The Standard Register Company v. Lynden Keala, et al.
Filing
44
ORDER DENYING PLAINTIFFS' MOTION FOR A TEMPORARY RESTRAINING ORDER re: 43 . Signed by JUDGE J. MICHAEL SEABRIGHT on 7/11/2014. ~ Written Order follows hearing on motion held on 7/11/2014. Minutes of hearing: (43) ~ (afc) CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
THE STANDARD REGISTER
) CIVIL NO. 14-00291 JMS-RLP
COMPANY, AND WORKFLOWONE )
LLC,
) ORDER DENYING PLAINTIFFS’
) MOTION FOR A TEMPORARY
Plaintiffs,
) RESTRAINING ORDER
)
vs.
)
)
LYNDEN KEALA, JAXCINE
)
KAULILI-GUZON, SHARON
)
BROWN-HENRY, AND AMERICAN )
BUSINESS FORMS, INC. dba
)
AMERICAN SOLUTIONS FOR
)
BUSINESS,
)
)
Defendants.
)
_______________________________ )
ORDER DENYING PLAINTIFFS’ MOTION FOR A TEMPORARY
RESTRAINING ORDER
I. INTRODUCTION
On June 25, 2014, Plaintiffs the Standard Register Company and
WorkflowOne LLC (collectively “WorkflowOne” or “Plaintiffs”)1 filed this action
against former employees Lynden Keala (“Keala”), Jaxcine Kaulili-Guzon
1
This action was originally filed naming as Plaintiffs the Standard Register Company,
Relizon Company, and Workflow Solutions LLC. On July 9, 2014, Plaintiffs filed an Amended
Complaint correcting pleading deficiencies regarding citizenship of the parties and naming the
current Plaintiffs. Doc. No. 32. The Amended Complaint reflects that WorfklowOne LLC
purchased the assets of Relizon Company and Workflow Solutions LLC, which had both
declared bankruptcy.
(“Kaulili-Guzon”), and Sharon Brown-Henry (“Brown-Henry”) (collectively, the
“Individual Defendants”), as well as their current employer American Business
Forms, Inc. dba American Solutions for Business (“ASB”), (collectively, together,
“Defendants”). WorkflowOne alleges that the Individual Defendants violated their
employment agreements with WorkflowOne or its predecessor when they went to
work for ASB and solicited WorkflowOne’s clients and/or disclosed
WorkflowOne’s trade secrets. Plaintiffs assert claims against the Individual
Defendants for breach of contract, and claims against all Defendants for
misappropriation of trade secrets and tortious interference with business relations.
Currently before the court is WorkflowOne’s Motion for Temporary
Restraining Order (“Motion for TRO”), requesting that the court enter an order
prohibiting Defendants from (1) breaching the non-solicitation and non-disclosure
provisions of the Individual Defendants’ agreements with WorkflowOne;
(2) misappropriating, disclosing, or otherwise using WorkflowOne’s trade secrets;
and (3) tortiously interfering with WorkflowOne’s valid business relationships and
contracts. A status conference was held on July 1, 2014. Plaintiff submitted a
supplemental brief on July 3, 2014, Doc. No. 19, Defendants submitted
Oppositions on July 7, 2014, Doc. Nos. 24, 28, and Plaintiffs submitted a Reply on
July 9, 2014. Doc. No. 38. A hearing was held on July 11, 2014. Based on the
2
parties’ briefing, the arguments made, and the entire record before the court, the
court DENIES the Motion for TRO.
II. FACTUAL BACKGROUND
A.
The Individual Defendants’ Employment With Plaintiffs
WorkflowOne is in the business of providing print, print-related, and
promotional marketing solutions, including print and promotional marketing and
distribution of promotional products. Doc. No. 2-2, Byron Riddle Decl. ¶ 3.
Each of the Individual Defendants was employed by WorkflowOne,
with Keala and Brown-Henry employed as Sales Representatives, and KauliliGuzon employed as a Customer Service Representative. Id. ¶¶ 6-7. Keala first
started worked for Relizon in the 1980s-1990s, left in 2000, and returned in 2005.
Doc. No. 28-1, Keala Decl. ¶ 1. Kaulili-Guzon started working for WorkflowOne
in August 2010, Doc. No. 28-2, Kaulili-Guzon Decl. ¶ 1, and Brown-Henry has
worked for WorkflowOne and/or its related entities for many years. Doc. No. 283, Brown-Henry Decl. ¶ 1.
Each of the Individual Defendants signed Agreements with
WorkflowOne and/or its related entities in which they agreed (1) not to disclose the
confidential trade secrets of WorkflowOne; and (2) for a period of twelve months
after their last day of employment with WorkflowOne, not solicit business
3
competitive to WorkflowOne from any customers whom they solicited or accepted
business during the final twelve months of their employment with WorkflowOne.
See Doc. Nos. 2-3 - 2-5, Pls.’ Exs. A-C. Kaulili-Guzon’s and Brown-Henry’s
agreements include the further restriction that they not only refrain from soliciting,
but also refrain from accepting, business from WorkflowOne customers. See Doc.
Nos. 2-4 - 2-5, Pls.’ Exs. B-C.
Keala signed his agreement on January 10, 2005, Doc. No. 2-3, Pls.’
Ex. A, and Kaulili-Guzon and Brown-Henry both signed their agreements after
they had been working for a period of time at WorkflowOne. See Doc. Nos. 2-4 2-5, Pls.’ Exs. B-C.
B.
WorkflowOne’s Alleged Trade Secrets
WorkflowOne asserts that it has made great efforts to develop
customer goodwill, and has expended significant resources to train and develop its
employees in business strategies and sales techniques to provide quality products
and foster customer goodwill and loyalty. Doc. No. 2-2, Riddle Decl. ¶¶ 4-5.
WorkflowOne further asserts that it has taken proactive steps to maintain the
secrecy of its customer lists and pricing information, and that this information is
not generally known to the public. Id. ¶ 5. According to WorkflowOne, the
Individual Defendants’ positions gave them direct and significant access to
4
confidential information and proprietary trade secrets critical to the success of
WorkflowOne’s business, including customer lists, pricing information, and other
confidential information related to company operations and financing. Id. ¶¶ 8-9.
Indeed, Keala’s agreement states that Keala acknowledges that his employer’s
trade secrets include, among other things, the names and contact information of its
customers, as well as sales, marketing, and product development plans, price lists,
market forecasts, and sales volumes. Doc. No. 2-3, Pls.’ Ex. A. Brown-Henry and
Kaulili-Guzon’s agreements similarly recognize that confidential and/or
proprietary information includes “any information shared with the Employee by
WorkflowOne’s management, regarding WorkflowOne’s operations, business,
employees, strategies, finances and/or customers, whether or not developed by
Employee . . . .” Doc. No. 2-4 - 2-5, Pls.’ Exs. A-B.
In contrast to WorkflowOne’s assertions, Keala and Brown-Henry
assert that (1) nothing was secret about their work at WorkflowOne; (2) they were
never told that information regarding their customers, sales, or products needed to
be kept confidential; (3) there were no special or secret sales methods at
WorkflowOne; (4) although WorkflowOne provided some sales training, it was of
no value to them and they did not use it in their work; and (5) prices and products
were not secret. Doc. No. 28-1, Keala Decl. ¶¶ 10-11; Doc. No. 28-3, Brown5
Henry Decl. ¶¶ 6-8.
C.
The Individual Defendants’ Subsequent Employment at ASB
Brown-Henry left her employment with WorkflowOne on January 27,
2014, Doc. No. 2-2, Riddle Decl. ¶ 15, and Kaulili-Guzon and Keala left on
February 1, 2014. Id. ¶ 16. Each of these employees were subsequently hired by
ASB which, similar to WorkflowOne, distributes print, promotional products,
office supplies, eCommerce, and marketing solutions. See Doc. No. 24-1, Kathryn
Hallstrom Decl. ¶ 2. ASB hired the Individual Defendants for its Honolulu office,
which it had opened earlier in 2014. Id. In particular, ASB hired (1) KauliliGuzon as Office Manager and Director of Customer Service, Hawaii, effective
February 3, 2014, (2) Keala as Sales Associate, Hawaii, effective February 11,
2014, and (3) Brown-Henry as Sales Associate, Hawaii, effective April 21, 2014.
Doc. No. 24-1, Kathryn Hallstrom Decl. ¶¶ 5-7.
According to Plaintiffs, the Individual Defendants have been
soliciting Plaintiffs’ customers on behalf of ASB in violation of the provisions in
their employment agreements that they not solicit WorkflowOne customers whom
they solicited and/or accepted business on behalf of WorkflowOne during the final
twelve months of their employment with WorkflowOne. Doc. No. 2-2, Riddle
Decl. ¶ 18. As to particular customers, WorkflowOne asserts that:
6
•
Keala solicited and accepted business from Blood Bank of Hawaii, as shown
by a March 12, 2014 email from Marc Cooper, Supply Specialist for the
Blood Bank of Hawaii, stating that Cooper would like to vet ASB for future
business and that ASB’s sales representative is Keala, id. at Ex. 1;
•
“we have obtained evidence” from an Old Republic Title & Escrow
employee that Keala and Kaulili-Guzon solicited and/or accepted its
business, as shown by a June 18, 2014 email inquiring whether
WorkflowOne can match prices on certain office supplies, id. at Ex. 2;
•
WorkflowOne has “obtained evidence” and/or “has evidence” (whether from
un-named customer employees or some other unidentified source), that the
Individual Defendants solicited and/or accepted business from Title
Guarantee, BEI, Maui Divers, and Oceanic, id. ¶¶ 21, 22, 24, 25; and
•
WorkflowOne has lost other customers, including Outrigger, Gentry Homes,
and Golf Concepts, which “upon information and belief” the Individual
Defendants solicited in violation of their agreements. Id. ¶ 26.
In contrast to Plaintiffs’ assertions, Keala asserts that he never
solicited his WorkflowOne customers after he began working for ASB, and that the
customers instead called him. Doc. No. 28-1, Keala Decl. ¶ 19. According to
Keala, after Kaulili-Guzon left WorkflowOne, WorkflowOne moved customer
7
service for Hawaii customers to the mainland, and WorkflowOne customers
subsequently complained to Keala that their WorkflowOne customer service
representative was not responsive. Id. ¶ 15. Contacting the Individual Defendants
was not difficult -- WorkflowOne required Keala and Brown-Henry to use their
personal cell phones for their work. Id. ¶ 12; Doc. No. 28-1, Brown-Henry Decl.
¶ 3. Like Keala, Brown-Henry asserts that “I never solicited my customers from
WorkflowOne after I began working for [ASB]. Customers always called me
first.” Doc. No. 28-3, Brown-Henry Decl. ¶ 10.
Kaulili-Guzon similarly asserts that she did not solicit any customers
from WorkflowOne after she began working for ASB; indeed, her duties at
WorkflowOne involved clerical work as a customer sales representative and she
was not trained in sales. Doc. No. 28-2, Kaulili-Guzon Decl. ¶¶ 1, 4. At ASB, she
similarly provides customer service, has no customer or account responsibilities,
and customers do not place orders with her. Doc. No. 28-2, Kaulili-Guzon Decl.
¶¶ 7, 8.
III. STANDARD OF REVIEW
A TRO may issue only if the plaintiff meets its burden under wellestablished factors. The standard for issuing a temporary restraining order is
identical to the standard for issuing a preliminary injunction. See, e.g., Hawaii v.
8
Gannett Pac. Corp., 99 F. Supp. 2d 1241, 1247 (D. Haw. 1999); cf. Stuhlbarg Int’l
Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001)
(observing that an analysis of a preliminary injunction is “substantially identical”
to an analysis of a temporary restraining order).
A “preliminary injunction is an extraordinary [and drastic] remedy
never awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7,
24 (2008) (citation omitted). A “plaintiff seeking a preliminary injunction must
establish that he is likely to succeed on the merits, that he is likely to suffer
irreparable harm in the absence of preliminary relief, that the balance of equities
tips in his favor, and that an injunction is in the public interest.” Id. at 20; accord
Sierra Forest Legacy v. Rey, 577 F.3d 1015, 1021 (9th Cir. 2009). “That is,
‘serious questions going to the merits’ and a balance of hardships that tips sharply
towards the plaintiff can support issuance of a preliminary injunction, so long as
the plaintiff also shows that there is a likelihood of irreparable injury and that the
injunction is in the public interest.” Alliance for Wild Rockies v. Cottrell, 632 F.3d
1127, 1135 (9th Cir. 2011). Winter emphasizes that a plaintiff seeking preliminary
relief must demonstrate that “irreparable injury is likely in the absence of an
injunction.” 555 U.S. at 22; see also Stormans, Inc. v. Selecky, 586 F.3d 1109,
1127 (9th Cir. 2009).
9
IV. DISCUSSION
To prevail on a Motion for TRO, Winter requires that Plaintiffs
establish all four elements -- likelihood of success, likelihood of irreparable harm,
a favorable balance of equities, and that an injunction is in the public interest.
Winter, 555 U.S. at 20. Based on the following, the court finds that Plaintiffs have
not demonstrated that they are likely to succeed on the merits of any of their
claims. Because Plaintiffs necessarily cannot obtain a TRO, the court does not
address the other elements necessary for a TRO. The court addresses each of
Plaintiffs’ claims in turn.2
A.
Breach of Contract
Plaintiffs have failed to establish that they are likely to succeed in
establishing the elements of their breach of contract claim.
First, Defendants have raised a significant issue as to whether KauliliGuzon’s and Brown-Henry’s contracts are unenforceable for lack of consideration.
See Douglass v. Pflueger Haw., Inc., 110 Haw. 520, 534, 135 P.3d 129, 143 (2006)
(“It is well-settled that consideration is an essential element of, and is necessary to
2
Below, the court address only those issues necessary to find that Plaintiffs have not
established a likelihood of success on the merits. Although the parties raise additional issues, the
court need not address them at this time.
10
the enforceability or validity of, a contract.” (quotations omitted)).3 In particular,
Kaulili-Guzon and Brown-Henry signed these agreements after they had already
been working for Plaintiffs for some time,4 and numerous courts have held that
where an employee has already been hired, continued at-will employment, standing
alone, is insufficient consideration for a non-competition agreement.5 And
3
Although each agreement includes a provision stating that Ohio law applies, the parties
agree that Hawaii law applies given the parties’ contacts in Hawaii and Hawaii’s interest in the
issues raised. For purposes of this Motion only, the court applies Hawaii law, without prejudice
to fuller briefing by the parties and/or the court raising this issue sua sponte.
4
At the July 11, 2014 hearing, counsel for the Individual Defendants argued that Keala
may have signed his agreement after he had already been working for some time with Plaintiffs.
At least based on the evidence in the record, it appears that Keala resumed working for Plaintiffs
in January 2005, Doc. No. 28-1, Keala Decl. ¶ 1, and signed his agreement on January 10, 2005.
See Doc. No. 2-3, Pls.’ Ex. A. As a result, the court addresses this issue as to Brown-Henry and
Kaulili-Guzon only, without prejudice for the parties to present additional evidence regarding
Keala.
5
See, e.g., See Menzies Aviation (USA), Inc. v. Wilcox, 978 F. Supp. 2d 983, 998 (D.
Minn. 2013) (finding that “continued employment alone is insufficient consideration . . . to
support enforcement of a non-compete agreement against an already employed employee”);
Digital Generation, Inc. v. Boring, 869 F. Supp. 2d 761, 775 (N.D. Tex. 2012) (finding that new
consideration is required to enforce a non-compete covenant on an existing employee); Access
Organics, Inc. v. Hernandez, 175 P.3d 899, 903 (Mont. 2008) (determining that “afterthought
agreements,” i.e., non-compete agreements signed by employees after the date of hire, require
independent consideration); Labriola v. Pollard Grp., 100 P.3d 791, 794 (Wash. 2004) (en banc)
(“A noncompete agreement entered into after employment will be enforced if it is supported by
independent consideration. . . . Independent, additional, consideration is required for the valid
formation of a modification or subsequent agreement. There is no consideration when one party
is to perform some additional obligation while the other party is simply to perform that which he
promised in the original contract.” (internal quotations and citations omitted)); Cf. PartyLite
Gifts, Inc. v. MacMillan, 895 F. Supp. 2d 1213, 1223 (M.D. Fla. 2012) (concluding that a noncompete clause entered after employment is enforceable because promotion of employee is
adequate consideration); But see Open Magnetic Imaging, Inc. v. Nieves-Garcia, 826 So. 2d 415,
417 (Fla. Dist. Ct. App. 2002) (citing cases that Florida courts have enforced non-compete
agreements after commencement of employment); Corson v. Universal Door Sys., Inc., 596 So.
(continued...)
11
contrary to Plaintiff’s argument, see Doc. No. 38, Pls.’ Reply at 12, the Hawaii
Supreme Court has not addressed this precise issue --Technicolor, Inc. v. Traeger,
57 Haw. 113, 120, 551 P.2d 163, 169 (1976), determined that where an employee
signed a non-compete agreement upon his promotion, his employment was
adequate consideration, especially where he was “paid a salary substantially above
what his other employers were willing to pay him for filling similar positions but
without such a postemployment restriction.” In comparison, the parties have not
presented any facts regarding the benefit Brown-Henry and Kaulili-Guzon received
in exchange for signing these agreements, and whether, under Hawaii law, such
benefit is adequate consideration.
Second, Plaintiffs have failed to show a likelihood that the Individual
Defendants breached their non-competition agreements. Although Plaintiffs assert
that they have presented “overwhelming evidence” that the Individual Defendants
breached their agreements, see Doc. No. 2, Pls.’ Mot. at 15, much of the purported
“evidence” are the conclusory assertions of Byron Riddle, Regional Vice-President
for WorkflowOne, that Plaintiffs “have evidence” of breaches from various thirdparty companies. In other words, Riddle largely says “trust me,” the Individual
5
(...continued)
2d 565, 568 (Ala. 1991) (similar).
12
Defendant have breached their agreements. But for the most part, Riddle fails to
describe this evidence in any manner, and his “evidence” could be anything -- a
phone call from a customer stating that it is taking its business elsewhere, a letter
stating that one of the Individual Defendants solicited its business, or simply
Riddle’s gut feeling that the Individual Defendants must have breached their
agreements because WorkflowOne is losing business.6 Without any details
regarding the substance of Plaintiffs’ “evidence,” the court is at a loss as to
whether Plaintiffs can in fact establish that the Individual Defendants have
breached any provisions in the agreements.
And even where Riddle describes his “evidence” in slightly more
detail -- e.g., Doc. No. 2-2, Riddle Decl. ¶ 22 (stating that a BEI employee verified
that Keala and Kaulili-Guzon solicited its business) -- Riddle again fails to provide
details establishing the likelihood of a beach. In particular, the court may rely on
hearsay in ruling on the Motion, but what weight to give such evidence is in the
court’s discretion. See Republic of the Philippines v. Marcos, 862 F.2d 1355, 1363
(9th Cir. 1988) (“It was within the discretion of the district court to accept
6
To the extent Riddle bases his assertions on the mere fact that WorkflowOne has lost
customers since the Individual Defendants left, it appears that the Individual Defendants’
departure from WorkflowOne was one of several changes at WorkflowOne that affected
customer service and loss of customers (the others being moving customer service to the
mainland, and Riddle’s focus on the bottom line rather than customer service, see Doc. No. 28-1,
Keala Decl. ¶¶ 2-7).
13
. . . hearsay for purposes of deciding whether to issue the preliminary injunction.”);
see also Herb Reed Enters. v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239, 1250 n.5
(9th Cir. 2013) (“Due to the urgency of obtaining a preliminary injunction at a
point when there has been limited factual development, the rules of evidence do
not apply strictly to preliminary injunction proceedings.”). The court gives little
weight to Riddle’s assertions that he has “evidence” from particular customers
where he fails to describe the name of the customer’s representative, what the
customer’s representative said, and to whom such information was relayed at
WorkflowOne.
And where Riddle’s Declaration does not provide a factual predicate,
these facts do not support his conclusions. For example, Riddle asserts that an
email from Blood Bank Hawaii seeking to vet ASB as a vendor establishes that
Keala solicited this WorkflowOne customer. See Doc. No. 2-2, Riddle Decl.
¶¶ 19-20. Not so -- the email establishes only that Blood Bank Hawaii was
interested in using ASB and that Keala is ASB’s customer representative; it does
not establish that Keala contacted Blood Bank of Hawaii to become a ASB
customer. This distinction as to Keala is important -- his agreement prohibits him
from “call[ing] upon or solicit[ing] business” from WorkflowOne customers, and
states nothing about his accepting business that contact him. See Doc. No. 2-3,
14
Pls.’ Ex. A. As Keala explains, any WorkflowOne customers contacted him, not
the other way around. Doc. No. 28-1, Keala Decl. ¶ 19.
As another example, Riddle asserts that “[w]e have obtained evidence
from an Old Republic employee that since leaving their employment with
WorkflowOne, they have both solicited business” from that customer. Doc. No. 22, Riddle Decl. ¶ 23. The only specific evidence presented, however, is an email
from Old Republic to WorkflowOne asking whether WorkflowOne can match
prices on certain products. Id. Ex. 2. The email does not mention ASB, much less
the Individual Defendants, and without more, it would take several inferential leaps
to accept Riddle’s interpretation that this email shows that “Kaulili-Guzon and
Keala have apparently undercut WorkflowOne’s prices.” Id. ¶ 23.
In short, Plaintiffs’ conclusory assertions of breach are insufficient to
establish a likelihood of success on the breach of contract claim. Indeed, nowhere
do Plaintiffs provide, for each WorkflowOne customer, (1) when the Individual
Defendants last had contact with the customer as a WorkflowOne employee, and
the scope of such contact (Riddle largely asserts that the Individual Defendants
“solicited or accepted” business from customers as WorkflowOne employees,
without explaining the nature of such contact); or (2) the substance of the alleged
15
breach, i.e., whether based on solicitation, acceptance of business, or both.7
Without such details, Plaintiffs leave the court with nothing more than speculation
as to whether the Individual Defendants breached their agreements.
Finally, in their Reply and at the July 11, 2014 hearing, Plaintiffs
argue that all the agreements prohibit the Individual Defendants from “soliciting”
WorkflowOne customers -- meaning that the Individual Defendants cannot conduct
business with WorkflowOne customers, regardless of who initiates the contact -and that the Individual Defendants admit in their Declarations that they accepted
business from WorkflowOne customers in violation of their agreements. See Doc.
No. 38, Pls.’ Reply at 10. Plaintiffs offer no legal support for their broad definition
of “solicit,” and the court declines to accept it at this time and on the record
presented. In particular, it appears that several courts have rejected in the
employment context the broad interpretation proposed by Plaintiffs,8 and Plaintiffs
7
Highlighting that such facts are necessary is that it appears that Kaulili-Guzon was not
involved in sales in either company, making Plaintiffs’ generalized assertions that she solicited
and/or accepted business for either company tenuous at best.
8
See, e.g., Hair Club for Men, LLC v. Elite Solutions Hair Alternatives, Inc., 2007 WL
1080588 at *2 (E.D. Cal. Apr. 05, 2007) (“Merely informing customers of one’s former
employer of a change of employment, without more, is not solicitation. Neither does the
willingness to discuss business upon invitation of another party constitute solicitation on the part
of the invitee.” (quoting Hilb, Rogal & Hamilton Ins. Servs. v. Robb, 39 Cal. Rptr. 2d 887
(1995)); Alpha Tax Servs., Inc. v. Stuart, 761 P.2d 1073, 1075-76 (Ariz. Ct. App. 1988) (same);
Paulson, Inc. v. Bromar, Inc., 808 F. Supp. 736, 741 (D. Haw. 1992) (discussing Aetna Bldg.
Maint. Co. v. West, 246 P.2d 11, 15 (Cal. 1952), which held that mere acceptance of an offer of
business was not solicitation because a a contrary holding would restrict competition and the
(continued...)
16
chose to use more specific language in later agreements (prohibiting an employee
from “soliciti[ing] or accept[ing] business”). On the limited briefing and argument
presented, the court rejects Plaintiff’s argument.9
For these reasons, Plaintiffs have failed to establish a likelihood of
success on their breach of contract claim. The court’s determination that Plaintiffs
have failed to carry their burden on the Motion for TRO does not mean that a
breach did not occur. Rather, Plaintiffs may very well, with additional and more
particular evidence, establish a breach. But on the record presented, Plaintiffs have
simply not carried their burden at this time.
B.
Misappropriation of Trade Secrets
Plaintiffs have also failed to establish a likelihood of success on their
trade secret misappropriation claim.
8
(...continued)
right to change employers); Akron Pest Control v. Radar Exterminating Co., 455 S.E.2d 601,
602 (Ga. App. 1995) (rejecting that a party bound by a nonsolicitation agreement should “refuse
and, in fact, turn away pest control business if contacted by any customers,” and determining that
an agreement “not to solicit, either directly or indirectly, any current or past customers” requires
more than “[m]erely accepting business” to constitute a breach); see also Meyer-Chatfield v.
Century Bus. Servicing, Inc., 732 F. Supp. 2d 514, 522 (E.D. Pa. 2010) (“Under the definition in
Black’s Law Dictionary, solicitation is not confined only to the verbal act of asking or requesting
something, or to the act of formally first approaching a potential employee. Actions to ‘awake or
incite to action,’ or ‘conduct intended to and calculated to incite’ the desired act are also acts of
solicitation.”).
9
And in any event, even if the court applied a broad interpretation of “solicit,” there is
no evidence presented as to the identity of the Individual Defendants’ customers as
WorkflowOne employees during the last twelve months of their employment.
17
Hawaii has adopted the Uniform Trade Secrets Act, see Hawaii
Revised Statutes (“HRS”) Ch. 482B, which defines a “trade secret” as:
information, including a formula, pattern, compilation,
program device, method, technique, or process that:
(1) Derives independent economic value, actual or
potential, from not being generally known to, and
not being readily ascertainable by proper means
by, other persons who can obtain economic value
from its disclosure or use; and
(2) Is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
HRS § 482B-2.
Plaintiffs assert in summary fashion that the Individual Defendants
had direct access to its trade secrets, which include customer lists and information
regarding products and pricing. See Doc. No. 2-1, Pls.’ Mot. at 20. Although this
information may in fact qualify as trade secrets (and the Individual Defendants’
agreements acknowledge that this information qualifies as such), Plaintiffs have
provided scant evidence that this is actually the case. Rather, Plaintiffs (again) rely
on the vague and conclusory assertion of Riddle that “WorkflowOne has . . . taken
proactive steps to maintain the secrecy of its customer lists and pricing information
and this information is not generally known to the public.” Doc. No. 2-2, Riddle
Decl. ¶ 5. Plaintiffs never describe, however, (1) the actual substance of the trade
secrets beyond generalized categories of customer, product, and pricing
18
information; or (2) what steps Plaintiffs took, beyond having the Individual
Defendants sign their agreements, to keep this information secret. Given that
customers are privy to sales methods and pricing, and customer lists are not trade
secrets if publicly available,10 the court cannot discern what it is that Plaintiffs
assert are trade secrets and whether such information was the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.
Further, Defendants have submitted evidence calling into question
whether Plaintiffs’ customer, product, and pricing information (as generally
described by Riddle) constitutes trade secrets. For instance, Keala asserts that he
was never told that anything about his customers, sales, or products needed to be
kept confidential, there were no special or secret sales methods, and prices were
necessarily relayed to customers. Doc. No. 28-1, Keala Decl. ¶ 10. Like Keala,
10
See, e.g., Wyndham Resort Dev. Corp. v. Bingham, 2010 WL 2740158, at *5 (E.D.
Cal. July 9, 2010) (“[C]ourts are reluctant to protect customer lists to the extent they embody
information which is “readily available” through public sources, such as business directories.
On the other hand, where the employer has expended time and effort identifying customers with
particular needs or characteristics, courts will prohibit former employees from using this
information to capture a share of the market.” (quotations and citations omitted)); TMX Funding,
Inc. v. Impero Techs., Inc., 2010 WL 1028254, at *5 (N.D. Cal. Mar. 18, 2010) (distinguishing
between “publicized or ‘readily ascertainable’” customer lists and product and pricing
information which do not constitute trade secrets, and more detailed information such as
“specific contacts for customers, past communications and agreements between Teledex and
customers or vendors, as well as any strategic plans that Teledex developed for its future
relationships” which were kept confidential); In re Parmalat Sec. Litig., 258 F.R.D. 236, 255
(S.D.N.Y. 2009) (holding that marketing strategies are not trade secrets where the plaintiff
“failed to explain what particular information about the particular . . . marketing techniques used
here . . . are not already public [and] are not already commonly known in the industry”).
19
Brown-Henry asserts that there was nothing secret about her work, she was never
told that she was supposed to keep certain information confidential, and her prices
were not secret because customers knew what they were paying and she set her
own prices for the products. Doc. No. 28-3, Brown-Henry Decl. ¶¶ 6-7. It also
appears that Plaintiffs may not have taken reasonable steps to safeguard
information they assert is confidential -- Keala asserts that he was provided a list of
Brown-Henry’s accounts when she left, and that Riddle failed to make any effort to
retrieve that list from Keala when he resigned, despite Keala’s repeated calls. Doc.
No. 28-1, Keala Decl. ¶ 16.
Given the totality of the evidence presented, at this time the court
cannot discern precisely what Plaintiffs contend are the trade secrets that
Defendants allegedly misappropriated. As a result, the court finds that Plaintiffs
have failed to establish a likelihood of success on their trade secret
misappropriation claim. Again, the court’s determination that Plaintiffs have failed
to carry their burden on the Motion for TRO does not mean that Defendants did not
misappropriate trade secrets. Rather, Plaintiffs have simply not carried their
burden on the record presented.
///
///
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C.
Tortious Interference with Business Relations
Finally, Plaintiffs have failed to establish a likelihood of success on
their claim for tortious interference with business relationships. To prevail on this
claim, Plaintiffs must establish:
(1) the existence of a valid business relationship or a
prospective advantage or expectancy sufficiently definite,
specific, and capable of acceptance in the sense that there
is a reasonable probability of it maturing into a future
economic benefit to the plaintiff; (2) knowledge of the
relationship, advantage, or expectancy by the defendant;
(3) a purposeful intent to interfere with the relationship,
advantage, or expectancy; (4) legal causation between the
act of interference and the impairment of the relationship,
advantage, or expectancy; and (5) actual damages.
Haw. Med. Ass’n v. Haw. Med. Serv. Ass’n, Inc., 113 Haw. 77, 116, 148 P.3d
1179, 1218 (2006) (quotations and citations omitted). This tort does not prevent
legitimate business competition -- rather, the intent element “denotes purposefully
improper interference . . . and requires a state of mind or motive more culpable
than mere intent.” Id. (quotations and citations omitted).
Plaintiffs base this claim on the same basic facts as the breach of
contract and trade secret misappropriation claims -- that the Individual Defendants
contacted WorkflowOne’s existing customers to bring them to ASB. As explained
above, however, Plaintiffs’ speculative evidence does not suggest that the
Individual Defendants breached their agreements or otherwise misappropriated
21
trade secrets. The court therefore finds that Plaintiffs have failed to establish a
likelihood of success on their tortious interference with business relations claim at
this time.
V. CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion for Temporary
Restraining Order is DENIED. As discussed at the July 11, 2014 hearing,
Plaintiffs further WITHDRAW the Motion for Preliminary Injunction, without
prejudice to refiling.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, July 11, 2014.
/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge
The Standard Register Co. et al. v. Lynden Keala et al., Civ. No. 14-00291 JMS-RLP, Order
Denying Plaintiffs’ Motion for a Temporary Restraining Order
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