Rockford Mfg., Ltd. v. Bennet
| Decision Date | 28 May 2003 |
| Docket Number | No. CIV.A.2:03-837-23.,CIV.A.2:03-837-23. |
| Citation | 296 F.Supp.2d 681 |
| Parties | ROCKFORD MANUFACTURING, LTD., et al., Plaintiffs, v. David D. BENNET, et al., Defendants. |
| Court | U.S. District Court — District of South Carolina |
Ellis R. Lesemann and John C. McElwaine of Nelson Mullins Riley & Scarborough, Charleston, SC, for plaintiffs.
Allen R. Holmes, Gibbs & Holmes, Charleston, SC, for defendants.
AMENDED ORDER
This matter is before the Court on Plaintiffs' Motion for Preliminary Injunction, pursuant to 5 U.S.C. § 705 and Fed. R.Civ.P. 65. For the following reasons Plaintiffs' motion is granted.
Plaintiffs filed suit in this Court on March 14, 2003. On April 25, 2003, Plaintiffs filed their First Amended Verified Complaint, seeking damages and other relief, for various claims, including breach of contract, breach of the duty of loyalty and violations of the federal Copyright Act, 17 U.S.C. § 101, and the federal Computer Fraud and Abuse Act, 17 U.S.C. § 1030. Plaintiffs contend that Defendants were former employees who have now wrongly solicited customers, dealers, and employees and who have appropriated confidential trade secrets in violation of non-solicitation agreements entered into by the parties.
Plaintiffs are all legally distinct, but affiliated entities involved in the engineering, design, manufacture, and marketing of steel buildings. Plaintiffs' products are available to the general public through a network of authorized dealers. Defendants each formerly held a position of employment with either Plaintiff Rockford Manufacturing or Plaintiff Rockford Acceptance. Plaintiffs originally alleged that Defendants Supreme Steel Buildings, Inc. and Supreme Building Systems are the apparent and current employers of some or all of the individual Defendants. Plaintiffs, however, have recently dismissed without prejudice Defendant Supreme Steel Buildings, Inc.
Plaintiffs contend that as sales employees, Defendants had significant access to confidential, proprietary and trade secret information, including, but not limited to: (1) confidential dealer lists; (2) confidential vendor lists; (3) confidential client lists; (4) confidential cost, estimating and pricing data; and (5) confidential information concerning manufacturing processes and practices.
Plaintiffs contend that Defendants signed agreements containing restrictive covenants regarding non-solicitation, non-disclosure, and non-competition. Plaintiffs allege further that in violation of such agreements, Defendants have (1) established a web-site, which allegedly plagiarizes information from Plaintiffs' website; (2) obtained illegal access to Plaintiffs' computer systems by fraud and have used such access to misappropriate highly protected trade secrets; and (3) solicited Plaintiffs' dealers, vendors, customers, contacts, and employees.
The Fourth Circuit outlined the analytical framework, which courts must employ in determining whether to grant preliminary relief, in Direx Israel, Ltd. v Breakthrough Medical Corp., 952 F.2d 802, 811 (4th Cir.1991) (citing Blackwelder Furniture Co. v. Seilig Mfg. Co., Inc., 550 F.2d 189, 195 (4th Cir.1977)). First, the party requesting preliminary relief must make a "clear showing" that he will suffer irreparable harm if the court denies his request. Id. at 812-13. Second, if the party establishes irreparable harm, "the next step then for the court to take is to balance the likelihood of irreparable harm to the plaintiff from the failure to grant interim relief against the likelihood of harm to the defendant from the grant of such relief." Id. at 812. Third, if the balance tips decidedly in favor of the party requesting preliminary relief, "a preliminary injunction will be granted if the plaintiff has raised questions going to the merits so serious, substantial, difficult, and doubtful, as to make them fair ground for litigation and thus more deliberate investigation." Id. at 813. However, "if the balance does not tip decidedly there must be a strong probability of success on the merits." Id. Fourth, the court must evaluate whether the public interest favors granting preliminary relief. Id.
The two most important factors are the probable irreparable harm to the moving party if an injunction is not issued and the probable harm to the non-moving party if an injunction is issued. Blackwelder, 550 F.2d at 198. If the balance of these two factors is in the non-moving party's favor, he or she does not have to show a likelihood of success on the merits, and the presentation of a grave or serious question is sufficient to warrant a preliminary injunction. Id. However, the inverse is true that if the likelihood success on the merits is great, the need for showing irreparable harm decreases proportionately. Combined Insurance Company of America v. Investors Consolidated Insurance Co., 499 F.Supp. 484 (E.D.N.C.1980).
A. Balance of Harms
Plaintiffs contend simply that they will suffer irreparable injury because their "confidential information, dealer lists, completed building lists, price lists and pricing information, and detailed customer information that Plaintiffs have spent years developing ... is invaluable in the hands of Plaintiffs' competitors ...." (Pl.s' Mot. at 11.) Plaintiffs have made a significant attempt to quantify the cost associated with developing what they consider their most important asset: a network of dealers who sell Plaintiffs' steel buildings products. (See Wirth Aff. at 2-6.) Notwithstanding their ability to quantify a portion of the potential injury they face, Plaintiffs contend that if Defendants are permitted to interfere in their dealer network, much of the injury would be irreparable insofar as there would be a resultant loss of good will and inability to restore dealer relationships. Plaintiffs have submitted the affidavit of Michael Wirth in support.
In contrast, Defendants have come forward with no evidence as to the potential harm they might face if the injunction were to lie. Plaintiffs contend that Defendants would suffer no harm because abiding by the Agreement not to solicit Plaintiffs' customers, employees, or dealers in no way prohibits them from other meaningful work. (See Wirth Aff. at 6-7.)
On this evidence, however, the Court cannot conclude that the balance of harms tips decidedly in Plaintiffs' favor. The Court is not convinced of the degree of irreparability as Plaintiffs contend. As a result, the burden on Plaintiffs to establish a likelihood of success on the merits becomes considerably greater. See Direx Israel, Ltd. v. Breakthrough Medical Corp., 952 F.2d 802, 817 (4th Cir.1991). Plaintiffs must demonstrate that there is a "strong probability of success on the merits." Id. at 813 (emphasis added).
(2) is reasonably limited in its operation with respect to time and place;
(3) is not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood;
(4) is reasonable from the standpoint of sound public policy; and
(5) is supported by valuable consideration.
Sermons v. Caine & Estes Insurance Agency, Inc., 275 S.C. 506, 273 S.E.2d 338 (1980); Rental Uniform Service of Florence, Inc. v. Dudley, 278 S.C. 674, 301 S.E.2d 142, 143 (1983).
South Carolina has expressly recognized that the Standard Register Co. v. Kerrigan, 238 S.C. 54, 119 S.E.2d 533 (1961). Plaintiffs contend that their network of dealers should be afforded the same characterization. The Court agrees that Plaintiffs will likely be able to demonstrate that the dealer-network developed by Plaintiffs is a legitimate business interest worthy of protection. Plaintiffs have already submitted some evidence of the significant time and money invested in the development of their dealer network. (Wirth Aff. at 2-4.) There is little question that such an investment would constitute a legitimate interest.
Defendants do not disagree that customers, employers, or dealers are of a legitimate interest to Plaintiffs, but contend that Plaintiffs have no legitimate interest in prohibiting the solicitation of employees, clients, and dealers of "Affiliated Companies"1 with whom Defendants never had any personal contact and, further, that such overbreadth renders the entire covenant unenforceable.
As an initial matter, the Court is convinced that Plaintiffs may in fact demonstrate that the non-solicitation agreement is properly tailored and not overbroad. The agreement is expressly premised on the understanding and acknowledgment of the employee that "during his employment with the Company he shall have access to certain confidential, proprietary and trade secret information including dealer and Affiliated Company related information." There is no evidence that Defendants, through their employment with either Rockford manufacturing or Rockford acceptance, might not have, in fact, had access to information concerning the proprietary interests of Affiliated Companies for which they did not actually work. Regardless, the Court concludes that Plaintiffs have shown that they are likely to demonstrate that the covenants are ultimately divisible and capable of enforcement to...
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