# ACRISON, INC. v. RAINONE

> District Court, D. New Jersey · November 3, 2022

URL: https://www.frixlaw.com/law-library/cases/10655092

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** November 3, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10655092

## How later opinions describe it (automated extraction)

- holding that “pendent [i.e., 8 Diversity jurisdiction under 28 U.S.C. § 1332(a) requires that “every plaintiff must be of diverse state citizenship from every defendant.” In re Briscoe, 448 F.3d 201, 215 (3d Cir. 2006

## Opinion text

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

ACRISON, INC.,
Plaintiff,
v.
ANTHONY M. RAINONE, BRACH Civ. No. 22-1176 (KM) (ESK)
EICHLER LLC, XCELLENCE, INC.
directly and as successor-in-interest OPINION
to RVM ENTERPRISES, INC. doing
business as XACT DATA
DISCOVERY, JOHN P. MARTIN,
JOHN DOES 1-10, ABC COMPANIES
1-10,
Defendants.

KEVIN MCNULTY, U.S.D.J.:
Plaintiff Acrison, Inc. (“Acrison”), a New Jersey corporation, brought this
action on March 3, 2022 against (1) Defendant Anthony M. Rainone, an
attorney, and Defendant John P. Martin, a paralegal, both of whom work for
Defendant Brach Eichler, LLC, a law firm (collectively, “Brach Eichler”); and
(2) Defendant Xcellence Inc., d/b/a Xact Data Discovery (“XDD”), which
acquired RVM Enterprises, Inc. on or about July 8, 2020. (DE 1, ¶¶ 1–5.)1
Brach Eichler and XDD now move to dismiss Acrison’s complaint.2 For the
following reasons, the motion to dismiss is GRANTED to the extent it seeks

1 Certain citations to the record are abbreviated as follows:
DE = docket entry
Compl. = Complaint (DE 1)
Mot. = Brach Eichler’s Brief in Support of the Motion to Dismiss (DE 9)
Opp. = Acrison’s Brief in Opposition to the Motion to Dismiss (DE 13)
2 XDD joins in and fully incorporates the factual recitations and legal arguments
advanced by Brach Eichler and did not file a separate brief. (DE 11, 21.)
dismissal of the federal claims. Because the basis for diversity or supplemental
jurisdiction is lacking, I dismiss the remaining state-law claims as well.
I. BACKGROUND
Acrison was formerly owned by two brothers, Ronald Ricciardi (“Ron”)
and Ralph Ricciardi (“Ralph”). (Compl. ¶¶ 18–20.) Ron, who was the founder,
President, and a director of Acrison, along with his spouse, owned 100% of
Acrison’s Class A, voting shares and 50% of Acrison’s Class B, non-voting
shares. (Id. at 19.) Ralph, who was the Vice President, Treasurer, and also a
director of Acrison, owned 45% of Acrison’s Class B, non-voting shares. (Id. at
20.) Ralph’s spouse owned the remaining 5% of Acrison’s Class B, non-voting
shares. (Id.) On December 20, 2021, Ralph and his spouse transferred all of
their non-voting shares to Acrison. (Id.)
The brothers and their spouses are not parties to this action. To
understand the allegations, however, it is necessary to review a prior legal
dispute in New Jersey state court between Ron and Ralph regarding Acrison.
A. The State Court Action
On September 5, 2019, Ralph and his spouse, Patricia Ricciardi,
represented by Brach Eichler, commenced a shareholder oppression action
against Ron, Geraldine Ricciardi (Ron’s spouse), Thomas Ricciardi (Ron’s son),
and Joseph Casini (Acrison’s former CFO) in the Bergen County Superior
Court, Chancery Division, New Jersey (Docket No. BER-C-238-19) (the “state
court action”). (Compl. ¶ 21.) Acrison was also named as a nominal defendant.
(Compl. ¶ 23.)
Ralph and Patricia brought the state court action as minority and
oppressed shareholders of Acrison, alleging “years of fraud, waste, misuse, and
misappropriation of corporate assets and opportunities” by the defendants.
(Compl. Docket No. BER-C-238-19, ¶ 1.)3 According to the state court

3 I consider the complaint and other filings in the state court action not for the
truth of the facts asserted therein, but to determine the nature and scope of the
proceeding, and the ruling of the state court in the underlying action. See Southern
Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group, Ltd., 181 F.3d 410, 426
complaint, Rocco Ricciardi, who is Ron and Ralph’s late father, founded
Acrison in 1963. (Id. ¶¶ 19–22.) When Rocco died in 1997, his shares in
Acrison should have been distributed equally to Ralph and Ron pursuant to his
will; however, that did not happen. (Id. ¶ 67.) Additionally, Ron and his
attorney allegedly “attempted to unilaterally change shareholder percentages
and voting structure of the shares of Acrison to make Ron the majority
shareholder with 51% of the shares and with voting control.” (Id. ¶ 90.)
Ralph and Patricia also alleged misconduct, oppression, and
mismanagement of Acrison by the defendants. Ron allegedly maintained an
unauthorized “cash slush fund” (id. ¶¶ 98–99), switched banks and refused to
allow audits of Acrison’s inventory or records (id. ¶¶ 100–07), misappropriated
corporate money for his benefit, manipulated corporate books and records to
“hide his scheme” (id. ¶¶ 108–18), and usurped corporate opportunities for his
own financial benefit (id. ¶¶ 119–46). In early 2019, Ralph and Patricia
confronted Ron about his actions. (Id. ¶ 147.) Ron denied the allegations and
enlisted his son, Thomas, to fabricate a record to rebut the allegations. (Id.
¶¶ 148–52.) In response, Ralph and Patricia demanded an inspection of
Acrison’s books and records, which Ron refused. (Id. ¶¶ 154–55.) Ron also
attempted to intimidate a witness. (Id. ¶¶ 160–65.)
Based on the above allegations, Ralph and Patricia asserted claims of
breach of duty of loyalty, breach of fiduciary duty, conspiracy to commit breach
of fiduciary duty and duty of loyalty, aiding and abetting breach of fiduciary
duty of care and loyalty, and oppressed shareholder claims.
B. Acrison’s Counterclaim
On October 21, 2019, Acrison filed its answer to the state court
complaint and asserted its counterclaims. (Answer & Counterclaim, Docket No.

(3d Cir. 1999) (“To resolve a 12(b)(6) motion, a court may properly look at public
records, including judicial proceedings, in addition to the allegations in the complaint.
. . . [O]n a motion to dismiss, we may take judicial notice of another court’s opinion—
not for the truth of the facts recited therein, but for the existence of the opinion, which
is not subject to reasonable dispute over its authenticity.”).
BER-C-238-19.) Acrison alleged that Ralph was exclusively in control of
Acrison’s inventory and that, while in that role, Ralph and his direct reports
ordered materials that were used for personal reasons and not for Acrison.
(Countercl. Docket No. BER-C-238-19, ¶ 21.) Ralph also paid a vendor to
complete certain projects that could have been handled in-house at Acrison.
(Id. ¶ 28.) Additionally, Ralph provided employees with loans without
authorization. (Id. ¶ 29.) Finally, Ralph’s children received health insurance
and other benefits through Acrison when they did not qualify for those benefits.
(Id. ¶¶ 36–42.) Based on the foregoing, Acrison alleged counterclaims against
Ralph and Patricia for breach of fiduciary duties, breach of duty of loyalty,
tortious interference with contractual relations and prospective economic
advantage, conversion of corporate assets, and joint and several liability/alter
ego/corporate veil.
C. Events Giving Rise to the Present Action
Two weeks after filing the underlying shareholder oppression action,
Brach Eichler, along with an Acrison employee, issued a “Change Order” to
XDD for services described as follows: “[XDD] will image a workstation after 7
PM in Moonachie, NJ.” (Compl. ¶ 29.) Specifically, Brach Eichler requested that
XDD image the hard drive of the work computer located at Acrison’s office and
used by Casini. (Id. ¶¶ 22, 24, 105.) Casini did not authorize anyone to access
this computer. (Id. ¶ 25.) Only Brach Eichler, the Acrison employee, and XDD
knew of this extraction. (Id. ¶ 29.)
The state court action proceeded in the normal course, and the parties
exchanged demands for the production of documents. (Id. ¶ 34.) On or about
March 17, 2020, Brach Eichler provided Acrison two sharefile links to
documents, one of which Acrison could not access. (Id. ¶¶ 39–40.) Acrison
advised Brach Eichler multiple times that it could not access the documents
and asked that the documents be provided on a thumb drive; Brach Eichler
declined Acrison’s requests. (Id. ¶¶ 41–45.)
Then, in May 2020, Brach Eichler acknowledged during a meet-and-
confer that a “pre-litigation” investigation occurred, but declined to provide
additional details. (Id. ¶ 46.) The issue arose again in October 2020 when
Brach Eichler attempted to use a document at a deposition that existed only on
Ron’s computer. At that point, “Brach Eichler disclosed that thousands of
pages of ESI were gathered as part of a ‘pre-litigation’ investigation and that the
ESI had been produced in discovery.” (Id. ¶ 47.) By November 2020, “Acrison
finally secured access to some of the ESI produced by Brach Eichler, but not
all.” Brach Eichler did not, however, produce the original document metadata.
(Id. ¶¶ 49–50.) Acrison made additional requests for the documents and
metadata, which Brach Eichler refused to honor. (Id. ¶¶ 49–52.)
In November 2020, Acrison raised the discovery issue with the state
court and sought an order requiring Brach Eichler to, inter alia, “disclose how
it obtained what appeared to be stolen information.” (Id. ¶ 57.) Ralph
responded with a certification stating that he obtained the documents “in a
pre-litigation investigation by accessing Acrison’s computers.” (Id. ¶ 59.) In
December 2020, Brach Eichler advised that XDD performed a data extraction
pre-litigation, between May 22 and 30, 2018. (Id. ¶¶ 62–63.) However, Acrison
retained an expert who concluded that some of the documents had “created
dates” after May 30, 2018, and not all documents and metadata had been
produced. (Id. ¶¶ 69–73.)
Acrison sought to depose a representative of XDD and requested the
production of certain documents. In response, in January 2021, XDD produced
an agreement with Brach Eichler authorizing XDD to “create a full forensic
issue of a company computer belonging to Domain Admin,” to “bring the
forensic image back to [XDD’s] lab to recover passwords and log-in
information,” and to “Remote VPN access [into] Acrison, Inc. then map and
image the paths and execute email export commands [and] perform the
collection after hours.” (Id. ¶¶ 79–80.) Brach Eichler and XDD arranged to meet
at Acrison on May 17, 2018 between 9:00 PM and 10:30 PM. (Id. ¶ 83.) XDD
also produced a copy of the “change order” instructing XDD to image Acrison’s
hard drive in September 2019. (Compl. ¶¶ 29, 86–87.)
Acrison conducted the deposition of XDD’s representative on January 29,
2021. (Id. ¶¶ 91–92.) The representative testified that he met with Brach
Eichler and another individual on May 17, 2018 at 9:00 PM at Acrison’s office.
(Id. ¶ 93.) The XDD representative extracted the hard drive of the computer
belonging to Acrison’s IT Director and “made an exact image of all the data on
the computer’s hard drive.” (Id. ¶ 95.) He also recorded network information so
that he could remotely access the computer, which he did at a later time. (Id.
¶¶ 96–97.) On February 17, 2021, Brach Eichler produced a drive that
purportedly contained a copy of the original forensic data. (Id. ¶ 108.)
D. Conclusion of the State Court Action
On February 4, 2021, all parties moved for summary judgment in the
state court action. Among other things, Acrison argued that all of Ralph and
Patricia’s claims should be dismissed with prejudice as a sanction for the
above-described discovery misconduct. (DE 9-5). Acrison asserted that Ralph
and Patricia had violated the New Jersey Computer Related Offense Act
(“CROA”) and the Computer Fraud and Abuse Act (“CFAA”). Acrison, however,
did not seek leave to amend its answer to assert such violations as
counterclaims. (Id. p. 22.) Acrison also relied on the alleged discovery-related
misconduct to further support its counterclaims for breach of fiduciary duty
and breach of duty of loyalty. (Acrison Opp. Br. Summ. J., 2/16/21, Docket
No. BER-C-238-19, pp. 16–19.)
On March 22, 2021, the state court issued an oral decision on the
parties’ summary judgment motions. (DE 9-6.) When discussing the discovery
dispute, the court noted that none of the defendants asserted in their answers
or counterclaims any violation of the CROA or CFAA. (DE 9-6, p. 26.) The court
also recognized that those claims require that the person or entity be damaged
and that the actions be unauthorized. (Id.) The court found that the defendants
did not show “any damage or specific prejudice” arising from Ralph’s actions,
and that a substantial question existed as to whether Ralph’s actions were
authorized. (Id.) The court ultimately denied Acrison’s motion for summary
judgment, finding genuine issues of material fact as to whether Ralph
misappropriated Acrison’s assets. (Id. p. 40.)
On March 25, 2021, just a few days after the court’s summary judgment
decision, the parties signed a term sheet agreement to settle the dispute.
(Compl. ¶ 110; Docket No. BER-C-238-19.) The parties then executed a
settlement agreement in December 2021. Per the settlement agreement, Brach
Eichler was to deliver to Acrison “all documents, records, recordings, and
electronically stored information (“ESI”) copied and extracted by [XDD] or
anyone else in connection with the pre-litigation and litigation activities in the
[state court action]. . . . No documents involving Brach Eichler and [XDD]
regarding Acrison’s ESI should be destroyed, altered or modified.” (Compl.
¶ 113.) Brach Eichler notified Acrison that it had instead instructed “Citrin” to
“destroy and purge” all documents, ESI, or copies in its possession that were
related to the state court action. (Id. ¶ 121.) Additionally, XDD deleted Acrison’s
ESI from its network. (Id. ¶ 122.)
On February 4, 2022, the parties filed a stipulation dismissing the state
court action with prejudice. (DE 9-7.)
E. This Action
On March 3, 2022, Acrison filed its complaint in this action, alleging that
Brach Eichler and XDD violated the CFAA (Count I), engaged in a conspiracy to
violate the CFAA (Count II), violated the CROA (Count III), and committed
trespass to personal property (Count IV) and conversion (Count V). Acrison
bases its claims on the facts underlying the discovery dispute that occurred in
the now-settled state court action. See Section I.C., supra.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a
complaint, in whole or in part, if it fails to state a claim upon which relief can
be granted. The defendant, as the moving party, bears the burden of showing
that no claim has been stated. Animal Science Prods., Inc. v. China Minmetals
Corp., 654 F.3d 462, 469 n. 9 (3d Cir. 2011). For the purposes of a motion to
dismiss, the facts alleged in the complaint are accepted as true and all
reasonable inferences are drawn in favor of the plaintiff. N.J. Carpenters & Trs.
Thereof v. Tishman Const. Corp. of N.J., 760 F.3d 297, 302 (3d Cir. 2014).
Federal Rule of Procedure 8(a) does not require that a complaint contain
detailed factual allegations. Nevertheless, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the
complaint’s factual allegations must be sufficient to raise a plaintiff’s right to
relief above a speculative level, so that a claim is “plausible on its face.” Id. at
570; see also West Run Student Housing Assocs., LLC v. Huntington Nat. Bank,
712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met
“when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
While “[t]he plausibility standard is not akin to a ‘probability requirement’ . . .
it asks for more than a sheer possibility.” Iqbal, 556 U.S. at 678.
III. DISCUSSION
A. Entire Controversy Doctrine
I will first address defendants’ argument that New Jersey’s entire
controversy doctrine required Acrison to raise its current claims as
counterclaims in the state court action and, because it did not do so, those
claims are precluded.
Res judicata, though an affirmative defense, may be considered on a Rule
12(b)(6) motion where, as here, the necessary facts are apparent on the face of
the complaint and other documents properly considered on a motion to
dismiss. Whether a state court judgment should have a preclusive effect in a
subsequent federal action depends on the law of the state that adjudicated the
original action. See Greenleaf v. Garlock, Inc., 174 F.3d 352, 357 (3d Cir. 1999)
(“To determine the preclusive effect of [the plaintiff’s] prior state action we must
look to the law of the adjudicating state.”). See also Allen v. McCurry, 449 U.S.
90, 96 (1980) (“Congress has specifically required all federal courts to give
preclusive effect to state-court judgments whenever the courts of the State from
which the judgments emerged would do so.”). Here, that state is New Jersey.
Claim preclusion in the traditional sense tends to be subsumed by New
Jersey’s “entire controversy” doctrine. The entire controversy doctrine is
currently codified in Rule 4:30A of the New Jersey Rules of Court, which
provides that “[n]on-joinder of claims required to be joined by the entire
controversy doctrine shall result in the preclusion of the omitted claims to the
extent required by the entire controversy doctrine.” N.J. Ct. R. 4:30A.
The entire controversy doctrine has been described as “New Jersey’s
specific, and idiosyncratic, application of traditional res judicata principles.”
Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883, 886 (3d Cir. 1997). The
doctrine precludes, not just claims actually decided by a prior judgment, but
all claims that a party could and should have joined in a prior case based on
the same transaction or occurrence. The doctrine “seeks to assure that all
aspects of a legal dispute occur in a single lawsuit.” Olds v. Donnelly, 636 A.2d
633, 637 (N.J. 1997). Its purposes are “(1) to encourage the comprehensive and
conclusive determination of a legal controversy; (2) to achieve party fairness,
including both parties before the court as well as prospective parties; and (3) to
promote judicial economy and efficiency by avoiding fragmented, multiple and
duplicative litigation.” Mystic Isle Dev. Corp. v. Perskie & Nehmad, 662 A.2d
523, 529 (N.J. 1995).
There are three requirements for the application of the entire controversy
doctrine:
(1) the judgment in the prior action must be valid, final, and on the
merits; (2) the parties in the later action must be identical to or in
privity with those in the prior action; and (3) the claim in the later
action must grow out of the same transaction or occurrence as the
claim in the earlier one.
McNeil v. Legislative Apportionment Comm’n of State, 828 A.2d 840, 859 (N.J.
2003) (citation omitted).
Final Judgement on the Merits
The first factor requires a final judgment on the merits, which I find is
satisfied. A dismissal with prejudice constitutes an adjudication on the merits
“as fully and completely as if the order had been entered after trial.” Petrossian
v. Cole, 613 F. App’x 109, 111–12 (3d Cir. 2015) (quoting Gambocz v.
Yelencsics, 468 F.2d 837, 840 (3d Cir. 1972)); see also Jackson v. Dow Chem.
Co., 518 F. App’x 99, 102 (3d Cir. 2013) (“[Plaintiff’s] voluntary dismissal with
prejudice of his remaining ADA claims also operated as a final judgment on the
merits for purposes of claim preclusion.”). Here, all parties voluntarily
stipulated to dismissal of the state court action, and expressly provided that
the dismissal was with prejudice. (DE 9-7.) Accordingly, I find that the
stipulation of dismissal in the state court action was a final judgment on the
merits and that this element of the entire controversy doctrine is satisfied.
Privity of the Parties
Neither Brach Eichler nor XDD was a party to the state court action.
Therefore, for the entire controversy doctrine to apply, they must be in privity
with a party to the state court action. I find that they are.
In comparison to federal preclusion principles, New Jersey has adopted a
broader definition of “privity.” See Opdycke v. Stout, 233 F. App’x 125, 129 n. 6
(3d Cir. 2007). “In New Jersey, privity is merely a word used to say that the
relationship between the one who is a party on the record and another is close
enough to include that other within the res judicata.” Hamburg Music Corp. v.
Winter, No. 04-2738, 2005 WL 2170010, at *3 (3d Cir. Sept. 8, 2005) (citation
and quotation omitted). Less circularly, a relationship is defined as being “close
enough” to satisfy privity “when the party is a virtual representative of the non-
party, or when the non-party actually controls the litigation.” Collins v. E.I.
DuPont de Nemours & Co., 34 F.3d 172, 176 (3d Cir. 1994). Thus, “one person
is in privity with another and is bound by and entitled to the benefits of a
judgment as though he was a party when there is such an identification of
interest between the two as to represent the same legal right.” Zirger v. Gen.
Accident Ins. Co., 676 A.2d 1065, 1071 (N.J. 1996) (citation omitted).
Brach Eichler represented Ralph in the state court action, creating a
legal relationship, and XDD was hired to conduct the alleged hacking at the
direction of Brach Eichler and Ralph. (DE 9-4; Compl. ¶ 29). In both instances,
the privity was formal and contractual, as well as practical. Acrison alleges that
the wrongfulness of the actions of Brach Eichler and XDD arose from Ralph’s
lack of rightful access to the computers. Acrison alleges that “Ralph and
defendants here lacked authorized access to Acrison’s computers and servers”
and, because “Ralph . . . had no authorized access to the subject servers and
computers and/or exceeded his authorized access to those serves and
computers,” Brach Eichler and XDD “cannot find safe harbor from liability.”
(Id. ¶¶ 31, 150.)
Moreover, “co-conspirators are by definition in privity.” Goel v. Heller,
667 F. Supp. 144, 152 (D.N.J. 1987) (citing Gambocz, 468 F.2d at 842). Acrison
alleges a direct violation of the CFAA, along with a conspiracy between Ralph,
XDD, and Brach Eichler to engage in a violation of the CFAA. (Compl. ¶¶ 161–
65.) There is room for doubt, particularly as to whether XDD and Brach Eichler
truly partook of Ralph’s legal interest in the underlying litigation, but that
argument is better addressed under the third factor, infra. Acrison’s own theory
of the case, particularly at the pleading stage, is sufficient to set forth a claim
of privity.
Transactionally Related
The real problem arises with respect to the third factor: whether the
claims in the present action arose from the same transaction or occurrence as
the state court action. I conclude that they do not. The independent claims
against Brach Eichler and XXD are ancillary to the actual merits of the state
court action, which relate to corporate control and malfeasance in corporate
governance.
This third factor requires that the facts of the later action are sufficiently
related to the facts giving rise to the underlying action, such that the two
actions “arise from related facts or the same transaction or series of
transactions.” Fields v. Thompson Printing Co., 363 F.3d 259, 265 (3d Cir.
2004) (citation omitted). “It is the core set of facts that provides the link
between distinct claims against the same or different parties and triggers the
requirement that they be determined in one proceeding.” DiTrolio v. Antiles, 662
A.2d 494, 502 (N.J. 1995). The court must consider the factual context “giving
rise to the controversy itself, rather than a commonality of claims, issues or
parties.” Mystic Isle Dev. Corp., 662 A.2d at 529. “In the absence of such a
factual nexus, a party is not required to join all of its claims against another
party in a single action.” McNally v. Providence Washington Ins. Co., 698 A.2d
543, 548 (N.J. Super. App. Div. 1997).
For example, in Fields v. Thompson Printing Co., Fields’s employer,
Thompson Printing Co., terminated him following allegations by three
employees that Fields sexually harassed them and created a hostile work
environment. 363 F.3d at 263. The three employees filed a lawsuit in New
Jersey state court against Fields and Thompson Printing Co. based on those
allegations, which ultimately settled. Id. During the pendency of the state court
action, Fields filed a federal action against Thompson Printing Co. alleging that
his employer breached his employment contract and violated ERISA by failing
to pay his benefits following his termination. Id. at 263–64. In response,
Thompson Printing Co. asserted that Fields’s claims were barred by the entire
controversy doctrine and should have been raised in state court because he
would not have been fired but for his actions underlying the state court matter.
Id. at 264. The Third Circuit found that the causal relationship between the
two sets of claims was insufficient to satisfy the entire controversy doctrine. Id.
at 265–66. The separate actions lacked a “commonality of facts”—the state
court action concerned the employees’ complaints of hostile working
conditions, whereas the federal action considered the language of Fields’s
employment contract and Thompson Printing Co.’s obligations pursuant to
ERISA. Id. at 266. Because “two different sets of facts” were relevant to the “two
different types of claims,” the Third Circuit found “no reason to believe that the
New Jersey courts would bar” Fields’s federal court action. Id.
Similarly, here, the facts of the state court action are distinct from the
facts necessary for Acrison to prove its claims in the present action. The state
court action concerned whether Ralph, Ron, and other persons who worked at
Acrison breached their duties to the company and committed fraud, waste,
misuse, and/or misappropriation of corporate assets and opportunities over
many years. See Section I.A., supra. In contrast, the present action turns on
whether Brach Eichler and XDD accessed Acrison’s computers in violation of
state or federal law. As in Fields, the cases raise two different types of claims
and rely on two different sets of facts.
Therefore, because the third factor of the entire controversy doctrine is
not satisfied, I conclude that it does not preclude Acrison’s claims.
B. Computer Fraud and Abuse Act
Statute of Limitations
Finding that the entire controversy doctrine does not apply, I will now
address whether Acrison has stated a claim for violation of the federal CFAA.
Acrison alleges Brach Eichler and XDD violated 18 U.S.C. § 1030(a)(2)(c),
a criminal provision which applies to whoever “intentionally accesses a
computer without authorization or exceeds authorized access, and thereby
obtains . . . information from any protected computer.” A violation of
§ 1030(a)(2) also gives rise to civil liability; a person suffering “damage” or “loss”
from such a violation is granted a cause of action to sue for money damages or
equitable relief. 18 U.S.C. § 1030(g); Van Buren v. United States, 141 S. Ct.
1648, 1652 (2021). A civil action for violation of the CFAA may be brought only
if one of the factors in § 1030(c)(4)(A)(i)(I) to (V) is satisfied.4 Here, Acrison

4 The factors are:
alleges “loss to 1 or more persons during any 1-year period . . . aggregating at
least $5,000 in value” under § 1030 (c)(4)(A)(i)(I), arising from: “investigation
expenses, expert costs, discovery master fees and legal fees in uncovering the
misconduct.” (Compl. ¶ 149.)
Defendants respond that Acrison cannot recover for such loss because
its claim is barred by the relevant two-year statute of limitations. The CFAA
requires that a civil action be brought “within 2 years of the date of the act
complained of or the date of the discovery of the damage.” 18 U.S.C. § 1030(g).
Thus, if a plaintiff does not allege later-discovered “damage,” as defined by
§ 1030(e)(8), then by default the plaintiff is limited to bringing the action within
two years of the violation itself. Radcliff v. Radcliff, No. 20-cv-3669, 2020 WL
7090687, at *5 (D.N.J. Dec. 4, 2020); Gap Properties, LLC v. Cairo, No. 19-cv-
20117, 2021 WL 5757410, at *4 n.5 (D.N.J. Dec. 3, 2021); Sewell v. Bernardin,
795 F.3d 337, 340 (2d Cir. 2015).
Defendants assert that Acrison has not alleged any “damage” (whether
contemporaneous or later-discovered) as that term is defined in the CFAA. The
CFAA defines “damage” as “any impairment to the integrity or availability of
data, a program, a system, or information.” 18 U.S.C. § 1030(e)(8). The term
“loss” likewise “relates to costs caused by harm to computer data, programs,

(I) loss to 1 or more persons during any 1-year period . . . aggregating at
least $5,000 in value;
(II) the modification or impairment, or potential modification or
impairment, of the medical examination, diagnosis, treatment, or care of
1 or more individuals;
(III) physical injury to any person;
(IV) a threat to public health or safety; [or]
(V) damage affecting a computer used by or for an entity of the United
States Government in furtherance of the administration of justice,
national defense, or national security.
18 U.S.C. § 1030(c)(4)(A)(i)(I) to (V).
systems, or information services.”5 Van Buren, 141 S. Ct. at 1659–60.
Moreover, the terms “damage” and “loss” “focus on technological harms—such
as the corruption of files—of the type unauthorized users cause to computer
systems and data.” Id. at 1660.
Acrison argues in its brief that it has suffered the following damage:
Brach Eichler and XDD accessed Acrison’s computers, imaged the computers’
hard drives, and captured passwords. (Opp. p. 13 (citing Compl. ¶¶ 14, 65, 79,
81, 101, 153).) Additionally, the data that defendants copied from Acrison’s
computers was deleted from the networks of XDD and a third party. (Compl.
¶¶ 114–26.) Acrison’s complaint, however, alleges that it only suffered “loss” as
defined by 18 U.S.C. § 1030(e)(11); it does not allege that Acrison also suffered
“damage” as defined by 18 U.S.C. § 1030(e)(8). (See Compl. ¶ 160.)
At any rate, even if damage had been alleged as a legal theory, the
allegations of the complaint would not support it. Courts have found damage
where a defendant has inflicted some type of impairment to the computer at
issue, such as corrupted files, see Van Buren, 141 S. Ct. at 1660; deleted data,
see Volpe v. Abacus Software Sys. Corp., No. 20-cv-10108, 2021 WL 2451968,
at *7 (D.N.J. June 16, 2021); prevented access, see United States v. Soybel, 13
F.4th 584, 595 (7th Cir. 2021); or installed software, see Radcliff, 2020 WL
7090687, at *6. Brach Eichler and XDD are alleged only to have accessed,
copied, or downloaded information from Acrison’s computers. That, without
more, is insufficient to show “damage” under the CFAA. See Fidlar Techs. v.
LPS Real Est. Data Sols., Inc., 810 F.3d 1075, 1084 (7th Cir. 2016) (holding that
downloading data without altering data or disrupting service is insufficient to
constitute “damage”); Rodgers Grp., LLC v. Lewis, No. 22-cv-482, 2022 WL
4095785, at *7 (D.N.J. Sept. 7, 2022). To the extent Brach Eichler and XDD are

5 The term “loss” is defined as “any reasonable cost to any victim, including the
cost of responding to an offense, conducting a damage assessment, and restoring the
data, program, system, or information to its condition prior to the offense, and any
revenue lost, cost incurred, or other consequential damages incurred because of
interruption of service.” 18 U.S.C. § 1030(e)(11).
alleged to have deleted or destroyed data, they did so only on their own
computers or the computer of a third party. Damage to those computers is not
at issue; the data stored on Acrison’s computers is not alleged to have been
deleted, corrupted, or compromised in any manner.6 (See Compl. ¶¶ 114–126;
Opp. p. 13.)
Because Acrison fails to allege ongoing or later-discovered “damage,” it
was required to bring its claim within two years of the date of the act
complained of. 18 U.S.C. § 1030(g). The conduct of Brach Eichler and XDD
occurred in May 2018 and September 2019, meaning the limitation periods
expired in May 2020 and September 2021. (Compl. ¶¶ 63, 69, 93, 105.) Acrison
did not file its complaint until March 3, 2022, which is well outside the two-
year limitation periods.
Equitable Tolling
Acrison attempts to excuse its untimely filing by invoking the doctrine of
equitable tolling by reason of fraudulent concealment. In the Third Circuit, a
party seeking equitable tolling under the doctrine of fraudulent concealment
bears the burden of showing three elements: “(1) that the defendant actively

6 The Senate Report on the 1996 amendments to the CFAA further illustrates
how defendants’ access, alone, may constitute “loss” but not “damage”:
[I]t is not always clear what constitutes “damage.” For example, intruders
often alter existing log-on programs so that user passwords are copied to
a file which the hackers can retrieve later. After retrieving the newly
created password file, the intruder restores the altered log-on file to its
original condition. Arguably, in such a situation, neither the computer nor
its information is damaged. Nonetheless, this conduct allows the intruder
to accumulate valid user passwords to the system, requires all system
users to change their passwords, and requires the system administrator
to devote resources to resecuring the system. Thus, although there is
arguably no “damage,” the victim does suffer “loss.” If the loss to the victim
meets the required monetary threshold, the conduct should be criminal,
and the victim should be entitled to relief.
S. Rep. No. 104-357, at 11 (1996). See also P.C. of Yonkers, Inc. v. Celebrations! Party
& Seasonal Superstore, L.L.C., No. 04-cv-4554, 2007 WL 708978, at *5 (D.N.J. Mar. 5,
2007).
misled the plaintiff; (2) which prevented the plaintiff from recognizing the
validity of her claim within the limitations period; and (3) where the plaintiff’s
ignorance is not attributable to her lack of reasonable due diligence in
attempting to uncover the relevant facts.” Cetel v. Kirwan Fin. Grp., Inc., 460
F.3d 494, 509 (3d Cir. 2006); Winder v. Postmaster Gen. of U.S., 528 F. App’x
253, 256 (3d Cir. 2013). District courts “should be sparing in their use of this
doctrine” and limit its application only to the “rare situation where [it] is
demanded by sound legal principles as well as the interests of justice.” LaCava
v. Kyler, 398 F.3d 271, 275 (3d Cir. 2005) (internal citations omitted). “[F]or a
petitioner to obtain relief there must be a causal connection, or nexus, between
the extraordinary circumstances [the petitioner] faced and the petitioner’s
failure to file a timely federal petition.” Ross v. Varano, 712 F.3d 784, 803 (3d
Cir. 2013). And even where the circumstances are extraordinary, “[i]f the
person seeking equitable tolling has not exercised reasonable diligence in
attempting to file after the extraordinary circumstances began, the link of
causation between the extraordinary circumstances and the failure to file is
broken, and the extraordinary circumstances therefore did not prevent timely
filing.” Brown v. Shannon, 322 F.3d 768, 773 (3d Cir.2003) (citation omitted).
I find that the equitable tolling doctrine is inapplicable to this matter.
I first address the claims based on defendants’ accessing of the Acrison
computers in May 2018. Acrison, by its own admission, knew about these acts
by November or December 2020 at the latest. In November 2020, for example,
Acrison sought an order requiring Brach Eichler to, inter alia, “disclose how it
obtained what appeared to be stolen information.” (Id. ¶ 57.) Ralph then
provided a certification which clearly, if grudgingly, acknowledged the having
accessed the computers: “As a part of a pre-suit investigation, I obtained copies
of electronically stored information (“ESI”) from Acrison’s servers and
computers located on the property of Acrison.” (Compl. ¶ 59; DE 9-4.) In
December 2020, Brach Eichler advised that XDD performed a data extraction
pre-litigation, between May 22 and 30, 2018. (Id. ¶¶ 62–63.)
So assume Acrison has adequately alleged an explanation for its failure
to learn of defendants’ May 2018 activities prior to November or December
2020 (which was already beyond the limitations period of May 2020). And
accept arguendo that these constituted extraordinary circumstances. Still,
Acrison provides no explanation as to why it did not file its complaint until
March 2022, over one year after it became aware of the acts giving rise to its
claim. I find that Acrison did not exercise “reasonable diligence in attempting to
file after the extraordinary circumstances began” with respect to the claims
arising from the unauthorized access to its computers in May 2018. See
Brown, 322 F.3d at 773.
I next address the allegations of unauthorized access in September 2019.
Acrison learned of defendants’ September 2019 actions by, at the latest,
January 2021, when XDD produced documents in response to Acrison’s
subpoena. (Compl. 75.) As part of that document production, Acrison received
a copy of the “change order” instructing XDD to image Acrison’s hard drive in
September 2019. (Compl. ¶¶ 29, 86–87.) That order was not merely suggestive,
but the proverbial smoking gun. The statute of limitations had not expired at
the time Acrison received a copy of the “change order.” Indeed, the limitation
period did not expire until September 2021, about eight months after Acrison
learned of the acts giving rise to its claim. Acrison provides no explanation for
its failure to file its CFAA claims within that eight-month period. See Brown,
322 F.3d at 773 (finding equitable tolling not justified where petitioner had one
month left in limitations period in which he could have filed at least a basic pro
se habeas petition).
Acrison did not learn everything about defendants’ actions, but it learned
enough to permit the filing of a complaint that would, at a minimum, have
permitted further exploration in discovery. I find that Acrison did not exercise
reasonable diligence, and I therefore conclude that equitable tolling under the
doctrine of fraudulent concealment does not apply.
Discovery rule
Acrison also invokes the “discovery rule,” a doctrine under which a
claim’s accrual date, and therefore the running of the statute of limitations,
may be delayed. See Hedges v. United States, 404 F.3d 744, 750–51 (3d Cir.
2005) (distinguishing between equitable tolling and the discovery rule).
Generally speaking, the discovery rule “tolls the limitations period until the
plaintiff learns of his cause of action or with reasonable diligence could have
done so,” and “is an exception to the usual principle that the statute of
limitations begins to run immediately upon accrual regardless of whether or
not the injured party has any idea what has happened to him.” Stephens v.
Clash, 796 F. 3d 281, 284 (3d Cir. 2015). Simply stated, “the discovery rule
means that the statute of limitations period begins to run as of the date of the
discovery of the cause of action.” Am. Bd. of Internal Med. v. Rushford, 841 F.
App’x 440, 443 (3d Cir. 2020).
However, where Congress has “expressly incorporated a limited discovery
rule” of its own, the more general judge-made “discovery rule” does not apply.
Stephens, 796 F.3d at 287. Here, Congress has done just that by requiring that
a CFAA action be brought “within 2 years of the date of the act complained of
or the date of the discovery of the damage.” 18 U.S.C. § 1030(g) (emphasis
added); see Tactical Pers. Leasing, Inc. v. Hajduk, No. 18-cv-203, 2018 WL
4740195, at *4 (W.D. Pa. Oct. 2, 2018) (rejecting application of the general
“discovery rule” to claims arising under the CFAA because “the language of 18
U.S.C. § 1030 favors a strict reading of the injury-discovery limitation that
applies only to discovery of damage.”); Kluber Skahan & Assocs., Inc. v.
Cordogen, Clark & Assoc., No. 08-cv-1529, 2009 WL 466812, at *7 (N.D. Ill.
Feb. 25, 2009) (same).
Under the specific, statutory discovery rule of the CFAA, Acrison must
sufficiently plead later-discovered “damage” in order to delay the onset of the
limitations period. As discussed in Section III.B.1., supra, Acrison fails to plead
“damage” as defined by 18 U.S.C. § 1030(e)(8) at all. Therefore, Acrison cannot
rely on the CFAA’s discovery rule.
Acrison’s CFAA claim is therefore barred by the statute of limitations and
Count I of the complaint is dismissed.
C. Conspiracy to Violate the Computer Fraud and Abuse Act
Acrison also alleges that defendants engaged in a conspiracy to violate
the CFAA. The parties dispute whether Acrison’s claim is one for general civil
conspiracy or conspiracy under 18 U.S.C. § 1030(b) (via the civil remedy of
§ 1030(g)). Because I find that Acrison fails to satisfy the requirements under
either theory, its claim for conspiracy to violate the CFAA is dismissed.
Some courts have entertained civil claims for conspiracy to violate the
CFAA on the theory that Section 1030(g)’s grant of a civil remedy for criminal
CFAA violations extends to the CFAA’s criminal conspiracy provision, 18 U.S.C.
§ 1030(b). See, e.g., Advanced Fluid Sys., Inc. v. Huber, 28 F. Supp. 3d 306,
328 (M.D. Pa. 2014), aff’d, 958 F.3d 168 (3d Cir. 2020); Ryanair DAC v.
Booking Holdings Inc., 20-cv-1191, 2022 WL 13946243, at *12 (D. Del. Oct. 24,
2022). Acrison must take the bitter with the sweet, however. The very section
that would grant such a civil cause of action also contains the two-year statute
of limitations. Because Acrison bases its conspiracy claim on the same conduct
underlying the substantive § 1030(a) violation, see Section I.C., supra, the
conspiracy claim is likewise time-barred, see Section III.B., supra.
Acrison argues in the alternative that there is or should be a generalized
tort of civil conspiracy that may have a CFAA violation as its object. Even
assuming arguendo that the common law concept of civil conspiracy applies
here, civil conspiracy is not really an independent tort, but rather a means of
imposing joint or vicarious liability upon all participants in an underlying tort.
The established rule is that a cause of action for civil conspiracy
requires a separate underlying tort as a predicate for liability.
Thus, one cannot sue a group of defendants for conspiring to
engage in conduct that would not be actionable against an
individual defendant. Instead, “actionable civil conspiracy must be
based on an existing independent wrong or tort that would
constitute a valid cause of action if committed by one actor.”
In re Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781, 789 (3d Cir.
1999) (quoting Posner v. Essex Ins. Co., 178 F.3d 1209, 1218 (11th Cir. 1999)
(quoting Williams Elec. Co. v. Honeywell, Inc., 772 F. Supp. 1225, 1239 (N.D.
Fla. 1991)) (applying Florida law)).7 See also Boyanowski v. Cap. Area
Intermediate Unit, 215 F.3d 396, 405–06 (3d Cir. 2000) (“The rule that civil
conspiracy may not exist without an underlying tort is a common one.”);
Curbison v. New Jersey, 242 F. App’x 806, 810 (3d Cir. 2007) (Under
Pennsylvania law, “[a] civil conspiracy claim requires a separate underlying tort
as a prerequisite for liability.”). “Thus, one cannot sue a group of defendants for
conspiring to engage in conduct that would not be actionable against an
individual defendant.” Pardue v. Gray, 136 F. App’x 529, 533 (3d Cir. 2005) (42
U.S.C. § 1983 conspiracy to violate civil rights; quoting Orthopedic Bone Screw,
193 F.3d at 789)).
Here, Acrison alleges that Brach Eichler and XDD agreed to engage in
the conduct described in Section I.C., supra. (Compl. ¶¶ 163–65.) However,
Acrison cannot base its civil conspiracy claims on underlying claims that
“would not be actionable against an individual defendant.” Id. Because
Acrison’s CFAA claim is dismissed, I must dismiss any related civil conspiracy
claim predicated on an underlying substantive violation of the CFAA.

7 To further illustrate these background common law principles, In re Orthopedic
Bone Screw Prods. cited state court cases such as Applied Equip. Corp. v. Litton Saudi
Arabia Ltd., 869 P.2d 454, 457 (Cal. 1994) (“Standing alone, a conspiracy does no
harm and engenders no tort liability. It must be activated by the commission of an
actual tort.”); Stoldt v. City of Toronto, 678 P.2d 153, 161 (Kan. 1984) (“Conspiracy is
not actionable without commission of some wrong giving rise to a cause of action
independent of the conspiracy.”); Alleco, Inc. v. Harry & Jeanette Weinberg Found., Inc.,
665 A.2d 1038, 1045 (Md. 1995) (“No action in tort lies for conspiracy to do something
unless the acts actually done, if done by one person, would constitute a tort.”) (citation
omitted); Alexander & Alexander of N.Y., Inc. v. Fritzen, 503 N.E.2d 102, 102–03 (N.Y.
1986) (“[A] mere conspiracy to commit a tort is never of itself a cause of action.
Allegations of conspiracy are permitted only to connect the actions of separate
defendants with an otherwise actionable tort.”) (citations omitted).
Therefore, the motions to dismiss are granted as to Count II.
D. Supplemental Jurisdiction
Acrison’s claims under the CFAA, which are now dismissed, are the only
federal claims in the complaint. All of the remaining claims are state-law
claims: violation of the New Jersey Computer Related Offense Act (Count III),
trespass to personal property (Count IV), and conversion (Count V). It follows
that there is no longer a basis for federal-question jurisdiction, because there is
no federal claim. See 28 U.S.C. § 1331.
As diversity of citizenship has not been alleged,8 the only remaining
candidate for subject matter jurisdiction is supplemental jurisdiction. See 28
U.S.C. § 1367. For the following reasons, I will not exercise my discretion to
retain supplemental jurisdiction over the state law claims.
“The district courts may decline to exercise supplemental jurisdiction
over a claim under subsection (a) if . . . (3) the district court has dismissed all
claims over which it has original jurisdiction . . . .” 28 U.S.C. § 1367(c). “[A]
court does not err if it declines to exercise supplemental jurisdiction over state
claims after it dismisses a federal claim on which its jurisdiction is based in the
absence of extraordinary circumstances.” Robert W. Mauthe, M.D., P.C. v.
Optum Inc., 925 F.3d 129, 135 (3d Cir. 2019). Indeed, where the federal claims
that provided the basis for original jurisdiction are dismissed, the court should
ordinarily “decline to decide the pendent state claims unless considerations of
judicial economy, convenience, and fairness to the parties provide an
affirmative justification for doing so.” Hedges v. Musco, 204 F.3d 109, 123 (3d
Cir. 2000) (citation omitted); see Shaffer v. Bd. of Sch. Dirs. of Albert Gallatin
Area Sch. Dist., 730 F.2d 910, 912 (3d Cir. 1984) (holding that “pendent [i.e.,

8 Diversity jurisdiction under 28 U.S.C. § 1332(a) requires that “every plaintiff
must be of diverse state citizenship from every defendant.” In re Briscoe, 448 F.3d 201,
215 (3d Cir. 2006). Plaintiff Acrison and Defendants Brach Eichler and XDD all
allegedly have their principal places of business in New Jersey. (Compl. ¶¶ 1, 3–4, 8–
12.)
supplemental] jurisdiction should be declined where the federal claims are no
longer viable, absent ‘extraordinary circumstances’”).
No such extraordinary circumstances or considerations of efficiency and
fairness are present here. The case is at the pleading stage, with no answer yet
filed. The Magistrate Judge stayed discovery pending resolution of these
motions to dismiss, so no discovery efforts would be wasted (and probably
would not be wasted in any event, assuming the claims proceed in state court).
(See DE 20, 24–25.) The state courts are available as an alternative, indeed
preferred, forum for these state law claims, so there are no significant concerns
of fairness. Accordingly, I decline to exercise jurisdiction over these state-law
claims based on their being supplemental to a now-dismissed federal claim.
IV. CONCLUSION
For the reasons set forth above, the motion to dismiss is granted. A
separate order will issue.
Dated: November 3, 2022
/s/ Kevin McNulty
___________________________________
Hon. Kevin McNulty
United States District Judge

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10655092. Public record. Not legal advice.