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FLYNN v. HEALTH ADVOCATE

July 8, 2004.

KEVIN FLYNN, et al., Plaintiffs,
v.
HEALTH ADVOCATE, INC., et al., Defendants.



The opinion of the court was delivered by: ROBERT KELLY, Senior District Judge

MEMORANDUM

I. INTRODUCTION

Presently before this Court are two Motions; one is filed by the Plaintiffs, Kevin Flynn ("Flynn") and Healthcare Advocates, Inc. ("HAS, Inc.") (collectively the "Plaintiffs") and the other is filed by Defendant Nancy Conwell ("Conwell") in response to the Plaintiffs' Motion.*fn1 First, the Plaintiffs filed their Motion for Leave to File a First Amended Complaint on May 3, 2004. Subsequently, on May 21, 2004, Defendant Conwell filed a Motion for In Camera Review of Exhibit 1 in opposition to Plaintiffs' Motion for Leave to file a First Amended Complaint.

  II. FACTUAL AND PROCEDURAL BACKGROUND

  On June 26, 2003, Plaintiffs filed suit against Health Advocate, Inc. ("HA") as well as various individuals (collectively referred to as the "Defendants"),*fn2 whom the Plaintiffs allege are or were connected with HA in some fashion. In their Original Complaint, the Plaintiffs sought relief for misappropriation of trade secrets, unfair competition, tortious interference with existing and prospective business relations, fraud, breach of contract, unjust enrichment, conspiracy, violation of the Lanham Act, trademark/service mark infringement and copyright infringement. Pursuant to the January 13, 2004 Memorandum Opinion and Order, this Court dismissed the Plaintiffs' copyright infringement claim without prejudice.

  The underlying facts of the Original Complaint and claims are set forth in the January 13, 2004 Memorandum Opinion. See Flynn v. Health Advocate, Inc., No. 03-3764, 2004 WL 51929, at *1-2 (E.D. Pa. Jan. 13, 2004). However, to put the instant Motions into context, this Court will briefly recite the relevant facts in this Memorandum Opinion. Flynn formed HAS, Inc. in 1996 to provide advice and consultation services to patients and employers in their dealings with the healthcare industry. The Plaintiffs allege that the Defendants conspired to gather information from HAS, Inc. so that they could form their own rival corporation, namely HA. Thus, the claims in the Original Complaint arise from transactions between Flynn, acting as president of HAS, Inc., and various individuals, most of whom were or still are associated with HA. For example, in the Original Complaint, the Plaintiffs state that at one point, merger/co-marketing discussions began between HAS, Inc., HA and their representatives. These discussions eventually led to a written non-disclosure agreement in which HAS, Inc. forwarded its marketing position, marketing strategies, business strategies, sales and marketing opportunities, business plans and other pieces of information to HA. However, the Plaintiffs allege that the real reason behind requesting the information in the first place was to help establish a company to rival HAS, Inc.

  On May 3, 2004, the Plaintiffs submitted a Motion for Leave to File a First Amended Complaint. Plaintiffs' proposed Amended Complaint attempts to accomplish four goals. First, Plaintiffs "wish to make a minor amendment to its Lanham Act claim to clarify that it is also seeking damages for . . . `passing off' of Plaintiffs' materials through the use of confusingly and substantially similar marketing materials." (Pls.' Mot. for Leave to File First Amend. Compl. ¶ 6). Second, Plaintiffs "wish to make a minor amendment by adding a claim for state law trademark infringement." (Id. ¶ 7). Third, Plaintiffs seek to amend their complaint so as to "identify the specific original work that was the subject of copyright infringement." (Id. ¶ 5). Finally, "Plaintiffs seek leave to add an additional party as a defendant for conduct occurring during the litigation." (Id. ¶ 8). The Defendants have only objected to the Plaintiffs' third and fourth proposed amendments to the Complaint, thus Plaintiffs other amendments will be granted.*fn3

  In the January 13, 2004 Memorandum Opinion, this Court stated that the Plaintiffs' Original Complaint failed to plead "what specific original works are the subject of the copyright claim." Flynn, 2004 WL 51929, at *12. Additionally, this Court stated that properly pleading the specific original work that is the subject of the copyright claim is often times accomplished by attaching the Copyright Registration to the Complaint. Id. (citing CRA Mktg., Inc. v. Brandow's Fairway Chrysler-Plymouth-Jeep-Eagle, Inc., No. 98-6485, 1999 WL 562755, at *1 (E.D. Pa. July 27, 1999); Johnson v. Katz, No. 94-6693, 1996 WL 107402, at *2 (E.D. Pa. March 7, 1996)). In their proposed Amended Complaint, the Plaintiffs have attached the Copyright Registrations which they allege are the subject of their copyright infringement claims.

  The other amendment at issue is the addition of another Defendant and the claims associated with this proposed new Defendant. Specifically, the proposed Amended Complaint seeks to bring in new claims against the law firm of Harding, Earley, Follmer & Frailey (the "Law Firm"). At one time, the Law Firm represented all of the Defendants in this case, however, the Law Firm now only represents one of the Defendants, namely Conwell. The new proposed claims against the Law Firm do not arise from the transactions or occurrences that formed the basis of the Original Complaint, but instead, arise from the alleged conduct by the Law Firm after the Original Complaint was filed on June 26, 2003.

  The Plaintiffs propose five new counts against the Law Firm. Specifically, the new counts being proposed against the Law Firm are: 1) Violation of the Digital Millennium Copyright Act; 2) Breach of Contract; 3) Violation of the Stored Wire and Electronic Communications and Transactional Records Access Act; 4) Violation of State Law for Computer Theft and Unlawful Duplication; and 5) Violation of the Computer Fraud and Abuse Act. These proposed new counts arise from the alleged conduct by the Law Firm from July 8, 2003 through July 15, 2003. The facts alleged by the Plaintiffs in the proposed Amended Complaint giving rise to the five new counts against the Law Firm are as follows as set out by the Plaintiffs:
49. Between July 8, 2003, and July 15, 2004, the Law Firm" hacked" into [HAS, Inc.'s] archived materials on a website known as www.archive.org. The forgoing website is effectively a library of all web pages and other information which appears on the internet. The website gathers information contained on the internet, which is thereafter archived by the website and can be searched through search engines on the website.
50. Not all of the information contained on www.archive.org is available to the public. Any owner of a website can notify www.archive.org that it does not want its past website material to be made public on www.archive.org and, according to the policies and procedures of the website, as well as the security safeguards implemented by www.archive.org and each website's owner's terms of use, such information is not available to the general public.
51. [HAS, Inc.] notified www.archive.org that it wanted its archival material to remain private and confidential and www.archive.org complied with [HAS, Inc's] request by blocking access to [HAS, Inc.'s] archival information.
52. As a result of the security put into place by www.archive.org, any person attempting to retrieve information regarding [HAS, Inc.] received a message advising the person attempting to obtain the information that the owner of the website had elected to deny access to the site to third parties.
53. The Law Firm attempted to obtain information regarding [HAS, Inc.] through www.archive.org; however, when it attempted to obtain the information it received the notice that the information was not available at the request of the owner.
54. Rather than honor this notice, or the terms of use on [HAS, Inc.'s] website, or www.archive.org's website, the Law Firm devised a methodology to defeat the security system that was put into place by www.archive.org.
55. Computer records demonstrate that between July 8 and July 15, 2003, the Law Firm made approximately 849 attempts to access the information regarding [HAS, Inc.] through www.archive.org. Notwithstanding the fact that the Law Firm knew that security was in place to prevent it from obtaining access to [HAS, Inc.'s] information, and the Law Firm actually received notices from www.archive.org that the information was not available, the Law Firm devised a methodology, using multiple computers at its offices, to defeat the security which was put into place by the website for the benefit of companies like [HAS, Inc.].
56. The Law Firm was successful in breaching the security put into place by www.archive.org on approximately 112 occasions. From a technological standpoint, this meant that the Law Firm was also receiving information directly from [HAS, Inc's] website on each of these occasions, as www.archive.org retrieved or attempted to retrieve information from [HAS, Inc.'s] website each time it was successful in breaching the security. It was a result of this communication between www.archive.org and [HAS, Inc.'s] website that [HAS, Inc.] obtained the web logs memorializing the hacking activity. This conduct constituted unlawful" hacking" activity in violation of both federal and state law, as described more fully below.
57. The Law Firm was successful in executing old HTML pages from the [HAS, Inc.] website without authorization from www.archive.org or [HAS, Inc.], and made copies of the copyrighted materials contained therein.
(Pls.' Mot. for Leave to File First Am. Compl. at Ex. 2). As a result of these newly alleged facts, the Plaintiffs have brought the five new counts against the Law Firm. The Law Firm, through Conwell, has filed a Motion for In Camera Review of what it considers attorney work product of their current client, Conwell, and their former clients, the other individual Defendants and HA. The Law Firm, through Conwell, asserts that this information was prepared by the Law Firm after the commencement of the litigation.

  III. STANDARD

  A motion for leave to file an amended complaint is governed by Federal Rule of Civil Procedure 15. This rule states that leave to amend "shall be freely given when justice so requires." FED. R. CIV. P. 15(a). While leave to amend should be freely granted, the United States Supreme Court (the "Supreme Court") has also noted times where such an amendment might not be allowed, "such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the amendments, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182 (1962). Additionally, the Supreme Court has stated that "the grant or denial of an opportunity to amend is within the discretion of the District Court." Id. As one court has noted, "where, however, the complaint, as amended, would radically alter the scope and nature of the case and bears no more than a tangential relationship to the original action, leave to amend should be denied." Miss. Assoc. of Coops. v. Farmers Home Admin., 139 F.R.D. 542, 544 (D.D.C. 1991).

  IV. DISCUSSION

  This Court will now discuss the two amendments to the ...


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