Colwell Consulting LLC v. Papageorge et al

Filing 32

OPINION AND ORDER that Plaintiff's Expedited 21 Motion to Set Bond for Temporary Restraining Order is granted. IT IS FURTHER ORDERED that, pursuant to Federal Rule of Civil Procedure 65(c), Plaintiff shall post on or before September 13, 2024 a bond of $5,000 with the Clerk of Court as security for the temporary restraining order (Doc. 20 ). IT IS FURTHER ORDERED that Defendants' 25 Notice of No-Objection to Preliminary Injunction and Motion to Vacate Preliminary Injunction Hearing is denied. Defendants shall file their written response to Plaintiff's Cross-Motion to Hold Defendants in Contempt for Violating the Temporary Restraining Order (Doc. 29 ) on or before September 6, 2024. Plaintiff and Defendants shall be permitted to make oral arguments on the motion at the September 17, 2024 hearing. See attached Order for complete details. Signed by Judge Jennifer Choe Groves on 8/30/2024. (ESG) Modified on 8/30/2024 to update the docket text (ESG).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

COLWELL CONSULTING LLC,
Plaintiff,
v.

Court No. 2:24-cv-01824-JCG

MICHAEL PAPAGEORGE AND
PPG CONSULTING LLC,
Defendants.

OPINION AND ORDER
Before the Court is Plaintiff’s Expedited Motion to Set Bond for Temporary
Restraining Order filed by Plaintiff Colwell Consulting LLC (“Plaintiff” or
“Colwell”). Pl.’s Expedited Mot. Set Bond TRO (“Plaintiff’s Motion” or “Pl.’s
Mot.”) (Doc. 21). Defendants Michael Papageorge and PPG Consulting LLC
(“PPG”) (collectively “Defendants”) filed Defendant’s Response to Plaintiff’s
Expedited Motion to Set Bond for Temporary Restraining Order. Defs.’ Resp.
Pl.’s Expedited Mot. Set Bond TRO (“Defs.’ Resp.”) (Doc. 24). Plaintiff filed
Plaintiff’s Reply in Support of Expedited Motion to Set Bond. Pl.’s Reply Supp.
Expedited Mot. Set Bond (“Pl.’s Reply”) (Doc. 26). Also before the Court is
Defendants’ Notice of No-Objection to Preliminary Injunction and Motion to
Vacate Preliminary Injunction Hearing. Defs.’ Notice No-Obj. Prelim. Inj. & Mot.

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Vacate Prelim. Inj. Hr’g (“Defendants’ Motion” or “Defs.’ Mot.”) (Doc. 25). In
response, Plaintiff filed Plaintiff’s Response to Defendants’ Motion to Vacate
Preliminary Injunction Hearing and Cross-Motion to Hold Defendants in Contempt
for Violating Temporary Restraining Order. Pl.’s Resp. Defs.’ Mot. Vacate
Prelim. Inj. Hr’g & Cross-Mot. Hold Defs. Contempt Violating TRO (Pl.’s Resp.”)
(Doc. 29).
DISCUSSION
I.

Bond

The Court issued a temporary restraining order on August 14, 2024. Op. &
Order (Aug. 24, 2024) (Doc. 20). Plaintiff moves the Court to set a bond, pursuant
to Federal Rule of Civil Procedure 65(c), for the temporary restraining order. Pl.’s
Mot. Plaintiff argues that because the temporary restraining order is narrow and
does not preclude Defendants from all employment, the Court should require no
security, but stipulates that it is willing to post a bond of $5,000. Pl.’s Mot. at 2–3;
Pl.’s Reply at 1. Defendants counter that a bond of at least $5,000 should be
imposed because “Defendants [have] serious potential of harm and damages
asserted by Colwell clients who sought to have certain case files transferred to
PPG, received agreement from Colwell for the same after which Colwell
transferred the files, and those clients have now had to terminate their relationship
with PPG and find yet another expert.” Defs.’ Resp. at 1. Federal Rule of Civil

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Procedure 65(c) provides that “[t]he court may issue a preliminary injunction or a
temporary restraining order only if the movant gives security in an amount that the
court considers proper to pay the costs and damages sustained by any party found
to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). The court
issuing a temporary restraining order has “discretion as to the amount of security
required, if any.” Johnson v. Couturier, 572 F.3d 1067, 1086 (9th Cir. 2009)
(quoting Jorgensen v. Cassidy, 320 F.2d 906, 919 (9th Cir. 2003)).
During his employment with Colwell, Papageorge signed restrictive
covenants prohibiting, in relevant part, the solicitation or acceptance of work from
Colwell customers that Papageorge had contact with during his employment and
the use of Colwell’s proprietary information for the benefit of Papageorge or any
other person, partnership, or corporation. Pl.’s Appl. TRO at Ex. 4 at 3–4 (Doc. 6).
The temporary restraining order imposed by this Court is narrowly tailored to only
prevent Defendants from “directly or indirectly soliciting or accepting work from
any client that Papageorge worked with while employed by Colwell Consulting,
LLC” and requires Defendants to “immediately identify and segregate any and all
information taken by Defendants from Colwell Consulting, LLC and to refrain
from utilizing such information.” Op. & Order (Aug. 14, 2024). As this Court
stated in the temporary restraining order:

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Requiring Defendants to adhere to the restrictive covenants that
Papageorge entered into at the start of his employment may temporarily
delay Papageorge’s ability to grow PPG but will not completely hinder
Papageorge’s ability to pursue employment. Papageorge would be free
to accept clients other than those that he worked with while employed
with Colwell. He could also pursue an alternative career consistent
with his education and experience, such as teaching or as an inhouse
engineer.
Id. at 22.
In asking the Court to impose a bond of $5,000 at a minimum, Defendants
concede that they accepted work from Colwell’s former clients and that the
damages potentially resulting from the temporary restraining order would be
limited to the loss of those clients. Defs.’ Resp. No more than a nominal bond is
necessary to cover costs and damages potentially sustained by Defendants’ loss of
business from former Colwell clients because Defendants are free to pursue other
clients not covered by the restrictive covenants. Both Parties have suggested
$5,000 as a reasonable bond in this case. Pl.’s Mot. at 2–3; Defs.’ Resp. at 1; Pl.’s
Reply at 1. The Court agrees and will impose a bond of $5,000 as security for the
temporary restraining order.
II.

Preliminary Injunction

A preliminary injunction hearing is scheduled in this matter for September
17, 2024. Order (Aug. 9, 2024) (Doc. 15). Defendants contend that they now
consent to the entry of a preliminary injunction consistent with terms of the

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existing temporary restraining order and ask that the preliminary injunction hearing
be cancelled. See Defs.’ Mot. Plaintiff opposes Defendants’ request and alleges
that it has become aware through discovery of violations of the temporary
restraining order and other contractual violations that should be addressed in the
preliminary injunction. Pl.’s Resp. at 6–8.
Because the Parties do not agree regarding the terms of the preliminary
injunction and Plaintiff contends that the restrictions of the temporary restraining
order may not be sufficient based on information obtained through discovery, the
Court will not convert the temporary restraining order into a preliminary injunction
without the benefit of oral argument. Defendants’ motion is denied.
III.

Contempt

Plaintiff moves the Court to hold Defendants in contempt for misleading the
Court and willfully violating the temporary restraining order. Id. at 8–10.
Contempt is a serious sanction that the Court will not impose prior to affording
Defendants an opportunity to provide a written response. The Court will also
allow Plaintiff and Defendants to present oral arguments on Plaintiff’s CrossMotion to Hold Defendants in Contempt for Violating the Temporary Restraining
Order at the September 17, 2024 hearing.

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CONCLUSION

For the above discussed reasons, the Court imposes a $5,000 bond as
security for the temporary restraining order. Defendants’ request to convert the
temporary restraining order into a preliminary injunction is denied and the
September 17, 2024 preliminary injunction hearing shall proceed as scheduled.
The Court will defer ruling on Plaintiff’s Cross-Motion to Hold Defendants in
Contempt for Violating the Temporary Restraining Order until after Defendants
have had an opportunity to provide a defense to Plaintiff’s allegations.
Accordingly, upon consideration of Plaintiff’s Expedited Motion to Set
Bond for Temporary Restraining Order, Defendant’s Response to Plaintiff’s
Expedited Motion to Set Bond for Temporary Restraining Order, Plaintiff’s Reply
in Support of Expedited Motion to Set Bond, Defendants’ Notice of No-Objection
to Preliminary Injunction and Motion to Vacate Preliminary Injunction Hearing,
Plaintiff’s Response to Defendants’ Motion to Vacate Preliminary Injunction
Hearing and Cross-Motion to Hold Defendants in Contempt for Violating
Temporary Restraining Order, and all other papers and proceedings in this action,
it is hereby
ORDERED that Plaintiff’s Expedited Motion to Set Bond for Temporary
Restraining Order (Doc. 21) is granted; and it is further

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ORDERED that, pursuant to Federal Rule of Civil Procedure 65(c),
Plaintiff shall post on or before September 13, 2024 a bond of $5,000 with the
Clerk of Court as security for the temporary restraining order (Doc. 20); and it is
further
ORDERED that Defendants’ Notice of No-Objection to Preliminary
Injunction and Motion to Vacate Preliminary Injunction Hearing (Doc. 25) is
denied. The preliminary injunction hearing shall be held on September 17, 2024 at
9:30 AM MST at the Sandra Day O’Connor U.S. Courthouse; and it is further
ORDERED that Defendants shall file their written response to Plaintiff’s
Cross-Motion to Hold Defendants in Contempt for Violating the Temporary
Restraining Order (Doc. 29) on or before September 6, 2024. Plaintiff and
Defendants shall be permitted to make oral arguments on the motion at the
September 17, 2024 hearing.
IT IS SO ORDERED this 30th day of August, 2024.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves
U.S. District Court Judge*
*

Judge Jennifer Choe-Groves, of the United States Court of International Trade,
sitting by designation.