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Grant Manufacturing v. Gregory Mcilvain

September 23, 2011

GRANT MANUFACTURING &
ALLOYING, INC.
v.
GREGORY MCILVAIN, ET AL.



The opinion of the court was delivered by: Juan R. Sanchez, J.

MEMORANDUM

Plaintiff Grant Manufacturing & Alloying, Inc. (Grant) brings claims against former Grant employees Gregory McIlvain and Darryl Williams pursuant to the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, and Pennsylvania law. McIlvain and Williams have each filed a motion for summary judgment as to all claims. For the reasons set forth below, summary judgment will be granted in Defendants' favor as to Grant's CFAA claims. Grant's remaining state law claims will be dismissed without prejudice pursuant to 28 U.S.C. § 1367(c)(3).

FACTS*fn1

Grant is a primary manufacturer of tin, tin alloys, and specialty products servicing the electronics, plating, and tin chemical industries. Grant sells its products both to end-users of the products and to distributors who resell the products to end-users. Although Grant does not have long-term contracts with its customers, the majority of Grant's business is from repeat customers.

McIlvain and Williams began working for Grant as sales representatives in 1986 and 1988, respectively. Neither had a written employment agreement or a non-compete agreement with Grant. No Grant employees have such agreements with the company.

Grant maintains an Alpha 5 computer database system, which includes an order entry system and a purchase order system.*fn2 McIlvain developed the order entry system, which was later refined by Grant's independent IT consultant, Jeffrey Fried. Fried set up the purchase order system. Both systems are password-protected, and, during McIlvain's and Williams's tenure at Grant, each of the company's sales representatives had passwords for both systems.*fn3 In addition, McIlvain and Williams each had the other's password so they could cover for one another when one of them was on vacation.

Grant's purchase order system includes a function which prepares and sends automatic price updates to Grant's customers by email, providing the recipient with current pricing information for the products it typically purchases on a scheduled basis.*fn4 Grant did not require its sales representatives to use the automatic price update function. Rather, individual sales representatives would determine, in consultation with their customers, whether and how often a customer received automatic price updates. McIlvain used the purchase order system to send automatic price updates to some of his customers, but Williams did not.

The pricing reflected in Grant's automatic price updates is a function of several factors, including raw material costs, the premium on raw materials, manufacturing costs, transportation costs, and a gross profit factor. Assigning a value to pricing factors such as gross profit or manufacturing cost was a sales representative's function.*fn5 McIlvain, Williams, and Tyler each had the ability to change these factors for their customers' accounts. Only McIlvain (and Fried) had the ability to change the pricing factors for distributor pricing.

In the spring or summer of 2008, McIlvain and Williams began preliminary discussions with representatives of Nathan Trotter and Company, Inc. (Trotter), one of Grant's major competitors, regarding the possibility of going to work for Trotter. On February 19, 2010, McIlvain and Williams resigned from Grant and accepted sales positions with Trotter.

Prior to resigning, McIlvain asked Fried how to remove his name from the automatic price updates that were scheduled to go out under his name, in the event he left Grant.*fn6 Fried told McIlvain he did not feel he could remove McIlvain's name for him. On February 18, 2010, the night before he resigned, McIlvain accessed Grant's purchase order system and marked for deletion 63 distributor and customer records. By marking the records for deletion, McIlvain rendered them inactive by suppressing them from view. He did not permanently delete the records from the system, a process known as "packing," Fried. Dep. 51-52, although he knew how to "pack" data from the system. At his deposition, McIlvain testified he marked the records for deletion to prevent automatic price updates from going out with his name on them because he was going to work for a competitor and did not want to have his name associated with two different companies in the same industry.

McIlvain Dep. 98, 104, Dec. 28, 2010. Both Thompson and Guarini testified that had McIlvain asked them to take his name off of the automatic price updates, they would have done so. Thompson Dep. 279; Guarini Dep. 358.

The same day McIlvain and Williams resigned, Fried came to Grant's offices to work on transitional issues relating to their departure. As part of this work, Fried discovered the distributor and customer records that McIlvain had marked for deletion.*fn7 Fried was able to restore all of the records marked for deletion by simply entering the command "recall all." By Fried's account, this undeletion process was "simple," taking only "15 seconds." Fried Dep. 94. He discovered no evidence any records had been permanently deleted from the system.

Fried also undertook various other projects relating to the transition, including changing the passwords and security settings within the system, removing or changing McIlvain's and Williams's names within the system, and assisting Grant in sending out an announcement to customers regarding McIlvain's and Williams's departure and implementing a blanket price reduction. Grant also asked Fried to look at the data in the Alpha 5 system, including the pricing data in the accounts managed by McIlvain and Williams, to determine whether there had been any changes over time.*fn8

Fried compiled a number of reports for Grant showing the available historical data regarding changes in the manufacturing cost and gross profit pricing factors for distributors and customers, and showing changes in the number of customers marked for deletion at various points in time. Fried's reports reflect that in some instances the gross profit and/or manufacturing cost factors were increased for certain products and certain Grant customers between February 15 and 19, 2010, in the week before McIlvain and Williams left Grant. See Fried Dep. Ex. 15. Because of the limitations of the data, Fried could not determine exactly when during that period the changes were ...


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