Courts Says Employer’s Lawsuit Against Ex-Employee Over Retention and Use of Twitter Account can Proceed–PhoneDog v. Kravitz

[Post by Venkat Balasubramani]

PhoneDog v. Kravitz, 2011 WL 5415612 (N.D. Ca.; Nov. 8, 2011)

Another day, another post-employment dispute over a social media account.

In this case, Noah Kravitz worked for PhoneDog, which is an “interactive mobile news and reviews web resource.” Kravitz worked as a reviewer and video blogger. He used the “@PhoneDog_Noah” twitter account, and it amassed approximately seventeen thousand followers. When he left, PhoneDog asked for the account “back” but he demurred, instead changing the account handle from @PhoneDog_Noah to “@noahkravitz“. PhoneDog sued, asserting claims for (1) misappropriation of trade secrets, (2) interference with economic advantage; and (3) conversion.

Trade secret claim: Kravitz argued that there was no “trade secret” information, because the followers of the account are not secret and are publicly discernable. The passwords he argued merely allow an individual logging on to the account to view the publicly known follower information. He also argued that PhoneDog did not adequately safeguard the password information and treat is a trade secret. The court punts on the issue and says:

PhoneDog has sufficiently described the subject matter of the trade secret with sufficient particularity and has alleged that, despite its demand that Mr. Kravitz relinquish use of the password and Account, he has refused to do so. At this stage, these allegations are sufficient to state a claim. Further, to the extent that Mr. Kravitz has challenged whether the password and Account followers are trade secrets and whether Mr. Kravitz’s conduct constitutes misappropriation requires consideration of evidence beyond the scope of the pleading.

Economic advantage claim: The court rejects the interference with economic advantage claim, saying that PhoneDog’s allegations were muddled on this issue. It was unclear as to whether PhoneDog was saying Kravitz interfered with PhoneDog’s relationship with account followers or with its subscribers or consumers more generally. The court also says PhoneDog failed to connect the dots with respect to any harm based on advertiser relationships, or even any economic harm generally. [I hope PhoneDog was not making a claim based on its vicarious relationship with followers of the @PhoneDog_Noah Twitter account–we all know how tenuous social media relationships are!]

Conversion: The court declines to dismiss the conversion claim, saying that PhoneDog alleged it had the right to possession over the account, and “the nature of that claim is at the core of this lawsuit and cannot be determined on the present record.”

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This is the scenario that many people speculated about when Rick Sanchez left CNN–would Sanchez get to keep his Twitter account? (“Who ‘Owns’ A Twitter Account: Employer Or Employee?“) Sanchez ultimately kept the account and changed the name. (See: “Ex-CNN anchor Sanchez keeps his Twitter account, changes the name.”) I don’t think this decision does much to move the needle either way, as it punts on the bulk of the issues.

I end up somewhat skeptical on both of PhoneDog’s remaining claims.

Was the password really a trade secret? Is an account’s follower list a trade secret? Social media account information does not fit nicely within the trade secret box. “Customer lists” historically were a classic trade secret, but when customer lists are now published publicly and capable of being mined, does that concept go away? Even if the list were public, could anyone “download” the list? Could Noah have contacted the list any other way than through the account that he’s supposed to turn over? What if Noah had posted a “goodbye” tweet saying “follow me at [new account name]”? With respect to the conversion issue, the court’s analysis was disappointingly brief. It’s interesting that, in this case, PhoneDog has its own Twitter account and this particular account was one set up specifically for Kravitz–it’s not as if he took the company’s one and only Twitter account. One other claim you often see discussed in this context is a trademark-based claim. Kravitz likely averted these by changing the name of the account, and presumably removing any PhoneDog branding elements.

The takeaway is to have a written agreement that governs this issue! I blogged about a case last month where a court resolved a social media/account ownership issue in favor of the employer, relying on a written agreement. (“Ex-Employee Converted Social Media/Website Passwords by Keeping Them From Her Employer–Ardis Health v. Nankivell.”)

A somewhat interesting aspect of the dispute arose over the value of the Twitter account and followers, which was relevant to the issue of whether PhoneDog’s claim for damages got over the $75,000 hurdle. (It had to satisfy the $75,000 jurisdictional threshold for diversity jurisdiction.) PhoneDog said it suffered $340,000 in damages. The account had 17,000 followers, “which according to industry standards, are each valued at $2.50.” [I must admit that this caused an eyeroll.] PhoneDog said this translated into a monthly damage amount of $42,500 “for each month that [Kravitz] used the account.” Kravitz on the other hand said that Twitter followers have discretion to subscribe or unsubscribe and therefore this valuation was suspect. He also argued that the value in any Twitter account “comes from . . . efforts in posting tweets and [an] individual’s interest in following . . . not from the account itself.” According to him, there’s no evidence that an account even with a significant number of followers has any ongoing value. The court does not resolve this issue, instead finding that PhoneDog alleged enough to get over the $75,000 jurisdictional threshold. These arguments really made me wonder whether the parties were spending money on the dispute in excess of the assets they were fighting over. As in many business break ups, emotions tend to run high. This was surely a contributing factor. This case has mediation written all over it.

Related posts:

“Ex-Employee Converted Social Media/Website Passwords by Keeping Them From Her Employer–Ardis Health v. Nankivell.”

Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account — Deck v. Spartz, Inc.