Arctic Energy Services, LLC v. Neal et al
Filing
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PRELIMINARY INJUNCTION ORDER by Judge Philip A. Brimmer on 02/22/2018. ORDERED that this order will remain in effect pending final disposition of plaintiff's lawsuit or further order of this Court. (sphil, ) Modified on 2/22/2018 to add docket text. (sphil, ).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 18-cv-00108-PAB-KLM
ARCTIC ENERGY SERVICES, LLC,
Plaintiff,
v.
DUSTIN NEAL,
DUSTIN AILPORT, and
WATER WAY SOLUTIONS, LLC,
Defendants.
PRELIMINARY INJUNCTION
This matter is before the Court on Plaintiff’s Motion for a Preliminary Injunction
[Docket No. 11]. The Court has jurisdiction pursuant to 28 U.S.C. § 1331 and 28
U.S.C. § 1367. On February 20, 2018, the Court held a hearing on plaintiff’s motion. At
the hearing, the Court made findings of fact that are incorporated herein by reference.
See Docket No. 44 at 3.
Plaintiff Arctic Energy Services, LLC is in the business of providing various
services to oil and gas companies, including flow back, production well testing, water
transfer services, and equipment rentals. Docket No. 1 at 2, ¶ 4. On January 12, 2018,
plaintiff filed a complaint asserting nine claims for relief. Docket No. 1. Plaintiff’s first
and second claims for relief allege that defendants Dustin Ailport, Dustin Neal, and
Water Way Solutions, LLC violated the federal Defendant Trade Secrets Act (“DTSA”),
18 U.S.C. § 1839(3) and the Colorado Uniform Trade Secrets Act (“CUTSA”), Colo.
Rev. Stat. § 7-74-101 et seq.1 by unlawfully acquiring and using plaintiff’s trade secrets.
Docket No. 1 at 23-27. On January 19, 2018, plaintiff filed a motion for a preliminary
injunction seeking to enjoin defendants from: (1) disclosing, using, and/or otherwise
making publicly available any documents and information they obtained as a result of
their employment with plaintiff; (2) destroying, erasing, or otherwise making unavailable
any evidence concerning the events alleged in the complaint; and (3) accepting any
business from a customer who was a customer of plaintiff during Mr. Neal’s and Mr.
Ailport’s employment with plaintiff. Docket No. 11-1 at 1-2.
To succeed on a motion for a preliminary injunction, the moving party must show
(1) a likelihood of success on the merits; (2) a likelihood that the movant will suffer
irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips
in the movant’s favor; and (4) that the injunction is in the public interest. RoDa Drilling
Co. v. Siegal, 552 F.3d 1203, 1208 (10th Cir. 2009) (citing Winter v. Natural Resources
Defense Council, Inc., 555 U.S. 7, 20 (2008)); see Little v. Jones, 607 F.3d 1245, 1251
(10th Cir. 2010)). “[B]ecause a preliminary injunction is an extraordinary remedy, the
right to relief must be clear and unequivocal.” Beltronics USA, Inc. v. Midwest Inventory
Distribution, LLC, 562 F.3d 1067, 1070 (10th Cir. 2009) (quoting Greater Yellowstone
Coalition v. Flowers, 321 F.3d 1250, 1256 (10th Cir. 2003)) (internal quotation marks
omitted). Granting such “drastic relief,” United States ex rel. Citizen Band Potawatomi
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The Court notes that certain employment and confidentiality agreements signed
by Mr. Ailport state that the terms of those agreements “shall be governed by,
construed and enforced in accordance with” Wyoming law. Ex. 11 at 3. This raises the
question of whether Wyoming law, rather than the CUTSA, governs Mr. Ailport’s duties
in regard to trade secrets. Defendants, however, do not challenge the applicability of
the CUTSA.
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Indian Tribe of Oklahoma v. Enter. Mgmt. Consultants, Inc., 883 F.2d 886, 888-89 (10th
Cir. 1989), is the “exception rather than the rule.” GTE Corp. v. Williams, 731 F.2d 676,
678 (10th Cir. 1984).
To prevail on a claim for misappropriation of trade secrets under Colorado law, a
plaintiff must show: “(i) that he or she possessed a valid trade secret, (ii) that the trade
secret was disclosed or used without consent, and (iii) that the defendant knew, or
should have known, that the trade secret was acquired by improper means.” Gates
Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 847 (10th Cir. 1993). The CUTSA
defines “trade secret” as “the whole or any portion or phase of any scientific or technical
information, design, process, procedure, formula, improvement, confidential business or
financial information, listing of names, addresses, or telephone numbers, or other
information relating to any business or profession which is secret and of value.” Colo.
Rev. Stat. § 7-74-102(4). To constitute a trade secret, “the owner thereof must have
taken measures to prevent the secret from becoming available to persons other than
those selected by the owner to have access thereto for limited purposes.” Id.
Under Colorado law, “[w]hat constitutes a ‘trade secret’ is a question of fact for
the trial court.” Doubleclick Inc. v. Paikin, 402 F. Supp. 2d 1251, 1257 (D. Colo. 2005).
Courts look to several factors to make this determination, including:
(1) the extent to which the information is known outside the business, (2)
the extent to which it is known to those inside the business, i.e., by the
employees[,] (3) the precautions taken by the holder of the trade secret to
guard the secrecy of the information, (4) the savings effected and the
value to the holder in having the information as against competitors, (5)
the amount of effort or money expended in obtaining and developing the
information, and (6) the amount of time and expense it would take for
others to acquire and duplicate the information.
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Id. (internal quotation marks omitted). The Tenth Circuit has held that, under Colorado
law, “a trade secret can exist in a combination of characteristics, each of which,
considered separately, is in the public domain, but, taken together, may yield a
competitive advantage that results in a protectable trade secret.” Harvey Barnett, Inc.
v. Shidler, 338 F.3d 1125, 1130 (10th Cir. 2003).
Similar to the requirements under Colorado law, a plaintiff asserting a claim for
misappropriation of trade secrets under the DTSA must establish: (1) the existence of a
trade secret that relates to a product or service used in, or intended for use in, interstate
or foreign commerce; (2) the acquisition of the trade secret, or the use or disclosure of
the trade secret without consent; and (3) the person acquiring, using, or disclosing the
trade secret knew or had reason to know that the trade secret was acquired by
improper means. See 18 U.S.C. §1836(b)(1); 18 U.S.C. § 1839; Ultradent Prods. Inc.
v. Spectrum Solutions LLC, 2018 WL 324868, at *2 (D. Utah Jan. 8, 2018); Blue Star
Land Servs. LLC v. Coleman, 2017 WL 6210901, at *4 (W.D. Okla. Dec. 8, 2017). Like
the CUTSA, the DTSA defines “trade secret” broadly to include “all forms and types of
financial, business, scientific, technical, economic, or engineering information” so long
as “the owner thereof has taken reasonable measures to keep such information secret”
and “the information derives independent economic value, actual or potential, from not
being generally known to,” or ascertainable by, another person. 18 U.S.C. § 1839(3).
At the hearing, the Court found that plaintiff demonstrated a likelihood of success
on the merits of its state and federal trade secrets claims. The Court determined that
the following information belonging to plaintiff constituted valid trade secrets: price lists,
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quotes, invoices, and master service agreements. Andrea Moncayo, plaintiff’s
information technology manager, testified that plaintiff employed various measures to
protect such information, including confidentiality warnings in company emails,
employee nondisclosure agreements, restricted access to offices containing
confidential information, and restricted access to confidential information on the
company server. An Employee Confidentiality and Unfair Competition Agreement
signed by Mr. Ailport in 2010 and submitted as plaintiff’s Exhibit 10 provides that the
“Employee shall treat as confidential and shall not, directly or indirectly, use,
disseminate, disclose, publish, or otherwise make available to any person, firm,
corporation, unincorporated association or other entity any Confidential and Proprietary
Information.” The agreement defines “Confidential and Proprietary Information” as “any
and all information disclosed or made available to the Employee or known by the
Employee as a direct or indirect consequence of or through his employment by the
Company and not generally known in the industry . . . , including . . . customers and
brokers, marketing plans, product development, plans, publications, equipment, and
financial information.” At the hearing, the Court found that price lists, quotes, invoices,
and master service agreements derived independent economic value to Arctic from
being kept secret. For example, Tracy Turner, Chief Executive Officer for Arctic,
testified that a company’s pricing information can be used by other companies to gain a
competitive advantage in the bidding process. The Court also determined that the price
lists, quotes, invoices, and master service agreements “relate[] to a product or service
used in, or intended for use in, interstate or foreign commerce,” 18 U.S.C. § 1836(b)(1),
given Mr. Turner’s testimony that Arctic operates in at least four states.
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As to the second element of the trade secrets claims, the Court found that
defendants acquired trade secrets belonging to plaintiff. At the hearing, Mr. Ailport
testified that, following his separation from Arctic, he retained four flash drives that
contained information downloaded from Arctic’s computers. Defendants’ Exhibit J4
showed that this information included customer price sheets and quotes. Plaintiff’s
Exhibit 15, which Ms. Moncayo testified was a screenshot of Mr. Ailport’s office
computer in Glenrock, Wyoming, showed a number of Arctic documents, including price
sheets, quotes, and master service agreements, were moved or downloaded onto
removable media. Regarding Mr. Neal, plaintiff introduced two exhibits – Exhibit 1 and
Exhibit 16 – showing that (1) Mr. Neal, while still an employee of Arctic, sent a Great
Western price sheet and a Synergy quote via his personal email account to Mr. Ailport
after Mr. Ailport had left Arctic, and (2) Mr. Neal removed a number of files, including
price sheets and customer quotes, from his Arctic One Drive account before leaving
Arctic. Brandon Buckovich, who succeeded Mr. Neal as plaintiff’s district manager for
Colorado, testified that Mr. Neal took a flash drive that he said belonged to him on his
last day of work for Arctic. The Court concludes from this evidence that Mr. Neal
downloaded and retained confidential information belonging to Arctic immediately
before he left Arctic.
Finally, the Court found that both Mr. Ailport and Mr. Neal knew that their
acquisition of Arctic’s trade secrets was improper. In making this finding as to Mr. Neal,
the Court relied on Exhibit 1 and the testimony of Mr. Buckovich. Mr. Buckovich
testified that, on the day Mr. Neal resigned, Mr. Neal referred Mr. Buckovich to another
Arctic employee for information about customer price sheets. When Mr. Buckovich
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talked to that employee, it turned out the employee knew nothing about the price
sheets. Mr. Buckovich then looked for the price sheets on Arctic’s server and
discovered they were missing. The Court concludes from these facts that Mr. Neal was
purposefully deceptive about his acquisition of plaintiff’s price sheets.
As to Mr. Ailport, the Court found that he was aware of Arctic’s policies
concerning the return and nondisclosure of confidential information. Exhibits 10
through 12 show that Mr. Ailport signed various agreements containing confidentiality
obligations that defined the types of information considered confidential. Mr. Ailport
testified that he downloaded a number of Arctic files in November 2017 while
attempting to copy personal files from his work computer. However, he also testified
that he downloaded the Arctic files because he wanted to protect them from other
employees in the building. Based on this testimony, the Court found that Mr. Ailport’s
downloading activities were not simply an attempt to preserve personal information, but
rather an attempt to acquire Arctic documents for purposes of gaining a competitive
advantage over Arctic. This conclusion was further supported by Exhibit 1, which
shows that Mr. Ailport received confidential Arctic information from a current Arctic
employee, Mr. Neal, following Mr. Ailport’s separation from the company.
In addition to finding a likelihood of success on the merits, the Court found that
plaintiff made a showing of irreparable harm. “To constitute irreparable harm, an injury
must be certain, great, actual and not theoretical.” Heideman v. South Salt Lake City,
348 F.3d 1182, 1189 (10th Cir. 2003). Mr. Ailport testif ied that he plugged the flash
drives containing Arctic files into his home computer and Microsoft Surface tablet to
perform work. It is thus reasonable to infer that information from the flash drives was
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transferred to Mr. Ailport’s home devices. Given Mr. Turner’s testimony regarding the
importance of pricing information to Arctic’s ability to maintain its competitive advantage
and Mr. Ailport’s improper acquisition of plaintiff’s confidential information, the Court
found that the potential use of such information to compete against plaintiff constitutes
irreparable harm.
The Court found that the balance of equities tips in favor of plaintiff. Plaintiff has
reason to expect that its employees will follow company policy in protecting its trade
secrets. By comparison, defendants do not have any legitimate interest in using
improperly acquired confidential information.
Finally, the Court found that a limited preliminary injunction is in the public
interest. Public policy supports the protection of trade secrets, and there is no
legitimate public interest in a company using confidential information to unfairly
compete with another company. As a result, the Court found that all four factors for
issuance of a preliminary injunction weighed in favor of granting injunctive relief.
Pursuant to Fed. R. Civ. P. 65(c), the Court required that plaintiff post a
$20,000.00 bond.
For the foregoing reasons and those stated in the Court’s oral ruling, it is
ORDERED that Plaintiff’s Motion for a Preliminary Injunction [Docket No. 11] is
GRANTED. It is further
ORDERED that defendants are enjoined from deleting, destroying, erasing, or
otherwise making unavailable for further proceedings in this matter any business
information of plaintiff that is in defendants’ control, including any trade secrets,
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proprietary information, and computer information. “Computer information” shall
include, among other things, the four flash drives retained by Mr. Ailport and any
devices that those flash drives were plugged into. It is further
ORDERED that defendants are enjoined from using, disclosing, or otherwise
making publicly available for any purpose confidential information, in the form of price
lists, quotes, invoices, and master service agreements, that they obtained as a result of
Mr. Ailport’s and Mr. Neal’s employment with plaintiff. It is further
ORDERED that defendants are enjoined from soliciting any current client of
plaintiff through the use of confidential information belonging to plaintiff. It is further
ORDERED that Mr. Ailport shall direct his New York counsel (1) to make exact
copies of the four flash drives discussed in this order and (2) to provide those copies to
his counsel in this case. Such copies shall include any metadata contained on the flash
drives so that a forensic analysis can be performed. It is further
ORDERED that this order will remain in effect pending final disposition of
plaintiff’s lawsuit or further order of this Court.
DATED February 22, 2018.
BY THE COURT:
s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
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