Mindspace Incorporated v. Young et al

Filing 99

ORDER the motion at docket 4 is DENIED, except for the relief already provided by the order at docket 97 . Signed by Judge John W Sedwick on 12/31/2014.(KMG)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF ARIZONA 8 9 Mindspace, Inc., 10 Plaintiff, 11 12 13 14 15 vs. Todd Young, et al., Defendants ) ) ) ) ) ) ) ) ) ) 2:14-cv-1713 JWS ORDER AND OPINION [Re: Motion at docket 4] 16 17 18 I. MOTION PRESENTED At docket 4, plaintiff Mindspace, Inc. (“Mindspace”) moved for a preliminary 19 injunction requiring certain actions and prohibiting other actions by defendants Todd 20 Young (”Young”); Jason Edwards (“Edwards”); Fiero Agency, Inc.; and Fiero LLC 21 (collectively “Fiero“). Defendants filed a response at docket 18, to which Mindspace 22 replied at docket at docket 29. Following discovery relating to the request for an 23 24 injunction, the court permitted the parties to file supplemental briefing. Mindspace’s 25 supplement was filed at docket 68, and defendants’ supplement was filed at docket 78. 26 The parties advised the court that an evidentiary hearing was not necessary, but 27 requested oral argument. Argument was heard on December 17, 2014. 28 1 2 II. BACKGROUND Mindspace is a “gamification” consultancy which solicits clients for whom it can 3 provide marketing advice and programs based on the use of games. The premise upon 4 5 which Mindspace’s business rests is that when a business engages customers and 6 prospective customers in game-like relationships it improves the business’ 7 communications with and strengthens its’ ties to those customers and prospective 8 customers. Airline frequent flyer programs are an example of gamification programs. 9 Mindspace is an Arizona corporation which has been operating since 2002. It is 10 owned by its president and chief operating officer Brent Shetler. Securing gamification 11 12 clients sometimes requires extensive efforts by Mindspace employees in identifying 13 likely clients, introducing those prospects to the gamification concept as it could be 14 applied to their businesses, and then selling Mindspace’s services. This effort may 15 make use of case studies developed by Mindspace, and other materials which 16 Mindspace considers to be proprietary information and trade secrets. The company has 17 18 19 20 been successful: Among Mindspace’s clients are major businesses such as Time Warner, Hyatt, Paramount, and Coca-Cola. Mindspace hired Young–who had considerable experience in selling digital 21 advertising–to be its director of business development on April 28, 2011. In that 22 position Young played a major role in obtaining new clients for Mindspace. Edwards 23 was recruited to work at Mindspace by Young. Edwards was employed by Mindspace 24 25 on November 2, 2012, to be Mindspace’s technical director, a position w hich called for 26 him to develop web-based products for use by Mindspace’s clients. Young and 27 Edwards each signed a Proprietary Rights Agreement (“PRA”) prepared by Mindspace, 28 -2- 1 which purports to set out numerous protections for Mindspace’s business interests. 2 The two PRAs are substantively identical.1 3 Mindspace terminated Edwards’ employment on October 2, 2013. There was 4 5 some dispute about how much money Mindspace might owe Edwards. This was 6 eventually resolved, and as part of the resolution Edwards signed a separation 7 agreement (“SA”), which purports to limit future actions by Edwards and provide 8 additional protection for Mindspace’s interests. Young resigned from Mindspace on 9 January 28, 2014. Young and Mindspace did not execute a separation agreement. 10 Fiero is a gamification consultancy which competes with Mindspace. Fiero is 11 12 13 14 15 16 owned by Young and Edwards. Mindspace accuses defendants of wrongfully using its proprietary information and trade secrets to advance Fiero’s business. In its complaint, Mindspace advances twelve claims which it denominates “counts.” Count One seeks injunctive relief based on alleged breaches of the PRAs, the SA, and fiduciary duties owed to Mindspace by Young and Edwards. Count Two 17 18 19 seeks damages based upon the alleged breach of the PRAs while Young and Edwards were still employed at Mindspace. Count Three seeks damages based upon the 20 alleged breach of the PRAs and the SA through wrongful use of confidential 21 information. Count Four seeks damages arising from defendants alleged solicitation of 22 clients in violation of the PRAs and SA. Count Five seeks damages based on the 23 alleged breach of fiduciary duties by Young and Edwards. Count Six seeks damages 24 25 on the theory that defendants tortiously interferred with Mindspace’s business 26 27 28 1 Young’s PRA is dated 7/18/11, and Edwards’ PRA is dated 11/2/12. -3- 1 2 3 expectancy. Count Seven seeks damages on the theory that defendants Edwards and Fiero tortiously interfered with Mindspace’s employment contract with Young. Count Eight seeks both injunctive relief and damages on the theory that defendants 4 5 misappropriated Mindspace’s trade secrets. Count Nine seeks dam ages based on 6 defendants violation of Arizona’s law prohibiting unfair competition. Count Ten seeks to 7 recover for “harm in an amount to be proven at trial”2 resulting from defendants’ unjust 8 enrichment. Count Eleven alleges that defendants have violated the Lanham Act by 9 engaging in false advertising for which they seek both damages and injunctive relief. 10 Count Twelve, which might be called the “Kitchen Sink” count, accuses each def endant 11 12 13 of aiding and abetting each other defendant giving rise to a claim for damages. Of the twelve counts, the only ones which could support injunctive relief are 14 Counts One, Eight, and Eleven. It follows that injunctive relief turns upon Mindspace’s 15 assertion that Young and Edwards violated the PRAs, that Young violated the SA, that 16 all defendants misappropriated Mindspace’s trade secrets, and that all def endants have 17 18 engaged in false advertising in violation of the Lanham Act. III. JURISDICTION 19 20 The court has subject matter jurisdiction over the Lanham Act claim pursuant to 21 28 U.S.C. § 1331. The court has subject matter jurisdiction over the related state law 22 claims pursuant to 28 U.S.C. § 1367. 23 24 25 26 27 28 2 Complaint, doc. 1 at para. 158. -4- 1 2 IV. STANDARD OF REVIEW "A plaintiff seeking a preliminary injunction must establish (1) that he is likely to 3 succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of 4 5 6 preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest." 3 7 8 9 V. DISCUSSION To obtain injunctive relief beyond the relief already provided in the order at docket 97 on any of the claims which might support injunctive relief, Mindspace has the 10 11 12 burden of proving irreparable harm. As the Supreme Court has written, to obtain a preliminary injunction, a plaintiff must “demonstrate that irreparable injury is likely in the 13 absence of an injunction." 4 Elaborating on that point, the Court has explained that 14 “[i]ssuing a preliminary injunction based only on a possibility of irreparable harm is 15 inconsistent with our characterization of injunctive relief as an extraordinary remedy that 16 may only be awarded upon a clear showing that the plaintiff is entitled to such relief."5 17 18 Mindspace has not made a clear showing that it will suffer irreparable harm if a 19 preliminary injunction (going beyond the relief already awarded) is not issued. If 20 defendants wrongfully obtain clients and secure revenue that would otherwise have 21 been available to Mindspace, there is an adequate legal remedy. The ensuing harm to 22 23 24 25 3 Johnson v. Couturier, 572 F.3d 1067, 1078 (9th Cir. 2009) (quoting Winter v. Natural Resource Defense Council, Inc., 555 U.S. 7, 21 (2008). 26 4 27 5 28 Winter, 555 U.S. at 21. Id. -5- 1 2 Mindspace is capable of reasonable estimation and can be adequately remedied by an award of damages. This assessment by the court is consistent with Mindspace’s 3 complaint, which generally seeks both damages and injunctive relief for the very same 4 5 6 7 8 9 types of conduct. VI. CONCLUSION For the reasons above, the motion at docket 4 is DENIED, except for the relief already provided by the order at docket 97. DATED this 31st day of December 2014. 10 11 12 /s/ JOHN W. SEDWICK SENIOR UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6-

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