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CrowdStrike, Inc. v. NSS Labs, Inc.

United States District Court, D. Delaware

December 21, 2018

NSS LABS, INC., Defendant.

          David E. Moore, Bindu A. Palapura, Stephanie E. O'Byrne, Potter Anderson & Corroon LLP, Wilmington, DE; Ryan Tyz, Erin Jones, Aaron Myers, Tyz Law Group PC, San Francisco, CA -attorneys for Plaintiff

          Brian E. Farnan, Michael J. Farnan, Farnan LLP, Wilmington, DE; Ian Feinberg, Elizabeth Day, Marc Belloli, Feinberg Day Alberti Lim & Belloli LLP, Menlo Park, CA - attorneys for Defendants



         Before the Court is a motion to dismiss (D.I. 40) filed by Defendant NSS Labs, Inc. ("Defendant" or "NSS"), alleging that Plaintiff CrowdStrike, Inc. ("CrowdStrike") has failed to state a claim upon which relief can be granted with respect to Counts VI (Tortious Interference with Contract) and VII (Common Law Fraud) of the Second Amended Complaint (D.I. 34). For the reasons set forth below, the Court denies Defendant's motion to dismiss.

         I. BACKGROUND

         CrowdStrike is a privately-owned cybersecurity company founded in 2011. (D.I. 34 ¶ 15). CrowdStrike developed the "Falcon Platform" software to provide cybersecurity to its customers. (Id.). NSS is a company that, among other things, tests cybersecurity software and tools available in the marketplace to determine how well they stand up to attacks. (D.I. 34 ¶¶ 22-23). In addition to conducting public tests, NSS also conducts private tests of cybersecurity platforms under contracts with vendors. (Id.).

         On or about April 11, 2016, CrowdStrike and NSS entered a written private testing agreement ("the Private Agreement") whereby NSS was to conduct a private test of CrowdStrike's Falcon cybersecurity platform ("the Falcon Platform") and to provide CrowdStrike with a report detailing the results of the test. (D.I. 34 ¶ 31). CrowdStrike alleges that NSS failed to perform the tests in a way that CrowdStrike deemed accurate. (Id. ¶38). NSS conducted additional testing in an attempt to remedy the failures CrowdStrike identified. (Id. ¶¶ 38-39). On January 18, 2016, during discussions regarding a third round of private testing, NSS notified CrowdStrike that it was planning to perform a public test of the Falcon Platform. (Id. at ¶ 40).

         CrowdStrike alleges that the Private Agreement prohibited NSS from retaining or using CrowdStrike's confidential information (including software) and prohibited NSS from using CrowdStrike's information to perform any public testing without separate express written approval from CrowdStrike. (Id. ¶¶ 32, 35). CrowdStrike never provided "separate express written approval" to NSS. (Id. ¶ 162). Moreover, CrowdStrike alleges that it told NSS that, because of NSS's repeated testing failures, CrowdStrike would not participate in a public group test or authorize use of its products for that purpose. (Id. ¶ 42). NSS allegedly responded that it would test CrowdStrike products anyway, using login credentials of a CrowdStrike customer. (Id. ¶ 43). CrowdStrike explained that any such access was unauthorized and forbidden under CrowdStrike's terms and conditions of service. (Id. ¶ 44). Nevertheless, according to CrowdStrike, NSS engaged David Thomason of Thomason Technologies LLC ("Thomason") to find a client willing to enter a contract with CrowdStrike for a Falcon Platform pilot license ("the License"). (Id. ¶¶ 50-51).

         NSS allegedly agreed to pay Thomason if he would gain access and credentials from the client and provide those to NSS once the purchase order went through. (Id. ¶¶ 51, 53). Thomason submitted a purchase order to CrowdStrike. (Id. ¶ 52). CrowdStrike alleges that, although NSS and Thomason both knew that the purpose of the purchase order was for NSS to gain access to CrowdStrike products and that neither Thomason nor his client would pay for the purchase, those details were deliberately concealed from the purchase order and from CrowdStrike. (Id. ¶¶ 52, 53, 164). It further alleges that had the purchase order disclosed that the purchase was made to enable NSS to access and use CrowdStrike's Falcon Platform, CrowdStrike would never have approved it. (Id. ¶ 166). And it alleges that that NSS's access under false pretense caused CrowdStrike damage.


         When reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court conducts a two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the Court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [disregarding] any legal conclusions." Id. at 210-11. Second, the Court determines "whether the facts alleged in the complaint are sufficient to show a 'plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). The court may grant a motion to dismiss only if, after "accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to plaintiff, [the] plaintiff is not entitled to relief." Id.

         To survive a motion to dismiss, a complaint cannot rely on labels, conclusions, "and a formulaic recitation of the elements of a cause of action," Bell Atlantic Corp. v. Twombly, 550 U.S. 644, 555 (2007), but instead "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face," Zuber v. Boscov's, 871 F.3d 255, 258 (3d Cir. 2017) (citing Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010). A claim is facially plausible where "plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Further, "[t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of the plaintiffs claim. Wilkerson v. New Media Tech Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotations omitted). Lastly, "[i]n deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputed authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (emphasis added).

         Rule 9(b) of the Federal Rules of Civil Procedure provides that "[i]n alleging fraud ... a party must state with particularity the circumstances constituting fraud .... Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." The purpose of Rule 9(b) is to provide defendants with notice of the precise nature of the claim against them, not to test the factual allegations of the claim. See Seville Indus. Mack Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). Date, place, and time allegations are not required to satisfy Rule 9(b), so long as the circumstances of the alleged fraud are pled sufficiently "to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior." Id.; Van Roy v. Sakhr Software Co., C.A. No. 11-00863 (LPS), 2014 WL 3367275, at *3 (D. Del. July 8, 2014).

         III. ...

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