A former employee of the upscale outdoor furniture designer and manufacturer Brown Jordan recently failed in his bid to pursue whistleblower retaliation claims against the company and also found himself liable for snooping on his boss’s (and other’s) emails. A three-judge panel of the Eleventh Circuit recently affirmed the District Court’s summary judgment for the employer on the former employee’s purported whistleblower claim, concluding that his report of alleged “misconduct” by his employer’s senior management was not actionable. In their unanimous decision, the judges also affirmed the District Court’s judgment in favor of the employer under the Stored Communications Act (SCA) and Computer Fraud and Abuse Act (CFAA) due to the employee’s spying on the emails of his superiors, colleagues, and subordinates without authorization over a period of months. While both the former employee and former employer traded accusations of wrongdoing during the course of the litigation, after summary judgment, trial and appeal, it is only Carmicle, the former employee, who has been found by the district court and the circuit to have done anything improper. Carmicle v. Brown Jordan Int’l, Inc., et al., No. 16-11350 (11th Cir. Jan. 25, 2017)

Background

As described in the district court and Eleventh Circuit opinions, Christopher Carmicle, who formerly ran two operating companies of Brown Jordan (a company that designs, manufactures, and sells furniture worldwide), engaged in a months-long email spying campaign stemming from his desire to know whether a subordinate employee he considered difficult to manage was communicating directly with the Company’s CEO. From there, it snowballed, as Carmicle repeatedly accessed other employees’ email accounts with a generic password (being used by the Company to transition to a new email service provider) and took screenshots with his personal iPad of hundreds of emails over a period of months. Not long thereafter, in an attempt to save his job, knowing that his expenses and the poor performance of the companies he ran were on the agenda at the meeting of Brown Jordan’s Board of Directors, Carmicle wrote a letter to the Board of Directors accusing senior management of wrongdoing. The Board hired an independent investigator who determined Carmicle’s allegations of misconduct by senior management to be meritless. As the District Court noted, once fully apprised of the facts, none of the Board members were concerned with management’s actions, and indeed the Company’s outside audit firm validated this view. The investigator also reported to the Board Carmicle’s improper accessing of emails and the fact that Carmicle had spent in excess of $100,000.00 in Company funds for unauthorized entertainment expenses. The Board of Directors decided that Carmicle’s employment should be terminated for cause, primarily due to his accessing others’ email accounts. The Company fired Carmicle for cause and sued him for violating the SCA and CFAA. Carmicle filed a suit of his own asserting, among others, claims of wrongful discharge and retaliation for his alleged exposure of the claimed misdeeds of management.

District Court’s Decision

The District Court granted summary judgment for Brown Jordan and dismissed seven of Carmicle’s eleven claims (another was rendered moot). Among the claims dismissed were Carmicle’s wrongful discharge claim and his claim that senior management had somehow violated their fiduciary duties. As to that claim, the District Court pointed to the absence of any evidence that the acts of management had done anything to harm any of Brown Jordan’s shareholders. Due to Carmicle’s spoliation and other litigation misconduct, the District Court also held a two-day evidentiary hearing on Brown Jordan’s motion for sanctions and found that Carmicle’s destruction of potentially relevant evidence was done in bad faith and that his explanations for doing so were not credible, later holding that this litigation misconduct warranted an adverse inference against Carmicle.

Following a nine-day bench trial, the District Court held that Carmicle violated the SCA and CFAA when he surreptitiously accessed emails of others without authorization and awarded Brown Jordan over $76,000 in actual and punitive damages and, separately, $15,000 worth of attorneys’ fees and costs for Carmicle’s litigation misconduct, as well as attorneys’ fees and costs under the SCA (the determination of the amount for which is pending). The District Court dismissed all of Carmicle’s remaining claims, finding them meritless and held that Carmicle’s email misconduct amounted to “cause” under the terms of the agreements between Carmicle and Brown Jordan, resulting in Carmicle’s forfeiture of his equity interests and severance under the terms of those agreements.

Eleventh Circuit’s Affirmance

Carmicle appealed contending that the District Court erred in: (i) finding for Brown Jordan on its SCA and CFAA claims, (ii) granting summary judgment for Brown Jordan on Carmicle’s retaliatory discharge claim, and (iii) holding that Carmicle’s email snooping amounted to “cause” termination under the terms of his agreements with the Company. After full briefing of the issues with most focus by Carmicle on the SCA claim, the Eleventh Circuit heard oral argument, which primarily centered on Brown Jordan’s claim under the SCA and Carmicle’s insistence that because the emails he accessed had already been opened by their intended recipients, these emails were not in “electronic storage” as this term is defined by the SCA.

On January 25, 2017, the Eleventh Circuit issued its unanimous 25-page opinion affirming the District Court’s ruling in all respects. Significantly, on a matter of first impression, the Eleventh Circuit has now joined the Fourth and Sixth Circuits in holding that a “loss” under the CFAA includes responding to the offense, even if there is no interruption of service. On the SCA claim, the Eleventh Circuit concluded that Carmicle did not have authorization to exploit a generic password and surreptitiously access emails of others and that he failed to preserve the unopened-versus-opened email issue for appeal. The Eleventh Circuit further held that the District Court correctly granted summary judgment for Brown Jordan on Carmicle’s wrongful discharge claim and correctly interpreted the “cause” provision of the agreements between Carmicle and Brown Jordan in determining that Carmicle’s misconduct amounted to “cause.”

Implications

This is a good decision for employers as it stands for the idea that employees do not have an unlimited right to access and take company communications for their own purposes. It also provides valuable precedent for employers seeking to fight back against the rampant “self-help” activities by current and former employees. Employers should review their computer and electronic communications policies to ensure that they make it plain that employees are not authorized to search or access employer’s documents, e-mails, and any other data unless they have express permission to do so. Finally, this case represents a meaningful development of the law under the CFAA in the Eleventh Circuit, as it makes clear (consistent with the law in the Fourth and Sixth Circuits) that a “loss” under the CFAA includes responding to the offense, even if there is no interruption of service.