Raymond James & Associates, Inc. v. Leonard & Co.

• Decision Date: 23 January 2006
• Docket Number: No. Civ. 05-40397.,Civ. 05-40397.
• Citation: 411 F.Supp.2d 689
• Parties: RAYMOND JAMES & ASSOCIATES, INC., Plaintiff, v. LEONARD & COMPANY, and Ronald Boerjan, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

411 F.Supp.2d 689

RAYMOND JAMES & ASSOCIATES, INC., Plaintiff, v. LEONARD & COMPANY, and Ronald Boerjan, Defendants.

No. Civ. 05-40397.

United States District Court, E.D. Michigan, Southern Division.

January 23, 2006.

COPYRIGHT MATERIAL OMITTED

Raymond W. Henney, Honigman, Miller, (Detroit) Detroit, MI, Abdu H. Murray, Honigman, Miller, (Bloomfield Hills), Bloomfield Hills, MI, for Plaintiff.

Brian C. Summerfield, Dennis J. Levasseur, Bodman (Detroit), Detroit, MI, for Defendants.

ORDER DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION

GADOLA, District Judge.

Plaintiff Raymond James & Associates, Inc., ("RJA") filed its complaint on December 29, 2005. Plaintiff filed a motion seeking a temporary restraining order and a preliminary injunction the same day. In this Court's absence, Judge Tarnow presided over a telephone conference between the parties regarding the temporary restraining order ("TRO") on the day the motion was filed. He did not rule on the motion, but instead advised the parties to extend their conversation and to work out as many issues as possible prior to a hearing in this Court. On January 6, 2005, this Court held a hearing on the issuance of a TRO and a preliminary injunction. The motion for a TRO was denied, and the motion for a preliminary injunction was taken under advisement. For the following reasons, the Court now denies Plaintiff's motion for a preliminary injunction.

I. Background

RJA is a national securities investment brokerage firm with offices throughout the United States. This lawsuit concerns RJA's office in Auburn Hills, Michigan, at which Defendant Ronald Boerjan was employed until he resigned on December 23, 2005 and began working with RJA's competitor, Defendant Leonard & Company ("LC"). Upon resigning, Boerjan immediately solicited clients that he serviced while at RJA to transfer their accounts to LC. The solicitations, which were signed by Boerjan, included account transfer forms pre-filled with the respective client's account numbers and personal information. RJA claims that Boerjan most likely solicited many, if not all, of his former clients,¹ though the individual affidavits of eight of RJA's employees submitted with its complaint identify only thirteen.

According to Boerjan, he acquired a substantial number of his clients while he was employed by another brokerage firm and had even convinced those clients to follow him to a firm which was later acquired by RJA. In fact, RJA's predecessor asked Boerjan to provide his clients' latest monthly statements and Boerjan's own "posting pages," so that it could prepare account transfer forms much the same way that LC has done.² Boerjan's posting pages are a record of the transactions Boerjan has completed for his clients. The posting pages, or "book of business," are industry standard and contain the client's personal information, including the name, address, telephone number, social security number and investment history, for each account serviced. Boerjan states in his affidavit that he started to maintain his posting pages when he was first employed as a broker over twenty-five years ago and that his posting pages are his property. Resp., Ex. A, at ¶¶ 10-11. He also avers that RJA's CEO told him and others at an October, 2005 yearly compliance meeting that "you own your book" and that they were free to take their book of business with them when they left RJA. Id. at ¶ 14. This corroborates Boerjan's assertion that RJA offered to buy his book of business for approximately $60,000.00 as part of an ultimatum that Boerjan either increase his monthly gross commissions or be terminated. Id. at ¶¶ 20-28. RJA has not refuted these assertions.

According to RJA, Boerjan obtained the information which allowed him to solicit RJA's clients from RJA's confidential customer lists which RJA claims are trade secrets necessary for its continued success in the investment brokerage industry. RJA maintains a Business Ethics and Corporate Policy ("Ethics Policy") which provides:

The Company's business records, including but not limited to customer lists, customer data, sales information, business methodologies, compensation records, and/or similar information are considered to be trade secrets to be used solely in the conduct of the Company's business. No such information shall be obtained, used or revealed by associates unless specifically authorized by their supervisor in the course of their regular job functions. Unauthorized use of the Company information or customer information, whether within or outside the Company, is a most serious violation and may result in immediate termination.

Compl., Ex. I. Boerjan certified annually that he understood RJA's policy and agreed to follow it. Boerjan also signed an acknowledgment that he had read RJA's Associates Handbook which provides:

Confidential information with respect to the Company or its clients is to be used solely for business purposes and under no circumstances revealed to unauthorized persons. Such information may include, but is not limited to, payroll and compensation records, trade secrets and other proprietary information relating to the Company's business, regardless of the format in which the information is stored. Associates who violate this policy will be subject to immediate dismissal and may be subject to civil action including injunctive proceedings.

Compl., Ex. J. The annual affirmation of RJA's Ethics Policy was "a condition of continued employment or affiliation" in furtherance of RJA's expectation that "its Associates ... exercise the highest degree of professional business ethics in all actions they undertake on behalf of the Company." Compl., Ex. I. The Associates Handbook acknowledgment which Boerjan signed stated that "I understand that the Associate Handbook is not a contract for employment, but that compliance with its guidelines and policies are conditions of employment." In other words, both RJA's Ethics Policy and Associates Handbook guidelines governed Boerjan's actions while he was employed by RJA, not afterwards. Furthermore, Boerjan did not sign any non-solicitation or non-compete agreement with RJA, nor did he sign any agreement altering the parties' property rights in any information.

RJA seeks a preliminary injunction enjoining Boerjan and LC from contacting or soliciting any of RJA's clients whom Boerjan serviced, as well as from using, disclosing, or disseminating RJA's trade secrets, which RJA's considers to include its customer lists, and any other RJA information. RJA also requests that Defendants be directed to return any original documents and derivatives containing RJA client information. At the hearing, RJA stated that it is only asking that Defendants be enjoined for approximately 60 days to allow it to rectify Boerjan's alleged breach of confidentiality and breach of fiduciary duty without interference from Boerjan. In essence, RJA wants time to persuade its clients to remain with RJA without competition from Boerjan.

II. Standard

A district court may issue a preliminary injunction if it is so favored by the balance of four factors:

(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury without the injunction; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuance of the injunction.

Memphis Planned Parenthood, Inc. v. Sundquist, 175 F.3d 456, 460 (6th Cir. 1999) (quoting Blue Cross & Blue Shield Mutual of Ohio v. Columbia/HCA Health-care Corp., 110 F.3d 318, 322 (6th Cir. 1997)); See also DeLorean Motor Co. v. DeLorean, 755 F.2d 1223, 1228 (6th Cir. 1985). These four considerations "are factors to be balanced, not prerequisites that must be met." DeLorean, 755 F.2d at 1229. A district court must make specific findings concerning each of the four factors unless fewer are dispositive of the issue. Performance Unlimited v. Questar Publishers, Inc., 52 F.3d 1373, 1381 (6th Cir.1995). "Although no one factor is controlling, a finding that there is simply no likelihood of success on the merits is usually fatal." Gonzales v. Nat'l Bd. of Med. Exam'rs, 225 F.3d 620, 625 (6th Cir.2000). Finally, "[a] preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it." Overstreet v. Lexington-Fayette Urban County Gov't, 305 F.3d 566, 573 (6th Cir.2002).

Here, the balance of the factors does not favor granting a preliminary injunction because RJA does not have a likelihood of success on the merits. For the first factor to favor the granting of an injunction, "a plaintiff must demonstrate a strong or substantial likelihood or probability of success." United of Omaha Life Ins. Co. v. Solomon, 960 F.2d 31, 35 (6th Cir.1992). A likelihood of success is not sufficient to meet this standard; RJA must demonstrate that the likelihood is "strong or substantial." Id.

RJA's complaint contains three counts: misappropriation of trade secrets; breach of fiduciary duty; and tortious interference with a business expectancy. RJA's claim for misappropriation of trade secrets is brought under Michigan's Uniform Trade Secrets Act ("MUTSA"), M.C.L. § 445.1901, et seq. MUTSA became effective October 1, 1998. M.C.L. § 445.1910. It provides injunctive relief and remedies for the misappropriation of trade secrets. M.C.L. § 445.1903-04. According to MUTSA,

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:

(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.

(ii) Is the subject of efforts that are reasonable under...