McKissock, LLC v. Martin

• Decision Date: 10 November 2016
• Docket Number: EP–16–CV–400–PRM
• Parties: MCKISSOCK, LLC, d/b/a/ Colibri Group, Plaintiff, v. Karen Tracy MARTIN, Defendant.
• Court: U.S. District Court — Western District of Texas

267 F.Supp.3d 841

MCKISSOCK, LLC, d/b/a/ Colibri Group, Plaintiff,

v.Karen Tracy MARTIN, Defendant.

EP–16–CV–400–PRM

United States District Court, W.D. Texas, El Paso Division.

Signed November 10, 2016

Charles C. High, Jr., Gerald Green Howard, Kemp Smith, LLP, El Paso, TX, Gary M. Smith, William R. Wurm, Lewis Rice LLC, St. Louis, MO, for Plaintiff.

Robert L. Blumenfeld, Mendel Blumenfeld LLP, El Paso, TX, for Defendant.

ORDER GRANTING PRELIMINARY INJUNCTION

PHILIP R. MARTINEZ, UNITED STATES DISTRICT JUDGE

On this day, the Court considered Plaintiff McKissock, LLC's, "Verified Complaint ... for Temporary Restraining Order, Preliminary and Permanent Injunctive Relief and for Damages Against Defendant Karen Tracy Martin" (ECF No. 1) [hereinafter "Verified Complaint"], filed on September 2, 2016; Defendant Karen Tracy Martin's "Answer and Counterclaim" (ECF No. 14) [hereinafter "Answer"], filed on September 16, 2016; Defendant's "Response in Opposition to Plaintiff's Application for Preliminary Injunction" (ECF No. 15) [hereinafter "Response"]; and the testimony and evidence the parties presented to the Court during the preliminary injunction hearing held on September 19, 2016. After due consideration, the Court is of the opinion that the preliminary injunction should be granted for the reasons that follow.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff McKissock is a Missouri-based company that provides continuing education courses to real estate professionals, such as appraisers, real estate brokers and agents, home inspectors, and land surveyors nationwide. Verified Compl. 3; Answer 3.

McKissock contracted the services of Defendant Martin, a real estate appraisal instructor, from 2002 to 2011. Resp. 8. Martin testified that she earned approximately $32,000 annually as an independent contractor, providing services to McKissock as well as other companies who similarly provide continuing education courses to individuals in the insurance-appraisal industry. Am. Tr. 52, Oct. 7, 2016, ECF No. 28 [hereinafter "Amended Transcript"].

On September 1, 2011, the nature of Martin's relationship with McKissock changed: she became a salaried employee, and her official title became "Senior Appraisal Instructor and Curriculum Advisor." Verified Compl. 1–2; Resp. 9. As a result, Martin received higher pay, at a salary rate of $58,000 annually, and health insurance benefits. Am. Tr. 100–01.

On that same date, September 1, 2011, Martin also signed three agreements: (1) "McKissock Non–Competition Terms of Agreement," Verified Compl. Ex. B [hereinafter "Non–Compete Agreement"]; (2) "Employee Nondisclosure Agreement," id. at Ex. A [hereinafter "Confidentiality Agreement]; and (3) "Ownership of Work Product Agreement," id. at Ex. D [hereinafter Work–Product Agreement].

The Non–Compete Agreement forbids Martin from competing against McKissock either directly or indirectly for a period of two years following her termination of employment; the restriction is nationwide.¹

The Confidentiality Agreement prohibits Martin from disclosing McKissock's trade secrets, confidential or proprietary data, such as technical information (e.g., methods, processes, formulae, compositions, techniques, inventions, computer programs, research projects), or business information (e.g., customer lists, pricing data, sources of supply). Confidentiality Agreement 1. The Confidentiality Agreement also requires Martin to return all company documents and property. Id.

Finally, the Work–Product Agreement provides that McKissock is the sole owner of all work product—or "work made for hire." Work–Product Agreement 1–2.

McKissock provided Martin with company property to assist her in performing her duties for the company, including a laptop computer, computer software, a printer, a company credit card, and a projector. Verified Compl. 7; Answer 4.

Five years later, Martin ceased her employment with McKissock, though the circumstances surrounding the termination of her employment are unclear. Martin testified that McKissock terminated her, while McKissock maintains that Martin resigned. See Am. Tr. 79. Martin testified that Tom Davidson, her direct supervisor, told her she "was being fired" on May 6, 2016, because of company budget cuts. Id. at 91. According to Martin, McKissock offered her the opportunity to continue to provide services as an independent contractor once again, but she declined. Id. Martin requested that her last day of employment with McKissock be May 31, 2016, however, the paperwork was not submitted timely.² Pl.'s Ex. 21.³ As a result, her official last day of employment occurred on June 10, 2016. Id.

Martin testified that she began providing services for Cannon Institute Inc. ("Cannon"), a competitor of McKissock, on June 1, 2016—"working under the impression that her last day [of employment] was May 31, 2016."See id. ; Am. Tr. 95. Cannon is a relatively new company that also provides continuing education courses for real estate professionals, with a focus in Arizona and Utah. See Am. Tr. 88; Resp. 9–10. Jeremy Johnson, one of Martin's colleagues at McKissock, who is also a real estate appraisal instructor, helped establish Cannon. Am. Tr. 99–100. Johnson had previously provided services to McKissock as an independent contractor. Id. at 76. While Martin was employed by McKissock and bound by the Non–Compete Agreement, she and Johnson had discussed the possibility of Martin assisting with Cannon's development. See Pl.'s Ex. 10. In one email correspondence between Martin and Johnson, Martin suggested that they should both "grow Cannon to the point that is a SERIOUS threat to McKissock." Id.

To prove that Martin resigned, McKissock introduced an email that Martin sent to Johnson stating that she was "going to be resigning as an employee of McKissock and doing contract work for them." Pl.'s Ex. 15. This email also provides that "[t]here are a number of reasons behind [Martin's] decision, including being able to work with [Johnson] without being unethical." Id. Martin conceded that she did write this email but explained that she had only indicated she was resigning because she was "embarrassed" to inform Johnson that she had actually been terminated. Am. Tr. 97.

After Martin's last day of employment, she promptly returned all of the McKissock property that she had been issued except for a Dell laptop computer. Verified Compl. 2; Resp. 10; Am. Tr. 103–04. Martin eventually returned the computer over a month later, after reformatting the computer's hard drive and deleting all information contained in the laptop. Am. Tr. 109–10. Significantly, Martin possessed McKissock's company laptop when she began working for Cannon.

McKissock thereafter filed its Verified Complaint in early September, wherein it sought preliminary and permanent injunctive relief to enforce the Non–Compete Agreement, the Confidentiality Agreement, and the Work–Product Agreement. Verified Compl. McKissock also filed a "Motion for Temporary Restraining Order" (ECF No. 3) on September 2, 2016, which the Court granted on September 6, 2016. See TRO 1–3 (ECF No. 6).

II. LEGAL STANDARD

"A preliminary injunction is an ‘extraordinary remedy’ that should not be granted unless its proponent clearly shows: (1) a substantial likelihood that he will prevail on the merits, (2) a substantial threat that he will suffer irreparable injury if the injunction is not granted, (3) his threatened injury outweighs the threatened harm to the party whom he seeks to enjoin, and (4) granting the preliminary injunction will not disserve the public interest." Google, Inc. v. Hood , 822 F.3d 212, 220 (5th Cir. 2016).

III. ANALYSIS

A. Likelihood of Success on the Merits

McKissock primarily seeks to enforce the Non–Compete Agreement. Verified Compl. 10. It requests that the Court enjoin Martin from breaching the Non–Compete Agreement and order her to cease her relationship with Cannon during the two-year restriction period provided in the Non–Compete Agreement. Id.

1. Choice-of-Law Provision

In assessing McKissock's likelihood of success on the merits, the Court must first determine which law applies to the parties' Non–Compete Agreement. The Non–Compete Agreement contains a choice-of-law provision, which provides that Pennsylvania law should govern. Neither of the parties contests the choice-of-law provision—both would prefer that the Court enforce it. Am. Tr. 14–15; Resp. 11. Nevertheless, given that McKissock is a nationwide company currently based in Missouri, given that Martin is a Texas resident who worked primarily from her home in Texas, and given the lack of any apparent connection between Pennsylvania and the present dispute, the Court will analyze whether the choice-of-law provision is enforceable. See Cardoni v. Prosperity Bank, 805 F.3d 573 (5th Cir. 2015) ("Contractual choice-of-law provisions are not so unassailable ... [they] dictate the law that will decide the dispute, and thus create more tension with a state's power to regulate conduct within its borders."); DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677 (Tex. 1990) ("However, the parties' freedom to choose what jurisdiction's laws will apply to their agreement cannot be unlimited. They cannot require that their contract be governed by the law of a jurisdiction which has no relation whatever to them or their agreement. And they cannot by agreement thwart or offend the public policy of the state the law of which ought otherwise to apply.").

"In making a choice of law determination, a federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state, here Texas." Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 403 (5th Cir. 2004) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). "Texas law recognizes the ‘party autonomy rule’ that parties can agree to be governed by the law of another state." Exxon Mobil Corp. v. Drennen, III, 452 S.W.3d 319, 324 (Tex. 2014) ; cf. Tex. Bus. & Com....