not receive any other payment from MGI after this point. (Id. ¶ 36.) At the meeting, Brand talked about posting an online review about Svanaco. (Id. ¶ 37.) Parker told Brand this would be acceptable "as long as it is truthful." (Id. ¶ 37.) That evening, Gilman reviewed Brand's post and told him to "make it very clear exactly what [Svanaco] put up which they think is a Beta Site," and include a title "something like 700 hours of AE done in 30 minutes using Word Press." (Id. ¶ 38.) Gilman also stated in his email to Brand, "The big point is that AE didn't do any work for us. Just minimal design concept stuff. I am concerned that AE won't feel intimidated by this review." (Id.) The parties dispute whether Brand incorporated Gilman's edits. (Id. ¶ 39.)
The following week, Brand sent Gilman a series of emails urging Gilman to write a demand letter to Svanaco and aggressively seek a refund. (Id. ¶ 40.) Brand also sent Gilman a proposed letter he drafted for Gilman to send to Svanaco, which stated, "My [Gilman's] understanding is that squaring up with Gilman Gear as soon as possible, you may see my consultant's personal warning website taken offline, rather than see it strengthened through aggressive social media and backlink campaigns." (Id. ¶ 43.) In another email to Gilman, Brand voiced his intent to damage Svanaco financially to the tune of "$100k — 500k in the first 7-9 months." (Id.) In addition, Brand told Gilman in the emails that "this happened to many other people," encouraged Gilman to read negative reviews of Svanaco that Brand had summarized, recommended that Gilman file a Better Business Bureau ("BBB") complaint against Svanaco, and asked Gilman to pay money to boost Brand's negative review website, americaneaglewebreviews.com, to the top of search-engine listings. (Id. ¶ 40.) Gilman claims he did not take any of the actions that Brand suggested and did not know Brand had filed a BBB complaint purporting to be from MGI. (Id. ¶ 41.) By contrast, Svanaco claims Gilman thanked Brand for filing the BBB complaint in his name and did not withdraw it. (Id.) Gilman also sent an email to Brand on November 1, 2015, asking "Is now the time to contact them and ask them to refund our money?" (Id. ¶ 43.)
Brand also took other steps to post negative content on the internet about Svanaco. He registered more than a dozen websites with the phrase "americaneagle" (or some variation or misspelling of the phrase) in the URL, such as "Americaneaglereviews.com," "Americaneaglewebreviews.com," "Americaneaglewebdesign.com," "Ameriacaneagle.com," and "Ameriecaneagle.com." (Id. ¶ 47.) On these newly created sites, Brand made negative statements about Svanaco, including "our developer above caught up to American Eagle's two years of work in 30 minutes and had the beta website handling product variations and pricing in 3 hrs.," "they walked with the $34,000, no arrests made to date but what is clear is that the design work never started beyond one roughly ½ hour task and that two years of slick Eagle talk," and "American Eagle's Manhattan offices appear to have used a combination of radio ads, proprietary jargon and contractual falsehoods to bill $34,000 for less than 6 hours of actual web services." (Id. ¶ 44; MGI's RASF ¶ 34.) Brand also called Svanaco an "incurious and overconfident high-end web scam," a "web contract fraud ring," and a "fraud." (Id. ¶¶ 34-35.) Posing as actual clients of Svanaco, Brand published these fake negative reviews both on
Brand sent links to his posts to Gilman, although the parties dispute whether Brand did so with Gilman's knowledge and approval. At his deposition in this matter, Brand testified that although he sent links, he did not think Gilman understood what was going on. (Id. ¶ 50.) The parties also dispute whether Brand posted the content alone or with the help of an online group called "Anonymous." (Id. ¶ 45.)
On November 18, 2015, Svanaco was targeted by a distributed denial-of-service ("DDOS") attack, which resulted in a 25-minute disruption of service for some websites hosted by Svanaco. (Id. ¶ 70.) The parties dispute whether Brand instigated the attack on November 18, 2015.
Svanaco also claims that on November 18, 2015 Brand initiated three separate live-chat sessions with Svanaco referencing Gilman Gear, suggesting that Svanaco "square up" with MGI and threatening to "attack" Svanaco and its "brand in web search," as well as its "existing clients." (Pl.'s RSMF Ex. SS.) MGI disputes that Brand initiated those live-chat sessions. (Def.'s RSMF ¶ 17.)
According to Svanaco, three potential customers ultimately decided not to do business with Svanaco after discovering Brand's postings and websites: NiSource, Calico Cottage, and ID Systems. (Pl.'s RSMF ¶ 78.) NiSource representative Theodore Markiewicz testified at his deposition that the night before NiSource met with Svanaco, one of Markiewicz's team
Judy Levin, Calico Cottage's Director of Marketing, stated that in April 2016, she mentioned in a phone conversation with Gareth Roberts, a regional director for Svanaco, that she had read a negative online customer review of Svanaco. (MGI's R. 56.1(a)(3) St. of Undisputed Mat. Facts ("MGI's SUMF") Ex. 45, Dkt. No. 196-7.) However, Levin did not recall any details about the review, such as who authored it or any of its content, "other than it appeared to be a generic complaint." (Id.) Similarly, Richard Garten, President of ID Systems, confirmed that he had viewed negative online comments about Svanaco. (MGI's SUMF Ex. 46.) Garten also stated that he emailed Laura Jackimec, a Svanaco employee, informing her that "one of the primary reasons that ID Systems decided not to go with [Svanaco] was because of various negative reviews that were posted online." (Id.)
Yet both Levin and Garten swore affidavits insisting that their respective companies did not base their decisions not to hire Svanaco on the negative online reviews. (Pl.'s RSMF ¶¶ 78.) Instead, Levin stated that her company declined Svanaco's business proposal for three reasons: "(1) we wanted to retain a company that was more conveniently located and more accessible for onsite meetings; and (2) [Svanaco] was not an expert in the content management system (CMS) that we use at Calico Cottage[; and] (3) we wanted to retain [a] company whose scale was more similar to ours." (MGI's SUMF Ex. 45.) Levin also sent an email to Svanaco explaining that Calico Cottage "just didn't feel it was a good fit based on the size of company we would like to work with and proximity to our offices." (Id.)
Garten, for his part, stated that his email to Jackimec was untruthful, and "the reason that I listed the negative reviews as a reason for choosing another website company was to stop the sales pitches from [Svanaco] so I could move on with running my company." (MGI's SUMF Ex. 46.) According to Garten, he had previously informed a female representative of Svanaco that its business proposal was too expensive, but Svanaco nonetheless made "multiple attempts ... to close a sale with ID Systems." (Id.) Garten added, "I can honestly state that even if all of the reviews that I may have read about [Svanaco] were positive, I still would not have entered into an agreement with [Svanaco] to build a website for ID Systems due to their pricing and ID Systems' budget." (Id.)
On November 24, 2015, Gilman received a letter from Reda identifying numerous allegedly defamatory and unlawful websites
Brand also advised Gilman, "Please send this basic form of reply to Mr. Reda, the attorney asap. [sic] 1. What does this content have to do with me? I see content relating to my business but I did not publish it. 2. I am not familiar with this content nor do I know exactly how it was obtained. 3. If I can be of further assistance, please let me know." (MGI's RSAF ¶ 18.) Brand sent another email to Gilman a few minutes later, stating:
(Id.) Gilman replied, "Yes, I will send you any communication before it is sent to AE [American Eagle]. Of course, I will not answer any question [sic] about you." (Id.) The following week, on December 1, 2015, Gilman sent an email to Reda stating, "I really don't know what you are referring to. Perhaps you could send me a link to what you are referring to because I have not seen it. I have no knowledge of what it contains." (Id. ¶ 19.) The first two paragraphs of this email were suggested by Brand; Gilman authored the last sentence. (Id.) Gilman then forwarded to Brand a copy of his email to Reda. (Id.) Gilman later asked Brand to respond to another communication from Reda, and Brand told Gilman that he had done so. (Id. ¶ 20.) Then, on December 19, 2015, Gilman asked Brand to send Reda a statement to the effect that MGI was not involved in the creation and posting of the reviews and websites. (Id. ¶ 21.) Gilman explained, "I need this to protect myself from all the threats being made by Reda and American Eagle." (Id.)
In January 2016, Gilman told Brand that he could submit a proposal to build a new e-commerce website for MGI. (Id. ¶ 24.) According to MGI, Brand was "desperate for money," even going so far as offering to "sweep floors" for MGI, and Gilman allowed Brand to submit a proposal out of pity. (Id.) MGI eventually declined to retain Brand for that purpose. (Id.) On January 27, 2016, Brand sent an email to Parker, MGI's financial administrator, stating, "I finished the side project months ago as agreed so that we could return to the reason I interviewed, to have a website proposal considered." (Id. ¶ 28.) However, Gilman eventually told Brand that he did
Summary judgment is proper "if 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(a). Summary judgment will be denied if "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 evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255, 106 S.Ct. 2505. However, a nonmoving party "may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Id. at 256, 106 S.Ct. 2505.
The arguments raised in the pending cross-motions for summary judgment largely overlap—especially regarding the issue of whether Svanaco and MGI's contract was breached and if so, by whom. Regarding the parties' factual contentions, the Court adopts "a dual, Janus-like perspective" on cross motions aimed at the same claim or defense. Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 603 (7th Cir. 2015) (internal quotation marks omitted). On one motion, the Court views the facts and inferences in the light most favorable to the nonmovant, but if summary judgment is not warranted, the Court gives the unsuccessful movant "all of the favorable factual inferences that it has just given to the movant's opponent." Id.; see, e.g., Nucap Indus., Inc. v. Robert Bosch LLC, 273 F.Supp.3d 986, 997-98 (N.D. Ill. 2017) (evaluating opposing parties' cross motions for summary judgment).
As discussed below, the Court grants MGI summary judgment on Count I (the ACPA claim) and Count II (the CFAA claim) because, even if Brand violated those statutes, Svanaco has not introduced evidence suggesting that it would be appropriate to hold MGI vicariously liable for Brand's actions. The Court denies MGI's motion for summary judgment, however, on Count III (defamation), Count IV (tortious interference), Count VI (civil conspiracy), and Count VII (breach of contract) because Svanaco has created genuine issues of material fact on each claim. And the Court denies Svanaco's motion for summary judgment on its counterclaim for breach of contract.
In Count I of its Complaint, Svanaco asserts a claim under the ACPA, 15 U.S.C. § 1125(d). The ACPA provides a remedy to victims of "cybersquatting," which has been defined as "the bad faith registration of domain names with intent to profit from the goodwill associated with the trademarks of another." Vulcan Golf, LLC v. Google, Inc., 726 F.Supp.2d 911, 915 (N.D. Ill. 2010) (internal quotation marks omitted). The relevant portion of the ACPA provides:
15 U.S.C. § 1125(d)(1).
To establish a claim under the ACPA, a plaintiff must prove that "(1) it had a distinctive or famous mark at the time the domain name was registered, (2) the defendant registered, trafficked in, or used a domain name that is identical or confusingly similar to the plaintiff's mark, and (3) the defendant had a bad faith intent to profit from that mark." Flentye v. Kathrein, 485 F.Supp.2d 903, 914 (N.D. Ill. 2007).
MGI does not dispute that Svanaco had a protected mark, "Americaneagle.com," but nonetheless argues that Brand's websites were not identical or confusingly similar to Svanaco's mark because several of them contained the word "reviews" in the URL. MGI argues this distinction "made it clear they were offering critique or evaluation," and "[n]o reasonable viewer would assume Svanaco was critiquing its own services." (MGI's Reply in Support of Mot. for Summ. J. at 8, Dkt. No. 226.) In fact, while some of Brand's domain names contained the word "reviews," such as "Americaneaglereviews.com," the majority did not. For example, Brand registered the domain names "Ameriacaneagle.com" and "Ameriecaneagle.com," which are subtle misspellings of Svanaco's mark, as well as the domain names "Americaneaglewebdesign.net," "Americaneaglewebsitedesign.com," "Americaneaglewebdesign.com," and "Americaneaglewebdesigns.com," which combine Svanaco's mark with the service it provides. (Pl.'s RSMF ¶ 47.) Accordingly, the Court finds that a reasonable jury could find that Brand registered domain names that were identical or confusingly similar to Americaneagle.com.
MGI also argues that Brand did not have a "bad faith intent to profit" from his use of that phrase. The ACPA sets forth nine factors
MGI argues that the fourth factor— "bona fide noncommercial or fair use of the mark"— cuts in its favor, as Brand registered the websites not to deceive consumers into making purchases but rather to complain about Svanaco's conduct. It is correct that the ACPA was not intended to prevent the publication of genuine "parody, comment, criticism," and other legitimate exercises of one's First Amendment rights. S. Rep. 106-140, at *8 (1999); see, e.g., Lamparello v. Falwell, 420 F.3d 309, 318-20 (4th Cir. 2005) (no liability where defendant created website with celebrity-plaintiff's misspelled name in URL to criticize his expressed beliefs); Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d 806, 809-10 (6th Cir. 2004) (no liability where defendant created website with plaintiff-company's name in URL to express her displeasure with its services). But a defendant who uses a website's noncommercial design to disguise his bad-faith intent may still be subject to liability under the ACPA. See, e.g., Toronto-Dominion Bank v. Karpachev, 188 F.Supp.2d 110, 114 (D. Mass. 2002); Flentye, 485 F. Supp. 2d at 915.
Here, the record contains sufficient evidence from which a jury could find that Brand registered the websites not merely for comment and criticism but also for financial gain. For example, on October 22, 2015, Gilman asked Brand whether Svanaco could be "shamed" into repaying his money, and Brand responded by sending him a link to Americaneaglereviews.com. (Pl.'s RSMF ¶ 34.) Over the next five months, Brand registered twelve additional websites that similarly displayed negative content about Svanaco. (Id. ¶ 47.) Brand also repeatedly stated that he expected Svanaco to issue a refund to MGI based on the negative online content and encouraged Gilman aggressively to seek a refund. (Id. ¶¶ 41-43.) Brand even drafted a letter addressed from Gilman to Svanaco, which stated that if Svanaco issued a refund to Gilman, Brand's websites would be taken down and threatened that if Svanaco did not do so, the websites would be "strengthened through aggressive social media and backlink campaigns." (Id. ¶ 40.) Furthermore, Brand was paid for his services on MGI's behalf, and the record contains evidence that his services included damaging Svanaco's reputation as revenge for their treatment of MGI. Based on these statements, a reasonable jury could find that the websites did not represent a "bona fide noncommercial or fair use" of Svanaco's mark but rather an intent to induce payment from Svanaco.
The facts in Toronto-Dominion Bank v. Karpachev, a case decided by another district court, are analogous to those at hand. 188 F. Supp. 2d at 110. There, the defendant, a disgruntled customer, claimed that
The fifth factor also weighs in Svanaco's favor, as evidence in the record suggests that Brand sought to "divert consumers" from Svanaco's actual website with "the intent to tarnish or disparage" Svanaco's name and reputation. While MGI argues that no reasonable internet user would believe that Brand's websites were sponsored by Svanaco, Brand's conduct demonstrates that he intended to confuse, mislead, and divert internet users into accessing his websites. For example, the domain names themselves provide evidence of his intent: as explained above, Brand intentionally chose domain names that are subtle misspellings of Americaneagle.com or that combine Svanaco's trade name with the service it provides. See, e.g., People for Ethical Treatment of Animals, Inc. v. Doughney, 113 F.Supp.2d 915, 920 (E.D. Va. 2000) (finding that although it was clear that the defendant's website promoting "People Eating Tasty Animals" was not operated by the plaintiff, People for the Ethical Treatment of Animals, the defendant "clearly intended to confuse, mislead and divert internet users into accessing his web site" PETA.org), aff'd, 263 F.3d 359 (4th Cir. 2001). Factor seven— "provision of material and misleading false contact information when applying for the registration of the domain name"—also suggests bad faith, as Brand used random contact information instead of his own when registering the websites, and his "prior conduct indicat[es] a pattern" of similar behavior. (See MGI's RSMF ¶ 18 ("All completely routine, I have done this before.").)
The ninth factor, which inquires into the "extent to which the mark incorporated in the person's domain name registration is... distinctive and famous within the meaning of [the ACPA]," weighs in Svanaco's favor as well. As a preliminary matter, MGI offers no support or reasoning for its argument that Svanaco's mark is insufficiently distinctive and famous. But regardless, MGI concedes that Svanaco registered its mark, a factor to be considered in evaluating the mark's fame. See 15 U.S.C. § 1125(c)(2)(A). And Svanaco's mark is distinct in the sense that it has "no logical association with the product." Eli Lilly & Co. v. Nat. Answers, Inc., 233 F.3d 456, 466 (7th Cir. 2000) ("The strongest protection [with respect to distinctiveness] is reserved for marks that are purely the product of imagination and have no logical association with the product.").
Factors six and eight weigh in favor of MGI and Brand. As to the sixth factor, there is no evidence that Brand offered to "transfer, sell, or otherwise assign" the domain names he registered to Svanaco "for financial gain without having used, or having an intent to use, the domain name." 15 U.S.C. § 1125(d)(1)(B)(i)(VI). Instead, Brand offered to remove the websites entirely
Ultimately, a plaintiff need not prove all nine factors, and the Court "is not limited to considering these nine factors when determining the presence or absence of bad faith." Virtual Works, Inc. v. Volkswagen of Am., Inc., 238 F.3d 264, 268 (4th Cir. 2001); see also Sporty's Farm L.L.C. v. Sportman's Market, Inc., 202 F.3d 489, 499 (2d Cir. 2000) (same). Rather, "the most important grounds for finding bad faith are the unique circumstances of th[e] case." Virtual Works, 238 F.3d at 268 (internal quotation marks omitted). In this case, seven of the nine factors under the ACPA weigh in Svanaco's favor. And although Brand's conduct was somewhat different from that of a typical cybersquatter in that his ultimate goal was not to sell domain names to Svanaco, the record contains ample evidence of Brand's bad-faith intent when registering the websites. Accordingly, MGI is not entitled to summary judgment as to Count I on this basis.
MGI also argues that, in this case, liability under the ACPA is limited to Brand, as § 1125(d)(1)(D) limits liability to the "domain registrant or that registrant's authorized licensee." But courts in this District have consistently held that a plaintiff may pursue an ACPA claim under a veil-piercing theory. See, e.g., Flentye, 485 F. Supp. 2d at 914. To pierce the veil to reach MGI, Svanaco must satisfy a two-pronged test: "(1) there must be such unity of interest and ownership that the separate personalities of [MGI and Brand] no longer exist; and (2) circumstances must be such that adherence to the fiction of separate ... existence would sanction a fraud or promote injustice." Wachovia Secs., LLC v. Banco Panamericano, Inc., 674 F.3d 743, 751-52 (7th Cir. 2012) (applying Illinois law) (internal quotation marks omitted). Here, the Court finds that no reasonable jury would pierce the veil and hold MGI responsible for Brand's conduct. The evidence illustrates that on multiple occasions, Brand acted independently or took unsolicited action; for example, Brand testified that although he sent links of his postings to Gilman, he did not think Gilman understood what was going on. See Flentye, 485 F. Supp. 2d at 913 (holding that veil piercing must be based on "factual manifestations suggesting ... that the two operate as a single entity" (internal quotation marks omitted)). The Court finds no evidence in the record that Brand operated as MGI's "alter ego." Id. at 912.
In summary, because the Court finds that Svanaco cannot proceed against MGI for Brand's registrations under a veil-piercing theory of liability, the Court grants MGI's motion for summary judgment as to Count I.
In Count II, Svanaco asserts a claim against MGI and Brand pursuant to the CFAA, 18 U.S.C. § 1030. The CFAA is primarily a criminal statute, but it provides a civil remedy as well. See Fidlar Techs. v. LPS Real Estate Data Sols., Inc., 810 F.3d 1075, 1079 (7th Cir. 2016). A plaintiff asserting a claim under the CFAA must prove: "(1) damage or loss; (2) caused by (3) a violation of one of the substantive provisions set forth in § 1030(a), and (4) conduct involving one of the factors of harm set forth in § 1030(c)(4)(A)(i)(I)-(IV)." Segerdahl Corp. v. Ferruzza, No. 17-cv-3015, 2019 WL 77426, at *4 (N.D. Ill. Jan. 2, 2019) (internal quotation marks omitted). The factors of harm given in the
According to Svanaco, Brand launched DDOS attacks against its websites in violation of § 1030(a)(5), which prohibits the "knowing[] ... transmission of a program, information, code, or command... intentionally caus[ing] damage without authorization, to a protected computer." MGI does not dispute that the DDOS attacks violated the CFAA but argues that it is entitled to summary judgment because Svanaco cannot show that it suffered a $5,000 loss, or any of the other factors of harm under § 1030(c)(4)(A)(i). The CFAA defines "loss" as:
18 U.S.C. § 1030(e)(11). Svanaco has offered evidence that, at a minimum, it lost 85 hours of employee time responding to the DDOS attacks, which it values as worth $17,141.
Svanaco also argues that Brand's live-chat conversations violated § 1030(a)(7)(A) of the CFAA, which provides for liability against anyone who "with intent to extort from any person any money or other thing of value, transmits in interstate or foreign commerce any communication containing any threat to cause damage to a protected computer." However, the Court's review of the live-chat conversations reveal no threat to damage Svanaco's
Finally, MGI argues that the CFAA does not authorize secondary liability, limiting Svanaco to seeking redress from Brand. Indeed, while § 1030(b) expressly establishes criminal liability for conspiracy to violate the CFAA, the Act is silent as to secondary liability in civil actions. And the Seventh Circuit has yet to address this issue. However, other courts have consistently permitted plaintiffs to assert claims under the CFAA through vicarious liability. See, e.g., Teva Pharm. USA, Inc. v. Sandhu, 291 F.Supp.3d 659, 671 (E.D. Pa. 2018) ("A person who did not directly access the computer may still be liable under the CFAA if he directs, encourages or induces someone else to access a computer that he himself is unauthorized to access." (internal quotation marks omitted)); SBM Site Servs., LLC v. Garrett, No. 10-cv-00385-WJM-BNB, 2012 WL 628619, at *6 (D. Colo. Feb. 27, 2012) (same). And here, this Court finds the court's analysis in Charles Schwab & Co. v. Carter, No. 04 C 7071, 2005 WL 2369815, at *5-7 (N.D. Ill. Sept. 27, 2005) to be persuasive:
Like the court in Carter, this Court finds that Svanaco is not precluded from asserting a CFAA claim against MGI under a vicarious-liability theory.
However, even though Svanaco is not foreclosed from pursuing a vicarious-liability claim against MGI, no reasonable jury could find that with respect to the DDOS attacks, MGI was the principal and that Brand was MGI's agent. See In re Aimster Copyright Litig., 334 F.3d 643, 654 (7th Cir. 2003) (explaining vicarious liability); Teva Pharm. USA, Inc., 291 F. Supp. 3d at 671 (noting that a person may be liable under the CFAA if he directs, encourages, or induces someone else to access a computer). While Brand discussed with Gilman several of the actions that he planned to take against Svanaco, such as publishing negative online reviews and websites and filing a complaint with the BBB, the record does not contain any evidence that Brand offered to launch a DDOS attack against Svanaco, much less that MGI or Gilman directed, encouraged, or induced Brand to do so. See Teva Pharm., 291 F. Supp. 3d at 671. Therefore, the Court grants MGI's motion for summary judgment as to Count II.
In Count III, Svanaco asserts a claim for defamation against Brand and MGI, based on the negative online content Brand published about Svanaco and its
MGI first argues it is entitled to summary judgment because none of Brand's posts can be considered false statements; rather, they are opinions. The First Amendment protects expressions of opinion, which are not actionable as defamation per se. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). But "a speaker cannot just couch a `false assertion of fact' in `terms of an opinion' and thereby evade liability." Bd. of Forensic Document Examiners, Inc. v. Am. Bar Ass'n, 287 F.Supp.3d 726, 736 (N.D Ill. 2018) (quoting Bryson v. News Am. Publ'ns., Inc., 174 Ill.2d 77, 220 Ill.Dec. 195, 672 N.E.2d 1207, 1220 (1996)). Thus, a statement is only protected as an opinion if it "cannot be reasonably interpreted as stating actual fact." Id. (internal quotation marks omitted). Under Illinois law, courts evaluate several factors to determine whether a statement is an opinion or fact: "whether the statement has a precise and readily understood meaning; whether the statement is verifiable; and whether the statement has a literary or social context that shows that is a factual assertion rather than an opinion." Id. (citing Solaia Tech., LLC v. Specialty Publ'g Co., 221 Ill.2d 558, 304 Ill.Dec. 369, 852 N.E.2d 825, 840 (2006)). Moreover, mixed expressions of opinion and fact are actionable. Id.
Here, several of Brand's statements comprise assertions of fact, not opinions. For example, Brand stated that Svanaco billed MGI "$34,000 for less than 6 hours of actual web services." How long Svanaco
Finally, MGI again argues that Svanaco may not assert a defamation claim against MGI, because it was Brand who posted the allegedly defamatory content. But it is well-established that a principal may be held vicariously liable for his agent's defamatory statements. See, e.g., Jones v. Res-Care, Inc., 613 F.3d 665, 671 (7th Cir. 2010); Nelson v. Levy Home Entm't., LLC, No. 10 C 3954, 2012 WL 403974, at *11 (N.D. Ill. Feb. 8, 2012). To hold MGI liable for Brand's statements, Svanaco must show that Brand's statements were made "within the scope of [his] employment." See Bagent v. Blessing Care Corp., 224 Ill.2d 154, 308 Ill.Dec. 782, 862 N.E.2d 985, 991 (2007); Nelson, 2012 WL 403974, at *11. Even though Brand was not an official MGI employee, "[a] court's cardinal consideration in determining whether a person is an agent [for purposes of vicarious liability] or an independent contractor, is the right to control the manner of work performance, regardless of whether that right was actually exercised." Phillips v. Quality Terminal Servs., LLC, 855 F.Supp.2d 764, 784 (N.D. Ill. 2012) (internal quotation marks omitted).
In this case, Svanaco has demonstrated that there is a disputed issue of material fact as to whether Brand was MGI's agent. Brand sent Gilman the link to one of his negative review websites and invited "comments/edits." (MGI's RSAF ¶ 11.) Gilman also reviewed one of Brand's posts and told him to include a title "something like 700 hours of AE done in 30 minutes using Word Press" to "intimidate" Svanaco, and reminded him that the goal of the review was to "intimidate" Svanaco. (Pl.'s RSMF ¶ 35). In addition, Svanaco has presented adequate evidence for a reasonable jury to believe that Brand was "authorized" to make the allegedly defamatory statements, that MGI "ratified" his conduct, and that Brand was "acting in furtherance of [MGI]'s business." Miles v. WTMX Radio Network, No. 1:02-CV-00427, 2002 WL 31103471, at *4 (N.D. Ill. Sept. 18, 2002). Specifically, Gilman asked Brand if Svanaco could be "shamed" into repaying his money, to which Brand responded with a link to the americaneaglereviews.com website that he created.
In sum, while MGI claims that it only hired Brand for the limited purpose of reviewing the beta website and opining how many hours it took to create, Svanaco's version of events—that MGI hired Brand to shame, intimidate, and defame Svanaco on the internet—finds sufficient support in the record. The Court thus denies MGI's motion for summary judgment as to Count III.
In Count IV, Svanaco asserts a state law claim for tortious interference with prospective economic advantage, claiming that the negative online content that Brand posted online ruined its chances to do business with three companies: NiSource, Calico Cottage, and ID Systems. Under Illinois law, the elements of a tortious interference claim are: "`(1) the plaintiff's reasonable expectation of entering into a valid business relationship; (2) the defendant's knowledge of the plaintiff's expectancy; (3) purposeful interference by the defendant that prevents the plaintiff's legitimate expectancy from ripening into a valid business relationship; and (4) damages to the plaintiff resulting from such interference.'" Botvinick v. Rush Univ. Med. Ctr., 574 F.3d 414, 417 (7th Cir. 2009) (quoting Fellhauer v. City of Geneva, 142 Ill.2d 495, 154 Ill.Dec. 649, 568 N.E.2d 870, 878 (1991)). Additionally, proof of tortious interference with prospective economic advantage requires "a showing that the tortfeasor acted with actual malice ... a desire to harm." Capital Options Invs., Inc. v. Goldberg Bros. Commodities, Inc., 958 F.2d 186, 189 (7th Cir. 1992) (applying Illinois law).
MGI argues that it is entitled to summary judgment as to Count IV because the undisputed evidence shows that Brand's posts did not influence the companies' decisions not to work with Svanaco. As evidence, MGI has submitted affidavits from decisionmakers at Calico Cottage and ID Systems, which state that their respective companies chose not to work with Svanaco for unrelated reasons, such as geographic location, company size, and pricing. (MGI's SUMF Exs. 45-46.) However, Levin and Garten, the two companies' respective decisionmakers, also admit in their affidavits that they saw negative online reviews about Svanaco before officially deciding not to hire the company. Both Levin and Garten also confronted Svanaco about the reviews before making their decisions, with Garten even telling Svanaco that the reviews played a primary role. Svanaco has thus presented a genuine dispute of fact regarding the impact of Brand's reviews on Calico Cottage and ID Systems.
As to NiSource, the record is even less straightforward. At his deposition, NiSource representative Markiewicz testified that he felt "concerned" about the "negative information" he had read online about Svanaco, which made him "very concerned about building a relationship" with Svanaco. (Pl.'s RSMF Ex. Y.) That Markiewicz did not specifically remember seeing Brand's posts or any reviews mentioning MGI does not foreclose the possibility that
MGI again argues that it cannot be held vicariously liable for Brand's tortious interference. But, as explained above, courts have not hesitated to hold principals vicariously liable for their agents' torts, including tortious interference with economic advantage. See Rice v. Nova Biomedical Corp., 38 F.3d 909, 913 (7th Cir. 1994) (applying Illinois law) (holding that principal may be liable for agent's tortious interference with employment relationship if agent was "acting in furtherance (however misguidedly) of his principal's business"). Here, a reasonable jury could conclude that Brand was acting in furtherance of MGI's business in causing Svanaco to lose out on a contract with NiSource. For example, Gilman told Brand that he wanted Svanaco to be "shamed" and "intimidated." (MGI's RSAF ¶¶ 9-12; Pl.'s RSMF ¶¶ 35-38.) Brand then asked Gilman to pay money to boost his negative review website to the top of search engine listings, presumably to scare away more of Svanaco's potential customers. In addition, Brand told Gilman that he expected Svanaco to suffer a loss of "$100k — 500k in the first 7-9 months" due to his online posts. (Pl.'s RSMF ¶ 43.) In light of this evidence, a reasonable jury could hold MGI vicariously liable for Brand's tortious interference. Therefore, MGI's motion for summary judgment as to Count IV is denied.
In Count VI, Svanaco asserts that MGI and Brand were engaged in a civil conspiracy to defame Svanaco, tortiously interfere with its prospective economic advantage, and otherwise force it to pay or provide services to MGI.
Second, MGI argues that Svanaco has not presented any evidence of an agreement, other than Brand's agreement to review the beta website in exchange for $900 from MGI. But the record contains conversations between MGI and Brand that suggest an agreement to defame or tortiously interfere with Svanaco's business prospects. For example, when Neil Gilman asked Brand if it was possible to "shame" Svanaco into returning his money, Brand answered "yes" and sent Gilman a link to a negative review website that he had created and invited Gilman to make comments and edits. (Pl.'s RSMF ¶ 34.) Gilman later asked Brand for an update on the website's status and expressed his expectation that Svanaco would contact him after seeing it. (MGI's RSAF ¶ 12.) Similarly, after learning that Brand had posted negative content about Svanaco online, Gilman asked Brand, "Is now the time to contact them and ask them to refund our money?" (Pl.'s RSMF ¶ 43.) Gilman also reviewed some of the content that Brand posted and provided feedback, indicating that he wanted Svanaco to "feel intimidated by this review." (Id. ¶ 38.) Gilman also told Brand that he expected that his online posts would cause Svanaco to suffer losses of "$100k — 500k in the first 7-9 months" by deterring potential customers. (Id. ¶ 43.)
In addition, after Svanaco's counsel Reda contacted Gilman about Brand's posts, Gilman promptly informed Brand. (Id. ¶ 62) Brand then drafted a three-point response letter for Gilman, which he claimed would ensure that "nothing goes outside of plan." (MGI's RSAF ¶ 18.) In response, Gilman agreed to send Brand "any communication before it is sent to AE" and assured Brand that he would "not answer any question[s] about you." (Id.) Thereafter, Gilman followed Brand's advice about how to respond to Reda, sending
Finally, MGI points out that as early as November 28, 2015, it instructed Brand to stop his activity targeting Svanaco and remove the negative online posts. However, this purported "extinguish[ment]" of the conspiracy affects only the damages to which Svanaco is entitled; it does not affect MGI's liability for the conspiracy up to that point. See, e.g., United States ex rel. McGee v. IBM Corp., No. 11-C-3482, 2017 WL 4467458, at *3-4 (N.D. Ill. Oct. 6, 2017) (granting summary judgment to defendant only for time period after its withdrawal from conspiracy). Based on the record, a jury could find that prior to November 28, 2015, Brand had already committed at least one overt act in furtherance of the conspiratorial agreement. See Balfour v. Kline, No. 83 C 661, 1987 WL 6865, at *5 n.2 (N.D. Ill. Feb. 11, 1987) ("To escape liability, [defendant] would have had to withdraw from the conspiracy before any overt act was taken in furtherance of the conspiratorial agreement.") (citing United States v. Read, 658 F.2d 1225, 1232 (7th Cir. 1981)). Therefore, MGI's argument that it withdrew from any conspiracy with Brand in November 2015 does not entitle it to summary judgment as to Count VI.
MGI's motion for summary judgment as to Count VI is thus denied. Svanaco's civil conspiracy claim may proceed to the extent that it is based on MGI and Brand's conspiracy to defame Svanaco and interfere with its prospective economic advantage.
Finally, the parties have cross-moved for summary judgment on their respective breach of contract claims. Under Illinois law, a breach of contract claim has four elements: "(1) the existence of a valid and enforceable contract; (2) substantial performance by [the claimant]; (3) a breach by [the other party]; and (4) resultant damages." Dual-Temp of Ill., Inc. v. Hench Control, Inc., 821 F.3d 866, 869 (7th
Svanaco claims MGI breached the Agreement by failing to provide the product import information necessary for Svanaco to complete the website. Svanaco's "Statement of Work," which was acknowledged and signed by Gilman on March 12, 2013, stated that product import information was a "client deliverable," and MGI was required "to provide [a] product import spreadsheet containing all pertinent information about your products." (Pl./CounterDefendant's St. of Mat. Facts ("Pl.'s SMF") ¶ 16, Dkt. No. 193; Pl.'s SMF Ex. E.) MGI does not dispute that it failed to provide the product information, even though it knew the information was essential to the final launch of the website. (MGI's RSMF ¶¶ 29-31.) While MGI argues that it never refused to provide the information and simply needed more time, "[i]t is a basic tenet of contract law, recognized in Illinois, that where no time for performance is specified, the law implies a reasonable time." Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 690 (7th Cir. 2011). The record illustrates MGI knew by at least March 12, 2013 of its responsibility to provide the product import information, but it failed to do so for over a year. (MGI's RSMF ¶¶ 22-29.) Therefore, a reasonable jury could find that MGI's delay was unreasonable and constituted a breach.
Svanaco also claims MGI breached the Agreement by failing to make the third and final payment. However, the pricing section of the Agreement states that MGI was not required to make the final payment until the "launch of site," and the MGI website was never launched. Therefore, MGI did not breach by refusing to make that payment.
In its counterclaim, MGI alleges Svanaco breached the Agreement in multiple ways: refusing to complete the website unless MGI prepaid a portion of the final payment, removing MGI's access to the beta website, and refusing to spend 55 hours assisting MGI with the data-import process as promised. Svanaco, for its part, argues it is entitled to summary judgment on MGI's breach of contract counterclaim because at the time of these alleged breaches, MGI had already breached the contract by failing to provide the product import information.
It is correct that under Illinois contract law, "plaintiffs cannot succeed on a breach of contract claim unless they demonstrate their own performance of the contract's requirements." Catalan, 629 F.3d at 691. But Svanaco disregards the possibility that a reasonable jury could find MGI's delay in providing the product import information to be reasonable and therefore not a breach. In that case, MGI would not be foreclosed from asserting a breach of contract claim against Svanaco for conduct that occurred after that point. See id. ("On these facts, which party breached first is not a question with a clear answer."); see, e.g., In re Sage Enterp., Inc., No. 04 B 05548, 2008 WL
For the foregoing reasons, MGI's motion for summary judgment is granted as to Counts I and II and denied as to Counts III, IV, VI, and VII. Svanaco's motion for summary judgment as to MGI's counterclaim is denied.
18 U.S.C. § 1125(d)(1)(B)(i).
