Balmoral Racing Club, Inc. et al v. Churchill Downs, Incorporated
Filing
52
MEMORANDUM OPINION signed by the Honorable John F. Grady on 7/21/2011. (cdh, )
11-1028.111-RSK
July 21, 2011
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BALMORAL RACING CLUB, INC.,
MAYWOOD PARK TROTTING CLUB
ASSOCIATION, INC., and THE
ILLINOIS HARNESS HORSEMEN’S
ASSOCIATION, INC.,
)
)
)
)
)
)
Plaintiffs,
)
)
v.
)
)
CHURCHILL DOWNS, INC., CHURCHILL
)
DOWNS TECH. INITIATIVES CO. d/b/a )
TWINSPIRES.COM and YOUBET.COM, LLC,)
)
Defendants.
)
No. 11 C 1028
MEMORANDUM OPINION
Before the court is Balmoral Racing Club, Inc.’s (“Balmoral”)
and Maywood Park Trotting Club Association, Inc.’s (“Maywood”)
motion for a preliminary injunction.
For the reasons explained
below, we deny their motion.
BACKGROUND
Balmoral and Maywood, which operate horse-racing tracks in
Illinois, entered into a Co-Branding Agreement (the “CBA”) with
Youbet.com,
Inc.
(“Youbet”)
in
December
2007.
(Stipulated
Statement of Facts ¶¶ 4, 15 (hereinafter, “Stip. Facts”); see also
CBA, attached as Ex. A to Pls.’ Mot.)
Pursuant to the agreement
Youbet agreed to develop a “co-branded version” of its advance-
- 2 -
(CBA § 1.)1
deposit-wagering (“ADW”) service.
As originally
conceived, the co-branded version of Youbet’s service (called the
“Co-Branded
Pages”
in
www.youbetillinois.com.
the
CBA)
would
(Id. at § 2.2.)
have
its
own
URL
—
The co-branded website
would look and function just like www.youbet.com, the company’s
“standard offering of the Service.”
(Id. at § 1.)
But the logos
of the “Associates,” the CBA’s term for the racetrack operators,
would
appear
on
the
website.
(Id.)
Youbet
agreed
to
use
“reasonable efforts” to “transfer” its existing Illinois customers
(numbering approximately 10,000, according to the defendants) to
the Co-Branded Pages.
13.)
(Id. at § 4.2; see also Blackwell Decl. ¶
In addition, the parties agreed to jointly market the Co-
Branded Pages to develop new customers for the service.
2.1, 2.2.)
(CBA §§
The parties would then share the “Net Commissions” and
“Net Revenues,” as those terms are defined in the CBA, generated by
wagers placed through the Co-Branded pages.
(Id. at § 6.)
The parties’ actual performance deviated somewhat from the
CBA’s express terms.
website.
Youbet did not create a separate co-branded
Instead, all wagers placed by customers with a verified
Illinois address on www.youbet.com were used to calculate the
parties’ fees.
1/
(Stip. Facts ¶ 43.)
Youbet provided all ADW-
ADW is "a form of pari-mutuel wagering on the outcome of horse races
in which an individual may establish an account with a licensed entity, deposit
money into the account, and use the account balance to pay for pari-mutuel wagers
placed via internet or telephone." (Stip. Facts ¶ 1.)
- 3 -
related services, which included: collecting and storing customer
account information, operating the websites, providing customer
support, and processing wagers. (Id. at ¶¶ 44-50.) Illinois-based
Youbet
customers
agreed
to
be
bound
by
Youbet’s
terms
and
conditions and were subject to Youbet’s privacy policy. (Id. at ¶¶
51-52.)
Balmoral and Maywood, for their part, spent a substantial
amount of money promoting the website.
(See Hannon Aff. ¶ 8
(stating that Maywood and Balmoral spent approximately $750,000
promoting the “co-branded” pages).)
1.
The Youbet Merger and the Twinspires/Youbet Integration
The
seeds
of
the
parties’
current
dispute were
sown
in
November 2009, when defendant Churchill Downs, Inc. announced that
it had reached an agreement to acquire Youbet.com, Inc.
Facts ¶ 54.)
(Stip.
The acquisition, which took the form of a merger
between Youbet.com, Inc. and a wholly-owned subsidiary of Churchill
Downs, was completed on June 2, 2010.
(Id. at ¶ 56.)
The
surviving company, the defendant Youbet.com, LLC, is the successorin-interest to the liabilities and obligations of Youbet.com, Inc.,
including those under the CBA.
(Id. at ¶ 57.)2
The Youbet merger
triggered Balmoral’s and Maywood’s right to terminate the CBA for
a change-of-control.
(Id. at ¶ 66; see also CBA § 10.2(b).)
They
2/
For the sake of convenience, we will refer to Youbet.com, Inc. and
Youbet.com, LLC as “Youbet,” except as otherwise noted.
- 4 -
declined to do so.3
At the time of the merger Churchill Downs
owned a competing ADW-service provider, defendant Twinspires.com
(“Twinspires”).
months
after
(Id. at ¶ 59.)
the
merger
For a period of approximately six
the
two
ADW
services
operated
independently.
On November 9, 2010, the defendants informed Balmoral and
Maywood that they were going to integrate Twinspires.com and
Youbet.com on November 16, 2010.
date
visitors
(Id. at ¶¶ 67-68.)
to
www.youbet.com
www.twinspires.com,
and eventually
www.youbet.com
altogether.
(Id.
would
be
defendants
at
¶
73.)
After that
redirected
would
phase
Defendants
to
out
told
plaintiffs that they would take steps to ensure that plaintiffs
would continue to be paid for wagers placed by legacy Youbet.com
customers on Twinspires’ ADW platform.
(Id. at ¶¶ 69-71.)
In
addition, the defendants planned to launch www.youbetillinois.com
— the URL that the parties originally contemplated to be the CBA’s
“Co-Branded
Pages.”
(Id.
at
¶¶
74-75.)
Post-integration,
plaintiffs would be paid under the CBA for wagers placed by
customers who signed up to use the Twinspires ADW platform via
3/
Plaintiffs contend that they were lulled into a false sense of security
by defendants’ representations that they would “honor” the CBA. (Stip. Facts at
¶¶ 61, 63-64, 66.) Defendants argue that the plaintiffs wanted to be bought out
of the CBA, which would not expire until the end of 2011 at the earliest. (Id.
at ¶¶ 65, 76-77; see also Defs.’ Resp. to Pls.’ Mot. for Prelim. Inj.
(hereinafter, “Defs.’ Resp.”) at 6.) It is unnecessary to resolve this dispute
to rule on the present motion.
- 5 -
www.youbetillinois.com.
(Id. at 72.)4
The defendants integrated
the two wagering platforms, as planned, on November 16, 2010. (Id.
at ¶ 79.)
Former Youbet customers were able to access their
accounts on the new platform using the usernames and passwords that
had previously been assigned to them.
(Id. at ¶ 81.)
And the
features of the legacy Youbet service were combined with the
features of Twinspires’ service.
(Id. at ¶ 82.)
Plaintiffs now
contend that the “migration” of customers from www.youbet.com to
www.twinspires.com violated the CBA’s anti-assignment clause. (See
CBA § 11.7.) But there is currently no evidence in the record that
plaintiffs declared a default at that time.
2.
November & December 2010 Proceedings Before the Illinois
Racing Board (“IRB”)
An ADW-operator must be licensed by the IRB before it may
accept ADW wagers from Illinois residents.
(Stip. Facts ¶ 86.)
In
order to obtain an ADW license, the ADW operator must have a
contract
with
an
racetrack operator.
“organization
licensee,”
(Id. at ¶¶ 87-91.)
i.e.,
an
Illinois
Balmoral and Maywood are
“organization licensees,” and pre-merger, Youbet.com, Inc.’s ADW
license was predicated in part on the CBA’s existence.
89-91.)5
(Id. at ¶¶
After the merger Youbet.com, LLC applied for and received
4/
As we understand the defendant’s post-integration plans, Illinois
residents who signed up through www.twinspires.com would not be counted as
customers under the CBA.
5/
Twinspires is an ADW licensee through a contract with Arlington Park,
another organization licensee. (Id. at ¶¶ 92-93.)
- 6 -
an ADW license based upon the CBA, and later sought to renew its
license for 2011.
(Id. at ¶ 95.)
At a hearing conducted on
November 30, 2010, the IRB’s staff recommended that the Board deny
Youbet’s renewal
application
because,
post-integration,
it
no
longer operated its own wagering platform as required by IRB
regulations.
(Id. at ¶ 100; see also IRB Hearing Trans., dated
Nov. 30, 2010, attached as Ex. C-4 to Blackwell Aff., at 4-6.)
Notwithstanding
this
recommendation,
the
Board
at
least
contemplated granting the license. (See, e.g., IRB Hearing Trans.,
dated Nov. 30, 2010, at 31-32.)
and
Balmoral
were
asked
When representatives of Maywood
whether
application, they equivocated.6
they
supported
Youbet’s
At the same time, they accused
Youbet of “engag[ing] in anti-competitive practices” that violated
IRB rules.
(Id. at 10-11; 15-16.)
The apparent purpose of
Balmoral’s and Maywood’s testimony at the hearing was to obtain
leverage in their dispute with the defendants.7
Rather than deny
6/
(Compare
IRB
Hearing
Trans.,
dated
Nov.
30,
2010,
at
32
(Maywood/Balmoral representative testifying that he “[didn't] know” whether he
supported the staff’s recommendation to deny the application); with id. at 37
(the same individual testifying that he "would have no objection if you grant
YouBet a license obviously.").
7/
(See IRB Hearing Trans., dated Nov. 30, 2010, at 15 ("We wanted to go
on the record and state that we believe them to be in violation of this Board
rule, and that conditions be put upon them for their licensing for 2011."); id.
at 31 ("We are not asking for a denial. We're asking for conditions."); see also
Hannon Email, dated November 10, 2010, attached as Ex. E to Defs.' Resp. ("On
Tuesday, November 30th an item on the Board agenda will be the renewal of
TwinSpires, Youbet, TVG and Xpressbet Illinois ADW licensees for 2011 — this is
good timing for us in our negotiations with [Churchill Downs] for the buy out
prior to this Board meeting.").)
- 7 -
YouBet’s license on the staff’s recommendation, the IRB deferred
the matter until the next Board meeting.
(Stip. Facts at 102.)
The next day, December 1, 2010, Youbet and Churchill Downs
sent a
letter
to
plaintiffs
terminating the
CBA,
citing
the
provision requiring plaintiffs to “use their best efforts to secure
and/or assist Youbet in securing any licenses required or available
in Illinois with respect to this Agreement . . . .”
(Letter dated
Dec. 1, 2010, attached as Ex. C to Pls.’ Mot.; Second Am. to CBA §
9; see also CBA § 10.2(d) (permitting either party to terminate
“effective upon written notice” for a material breach not cured
within 30 days of notice of default).)8
At the December 21, 2010
IRB meeting, the IRB “tabled” Youbet’s renewal application by a 5-4
vote. (Stip. Facts ¶ 109.)
Two months later plaintiffs filed this
lawsuit.
Plaintiffs allege that the defendants violated the CBA’s antiassignment and confidentiality provisions when they “migrated”
Youbet’s customer accounts to Twinspires.com (Count I).
(See CBA
§§ 8, 11.7.)
They further claim that the transfer constituted a
trade-secret
misappropriation
on
the
theory
that
Twinspires
improperly obtained the “Customer List,” which the CBA defines as
“the list of all Customers who have wagered through the Co-Branded
Pages” (Count II).
(Id. at § 4.3.)
In their opening brief,
plaintiffs argued that under either or both legal theories they
8/
The defendants’ letter also cited CBA
difficult to see how that provision applies here.
§
10.2(f),
although
it
is
- 8 -
were entitled to an injunction prohibiting the defendants from
“using” the Customer List and requiring defendants to turn it over
to the plaintiffs.
filed
their
(Pls.’ Mot. at 1.)
motion,
the
defendants
Shortly after plaintiffs
gave
plaintiffs
a
list
purporting to identify all Illinois-based customers (numbering
approximately 5,500) who had signed up for Youbet’s ADW service
during the CBA’s term.
(Stip. Facts ¶ 112.)
The list includes the
customers’ names, mailing addresses, email addresses, and the dates
that they registered with Youbet.
(Id. at ¶ 113.)
As we will
discuss in more detail below, plaintiffs’ interpretation of the CBA
and the scope of the injunction that they have requested have
changed since they filed their motion.
following
relief:
(1)
an
order
Currently, they seek the
compelling
the
defendants
to
transfer to plaintiffs’ new ADW service the customer accounts of
any Illinois-based customers who registered with Youbet during the
CBA’s term; or, in the alternative, (2) the usernames or account
numbers for those same customers.
DISCUSSION
A.
Legal Standard
“To justify a preliminary injunction, the plaintiffs must show
that they are likely to succeed on the merits, that they are likely
to suffer irreparable harm without the injunction, that the harm
they would suffer is greater than the harm that the preliminary
injunction would inflict on the defendants, and that the injunction
is
in
the
public
interest.
These
considerations
are
- 9 -
interdependent: the greater the likelihood of success on the
merits, the less net harm the injunction must prevent in order for
preliminary relief to be warranted.” Judge v. Quinn, 612 F.3d 537,
546 (7th Cir. 2010) (citations omitted).
B.
Likelihood of Success on the Merits
We will address plaintiffs’ breach-of-contract claim first,
which they characterized as their “main” legal theory at the
preliminary-injunction hearing.
1.
Breach of Contract
In order to establish a likelihood of success on the merits,
the plaintiffs need only show a “better than negligible chance of
succeeding.” See Cooper v. Salazar, 196 F.3d 809, 813 (7th Cir.
1999).
We conclude that they have cleared this low threshold with
respect to their claim that defendants violated the CBA’s antiassignment clause.
Section 11.7 of the CBA prohibits the parties
from delegating their obligations under the contract, “either in
whole or in part, whether by operation of law or otherwise, without
the prior written consent of the other party.”
(CBA § 11.7.)
It
is apparently undisputed that after November 16, 2010 Youbet.com,
LLC, Youbet.com, Inc.’s successor-in-interest, no longer performed
any of the ADW services that the CBA obligated it to perform. (See
CBA
§
3.1.a.)
Twinspires.
Instead,
Section
11.7
those
does
services
not
create
were
an
performed
exception
by
for
assignments or delegations to corporate affiliates, and at least at
this stage of the case, we are not persuaded by defendants’
- 10 -
argument that the migration was not a delegation because the
integrated platform was similar or superior to Youbet’s. If, postmigration, Youbet could still be said to have had a “standard
offering of the Service” (CBA § 1) — which we doubt — then it was
implemented
by
delegating
ADW
operations
to
a third
party.
Defendants needed plaintiffs’ prior written consent to make such a
change.
anticipated
The
the
fact
that
plaintiffs
integration
after
could
the
(or
merger
should)
is
have
irrelevant:
plaintiffs’ rights under the CBA’s change-of-control and antiassignment provisions are distinct.
However, plaintiffs’ claim for injunctive relief — as opposed
to damages, which “are the norm in breach of contract as in other
cases” (see Walgreen Co. v. Sara Creek Property Co., B.V., 966 F.2d
273, 274 (7th Cir. 1992)) — hinges on their argument that the CBA
entitles them to the Illinois customers who registered with Youbet
during the contract’s term. Plaintiffs initially argued that § 4.3
(“Ownership of Customer List”) entitled them to exclusive ownership
of the Customer List:
Upon the expiration of the term of this Agreement,
Associates will have joint ownership of the list of
Customers who have wagered through the Co-Branded Pages
(the “Customer List”). In the event this Agreement is
terminated by Company for cause set forth in Section 10.2
Associates shall not be entitled to obtain a list of
customers who were customers of www.Youbet.com prior to
the effective date of this Agreement.
- 11 -
(CBA § 4.3.)9
“[J]oint ownership,” the plaintiffs argued, meant
joint ownership solely among the Associates. (Pls.’ Mot. at 4-5.)
Defendants responded that “joint ownership” means ownership between
the Associates and Youbet, pointing out that the CBA uses the term
“Associates” predominately as a singular noun.
(Defs.’ Resp. at
15-17.) Moreover, Youbet maintained and controlled the list during
the CBA’s term, and there is no language in § 4.3 specifically
divesting Youbet of that control.
During pre-hearing discovery
plaintiffs changed course and effectively adopted the defendants’
interpretation of § 4.3's first sentence.10
But they argued that
if Youbet terminated the agreement early, then pursuant to the
second
sentence
exclusively.
the
Associates
would
own
the
Customer
List
(Hannon Dep. at 53-54, 63-65; see also Hannon Reply
Aff. ¶¶ 23-24.)
Exclusive ownership of the Customer List, they
argued, was tantamount to exclusive “ownership” of the customers
and their accounts.
(Email from S. Groth to P. Veith, attached as
Ex. B-1 to Defs.’ Resp. (“We will be asking the court to rule that
delivery of the Customer List equates to delivery of the customer
9/
At the preliminary injunction hearing plaintiffs pointed out that § 4.3
does not indicate what happens to the Customer List if one or more of the
Associates terminates for cause. The point is academic, however, because Youbet
terminated for cause on December 1, 2010, and §§ 4.3 and 10.4 clearly spell out
the parties’ obligations in that event. Youbet may have breached the contract
two weeks earlier, but there is no evidence that the plaintiffs provided the
termination notice required by § 10.2(d) at that time.
10/
(See Hannon Dep., attached as Ex. K. to Defs.' Resp., at 54, 63
(testifying that Youbet and the Associates would jointly own the Customer List
when the CBA expired); see also Hannon Reply Aff., attached as Ex. C to Pls.'s
Reply, ¶ 23 (same); Pls.’ Reply at 17.)
- 12 -
accounts . . . .”); see also Hannon Dep. at 52, 90 (stating that he
made no distinction between owning the Customer List and “owning”
the
customers).)
There
is
simply
no
basis
in
the
CBA
for
construing “list” to mean “customers,” contrary to the ordinary
meaning of these terms.11
And while we agree with the parties that
the first sentence of § 4.3 gives the Associates and Youbet “joint
ownership” of the Customer List, there is no textual support in the
immediately
succeeding
sentence
for
granting
the
Associates
exclusive ownership in the event of an early termination. (See CBA
§ 4.3 (“In the event this Agreement is terminated by Company for
cause set forth in Section 10.2 Associates shall not be entitled to
obtain a list of customers who were customers of www.Youbet.com
prior to the effective date of this Agreement.”).
Besides finding
no support in the CBA’s language, this interpretation creates the
absurd result that Youbet would lose the Customer List even if the
Associates deliberately breached the contract.
In their reply brief plaintiffs took a different tack, which
they
spelled
out
injunction hearing.
somewhat
more
clearly
at
the
preliminary
The Associates “own” the customers, not
because the “Customer List” means the customers, but because: (a)
these were Balmoral’s and Maywood’s customers during the CBA’s
term; (b) Youbet breached the CBA; therefore (c) “equity requires
that those customers be transferred to Maywood and Balmoral.”
11/
At the preliminary injunction hearing plaintiffs effectively abandoned
this argument.
- 13 -
(Pls.’ Reply at 8-11.)
Section 4.2, which the plaintiffs cite to
support this argument, simply required Youbet to use “reasonable
efforts” to “transfer” its existing Illinois customers to the CoBranded Pages.
(CBA § 4.2.)
As originally contemplated by the
parties, wagers placed through the Co-Branded Pages would be
included in the CBA’s fee calculation.
(See CBA § 6.)
In
practice, Youbet did not create a separate co-branded website, and
instead calculated fees based on the wagers placed by all Illinoisbased customers on www.youbet.com.
Nothing in § 4.2 or the
parties’ performance indicates that these customers — whether they
opened Youbet accounts before or after the parties executed the CBA
— “belong[]” to Balmoral and Maywood.
(Cf. Pls.’ Reply at 8.)
These customers created ADW accounts with Youbet, and by using
Youbet’s service
conditions.
parties’
they
agreed to
abide
by
Youbet’s
terms
and
Customers who were steered to the website by the
joint-marketing
efforts
relationship with the plaintiffs.
did
not
have
any
direct
Indeed, plaintiffs had only
limited rights to access information about these customers during
the CBA’s term.
accounts.
Plaintiffs did not “own” these customers or their
They had, instead, the right to compensation based upon
the customers’ wagering activity and the opportunity at the end of
the contract to solicit their business using the Customer List. We
will not rewrite the contract to require defendants to transfer
- 14 -
customer accounts to an ADW service that did not even exist before
plaintiffs filed this lawsuit.
Finally, we reject plaintiffs’ alternative argument that the
CBA requires defendants to supply more information about the
customers than they have already provided.
Nothing in the CBA
indicates that the Customer List described in § 4.3 must contain
more than the actual names of the Illinois-based customers who
wagered on www.youbet.com during the CBA’s term.
Plaintiffs point
out that as part of its marketing obligations under the CBA, Youbet
agreed
to
pay
for
and
messaging to customers.”
provision
required
coordinate
(CBA § 2.2.)
Youbet
to
“data
and
targeted
Plaintiffs argue that this
compile
information and wagering activity.
mining
the
customers’
(Pls.’ Reply at 16.)
account
That may
be so, and knowing that information may give Twinspires a post-CBA
competitive advantage, but that does not make it part of the
Customer List.
At the preliminary injunction hearing plaintiffs
refined their request, asking only for the usernames or account
numbers for the individuals identified on the list defendants gave
them.
With this information, plaintiffs contend that they can
determine the customers’ wagering activity themselves using reports
that Youbet gave them periodically during the CBA’s term.
Hannon Dep. at 62.)
(See
The fact that this information would make the
wagering reports more useful is irrelevant.
The CBA simply does
not support plaintiffs’ argument that they are entitled to any and
- 15 -
all
customer
information
that
would
help
them
compete
with
Twinspires.
2.
Trade Secret Misappropriation
Plaintiffs contend that the Customer List is a trade secret.
The Illinois Trade Secret Act defines “trade secret” as follows:
“Trade secret” means information, including but not
limited to, technical or non-technical data, a formula,
pattern, compilation, program, device, method, technique,
drawing, process, financial data, or list of actual or
potential customers or suppliers, that:
(1) is sufficiently secret to derive economic value,
actual or potential, from not being generally known to
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
or
confidentiality.
765 ILCS 1065/2.
Even if we assume that the Customer List meets
this definition, the assignment and/or delegation to Twinspires
was not a misappropriation. “A trade secret misappropriation
involves the acquisition of a trade secret through improper means,
which requires the breach of a confidential relationship or other
duty to maintain secrecy.”
Seng-Tiong Ho v. Taflove, --- F.3d
----, 2011 WL 2175878, *11 (7th Cir. June 6, 2011) (slip op.); see
also
765
ILCS
1065/2(a),
(b).
Under
the
CBA’s
terms,
the
plaintiffs did not control, maintain, or “own” the Customer List
prior to termination.
right to
inspect
(See CBA § 4.3.)
Youbet’s books
and
They had only a limited
records,
including
pertinent information relating to . . . Customers.”
“all
(CBA § 6.5)
- 16 -
Youbet, for its part, did not have any specific contractual
obligation
to
keep
the
Customer
List
secret
from
affiliates (or from anyone else, for that matter).
which
authorized
the
parties
confidential, is inapplicable.
“disclose”
the
Customer
to
designate
(CBA § 8.2.)
List
to
Youbet
corporate
Section 8.2,
certain
materials
Plaintiffs did not
and
designate
it
confidential, as § 8.2 contemplates. Defendants may have breached
the CBA’s anti-assignment clause, but in doing so they did not
violate any property rights plaintiffs had in the Customer List.12
We conclude that plaintiffs’ trade secret claim does not satisfy
even the low threshold for likelihood of success.
C.
Irreparable Harm & Adequate Remedy at Law
Plaintiffs argue that they have suffered irreparable harm
because they have lost customers.
Plaintiffs, who did not own or
operate a functioning ADW service at any point relevant to this
lawsuit, did not lose ADW customers.
(Cf. Pls.’ Mot. at 9-10.)
They lost fees based on the wagering activity of customers using
Youbet’s ADW service.
(See supra § B.1.)
Damages are an adequate
remedy insofar as plaintiffs seek to recover those fees and/or
advertising expenses.
relief).)
(See Compl. ¶¶ 54-57 (requesting such
It is true that defendants did not turn over the
12/
Plaintiffs also base their preliminary injunction claim on CBA § 11.4,
which authorizes an action for injunctive relief for breach “of any
confidentiality or proprietary rights provision of this Agreement.” (See Pls.’
Reply at 12.)
For the reasons we have just discussed, this provision is
inapplicable:
the
customer
“migration”
did
not
implicate
the
CBA’s
“confidentiality or proprietary rights” provisions. (Cf. CBA §§ 5, 8.)
- 17 -
Customer
List
within
7
required. (See § 10.4.)
days
after
termination,
as
the
CBA
But plaintiffs did not demand the list
prior to filing their preliminary injunction motion, approximately
five months after receiving Youbet’s termination notice. (Stip.
Facts ¶ 111); see also Ty, Inc. v. Jones Group, Inc., 237 F.3d
891,
903
(7th
Cir.
2001)
(“Delay
in
pursuing
a
preliminary
injunction may raise questions regarding the plaintiff’s claim
that he or she will face irreparable harm if a preliminary
injunction is not entered.”).13
And since obtaining the Customer
List in April, they have not used it to promote their nascent ADW
business, despite James Hannon’s testimony that it would cost
plaintiffs virtually nothing to send promotional material via
email to the customers on the list.14
Even if plaintiffs had been
harmed by the delay, this type of harm does not support injunctive
relief.
See Machlett Labs., Inc. v. Techny Indus., Inc., 665 F.2d
796, 796 n.2, 798 (7th Cir. 1981) (injuries that have already
occurred generally do not support injunctive relief). We conclude
that plaintiffs have not been irreparably harmed, and that they
have an adequate legal remedy.
13/
Even if we consider plaintiffs’ complaint a constructive demand for the
Customer List, plaintiffs filed it more than three months after receiving the
termination notice.
14/
Hannon testified that blindly emailing the 5,500 customers on the list
could subject plaintiffs to liability, or at least create customer bad will. But
there is no evidence, or even any suggestion, that a customer’s username and/or
account number would tell plaintiffs whether, for instance, a particular customer
had a gambling addiction or had elected not to receive promotional materials.
- 18 -
D.
Balance of the Harms
We agree with the defendants that transferring customer
accounts overnight to a new ADW service would upset customers, and
it is probable that some of those customers would never return to
Twinspires.
The fact the customers might also blame plaintiffs is
cold comfort for the defendants.
Indeed, even if we had found
some basis in the CBA or trade-secret law to support such relief,
we would be reluctant to upset the status quo in this way.
Luring
away Twinspires’ existing customers with a new ADW service may be
challenging, but that is plainly what the CBA contemplates.
Turning to plaintiffs’ alternative request for relief, defendants
conceded at the hearing that it would cost them very little to
disclose the customers’ usernames or account numbers.
We have
already
require
concluded,
however,
that
the
CBA
defendants to disclose that information.
does
not
Defendants are not
obligated to help their competitors, even if they can do so
without significant harm to themselves.
The balance of harms
favors denying the injunction.
E.
Public Interest
As plaintiffs point out, the public interest generally favors
contract enforcement and trade-secret protection. (See Pls.’ Mot.
at 12-13.)
For the reasons we have already discussed, however,
those policies do not support imposing the injunction that the
plaintiffs have requested.
The public interest would be harmed,
- 19 -
not furthered, if we rewrote the CBA in the name of equity or
relied on a tort theory to circumvent its express terms.
CONCLUSION
Plaintiffs’ motion for a preliminary injunction (13) is
denied.
A status hearing is set for July 27, 2011 at 10:30 a.m.
DATE:
July 21, 2011
ENTER:
___________________________________________
John F. Grady, United States District Judge
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