API Americas Inc. v. Miller

Filing 18

TEMPORARY RESTRAINING ORDER granting 5 Motion for TRO. See Order for details. Signed by District Judge Carlos Murguia on 11/6/17. (kao)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
API AMERICAS INC.,
Plaintiff,
v.
PAUL W. MILLER,
Defendant.

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Case No. 17-cv-02617-CM-GLR

TEMPORARY RESTRAINING ORDER
This matter comes before the Court on the Application for Temporary Restraining Order
(Doc. 5) (“Application”) filed by Plaintiff, API Americas Inc. f/k/a API Universal Foils Inc. f/k/a
API Foils, Inc. (“API”). API seeks to enjoin and restrain Defendant, Paul W. Miller (“Miller”)
from using (and further requiring him to return) the trade secrets and other confidential and
proprietary information that he allegedly took from API; cease and desist from contacting and
soliciting API’s customers, most notably Hallmark Cards Incorporated (“Hallmark”); and cease
and desist any employment or other competition with API, most notably his alleged employment
with and work for UNIVACCO Foils Corporation (“Univacco”) (allegedly a direct competitor of
API); unless and until specifically permitted to do otherwise by further Order of this Court after
due consideration and rulings on API’s request for preliminary injunction.
After due consideration of the Application (Doc. 5) and Verified Complaint (Doc. 1)
(“Complaint”), and being duly advised in the premises, the Court grants Plaintiff’s Application
for Temporary Restraining Order [Doc. 5] and finds, concludes, and orders as follows:
1.

The Court has jurisdiction over the parties and the subject matter of this action.

2.

Fed. R. Civ. P. 65 (“Rule 65”), 18 U.S.C. § 1836(b), K.S.A. 60-3321, and 18

U.S.C. § 1030(g) provide for a restraining order with or without notice.

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3.

Prior to entry of this Temporary Restraining Order, API, on October 24, 2017,

provided advance notice to Miller, via email to his personal account, of API’s intent to seek the
instant Temporary Restraining Order. In particular, API advised Miller that “we will be asking
the Court to immediately enter a Temporary Restraining Order, requesting the injunctive relief
set forth in our Verified Complaint,” that “time is of the essence,” and that “[i]f we do not hear
from you promptly, we will assume that you have no objection to our above request and will
look for your Answer to our Verified Complaint in due course.” API also provided a copy of the
Complaint via the same manner.
4.

On October 25, 2017, this Court entered an Order requiring, in part, that

“Defendant Paul W. Miller must file any Response on or before close of business (5:00 PM) on
10/30/2017.” Doc. 6. Later that same day, API filed a Notice of Court Order and Hearing on
Plaintiff’s Application for Temporary Restraining Order (Doc. 7), which specifically states, in
part, that “Defendant Paul W. Miller must file any response to the Application [for Temporary
Restraining Order (Doc. 5)] on or before 5:00 P.M. on October 30, 2017.” API’s counsel emailed
a copy of this Notice (Doc. 7) to Miller on October 25, 2017.
5.

On October 26, 2017, Miller was personally served with, inter alia, a copy of the

Summons, Verified Complaint, Application for Temporary Restraining Order, and Notice (with
exhibits thereto).
6.

Miller did not file any response to the Application for Temporary Restraining

Order by October 30, 2017 as required by this Court’s Order (Doc. 6).
7.

Because API provided advance notice to Miller, the requirements of Rule 65(b)

for issuing a restraining order without notice are inapplicable.

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8.

Thus, Rule 65, 18 U.S.C. § 1836(b), K.S.A. 60-3321, and 18 U.S.C. § 1030(g),

individually and collectively, permit this Court to issue a temporary restraining order without
bond to preserve the status quo until further Order of the Court.1 The issuance of a restraining
order is a matter for the sound discretion of the Court.2
9.

Miller is an individual residing in Johnson County, Kansas.

10.

API is a corporation organized, existing, and in good standing under the laws of

the State of Delaware. API is registered and in good standing to do business in both Kansas and
New Jersey.
11.

API is in the business of designing, manufacturing, and distributing hot stamping

foils and other products. API asserts that its business depends on its unique technology,
manufacturing processes, marketing strategies, customer and prospective customer relationships,
and its business models and strategies.
12.

API asserts that Miller started working for API in June 2007 as a Customer

Service Representative, and that over the years, was promoted to Customer Service Manager and
then Technical Service and Account Manager. API further states that in his role as a Technical
Service and Account Manager, Miller’s major job duties and responsibilities included, without
limitation, supporting API’s customers, sales, and CSR groups with technical knowledge on how
foil is applied on all types of application equipment; supporting the sale of API’s laminates;
managing the outflow and follow up of trial samples to customers; evaluating and reviewing
complaint material and forwarding to the technical department for evaluation and any necessary
follow up; assisting in API’s activities at all customer trade shows; assisting manufacturing in
1

Snyder v. Am. Kennel Club, 575 F. Supp. 2d 1236, 1241 (D. Kan. 2008) (a restraining order preserves the
status quo until the hearing is held for the preliminary injunction, the status quo being “the last uncontested status
between the parties which preceded the controversy until the outcome of the final hearing”).
2

Equimed, Inc. v. Genstler, 925 F. Supp. 710, 716 (D. Kan. 1996).

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product quality control and quality assurance of products; ensuring the product recommended
would perform as expected and provide the know-how so as to consult with the customer; and
managing the outflow of trial samples to customers. In particular, API asserts that it entrusted
Miller as its Account Manager for Hallmark effective the Third Quarter of 2016.
13.

API states that on July 6, 2011, Miller and API entered into a written Employee

Confidentiality, Non-Solicitation and Non-Competition Agreement (“Agreement”), which is
attached to both the Complaint and the Application as Exhibit 1, and which provides in part that
Miller and API understand and agree that:
[API] is in the business of designing, manufacturing and distributing hot stamping
foils and other products, that [API’s] business depends on its unique technology,
manufacturing processes, marketing strategies, customer and prospective
customer relationships, and products, potential products and its business models
and strategies;
***
[API] spends substantial time, money and effort in identifying its customers,
learning their business needs, and designing manufacturing and distributing
products to meet those needs;
***
[API] is engaged in the hot stamping foils business on a nationwide basis and has
and solicits customers throughout the United States; and
***
through employment with [API] [Miller] will gain valuable information and
knowledge concerning [API’s] business and the business of [API’s] customers
and that if [Miller] were to compete with [API] in its business through the use of
that information and knowledge, [API] would be severely and irreparably
injured[.]
Doc. 1-1, at p. 1.
14.

API asserts that Miller “knowingly and voluntarily agree[d] to the terms and

conditions of this Agreement.” Doc. 1-1, at p. 5.

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15.

API states that Miller voluntarily and unexpectedly resigned in September 2017,

and that during his employment with API, Miller acquired significant confidential and
proprietary information and trade secrets of API, including but not limited to API’s product
formulations/recipes, pricing, quality control, and other strategies with its customers. Because of
the confidential and proprietary information that Miller was privy to in light of his employment
with API, API asserts, Miller was subject to the Agreement which prohibits, among other things:
(a) the use or disclosure of confidential and proprietary information for Miller’s own benefit or
the benefit of third parties; (b) employment with a direct competitor (as specifically defined in
the Agreement); or (c) solicitation of an existing customer.
16.

API asserts that it has recently learned that prior to Miller’s departure from API

that he downloaded and emailed certain of API’s trade secrets and other confidential and
proprietary information to his personal email account. API further states that it has also learned
that Miller is now employed by Univacco, a direct competitor of API, as its Midwest Sales
Manager, working in the very same territory that he did with API, and calling on one of API’s
largest customers in that area, Hallmark, for whom API had entrusted Miller to serve as its
Account Manager.
17.

API states that as an example of how key Hallmark is as a customer to API, that

API opened a facility in Lawrence, Kansas several years ago for the benefit of Hallmark.
18.

API asserts that Miller’s transfer of trade secrets and confidential and proprietary

information to his personal email for his own personal benefit and/or the benefit of his new
employer, Univacco, coupled with the fact that he is now employed by a direct competitor of
API (all actions which API claims are in breach of Miller’s Agreement and/or applicable law),
jeopardizes API’s business contract and relationship with its biggest foil customer, Hallmark.

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API further asserts that Miller, in direct violation of his Agreement with API, has been and is
actively soliciting Hallmark to end its relationship with API and join Univacco, specifically
including a recent (on or about October 16, 2017) presentation and testing on Univacco’s behalf
to Hallmark representatives at their facility in Lawrence, Kansas.
19.

Upon learning this information, API states that it wrote to Miller (along with his

new employer, Univacco, by separate letter) on October 18, 2017, requesting written assurances
that he was not violating his contractual agreements with API, specifically including his
covenants not to compete with API (such as by accepting employment with Univacco) or to
solicit API’s existing customers (like Hallmark). API states that copies of these letters are
attached to both the Complaint and the Application as Exhibits 3 and 4, respectively. API asserts
that as of its filing of the Application, neither Miller nor Univacco responded.
20.

API states that Miller has already expressly agreed and acknowledged that if he

violated “any of the[] [non-competition or non-solicitation] covenants” in the Agreement that it
“will result in immediate, irreparable and substantial harm to [API] and its business.” Doc. 1-1,
at § 3(c). Further, API states that Miller expressly agreed that “[API] is entitled to preliminary
and permanent injunctive relief and any other remedies which are available to enforce these
covenants.” Doc. 1-1, at § 3(c). API asserts that covenants not to compete are valid and
enforceable where they are “reasonable under the circumstances and not adverse to the public
welfare.”3
21.

API further asserts that even without Miller’s binding contractual admissions, this

Court has also recognized these principles: “The loss of customers and sales and the threat of the
continuation of such loss to a legitimate business interest is sufficient to show that a plaintiff will

3

Weber v. Tillman, 913 P.2d 84, 89 (Kan. 1996).

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suffer irreparable injury unless protected by the court.”4 “Plaintiff’s evidence is sufficient to
show that absent preliminary injunctive relief, it is likely to suffer some irreparable harm in the
form of lost customers, loss of goodwill, and unfair competition by the defendant, prior to any
determination on the merits of the claims.”5 “Plaintiff’s evidence of harm goes beyond
speculation and cannot be adequately measured in damages.”6
22.

Therefore, API maintains, particularly in light of Miller’s alleged breach of the

non-competition covenants by working for Univacco and his alleged breach of the nonsolicitation covenants by contacting and soliciting Hallmark in an attempt to lieu Hallmark away
from API and into his new customer portfolio with Univacco, that API faces immediate and
irreparable harm that cannot be remedied with an adequate remedy at law.
23.

API further asserts that given the severe injury that Miller allegedly threatens to

inflict on API if not enjoined (such as soliciting API’s leading foil customer to a direct
competitor, all while using API’s trade secrets and proprietary information that he
misappropriated from API, as just one example), that the threated injury to API outweighs
whatever damage the TRO might cause to Miller, all of which, API claims, Miller has created
and inflicted upon himself.
24.

API further states that Miller also knowingly and voluntarily agreed that the non-

competition and non-solicitation covenants “are reasonable and necessary to protect the
legitimate interests of” API.”7 API further claims that applicable law is in accord, such that

4

Oldham Graphic Supply, Inc. v. Cornwell, No. 09-1250-WEB-KMH, 2009 U.S. Dist. LEXIS 85214, at *41–
42 (D. Kan. Sep. 17, 2009).
5

Id.

6

Id.

7

Doc. 1-1, at § 3(c) & p. 5.

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employers have a protectable interest in, among other things, their “trade secrets, confidential
business information and customer relationships.”8
25.

API further claims that the requested Temporary Restraining Order will promote

the public interest, rather than somehow adversely affect it, in part because this Court has
recognized that “‘[a]lthough restrictive provisions in contracts of employment must be
reasonable and not such as to contravene the public welfare, the paramount public policy is that
freedom to contract is not to be interfered with lightly.’”9 API further points to this Court’s
observation that “Kansas courts have made it clear that freedom to contract is paramount public
policy,” which supports a finding of enforcing the covenants.10
26.

API claims that it is likely to ultimately succeed on the merits in light of Miller’s

alleged breach of the restrictive covenants in the Agreement (set forth in Counts I–III of the
Complaint), and further, his alleged violations of the federal Defend Trade Secrets Act (Count
V), Kansas Uniform Trade Secrets Act (Count VI), and federal Computer Fraud and Abuse Act
(Count VII). In particular, API asserts that Miller violated, and continues to violate, these federal
and state laws by, among other things, misappropriating and continuing to use API’s trade
secrets and other confidential and proprietary information.
27.

According to API, as further stated in Count I of the Complaint, Miller removed

API’s trade secrets and other confidential and proprietary information from API’s premises
without API’s consent, thus violating Section 1(c) of the Agreement and entitling API to

8

Coskey's Television & Radio Sales and Service, Inc. v. Foti, 602 A.2d 789, 794 (N.J. Super. Ct. App. Div.
1992); Oldham Graphic Supply, Inc. v. Cornwell, No. 09-1250-WEB-KMH, 2009 U.S. Dist. LEXIS 85214, at *41–
42 (D. Kan. Sep. 17, 2009) (“The loss of customers and sales and the threat of the continuation of such loss to a
legitimate business interest is sufficient to show that a plaintiff will suffer irreparable injury unless protected by the
court.”).
9

Digital Ally, Inc. v. Corum, No. 17-cv-02026-DDC-GLR, 2017 U.S. Dist. LEXIS 65094, at *30 (D. Kan. Apr.
28, 2017) (quoting Weber v. Tillman, 913 P.2d 84 (Kan. 1996)).
10

Id.

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injunctive relief. API further asserts that Miller has refused to return this information to API,
further breaching Section 1(c). API asserts, upon information and belief, that Miller has used,
and continues to use, this information in breach of his non-disclosure covenants and for his own
direct personal gain and benefit, and likely the direct or indirect gain and benefit of API’s direct
competitor (and Miller’s new employer), all to the severe detriment of API.
28.

API asserts, for reasons further articulated in Count II, that Miller has also

breached his non-competition covenants by accepting a position with Univacco and working as
its Midwest Sales Manager, working in the very same territory that he did with API, and calling
on one of API’s largest customers in that area, Hallmark, for whom API had entrusted Miller to
serve as the Account Manager.
29.

Additionally, API asserts, for reasons further stated in Count III, that Miller has

also breached his non-solicitation covenants, such as by actively contacting, recruiting, providing
testing and demonstrations for, and soliciting API’s leading customer, Hallmark, on behalf of
API’s direct competitor Univacco.
30.

Lastly, according to API, emergency relief is necessary here because without

entry of a Temporary Restraining Order that API will face immediate and irreparable harm due
to Miller’s own knowing, deliberate, and unlawful actions, and that there is not sufficient time to
wait for a hearing on the issue. Rather, as API continues to claim, API’s existing customer,
Hallmark, is in its final stages of awarding its foil business and may make its decision at any
moment. According to API, Miller, in direct violation of applicable law and his contractual
agreements, is currently actively engaged with API’s direct competitor Univacco in working to
solicit Hallmark’s foil business away from API (and to his new employer Univacco). API states
that delaying entry of the Temporary Restraining Order for any reason would enable Miller to

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continue his alleged unlawful competition, solicitation, and disclosure of API’s trade secrets and
other proprietary information that he misappropriated from API before he left. If allowed to
continue, API claims, especially if he succeeds in soliciting Hallmark, API asserts that it will be
left irreparably harmed and without adequate remedy at law, as it would be impossible to
calculate monetary damages. Therefore, API requests entry of a Temporary Restraining Order
immediately to temporarily enjoin and restrain Miller, with a preliminary injunction hearing set
when reasonably practical.
31.

Allowing Miller to continue with the actions and conduct indicated above may

result in immediate irreparable harm to API, specifically including an inability to obtain
monetary relief due to the reasons that API has stated.
32.

API may therefore suffer irreparable injury and harm from Miller’s actions should

a restraining order not immediately issue enjoining and restraining Miller from the conduct that
API has identified, as specifically enjoined below, unless and until specifically permitted to do
otherwise by further Order of this Court after due consideration and rulings on API’s request for
preliminary injunction.
33.

Any harm that Miller may allegedly incur as a result of the requested injunctive

relief is outweighed by the harm to API and/or the public or others should a restraining order not
issue.
34.

Injunctive relief is not adverse to the public interest.

35.

The requested Temporary Restraining Order must be granted to avoid immediate

irreparable injury, loss, and damage to API.
WHEREUPON, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that
Defendant, Paul W. Miller (“Miller”), is enjoined and restrained from:

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(i)
Disclosing, using, or providing any trade secrets or confidential or
proprietary documents or information of API (including without limitation the
Confidential Documents or Confidential Information as defined and identified in the
Agreement), directly or indirectly, to anyone (except for the return of such documents,
information, or trade secrets directly to API) and/or for his own benefit or for the benefit
of any third party; and further, requiring Miller to immediately return any and all such
documents, information, and trade secrets (in whatever form, including without limitation
copies, notes, drawings, video/audio tapes, and computer programs, disks, and duplicated
information) directly to API; (all as provided at § 1(b)–(c) of the Agreement);
(ii)
Competing in any way, directly or indirectly, with API in the hot stamping
foils business or any other business or aspect of API’s business in which API engaged
during Miller’s employment until a hearing on the preliminary injunction; and further,
from consulting with, providing services to, being employed by, or having any interest in
any business, firm, partnership, corporation, or other entity, whether as employee, officer,
director, agent, security holder, creditor, consultant, independent contractor or otherwise,
which competes in any way, directly or indirectly with API in the hot stamping foils
business or in any aspect of API’s business; which specifically includes from working
with API’s direct competitor Univacco, and/or competing with API by soliciting or
interacting with API’s existing client Hallmark until a full and complete hearing on the
preliminary injunction; (all as provided at § 2(c) of the Agreement); and
(iii) Directly or indirectly contacting, inducing, enticing or in any way
attempting to solicit the hot stamping foils business of any of API’s customers or
Prospective Customers (with a “Prospective Customer” defined as “any entity or
individual for which [API] has invested time, money and effort in soliciting as a customer
during [Miller’s] employment”) until a full and complete hearing on the preliminary
injunction; and further, from directly or indirectly inducing, enticing, soliciting, or hiring
or attempting to solicit, hire or employ any employee of API; which specifically includes
from contacting, communicating, inducing enticing, or in any way attempting to solicit
API’s existing customer Hallmark until a full hearing on the preliminary injunction; (all
as provided at § 3(a)–(b) of the Agreement).
IT IS FURTHER ORDERED that this Temporary Restraining Order issue without bond,
pursuant to Fed. R. Civ. P. 65, subject to further Order of this Court.

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IT IS FURTHER ORDERED that this Temporary Restraining Order shall remain in full
force and effect until further Order of this Court expressly modifying or lifting this Temporary
Restraining Order.
IT IS SO ORDERED.
Dated this 6TH day of NOVEMBER, 2017 at Kansas City, KS.
/s/ Carlos Murguia
Hon. Carlos Murguia,
United States District Judge
Submitted by:
LATHROP GAGE LLP

By: /s/ Jennifer M. Hannah
Jennifer M. Hannah, KS #19111
[e-mail]
2345 Grand Blvd., Suite 2200
Kansas City, MO 64108
Telephone: [phone]
Telecopier: [phone]
Mark A. Samsel, KS #24551
[e-mail]
10851 Mastin Blvd., Suite 1000
Overland Park, Kansas 66210-1669
Telephone: [phone]
Telecopier: [phone]
ATTORNEYS FOR PLAINTIFF
APPROVED AS TO FORM BY:
By:

/s/ Curtis N. Holmes
Curtis N. Holmes, KS #23434
[e-mail]
115 South Kansas Avenue
Olathe, KS 66061
Telephone: [phone]
Facsimile: [phone]

ATTORNEYS FOR DEFENDANT

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