TMX Funding, Inc. v. Impero Technologies, Inc. et al

Filing 167

ORDER DENYING 148 MOTION FOR RECONSIDERATION. Signed by Judge Jeremy Fogel on 7/8/2010. (jflc2, COURT STAFF) (Filed on 7/9/2010)

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TMX Funding, Inc. v. Impero Technologies, Inc. et al Doc. 167 1 2 3 4 5 6 7 8 **E-Filed 7/9/10** IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 TMX FUNDING, INC., a Delaware corporation, Plaintiff, v. Case Number C 10-00202 JF (PVT) ORDER1 DENYING MOTION FOR RECONSIDERATION [re doc. no. 148] IMPERO TECHNOLOGIES, INC., A California Corporation; CLARENCE NICHOLAS STEIGELMAN, An Individual; RONALD J LESNIAK, An Individual; MITCHELL A HEINLEIN, An Individual; JOSEPH ZHANG, a.k.a. XIANGCHOU ZHANG, An Individual; MICHELLE DOVER, An Individual; And DAVID LESNIAK, An Individual, Defendants. On May 20, 2010, the Court modified the existing preliminary injunction (the "Injunction"), removing language prohibiting Defendants Ronald and David Lesniak (the "Lesniak Defendants") from retaining certain property and carrying out certain business activities that the Court deemed likely to constitute a misappropriation of trade secrets belonging This disposition is not designated for publication in the official reports. C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) Dockets.Justia.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to Plaintiff TMX Funding, Inc. ("TMX"). TMX moves for the reconsideration of that order, and the Lesniak Defendants oppose the motion. The Court has considered the moving and responding papers and the oral argument of counsel presented at the hearing on July 2, 2010. For the reasons discussed below, the motion will be denied, without prejudice. I. BACKGROUND On January 14, 2010, TMX filed the instant action against Defendants Impero Technologies, Inc. ("Impero"), Clarence Steigelman ("Steigelman"), Ronald Lesniak ("R. Lesniak"), Mitchell Heinlein ("Heinlein"), Joseph Zhang ("Zhang"), Michelle Dover ("Dover"), and David Lesniak ("D. Lesniak") (collectively, "Defendants"), asserting several claims for relief including misappropriation of trade secrets in violation of the California Uniform Trade Secrets Act ("UTSA"), Cal. Civ. Code 3426.1; interference with prospective economic advantage; breach of contract; unfair competition in violation of Cal. Bus. & Prof. Code 17200, et seq.; and conversion in violation of Cal. Penal Code 502(e). A. Factual history TMX purchased certain assets and collateral of Teledex, LLC ("Teledex"), a designer and manufacturer of hotel guest room telecommunication solutions, including wireless broadband internet, analog telephone, and voice-over internet protocol telephone systems. TMX acquired the assets and collateral of Teledex after the expiration of several forbearance agreements with respect to a loan on which Teledex was the borrower. R. Lesniak was the president and chief executive officer ("CEO") of Teledex, and D. Lesniak was a field service manager at Teledex. (R. Lesniak Decl. ISO Defs.' Opp'n to Premil. Injx. 2; D. Lesniak Decl. ISO Defs.' Opp'n to Prelim. Injx. 2.) In connection with the acquisition, GE Capital Corporation ("GECC") confiscated Teledex's assets, including its funds necessary to pay employee wages. R. Lesniak claims that he terminated all Teledex employees on December 8, 2009. (R. Lesniak Decl. ISO Defs.' Opp'n to Premil. Injx. 9.) R. Lesniak allowed the Teledex employees, including D. Lesniak, to retain possession of the Teledex laptop computers they had used while employed. (Id. at 10.) On December 9, 2009, the Santa Clara Superior Court appointed a receiver to take possession of Teledex's property, with the exception of 2 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 "property that relates to membership interests and equity of [Teledex]." (TMX's Complaint, Ex. A at 2:19-20.) The Superior Court also issued a restraining order against Teledex, its agents, officers, employees, and all persons acting under, in concert with, or for them, forbidding them to "[e]xpend, disburse, transfer, assign, sell, convey, devise, pledge, mortgage, create a security interest in, encumber, conceal or in any manner whatsoever deal in or dispose of the whole or any part of [Teledex's] assets without prior Court order." (TMX's Complaint, Ex. A at 9:18-20, 10:4-7.) Teledex's corporate counsel, Deborah Ludewig ("Ludewig") instructed her IT professional, Thomas Adler ("Adler"), to copy R. Lesniak's emails and desktop information, believing that it was "likely that communications between GECC and Teledex and company information would be located in those locations." (Ludewig Decl. 6.) Ludewig was concerned about the antitrust implications of TMX's purchase of Teledex's assets and was interested in preserving "any evidence relating to communications by and between GECC and TMX and information relating to the status of the Teledex entity at the time of the transaction." (Ludewig Decl. 4.) On December 15, 2009, 117 files were copied from R. Lesniak's desktop computer onto compact disks ("CDs"). (McKnight Decl. 9.) On December 16, 2009, an additional file from R. Lesniak's computer was copied onto a CD. (Id.) Examples of the names of the files copied onto the CDs include: Chart October Presentation Financial ComparisonBook1.xls Confidential follow-up.htm Confidentiality agreement(v4).DOC Confidentiality agreement(v5).DOC Purchase Order Dates.xls Sales By Category.rtf Terms and Conditions for a Purchase Order..htm [sic] Three Buckets Marketing.xls (Id.) R. Lesniak denies making these copies. (R. Lesniak Decl. ISO Lesniak Defs.' Opp'n to Mot. for Reconsideration, 2). Adler also denies having made these copies or having seen 3 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 anyone make them, (Adler Decl. 11), and Ludewig does not discuss the CDs in her declaration. It is undisputed, however, that Adler met R. Lesniak at Teledex's former facilities on December 16, 2009 in order to copy the files requested by Ludewig. (Adler Decl. 4.) When Adler arrived at 10:53 a.m., R. Lesniak already was there. (Id.) While he was copying the files, Adler noticed that the "CD burner program" on R. Lesniak's desktop computer was active. (Id. at 11.) He attempted to shut down the program, but he was unable to do so, even after referring to Google for information about the program. (Id.; see also McKnight Decl. 8 (noting that the following Google searches had been performed on R. Lesniak's desktop computer on December 16, 2009: Windows Files to Burn and Windows Remove Files to Burn.) .) Adler proceeded to copy R. Lesniak's emails and "desktop information" onto two external storage devices a Memorex TD Classic ("Memorex drive") and a Seagate FreeAgent ("Seagate drive") (Adler Decl. 5, 13; McKnight Decl. 4.) and then delivered the external storage devices to Ludewig. (Adler Dec. 13.) Ludewig claims that R. Lesniak never had access to the external storage devices. (Ludewig Decl. 10.) In February 2010, two months after resigning from Teledex, R. Lesniak began working for VTech Corporation ("VTech"), a competitor of Teledex. (R. Lesniak Decl. ISO Lesniak Defs.' Opp'n to Mot. for Reconsideration, 6-7.) During 2009, VTech and other entities had considered acquiring Teledex. (Id. at 6.) R. Lesniak prepared possible business plans for VTech and these other entities in connection with the potential acquisition. (Id.) D. Lesniak has been unemployed since TMX's acquisition of the assets of Teledex. (D. Lesniak Decl. ISO Lesniak Defs.' Opp'n to Mot. for Reconsideration, 4.) TMX appears to have been in possession of R. Lesniak's desktop computer since TMX acquired Teledex's assets in December 2009. TMX's expert began investigating the contents of this computer's hard drive in April 2010, (TMX's Mot. at 5:20-21), after which TMX discovered that certain files had been copied, as discussed above. D. Lesniak's laptop was in the possession of his attorneys shortly after the instant litigation began, and it was transferred to TMX in May 2010. (TMX's Mot. at 4:24-25.) TMX's expert began to investigate the laptop's 4 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 hard drive on May 18, 2010. (McKnight Decl. 10.) The expert discovered that the laptop contains local copies of D. Lesniak's Microsoft Outlook emails generated during his employment at Teledex and D. Lesniak accessed these files on February 6, 2010. (Id.) D. Lesniak denies having accessed his Teledex emails intentionally after he was terminated. (D. Lesniak Decl. ISO Lesniak Defs.' Opp'n to Mot. for Reconsideration, 2-3.) B. Procedural history On January 20, 2010, TMX moved for a temporary restraining order ("TRO") and an order to show cause why Defendants should not be enjoined from unlawfully taking, retaining and utilizing property and confidential, proprietary, and trade secret information allegedly belonging to TMX. On January 29, 2010, the Court denied the request for a TRO. On February 12, 2010, the Court held a hearing on TMX's motion for a preliminary injunction. The evidence proffered by TMX in support of the preliminary injunction included admissions by several Defendants that they had retained laptop computers belonging to TMX that likely contained confidential and proprietary information, and that on several occasions Defendants had utilized specific information obtained during their tenure at Teledex and not known generally by the public or others in the industry in order to communicate with and generate business from several TMX/Teledex customers and vendors. In an order dated March 18, 2010, the Court found that TMX had satisfied its evidentiary burden under California law for obtaining a preliminary injunction. The information contained on the missing laptops and in email communications between Defendants and TMX/Teledex clients and vendors met the definition for proprietary information or trade secret under the UTSA, and TMX demonstrated a strong likelihood of misappropriation based on several facts. In particular, the evidence showed that Defendants proffered sections of a Teledex contract that TMX has been unable to locate since its acquisition of Teledex and that Defendants had "picked up" the same thread of communications with Teledex clients and vendors containing content related to potential business deals and negotiations that they had managed during their employment with Teledex. TMX also demonstrated that the alleged misappropriation was hindering its ability to operate Teledex, even after it had taken steps during and after the 5 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 acquisition to preserve the assets it had acquired. The Court found that this showing sufficiently established a likelihood of irreparable harm, particularly in light of the presumption of irreparable harm applied by California courts when proprietary information is misappropriated. See Western Directories, Inc. v. Golden Guide Directories, Inc, 2009 WL 1625945, at *6 (N.D. Cal. June 8, 2009) (citing Lillge v. Verity, 2007 WL 2900568, at *7 (N.D. Cal. Oct. 2, 2007)).2 Finally, because Defendants claimed that they were not utilizing any proprietary information in their new business, the Court concluded that a narrowly tailored injunction would prevent further harm to TMX without unnecessarily infringing upon Defendants' right to work in their chosen field. On March 31, 2010, the Court issued the Injunction, enjoining Defendants from, among other things, failing to return TMX's confidential, proprietary, and trade secret information. Defendants filed a notice of appeal. On May 20, 2010, the Court modified the injunction, removing the Lesniak Defendants from its scope and clarifying the bounds of the protected information. For purposes of the Injunction, "Confidential, Proprietary, and/or Trade Secret Information" shall include but is not limited to the following information: (a) business plans and strategies of Teledex, including any strategic plans that Teledex developed for its future relationships, (b) "Proprietary Information" and customer information that Teledex sought to protect through its Proprietary Information and Inventions Agreement and Confidential Information and Policy Agreements, and (c) past communications and agreements between Teledex and customer or vendors. (Docket No. 141.) With respect to the Lesniak Defendants, the Court found that TMX had failed to present evidence that they posed any present or future threat to TMX's interests. (Docket No. 140 at 19:9-11.) Defendants subsequently dismissed their appeal. TMX argues that its newly-discovered evidence demonstrates that the Injunction should be modified once again to include the Lesniak Defendants. // // Defendants previously have challenge the validity of this presumption, which is discussed below. 6 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. Legal standard II. DISCUSSION A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 376 (2008). A party seeking a preliminary injunction must show, "[1] that [it] is likely to succeed on the merits, [2] that [it] is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in [its] favor, and [4] that an injunction is in the public interest." Indep. Living Ctr. of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644, 651 (9th Cir. 2009), quoting Winter, 129 S.Ct. at 374. "To the extent that our cases have suggested a lesser standard, they are no longer controlling, or even viable." Am. Truckin Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009). The issuance of a preliminary injunction is committed to the discretion of the district court. Indep. Living Ctr., 572 F.3d at 651. Generally, a court may exercise its "`inherent procedural power to reconsider, rescind, or modify an interlocutory order for cause seen by it to be sufficient.'" City of L.A. v. Santa Monica BayKeeper, 254 F.3d 882, 885 (9th Cir. 2001) (quoting Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. 1981)). However, Civ. L.R. 7-9 controls motions for reconsideration, such as the instant motion. Under Civ. L.R. 7-9(b)(1), TMX must show both that there is a material difference between the current facts and the facts presented to the court before entry of the order and that it has exercised reasonable diligence to discover such facts. B. Reasonable diligence under Civ. L.R. 7-9(b)(1) TMX did not gain possession of D. Lesniak's laptop until May 2010, and TMX began to investigate the contents of that laptop's hard drive on May 18, 2010. (McKnight Decl. 10.) Accordingly, TMX has demonstrated reasonable diligence in pursuing the facts regarding its claims against D. Lesniak. At the same time, TMX has suspected at least since January 14, 2010 that R. Lesniak engaged in the theft of proprietary information. TMX does not dispute that it has had possession of R. Lesniak's desktop computer since its acquisition of Teledex's assets in December 2009, yet TMX's expert did not begin reviewing the desktop computer's hard drive until May 2010. (McKnight Decl. 4.) TMX's expert was able to analyze the hard drive of D. 7 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Lesniak's laptop in a matter of weeks. While TMX submitted a significant amount of evidence in connection with its original motion for a preliminary injunction, (see Docket No. 13), TMX does not offer any explanation as to why it took months for its expert to begin reviewing the hard drive of R. Lesniak's desktop computer. C. Misappropriation of trade secrets 1. Likelihood of success on the merits Under the Uniform Trade Secrets Act ("UTSA"), "misappropriation" is the: "(1) [a]cquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) [d]isclosure or use of a trade secret of another without express or implied consent by a person who: (A) [u]sed improper means to acquire knowledge of the trade secret; or (B) [a]t the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: (i) [d]erived from or through a person who had utilized improper means to acquire it; (ii) [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (iii) [d]erived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use . . . ." Cal. Civ. Code 3426.1(b). a. TMX's claim against R. Lesniak The Injunction defines TMX's confidential, proprietary, and trade secret information as: (a) business plans and strategies of Teledex, including any strategic plans that Teledex developed for its future relationships, (b) "Proprietary Information" and customer information that Teledex sought to protect through its Proprietary Information and Inventions Agreement and Confidential Information and Policy Agreements, and (c) past communications and agreements between Teledex and customer or vendors." (Docket No. 141.) At least some of the information copied from R. Lesniak's desktop computer appears to come within this definition. Adler admits copying the email files of R. Lesniak, (Adler Decl. 8), who was the president and CEO of Teledex, which likely contain some discussions of TMX's business plans and strategies, protected customer information, and past communications between Teledex and its customers or vendors. R. Lesniak claims that it was not improper for him to acquire the trade secrets and that he was under no duty to maintain the secrecy of that information. The Superior Court's restraining 8 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 order excluded property that relates to the membership interests and equity of Teledex, and Ludewig contends that this exclusion covers evidence relating to the communications between GECC and TMX. Even accepting Ludewig's characterization as accurate, it is clear that Adler copied R. Lesniak's emails and other documents on the desktop computer indiscriminately. (Adler Decl. 8-10.) While Adler claims that he targeted documents that might contain communications and corporate information, he did not sort or review the documents. (Id. at 10.) Not all communications and corporate information could have related to membership interests and equity in Teledex, and many of them were likely to encompass confidential, proprietary, and trade secret information as defined by the Injunction. Ludewig asserts that she was directed by "the authorities" to preserve "any evidence relating to communications by and between GECC and TMX and information relating to the status of the Teledex entity at the time of the transaction." (Ludewig Decl. 4.) While she claims that she contacted the United States Department of Justice (the "DOJ"), the California Attorney General's Office, and "several other federal and state government agencies, (Ludewig Decl. 4), she does not identify which specific authority instructed her to preserve this information. Ludewig does refer to a Civil Investigative Demand ("CID") from the DOJ, seeking "all documents relating to, and communications between GE Capital and Teledex, but not limited to communications relating to Teledex debt owed to GE Capital and any acquisition of Teledex debt, assets, or equity by any person." (Ludewig Decl. Ex. A.) However, the CID was dated April 21, 2010, months after Adler copied the Teledex files. Moreover, Ludewig does not claim that she received a court order allowing her to copy Teledex documents other than those relating to the membership interests and equity of Teledex. R. Lesniak claims that he did not actually acquire the files because he never had access to the external storage devices used by Adler. Adler declares that he delivered the storage devices to "DJL Corporate Law," (Adler Decl. 13), which is Ludewig's law firm, (see Ludewig Decl. Ex. A (letter from the DOJ to Deborah J. Ludewig, DJL Corporate Law).) However, the address listed for DJL Corporate Law, 17349 Parkside Court, Monte Sereno, California 95030, (Ludewig Decl. Ex. A), also is the address of R. Lesniak, (see Dwyer Decl. Ex. 2 (results of an advanced 9 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 people search, showing R. Lesniak's address).) Ludewig claims that she delivered the Seagate device to the DOJ, but the DOJ did not confirm receipt of the hard drive until June 16, 2010. (Ludewig Decl. Ex. B.) Thus, it is likely that R. Lesniak at least had access to the Seagate device from December 16, 2010 to June 2010. Moreover, Ludewig provides no information as to the current whereabouts of the Memorex device, which presumably remains at the shared address of Ludewig and R. Lesniak. R. Lesniak also has not provided a credible explanation for the files copied from his desktop computer to CDs on December 15 and 16, 2009. While R. Lesniak claims that he did not copy these files, his computer is password protected, (Ludewig Decl. 6), Adler noticed that the CD burner program was active when he arrived at the former Teledex facility on December 16, 2009 at 10:53 a.m., (Adler Decl. 4), and R. Lesniak already was at the facility when Adler arrived. (Id.) At least some of the files copied to the CDs appear to be information protected by the Injunction. Accordingly, TMX has demonstrated that it is likely to succeed on the merits of its claim that R. Lesniak has misappropriated its trade secrets. b. TMX's claim against D. Lesniak TMX alleges that D. Lesniak's laptop contained local copies of his Teledex emails. D. Lesniak was a field service manager at Teledex. Neither TMX nor D. Lesniak attempts to explain the job functions of a field service manager. Thus, it is not clear necessarily that D. Lesniak's email would include: (a) business plans and strategies of Teledex, including any strategic plans that Teledex developed for its future relationships, (b) "Proprietary Information" and customer information that Teledex sought to protect through its Proprietary Information and Inventions Agreement and Confidential Information and Policy Agreements, and (c) past communications and agreements between Teledex and customer or vendors." Accordingly, TMX has not demonstrated that it is likely to succeed on the merits of its claim that D. Lesniak has misappropriated confidential, proprietary, or trade secret information. 2. Irreparable harm In its original order granting injunctive relief, the Court observed that irreparable harm may be presumed upon a showing of the likelihood of success on the merits of a trade-secretmisappropriation claim. See Western Directories, 2009 WL 1625945 at *6 (presuming irreparable harm following a conclusion that the plaintiffs were likely to succeed on the merits of 10 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a trade secret infringement claim). The continuing viability of this presumption appeared to be in question following Winter and the Supreme Court's prior decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006) (concluding that district courts must apply traditional principles of equity including assessing the likelihood of irreparable harm when applying a permanent injunction in the context of patent infringement). Post Winter, the Ninth Circuit has reaffirmed the ability of a district court to presume irreparable harm upon a showing of the likelihood of success on the merits of a trademark infringement claim. Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir. 2009) (concluding, in a trademark infringement action, that "[b]ecause the court found a likelihood of success on the merits, it reasonably presumed irreparable injury."). While the Ninth Circuit has not addressed the presumption of harm in a trade secret action, it follows reasonably that the presumption remains valid in this circuit following Marlyn Nutraceuticals. Nonetheless, while the presumption of irreparable harm was informative, the Court issued the original Injunction in part based on an actual showing of the likelihood of irreparable harm. TMX has not demonstrated how it will be harmed irreparably by D. Lesniak's previous access to his Teledex emails. D. Lesniak no longer possesses the laptop, and Teledex has not shown that D. Lesniak possesses a copy of these emails or is in any position to use the information in the emails to the detriment of TMX. The evidence is much closer with respect to R. Lesniak. TMX contends that R. Lesniak is using or plans to use its trade secret information for the benefit of his current employer, VTech. However, although it claims that R. Lesniak was creating VTech business plans while still employed at Teledex, TMX has not provided a copy of such a business plan to the Court, nor does its expert identify documents related to VTech on the hard drive of R. Lesniak's desktop computer. R. Lesniak admits preparing documents in connection with VTech's inquiries into acquiring Teledex, but TMX does not explain how these documents present the possibility of irreparable harm. TMX alleges conclusorily that VTech plans to "launch a new line of telecommunication products and services to the hospitality industry by using Teledex confidential, proprietary, and trade secret information that it obtained from [R. Lesniak]." 11 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (TMX's Mot. At 2:2-3.) At oral argument, TMX represented that VTech entered the hospitality market only after hiring R. Lesniak. However, TMX does not identify the new products or services, much less explain how Teledex's protected information is utilized in them. While R. Lesniak may possess TMX's trade secret information in the form of the CDs and the Memorex device, TMX has not shown that R. Lesniak is likely to use that information in a way that would result in present or future harm to TMX's interests. When he was hired by VTech, R. Lesniak signed an agreement stating that he would not disclose or use any Teledex confidential information in his work for VTech. (Delany Decl. 7 and Ex. 1.) VTech already has demonstrated its willingness to enforce the agreement by suspending R. Lesniak after the Court issued the original injunction. (Id. at 8.) The Court previously granted the Injunction upon TMX's showing that other Defendants, after they were terminated from Teledex, had resumed conversations with Teledex customers by using email chains they started while working at Teledex. TMX also offered concrete evidence that other Defendants possessed copies of contracts between Teledex and Accor, a Teledex customer, and signed a contract with Accor a mere ten days after they were terminated from Teledex. In contrast, in the context of the instant motion for consideration, TMX has demonstrated only that VTech has hired a person with experience in the hospitality industry and then entered the hospitality industry. This is insufficient to demonstrate the likelihood of irreparable harm. While Marlyn Nutraceuticals apparently permits the Court to presume irreparable harm, the Court concludes that the application of the presumption against R. Lesniak is unwarranted under the circumstances.3 // See Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1220 (9th Cir. 1987) (noting that "[o]nce the plaintiff in an infringement action has established a likelihood of confusion, it is ordinarily presumed that the plaintiff will suffer irreparable harm if injunctive relief does not issue," but declining to apply the presumption based on the record in that case because the plaintiff "ha[d] made no independent showing of irreparable harm.") 3 12 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3. Balance of equities and the public interest The balance of equities also tips in favor of the Lesniak Defendants. TMX has not shown how an injunction against the Lesniak Defendants would create significant benefit to it, while the livelihood of the Lesniak Defendants would be severely impacted by once again making them subject to the Injunction. Nick Delany, the president of VTech, declares that he suspended R. Lesniak from employment after learning that the original Injunction included him. (Delany Decl. 8.) R. Lesniak was reinstated only after the Injunction was modified, (id.), and it is likely that R. Lesniak would be suspended if the Injunction once again was to include him. Similarly, though D. Lesniak is unemployed, his employment prospects would be severely damaged if he again was subject to the Injunction. While the public interest favors the protection of legitimate trade secrets, "public policy and natural justice require that equity should also be solicitous for the right inherent in all people . . . to follow any of the common occupations of life." Continental Car-NaVar Corp. v. Moseley, 24 Cal. 2d 104, 110 (1944). C. TMX's remaining claims TMX asserts several claims for relief, including breach of contract; unfair competition in violation of Cal. Bus. & Prof. Code 17200, et seq.; and conversion in violation of Cal. Penal Code 502(e). Regardless of its likelihood of success on the merits of these claims, TMX has not demonstrated that the Lesniak Defendants pose any present or future threat of irreparable harm to TMX's interests in connection with these claims, and no authority exists for presuming irreparable harm in the context of the claims. D. Lesniak has returned the laptop computer, and TMX has not presented evidence that he threatens harm to its interests, given that he is not competing currently against TMX. Nor, as discussed above, has TMX shown that R. Lesniak poses any present or future threat to its interests. While it is likely that R. Lesniak has at least confidential information that belongs to TMX, TMX has not shown that R. Lesniak is using or plans to use that information. Under Winter, a party seeking a preliminary injunction must show that it is likely to suffer irreparable harm absent the entry of a preliminary injunction. See Am. Truckin, 559 F.3d at 1052. // 13 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DATED: 7/8/2010 IT IS SO ORDERED III. CONCLUSION While TMX has demonstrated its likelihood of success on the merits with respect to its claim that R. Lesniak has misappropriated trade secrets, its showing of irreparable harm as a result of R. Lesniak's alleged wrongdoing is factually deficient. With respect to its claims against D. Lesniak, TMX has demonstrated neither a likelihood of success nor a likelihood of irreparable harm. Accordingly, the motion will be denied without prejudice. TMX may move for reconsideration if it obtains more specific evidence with respect to its claims. TMX must show that it exercised reasonable diligence to discover such evidence. JEREMY FOGEL United States District Judge 14 C a s e Number C 10-00202 JF O R D E R DENYING MOTION FOR RECONSIDERATION (J FE X 1 )

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