Matrix North American Construction, Inc. v. Advantage Industrial Systems, LLC et al
OPINION AND ORDER DENYING 53 Motion for Preliminary Injunction by Plaintiff Matrix North American Construction, Inc. Signed by Judge Philip P Simon on 2/17/2021. (mrm)
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
MATRIX NORTH AMERICAN
ADVANTAGE INDUSTRIAL SYSTEMS,
INC., et al.,
OPINION AND ORDER
Five former employees of Plaintiff, Matrix North American Construction, Inc.,
jumped ship after the company lost U.S. Steel, its biggest steel client, and they took with
them a treasure trove of documents to their next employer, Advantage Industrial
Systems, Inc. About six months after filing the complaint in this matter, Matrix filed
this Motion for Preliminary Injunction. [DE 53.] Despite the fact that AIS has turned
over thumb drives to a third-party forensic examiner which showed the stolen
information has largely not been accessed, Matrix still seeks an order that Defendants
may not use or rely upon any of Matrix’s confidential information or trade secrets and
for a forensic examination to identify any of Matrix’s information that remains in
Defendants’ possession, so it can be destroyed. Because I find that Matrix is not
suffering from irreparable harm, an injunction is not warranted.
I held a hearing in this matter on February 8, 2020, at which James Faroh, the
previous Vice President of Industrial and current Special Projects Advisor at Matrix,
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testified at length. Matrix provides procurement, construction, maintenance and repair
services to energy and industrial markets in North America. Matrix’s steel business
used to consist of two main disciplines: steel maintenance and capital construction.
[Faroh Dec., DE 54-1, ¶ 10.] On the steel maintenance side, Matrix had two main
customers: U.S. Steel and ArcelorMittal. However, in the Fall of 2019, Matrix got into a
dispute with U.S. Steel over a project in Ohio, and on January 17, 2020, U.S. Steel
ordered Matrix off of the project and cut ties with Matrix. [Joint Stip. Of Fact, DE 78, ¶
34.] Matrix’s only other steel maintenance customer was ArcelorMittal. Because it
made no sense to maintain a whole division for steel maintenance when it only had one
customer, Matrix decided to get out of the steel maintenance business altogether. On
February 5, 2020, Matrix formally announced its decision to exit the steel maintenance
portion of its business in the United States. [Faroh Dec. ¶ 142.]
At around the same time that the Matrix/U.S. Steel dispute in Ohio was
percolating, the 5 individual defendants in this case left Matrix to go to work for AIS.
Most of the individual defendants resigned from Matrix at the beginning of February
2020, and some like Steven Harker, II left earlier. It seems pretty clear that, perhaps
with the exception of Harker, the employees could see the writing on the wall that their
jobs would be in jeopardy if they stayed with Matrix. So they all left in short order at
around the same time. What is equally clear is that when they left, they took with them
to AIS a cache of documents including templates, information from the operations
handbook, pricing information, and forms that Matrix uses in its business. Matrix
argues that the five defendants leaving (and taking confidential information over to
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AIS), factored into the decision to discontinue its steel work. But the evidence at the
hearing shows that this confuses cause and effect. The employees abandoning ship
didn’t cause Matrix to lose the business; it was the effect of it. Indeed, the relationship
between Matrix and U.S. Steel had begun to deteriorate several months before the
employees jumped ship. And when U.S. Steel formally put an end to the relationship, as
Mr. Faroh testified, it didn’t really make sense for Matrix to continue in its steel
maintenance side of the business for only one customer.
So where do things stand right now between Matrix and AIS? According to Mr.
Faroh, Matrix does not currently do steel maintenance work, and has no plans to get
back into steel maintenance business. On the flipside, AIS does not do capital
construction work, and Mr. Faroh could not think of an instance where AIS competed
against Matrix for capital construction work. The takeaway is that, presently, AIS is in
the steel maintenance business without competition from Matrix. And vice versa,
Matrix remains in the capital construction business without competition from AIS. In
short, they aren’t competitors.
“[A] preliminary injunction is an extraordinary and drastic remedy, one that
should not be granted unless the movant, by a clear showing, carries the burden of
persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original); see
also Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of Am., Inc., 549
F.3d 1079, 1085 (7th Cir. 2008) (“a preliminary injunction is an exercise of a very farreaching power, never to be indulged in except in a case clearly demanding it.”). “In
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order to obtain a preliminary injunction, the moving party must show that: (1) they are
reasonably likely to succeed on the merits; (2) no adequate remedy at law exists; (3) they
will suffer irreparable harm which, absent injunctive relief, outweighs the irreparable
harm the respondent will suffer if the injunction is granted; and (4) the injunction will
not harm the public interest.” Joelner v. Village of Washington Park, Illinois, 378 F.3d 613,
619 (7th Cir. 2004).
The party seeking the injunction must first show a reasonable likelihood of
success on the merits of its claims and a sufficiently imminent threat of irreparable harm
to it if no injunction is issued. See Aircraft Owners and Pilots Ass’n v. Hinson, 102 F.3d
1421, 1424 (7th Cir. 1996). If the moving party meets these two criteria, then the court
must balance the harms of erroneously granting or erroneously denying injunctive
relief, and must consider the public interest, including the effect an injunction or the
absence of an injunction would have on the interests of people not before the court. Id.
In this case, even giving Matrix the benefit of the doubt and assuming that it is
reasonably likely to succeed on the merits, a preliminary injunction is still not
appropriate because Matrix hasn’t shown that it will suffer irreparable harm absent
injunctive relief. In other words, I never make it to the balancing test because Matrix
has not shown that it will be irreparably harmed if no injunction is entered.
Matrix argues that the loss of its exclusive use of its confidential information and
trade secrets alone constitutes irreparable harm. [DE 54 at 15-17.] I don’t think this is
enough. There is simply no proof of continuing irreparable harm in this case. It is
undisputed that Matrix is no longer in the steel maintenance business, U.S. Steel is no
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longer its client, and Matrix now only does capital construction in the United States.
And it is undisputed that AIS does not do capital construction work, but does steel
maintenance instead. In other words, they really aren’t competitors. Matrix has left the
industry that AIS is in. While there may have been some initial harm done when the
individual employees left Matrix and took information with them to AIS, courts have
held that there is no irreparable harm to justify an injunction when a plaintiff alleges
that “the damage is done.” Arjo, Inc. v. Handicare USA, Inc., No. 18 C 2254, 2018 WL
5298527, at *9 (N.D. Ill. Oct. 25, 2018). Allegations of past irreparable harm are
insufficient to support a preliminary injunction – the plaintiff has to demonstrate that it
will suffer future harm in the interim, prior to the final resolution of the lawsuit. Matrix
has not done this. Moreover, while these documents may have made it easier for AIS to
quickly gain U.S. Steel as a client, this was not to Matrix’s detriment. The relationship
between U.S. Steel and Matrix had deteriorated to such an extent that the likelihood of
it ever being resuscitated is remote. So Matrix no longer works for U.S. Steel and has no
prospect of doing so in the near future. Because it is no longer in the steel maintenance
business, it is difficult to see how it will be harmed in that business moving forward.
What’s more, although there is an abundance of evidence that the former Matrix
employees stole a trove of documents on their way out the door, there is scant evidence
that AIS is actually using those documents. Matrix’s counsel conceded at the hearing
that he did not have specific evidence of the individual defendants or AIS using any of
the information that was taken. Mr. Faroh testified he was not aware of AIS using any
confidential Matrix information to land any capital construction business and he was
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not aware of any circumstances showing AIS is threatening or planning to use any
Matrix confidential information. Mr. Faroh was also not aware of any of the individual
defendants doing anything to currently interfere with Matrix at all.
There is also the evidence from the forensic computer specialist. The parties
disagree as to the conclusion to be drawn from the forensics. AIS claims it shows that
the information was never accessed after the individual defendants left Matrix. [DE 66
at 17; DE 66-8.] But Matrix contends that the “last accessed” date shows that some
documents were downloaded/accessed recently. [DE 67 at 9.] Nevertheless, the parties’
joint stipulation of facts about the forensics reflects that most of the thousands of
documents were accessed or modified only before the individual defendants left Matrix.
[DE 76.] In other words, most of the stolen documents were never accessed after the
employees left their employment with Matrix. That is also evidence that the risk of
future irreparable harm is fairly remote in this case.
Although Matrix claims that irreparable harm exists in all cases like this
involving misappropriation of trade secrets, this is a mischaracterization of the law.
The cases cited by Matrix are distinguishable. For example, the court in Badger
Daylighting Corp. v. Palmer, No. 1:19-cv-02106-SEB-MJD, 2019 WL 4572798, at *12 (S.D.
Ind. Sept. 20, 2019), found an injunction was necessary in part because of the
defendant’s “reticence in taking responsibility for his wrongful taking of Badger’s
business documents has complicated the Court’s and the parties’ ability to resolve these
issues without injunctive relief.” Matrix’s conduct was quite different in this case, as it
has already given the drives with AIS information to a forensic specialist and has
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worked with Matrix to resolve the document issue. In CDW LLC v. NETech Corp., 722
F.Supp.2d 1062, 1064 (S.D. Ind. 2010), the court ruled that “[w]hen an employee has
been hired in violation of an employment agreement, Indiana courts will infer that the
plaintiff has been irreparably harmed.” And in CDW, the defendant did not advance
any rationale to rebut the inference. Id. Here, Matrix has not showed that there were
any contractual provisions that would have prevented the individual defendants from
going to AIS, and AIS has put forth evidence and argument that Matrix is not being
irreparably harmed. Last, HCAFranchise Corp. v. Alisch, No. 3:16-cv-476, 2016 WL
10706285, at *7 (N.D. Ind. Aug. 12, 2016), involved misappropriating trade secrets and
violating a covenant not to compete between competitors and even there, the court
found the trade secret misappropriation gave rise to a presumption of irreparable harm,
which was unrebutted.
Even if I apply a presumption of irreparable harm in this case, AIS has
successfully rebutted that presumption. Therefore, Matrix cannot succeed by arguing it
is necessarily suffering irreparable harm just because its former employees took some
documents to AIS on their way out the door.
Because I find that Matrix will not suffer irreparable harm without an injunction,
its request for a preliminary injunction is denied. This isn’t to say that Matrix might not
ultimately be meritorious in its underlying claims in this lawsuit. I just don’t believe the
extraordinary remedy of an injunction and requiring AIS to submit to a forensic expert
evaluating all personal and business accounts on their e-mail and electronic devices is
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For the above-referenced reasons, Plaintiff, Matrix North American
Construction, Inc.’s Motion for Preliminary Injunction [DE 53] is DENIED.
ENTERED: February 17, 2021.
/s/ Philip P. Simon
PHILIP P. SIMON, JUDGE
UNITED STATES DISTRICT COURT
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