Payment Alliance International, Inc. v. Harbison

Filing 47

MEMORANDUM OPINION AND ORDER by Chief Judge Greg N. Stivers on 9/8/2021 GRANTING IN PART and DENYING IN PART in part Plaintiff's #5 Motion for Preliminary Injunction cc: Counsel(JWM)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:21-CV-00489-GNS-CHL
PAYMENT ALLIANCE INTERNATIONAL, INC.

PLAINTIFF

v.
NATHAN HARBISON

DEFENDANT
MEMORANDUM OPINION AND ORDER

This matter is before the Court on Plaintiff’s Motion for Preliminary Injunction (DN 5).
The motion is ripe for adjudication. For the reasons stated below, the motion is GRANTED IN
PART and DENIED IN PART.
I.

STATEMENT OF FACTS AND CLAIMS

Plaintiff Alliance International, Inc. (“PAI”) owns a national network to ATM terminals
and provides ATMs and ATM processing services to its customers. (Compl. ¶ 2, DN 1).
Defendant Nathan Harbison (“Harbison”) formerly served in numerous positions at PAI
including Director of Business Development. (Hayes Decl. 3-4, DN 1-2). As a condition of his
employment, Harbison signed a non-solicitation and non-disclosure agreement (“Agreement”).
(Haynes Decl. Ex. A-1, DN 1-2). In addition to the Agreement, Harbison also signed: (i) a
verification form (“Verification”) acknowledging that he had received PAI’s handbook, which
contained policies regarding privacy and information security; and (ii) an acknowledgment
(“Acknowledgment”) regarding the receipt of the employee handbook. (Haynes Decl. Ex. A-2,
DN 1-2; Hayes Decl. Ex. A-3, DN 1-2).
When Harbison left his employment, his access to PAI’s computer systems was revoked.
(Compl. ¶ 25). His access, however, was temporarily reinstated while he assisted PAI with the
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completion of a final revenue report. (Compl. ¶ 26). PAI subsequently learned that Harbison
downloaded trade secrets and confidential information of PAI around the time of his resignation.
(Compl. ¶¶ 26-31).
Plaintiff then filed this action asserting claims for a violation of the Kentucky Uniform
Trade Secrets Act (“KUTSA”), breach of contract, breach of fiduciary duty, and unfair
competition. (Compl. ¶¶ 40-64). After Plaintiff moved for a temporary restraining order and
preliminary injunction, the Court granted a temporary restraining order and permitted the parties
to conduct limited discovery. (TRO, DN 8; Am. TRO, DN 12). Following a hearing on
Plaintiff’s request for a preliminary injunction, the motion is ripe for a decision.
II.

JURISDICTION

The Court has subject matter jurisdiction over this action under 28 U.S.C. § 1332 as there
is complete diversity between the parties and the amount in controversy exceeds the sum of
$75,000.00.
III.

STANDARD OF REVIEW

In determining whether to grant a preliminary injunction, a court considers the following
factors: “(1) whether the movant has a strong likelihood of success on the merits; (2) whether
the movant would suffer irreparable injury without the injunction; (3) whether issuance of the
injunction would cause substantial harm to others; and (4) whether the public interest would be
served by the issuance of the injunction.” Certified Restoration Dry Cleaning Network, LLC v.
Tenke Corp., 511 F.3d 535, 542 (6th Cir. 2007) (quoting Tumblebus Inc. v. Cranmer, 399 F.3d
754, 760 (6th Cir. 2005)). A court should make specific findings concerning each factor, “unless
fewer are dispositive of the issue.” In re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir.
1985) (citing United States v. Sch. Dist. of Ferndale, 577 F.2d 1339, 1352 (6th Cir. 1978)). The

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movant bears the burden of making a “clear showing” of the need for the grant of a preliminary
injunction. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997); see also Gonzales v. O Centro
Espírita Beneficente Uniã do Vegetal, 546 U.S. 418, 429 (2006) (“[T]he burdens at the
preliminary injunction stage track the burdens at trial.”).
IV.
A.

DISCUSSION

Likelihood of Success

The first factor is the likelihood that Plaintiff will prevail on the merits of its claims. See
Tenke Corp., 511 F.3d at 542 (citation omitted). In relevant part, the Agreement provides:
2.
Non-Solicitation. During the period commencing on the first date of
Employee’s employment with the Company and ending on the third (3rd)
anniversary following termination of Employee’s employment with the Company,
the Employee shall not, except as an employee of the Company, directly or
indirectly engage in the solicitation of ATM equipment sales, leasing or
placement; ATM processing services; credit card or debit card processing
services, or the provision of any products or services competitive with Company
services (hereinafter jointly referred to as “Products and/or Services”), from or for
any current or potential customer, independent sales organization, sponsoring
agent, or correspondent financial institution with which the Company has
solicited and/or is providing such Products and/or Services during the period of
the Employee’s employment with the Company.
3.
Non-Disclosure.
During the period commencing on the date of
Employee’s employment with the Company and ending on the third (3rd)
anniversary following the termination of the Employee’s employment, the
Employee shall not directly or indirectly divulge, furnish, or make accessible to
anyone or use in any way other than in the ordinary course of business of the
Company any Confidential Information of the Company; any Confidential
Information of any Company vendor; service provider bank or merchant client;
co-venturers; and/or any other third parties doing business with Company
(hereafter “Third Parties”), regardless of the form of the Information, whether
written or verbal, tangible or intangible, electronic or visual whether such
Confidential Information was developed by the Company, the Employee a Third
Party or by others. “Confidential Information” shall include but not be limited to
all “non-public personal information” of Company’s merchant customers as that
phrase is defined by Title V of the Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et
seq.). Confidential Information shall also include but not be limited to any
Company data or Information that is proprietary and/or not generally known to
the public regarding Company’s Products and/or Services including but not
limited to Company’s business marketing, advertising and promotional plans;
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contracts, agreements, business strategies, policies, procedures or practices;
inventions, patents and patent applications, discoveries, notes, compilations,
studies, ideas, concepts, software in various stages of development, designs,
drawings, specifications, techniques, technical processes, models, data,
documentation, diagrams, flow charts, research, development, “know-how,” trade
secrets, cost/price lists and pricing policies; credit card or ATM sales volumes,
average credit card sales tickets, number of outlets, and terminal equipment of the
Company [sic] merchant customers, financial Information, including budgets,
forecasts, projections, operating results and financial statements; and/or any
Confidential Information of the Company or any Confidential Information that
Company has received from any other Third Parties that Company is obligated to
treat as Confidential. [“]Confidential Information” shall not include information
in the public domain or information which is readily available from sources other
than the Company.
(Haynes Decl. Ex. A-1, DN 1-2).
In part, the Verification states:
I . . . agree to take all reasonable precautions to assure that PAI Confidential
Information and/or information that has been entrusted to PAI by third parties
such as customers, will not be disclosed to unauthorized persons. At the end of
my employment or contract with PAI, I agree to return to PAI all Information to
which I have had access as a result of my position with the Company. I
understand that I am not authorized to use this information for my own purposes,
nor am I at liberty to provide this information to third parties without the express
written consent of PAI.
(Haynes Decl. Ex. A-2, DN 1-2). Similarly, the Acknowledgment states:
I understand that, as a result of my employment, I may have access to confidential
information, including (but not limited to) salary information about employees,
financial information about Payment Alliance International, and customer
Information.
I understand and agree that, as a condition to my continued employment, I am
required to keep all of the above information confidential and not disclose any
such information to any person unless authorized to do so by the head of my
department. I understand that unauthorized discussion or disclosure of any
confidential information may result in immediate termination of my employment.
(Haynes Decl. Ex. A-3, DN 1-2).
At the hearing, Defendant has admitted that: (i) he used a USB device to download
documents containing PAI’s confidential customer and financial information; (ii) he sent PAI’s
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confidential customer and financial information to his personal email address in the days before
leaving PAI, and (iii) he sent to a competitor of PAI information regarding “cold call” targets
while Defendant was still employed by PAI. (Prelim. Inj. Hr’g Tr. 28:17-29:15, 30:9-32:1, DN
43). Although Defendant has disavowed any interest in further use of PAI’s information, any
such use would cause irreparable harm to PAI under the express terms of the Agreement.
With respect to Plaintiff’s claims regarding Defendant’s violation of the non-solicitation
provision of the Agreement, Plaintiff has not met its burden of showing a strong likelihood of
success on the merits. The Agreement was drafted by PAI, and any ambiguity therefore must be
construed against it. See Weinberg v. Ghari, 338 S.W.3d 307, 313 (Ky. App. 2011) (“[O]ur law
is clear that the language of a contract, if susceptible to two meanings, will be construed against
the drafter.” (citing Theatre Realty Co. v. P.H. Meyer Co., 48 S.W.2d 1, 2 (Ky. 1932))).
Further, the non-solicitation obligation is in the nature of a non-compete agreement, which is to
be given a narrow construction. See Snider Bolt & Screw, Inc. v. Quality Screw & Nut, No. 3:05CV-738-H, 2010 WL 1032799, at *5 (W.D. Ky. Mar. 17, 2010) (“The agreement did not prohibit
Scott from ‘working’ for a competitor; it only prohibited Scott from ‘selling’ to or ‘soliciting’
from Snider’s current or former customers. That is a very narrow prohibition, and properly so.
In Kentucky, a non-compete agreement must be limited in scope and duration to be enforceable.”
(citing Calhoun v. Everman, 242 S.W.2d 100, 102 (Ky. 1951))). It appears that the new business
described by Defendant during the hearing does not involve the sale of goods and services which
Plaintiff has offered to its customers and potential customers during the term of Defendant’s
employment with PAI. Instead, as described by Defendant (and reflected in the name of his new
venture “National ATM Brokerage Company”), he intends to provide brokerage services to
ATM operators wishing to sell their operations. (Prelim. Inj. Hr’g Tr. 70:15-24, 73:19-25).

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Plaintiff has not demonstrated that it has provided or offered similar brokerage services to its
customers. Thus, Plaintiff’s request for injunctive relief to prevent Defendant from providing or
offering to provide brokerage services to Plaintiff’s customers is denied.
Plaintiff also seeks to preclude Defendant from using the contacts on his cellphone.
Plaintiff has not demonstrated a strong likelihood of establishing that this contact information is
not in the public domain or readily available from other sources to prevail on its claim for a
breach of the Agreement. (Hayes Decl. Ex. A-1). Likewise, those contacts do not appear to be
covered by the relevant provisions in either the Acknowledgment or the Verification, and any
ambiguity must be construed against Plaintiff. (Hayes Decl. Ex. A-2; Hayes Decl. Ex. A-3).
Thus, the Court concludes that Plaintiff has failed to show that it is likely to prevail on its claims
relating to Defendant’s cellphone contacts.
B.

Irreparable Injury

The Court must also consider whether Plaintiff will suffer irreparable injury absent the
granting of a preliminary injunction. See Tenke Corp., 511 F.3d at 542 (citation omitted). As the
Sixth Circuit has noted, “a plaintiff’s harm is not irreparable if it is fully compensable by money
damages. However, an injury is not fully compensable by money damages if the nature of the
plaintiff’s loss would make damages difficult to calculate.” Basicomputer Corp. v. Scott, 973
F.2d 507, 511 (6th Cir. 1992) (citing Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380,
386 (7th Cir. 1984)).
In this instance, any potential harm to Defendant by the issuance of this Preliminary
Injunction as to the trade secrets and confidential information is a result of Defendant’s own
wrongdoing, and is outweighed by PAI’s injuries and harm.

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Restraining Defendant from

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disseminating trade secrets and breaching his restrictive covenants will merely preserve the
status quo until this matter is resolved on the merits.
C.

Substantial Harm to Others

The third factor is whether others will be substantially harmed by granting injunctive
relief. See Tenke Corp., 511 F.3d at 542 (citation omitted). This factor does not weigh against
granting Plaintiff’s motion. To the contrary, the interests of Plaintiff’s customers would be
protected by prohibiting the disclosure of the customers’ confidential information through the
issuance of a preliminary injunction.
D.

Public Interest

The final factor is whether the public interest would be served by granting the
preliminary injunction. See Tenke Corp., 511 F.3d at 542 (citation omitted). As the Sixth
Circuit has noted, “[e]nforcement of contractual duties is in the public interest” and weighs in
favor of issuing a preliminary injunction. Tenke Corp., 511 F.3d at 551. Thus, the issuance of
injunctive relief with respect to Plaintiff’s trade secrets and confidential information will not
harm the public interest because the public has an interest in having contractual obligations
upheld.
V.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED as follows:
1.

Plaintiff’s Motion for Preliminary Injunction (DN 5) is GRANTED IN PART

and DENIED IN PART.
2.

Defendant is enjoined and restrained from, directly or indirectly, whether alone or

in concert with his current employer or others:

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a.

using, disclosing, transferring, or transmitting (for any purpose) any

confidential or trade secret information belonging to PAI;
b.

using PAI’s confidential customer information to target PAI’s customers;

c.

violating the terms of the Agreement dated August 22, 2016, by directly or

indirectly engaging in the solicitation of products or services competitive with the
products and services offered by PAI from or for any current or potential customer,
independent sales organization, sponsoring agent, or correspondent financial institution
with which PAI has solicited and/or is providing such products and/or services during the
period of Defendant’s employment with PAI (provided, however, that Defendant is not
enjoined from engaging in the business of providing brokerage services to ATM
operators); and
d.

destroying, deleting, erasing, modifying, or otherwise failing to preserve

intact any documents, records, or files (written or electronically stored) or any other
evidence regarding or related to Plaintiff’s claims and allegations in this action,
including, but not limited to, any evidence stored on any personal computer, cell phone,
USB device, personal or other email system/network.
3.

Defendant, and anyone acting in concert or participation with him, is ordered to

return to PAI all confidential and trade secret information belonging to PAI, including copies and
any and all electronically stored information, provided that any such information purged from an
electronic source shall be printed prior to purging and all copies provided to PAI, within twentyfour (24) hours of entry of this Order and within forty-eight (48) hours of future discovery of
such information being in their possession.

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4.

Pursuant to Fed. R. Civ. P. 65(c), PAI gave security in the amount of $10,000 to

the Clerk of Court, which the Court considers proper based upon the current record, as security
for the Temporary Restraining Order. That $10,000 shall serve as security for this Preliminary
Injunction.
5.

This Preliminary Injunction is binding upon Defendant, his agents, any employer,

and any others in active concert or participation with him who receives actual notice of this
Memorandum Opinion and Order.
6.

This Preliminary Injunction shall remain in full force and effect until this Court

rules on Plaintiff’s request for a permanent injunction at the conclusion of the trial of this matter.

September 8, 2021

cc:

counsel of record

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