Iron Mountain Information Management v. Taddeo

• Decision Date: 30 June 2006
• Docket Number: No. 06-CV-2164(JFB)(AKT).,06-CV-2164(JFB)(AKT).
• Citation: 455 F.Supp.2d 124
• Parties: IRON MOUNTAIN INFORMATION MANAGEMENT, INC., Plaintiff, v. Ben TADDEO, Media Recovery, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

455 F.Supp.2d 124

IRON MOUNTAIN INFORMATION MANAGEMENT, INC., Plaintiff, v. Ben TADDEO, Media Recovery, Inc., Defendants.

No. 06-CV-2164(JFB)(AKT).

United States District Court, E.D. New York.

June 30, 2006.

COPYRIGHT MATERIAL OMITTED

Andrew Todd Solomon, Esq. and Adam B. Oppenheim, Esq., Sullivan & Worcester LLP, New York City, for plaintiff.

R. Lance Witcher, Esq., Josef S. Glynias, Esq., and Randall S. Thompson, Esq., Blackwell Sanders Peper Martin LLP, Saint Louis, MO, and Peter Venaglia, Esq., Dornbush Schaeffer Strongin & Venaglia, New York City, for Defendants.

MEMORANDUM AND ORDER

BIANCO, District Judge.

This is a diversity action arising out of an alleged breach of an employment agreement. The plaintiff, Iron Mountain Information Management, Inc. ("Iron Mountain"), seeks a preliminary injunction that would enjoin (1) defendant Ben Taddeo ("Taddeo") from soliciting business from any actual or prospective customer or client of Iron Mountain with which Taddeo had contact during his Iron Mountain employment, and (2) defendants Taddeo and Media Recovery, Inc. ("Media Recovery") from soliciting business from any actual or prospective clients of Iron Mountain or its predecessor, who are known to defendants as a result of information or data known or obtained by Taddeo during his employment with Iron Mountain.

The parties stipulated to a temporary restraining order pending a preliminary injunction hearing. A hearing was held on June 13, 2006, on the motion for a preliminary injunction, and the parties had the opportunity to examine witnesses and submit relevant documentary evidence. Closing statements were heard on June 22, 2006.¹ Having reviewed the submissions and assessed the credibility of the witnesses, the Court makes the following Findings of Fact and Conclusions of Law, pursuant to Fed.R.Civ.P. 52(a) and 65, and denies the motion for a preliminary injunction.

I. FINDINGS OF FACT

A. THE PARTIES

Plaintiff Iron Mountain, formerly known as Iron Mountain Records Management, Inc., is a Delaware corporation with its principal place of business in Boston, Massachusetts. Iron Mountain provides Data Protection Services, Data Storage, Electronic Vaulting, and Data Products to its clients. (Preliminary Injunction Hearing Transcript, dated June 13, 2006, at 24 (hereinafter "Tr.")). Defendant Taddeo is an individual who resides in North Babylon, New York. Taddeo became an employee of Iron Mountain in 1998 when it acquired his former employer, Arcus Data Security, Inc. (Tr. at 160.) In 1999, Taddeo became a salesperson with Iron Mountain. (Tr. at 161.) In that capacity, Taddeo sold Data Protection Services, Data Storage, Electronic Vaulting and Data Products. (Tr. at 24.) Defendant Media Recovery is a Texas corporation with its principal place of business in Dallas, Texas. Media Recovery is a competitor of Iron Mountain in the sale of Data Products; it does not offer storage services of any kind and, thus, does not compete with Iron Mountain other than in connection with Data Products. (Tr. at 244, 262.)

B. THE PRODUCTS AND SERVICES

Data Storage and Electronic Vaulting (collectively, "Storage") are both services Iron Mountain offers where it stores its customers' computer backup information in Iron Mountain's own facilities. (Tr. at 24.) With Electronic Vaulting, the customer's backup information is transmitted to Iron Mountain's storage facility over secure phonelines. (Tr. at 25.) For Data Storage, the information is saved onto computer backup tapes at the customer's facility, and Iron Mountain then physically retrieves those tapes and stores them in a secure environment, providing twenty-four hour access. (Tr. at 24.) "Data Products" include a wide array of office supply products, similar to those that are available at a "Staples" or "Office Max." (Tr. at 81.) Virtually every business using computers and possessing a need to backup the information on those computers is a potential Data Products customer. (Tr. at 80-81, 242-43, 245.)

Iron Mountain's customers for Storage services sign contracts that can last for one to three years and the service provided by Iron Mountain recurs on a weekly, monthly or annual basis. (Tr. at 25, 243-44.) As a part of those contracts, Iron Mountain's Storage services customers face a monetary penalty if they choose to terminate the contract before the expiration of its term. (Tr. at 244.) In contrast, sales for Data Products are one-time, lowmargin sales, and each new sale requires a new order from the customer. (Tr. at 25.) Data Products customers do not sign contracts with Iron Mountain and typically would call Iron Mountain to request a quote and would compare those prices by shopping around with other vendors. (Tr. at 245-46, 255-56.) Data Products are similar to commodities in that the price fluctuates. (Tr. at 78, 132-33.) The pricing information on Iron Mountain's cost sheets, which are available on its intranet, change about every two weeks. (Tr. at 251.)

As a sales representative for Iron Mountain, Taddeo used a number of methods to locate and contact prospective customers for Data Products, including local trade publications that publish lists of top accounting firms, law firms, and other public and private companies on Long Island, Hoover's online, Crain's, and other commercially available publications. (Tr. at 164-65, 242-45.) Other customers contacted Iron Mountain's telemarketing department directly, some were existing customers and Taddeo simply "cold-called" others. (Tr. at 164, 166-67.) In addition to these outlets for information, Taddeo implemented his own marketing methods in which he sent out reminder e-mails to customers and ran occasional price specials. (Tr. at 129.) According to one of Taddeo's supervisors, John Connors (Executive Vice — President for North American Sales and Marketing for Iron Mountain), Taddeo was "almost running his own business" with respect to marketing and selling Data Products to prospective customers. (Id.)

To sell Data Products to a prospective customer, Taddeo would call the customer's general telephone number and ask to speak with an employee in the information technology department or someone ultimately responsible for purchasing Data Products. (Tr. at 252-53.) It generally took Taddeo one or two phone calls to find the right person. (Tr. at 254.) Taddeo would then inquire about the customer's Data Products needs and solicit orders accordingly. (Id.) To the extent the customer had any specific preferences for Data Products, Taddeo would obtain that information by asking a direct question or as a result of the customer volunteering such information. (Tr. at 254.) This prospecting conversation could take place in one to two minutes. (Tr. at 253-54.)

At the time of the relevant events in early 2006, Iron Mountain's goal was to change the focus of the sales representatives from Data Products to the higher margin, core services. (Tr. at 43, 70.)

C. THE EMPLOYEE HANDBOOK

On November 16, 2003, Taddeo signed an Employee Acknowledgment Form, acknowledging acceptance of Iron Mountain's Employee Handbook revised January 1, 2003. (Stipulated Facts For Preliminary Injunction Hearing dated June 12, 2006 (hereinafter "Stip.") ¶ 3.) The Employee Handbook prohibited employees from disclosing "to any person the identity of any Iron Mountain customer except to carry out Iron Mountain's obligation with respect to such customer." (Pl.Ex.2.) The Employee Handbook also provided that "[a]ll customer and employee information shall be treated as confidential and proprietary" and it restricted employees from "simultaneous employment with a . . . competitor." (Id.)

D. THE CONFIDENTIALITY AND NON-COMPETE AGREEMENT

During his employment, Taddeo was required to execute Employee Confidentiality and Non-Competition Agreements with Iron Mountain, in conjunction with changes to his compensation plan. (Tr. at 31-33.) The most recent agreement was executed by Taddeo in December 2004 in conjunction with the 2005 Compensation Plan (the "2004 Agreement"). (Tr. at 32-33; see also Stip. ¶ 5.) The 2004 Agreement had a confidentiality provision, a non-competition provision, and a non-solicitation provision. (Pl.Ex.3) The 2004 Agreement's non-competition provision prevented Taddeo from accepting employment with any competitor within a 50-mile radius of any Iron Mountain facility for one year following his termination from Iron Mountain.² (Id.) The non-solicitation provision prevented Taddeo from soliciting business from any actual or prospective customers of Iron Mountain with whom he had contact during his, employment at Iron Mountain for one year following his termination from Iron Mountain. (Id.)

On January 6, 2006, Taddeo's supervisor presented Taddeo with Iron Mountain's 2006 Sales Compensation Plan and another Employee Confidentiality and Non-Competition Agreement in connection with the introduction of the 2006 Compensation Plan (the "2006 Agreement"). (Tr. at 31-32, Stip. ¶ 6.) Execution of the 2006 Agreement was a requirement before Taddeo could receive compensation under the 2006 Compensation Plan. (Tr. at 179-80.) The 2006 Compensation Plan differed from the 2005 Compensation Plan. (Tr. at 58.) First, the 2006 Compensation Plan contained a monthly limit on the commission Taddeo could earn on the sale of Storage services. (Tr. at 59.) In addition, whereas Taddeo had previously received commissions on any sale of Data Products, the new plan cut off those commissions 90 days after the customer placed its first order for Data Products. (Tr. at 58-59.) The 2005 Compensation Plan did not contain these restrictions. (Tr. at 58.)

Taddeo refused to sign the 2006 Agreement, citing the concerns he had regarding the impact of the 2006 Compensation Plan on his income. (Tr. at 32, 64-65, 180.) On January 13, 2006, Taddeo executed an affirmation that he "received, read and understand [sic] the 2006 Sales Plan Memorandum and the 2006 Sales Compensation...