Uarco Inc. v. Lam
| Decision Date | 14 September 1998 |
| Docket Number | Civ. No. 98-00177 ACK. |
| Citation | 18 F.Supp.2d 1116 |
| Parties | UARCO INC., et al., Plaintiffs, v. Kerry LAM, et al., Defendants. |
| Court | U.S. District Court — District of Hawaii |
Jeffrey S. Harris, Torkildson Katz Fonseca Jaffe & Moore, Honolulu, HI, Timothy J. Gerenda, Peter C. Woodford, Seyfarth Shaw Fairweather & Geraldson, Chicago, IL, Michael R. Levinson, Timothy J. Gerend, Alan S. Dalinka, Chicago, IL, for plaintiffs.
Michael R. Marsh, Case Bigelow & Lombardi, Honolulu, HI, Paul H. Parilla, Bradley N. Garber, Parilla Militzok & Shedden, Irvine, CA, for defendants.
ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION
Before the Court is a motion for a preliminary injunction by an employer against two former employees. The Plaintiff employer, UARCO, and its successor corporation, Standard Register, ("Plaintiffs") seek to enjoin Defendants Kerry Lam and Eliott Lum ("Defendants") from violating a noncompete clause in their contracts with UARCO. Pursuant to the findings of fact and conclusions of law below, the Court GRANTS Plaintiffs' motion for a preliminary injunction.
The Court previously denied Plaintiffs' motion for a temporary restraining order, see April 2, 1998, Order, but Plaintiffs have provided significant, additional evidence to support this motion. Most importantly, Plaintiffs have shown that UARCO and Standard Register have merged. Accordingly, Standard, as the successor corporation, succeeds to the noncompete agreements by operation of law and therefore may enforce them; no assignment has occurred. The evidence also shows that Defendants did not actually rely on any statement by UARCO that it would cease to exist. Thus, no estoppel applies.
Defendants also have provided additional evidence to oppose this motion. They argue that Plaintiffs have unclean hands because they allegedly agreed with other competitors not to hire each other's sales personnel in violation of antitrust laws. The court finds that Defendants have not presented sufficient evidence that any such agreement was illegal, nor does the harm created by the alleged agreement directly relate to this action. Therefore, the unclean hands defense does not bar this Court from granting Plaintiffs' motion.
UARCO filed this action against two former employees, Defendants Kerry Lam and Eliott Lum, seeking an injunction and damages based on Defendants' alleged acts after terminating their employment with UARCO. Plaintiff Standard Register Company subsequently joined this action, and UARCO and Standard Register have since merged.
Defendant Lam began working for UARCO in 1985, and Defendant Lum began working for UARCO in 1981. Prior to joining UARCO, each worked for Burroughs, a competitor of UARCO. When Defendants joined UARCO, each Defendant signed Salesman's Agreements, which contained, among other terms, restrictions regarding Defendants' post-employment activities. The Salesman's Agreements state that the salesman may not use UARCO's confidential information or trade secrets for the benefit of another company. In addition, the Salesman Agreements provide:
For a period of two years following the termination of his employment ... Salesman agrees that he will not contact, with a view toward selling any product competitive with any product sold or proposed to be sold by Company at the time of the termination of the Salesman's employment, or sell any such product to, any person, firm, association or corporation:
(c) which is known by Salesman to have been a customer of Company during the year preceding termination of Salesman's employment and which is located either within the geographical territory served by any District Office of Company to which Salesman was assigned during such year or within the same metropolitan area as any customer named in the Confidential Customer List in effect hereunder as of the date of termination of Salesman's employment.
Compl. Exh. A ¶ 8, Exh. B ¶ 8. The Salesman's Agreement further provides that, in the event that a salesperson breaches this paragraph, the Company is entitled to, inter alia, preliminary and permanent injunctions and liquidated damages. Compl. Exh. A ¶ 10, Exh. B ¶ 10.
Defendants resigned from UARCO on or about December 31, 1997. Following Defendants' departures, Defendants have commenced employment with UARCO's competitor Monarch Business Forms ("Monarch"). Plaintiffs allege that Defendants have used UARCO's confidential information and trade secrets in their new employment. Defendants concede that they have informed some of UARCO's customers that they have moved to Monarch, and that they currently are selling business forms to some of those customers.
On March 4, 1998, UARCO filed a motion for a temporary restraining order ("TRO") pending determination of its motion for a preliminary injunction. Standard Register subsequently joined UARCO's motion for a TRO. On April 2, 1998, the Court issued an Order Denying Plaintiffs' motion. On June 1, 1998, Plaintiffs filed a motion for a preliminary injunction and a concise statement of facts in support of their motion. The hearing was set for September 22, 1998. On June 26, 1998, Plaintiffs filed a motion for temporary restraining order or, in the alternative, to advance hearing on motion for preliminary injunction. On July 17, 1998, Defendants filed a memorandum in opposition. On July 24, 1998, Plaintiffs filed a reply. On July 31, 1998, by leave of the Court, Defendants filed a supplemental memorandum in opposition to Plaintiffs' motion. Plaintiffs filed a response on August 4, 1998.
Plaintiffs seek a TRO or a preliminary injunction restraining Defendants and their agents from:
1. Breaching, altering, or discontinuing in any way Defendants' obligations under UARCO Salesman's Agreement executed by Defendants
2. Contacting, directly or indirectly, with a view toward selling any product competitive with any product sold or proposed to be sold by UARCO at the time of Defendants' resignation from UARCO, any customer of UARCO to which Defendants solicited, contacted, or otherwise dealt with on behalf of UARCO during the year preceding the Defendants' December 31, 1997 resignation from UARCO.
3. Assisting or causing any person, company, association, firm or corporation from contacting, with a view toward selling any product competitive with any product sold or proposed to be sold by UARCO at the time of Defendants' resignation from UARCO, any customer of UARCO to which Defendants solicited, contacted, or otherwise dealt with on behalf of UARCO during the year preceding the Defendants' December 31, 1997 resignation from UARCO.
Any finding of fact more properly deemed, in whole or in part, a conclusion of law shall be deemed as such, and vice versa.
The standard for granting a TRO is similar to that for granting a preliminary injunction. Cf. Los Angeles Unified School Dist. v. United States Dist. Court For Central Dist. of California, 650 F.2d 1004, 1008 (9th Cir.1981) () (Ferguson, J., dissenting); Half Moon Bay Fishermans' Marketing Ass'n v. Carlucci, 857 F.2d 505, 507 (9th Cir.1988) ().
In Miller v. California Pacific Medical Ctr., 19 F.3d 449 (9th Cir.1994), the Ninth Circuit set forth the standard for granting a preliminary injunction and TRO as follows:
Traditionally we consider (1) the likelihood of the moving party's success on the merits; (2) the possibility of irreparable injury to the moving party if relief is not granted; (3) the extent to which the balance of hardships favors the respective parties; and (4) in certain cases, whether the public interest will be advanced by granting the preliminary relief.
Id. 19 F.3d at 456 (citing United States v. Odessa Union Warehouse Co-op, 833 F.2d 172, 174 (9th Cir.1987)).
The moving party must show `either (1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) the existence of serious questions going to the merits, the balance of hardships tipping sharply in its favor, and at least a fair chance of success on the merits.'
Miller, 19 F.3d at 456 (quoting Senate of California v. Mosbacher, 968 F.2d 974, 977 (9th Cir.1992)).
`These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases.'
Miller, 19 F.3d at 456 (quoting Odessa Union, 833 F.2d at 174).
The grant or denial of a TRO or preliminary injunction is reviewed for abuse of discretion. See Miss Universe, Inc. v. Flesher, 605 F.2d 1130, 1132-33 (9th Cir. 1979).
The Court will consider (1) Plaintiffs' likelihood of success; (2) the possibility of irreparable injury to Plaintiffs; (3) the balance of hardships; and (4) the public interest.
In seeking a TRO or preliminary injunction, the plaintiff's likelihood of success determines what other elements the plaintiff needs to prove. If the plaintiff can show "probable success on the merits" then the plaintiff needs only to "show ... the possibility of irreparable harm." Miller v. California Pacific Medical Center, 19 F.3d 449, 456 (9th Cir.1994). If, however, the plaintiff can only show "a `fair' chance of success," then it must also "show that there are serious questions going to the merits of the case and that the balance of the hardships tips decidedly in its favor." Id. 19 F.3d at 460 n. 5; Chalk v. U.S. District Court Cent....
To continue reading
Request your trial
-
In re Ry. Indus. Emp. No-Poach Antitrust Litig.
...subject to per se analysis because it was "at least potentially reasonably ancillary" to a proper business purpose); UARCO Inc. v. Lam, 18 F.Supp.2d 1116 (D. Haw. 1998) (analyzing an "unclean hands" defense in deciding a motion for preliminary injunction and holding that companies' agreemen......
-
Matsuura v. E.I. Du Pont De Nemours and Co.
...is governed by Hawaii law because that is the state with the most significant relationship to the transaction. UARCO, Inc. v. Lam, 18 F.Supp.2d 1116, 1123 (D.Haw.1998). 25. "If GM violated discovery rules by failing to produce documents in previous cases, then GM should have been sanctioned......
-
Smallwood v. Ncsoft Corp.
...Hawaii law applies unless another state's law 'would best serve the interests of the states and persons involved.' " UARCO Inc. v. Lam, 18 F.Supp.2d 1116, 1123 (D.Haw.1998). Although Hawaii choice of law analysis places an emphasis on determining which state has the strongest interest in se......
-
Aon Consulting v. Midlands Financial
...a covenant not to compete is an asset which is transferred to and vests in the surviving entity of a merger by operation of law.12 In UARCO Inc. v. Lam,13 the applicable Hawaii statute provided that after a statutory merger, the surviving corporation possessed "`all of the rights, privilege......
-
Hawaii. Practice Text
...1244 (D. Haw. 2005). 349. Id. at 1249-51. 350. 177 P.3d 341, 352-53 (Haw. 2008). 351. 551 P.2d 163 (Haw. 1976). 352. Id. at 170. 353. 18 F. Supp. 2d 1116 (D. Haw. 1998). 354. Id. at 1121-22. 355. Id. at 1122 (citing Henry Hope X-Ray Prods. v. Marron Carrel, Inc., 674 F.2d 1336, 1342 (9th Ci......