Finkel v. Cashman Prof'l, Inc.

• Decision Date: 01 March 2012
• Docket Number: Nos. 54520,55377.,s. 54520
• Citation: 33 IER Cases 879,270 P.3d 1259,128 Nev. Adv. Op. 6
• Parties: Marc FINKEL, an Individual, Appellant, v. CASHMAN PROFESSIONAL, INC., a Nevada Corporation; Cashman Enterprises, Inc., a Nevada Corporation; and Cashman Photo Enterprises of Nevada, a Nevada Corporation, Respondents.Marc Finkel, an Individual; IQ Variable Data, LLC, a Nevada Corporation; Richard Clark, an Individual; and MFRC Ventures, LLC, d/b/a Influent Solutions, a Nevada Corporation, Appellants, v. Cashman Professional, Inc., a Nevada Corporation; Cashman Enterprises, Inc., a Nevada Corporation; and Cashman Photo Enterprises of Nevada, a Nevada Corporation, Respondents.
• Court: Nevada Supreme Court

128 Nev. Adv. Op. 6

270 P.3d 1259

33 IER Cases 879

Marc FINKEL, an Individual, Appellant,

v.CASHMAN PROFESSIONAL, INC., a Nevada Corporation; Cashman Enterprises, Inc., a Nevada Corporation; and Cashman Photo Enterprises of Nevada, a Nevada Corporation, Respondents.Marc Finkel, an Individual; IQ Variable Data, LLC, a Nevada Corporation; Richard Clark, an Individual; and MFRC Ventures, LLC, d/b/a Influent Solutions, a Nevada Corporation, Appellants,

v.Cashman Professional, Inc., a Nevada Corporation; Cashman Enterprises, Inc., a Nevada Corporation; and Cashman Photo Enterprises of Nevada, a Nevada Corporation, Respondents.

Nos. 54520

55377.

Supreme Court of Nevada.

March 1, 2012.

Law Office of Daniel Marks and Adam Levine, Daniel Marks, and Christopher L. Marchand, Las Vegas, for Appellants.

Kravitz, Schnitzer, Sloane & Johnson, Chtd., and Michael B. Lee and Martin J. Kravitz, Las Vegas, for Respondents.

BEFORE SAITTA, C.J., HARDESTY and PARRAGUIRRE, JJ.

OPINION

By the Court, PARRAGUIRRE, J.:

In this appeal, we review two district court orders: one granting a preliminary injunction to enforce restrictive provisions in a consulting agreement (the Agreement) and to prevent likely violations of Nevada's Uniform Trade Secrets Act, and the other refusing to dissolve that preliminary injunction after the Agreement had been terminated. Because substantial evidence supports the district court's findings that appellant likely breached the Agreement and violated Nevada's Uniform Trade Secrets Act, we affirm the district court's order granting respondents' request for preliminary injunctive relief. However, upon termination of the Agreement, the district court should have granted appellant's motion to dissolve the injunctive provisions that were grounded on findings that appellant likely breached the Agreement. With regard to the alleged trade secret violations, NRS 600A.040(1) requires the district court to make findings as to the continued existence of a trade secret and to what constitutes a “reasonable period of time” for maintaining an injunction under Nevada's Uniform Trade Secrets Act. Because the district court failed to make these findings, we reverse the district court's second order and remand to the district court for further proceedings regarding the extent that the injunctive provision related to likely violations of the Trade Secrets Act should continue to remain in effect.

FACTS AND PROCEDURAL HISTORY

Beginning in 2001, appellant Marc Finkel was employed in various executive positions at respondent Cashman Professional, Inc., which is affiliated with respondents Cashman Enterprises, Inc., and Cashman Photo Enterprises of Nevada (collectively, Cashman). During his employment, Finkel performed various tasks designed to expand and streamline Cashman's Las Vegas-based wedding photography business. Among other things, Finkel designed business software, negotiated sales contracts with customers, developed new sales strategies, drafted employment agreements, created training programs, and implemented new management techniques for the business.

Cashman went to great lengths to keep the above aspects of its business confidential. In particular, Finkel was one of only four people with access to Cashman's contracts, which were kept under lock and key to thwart attempts of underbidding by competitive companies.

Accordingly, when Finkel left his employment with Cashman in 2008, Cashman and Finkel entered into the Agreement, which, in large part, was designed to maintain the confidentiality of this information following Finkel's departure. The Agreement provided that Finkel would serve as a consultant to Cashman and would abide by several restrictive covenants in exchange for certain compensation. The restrictive covenants prohibited Finkel from engaging in a competing business, disparaging Cashman, soliciting Cashman's employees, and disclosing Cashman's confidential information.

In early 2009, Finkel purchased a printing company called IQ Variable Data, LLC (IQ), which he renamed as Influent Solutions. According to the parties, IQ was the only printing company in Las Vegas that could provide overnight printing of wedding photo books, and Cashman's photography business relied on IQ when overnight printing services were required. Finkel continued to provide the same services as IQ through Influent Solutions, and in doing so, he enlisted several Cashman employees to help establish his business. Finkel also approached at least two of Cashman's customers and solicited them to move their entire wedding photo and print production to Influent Solutions.

Detecting a threat to its business interests, Cashman filed a motion in the district court alleging breach of the Agreement and, in part, seeking a preliminary injunction to enforce the Agreement's restrictive covenants. The district court granted Cashman's request for a preliminary injunction in August 2009, concluding that Finkel had likely violated several provisions in the Agreement and misappropriated trade secrets in violation of Nevada's Uniform Trade Secrets Act, and that Cashman would suffer irreparable injury absent the issuance of an injunction. The preliminary injunction prevented Finkel from engaging in a competing business, making disparaging remarks about Cashman, soliciting Cashman's employees, and disclosing Cashman's confidential information. It further enjoined Finkel from misappropriating Cashman's trade secrets.

Finkel appealed from the preliminary injunction order and later informed Cashman that he was exercising his right to terminate the Agreement. Because the restrictive covenants were only applicable while the Agreement was in effect, Finkel then filed a motion to dissolve the preliminary injunction upon termination of the Agreement. After a hearing, the district court entered an order in January 2010, denying Finkel's motion to dissolve the injunction, finding that termination of the Agreement did not end the district court's authority to protect Cashman from an unfair competitive scenario. Finkel appealed from the order refusing to dissolve the injunction, and this court consolidated the two matters for resolution.

DISCUSSION

On appeal, Finkel first argues that the district court abused its discretion by issuing the preliminary injunction because substantial evidence does not support that Cashman would suffer irreparable harm and that Cashman would likely succeed in establishing that Finkel had breached the Agreement or misappropriated trade secrets.¹ As explained below, we disagree.

The order issuing the preliminary injunction was supported by substantial evidence

“A preliminary injunction is available when the moving party can demonstrate that the nonmoving party's conduct, if allowed to continue, will cause irreparable harm for which compensatory relief is inadequate and that the moving party has a reasonable likelihood of success on the merits.” Boulder Oaks Cmty. Ass'n v. B & J Andrews, 125 Nev. 397, 403, 215 P.3d 27, 31 (2009).

Standard of review

This court reviews a district court's issuance of a preliminary injunction for an abuse of discretion. Guerin v. Guerin, 114 Nev. 127, 134, 953 P.2d 716, 721 (1998), abrogated on other grounds by Pengilly v. Rancho Santa Fe Homeowners, 116 Nev. 646, 648–49, 5 P.3d 569, 570–71 (2000). “A decision that lacks support in the form of substantial evidence is arbitrary or capricious and, therefore, an abuse of discretion.” Stratosphere Gaming Corp. v. Las Vegas, 120 Nev. 523, 528, 96 P.3d 756, 760 (2004) (quotation omitted). “Substantial evidence has been defined as that which a reasonable mind might accept as adequate to support a conclusion.” McClanahan v. Raley's, Inc., 117 Nev. 921, 924, 34 P.3d 573, 576 (2001) (quotations omitted). Irreparable harm and likelihood of success on the merits

Finkel argues that the record lacks substantial evidence to support the district court's conclusion that Cashman would likely succeed on the merits on its breach of contract and related claims or that it would suffer irreparable harm absent the issuance of the injunction.

This court has held in the context of an appeal from an order granting an injunction that “acts committed without just cause which unreasonably interfere with a business or destroy its credit or profits, may do an irreparable injury.” Sobol v. Capital Management, 102 Nev. 444, 446, 726 P.2d 335, 337 (1986). Here, the district court found that Finkel likely competed with Cashman, solicited Cashman's employees, disparaged Cashman, disclosed Cashman's confidential information, and misappropriated Cashman's trade secrets.

Contrary to Finkel's arguments, substantial record evidence supports the district court's conclusions. First, the Agreement restricted Finkel's ability to engage in a competing business, defined in part as any commercial photography or related service offered by Cashman, whether performed internally or by an outside service. It is undisputed that Finkel proceeded to acquire and operate the only vendor for wedding albums who could provide next-day printing in the relevant area, and that IQ had performed as an outside-service provider for Cashman in the past. Finkel argues that this fact is insufficient to show that he was participating in a competing business because Influent Solutions offered a variety of other commercial printing services. However, this does not undermine the district court's conclusion that Influent Solutions was in competition with Cashman, especially in light of Finkel's admission that he approached several of Cashman's customers, urging them to move their business to Influent Solutions.

Second, the Agreement prohibited Finkel from making any type of disparaging or derogatory remarks regarding Cashman. The record indicates that Finkel repeatedly violated this clause by referring to Cashman executives as untrustworthy, swindling “snake[s],” and other similar remarks.

Next, the Agreement restricted Finkel...