Curtis 1000, Inc. v. Youngblade, No. C 94-4117.
Court | United States District Courts. 4th Circuit. Northern District of West Virginia |
Citation | 878 F. Supp. 1224 |
Decision Date | 27 January 1995 |
Docket Number | No. C 94-4117. |
Parties | CURTIS 1000, INC., Plaintiff, v. Daniel YOUNGBLADE, Defendant. |
878 F. Supp. 1224
CURTIS 1000, INC., Plaintiff,
v.
Daniel YOUNGBLADE, Defendant.
No. C 94-4117.
United States District Court, N.D. Iowa, Western Division.
January 27, 1995.
James C. Hanks and Douglas L. Phillips, Klass, Hanks, Stoos, Stoik, Mugan & Villone, Sioux City, IA, for defendant Youngblade.
ORDER REGARDING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION PURSUANT TO FED.R.CIV.P. 65(a)
BENNETT, District Judge.
I. INTRODUCTION AND PROCEDURAL HISTORY ..................................... 1231 II. FINDINGS OF FACT ........................................................ 1232 A. Curtis 1000's Training Of Its Sales Staff ............................ 1233 1. Level I Contacts .................................................. 1233 2. Level II Contacts ................................................. 1234 3. Level III Contacts ................................................ 1234 4. Level IV Contacts And Other Training .............................. 1235 B. Restrictive Covenants ................................................ 1236 C. Youngblade's Employment History With Curtis 1000 ..................... 1238 1. The Development Of Problems Between Youngblade And Curtis 1000 .... 1239 a. Compensation ................................................... 1239 b. Short Counting ................................................. 1239 2. Youngblade's Termination .......................................... 1240 D. Events After Youngblade's Termination ................................ 1241 III. CONCLUSIONS OF LAW ...................................................... 1243 A. Standards For Granting A Preliminary Injunction ...................... 1243 1. State Or Federal Standards? ....................................... 1243 2. Dataphase And Its Progeny ......................................... 1244 a. Purpose And Standards For Preliminary Injunctions .............. 1244 b. The Individual Factors And Their Relationship .................. 1245 i. Likelihood Of Success On The Merits ........................ 1246 ii. Threat Of Irreparable Harm ................................. 1247 iii. Balance Of Harm ............................................ 1248 iv. The Public Interest ........................................ 1249 3. Stipulated Grounds For Injunction ................................. 1249 B. Conflict of Laws ..................................................... 1251 1. The Iowa Conflict Of Laws Rules For Contract Cases ................ 1251 2. Application Of The Choice Of Law Rules ............................ 1253 a. The Chosen State Has No Substantial Relationship ............... 1254 b. The Chosen State's Law Is Contrary To Iowa's Policy ............ 1255 C. The Covenant Not To Compete .......................................... 1256 1. Covenants Not To Compete Under Iowa Law ........................... 1257 a. An Overview .................................................... 1257 b. The Consideration Requirement .................................. 1259 c. The Enforceability Analysis .................................... 1260 d. Summary Of Iowa Law ............................................ 1263 2. Covenants Not To Compete Under Delaware Law ....................... 1264 3. Comparison Of Iowa And Delaware Law ............................... 1267 D. The Grant Or Denial Of A Preliminary Injunction: Application Of The Dataphase Factors ............................... 1268 1. Likelihood Of Success On The Merits: The Validity And Enforceability Of This Covenant ............... 1268 a. Validity And Enforceability Under Iowa Law .................... 1269 b. Under Delaware Law ............................................ 1272
878 F. Supp. 1231III. CONCLUSIONS OF LAW â Continued D. The Grant Or Denial Of A Preliminary Injunction: â Continued 2. Threat of Irreparable Harm ................................. 1272 3. Balance Of Harms ........................................... 1274 4. Public Interest ............................................ 1274 E. The Requirements Of Fed.R.Civ.P. 65(c) & (d) .................. 1275 1. The Scope Of A Preliminary Injunction ...................... 1275 2. Fed.R.Civ.P. 65(c)'s Security Requirement .................. 1275 IV. CONCLUSION ....................................................... 1280
This application for a preliminary injunction requires the court to confront a number of intriguing questions raised by a covenant not to compete in an employment contract. First, the court must decide whether a covenant not to compete in an employment contract should be enforced according the law chosen in the contract between the parties (Delaware), which is the law of a forum with no substantial contacts with the parties or the transaction, or the law of the state in which the contract was substantially performed (Iowa). Second, the court must decide whether the covenant is valid and enforceable under the law of either state, identifying in the process significant differences between those bodies of law concerning covenants not to compete. Third, the court must decide whether issuing a preliminary injunction is appropriate in the circumstances of this case. This third issue requires the court to consider what standards apply to the determination of whether the injunction should issue, state law, federal law, or a clause of the contract between the parties which purportedly establishes a lower threshold for this court's exercise of such equitable powers.
An employer, a nationally-recognized manufacturer of business forms and papers, seeks a preliminary injunction against a former top sales representative enjoining the sales representative from violating a covenant not to compete found in the sales representative's employment contract. The sales representative, who was terminated from his position shortly after filing a declaratory judgment action in Iowa district court seeking to determine his rights under the covenant not to compete, has found employment with another local business, and has allegedly been contacting customers he originally obtained for his former employer. Some of those customers have switched allegiance to the sales representative's new company, allegedly causing or potentially causing his former employer serious economic harm and other injuries. The court notes that from at least late 1993, the employee's repeated indications that he could do better elsewhere and could probably take some of his customers with him when he went "hung like the sword of Damocles over the heads of" the employer. The value of the Damoclean sword is "that it hangs â not that it drops." LaSociete Generale Immobiliere v. Minneapolis Community Development Agency, 44 F.3d 629, 637 (8th Cir.1994) (quoting Marshall, J., dissenting, in Arnett v. Kennedy, 416 U.S. 134, 231, 94 S.Ct. 1633, 1682, 40 L.Ed.2d 15 (1974)). When it did drop in this case, it may have severed more than the employee anticipated.
I. INTRODUCTION AND PROCEDURAL HISTORY
This matter comes before the court pursuant to the motion of plaintiff Curtis 1000, Inc. ("Curtis 1000"), for a preliminary injunction filed December 22, 1994, in an action filed the same day. On January 6, 1995, an amended complaint was filed by Curtis 1000. Curtis 1000's amended complaint seeks, in Count I, an injunction for breach of contract, and, in Count II, an injunction for violation of Iowa's Uniform Trade Secrets Act, Iowa Code § 550.3 (1993). A return of service was executed on defendant Daniel Youngblade on January 11, 1995.
On December 29, 1994, Youngblade also filed a lawsuit, but in the Iowa District Court for Woodbury County, in a case styled Youngblade v. Curtis 1000, Inc., Equity No. 110095C. In his lawsuit, Youngblade seeks a declaratory judgment with respect to the parties' rights pursuant to a covenant not to compete found in an employment contract between the parties. On January 19, 1995, Curtis 1000 removed that action to this court on the ground that diversity of citizenship
A hearing on Curtis 1000's motion for preliminary injunction was held on January 20, 1995. Curtis 1000 appeared through its counsel Roger T. Stetson of Belin, Harris, Lamson, McCormick, Des Moines, Iowa. Defendant Youngblade was represented at the hearing by James C....
To continue reading
Request your trial-
Dethmers Mfg. Co. v. Automatic Equip. Mfg. Co., No. C 96-4061-MWB.
...1458 (N.D.Iowa 1996); Harlan Feeders, Inc. v. Grand Labs., Inc., 881 F.Supp. 1400 (N.D.Iowa 1995); Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224, 1251-54 (N.D.Iowa 1995). To resolve the issue of which state's law applies to Dethmers's common-law claims, the court looks to the conflict-o......
-
Kracht v. Aalfs Associates HCP, No. C 94-4025.
...to mind, on a wing; but often how one must decide it comes arduously, weighed down by somber thought." Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224, 1232 (N.D.Iowa 1995) (quoting Letelier v. Republic of Chile, 748 F.2d 790, 791 (2d Cir.1984), cert. denied, 471 U.S. 1125, 105 S.Ct. 2656......
-
Branstad v. Glickman, No. C00-3072-MWB.
...371 (8th Cir.1991)). Rather, as this court explained in its consideration of the "Dataphase factors" in Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224 (N.D.Iowa Likelihood of success on the merits requires that the movant find support for its position in governing law. In order to weigh ......
-
B & D Land and Livestock Co. v. Veneman, No. C 02-3051-MWB.
...371 (8th Cir.1991)). Rather, as this court explained in its consideration of the "Dataphase factors" in Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224 (N.D.Iowa Likelihood of success on the merits requires that the movant find support for its position in governing law. In order to weigh ......
-
Dethmers Mfg. Co. v. Automatic Equip. Mfg. Co., No. C 96-4061-MWB.
...1458 (N.D.Iowa 1996); Harlan Feeders, Inc. v. Grand Labs., Inc., 881 F.Supp. 1400 (N.D.Iowa 1995); Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224, 1251-54 (N.D.Iowa 1995). To resolve the issue of which state's law applies to Dethmers's common-law claims, the court looks to the conflict-o......
-
Kracht v. Aalfs Associates HCP, No. C 94-4025.
...to mind, on a wing; but often how one must decide it comes arduously, weighed down by somber thought." Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224, 1232 (N.D.Iowa 1995) (quoting Letelier v. Republic of Chile, 748 F.2d 790, 791 (2d Cir.1984), cert. denied, 471 U.S. 1125, 105 S.Ct. 2656......
-
Branstad v. Glickman, No. C00-3072-MWB.
...371 (8th Cir.1991)). Rather, as this court explained in its consideration of the "Dataphase factors" in Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224 (N.D.Iowa Likelihood of success on the merits requires that the movant find support for its position in governing law. In order to weigh ......
-
B & D Land and Livestock Co. v. Veneman, No. C 02-3051-MWB.
...371 (8th Cir.1991)). Rather, as this court explained in its consideration of the "Dataphase factors" in Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224 (N.D.Iowa Likelihood of success on the merits requires that the movant find support for its position in governing law. In order to weigh ......
-
Understanding and Litigating Trade Secrets: An Outline for Analyzing the Statutory and Common Law of Trade Secrets In Illinois
...Rule 65 of the Federal Rules of Civil Procedure governs the procedure in federal district courts. Curtis 1000, Inc. v. Youngblade, 878 F. Supp. 1224, 1243 (N.D. Iowa 1995). a) Standards in Illinois state court. In Illinois, a party seeking preliminary injunctive relief must establish: a. a ......