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HCC Insurance Holdings, Inc. v. Flowers

United States District Court, N.D. Georgia, Atlanta Division

February 22, 2017

HCC INSURANCE HOLDINGS, INC., Plaintiff,
v.
VALDA FLOWERS, CREATIVE RISK UNDERWRITERS, LLC, MICHAEL REMEIKA, Defendant.

          OPINION AND ORDER

          WILLIAM S. DIJFFEY, JR. UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants Valda Flowers (“Flowers”), Creative Risk Underwriters, LLC (“CRU”), and Michael Remeika's (“Remeika”) (collectively, “Defendants”) Motion for Summary Judgment [87].

         I. BACKGROUND[1]

         This case arises out of Flowers' and Remeika's resignation from non-party HCC Life Insurance Company (“HCC Life”) and their operation of a competing business, CRU. On September 16, 2015, HCC Insurance Holdings, Inc. (“HCC”) initiated this action, claiming that Flowers, at the direction of Remeika, misappropriated HCC's trade secrets to establish CRU and compete with HCC. HCC claims Flowers engaged in a variety activities that indicate that she misappropriated HCC's trade secrets.

         A. Flowers' Activity

         1. Email Activity

         On August 11, 2015, 8, 683 emails from Flowers' HCC Life email account were moved to her H: Drive on HCC's network. 1, 384 of those emails were then deleted. HCC claims this activity was suspicious, including because Flowers had never moved emails to her H: Drive before, her email box was not close to capacity, and she deleted emails from this email box on the same day. HCC's former employee, Shalla Miguez, testified that she helped Flowers move the emails after Flowers asked her to help clean up her inbox, and she asked to be shown how to create folders to save relevant emails.

         2. Hot Sheet Activity

         On August 12, 2015, Flowers copied to her H: Drive on HCC's network around 500 “Hot Sheets” from HCC Life's underwriting drive. She then transferred them to the local C: Drive of her HCC computer. Hot Sheets are excel spreadsheets that list prospective new business and existing policies up for renewal. HCC claims Flowers' activity was suspicious because it was not part of her job duties to update all of HCC's Hot Sheets, and because, prior to August 12, 2015, Flowers only had four Hot Sheet folders located in the C: Drive of her HCC computer. Defendants claim that updating Hot Sheets was part of Flowers' regular job duties, and note that, on the same day the Hot Sheets were moved, Flowers received an email requesting that all Hot Sheets be updated. Defendants also note that Flowers' history of working with Hot Sheets shows she often copied them to her local HCC computer.

         On August 20, 2015, the night before she resigned, Flowers deleted over 500 Hot Sheets from the C: Drive of her HCC computer. HCC claims this activity is suspicious because a forensic review of Flowers' past practices showed no evidence of any other mass deletions of documents. Defendants note that all of the “deleted” Hot Sheets were in the recycle bin of Flowers' HCC laptop, and that HCC had the ability to retrieve the files.

         3. Return of HCC Computer

         On Friday, August 21, 2015, Flowers emailed her resignation letter to her supervisor at HCC Life. That afternoon, HCC Life's Human Resources Manager, Tim Swoger, called Flowers three times to request that she return her HCC computer. Flowers returned her computer around 4:15 p.m. that day, after asking Mr. Swoger whether she could keep her HCC computer over the weekend. HCC claims this activity was suspicious, including because Flowers logged into HCC Life's networks remotely after 10 p.m. the night before she resigned, and again throughout the day of her resignation. HCC contends that Flowers was attempting to access the HCC network to complete her expense report, because she had $41, 272.00 in reimbursable expenses and had not submitted an expense report since June 2015.

         B. CRU

         A few weeks before they both resigned, Flowers told Remeika “she was thinking of becoming an Uber driver” and she “express[ed] that she was unhappy” with her employment at HCC. (Remeika Dep. [93.3] at 30:13-18). During that same conversation, Remeika told Flowers he was thinking of starting his own company, and Flowers said she would like to join him if he did. (Id. at 30:19-31:24). Though Remeika also stated that the two of them “talked about being partners[, ]” (Id. at 32:19), the context of Remeika's testimony is clear that Flowers initiated the idea of joining Remeika. Flowers testified that she told Remeika she was dissatisfied with her job at HCC. (Flowers Dep. [87.7] at 36:6-37:23). She told him that she “wanted to drive for Uber or somebody like that. I was ready to quit.” (Id. at 38:6-7). Remeika “told [her] he was thinking about doing something else and would I want to be a partner. We were thinking about being partners. But we had-I had talked about leaving [HCC Life] for-on and off for a couple of years.” (Id. at 38:11-16). Flowers testified that, prior to the conversation, she had sent out résumés, and had a résumé posted on Career Builder for “forever.” (Id. at 38:19-23). On August 3, 2015, a few weeks before the two resigned, Remeika and Flowers set up CRU. The two researched the viability of starting CRU “on [their] own time.” (Remeika Decl. [87.4] ¶ 2). Their activities included creating a business plan, discussing potential vendors, estimating operating expenses, answering questionnaires needed to obtain approval from carriers to use their paper for CRU, creating a list of CRU's needs, and setting up a domain name. (See [93.2] ¶¶ 32-39). On August 21, 2016, Flowers and Remeika resigned.[2]

         CRU competes with HCC. A July 2015 CRU strategy document states that CRU's strategy was to “cherry-pick” accounts from HCC. HCC claims that CRU (1) was formed from the ground up in approximately two months, and “stole” its first account from HCC one month after Remeika and Flowers resigned; and (2) HCC subsequently stole seventeen (17) former HCC Life accounts within the first five months of CRU's existence. HCC contends that it is “inconceivable, in an industry with high barriers to entry, that a small, start-up company could have had such immediate success without using HCC's trade secrets.” ([93] at 9).

         C. Mr. Flowers

         Flowers' husband, Jeff Flowers, is an experienced IT professional with 35 years of experience, and he assisted CRU with IT matters. HCC claims Mr. Flowers helped Flowers misappropriate HCC trade secrets. HCC claims Mr. Flowers “could have utilized several methods to transfer HCC's trade secrets to [Flowers'] personal devices without leaving any evidence on her HCC computer, ” including by using Gmail, using Citrix, or by imaging the hard drive of Flowers' HCC computer.

         D. Allegedly Destroyed Evidence

         HCC claims that, after receiving the lawsuit papers in this case, and after the Court ordered Flowers to produce her personal computer, Defendants destroyed: (1) data on Flowers' personal laptop; and (2) a thumb drive that was plugged into Flowers' personal computer on September 20, 2015 (“Thumb Drive”).

         1. Thumb Drive

         Mr. Flowers claims he inserted his personal Thumb Drive on September 20, 2015 to back up data on Flowers' personal laptop, that the Thumb Drive was corrupted and did not work, and that he therefore threw it away. Mr. Flowers tried to plug the Thumb Drive into the laptop twice, but the computer did not appear to recognize the Thumb Drive since he did not see an auto-popup or auto-play message. Mr. Flowers believed the Thumb Drive was defective, and he discarded the Thumb Drive the same day by throwing it into the trash. HCC contends Mr. Flowers' claim is contradicted by Defendants' own computer forensic expert, who confirmed that, the second time Mr. Flowers inserted the thumb drive, it worked properly. The second time Mr. Flowers plugged it in, he removed it after 38 seconds. Two days later, on September 22, 2015, Mr. Flowers used a different thumb drive to copy iTunes and photograph folders that he claims he intended to copy on September 20, 2015.

         2. Personal Computer

         On September 19, 2015, and again on September 22, 2015, the day after the Court ordered Flowers to produce her personal computer, the computer wiping program CCleaner was manually run on Flowers' personal laptop. CCleaner is a program that can be used to clean the registry of a computer, which becomes corrupted during updates to the computer. The parties disagree how often the CCleaner program was run manually, with Defendants contending it had been run manually at least fifteen (15) times, and HCC claiming the program had only been run manually once before in September 2013. HCC also claims the program was run a total of eleven times from September 19 through September 22, whereas it had previously only been run a total of four times. During the time period of September 19 through September 22, 2015, the laptop had a “blue screen” crash, and there was an update to Windows and/or the iTunes program. Mr. Flowers claims he ran the CCleaner registry cleaning function to get the laptop to properly run. Defendants claim the laptop is an unstable machine that frequently crashes, and was originally purchased in 2008. Because of its unreliability, Defendants claim they use it mostly to store Flowers' iTunes account and photograph folders.

         HCC claims that, on September 22, 2015, a program called Defraggler was run on the laptop. Defraggler is a program that overwrites deleted files in unallocated space on a computer's hard drive. Mr. Flowers used Defraggler routinely on the laptop for maintenance, and Defendants contend that the last time Defraggler was used on the laptop was on June 9, 2015, months before the events relevant to this action.

         On September 24, 2015, the day before Flowers turned her personal computer over to Greg Freemyer, the neutral forensic examiner jointly selected by the parties (“Neutral”), a program called WinUndelete, which is used to recover deleted files, was run on her personal computer. HCC claims Mr. Flowers used WinUndelete to confirm that he had destroyed evidence. Mr. Flowers claims he ran the program off of his work thumb drive to familiarize himself with it for future use for work purposes.

         E. Discovery and Forensic Examinations

         During discovery, Flowers turned over all of her personal and work computers, electronic storage devices, email accounts and cloud storage accounts to the Neutral. After running extensive searches over several weeks, the Neutral did not locate any HCC confidential information or trade secrets. The parties then sent all of the data collected by the Neutral to each party's respective forensic expert. HCC's forensic expert, Davis Roose, did not identify any document, information, files, or other data taken from HCC by Flowers.

         HCC subpoenaed Google, Microsoft, and Citrix to produce emails and documents from Flowers', Remeika's, and Mr. Flowers' accounts from May 2015 through November 2015, and deposed several witnesses, including Mr. Flowers and his son. HCC has not presented any evidence that HCC's Hot Sheets or other sensitive information were resident on any electronic device or storage medium in Flowers' custody, possession, or control. It claims that Defendants “were able to effectively cover their tracks to make it impossible to determine exactly what HCC information they misappropriated.” ([93] at 1-2).

         F. Business Confidentiality Policy

         HCC claims Flowers breached its Business Confidentiality Policy (“Policy”). The Policy defines “Confidential Information” to include “all information relating to [HCC] or its operations which is not generally known to people that are not employees of, or otherwise associated with, [HCC] whether or not designated as confidential.” ([93.5] at 20). The Policy does not include a time limitation.

         G. Procedural History

         On September 16, 2015, HCC filed its Complaint. On June 30, 2016, HCC filed its Revised Second Amended Complaint [83] (“RSAC”). In it, HCC asserts the following claims: (1) misappropriation and theft of trade secrets, in violation of the Georgia Trade Secrets Act, O.C.G.A. § 10-1-760, et seq. (“GTSA”); (2) breach of contract; (3) tortious interference with contract; (4) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq. (“CFAA”); (5) breach of fiduciary duty; and (6) attorneys' fees under O.C.G.A. § 13-6-11.

         On July 29, 2016, HCC filed its Motion for Sanctions for Spoliation, seeking an adverse inference against Defendants for their alleged destruction of electronic evidence. On July 29, 2016, Defendants filed their Motion for Summary Judgment.

         On January 30, 2017, the Court issued an order [121] denying HCC's Motion for Sanctions for Spoliation. The Court found that “HCC's Motion is based on a series of events it casts as suspicious, but HCC offers only bare speculation that any of its trade secrets or other data were actually transferred from HCC Life's systems to Flowers' personal laptop.” ([121] at 12).

         II. DISCUSSION

         A. Legal Standard

         Summary judgment is appropriate where the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56. The party seeking summary judgment bears the burden of demonstrating the absence of a genuine dispute as to any material fact. Herzog v. Castle Rock Entm't, 193 F.3d 1241, 1246 (11th Cir. 1999). Once the moving party has met this burden, the nonmoving party must demonstrate that summary judgment is inappropriate by designating specific facts showing a genuine issue for trial. Graham v. State Farm Mut. Ins. Co., 193 F.3d ...


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