PhoneDog, LLC v. Kravitz [1]

PhoneDog, LLC, an "interactive mobile news and reviews resource," filed suit against former employee Noah Kravitz on July 15, 2011, for ownership of a Twitter account Kravitz used while he was employed by PhoneDog. As a product reviewer for PhoneDog, Kravitz was allegedly given use of a Twitter account with the handle @PhoneDog_Noah to promote PhoneDog's services. PhoneDog claimed that after his employment ended, Kravitz changed the Twitter handle to @noahkravitz and continued use of the account, even though PhoneDog requested Kravitz relinquish use.

The complaint [2] asserts four claims for relief. First, PhoneDog alleged that Kravitz willfully and intentionally obtained and misppropriated confidential information from PhoneDog, primarily the passwords to its Twitter accounts. According to PhoneDog, this information "would be of substantial value to PhoneDog's competitors" if it leaked. PhoneDog claimed that Kravitz used this confidential information to his own advantage, constituting trade secret misappropriation.

The second and third claims for relief allege that Kravitz intentionally and negligently interfered with PhoneDog's prosepctive economic advantage by using the confidential information to disrupt PhoneDog's business with current and prospective users. 

Finally, PhoneDog claimed that Kravitz unlawfully converted the Twitter account to his own use by changing the handle, even after PhoneDog requested that he relinquish the account.

PhoneDog requested that the court issue a temporary restraining order, preliminary injunction, and permanent injunction preventing Kravitz from using its confidential information. Additionally, PhoneDog asserted it suffered $340,000 in compensatory damages as a result of the alleged conversion. To arrive at this figure, PhoneDog assumed that, according to industry standards, Twitter followers are valued at $2.50 per month each. Since Kravitz's account has approximately 17,000 users, PhoneDog has suffered damages of $42,500 per month since October 2010.

On October 4, 2011, Kravitz moved to dismiss [3] the complaint for lack of subject matter jurisdiction under FRCP 12(b)(1), and failure to state a claim under FRCP 12(b)(6). On the jurisdictional issue, Kravitz asserted that the amount in controvery, if any, could not exceed $8,000, which is under the statutory limit, a federal court could not hear the case. Kravitz used sites such as tweetvalue.com and whatsmytwitteraccountworth.com to value the account.

Kravitz also claimed that PhoneDog could not satisfy the misappropriation of trade secrets claim, because any information obtained by Kravitz (including the identity of the account's followers and its password) are not trade secrets under California law. Regarding claims of intentional and negligent interference with prospective economic advantage, Kravitz alleged that PhoneDog could not establish the existence of a current economic relationship between PhoneDog and the Twitter account followers, an essential element of each claim. Finally, Kravitz contended that PhoneDog's complaint did not establish ownership or the right to possess the Twitter account, which would require the court to dismiss the conversion claim.

After both PhoneDog and Kravitz filed subsequent pleadings related to the motion to dismiss (PhoneDog Response [4]; Kravitz Reply [5]), the court issued an order [6] granting in part and denying in part the motion. The court denied the motion with respect to lack of jurisdiction, stating that the determination of whether the court has subject matter jurisdiction is so tied up with PhoneDog's claims that it could not be resolved in this early stage. Turning to the substantive claims, the court granted Kravitz's motion with respect to the claims of intentional and negligent interference with prospective economic advantage, finding that PhoneDog failed to assert essential elements of the claim, including the existence of economic relationships and a duty of care. The court denied, however, the motion with respect to the misappropriation of trade secrets and conversion claims. The court also granted PhoneDog leave to amend its complaint.

The amended complaint [7], filed on November 29, 2011, alleges that PhoneDog has economic relationships with its users, including CNBC and Fox News. The amended complaint also claimed that Kravitz owed a duty of care to PhoneDog as a former agent of the company.