Stormwater Systems, Inc. v. Reitmeyer
Filing
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MEMORANDUM, OPINION and ORDER; denying 9 Motion for TRO. Signed by Chief Judge Morrison C. England, Jr. on 12/1/2014. (Deutsch, S)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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STORMWATER SYSTEMS, INC., dba
SAFE DRAIN, INC., a California
corporation, et al.
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Plaintiffs,
No. 2:14-cv-0472-MCE-CKD
MEMORANDUM AND ORDER
v.
DOUGLAS REITMEYER, an individual,
et al.,
Defendants.
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This case presents a complex dispute among former business associates. On
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October 21, 2014, Stormwater Systerms, Inc. (“Stormwater”) filed a complaint against
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Douglas Reitmeyer (“Reitmeyer”). ECF No. 1. Thereafter, on November 12, 2014,
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Plaintiffs Stormwater dba Safe Drain, Inc. (“Safe Drain”), John Deming (“Deming”), and
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Safe Drain International, Inc. (“International”) (collectively “Plaintiffs”) filed the operative
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First Amended Complaint (“FAC”) against Reitmeyer, Michael Brasberger, Sr.
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(“Brasberger, Sr.”), Michael Brasberger, Jr. (“Brasberger, Jr.”) and the Brasbergers’
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company ASHMB, LLC (collectively “Defendants”). ECF No. 5. On November 20, 2014,
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thirty days after the filing of the initial complaint and eight days after they filed the FAC,
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Plaintiffs filed the instant Application for a Temporary Restraining Order (“Application”).
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ECF No. 9. Reitmeyer filed an opposition to the Application on November 24, 2014.
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ECF No. 13. On November 25, 2014, the Court held a hearing at which counsel for
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Plaintiffs and Reitmeyer appeared. 1 At the conclusion of the hearing, the Court orally
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denied Plaintiffs’ Application. ECF No. 17. This Memorandum and Order serves as the
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Court’s formal ruling on the matter. Any conflict between this Memorandum and Order
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and the Court’s oral decision shall be resolved according to this Memorandum and
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Order.
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BACKGROUND
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Thus far, the Court has heard from Plaintiffs and only one Defendant. Although
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there is little agreement among the parties about the events that have transpired over
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the past year, the Court’s very basic understanding of the facts follows.
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Deming has conducted business through Safe Drain 2 since approximately 2000,
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selling storm drain catch basins that capture pollutants and contaminants before they
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can enter the sewer system. FAC, ECF No. 5 ¶¶ 14, 16. Deming used the domain
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. Id. ¶ 37. In late 2013, Deming and Reitmeyer formed International, a
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Nevada corporation, to sell the drains through ten regional offices that correspond to the
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regional divisions established by the Environmental Protection Agency (“EPA”). Id. ¶ 22.
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Each regional office would be run by a regional sales director, who would earn 60% of
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the profits generated by drain sales Id. ¶ 24. Safe Drain would receive the remaining
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profits. Id. Brasberger, Sr. and Brasberger, Jr. are regional sales directors of two
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regional offices. Id. ¶ 25.
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By mid-2014, business relations between Deming and Reitmeyer had started to
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deteriorate. Plaintiffs allege that at an early July 2014 meeting, Deming and others,
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including Brasberger, Sr., confronted Reitmeyer about his alleged misuse of corporate
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It appears that neither the Brasbergers nor ASHMB, LLC, had been served with a summons and
FAC at the time of the hearing. ECF No. 12.
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Deming changed the name of the business to Stormwater Systems, Inc. due to other pending
litigation.
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funds. Id. ¶ 43. On July 7, 2014, Deming and another regional sales manager,
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Benjamin “Buzz” Holmes, incorporated a new company called Safe Drain International
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Delaware with the purpose of selling drains without Reitmeyer’s interference. Id. ¶ 47.
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The Brasbergers and ASHMB were involved in this new company. Id. ¶ 48.
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Also during this time, Plaintiffs learned that Reitmeyer transferred the
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domain into his own name in January 2014. Id. ¶ 43. Moreover,
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Reitmeyer threatened to keep the domain until he “got what he wanted.” Id. ¶ 44. On
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July 20, 2014, Deming took steps to rectify this alleged malfeasance by writing to the
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domain agent, GoDaddy, and explaining that the domain name at issue had been taken
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illegally. Id. ¶ 45. GoDaddy was nonetheless unable to assist Deming due to the
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passage of time since the domain was transferred. Id. ¶ 46. Consequently, on July 24,
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2014, attorney Lawrence Townsend, who had represented International and eventually
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filed the initial complaint in this action, wrote to Reitmeyer about his allegedly unlawful
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acts in connection with the domain name. Opp’n, ECF No. 14-1, Ex. 20. Townsend’s
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missive noted that Reitmeyer’s “liability for such a clear case of cybersquatting under
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federal law is not only an injunction and transfer of the domain name, but also statutory
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damages up to $100,000 and an award of Safe Drain’s attorneys’ fees.” Id. (emphasis
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added).
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Shortly after the formation of Safe Drain International Delaware, Deming’s
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relationship with the Brasbergers also began to sour. Indeed, by October 2, 2014, and
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in some instances much earlier, Plaintiffs allege Deming learned that Brasberger, Jr.
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(1) terminated Deming’s administrative rights to the Customer Relationship Management
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System (“CRM”), which cut off Deming’s ability to control marketing, customer service,
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and sales of the company’s extensive customer base, ECF No. 5 ¶ 49; (2) had been
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preventing Deming from accessing contacts and leads in the CRM systems for months
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prior, id. ¶ 50; (3) took control of the website and substituted his personal contact
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information for all but two of the ten EPA regions, including Deming’s region, id. ¶ 53;
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and (4) altered the site so all leads would be sent to Brasberger, Jr. alone, id. ¶ 54.
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According to Plaintiffs, on October 4, 2014, Deming met with Brasberger, Sr. and
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Holmes in an attempt to resolve their issues related to the control of the business. Id. ¶
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59. Deming asserts that at the meeting the parties agreed that Defendants “would
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release all control of accounting, the CRM system,…the domain and website, and all
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other facets of…corporate operations” on October 6, 2014. Id. ¶ 64. Plaintiffs also claim
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that this meeting resulted in Defendants strong arming Deming into signing an
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agreement, a copy of which has not been provided to the Court, without giving him
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adequate time to read it or consult with a lawyer. Id. ¶¶ 61-65.
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According to Plaintiffs, October 6th came and went and Defendants did not
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perform their end of the bargain. Rather, they refused to return control of the website,
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domain, CRM system, and accounting, and also terminated Plaintiffs’ control over the
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business’ Facebook page and changed all contact information thereon. Id. ¶¶ 66-67. In
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addition, according to Plaintiffs, beginning in mid-October Defendants began telling third
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parties that Deming was unable to pay his bills, had not filed corporate tax returns and
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that Safe Drain, Inc. was a defunct corporation. Id. ¶¶ 73, 82-83.
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On October 19, 2014, Reitmeyer allegedly contacted Palm Tree, the
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website manager, and indicated he owned and controlled the domain
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for the protection of himself and other investors. Id. ¶ 73. Additionally, Deming alleges
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that on this date Defendants took control of all emails, including
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Deming’s personal account, and began sending emails to customers while posing as
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Deming. ECF No. 9 at 8.
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STANDARD
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Issuance of a temporary restraining order, as a form of preliminary injunctive
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relief, is an extraordinary remedy, and Plaintiffs have the burden of proving the propriety
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of such a remedy. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). In general,
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the showing required for a temporary restraining order and a preliminary injunction are
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the same. Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839
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n.7 (9th Cir. 2001).
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The party requesting preliminary injunctive relief must show that “he is likely to
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succeed on the merits, that he is likely to suffer irreparable harm in the absence of
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preliminary relief, that the balance of equities tips in his favor, and that an injunction is in
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the public interest.” Winter v. Natural Resources Def. Council, 555 U.S. 7, 20 (2008);
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Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (quoting Winter). The
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propriety of a TRO hinges on a significant threat of irreparable injury that must be
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imminent in nature. Caribbean Marine Serv. Co. v. Baldridge, 844 F.2d 668, 674
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(9th Cir. 1988).
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Alternatively, under the so-called sliding scale approach, as long as the Plaintiffs
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demonstrate the requisite likelihood of irreparable harm and show that an injunction is in
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the public interest, a preliminary injunction can still issue so long as serious questions
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going to the merits are raised and the balance of hardships tips sharply in Plaintiffs’
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favor. Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-36 (9th Cir. 2011)
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(concluding that the “serious questions” version of the sliding scale test for preliminary
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injunctions remains viable after Winter).
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Mandatory injunctions are subject to heightened scrutiny even beyond that
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normally applied to preliminary injunctive relief generally. Dahl v. HEM Pharms. Corp.,
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7 F.3d 1399, 1403 (9th Cir. 1993). They are particularly disfavored and will not be
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granted unless extreme or very serious harm will result. Marlyn Pharms., Inc. v. Mucos,
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571 F.3d 873, 879 (9th Cir. 2009). The court must accordingly be “extremely cautious”
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about granting such relief. Martin v. Int’l Olympic Comm., 740 F.2d 670, 675 (9th Cir.
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1984).
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ANALYSIS
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In their Application, Plaintiffs ask that the Court order Defendants to:
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1. Refrain from holding funds properly belonging to Plaintiffs;
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2. Refrain from withdrawing or transferring any funds from any account of
Plaintiffs;
3. Refrain from holding property properly belonging to Plaintiffs, including, but
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not limited to, demo units, valves, and other items of equipment; sales
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literature (brochures and cut sheets) and/or trade show displays;
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4. Refrain from holding proprietary software and rights properly belonging to
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Plaintiffs, including, but not limited to, email accounts, Customer
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Relationship Management (“CRM”) software, and Facebook account(s);
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5. Refrain from any and all use of the “Safe Drain” mark, including, but not
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limited to, advertising, websites, social media, production, sales, and/or
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solicitations;
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6. Refrain from contacting any vendors of Plaintiffs;
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7. Provide Plaintiffs with the names of all customers or potential customers
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who have made inquiry as to any Safe Drain product from and after
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January 1, 2014;
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8. Refrain from harassing Deming or any other staff member of Plaintiffs;
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9. Refrain from providing access to any person, other than Plaintiffs, of any
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Safe Drain proprietary information, funds, and accounts; and
10. Refrain from contacting any customer of Plaintiffs and/or from using
Plaintiffs’ customer lists. ECF No. 9-1 at 21-22.
Plaintiffs are not simply seeking to maintain the status quo until a preliminary
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injunction can be issued. Instead, the relief requested seeks to alter business
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relationships and would involve a substantial alteration of the parties’ respective
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positions. Therefore, this Application is for a mandatory injunction, which the Court must
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view with heightened scrutiny. Dahl, 7 F.3d at 1403.
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A careful analysis of the sequence of events shows that Plaintiffs have been less
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than expeditious about bringing this dispute to the Court’s attention. While many of the
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facts are in dispute, Plaintiffs’ counsel repeatedly represented at the hearing that
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Deming was aware by October 19, 2014, that Defendants had wrested full control of the
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business from him and had no interest in compromising. On October 21, 2014, Plaintiffs
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finally filed a two count complaint naming Reitmeyer as the sole defendant. ECF No. 1.
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The initial complaint was not accompanied by an application for a TRO or preliminary
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injunction. Neither did Plaintiffs immediately seek a TRO when they filed the operative
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First Amended Complaint twenty-two days later, ECF No. 5; rather, they waited an
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additional eight days to file their TRO application, ECF No. 9. Plaintiffs’ delay militates
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against the showing of imminent and irreparable harm required for preliminary injunctive
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relief. Because Plaintiffs have not treated this situation as an emergency over the
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preceding months, the Court will not grant relief on an emergency basis.
Additionally, given the convoluted nature of this case, the widely divergent factual
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position taken by the parties, and the fact that a number of the Defendants have not
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even yet been served, adjudicating this matter on an emergency basis, without full and
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complete briefing, is unwarranted and unwise. See Martin, 740 F.2d at 675.
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CONCLUSION
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Given the considerations outlined above and for the reasons stated on the record
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during the November 25, 2014 hearing, Plaintiffs’ Application for a Temporary
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Restraining Order, ECF No. 9, is DENIED. 3
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IT IS SO ORDERED.
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DATED: December 1, 2014
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__________
__________
___________
__________
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MORRISON C. ENGL
N
LAND, JR, C
CHIEF JUDG
GE
UNITED ST
TATES DIS
STRICT COU
URT
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As the Court noted on the record during the TRO hearing, the parties’ actions between now and
the hearing on Plaintiffs’ Application for a Preliminary Injunction, which is currently set for January 22,
2015, will be heavily scrutinized.
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