Google Inc. v. American Blind & Wallpaper Factory, Inc.

Filing 243

Attachment 19
Declaration of Ajay S. Krishnan in Support of 238 MOTION for Sanctions Notice of Motion and Motion for Terminating, Evidentiary, and Monetary Sanctions Against ABWF for Spoliation of Evidence filed byGoogle Inc., Google Inc.. (Attachments: # 1 Exhibit A# 2 Exhibit B# 3 Exhibit C# 4 Exhibit D# 5 Exhibit E# 6 Exhibit F# 7 Exhibit G# 8 Exhibit H# 9 Exhibit I# 10 Exhibit J# 11 Exhibit K# 12 Exhibit L# 13 Exhibit M# 14 Exhibit N# 15 Exhibit O# 16 Exhibit P# 17 Exhibit Q# 18 Exhibit R# 19 Exhibit S (part 1)# 20 Exhibit S (part 2)# 21 Exhibit T# 22 Exhibit U# 23 Exhibit V# 24 Exhibit W# 25 Exhibit X)(Related document(s)238) (Krishnan, Ajay) (Filed on 12/26/2006)

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Google Inc. v. American Blind & Wallpaper Factory, Inc. Doc. 243 Att. 19 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 1 of 50 EXHIBIT S Dockets.Justia.com Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 2 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 1 of 50 9i UNITED STATES DISTIUCT COURT FOR THE EASTERN DISTRICT OF MICHIGAN AMERICAN BLTND AND W ALLP APER FACTORY, INC., Case: 2:06-cv-13576 Assignéd To: Cohn, Avern Referral Judge: Pepe, Steven D Filed: 08-10-2006 At 10:27 AM cmp AMERICAN BLIND AND WALLPAPER FA CTORY, lNC V KATZMAN (TAM) Plaintiff, v. STEVE KATZMAN, Defendant. SCOTT A- MACGRlFF (P55864) DICKINSON WRIGHT PLLC Attorneys for Plaintiff 4000 500 Woodward Avenue, Suite Detroit, MI 48226 (313) 223-3477 EmaI1: smacgr ff(fdickinsonwrighLcom AMERICAN BLIND AND WALLPAPER FACTORYlS MOTION :FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION Plaintiff, American Blind and Wallpaper Factory, Inc. ("American Bl1ndj'), by and through its undersigned counseL, upon the accompanying Anldavit of Joel Levine, hereby mOves this Court, pursuant to Fed. R_ Civ. P. 65, for entry of a temporary restraining order and a preliminary injunction barring defendant, Steve Katzman ("Katzman" or "Defendant"), and any persons ading on Defendant's behair or at Defendant's request, from using any of AnierÎeili Blind's confidential and proprietary property and infonnation, and requiiing Defendant to immediately return to American Blind all such property and infonl1ition (the "Motion")- Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 3 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 2 of 50 In support hereof, American Blind fHes and ineorporates, as if fully restated herein, the attached Brief in Support of its Motion. BY: SCOTT A. MACGRTFF (P55864) Attorneys lor Plaintiff 500 Woodward Avenue Su1te 4000 Detroit, MI 48226 (313) 223-3477 Email: smacgrfI~ydickinsonwrightcom Date: August \ q 2006 DGTROI1' i4:1l(-~ Q~OOi;2vi 2 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 4 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 3 of 50 .. UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN ., ElCh, bits l¡ A - 0 AMERICAN BLIND AND W ALLP APER FACTORY, INC., Plainti ff, v. Case: 2: 06-cy-13576 Assigned Tn: Cohn, Avern Referral Judge: Pepe, Steven D Filed: 08-10~2006 At 10:27 AM cmp AMERICAN BLIND AND WALLPAPER FA CTORY, INC V. KATZMAN (TAM) STEVE K. TZMAN, Defendant. SCOTT A. MACGRIFF (P55864) DICKINSON WRlGHT PLLC Attorneys for Plaintiff 500 Woodward Avenue, Sulte 4000 Detroit, Mr 48226 (313) 223-3477 Email: smaegriff(idickinsonwrightcom AMElUCAN BLIND AND W ALLP APER FACTORY'S BRIEF IN SUPPORT OF MOTION FOR A TEMPORARY RESTRANING ORDER AND PRELIMINARY INJUNCTION Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 5 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 4 of 50 TABLE OF CONTENTS Page I. INTRODUCTION .................... ......... ..........,... ._.................. ........... .......,........................1 IT. TH.E PARTIES... ....... ............ ..................... ..u...., .......... ......... ..-.............. _................. ......._2 IlL. FACTUAL BACKGROUN ............ ..._........ ....__.............-.............................. ........_......2 TV. ARGUMENT....... ....._ .......,........... .... ........ ........... ...__............. ...... .....--. ........ .........,.. ...._..8 Ä- A Temporary Restraining Order Is Waranted ......_...........--...."...._............_......8 B. Inj unctìve Relief Is Warranted....... .........., ........ ............................... ............... ......9 1. American B1Índ wil likely succeed on the merits of its claim ...............10 a) Violation ofthe CFAA _... ........... _...... .............." ..--...."......... .....1 0 b) Violation of 18lJ.S.C. § 2701 et seq. ........__......................--....11 c) Violation of MUTSA ...._............._..... ................ ....-............ .......12 d) Common-law conversion ............. ......... ........ ........- ....... ........... .15 e) Tortious Interference.......-. .......... ,...... ......... ............. _................ .15 1) Breach of Contract......... ........................................" ..................1 Ó 2. American Blind will be irreparably harmed absent immedÜile injuntive re1Íef............ ...._... ........... _... .......... .......... ........... .....-.......... ...... I 8 3. Granting the injunction will not har anyone ...........__...."....._."..........19 4. The public interest will be served by issuing the injUllction..............,,--20 V. CONCLUSION ....... ........ .............. ........- ........... w. n........... ._............. ... ........ .-............... ..20 1 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 6 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 5 of 50 TABLE OF AUTHOIUTIES Cases ACS Consultant Co., Inc. v. Willams, No. 06-11301, 2006 WI, 897559, *7 (B.D. Mich. Apr. 6, 20(6)........".... ........ ........ ......__... ......... ..... ....... ........ ....... ........ ...-- ..... ............. .... 14, 19 American Can Co. v. Mansukhani, 742 F.2d 314,325 (7ifi eir 1984) .....................................--..9 American Parts Co., Inc. v American Arbitration Ass 'n, 154 N.W.2d 5 (Mich. Ct. App. 1967) ....... ..... ........ ........ ........... ........, ....... ..... ......... ...... ............................. ..--.................... 17 BPS Clinical Laboratories v. Blue Cross and Blue Shield 0/ Michigan, 552 N. W.2d 919, 925 (Mieh. Ct. A pp. 1996) ............................. .............. ....................... ...................... ........ 16 CMllnt'l, Inc. v. Intermet Inl 'I Corp., 649 N.W.2d 808,813 (Mich. Ct. App. 2002) ........... 13, 14 Easton Sports, Inc. v. Warrior LaCrosse, Inc., No. 05-CV -72031, 2005 WL 2234559 Mich. Sept. 14, 2005)................ ................................... ......... ................................ 16 (E.D . Fielder v. Greater Media. Inc., LC No. 04-436195-CZ, 2006 WL 2060404, *4 (Mich. Ct. App. July 25, 2006)........... ...................__ ............... ...... .......--.... ........ ......., ........... ......--..... 16 Foremost lrzs. Co. v. Allstate Ins. Co., 486 N.W.2d 600,606 (1992)........................................_..15 In re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir. 1985)...................--............................. y In re Eagle-Picher Industries, Inc., 963 F.2d 855, 859 (6th eir. 1992) ......;................................. 9 In re InLzÚt Privacy LitigllfÌon, 138 F. Supp. 2d 1272, 1276 (C.D. CaL. 20(1)............................. 12 International Airport Centers, LL C. v- Citrin, 440 F.3d 418,420 (7th Cir. 2006).................... 11 Kimber~y & European Diamonds, Inc. v. Burbank, 684 F.2d 363 (6th Cir. 1982).....--............... is Leach v. Ford Motor Co., 299 F. Supp. 2d 763 (E.D. Mich. 2004) ..............--...........--...............16 , Merril Lynch Pierce Fenner & Smith v. Ran, 67 F. Supp. 2d 764, 778 (n.D. Mich. 1999)........ 19 PepsiCo., Tnt. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995)....................--...........--.............. 14 Six Clinics Holding Corp., !lv. Cafcomp Systems, ¡nc., 113 F.3d 393, 402 (6th Cir. 1997) ....... 10 Superior Consultant Co. v. Bailey, No. OO-CV-73439, 2000 WL 1279161, *10 (B.D. Mich. Aug. 22, 2000.). ....... ................ .__".... .................... .............................' ........... ..--..... 14 Superior Consulting Co. v. Wailng, 851 F. Supp. 839,846 (B.D. Mich. 1994)...................... 9, 18 Thomas v. Leja, 468 N.W.2d 58 (Mieh. Ct. App. 1991).....................--............--...................... i 7 u Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 7 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 6 of 50 United Rentals (North America), Inc. v. Keizer, 355 F.3d 399, 412-13 (6th Cir. 2004) ...........-- 13 Statutes II Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 8 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 7 of 50 T. INTRODUCTION Derendant is the fonner CEO of American Blínd, having resigned voluntarily on May 18, 2006. in connection with his tenure as American Blind's CEO, Defendant signed an ernployment agreement which contains provisions forbidding him to use confidential or proprietary infoffiution obtained while at American Blind for his own bene11t, or for the benefit of anyone other than American Blind (the ..Employment Agreement"). (A copy of the Employment Agreement is annexed as Exhibit A to the accompanying Affidavit of Joel Levine, dated August 9, 2006 and fied in conjunction with this Motion. The Employment Agreement is hereby incorporated by reference,) The Employment Agreement also contains a provìsion reqiiiring Defendant to immediately return all American Blind property to American Blind upon his tcrminaiion. These provisions explicitly survive the term of the EmploymentAgreellent and Defendant's employment at American Blind. They also specifically contemplate injunctive reHcfupon any breach of them by Defendant. When Defendant resigned, American Blind executives immediately discovered that Defendant had taken with him several confidential items of American Blinds property, violating the Employment Agreement. Specifically, Defendant took a proprietary spreadsheet containing detailed information about American Blind's coinpeIÎtors (the "Competitive Matrix"), as well as the American Blind employee handbook (the "Employee Handbook"). American Blind has reason to believe that Defendant took with him addilional proprietary documents and infonllation which American Blind has yet to identify. American Blind also discovered that following his resignation, Defendant erased thousands of electronic fies contained on several of American Blind's computers to which Defcndant had access during his employment. Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 9 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 8 of 50 American Blind also subsequently learned that Defendant has created a new business to compete directly with American Blind, called Nationwide Blind and Wallpaper Factory ("Nalionwide"). American Blind has good cause to believe that Defendant culTently is wrongfully using the Competitive Matrix and the Employee Handbook, violating ongoing provisions of Defendant's Employment Agreement, in order to help get Nationwide up and running. By this action Amercan Blind seeks immediate retum of all confidential and proprietary documents and information wrongfully taken by Defendant upon his resignation. American Blind also seeks the immediate cessation of any and all use by Defendant, Nationwide, and anyone else acting on Defendant's behalf of American Blind's confidential and proprietary inIòmiation and documents. II. THE PARTIES American Blind is a Delaware corporation with its principal place of business at 909 North Sheldon Road, Plymouth, Michigan. On ínfomiation and belief: Steve Katzman is a Michigan citiz.en and resident who resides at 653 i Pembridge Hil, West Bloomfield, Michigan. ILL. FACTUAL BACKGROUND American Blind is the largest direct-to-customer retailer of window treatments and wall coverings in the United States. American Blind, through its predecessor companies, has been in the home decorating business for over 50 years. IT. at ii 4.1) Defendant was hired as American Blind's CEO in 1998. (Levine A American On or about June 5, 2000, as a condition of his continued employment as References to the accompany Atfdavit or Joel Levine, dated August 9j 2006 and fied 1n conjunction with this Motion, are to "Levine AIT. at ii _no 2 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 10 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006. Page 9 of 50 Blind's CEO, Defendant entered into the Employment Agreement with American Blind. (Levine AlT., Ex. A,2) On or about September 18, 2003, American Blind and Katzman renewed the Employment Agreement, extending its term through December 31,2005. (Li;vinc Aft', Ex. R) The Employment Agreement contains several provisions forbidding Defendant to, inter alia, take with him or use any American Blind proprietary infonnation or documents following tennination of his employment at American Blind. (Levine Aff; Ex. A at ~ il(a), 11(b).) These provisions explicitly survive the term of the Employment Agreement and n.~main in effect no matter the circumstances under which Defendant departs American Blind. (Id.) Sped lícally, subparagraph 11 (a) of the Employment Agrcemelt provides, inter alia: Proprietary Tnfonnation. Executive (DeiendantJ shall not during the the Employment Term or at any time thereafÌer (irrespective of circumstances under which Executive's employment by Corporation (American Blind) terminates), directly or indirectly, use for his own purposc or for the benefit of any person or entily other than Corporation, nor otherWise disclose, any Propridary Information, . . . to any individual or entity, unless such disclosure has been authorized in writing by the Board or is otherwise required by law. . . . (ld. at § l1(a).) And subparagraph 1 l(b) of the Employment Agreement provides, inter alia: Confidentiality and Sun-ender of Records. Executive shall iiot retain, and wil deliver proinptly to Corporation, any ConHdcntial Rceords following termination of his eniployimmt. "Confidential Records" shall mean all correspondence, memoranda, mes, mamials, books, lists, financial, opcrating or markeLing records, magnetic tape or electronic or other media or equipment of any kind which may be in Executive's possession or under his control or accessible to him which may contain any Proprietary Information. . . . All Confldcntial Records shall be and remain the sole property of Corporation during the Employment Tenn and 2 " References to Exhibits to lhe Affidavlt of Joel Levine are to "Levine Aff., Ex. 3 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 11 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 10 of 50 thereafter. On February 14, 2006, Defendant executed an Employee Hardware Loan Agreement with American Blind, which obligated Defendant to return, upon his deparure from American Blind, the company laptop computer and related accessories that American Blind had fumishcd for him, among other things (the "Hardware Agreement"). (Levine All, Ex. B.) At approximately 4:30 p.m. on May 18, 2006, Defendant participated in a tc1ecoiilcrence in his ofl1ce along with American Blind's CFO, Gerald Curran, (Levine AfC at ii 11.) At this time, Mr. Curran observed that various property of American Blind, including files, documents, records, electronic data, computer fies, and other proprietary infoniiation (the "Compaiy Property") was located in Defendant's orfce and on two desktop computers in Defendant's office. (ld.) Later that evening, at approxiniately 7:33 p.m. on May 18,2006, Derendant tcndered his resignation to American Blind's board of directors. (Levine Aff., Ex. C.) The next moming, at about 8:00 a.ni. on May 19, 2006, Joel Levine, who replaced Defendant as American Blind's CEO, entered Defendant's office and discovered that the Company Property was missing from Defendant's o1Tce. (Levine AIr. at ~ 13.) Also on or about May 19, 2006, Greg Ruppert, AmerícllTl Blind's vice president of technical operations, inspected the two desktop computers in Defendant's office at American 4 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 12 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 11 of 50 Blind and discovered that all of the electronic documents and emails had been erased from them. (Levine Aff. at 'I 14.) Later that day, on May "\9, 2006, American Blind demanded that Katzman return the Company Property by 5:00 p.m. on May 22, 2006. (Levine Air, Ex. D,) American Blind also dÜ¡ablcd Defendant's access to American Blind's Virliial Private Computer Network ("VPN") on May 19, 2006. (Levine Afr. at '117.) On May 19, 2006, Mr. Levine discovered that Katzman had been communieating with certain vendors and creditors or American Blind and, on infonnation and belief, falsely indicating or implying to them that American Blind was in financial distress. (!d. at ,118.) Mr. Levine also discovered on that sanie day that following one such communication with Defendant, First Data, the company who processed American Blind's corporate credit card, placed a "hold" on American Blind's eredit in the amount of$750,OOO.00. (lei. at il19.) As a result of First Data's "hold", American Blind wag forced to secure a loan from another entity in this amount of $750,000.00, at an unfavorable interest rate. (Jd. at ,120.) On Jmie 5, 2006, Defendant infom1ed counsel for American Blind that he intended to send American Blind a diskette containing 4,368 company-related einails. Defendant also infomJed American Blind's counsel that he was sending a copy of the diskette to his own personal attorney, in anticipation of a possible "dispute arisling)" involving lhe "integrty of the information" he was retuDiing. (Levine Aff., Ex. F.) Katzman also slated in his June 5, 2006 einail that he was in the process ofrevicwíng "over 15,000" additional electronic fies, which he had "archivedll on his home computer, so that he could reniove any of his "personal" items before sending them back to American Blind. (Id.) On June 12, 2006, Ira Kline, Amcriean Blind's vice president of human resources, 5 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 13 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 12 of 50 resigned. (Id. at ir 25.) On June 12, 2006, American BUnd received a diskette from Defendant purportedly containing all of Defendant's business-rehited emails. (Levine Afr. at ii 26.) On June 12, 2006, Defendant informed American Blind's counsel that he was stil working to assemble the electronic fies demanded by American Blind, and that he intended to return the requested files within a week. (Levíne Aff., Ex. G.) Defendant acknowledged in his June 12, 2006 email that he was obligated by paragraph 11 (b) of the Employment Agreement to do so, and that he intended to comply with paragraph l1(a)'s nondisclosure requirements. (Levine Aff. at '127, Ex. G.) On June 14, 2006, Defendant infonncd AmericanBlinds counsel that he was returning all company electronic fies that were archived on his home computer. (Levine Aff., Ex. H.) Defendant stated that he had already provided his own personal attorney with a copy of the same, again anticipating a "dispute aris(ing) where (sic) the integrity of the information becomes important." (ld.) Defendant also statcd affl1natively that he would not personally retain a copy of these fies, nor would anyone acting on his behalf access those fies Ü"ir any purpose forbidden by the Employment Agreement. (Id.) On June 21, 2006, American Blind's counsel finally received a disk from Defendant pL~rportedJy containing the American Blind electronic files which Defendant had archived on his home computer. (Levine Aff. at '1 30.) As of June 21, 2006, Defendant still had not returned his company laptop computer and related accessories. (Levine Aff. at '1 31.) American Blinds counsel therefore again communicated American Blind's demand that Defendant immcdíately retum the computer. (Lcvíne All'., Ex. L) 6 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 14 of 50 5 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 13 of 0 Defendant then asked ifhe could keep the computer and pay Ainerican Blind "faiT market value" for it. (Levine Aff., Ex. 1.) Mr. Levine immediately responded in the negative and again demanded the laptop's return. (Levine Aff., Ex. K.) Thereafter, Defendant finally retumed the laptop. When American Blind personnel inspected the laptop, however, they found that its eiitire contents had beei1 erased - just as were the desktop computers in Defendant's offce. (Levine Aff. at ~136.) On July 17, 2006, Defendant sent an email message to the American Blind el1ail account of Irma Kline, who was no longer with the company. Defendant's cmail attached a sprcadsheet containing detailed information about American Blind's competitors, which spreadsheet had been developed by and belonged to American Blind (the '"Competitive Matrix"), and requested that Kline add additional infonnation to the Competitive Matiix. (Levine AlT. at ii 37; Levine Aff., Ex. L.) On July 21, 2006, Defendant sent another eniail message to Kline'g American Blind emaÎl address, this time attaching a red-lined version of American Blínd's employee handbook (the "Employee Handbook") which contained numerous and substantial edits to the handbook. (Levii1e Aff. at ii 38; Levine Afr, Ex. M.) Also on July 21) 2006, Defendant again forwarded the Competitive Matrix to Kline's American Blind eniclil address. (Levine A fL at '139~ Levine Afr., Ex. N.) Immediately after discovering these emaiJ messages from Defendant, American Dl\l1d conduded a through search of its computer systems in order to determine the extent of Derendant's attempts to wrongfully accesS AmerIcaii Blind's proprietary information. (Levine Afl at ir 40.) American Blind detenn¡ned that sinee Defendant's resignation, 22 separate attempts had been made to log on to Americai1 Blinds VPN from Defendant's Intcmet Protocol 7 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 15 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 14 of 50 address C'IP Address"), using Kline's, Rupprecht's, and Defendant's passwords. (Levine Aff. at ,140.) As a direct result of Defendant's repeated attempts to improperly access American Blind proprietary information following his resignation, as wen as Defendanls deletion of substantial amounts of data from his company laptop and desktop eomputers, Americ311B1ind hus beeD forced to curr out a number of company-wide security measures, including compre1lensivc1y evaluating its network integrity and having employees change their passwords. (Levine Aff at '1 43.) iv. ARGUMENT A. A Temporary Restraining Order Is Warranted Inasmuch as it has become clear that Katzman is using American Blinds confidential and proprietary information in order to star his competing business and there is reason to believe that Katzman is utiJzing other yet to be identified eonfidential and propriety information to the detriment of American Blind, American Blind seeks a temporary restraining ordcr pursuant to Rule 65(h) of the Federal Rules of Civil Procedure. A temporary restraining order is intended to preserve the status quo until there is an opp0l1unIty to hold a hearng on the application for a preliminary injunction and may be issued with or without notice to thc adverse party. Wright, Miller and Kane, Federal Practice and Procedure, 2nd Ed. 1995, § 2951 p. 253 (footnotes omitted). Furthermore, Rule 6S(b) provides that (al temporary TestrainI11g order may be granted without written or oral notice to the adverse pary or that party's altorney only if (1) it clearly appears from specilic facts shown by affdavit or by the verified complaint that immediatù and irreparable iIiury, loss, or damage wì1 result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) die applicant's attorney certifies to the court in writing the efforts, if any, which have been mude to give the notice and the reasons supporting the claim that notice should not be 8 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 16 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 15 of 50 9 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 17 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 16 of 50 1. American Blind wil likely succeed on the merits of its claim For purposes of a preliminary injunction, and to demonstrate the likelihood 0 t success on the merils, "it is ordinarily suffcient if the plaintiff has raised questions going to the merits so serious, substantial, diffcult, and doubtful as to make them a rair ground for litìgation and thus for more deliberate investigation." Six Clinics Holding Corp., II v. Cafcomp Sy8lems, TIlC., 113 F.3d 393, 402 (6th Cir. 1997). American Blind asserts nine substantive causes or action against Defendant two for violation of 18 U.S.C. § 1030(a) et sec¡. (the Computcr Fraud and Abuse Aet, or "CFAA")~ one for violation of 18 U.S.C. § 2701 (the "Electronic Communications Privacy Act"); two for violation ofM.CL. § 445.1901 et seq. (the Michigan Uniform Trade Secrets Act, or "MUTSA"); one for coin1non-law conversion; one for tortious interference; and two for brcach of contract. American Blind has shown that it will prevail on each cause of action. a) Violation of the CFAA There are several routes for civil claimants to establishing a violation of the CF AA. Under 18 U.S.c. § l030(a)(4), a plaintiff must show that the defelidant (1) knowingly and with intent to defraud; (2) accessed a protected computer without authorization, or (by exceeding) aulhorized access; (3) and thereby furthers the intended Fraud or obtains something worth more thaii $5,000.00. 18 U.S.c. § 1030(a)( 4). And under subscctìon 1030(a)(S)(A)(i), a plaiiiti IT must show that the defendant (1) know1ngly caused the transmission of a program, infoniation, code, or command; (2) to a protected computer; (3) thereby intentionally causing dainage without authorizatìon in an amount exceeding $5,000.00. 18 U.S,c. ~§ l030(a)(5)(A)(i); 1030(a)(5)(B)(i). American Blind has established its right to recover on both routes under the CFAA. The 10 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 18 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 17 of 50 American Blind computers Defendant accessed (both Defendant's laptop and the two desktop computers in Defendant's office) were "protected eomputers" under the CFAA because thcy were "used in interstate or foreign commerce (and) communication." 18 U.S.C. § io30(e)(2)(B). Defendant intentionally accessed those computers in order to both (a) knowingly and intentionally defraud American Blind by obtaining proprietary infonnation (i.e., the Competitive Matrix, the Employee Handbook, and likely other records); and to (b) knowingly transmit a program or command suffcient to "erase" the i;ntire contents of those computers. Levine AIr. at '1'1 15, 34-40; see International Airport Centers, L.L.C v. Citrin, 440 F.3d 418, 420 (7th Cir. 2006) (running a progrmn to erase contents ora computer without authorization violates CFAA). The damages incurred by American Blind as a result or Defendant's conduct are alrcady well in excess of $5,000.00 and continue to climb. Levine Aff. at ~ 43. And the economic value of the Competitive Matrix and the Employee Handbook are themselves substantially more than $5,000.00. Levine Aff. at ~ 41. In short, what Dcfendant has done is prceisely thc kind of conduct proscribed by the CF AA, and preliminary injunctive relief is therefore proper. b) Violation of 18 U.S.c. § 2701 et set¡. Section 2707 of the Electronic Communications Privacy Act allows for a private action by an entity aggrieved by a violation of Section 2701. 18 U.S.c. ~ 2707. Section 2701 is violated when a person (1) intentionally accesses without authorization a facility through which aii electronic eommunication serviec is provided; or (2) intentionally exceeds an authoiization to access that fac11ty; and thcre obtains, alters, or prevents authorized access to wire or electronic communication while it is in electronic storage in such systen1. 18 U.S.C. § 2701. Here, Katzman accessed his laptop and two desktop computers following his resignation from American Blind and (i) took electroniç lilcs anù documents for which he nO longer had access and (2) destroyed stored communications and electronic fies hy erasing them from the ii Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 19 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 18 of 50 computers. Moreover, Katzman made repeated attempts to hack into American Blind's VPN from his IP address following his resignation. Although American Blind's VPN log indicates that those attempts failed, if any of those attcmpts did succeed, such hacking would constitute a direct violation of Section 2701As noted by the court in In re Intuit Privacy Litigation, 138 F. SLLPP. 2d 1272, 1276 (C.D. CaL. 2001), "(t)he primary act requircd for violation of Section 2701 is thß act 0 r accessÎng electronically stored data. For example a hypothetical 'hacker' who accesses data in a computer without the owner's knowledge would be guilty of violating Seetion 2701 ...." Kutzmaiilias exhibited the type of conduct prohibited under this federal statute. Accordingly, American Blinds is likely to succeed on the merits of its claim under the Electronic CommunicatÎons Privacy Act. c) Violation of MUTSA As with the CFAAj there is more than one way for a civÍl claimant to establish a violation that statute, a plaintiff of the MUTSA. Under the "acquisition" prong or must show that (1) the defendant acquired a trade secret; (2) the trade secret belonged to the plaintiff; and (3) the defendant acquired the trade secret with knowledge or reason to know that the acquisiton was by improper means. M.C. L. § 445. I 902(b )(i). Under the "disclosure or use" prong, a plainti rl establishes a right to recover by showing that (1) the defendimt disclosed or used a trade secret; (2) the trade secret belonged to the plaintiff; (3) the defendant disclosed or used the trade secret without the plaintifrs consent; and (4) that either (a) the defendant used improper means to acquire the trade secret; or (b) thc defendant knew or had reason to know that he or she acquired the traùe secret under eircumstances giving rise to a duty to maintain its secrecy or limit its use. M.C.L. § 445 .1902(b )(ii). Cours can enjoi n both actual and threatened misappropriation under the 12 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 20 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 19 of 50 M UTSA, and they can order any affmiative conduct they deem necessary to protect trade secrets. eMf 1nt'l, Inc. v. Intermet lItt'l Corp.. 649 N.W.2d 808, 813 (Mich. Ct. App. 2002). American Blind has shown that 1t wil succeed under both the "acquisition" and "'disclosure or use" prongs of the MUTSA. The Competitive Matrix and the Employee Handbooks are certainly ~'trade sccrets" undcrthe MUTSA because they constitute "infoffiationj . . . compilation(s), program(s); device(s), mcthod(s), tcchique(s), or proecss(esl" that derive independent economic value both by not being generally known or available by proper means by others who might stand to benefit from knowing them, and being subject to reasonable efforts to maintain their secrecy. M.C.L. § 445. I 902(d); see also, e.g., United Rf;nlals (North America). Inc. v. Keiier, 355 F.3d 399, 412-13 (6th Cir. 2(04) (customer list is a trade secret under MUTSA);3 Levine All at,r 39. It is also indisputable that both the Competitive Matrix and the Employee Handbook were created by American Blind personnel for American Blind's exclusive use, and belong to Ameiican Blind. See Levine ArC at ,141. Yet Defendant's July 17-21, 2006 emails reveal that Defendant was using them for his own purposes, without American Blind's consent. Levine ArC at iiii 37-39. hideed, barely a month before his July 2006 emails, Ddendant affirmatively promised not to keep or use such AmerÎcan Blind property in that manner. Li;wÎnc Aff. at iiii 28-30. It would therefore defy all logic and reason to conclude that Defendant obtained the Competitive Matrx by anything but improper means, or that he used them with Amcrican Blind's consent. Moreover, given 3 In, United Rentals, the Sixth Circuit affirmed denial of a preliminary injunetion on the plaintiff ronner employer's MUTSA claim, but only because there was affrmative evidence that the people to whom its romier president disclosed the customer list (the former employer in United Rentals pursued its MUTSA claim against a competing eompany, but not the fonner president) decided not to use the list. 355 F.2d at 412-13. Here; by contrast, Defendant's own email messages reveal that he is actively using American Blind's customer list in conjunction with starting his new company. Levine Aff. at iiir 35-37. 13 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 21 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 20 of 50 Defendant's ongoing promises (as evidenced by the July 2006 emails, the Hardware Agreement, and the Employment Agreement), it is beyond dispute that DefeiidaiÜ knew the circumstances uii.dcr which he obtained the Competitive Matrix and Employee Hanùbook oblígated him to keep them secret and limit their use.4 Based on the foregoing, American Blind wil likely succeed on the merits of its claims under MUTSA. See, e,g., ACS Consultant Co.. Inc. v. Wiliams, No. 06- 11301,2006 WL 897559, *7 (E.D, Mich. Apr. 6,2006) (preliminary injunction granted against former employees who "absconded with client and employee information and would continue to violate the temis of (their) employment agreements, as it appear( ed) they intended to us.e this infonuatIon at clients/competitors'); Superior Consultant Co. v. Railey, No. OO-CY -73439, 2000 WL 1279161, * 10 (E.n. Mich. Aug. 22, 2000) (preliminary injunction granted against former employee on former employer's breach of employment agreement and MUTSA claims where there was "strong circumstantial evidence" that fomi.ef employee accessed "confidential information about (former employer) that would be of economic value to third party competitors, . . . (such as) business plans (and) pitched work"); PepsiCo., Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (affinning issuance of preliminary injunction against former employee on MUTSA claim for threatened misappropriation where employee demonstrated a lack or truslworthiness); cf CMllnll, inc., 649 N.W.2d at 813 (înevitable disclosure doctrine applies where ex~employer shows more than just "the exÎstcnce of generalized trade secrets" and knowledge orthosc trade secrets on the part olnew employer; doetrine 110t applicable ifthere is "no cvidence of (fonner employee's) duplicity" or a "specific trade secret (ex-employec was) likely to misappropriate"). 4 Defendant's lack of candor and eagemess 10 use American Blinds property evcn as he promises not to is troubling, to say the least. 14 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 22 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 21 of 50 d) Common-law conversion the To succeed on a claim for common-law conversion, a plaintiff must show that defcndanl "wrongfully exerled" "any distinct act of domain . . . over lplaintiff'sl personal property in denial of or inconsistent with the ldefendant'sJ rights (in that property)." Foremost Ins. Co. v. Allstate Ins. Co., 486 N.W.ld 600,606 (1992); As explained above, the Competitive Malrix and the Employee Handbook are American Blind's property. Lcvine All at ~ 39. Upon his re!jignation, pursuant to the Employment Agreement, any 'rights Defendant may have had with respect to them ceased. Following Derendant's resignation, American Blind and Aillerican Blind's counsel repeatedly infonned Defend¡:mt of this fact in numerou!' emails. S'ee genetal~v Levine All Defendant even acknowledged that he had no ongoing rights in any such American Blind properly, at least t\ice. Levine ArC at'~ 27-29. Yel despite these acknowledgements, it is clear thal Defendant has been utilizing the Competitive Matrix and the Employee Handbook, altering them, and - more to the poinl- adapting them for use in a new company Defendant is starting to compete with American Blind. American Blind wil doubtless succeed. on the merits of its claim for common-law conversion, and preliminary injundive relief is proper. See, Kg., Kimherly & European Die/monds, Inc. v. Burbank, 684 F.2d 363 (6th Cir. 1982) (preliminary injunclion gnmled on diamond wholesaler's conversion claim against lendcr\ e) Tortious Interference The elements of lortious inlerference with a business expectancy are (1) the existence of a valid bU$lliCSS relationship or expectancy; (2) knowledge of part of the defendant; (3) an intentional interference by the defendanl; (4) inducement or causing 5 The Sixth Circuit's decision in Kimberly applied Kentucky law, not Michigan law, hut the elements of common-law conversion are nearly identical in cach state. See Kimberly, -. 15 the relationship or expectancy on the 684 F.2d at 365-66; For~most Ins. Co., 486 N.W.2d at 606. Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 23 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 22 of 50 of a breach or termination or the relationship or expectancy by the detèndant; and (5) damages resulting to the plaitiff BPS Clinical Laboratories v. Blue Cross and Blue Shield ofMichigaii, 552 N. W.2d 919, 925 (Mich. Ct. App. 1996). A plaintiff can establish a tortiou~ interferenee by showing that it has been defamed by the detcndant. Fielder v. Greater Media, Inc., LC No. 04436 1 95-CZ. 2006 WL 2060404, *4 (1ich. Ct. App. July 25) 2006). As American Blind's CEO, Defendant had first-hand knowledge of the business i rdationships and expectancies of A.nerican Blind. Defendant ahused this knowledge by communicating to several of American Blind's customers, vendors, and creditors anù implying that American Blind was in financial distress, Levine Aft'. at ir 18. Spccifically, Defendant falsely indicated to First Data that American Blind was in financial distress. Id. As a result, First Data witl1(lrew a significant amount of American Blind's credit, forcing American Blind to seek a line of credit elsewhere, at an unfavorable interest rate. Id at '1'1 19-20. In short, Defendant intentionally interfered with American Blind's expectancy of its continued credit relationship with First Data. That credit relationship was tenninated and American Blind suffered financially as a direct result of D~fendant's conduct. Preliminary injunctive reliel is proper to prevent any further wrongful111tcrfcrence by Defendant. Leach v. Ford Motor Co., 299 F. Supp. 2d 763 (B.D. Mich. 2004) (prelimil1ary injunction granted against fonner employer where former executive sucd employer tor toitioiiS interference); see also Haston Sports. inc. v. Warrior LaCrosse, inc., No. 05-CV-n031, 2005 WL 2234559 (E.D. Mich. Sept. 14, 2005) (denying defendant's motion to dismiss tortious interference claim iii advance of hearing on plaintiff's motion for temporary restraining order and preliminary injunction). f) Breach of Contract The elements of breach of contract under Miehigan law arc (1) the existence of a valid contract between the paries and (2) breach of a contractual ten-no American Parts Co., Inc. v 16 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 24 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 23 of 50 17 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 25 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 24 of 50 (Defendant) agrees that the covenants contained in Section 11 of this Agreement relate to matters which are of a speciaL, unique and extraordinary character and that (American Blind) cannot be reasonably or adequately compensated in damages in an action at law in the event (Defendant) breaches any of these covenants or undertakings. Therefore, ¡Defendant) agrees that (Amerlcan Blind) shall be cntitled, as a matter of course, without the need to prove irreparable injury, to an injwiction, restraining order or other equitable relief from any court of competcnt jurisdiction, restraining any violation or threatened violation or any such tenris by e;iecutÌve. Levine Aff., Ex. A at § 11 (f)(ii). 11ms, not only is American Blind entitled to injunctive reliel under Miehigan Law, but Defendant has already agreed, in writing, to that relieC 2. American Blind wil he irreparably harmed absent immediate inj undve relief Defendant CIlleiitly possesses proprietary records belonging to Amei1can Blind that are critical to American Blind's competitive prospects, including, in particular, American Blinds COlupetitíve Matrix. Defendant also currently possesses other American Blind documents, including the Employee Handbook) which was creatcd at considerable expense by and tor Amcrican Blind's personneL. Despite signing, and acknowledging, contractual provisions speci ficaUy barrng him from doing so, Deiendant is using these records to the detriment of Amcrican Blind. Each day that passes with tbese records in Defcndant's possession brings Încreased dangers that American Blind's business will suffer, a.nd its competitive position compromised. These dangers are also precisely the type of irreparable han from which courts routinely deliver plaintiffs with preliminary injunetive relict~ See, e.g., Superior Consulting Co. v. Wallng, 851 F. Supp. 839, 847-48 (E.D. Mich. 1994) (11aml emanating from loss of proprietary infomiation, which efleets the loss of fair competÎIol1i puts plaintifr at a competitive disadvantage, and is both immeasurable and irreparable). As set fort above, and as set forth in the accompanying Affidavit or .Joel Levine, the 18 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 26 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 25 of 50 19 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 27 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 26 of 50 tradc secrets or confidential infomiation, . . , (or) used that information to unfairly compete against (American Blind). Superzor Consultant Co., 2000 WL 1279161 at *12. Given that Defendant "voluntarily entered into his EmploYTl1ent Agreement and agreed to the limitations that (American Blind) now seeks to enforce," Defendant simply cannot complain about any hami that may, in fact. befall him. ACS Consultant Co., lltc., 2006 WL 897559 at *R. 4. The public jnterest wil be served by issuing the injunction "Michigan law provides that the public interest is promoted in protecting confidential information and enforcing valid employment agreements:' ld. at *8, citing M.C.L. § 445.774a. On the other hand, there lS no public interest that excuses Defendant's breaehes of thc Employment Agreement, his intentional and wrongful acquisition, use, and disclosure of American Blind's confidential and proprietary infonmÜion, or his intentional and fraudulent acts in erasing American Blind coniputers and attempting to "hack" into the Amercan Blind computer network. American Blind's Motion must therefore he granted. v. CONCLUSION Defendant has violated various statutes and ongoing provisions or his Employment Agreement gincc his regignation as American Blind's CEO. He has done so by unlawfully destroying American Blind proprietary property, hy takng with him and using for his own purposes trade secret and confidential American B111îd fies, and by interlering with American Blind's existing relationships with its custoniers, vendors, and creditors. Every passing day Defendant possesses and uses American Blind's Competitive Matrix and Eniployee Handbook works continued and increasing hami on American Blinds goodwil with its customers and its business prospects with both existing and potential customers. Unless Defendant is ordered to immediately retum all American Blind confidential and proprietary infonnation in his 20 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 28 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 27 of 50 possession, and unless Defendant is ordered to immediately stop .using American Blind property he wrongfully took with him when he departed, Amercan Blind wil be irreparably hanned. There is no adequate remedy at law that can compensate American Blind for this harm. WHEREFORE, Plaintiff. Amenean Blind, respecU'ul1y rcquests that this Court enter a temporary restraining order and preliminary injunction that: (a) Enjoins Defendant from using any American Blind proprietary docuients, fies, programs, or other information; including, but not limited to, the Competitive Matrix and the Employee Handbook; tor any purpose; (b) Requires Defendant to immediately return to American Blind all copies; including original copies, in whatever form, of any American Blind documents, files, programs, or othcr information in Defendant's possession, whether modified or in original tonn; eating with any American (c) Requires Defendant to immediately cease communi Blind customers, creditors, or vendors any false, defamatory, or otherwise negative statements concerning American Blind~ . (d) Requires Defendant to immediately comply fulIy and completely with Defendant's ongoing obligations under paragraphs l1(a) and 11 (b) ol the Employment Agrecment; (e) Requires Defendant to immediately provide a list or every document; fie, and program, and all data. which Defendant erased or caLised to be erased from the two dcsktop computers in Defendant's former offce at American Bl1nd and the laptop computer whieh Amerìcan Blind provided for Defendant's use while employed at AmerÍcan Blind; and 21 Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 29 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 28 of 50 (I) Awards to American Blind all other, lìirthcr, and different relief that this Com1 dccms just and proper. BY: SCOT A. MACGRTFF (P55864) Attomeys for PlaItìff 500 Woodward Avenue Date: August L, 2006 ¡',TROIT 24336..1 ~jW02yl . 10 Suite 4000 Detroiti Ml 48226 (313) 223-3477 Emai1: smacgrff(ÐdickinsonwrighLcom 22 Case 5:03-cv-05340-JF " Document 243-20 Filed 12/26/2006 Page 30 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 29 of 50 Case 5:03-cv-05340-JF " Document 243-20 Filed 12/26/2006 Page 31 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 30 of 50 UNITED STATES J)ISTRICT COURT FOR THE EASTERN DISTRlCT OF MICHIGAN AMERICAN BLIND AND WALLPAPER FACTORY, INe., Case No. Plaintiff, v. Hon. STEVE KATZMAN, JUY TRIL DEMANDED Defendant. Scott A. Mac Griff DICKIN"SON WRIGHT PLLC 500 Woodwa.rd Avenue, Suite 4000 Detroit, MI 48226 Tel: (313) 223-3477 Fax: (313) 223-3598 ..ßuorne,vs for Plaintiff ___ AFFIDAVIT OF JOEL P. LEV1NE IN SUPPORT OF AMERICAN BLIND'S MOTION FOR A TEMPORARY R~§..RANING ORDER AND PRELIMINARY INJUNCTION STATE OF MICHIGAN ) COUNTY OF WAYNE ) ) sS.: The undersigned, Joel P. Levine, having been duly swom on oath, docs depose and states as fbllows: 1. My name is Joel P. Levine. 1 currently reside at 660 Hermi.tage Circle, Palm Beach Gardens, Florida 33410. 2. I was bom on January i 1, 1948. 3. I am the Chief Executive Offcer of American Blind and Wallpaper Factory, Inc. ("American Blind"). Case 5:03-cv-05340-JF " Document 243-20 Filed 12/26/2006 Page 32 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 31 of 50 4. In 1998, Steve Katzman ("Katzman") became American Blind and Wallpaper Factory, Inc.'s Chief Executive Offcer. 5. On June 5, 2000, American Blind and Wallpaper Factory, Inc. ("American Blind") and Katzman entered into an Aimmdt:d and Restated Employment Agreement, under which Katzman was to serve as CEO for an additional three years (the "Employment Agreement"). (A copy Qfthe Employment Agreement is annexed herto as Exhibit A ànd is hereby incorporated by reference.) 6. Paragraph 11 (a) of the Employment Agreement contains a provisiun forbidding Katzman from using American Blind proprietary information for his own personal benefit or for the benefit of anyone other than American Blind without American Blind's consent following termination of Katzman's em.ployment at American Blind, and forbidding him to do so while employed at American Blind absent his good- faith belíefthat doing so is necessary or desirable to fulfill his duties as CEO, (Se~ Exhibít A at p. 9.) 7. P31agraph 1 I (b) of the Employment Agreement contains a provision forbidding Katzman from retaining any confidential American Blind records upon his teninatlon from American Blind, and requiring him to promptly return to American Blind such rccòrds upon his termination. (See Exhibit A at p. 9.) 8. On September 18,2003, American Blind and Katzman renewed the Employment Agreement and extended the tenn of his tenure as Cf.:O through December 31,2005. Case 5:03-cv-05340-JF " Document 243-20 Filed 12/26/2006 Page 33 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 32 of 50 9. Beginning on January 1,2006, pursuant to agreement with American BEnd, Katzman continued to serve as American Blinds CEO on a month-to-month basis, receiving the same salary and beneí1ts as set forth in the Employment Agreement. 10. On February 14,2006, Katzman executed an Employee Hardware Loan Agreement with American Blind which obligated Katzman to retlmi, upon his deparure from Amercan Blind, the company laptop computer and re1ab::d accessories that American Blind fumish~d for him for business use and communications, among other things (the ¡'Hardware Agreement"). (A copy of the Hardware Agreement is 3lcxed hereto as Exhibit B and is hereby incorporated by reference.) i 1. I was advised that by American Blínds CFO, Gerald Curran, that at approximately 4:30 p.m.,; on May 18,2006, he anù Katzman paiticipated in a telephone conference from Katzman's offce at American Blind. Gerald CUlTan further advised me that at that time, various property of American Blind, includìng tïles, documents, records, electronic data, computer fies, and other proprietary information was located in Katzman's offce and on the two desktop computers also in his offce (the "Company Property"). i 2. Later that evening on May 18, 2006, Katzman voluntarily resigned from American Blind. (A copy ofthe Katzman's tesígnation letter is annexed hereto as Exhibit C.) 13. At approximately 8:00 u.m. on the mornng of May 19,2006, I entered Katzman's fonner offce at American BHnd and discovered that the Company Property that was present only the evening before was missing from Katzman's office. Case 5:03-cv-05340-JF ., Document 243-20 Filed 12/26/2006 Page 34 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 33 of 50 14. On or about May 19, 2006, Greg Rupprecht, American Blind's Vice President of Technical Operations, inspected the two desktop computers that were in Katzman's offce at American Blind and were providtid for and used by Katzman for business communication and other pulloses. 15. Mr. Rupprecht advised me that all of the electronic documents and emails had been erased from the desktop computers. 16. On May 19,2006, American BJjnd demanded that Katzman return the Company Property by 5:00 p.m. on May 22, 2006. (A copy ofS. Greem;pon's May 19, 2006 correspondence is aiini;xed hereto as Exhibit D.) i 7. On May 19,2006, Kalzman's access to the American Blind's Virtual Private Computer Network ("VPN") was discontinued. 18. On May 19,2006, I learned that Katzman had been communicating with cerain vendors and creditors of American Blind, including, but not limited to, First Data, Woodland Blinds, and Prestige Manufacturing following Katzman's fetììgnation from American Blind. I believe that Katzman falsely indicated or implied to these entities that American Blìnd was in financial distress. 19. On May 19,2006, I was also advised that following Katzman's communication with First Data, an entity that processed American Blind's credit card transactions, that FÍrst Data had put a "hold" on $750,000.00 of American Blind's transaction receipts, leaving it with H cash shortfall. 20. As a result of First Data's "hold", Ameiican Blind was fOrced to increase $750,000.00 and thereupon pay is borrowings from ìts lender in this same amount of interest ìn order to borrow its own money. Case 5:03-cv-05340-JF ., Document 243-20 Filed 12/26/2006 Page 35 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 34 of 50 21. On May 19, 2006, counsel for American Blind sent Katzman a letter demanding that he cease and desist his communications with the vendors and creditors of Amercan Blind, (A copy of S. Greenspon's May 19~ 2006 correspondence is annexed hereto as Exhibit E.) 22. OJ) June 5, 2006, Katzman informed counsel for American Blind that he was going to send a disk to American Blind containing 4,368 company-related e-mails. (A copy ofKatzman~s June 5, 2006 e-mail is. aiuiexed hereto as Exhibit F.) Katzman also informed American Blind's counsd that he was forwarding to his attorney a copy of the disk for safekeeping, "in the event a dispute arises where (sic) the integrity of the information becomes important." (See Exhibit F.) 23. Katzman further stated in his June 5, 2006 correspondence that he was in the process of reviewing Over 15,000 electronic files and documents so that he could remove any "personal" items before sending them to Alnerican Blind. (See Exhibit F.) 24. Katzman also stated in his June 5, 2006 cOlTesp~mdence that as soon as he completed his review of the fies and documents, he would forward to American Blind a disk containing all corporate records that he had archived. (See Exhibit F.) 25. On June 12,2006, Ira Kline, Amtlrican Blind's Vice PresidenL olHuman Resources, resìgncd from American Blind. 26. On June 12,2006, Amercan Blind received a disk from Katzman, which purortedly contained all of the company-relatedemui Is. 27. By email dated June 12,2006, Katzman advised counsel for Amercan Blind that he was still working to assemble the electronic fies and documents demanded by American Blind, and that he intended to send the remaining files in his possession that Case 5:03-cv-05340-JF ,. Document 243-20 Filed 12/26/2006 Page 36 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 35 of 50 week. (A copy of Katzman's June 12,2006 e-mail is annexed hereto as Exhibit G.) Katzman acknowledged in this a-mail that he was required, pursuant to paragraph 11(b) of the Employment Agreement, to return to American Blind all documents and records in his possession containing proprietary information. (See Exhibit G.) 28. Katz,man also stated in his June 12,2006 email that he would maintain the integrty of the American Blind proprietar information in his possession, and that he intended to comply with the nondisclosure requirements set forth in paragraph 11 (a) ùf the Employment Agreement. (See Exhibit G.) 29. By email on June 14,2006, Katzman advised counsel for American Blind that he was returning all company emails and dociiments that were archived on his home computer. (A copy of KatzmaiÙ June 14,2006 e-mail is annexed hereto as Exhibit H.) Katzman further stated that he had already provided a copy of all such fies to his attorney for safekeeping, "in the event a dispute arises where the integrity of the information becomes important." (See Exhibit H.) Katzman also stated that he would not personally retain a copy ofthcse fies, nor would he or anyone acting on his behalf access infonnation contained in those fies for any purpose forbidden by the Employment Agreement. (Id.) 30. On June 21, 2006, counsel fOT American Blind receiveù a ùisk fronl Katzman purportedly containing American BEnd's electronic files and doctunents. 31. Also on June 21, 2006, cOlUisel for American BHnd demanded that Katzman retUrn the American Blind company laptop coniputer and related accessories, which Katzman was required to do under the Hardware Agteement. American Blind's Case 5:03-cv-05340-JF .. Document 243-20 Filed 12/26/2006 Page 37 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 36 of 50 counsel demanded the return of the computer by 5:00 p.m. on Jwie 22,2006. (A copy of S. Greenspon's June 21, 2006 correspondence is annexed hereto as Exhibit I.) 32. On June 22, 2006, Katzman then inquired whether American Blind would "sell" him the lapiop so that he would not have to return it. (A copy of Katzmail s June 22,2006 e-maîl is annexed hereto as Exhibit 1.) 33. I immediately rejected Katzman's request and demanded the laptop's return. (A copy afmy June 22,2006 c-mail is annexed hereto as Exhibit K) 34. Thercaílcr, Katzman returned his laptop computer to American Blind. 35. Following its retur, Mr. Rupprecht inspected the laptop. 36, Following his inspection, Mr. Rupprecht advised me that the entíre contents of the laptop - including all electronic data, .documents, and files - had been erased from it. 37. On July 17,2006, Katzman sent an e-mail message to the American .Blind e-mail address oflrma Kline attaching a spreadsheet containing detailed information about American Blinds competitors, which spreadsheet had been developed by and belonged to American Blind (the "Competitive Matrix"), and requesting that Kline add additional information to the Competitive Matrix. (A copy of Katzman's July 17,2006 e- mail is annexed hereto as Exhibit L.) 38. On July 21, 2006j Katz.nian sent another e~mciil message to Kline's American Blind email address, attaching a red. lined version of Amencan Blind's employee handbook (the "Employee Handbook") which contains numerous edits to the handbook and details the emergence of Katzman's new company (called "Nationwide Case 5:03-cv-05340-JF ., Document 243-20 Filed 12/26/2006 Page 38 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 37 of 50 Case 5:03-cv-05340-JF .. Document 243-20 Filed 12/26/2006 Page 39 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 38 of 50 the company upon temiination of employment. Both the Competitive Matrix and the Employee Handbook would be immensely valuable to any person or entity who wishes to compete with American Blind, and they are not available through any legitimate charllels to any such person or entity 42. It is my beliefthat Katzman acquired the Competitive Matrix and the Employee Handbook from the company laptop computer and desktop computers he used while employed at American Blind. It is also my belief that, prior and subsequent to his resignation, Katzman has been using the Competitive Matrx and the Employee Handbook in order to help him create a new business to compete with American Blind, called "Natíonwide Blinds and Wallpaper Factory". Katzman's efforts to found Nationwide are detailed in the first page of the red-lined Employee Handbook, which Katzman has adapted for use in his new company. It is also my beliefthat Katzman may possess addìtional American Blind proprietary records and may be using them to help create his competing business. Each day that Katzman possesses and uses Anierican Blind confidential and proprietary infoffiation brings increasing danger that American Blind wil lose market share and the goodwil of its customers, 43. AfÜ.."t discoveríng Katzman's repeated attempts to log on to American Blind's VPN, American Blind personnel spent considerable hours evaluating its network and having each and every American Blind employee go through the process of changing their passwords. These procedures haw distracLed Ameiican Blindsbw;iness and sapped the productivity of key employees, American Blind estimates that Katzman's. conduct has already cost the company more than $5,000.00 in lost time and other resources. Case 5:03-cv-05340-JF .. Document 243-20 Filed 12/26/2006 Page 40 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 39 of 50 SWORN to before me this llh day of August 2006. ú . -" " .-" c.~ Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 41 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 40 of 50 Case 5:03-cv-05340-JF Document 243-20 Document 3-1 Filed 12/26/2006 Filed 08/10/2006 Page 42 of 50 Page 41 of 50 Case 2:06-cv-13576-AC-SDP . , ,." AMENDED AND RESTATED EMPLOYMENT AGREEMENT ~ 1~is Amended and Restaled Employmant Agreement .made I~is ~ of v_ ~. 2000, between DECOM TETODAY.CQM1 INC. a Delaware corporation. With its principal offce at 909 N. Sheldon Road, Plymouth, Michigan. (the üCorporation"). and STEVEN B. KATZMAN, residing at 10755 Oxbow Lake Shore Dnve, White Lake, MI 48386, (the "Executive"). WliNESSETH Agreement ("CEO") of 14, WHEREAS, Executive is currently the chief executive offcerdated August the corporation pursuantto the terms ofthat certain Empioyment 1998. by and betNeen the Executive and the Corporation (the "Original Empioyment Agreement"; WHEREAS. the Corporation desires to secure the continued services of ExecutiVe, and Executive desires to continue to furnish services to the Corporation. on the temis and conditions hereinafter set forth: and . VVEREAS, cøncurrently with th~ execution of this Agreement. the Corporation is entering into that certain Stock Purchase Agreementwith Primus Capital Fund IV limited PartnershiP. Primus Executive Fund Limited Partnership and certain other co-Investors, for the purchase of ClaSS A shares of the Corporation (the "lnve$tment~); and WHEREAS, it is a term and condition of the Investment that the Executive enter into Agreement upon the terms and conditions herein this Amended and Restated Employment . contained. NOW. THEREFORE. in consideration ofthe premises and the mutual agreements hereinafter contained. the parties hereto hereby agree as followS: 1. i;ploymenl The Corporation shall employ E)(ecutive, and Executive shall serve the Corporation upon the terms and conditions hereinafter set fort. 2. TM. Subject to the terms and conditions hereinafter set fort, the term of Executlve's employment hereunder shall commence on the date hereof, (the "Effectve Date"). and shall continue unti the third anniversary of the Effective Date. unless earlier terminated pursuant to Sections 8, 9 or 10 herein (the "Initial EmploymantTerm't)". Unless earlier terminated pursuant to Sections 8, 9 or 10 the Inital Empioyment Term (and each one-year extension thereof pursuant to this sentence (each, an HExtended Empioyment Term")) may be extended upon the same terms and conditions as set fort herein for additional one year terms by mutual agreement of the Executive and the Corporation. no later than the ninety (90) days prior to the expiration of the Initial Employment Term (or Extended Employment Term, as applicable). The Initial Employment Term andge 1 all Pa K:\EA\SJO'ii~mtlTlagmkIiJJn-2~.wp Case 5:03-cv-05340-JF Document 243-20 Filed 12/26/2006 Page 43 of 50 Case 2:06-cv-13576-AC-SDP Document 3-1 Filed 08/10/2006 Page 42 of 50 Extended Employment Terms (ìf any) are hereinafter collectively referred to as the "Employment TermR. 3. tLutles and Extent of Servii:. During the Employment Term, Executive shall serve as CEO of the corporation, and shall devote substantially all of his business time, energy and skil to such employment. The Executive shall be vested with the dutíes and authority that are customarily delegated to a chief executive offcer of a corporation of similar size but which are in no event materially less than the responsibilties, duties and authority that Executive has as of the Effective Date. The Executive shall report only to, and be subject to the direction, of the Board of Directors of the corporation (the ~BoardR). The Executive shall also perform such other specific duties and services ofa senior executive nature commensurate with his position as the Board shall request, including, without limitation. serving as a senior offcer and/or director of any of the Corporation's subsidiaries. 4; Base Salary. Effective as ofthe commencement ofthe Corporation's current fiscal year and dLinng the Employment Term, the Corporation shall pay Executive a base salary rBase salaiy") øt a rate of Three Hundred Eighty-Five Thousand United States Dollars (U.S. $385,000) per annum, payabie in equal bi-weekly installments. Commencing as of January 1, 2001 and at the beginning of each calendar year thereafter during the Employment Term, the Base Salary shall automatically increase by Five Percent (6%) of the Base Salary then in effect The parties hereto hereby agree that the Executive's Base Salary shall be reviewed and may be modified by the corporation's Compensation Committee, on not less than an annual basis commencing as of January 1,2001: provided. however that in no event shall the Executive's Base Salary be reduced from the Executive's Base Salary as ofthe Effective Date

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