NCMIC Financial Corp. v. Artino
638 F.Supp.2d 1042
In the United States District Court for the Southern District of Iowa
Case Number 4:07-cv-00204-JEG
Before District Judge J.E. Gritzner
Decided on July 28, 2009

Relevancy of the Case: Termination of authorised access when an employee acts with the intention to defraud the employer

Statutes and Provisions Involved

• The Computer Fraud and Abuse Act, 18 U.S.C. § 1030

Relevant Facts of the Case

• NCMIC is a subsidiary of a financial services holding firm specialising in providing professional liability insurance to chiropractors. A majority of NCMIC’s customers originate from healthcare vendors that recruit them to buy or lease their equipment.
• Artino, the first defendant, began working in the lease financing industry in 1984. He co-founded Professional Capital Group (PCG) with Scott Stewart. PCG was an equipment leasing company that provided direct base loans to service healthcare providers via the Internet.
• PCG established a business partnership with NCMIC. This partnership allowed PCG to write leases by providing a line of credit.
• In June 2003, NCMIC purchased PCG and appointed the first defendant as the vice president and general manager of NCMIC’s equipment financing division.
• In 2006, he established Pro Funding Group (PFG), the fourth defendant. PFG was a direct competitor to NCMIC and was a leasing business for ProSolutions, Inc. (PSI).
• As an employee of NCMIC, he attended a trade exhibition in 2006. He obtained a spreadsheet containing information about NCMIC customers and exhibition attendees. He forwarded this spreadsheet to his own email address, which he used to help LEAF, another company in this market segment.
• Artino and Kerr, the second defendant, obtained the credit score information for this spreadsheet using NCMIC’s customer system. They also assisted PSI in the placement of LEAF leases.
• The plaintiff has accused the first defendant of using confidential information to broker leases with competitors.

Prominent Arguments by the Counsels

• The plaintiff’s counsel contended that the first defendant used his access to breach his duty with the intent to defraud NCMIC. This act violates Section 1030(e)(6) of CFAA. NCMIC suffered losses compensable under Section 1030(c)(4)(A)(i), establishing cause of action against Artino.
• The defendants’ counsel argued that liability arises only when access is unauthorised and information is misappropriated. However, the first defendant had the authority to access information contained in the spreadsheet.

Opinion of the Bench

• Considering a broad interpretation of Section 1030(e)(6), the defendant’s intention to defraud NCMIC makes his access unauthorised.
• His actions to send emails containing information about NCMIC customers occurred without NCMIC’s authorisation. This satisfies the third element of a Section 1030(a)(2)(C) claim.

Final Decision

• The court ordered the first defendant to pay $638,827 plus interest for computer fraud, breach of employment and severance agreement, misappropriation of trade secrets, and breach of fiduciary duty.
• Further, the fourth defendant shall pay $436,384 for tortiously interfering with the contract between the plaintiff and the first defendant.

Linet Christina Thomas, an undergraduate student at Lords Universal College of Law, and Ojasvi Gupta, an undergraduate student at the Faculty of Law, Banaras Hindu University, prepared this case summary during their internship with The Cyber Blog India in May/June 2022.