Just Funky, LLC v. Boom Trendz, LLC

• Decision Date: 25 June 2021
• Docket Number: CASE NO. 5:21-cv-1127
• Parties: JUST FUNKY, LLC, PLAINTIFF, v. BOOM TRENDZ, LLC, et al., DEFENDANTS.
• Court: U.S. District Court — Northern District of Ohio

JUST FUNKY, LLC, PLAINTIFF, v. BOOM TRENDZ, LLC, et al., DEFENDANTS.

CASE NO. 5:21-cv-1127

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

June 25, 2021

JUDGE SARA LIOI

MEMORANDUM OPINION AND ORDER

This matter is before the Court on the motion of plaintiff for a temporary restraining order. (Doc. No. 4.) The Court conducted a hearing on plaintiff's motion where all parties were represented by counsel and counsel presented argument regarding their clients' respective positions on plaintiff's motion. For the reasons that follow, plaintiff's motion is denied.

I. BACKGROUND

According to the complaint, Just Funky is a "premiere manufacturer of licensed and private label merchandise for the mainstream retail market." (Doc. No. 1 ¶ 8). Just Funky's principal place of business is in Richfield, Ohio where they are "in the business of procuring licenses to third party intellectual property, and arranging for the designing, manufacturing, distribution, sale, and use of articles pursuant to said licenses." (Id. ¶¶ 7, 9). Defendant Boom Trendz is an Ohio LLC engaged in a similar business enterprise to that of Just Funky with its principal place of business in the state of Ohio. (Id. ¶ 10). Defendant Carpenter, who resides in Wooster, Ohio, was previously employed by Just Funky and currently is the owner and statutory agent for Boom Trendz. (Id. ¶¶ 12, 13.) Defendant Tyagi was also previously employed by Just Funky as part of plaintiff's India-based operations and is a resident of India,¹ but "work[ed] closely" with Ohio headquarters. (Id. ¶ 14). Tyagi's employment with plaintiff ended on October 30, 2020, and he is now employed by Boom Trendz. (Id. ¶¶ 41-43.)

Plaintiff claims that Carpenter, Boom Trendz, and Tyagi have violated both federal and state law in connection with Just Funky's confidential information and trade secrets. Specifically, plaintiff alleges that all three violated the Defend Trade Secrets Act ("DTSA") (18 U.S.C. § 1836, et seq.) (Count One) (Doc. No. 1 ¶¶ 81-89), the Computer Fraud and Abuse Act ("CFAA") (18 U.S.C. § 1030(a)(4)) (Count Two) (Doc. No. 1 ¶¶ 90-97), and Ohio's Uniform Trade Secrets Act (Ohio Rev. Code § 1331.61 et seq.) (Count Three) (Doc. No. 1 ¶¶ 98-105) by misappropriating plaintiff's confidential, proprietary information and trade secrets, and unfairly competing against Just Funky (Count Four) (Doc. No. 1 ¶¶ 106-110). As to plaintiff's claims against the defendants individually, Just Funky alleges that under Ohio law, Tyagi and Carpenter breached the restrictive covenants in their contracts with plaintiff by disclosing and misappropriating plaintiff's confidential information and trade secrets and by competing against plaintiff and soliciting plaintiff's customers, manufacturers, and suppliers (Counts Five and Six, respectively). (See Doc. No. 1 ¶¶ 111-120). Lastly, in Count Seven, Just Funky claims that Boom Trendz and Carpenter tortiously interfered with plaintiff's contract with Tyagi by causing Tyagi to breach his contract as alleged in Count Five. (See Doc. No 1 ¶¶ 121-125.)

The Court has subject matter jurisdiction over plaintiff's federal claims pursuant to 28 U.S.C. § 1331, and supplemental jurisdiction over plaintiff's state law claims pursuant to 28 U.S.C. § 1367. Venue is proper in the Northern District of Ohio pursuant to 28 U.S.C. § 1391(b)(2).

Plaintiff filed a motion seeking injunctive relief against all three defendants pursuant to Fed. R. Civ. P. 65 in the form of a temporary restraining order ("TRO") and/or preliminary injunction only as to its misappropriation claims (counts one and three) and its contractual claims (counts five, six, and seven). (Doc. No. 4.) At the hearing, defendants' counsel argued on behalf of their respective clients that the allegations in the verified complaint and exhibits thereto are insufficient to support an award of equitable relief under Rule 65.²

II. DISCUSSION

A. Standard of Review

Plaintiff brings its motion for injunctive relief pursuant to Fed. R. Civ. P. 65. In determining whether to impose a TRO, the Court considers the same four factors as are considered for a preliminary injunction: (1) whether plaintiff has a substantial likelihood or probability of success on the merits; (2) whether plaintiff will suffer irreparable injury if the relief is not granted; (3) whether the injunctive relief would unjustifiably harm a third party; and (4) whether the public interest would be served by issuing the injunctive relief. Frisch's Restaurant, Inc. v. Shoney's Inc., 759 F.2d 1261, 1263 (6th Cir. 1985); Am. Family Life Ins. Co. v. Hagan, 266 F. Supp. 2d 682, 687 (N.D. Ohio 2002). The test is a flexible one and the factors are not prerequisites to be met but considerations that must be balanced against each other. Leary v. Daeschner, 228 F.3d 729, 736 (6th Cir. 2000) (citing cases); In re DeLorean Motor Co., 755 F.2d 1223, 1229 (6th Cir. 1985).

While no single factor is determinative, "a finding that there is simply no likelihood of success on the merits is usually fatal." Gonzales v. Nat'l Bd. of Med. Examiners, 225 F.3d 620, 625 (6th Cir. 2000). And, in the context of a temporary restraining order, there is emphasis on consideration of irreparable harm in order to preserve the status quo. See Reid v. Hood, No. 1:10-cv-2842, 2011 WL 251437, at *2 (N.D. Ohio Jan. 26, 2011) (citing Motor Vehicle Bd. of Cal. v. Fox, 434 U.S. 1345, 1347 n.2, 98 S. Ct. 359, 54 L. Ed. 2d 439 (1977)); Procter & Gamble Co. v. Bankers Trust Co., 78 F.3d 219, 226 (6th Cir. 1996) ("[T]he purpose of a TRO under Rule 65 is to preserve the status quo so that a reasoned resolution of a dispute may be had.").

Plaintiff bears the burden of establishing entitlement to the extraordinary remedy of a temporary restraining order. See Jones v. Caruso, 569 F.3d 258, 265 (6th Cir. 2009) (citations omitted). To satisfy this burden, the party seeking a TRO must establish its case by clear and convincing evidence. Hartman v. Acton,—F. Supp. 3d—, No. 2:20-cv-1952, 2020 WL 1932896, at *2 (S.D. Ohio Apr. 21, 2020) (citing Overstreet v. Lexington-Fayette Urban Cnty. Gov't, 305 F.3d 566, 573 (6th Cir. 2002)); Honeywell, Inc. v. Brewer-Garrett Co., No. 97-3673, 1998 WL 152951 (6th Cir. March 23, 1998)); see also Marshall v. Ohio Univ., No. 2:15-cv-775, 2015 WL 1179955, at *4 (S.D. Ohio March 13, 2015) ("The burden of proving that the circumstances 'clearly demand' such an extraordinary remedy is a heavy one: '[t]he party seeking the injunction must establish its case by clear and convincing evidence.'") (quoting Overstreet, 305 F.3d at 573); Union Home Mortg. Corp. v. Cromer, No. 4:21-cv-385, 2021 WL 1601193, at *7 (N.D. Ohio Apr. 23, 2021) ("'The burden of proving that the circumstances clearly demand such an extraordinary remedy is a heavy one since the party seeking the injunction must establish its case by clear and convincing evidence.'") (quoting Hartman, 2020 WL 1932896, at *2). Indeed, plaintiff's burden of establishing that it has a substantial likelihood of success on the merits of its claim is moredemanding than that required to survive a motion to dismiss or even summary judgment. Marshall, 2015 WL 1179955, at *8 (citing Leary, 228 F.3d at 739 ("[T]he proof required for the plaintiff to obtain a preliminary injunction is much more stringent than the proof required to survive a summary judgment motion.")).

B. Analysis

As noted, plaintiff moves for temporary injunctive relief only as to counts one and three (the "misappropriation claims") (Doc. No. 4-1 at 6³), and counts five, six, and seven (the "contractual claims") (id. at 9-10). The Court limits its analysis accordingly.

After considering the allegations in the verified complaint and exhibits thereto, the arguments of counsel at the TRO hearing, and balancing the factors applicable to consideration of plaintiff's motion, and the Court finds that, at this time, plaintiff has not satisfied its burden establishing entitlement to a TRO.

1. Carpenter and Boom Trendz

a. Likelihood of success on the merits

Contract claims (counts six and seven)

Carpenter was employed as a Key Account Manager by Just Funky from August 2012 until April 5, 2019. As an account manager, plaintiff alleges that Carpenter had access to plaintiff's confidential and proprietary information and trade secrets. Carpenter executed three agreements in connection with her employment with Just Funky. (See Doc. No. 1 ¶¶ 24-30; Doc. Nos. 1-1, 1-2, 11.) In count six, plaintiff claims that Carpenter breached the restrictive covenants in those agreements.

The first, entitled Fair Competition Agreement ("FCA"), was executed by Just Funky and Carpenter on May 3, 2013. (Doc. No. 1-1.) Paragraph 1 defines Just Funky's confidential information as including the identity of Just Funky's customers, manufacturers, and suppliers, internal procedures and processes, costs materials, special requirements, sales and pricing, business plans, operational procedures and policies, scientific, engineering, and technical information, product development and performance information, and Just Funky's trade secrets as defined by Ohio Rev. Code § 1331.61 et seq., and prohibits Carpenter from disclosing this information. The terms of the FCA also prohibit Carpenter from soliciting Just Funky's employees, customers, manufacturers, and suppliers for a period of twenty-four months following the termination of her employment with Just Funky. (Id. ¶¶ 2-4.) The FCA further prohibits Carpenter from competing with Just Funky for a period of twenty-four months following the termination of her employment within a certain territory described in an exhibit⁴ to the agreement. (Id. ¶ 5.) The FCA provides that if Carpenter breaches the terms of paragraphs two through five, the twenty-four month limitation period is extended for a period of time equal to the time period of the breach. (See id. ¶ 7.)

The second agreement, signed by Carpenter and Just Funky on July 1 and July 2, 2014,...