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Court of Appeal:
Prevailing Defendant May Seek Fees in Digital Theft Cases
Opinion Says Code Section Creating Civil Remedies for Unauthorized Use of Computer Systems Permits Recovery if Claims Are Frivolous, Disagreeing With Federal Cases Limiting Recovery to Plaintiffs
By Kimber Cooley, associate editor
Div. One of the Fourth District Court of Appeal has held in a case of first impression that a defendant who successfully defeats a civil claim for the unauthorized use of computer systems may seek attorney fees, under a code section allowing for the recovery in “any action brought” under the governing statute, but said the defense awards are only proper if the case was frivolous.
At issue is Penal Code §502, which provides that the unauthorized use of a computer system for an improper purpose is a “public offense.” Subdivision (e) specifies that “[i]n addition to any other civil remedy available, the owner or lessee of the…computer system,…who suffers damage or loss by reason [of such unauthorized use]…may bring a civil action against the violator for compensatory damages and injunctive relief or other equitable relief.”
The subdivision further provides that “[i]n any action brought pursuant to this subdivision the court may award reasonable attorney’s fees.”
In an opinion, filed Thursday and authored by Justice Martin N. Buchanan, the court disagreed with several U.S. District Court decisions concluding that the attorney fee provision in §502 was intended to allow awards only to prevailing plaintiffs and declined to adopt such a rule, saying it was contrary to the plain language of the law.
However, the court pointed to the 2023 California Supreme Court decision of Travis v. Brand, which held that a “prevailing party” attorney fee provision in the Political Reform Act—a law permitting private enforcement of certain violations of laws governing the political processes—must be interpreted to only allow for the recovery fees to a successful defendant if the action was frivolous in order to avoid chilling legitimate suits.
Buchanan concluded that the Supreme Court’s reasoning applied to §502, which was amended to make it easier for victims to seek civil remedies without first obtaining a criminal conviction after concerns were raised that local prosecutors were not pursuing charges based on the section. He wrote:
“We agree with [the defendant] that section 502 allows the award of attorney fees to prevailing defendants. We further conclude, however, that section 502 defendants may only recover attorney fees where the plaintiff’s claim was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.”
Unauthorized Copy
The question of fees arose after plaintiff Emoke Hay filed a complaint against David Marinkovich, asserting a claim under §502 as well as causes of action for a violation of her right to privacy, conversion, and receiving stolen property.
Hay alleges that Marinkovich, a former employee of Corrugated Technologies Inc., a software company founded by the plaintiff and her husband in 1981, made and retained an unauthorized copy of a computer hard drive containing her personal and confidential information after the plaintiff asked him to help her create a backup of her laptop data.
After Hay and her husband sold the company in 2015, Marinkovich sued, asserting that he did not receive the compensation he had been promised from the sale. In that lawsuit, which was resolved in August 2019, Marinkovich admitted that he had the backup of data from Hay’s computer.
Hay filed the operative complaint in July 2019, seeking special damages, punitive damages, injunctive relief, and attorney fees. After a jury found in favor of Marinkovich on Hay’s §502 claim, the defendant filed a motion for fees and costs, seeking $19,284.58 in costs and $315,427.00 in attorney fees.
San Diego Superior Court Judge Carolyn Caietti noted the absence of any published California case law as to whether a defendant can recover attorney fees under §502 but found that “it would be unreasonable to award fees” to Marinkovich because there was “no evidence to find Plaintiff’s Penal Code section 502 claim was frivolous or abusive.” She awarded him costs under Code of Civil Procedure §1032 but denied his request for attorney fees.
Thursday’s opinion, which was joined in by Acting Presiding Justice Joan K. Irion and Justice David M. Rubin, affirmed the denial.
Statutory Language
Buchanan wrote:
“We agree with Marinkovich that the language of section 502 is clear and unambiguous. First, all that it requires for the trial court to award fees is an action ‘pursuant to’ section 502, subdivision (e). The text of the statute does not limit the award to a particular party, and we may not infer such a limitation.”
He said that “[u]nder other circumstances, our analysis could stop here,” but remarked that “because at least three federal district courts have relied on the legislative history to conclude—incorrectly, in our view—that the Legislature intended attorney fees awards be available only to prevailing plaintiffs, we address it here.”
The jurist acknowledged that when §502 was amended in 2000, the Legislature declined to adopt a competing version of the attorney fee provision which called for such awards to be paid to a “prevailing party.”
Disagreeing with the federal courts, he opined that the deletion of the “prevailing” language from the statute “does not logically support a conclusion that fees may only be awarded to successful plaintiffs” and “if the Legislature intended to restrict fee awards to prevailing plaintiffs, it could easily have done so.”
Continuing, he said:
“Second, we disagree with the federal district courts that the legislative history reveals a clear intent to allow fee awards under section 502 only for plaintiffs….Though [a statement in the Senate Judiciary Committee report] provides some support for the idea that there was a fear section 502 claims might be chilled by the prospect of being forced to pay attorney fees to a prevailing defendant,….the Legislature…did not include any such limitation in the neutral language of the amended statute.”
Based on this history, he declared that “the legislative history viewed as a whole does not defeat our plain reading of the statute: it allows fees to any party.”
Travis Decision
Turning to the Travis decision, Buchanan commented that the case placed weight on the purposes behind the Political Reform Act which included “[m]aximizing the number of meritorious suits through the Political Reform Act’s private enforcement mechanism.”
In order to determine if a defense request for fees under §502 is limited to circumstances where the case filed against them was without merit, the justice said “we must examine the goals and objectives of section 502.”
He reasoned:
“In light of the statute’s objectives and goals, and to effectuate the purpose of encouraging private litigation under section 502, we conclude that a prevailing defendant should not be awarded attorney fees unless the court finds that the action was objectively without foundation when brought, or the plaintiff continued to litigate it after it clearly became so….A contrary rule would chill private enforcement of the statute and thus undermine its purpose.”
Unpersuaded by Marinkovich’s contention that courts have adopted an asymmetrical standard only in cases involving the enforcement of “important public rights,” and that no such interests are at stake here, Buchanan wrote:
“[T]he Legislature made clear that its intent in enacting section 502 was to address the proliferation of computer crime and protect individuals, businesses, and governmental agencies….The statute…expressly states that anyone who commits the prohibited acts ‘is guilty of a public offense’…, indicating that a section 502 case involves an issue of public importance warranting the imposition of the asymmetrical fee standard….The text and legislative history of the bill thus support our conclusion that the asymmetrical standard is appropriate here.
He declared that “the trial court was well within the bounds of reason in finding Hay’s section 502 claim was not frivolous” and “acted within its discretion when it denied Marinkovich’s request for fees.”
The case is Hay v. Marinkovich, D082561.
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