Storz Management Company et al v. Carey et al

Filing 152

ORDER signed by District Judge Troy L. Nunley on 2/19/21 DENYING 8 plaintiffs' Motion for Preliminary Injunction. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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STORZ MANAGEMENT COMPANY, a
California Corporation, and STORZ
REALTY, INC.,

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Plaintiffs,

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v.

No. 2:18-cv-00068-TLN-DB

ORDER DENYING PLAINTIFFS’
MOTION FOR PRELIMINARY
INJUNCTION

ANDREW CAREY, an individual, and
MARK WEINER, an individual,
Defendants.

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This matter is before the Court on Plaintiffs Storz Management Company (“SMC”) and

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Storz Realty, Inc.’s (“SRI”) (collectively, “Plaintiffs”) Motion for Preliminary Injunction. (ECF

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No. 8.) Defendants Andrew Carey (“Carey”) and Mark Weiner (“Weiner”) (collectively,

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“Defendants”) filed an opposition. (ECF No. 23.) Plaintiffs filed a reply. (ECF No. 25.) For the

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reasons set forth below, Plaintiffs’ Motion for Preliminary Injunction is DENIED.

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I.

FACTUAL AND PROCEDURAL BACKGROUND

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Plaintiffs allege that Defendants, who were SMC’s Chief Executive Officer and Chief

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Financial Officer/Chief Operating Officer, secretly started a competing business — called

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“Monolith” — while employed by SMC. (ECF No. 7 at 2.) Plaintiffs filed a First Amended

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Complaint (“FAC”) on January 30, 2018, stating claims for: (1) violation of the Defend Trade

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Secrets Act; (2) breach of fiduciary duty; (3) breach of contract; (4) breach of implied covenant of

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good faith and fair dealing; (5) intentional interference with contractual relationship; (6) fraud; (7)

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violation of California’s Unfair Competition Law; and (8) violation of the Computer Fraud and

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Abuse Act. (See id.) That same day, Plaintiffs filed the instant Motion for Preliminary

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Injunction. (ECF No. 8.)

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II.

STANDARD OF LAW

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Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear

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showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555

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U.S. 7, 22 (2008) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). “The

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purpose of a preliminary injunction is merely to preserve the relative positions of the parties until

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a trial on the merits can be held.” Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981)

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(emphasis added); see also Costa Mesa City Employee’s Assn. v. City of Costa Mesa, 209 Cal.

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App. 4th 298, 305 (2012) (“The purpose of such an order is to preserve the status quo until a final

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determination following a trial.”) (internal quotation marks omitted); GoTo.com, Inc. v. Walt

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Disney, Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (“The status quo ante litem refers not simply to

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any situation before the filing of a lawsuit, but instead to the last uncontested status which

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preceded the pending controversy.”) (internal quotation marks omitted). In cases where the

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movant seeks to alter the status quo, preliminary injunction is disfavored and a higher level of

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scrutiny must apply. Schrier v. University of Co., 427 F.3d 1253, 1259 (10th Cir. 2005).

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Preliminary injunction is not automatically denied simply because the movant seeks to alter the

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status quo, but instead the movant must meet heightened scrutiny. Tom Doherty Associates, Inc.

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v. Saban Entertainment, Inc., 60 F.3d 27, 33–34 (2d Cir. 1995).

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“A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed

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on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief,

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[3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.”

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Winter, 555 U.S. at 20. A plaintiff must “make a showing on all four prongs” of the Winter test

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to obtain a preliminary injunction. All. for the Wild Rockies v. Cottrell (Alliance), 632 F.3d 1127,

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1135 (9th Cir. 2011). In evaluating a plaintiff’s motion for preliminary injunction, a district court

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may weigh the plaintiff’s showings on the Winter elements using a sliding-scale approach. Id. A

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stronger showing on the balance of the hardships may support issuing a preliminary injunction

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even where the plaintiff shows that there are “serious questions on the merits...so long as the

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plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the

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public interest.” Id. Simply put, a plaintiff must demonstrate, “that [if] serious questions going to

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the merits were raised [then] the balance of hardships [must] tip[ ] sharply in the plaintiff’s

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favor,” in order to succeed in a request for preliminary injunction. Id. at 1134–35.

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III.

ANALYSIS

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Plaintiffs argue they will suffer three types of irreparable harm in the absence of an

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injunction: (1) serious monetary harm; (2) loss of future business opportunities; and (3)

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reputational harm. (ECF No. 8-1 at 23.) In opposition, Defendants argue that Plaintiffs have not

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shown irreparable harm because they only complain of past conduct and alleged harm. (ECF No.

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23 at 20.) The Court agrees with Defendants.

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“Purely economic harms are generally not irreparable, as money lost may be recovered

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later, in the ordinary course of litigation.” Idaho v. Coeur d’Alene Tribe, 794 F.3d 1039, 1046

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(9th Cir. 2015). Plaintiffs must “establish that remedies available at law, such as monetary

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damages, are inadequate to compensate” for the injury arising from Defendants’ conduct. Herb

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Reed Enter., LLC v. Fla. Entm’t Mgmt., Inc. (Herb Reed), 736 F.3d 1239, 1249–50 (9th Cir.

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2013) (citation omitted).

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In the instant case, Plaintiffs allege “Defendants have successfully poached 18 of

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Plaintiffs’ fee managed clients, which represents over $452,000 in lost revenue annually.” (ECF

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No. 8-1 at 23.) Yet Plaintiffs fail to explain why monetary damages would be inadequate to
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remedy this alleged harm. See Herb Reed, 736 F.3d at 1249–50. Absent any argument or

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evidence to the contrary, it appears Plaintiffs are capable of calculating and recovering monetary

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damages “in the ordinary course of litigation.” Idaho, 794 F.3d at 1046. Therefore, Plaintiffs’

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alleged monetary harm is not a proper basis for granting an injunction.

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Plaintiffs’ other alleged harms are also insufficient to warrant an injunction. Plaintiffs

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summarily argue they “will continue to lose future business opportunities” and “are suffering

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reputational harm as a result of Defendants’ wrongful actions.” (ECF No. 8-1 at 23.) These

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conclusory statements are too speculative to establish irreparable injury. See Goldie’s Bookstore,

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Inc. v. Superior Court of State of Cal., 739 F.2d 466, 472 (9th Cir. 1984) (concluding that in the

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absence of factual support, the harm of losing goodwill and “untold” customers was too

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speculative to constitute irreparable injury). Plaintiffs vaguely mention Defendants prepared an

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investment circular that contained false information about SMC — namely, that SMC was an

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affiliate of Monolith and supported Monolith’s operations. (ECF No. 8-1 at 23–24.) But it is

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unclear how or even if such representations would cause damage to SMC’s reputation.

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Plaintiffs cite eBay, Inc. v. Bidder’s Edge, Inc., 100 F. Supp. 2d 1058, 1066 (N.D. Cal.

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2000), to argue “[h]arm resulting from lost profits and lost customer goodwill is irreparable

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because it is neither easily calculable, nor easily compensable and is therefore an appropriate

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basis for injunctive relief.” (ECF No. 8-1 at 22–23.) However, eBay is not persuasive. Like

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several other cases cited by Plaintiffs, eBay predated Winter and applied a lesser standard, finding

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among other things that the plaintiff had “at least established a possibility of irreparable harm”

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based on loss of goodwill. eBay, 100 F. Supp. 2d at 1066 (emphasis added). Moreover, eBay

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was factually distinct, the plaintiff provided considerable evidence of harm, and the defendant did

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not “seriously contest” that lost customer goodwill constituted irreparable harm in that case. See

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id. at 1065–66. Plaintiffs’ reliance on Pyro Spectaculars North, Inc. v. Souza, 861 F. Supp. 2d

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1079 (E.D. Cal. 2012), is similarly unpersuasive. (ECF No. 25 at 8.) In Pyro, the defendant

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admitted to funneling information from his old employer to his new employer to formulate

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proposals to the old employer’s clients. 100 F. Supp 2d at 1092. There has been no such

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admission in this case, and Plaintiffs’ factual allegations remain in dispute.
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Plaintiffs cite various other cases for the general propositions that damage to goodwill,

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future business opportunities, or reputation may constitute irreparable harm. (See ECF No. 8-1 at

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22–24; see also ECF No. 25 at 8.) But Plaintiffs have not fully developed their arguments or

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provided sufficient evidence “to demonstrate that irreparable injury is likely in the absence of an

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injunction” in this specific case. Winter, 555 U.S. at 22 (emphasis in original). Therefore, the

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Court need not and does not address Plaintiffs’ arguments as to the other prongs of the Winter

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test. See Alliance, 632 F.3d at 1132, 1135 (“[A] preliminary injunction requires a showing of

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likely irreparable injury.”).

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IV.

CONCLUSION

For the foregoing reasons, the Court DENIES Plaintiffs’ Motion for
Preliminary Injunction. (ECF No. 8.)

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IT IS SO ORDERED. DATED: February 19, 2021

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Troy L. Nunley
United States District Judge

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