Watters v. Breja

Background

Andrew G. Watters sued Siddharth Breja, his former client, and named American Express and JP Morgan Chase Inc. as nominal defendants. Watters alleged that, after briefly representing Breja in divorce proceedings, Breja ended the representation and obtained refunds of payments previously made to Watters by submitting successful but fraudulent refund requests to the nominal bank defendants. Watters also alleged that the requests caused Chase to close his client trust account.

Watters asserted a claim under the Computer Fraud and Abuse Act, a federal anti-hacking law, and state-law claims for fraud, breach of contract, and violations of California’s Unfair Competition Law. He sought a declaration, damages from Breja, and an injunction requiring Breja and the nominal banks to return the disputed funds and reopen the account.

Breja’s Motion to Dismiss

The court treated Breja’s argument that the Computer Fraud and Abuse Act claim was frivolous as a motion under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. The court held that Watters had not plausibly alleged a violation of 18 U.S.C. § 1030(a)(4).

That provision addresses knowingly accessing a protected computer without authorization or exceeding authorized access while intending to defraud and obtaining something of value. The court explained that the statute targets computer hacking. Watters did not allege that Breja entered restricted areas of the American Express or Chase websites, rather than using a public website interface, to submit the refund requests.

The court also stated that, even if Breja had logged into password-protected portions of the websites, the complaint did not allege that he used false credentials, accessed unauthorized areas, or exceeded the access he was authorized to have. Allegedly violating a website’s terms of service, without more, was not enough to establish liability under the Act. The court therefore granted Breja’s motion to dismiss Watters’s Computer Fraud and Abuse Act claim under Rule 12(b)(6).

Subject-Matter Jurisdiction

The Computer Fraud and Abuse Act claim was Watters’s only federal claim. After dismissing that claim, the court concluded that it had no federal-question jurisdiction over the remaining claims. It also stated that the amount in controversy was at most $20,000, below the $75,000 threshold required for diversity jurisdiction.

The court declined to exercise supplemental jurisdiction over the related state-law claims because it had dismissed all claims over which it had original jurisdiction. It therefore dismissed the complaint for lack of subject-matter jurisdiction and granted Watters leave to amend.

Disposition

The court granted Breja’s motion to dismiss Watters’s Computer Fraud and Abuse Act claim. Because of the resulting jurisdictional ruling, the court did not reach the remainder of Breja’s motion or Chase’s motion. The court terminated Chase’s motion to dismiss as moot, dismissed the complaint, and directed Watters to file any amended complaint within 21 days. The court stated that any amended complaint could assert only causes of action for which Watters had a factual basis.