AFT Mich. v. Project Veritas
AFT Mich. v. Project Veritas
Opinion of the Court
This action involves allegations of political espionage and an important, unresolved question of Michigan law concerning the protections afforded participants in a private conversation under the Michigan Eavesdropping statute (
I. Background
Plaintiff, the Michigan affiliate of the American Federation of Teachers, is a labor organization that, along with its affiliates, represents more than 35,000 public school employees. (See Sec. Am. Compl. ¶ 1, ECF No. 72 at 2, PageID 2036.) AFT Michigan alleges that Defendant Project Veritas implanted Defendant Jorge in its organization to covertly record its staff members' conversations, distort and manipulate them, then release them to the public for the purpose of disparaging AFT. (See
AFT Michigan alleges that Defendant Jorge sought an internship with AFT, see
Furthermore, AFT alleges that Jorge "employed a hidden camera [in a private office] to covertly record a private conversation with an AFT Michigan staff representative" during which they discussed the resolution of a matter related to teacher discipline with the goal of teaching Jorge how staff members provide assistance in those matters. (Sec. Am. Comp. ¶¶ 28-29, 32, ECF No. 72 at 7, PageID 2041.) Defendant Project Veritas later published portions of the recorded conversation (along with some of AFT's confidential documents) on YouTube, editing the conversation to provide a false narrative as to AFT's staff member's role for the specific purpose of disparaging AFT Michigan. (See
AFT Michigan initiated this lawsuit, believing Defendants to be in possession of its proprietary and confidential information, in the Third Circuit Court for the County of Wayne, Michigan (Case No. 17-014348-CZ). (See Not. Removal, ECF No. 1, PageID 1.) Defendants removed the lawsuit to the Eastern District of Michigan based upon diversity jurisdiction. (See
Defendants' Motion to Dismiss does little to refute the alleged conduct against them but repudiates Plaintiff's claims as "no more than conclusory labels". (Mot. Dismiss 1, ECF No. 74 at 1, PageID 2083.)
II. Michigan's Eavesdropping Statute
Defendants contend that they are not liable under Michigan's eavesdropping statute because Jorge was a participant to the private conversations she allegedly recorded. Defendants note that two past Michigan Court of Appeals decisions- Sullivan v. Gray ,
Given that the Court's subject matter jurisdiction over this action is based on diversity, see 28 U.S.C. 1332(a)(1), the Court must apply Michigan law as determined by the Michigan Supreme Court. See Erie R.R. Co. v. Tompkins ,
A.
Michigan Comp. Laws ("MCL") § 750.539c provides:
Any person who is present or who is not present during a private conversation and who willfully uses any device to eavesdrop upon the conversation without the consent of all parties thereto, or who knowingly aids, employs or procures another person to do the same in violation of this section, is guilty of a felony punishable by imprisonment in a state prison for not more than 2 years or by a fine of not more than $ 2,000.00, or both.
MCL § 750.539a(2) defines "eavesdropping" as meaning "to overhear, record, amplify or transmit any part of the private discourse of others without the permission of all persons engaged in the discourse."
The only three instances in which the Michigan Supreme Court has addressed the application of Michigan's eavesdropping statute- Dickerson v. Raphael ,
When interpreting a statute, the Michigan Supreme Court's primary goal is to give effect to the Michigan's Legislature's intent, which is primarily ascertained through the statute's plain language. See Stone ,
The majority in Sullivan , the Michigan appellate court that first construed the reach of the state's prohibition against eavesdropping, believed that "the statutory language, on its face, unambiguously exclude[d] participant recording from the definition of eavesdropping by limiting the subject conversation to 'the private discourse of others' ".
This Court is also convinced that the Michigan Supreme Court would decide in the same manner and apply the same construction advanced by Judge Brennan in his dissenting opinion in Sullivan . This Court unequivocally concurs with Judge Brennan's dissenting opinion and adopts its rationale, which reasoned:
On its face, the statute does not state that a person who is a party to the conversation cannot violate the statute. Rather, if the Legislature had intended that the statute not apply to participants, I think that it would have stated that intention in clear language. As a matter of fact, the very first phrase of the statute indicates that participants to the conversation can violate the statute: 'Any person who is present ...' (emphasis added). If the Legislature intended to exclude participants, I think that it would have stated any person not a party to the conversation. Moreover, the statute also states that all participants in the conversation must consent to the overhearing, recording, amplifying or transmitting of the conversation. (emphasis added). To me, this plainly prohibits participants, as well as third parties, from the activities designated in the statute without disclosure to the other persons to the conversation that the conversation is being overheard, recorded, amplified or transmitted.
Moreover, I think the fact that the Legislature even defined the word "eavesdropping" is significant.... [T]he Legislature did define eavesdropping, using the disjunctive "or", as not only overhearing but also recording, amplifying or transmitting the conversation. Thus, to violate the statute, one needs only to overhear or record or transmit or amplify. This clearly indicates to me that the *621Legislature specifically prohibits conduct beyond the ordinary meaning of the word eavesdropping, by prohibiting conduct that not only could be accomplished by a third party but also by a participant.
Further, the majority seems to focus on the phrase "private discourse of others", contained in the definition, as supporting their conclusion that the statute does not apply to participants. By reading the phrase in context, with the definition substituted for the word eavesdrop in the statute, the majority's interpretation is not supported....
Moreover, the phrase is followed by the words "without the permission of all persons engaged in the discourse " (emphasis added), indicating that the unilateral recording of a conversation, unbeknownst to the others involved, is not permitted. Thus, reading the statute as a whole, I would find that a participant is prohibited from recording the private discourse of any other person involved in the conversation unless all persons consent. (emphasis added).
Sullivan ,
Therefore, the "available data" leads this Court to conclude that the Michigan Supreme Court would not permit a participant or "any person present " or not present during a conversation, to which a participant has a reasonable expectation of privacy, to willfully use any device to overhear, record, transmit or amplify that conversation without the consent of "all parties thereto ". MCL §§ 750.539a, 750.539c (emphasis added). Accordingly, the Court will examine AFT's eavesdropping claim in accordance with this opinion and conclusion.
III. Standard of Review
A motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), tests the legal sufficiency of the complaint. See RMI Titanium Co. v. Westinghouse Elec. Corp. ,
As the Supreme Court provided in Iqbal and Twombly , "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' "
In deciding whether the plaintiff has set forth a "plausible" claim, the court must accept the factual allegations in the complaint as true. See Erickson v. Pardus ,
IV. Applicable Law & Analysis
Count III: Eavesdropping
Although Michigan's eavesdropping statute is criminal and punishable by imprisonment for up to two years and/or by a fine of up to $ 2,000.00, § 750.539h entitles a party upon which eavesdropping is practiced to three potential civil remedies: (1) an injunction prohibiting further eavesdropping, (2) actual damages, and (3) punitive damages as determined by the court or by a jury.
Defendants argue that Plaintiff fails to allege all the requisite elements of the statute and fails to allege that Defendant Jorge eavesdropped on private conversations to which she was not a participant-as required by the Michigan Court of Appeals. This Court disagrees with the former argument and declines to apply the statutory construction that supports the latter.
Accepting Plaintiff's allegations as true, the Court finds that AFT has sufficiently demonstrated a violation of the eavesdropping statute, as predicted to be construed by the Michigan Supreme Court. The Court can reasonably infer from the alleged recording of her conversation with an AFT staff representative that Jorge violated the statute. If true, there is little doubt that Jorge willfully used some device to record a conversation reasonably expected to be free from intrusion or surveillance (having taken place in a private office concerning nonpublic information) without the consent of all other parties. Additionally, Defendant PV is found in violation of the statute as a party that "employ[ed] or procure[d] another person" to violate it. MCL § 750.539c.
Furthermore, given that Jorge allegedly carried her cellular phone wherever she went, it is reasonable to infer that she also recorded conversations to which she was present but not a participant. The Defendants' argument to the contrary rests solely on a presumption that Jorge was a participant in all conversations that she possibly recorded. These facts, however, are either wholly unknown or in dispute at this stage. Because the Court must examine claims in a light most favorable to Plaintiff and must draw all reasonable inferences in its favor, the Court concludes that Plaintiff has sufficiently alleged facts demonstrating a plausible claim against Defendants for eavesdropping under this theory as well. Therefore, the Court denies Defendants' motion as to Count III of Plaintiff's Second Amended Complaint.
Count VI: Misappropriation of Trade Secrets
The actual or threatened misappropriation of trade secrets may be enjoined or affirmative acts may be compelled by court order to protect such secrets. Michigan's Uniform Trade Secrets Act ("MUTSA"), MCL § 445.1901 et seq. (1998). A trade secret means information that both: (1) derives independent economic value, and (2) is the subject of efforts to maintain its secrecy.
Defendants contend that none of the private, confidential documents that Plaintiff has alleged to be removed from its offices and/or photographed by Jorge constitute trade secrets. Although Plaintiff has alleged that these documents were private, confidential, and kept in private *623storage, the Court agrees that they do not constitute trade secrets under Michigan law, and Plaintiff has not provided the Court authority demonstrating otherwise. Disclosure of Plaintiff's confidential information and documents likely would cause harm to Plaintiff and its organization's efforts; and Plaintiff has alleged a potential economic impact from the information's disclosure. Still, Plaintiff has failed to demonstrate that any information has independent economic value and thereby failed to allege facts sufficient to support its misappropriation claim. Therefore, the Court grants Defendants' motion as to Count VI of Plaintiff's Second Amended Complaint.
Count VII: Breach of Fiduciary Duty and Duty of Loyalty
In Plaintiff's Second Amended Complaint, Plaintiff alleges Defendant Jorge breached her fiduciary duty and duty of loyalty when she engaged in the following:
a) accessing information outside her authorization;
b) accessing information unrelated to her assignment; and
c) securing and copying information not generally available to the public for the purpose of sharing that information with Defendant PV.
(Sec. Am. Compl. ¶ 93, ECF No. 72.) However, the Court does not find Plaintiff's fiduciary duty claim applies and declines to recognize a fiduciary duty in the context Plaintiff would like. Moross Ltd. P'ship v. Fleckenstein Capital, Inc. ,
On the other hand, the Court will recognize a duty of loyalty in this context. See, e.g. , Wysong Corp. v. M.I. Indus. ,
Defendants argue that both claims are in tort, which should be displaced by MUTSA because they arise from the same alleged acts that constitute misappropriation. However, MUTSA does not displace claims based on wrongful conduct independent of the misappropriation of trade secrets, and this has been recognized in relation to a breach of fiduciary duty and of the duty of loyalty. See Wysong ,
Count I: Fraudulent Misrepresentation
A claim of fraudulent misrepresentation requires Plaintiff to demonstrate:
(1) the defendant made a material representation;
(2) the representation was false;
(3) when the representation was made, the defendant knew that it was false, or made it recklessly, without knowledge of its truth, and as a positive assertion;
(4) the defendant made it with the intention that the plaintiff should act upon it; and
(5) the plaintiff acted in reliance upon the representation;
(6) the plaintiff thereby suffered injury.
Roberts v. Saffell ,
Count II: Trespass
"A trespass is an unauthorized invasion upon the private property of another." Am. Transmission, Inc. v. Channel 7 of Detroit, Inc. ,
Count IV: Larceny by Trick
Larceny by trick is a criminal offense codified in the Michigan Penal Code. See MCL § 750.356. Plaintiff has failed to provide the Court with authority demonstrating that this offense has a private right of action with a civil remedy. As such, the Court does not find this offense applicable under the present circumstances. Plaintiff argues that the offense is recognized as actionable under the doctrine of common law fraud. However, Plaintiff has already pled fraud as an independent cause of action. Plaintiff is free to argue this theory of fraud under that claim. Consequently, the Court grants Defendants'
*625motion to dismiss Count IV of Plaintiff's Second Amended Complaint.
Count V: Civil Conspiracy
As Defendants' stated in their motion, an action for civil conspiracy must be supported by an underlying actionable tort. Cleary Tr. v. Muzyl Tr. ,
Count VIII: Unlawful Interception of Oral Communications
"[A]ny person whose wire, oral, or electronic communication is intercepted, disclosed, or intentionally used in violation of [the Wire and Electronic Communications Interception and Inception of Oral Communications Act] ... may in a civil action recover from the person or entity ... which engaged in that violation."
Count IX: Electronic Communications Privacy Act
The Electronic Communications Privacy Act ("ECPA") applies to electronic communication service providers.
Standing and Damages
To have Article III standing, a plaintiff must suffer an injury that is "concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling." Monsanto Co. v. Geertson Seed Farms ,
Given that the Court recognizes Plaintiff's claimed injuries, it finds that Plaintiff has sufficiently alleged damages. See Memphis Cmty. Sch. Dist. v. Stachura ,
V. Conclusion
For the reasons stated, the Court grants, in part, and denies, in part, Defendants' Motion to Dismiss Plaintiff's Second Amended Complaint.
Accordingly,
IT IS ORDERED , that Defendants' Motion to Dismiss (ECF No. 74 ) is GRANTED, IN PART, AND DENIED, IN PART in accordance with this opinion and order;
IT IS FURTHER ORDERED , that Counts IV, VI, and IX of Plaintiff's Second Amended Complaint are DISMISSED WITH PREJUDICE ; and
IT IS FURTHER ORDERED , that Counts I, II, III, V, VII, and VIII of Plaintiff's Second Amended Complaint survive dismissal.
IT IS SO ORDERED.
Dickerson v. Raphael ,
Supra note 1.
The Court addresses the claims in the order addressed in Defendants' motion.
The same conclusion applies to Plaintiff's additional tort claims under Michigan law: the Court finds Jorge engaged in independent acts that serve to substantiate Plaintiff's fraudulent misrepresentation, trespass, eavesdropping, and civil conspiracy claims.
Reference
- Full Case Name
- AFT MICHIGAN v. PROJECT VERITAS, and Marisa L. Jorge
- Status
- Published