Judge Jean Hamilton’s recent order in Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting, LLC, E.D. Missouri (October 26, 2009) held that an ex-employee who accesses information on a company-issued laptop for a purpose adverse to the company can be liable under the federal Stored Communications Act (SCA). Judge Hamilton’s ruling also suggests that even current employees can be held liable under the SCA as well, if they access information from a laptop for a purpose that violates their duty of loyalty to the company.

This ruling is important, because the SCA provides for criminal penalties, as well civil actions, against offenders. 18 U.S.C. §§ 2701(b), 2707. Tens of millions of U.S. employees are issued company-owned laptops, and countless employees download information from these computers for purposes adverse to their former employer’s interests, both during and after leaving the company. Under Judge Hamilton’s ruling, many thousands of these employees theoretically stand in jeopardy of federal prison time.

But is Judge Hamilton’s ruling right? At least one other recent ruling suggests that the SCA cannot be used in this situation at all. See Thule Towing Systems, LLC v. McNallie, E.D.Mich., No. 2:09-cv-10905, Order (July 15, 2009). Other case law suggests that the SCA only reaches employees who access to emails and other communications stored on company-owned computers has been expressly revoked.

Judge Hamilton’s decision was based on SCA Section 2701, which provides that “whoever (1) intentionally accesses without authorization a facility through which an electronics communication service is provided; or (2) intentionally exceeds an authorization to access that facility; and thereby obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such a system shall be punished as provided in subsection (b) of this section.” 18 U.S.C. § 2701(a).

Here, Lasco had alleged that the defendants, Shaw and Hall, were long-time Lasco sales executives and had been provided with company laptops for use in company business. In 2008, Shaw and Hall decided to start a competing restaurant food supply. Both before and after Lasco became aware of this new business, but which they were still Lasco employees, the defendants allegedly “accessed, printed, copied and/or downloaded” a substantial amount of data from their laptops, as well as from Lasco’s network, for use in their competing business. See Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting LLC, E.D.Missouri, No. 4:08-cv-01683, Third Amended Complaint (May 15, 2009).

Using principles of agency laws, Judge Hamilton reasoned as follows:

“While Lasco afforded Defendants access to its computers, networks and information for purposes of their employment, Lasco alleged that Hall and Shaw accessed Lasco’s Information to benefit the interests of Defendants, not Lasco. Defendant Hall and Shaw’s authorization to access this information ceased when they breached their duty of loyalty to Lasco and their employment terminated” (emphasis added).