Total Safety U.S., Inc. v. Rowland

Filing 116

ORDER AND REASONS Granting 97 Motion for Leave to File Second Amended Complaint; denying 98 Motion for Temporary Restraining Order and Preliminary Injunction; Further Ordered that the 111 114 Motions for Leave to File Replies, and 112 Motion for Leave to File Supplemental Memorandum, and 113 Motion to Strike are Dismissed as Moot. Signed by Judge Ivan L.R. Lemelle on 2/24/2014. (ijg, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TOTAL SAFETY U.S., INC

CIVIL ACTION

VERSUS

NO. 13-6109

GARY ROWLAND ET AL.

SECTION “B”(4)
ORDER AND REASONS

Nature of Motion and Relief Sought:
Before the Court are Total Safety U.S., Inc.'s ("Plaintiff"
or "Total Safety") Motion for Leave to File Second Amended
Complaint (Rec. Doc. 97) and third Motion for Temporary
Restraining Order and Preliminary Injunction Hearing (Rec. Doc.
98). Both Defendant Gary Rowland ("Rowland") and 24 Hour Safety,
LLC ("24 Hour Safety") have filed opposition to both motions.
(Rec. Docs. 107-110).1 Accordingly,
IT IS ORDERED that Plaintiff's Motion for Leave to File
Second Amended Complaint (Rec. Doc. 97) is GRANTED, and
Plaintiff's Motion for Temporary Restraining Order and
Preliminary Injunction Hearing is DENIED (Rec. Doc. 98).
IT IS FURTHER ORDERED that Total Safety's Motions for Leave
to File replies (Rec. Docs. 111 & 114) and Rowland's Motion for
Leave to File a supplemental memorandum and Motion to Strike
Total Safety's reply (Rec. Docs. 112 & 113) are DISMISSED as
moot.

1

The briefs were sufficient to allow resolution of the subject motions
without oral argument.

Procedural History and Facts of the Case:
This case arises from Rowland's decision to leave the employ
of Total Safety for that of 24 Hour Safety in October of 2013.
(Rec. Doc. 1 at 1). Rowland resigned on October 6, 2013, and
Total Safety initiated this suit four days later, asserting a
single claim for breach of an employment agreement and seeking
injunctive relief restraining Rowland from working for 24 Hour
Safety in certain regards. Id. at 10-13. The employment agreement
then in question was originally signed in 2005, was renewed on a
regular basis, and contained restrictive covenants under which
Rowland agreed to refrain from certain competitive activities
(hereinafter referred to as the "Employment Agreement") Id. at 27. Generally, those covenants provided that Rowland would neither
work for Total Safety's competitors nor solicit its employees to
the same within certain geographical areas, which were mostly
defined in terms of Louisiana Parishes. Id. Calcasieu Parish was
not within those geographical areas.
After a telephonic hearing, the Court granted Plaintiff's
TRO request on October 11, 2013. (Rec. Doc. 7). Ten days later,
on Rowland's motion and with his consent, the Court extended the
TRO by two weeks and continued a previously scheduled preliminary
injunction hearing by roughly the same period. (Rec. Doc. 17). On
October 21, 2013, just two days after the TRO was extended, Total

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Safety filed a First Amended Complaint ("FAC"), alleging that
Rowland not only breached his Employment Agreement but also acted
in concert with 24 Hour Safety to steal valuable trade secrets
and confidential information before his October 6 resignation.
(Rec. Doc. 18). On those grounds, the FAC added 24 Hour Safety as
a defendant and asserted claims for (i) Breach of Employment
Agreement, (ii) Misappropriation of Confidential Information and
Trade Secrets, (iii) Unfair Trade Practices, (iv)Conversion, (v)
Breach of Fiduciary Duty, (vi) Conspiracy, (vii) Violation of the
Computer Fraud and Abuse Act, and (viii) Violation of the Federal
Stored Communications Act. (Rec. Doc. 18). The FAC was
accompanied by a Motion for renewed and expanded injunctive
relief restricting Rowland from competing in any way with Total
Safety.(Rec. Doc. 19). Concurrent with the FAC, Total Safety also
filed a Motion for Contempt, contending that Rowland violated the
TRO then in place by working for 24 Hour Safety and soliciting
Total Safety's customers within restricted areas. (Rec. Doc. 20).
On October 28, 2013, after a second telephonic hearing, the Court
granted the new TRO request in part and enjoined Rowland from
working in geographic areas covered by the Employment Agreement
and from soliciting Total Safety's customers within the same, but
denied to the extent it sought injunctions on a national or
company-wide level. (Rec. Docs. 30 & 33).
On December 16, 2013, after several days of hearing and upon

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consideration of the parties' numerous memoranda, the Court
entered a Preliminary Injunction against Rowland, limited in
scope to the terms set forth in the 2005 Employment Agreement,
and granted Plaintiff's motion for contempt as to Rowland. (Rec.
Doc. 84, 95, & 96).
On February 2014, Total Safety sought leave to file a Second
Amended Complaint ("SAC"), which in most respects mirrored the
FAC, but added claims for specific performance against 24 Hour
Safety and new grounds for Breach as to Rowland. (Rec. Doc. 97 &
97-1). Both of these claims are premised on alleged violations of
distinct agreements not squarely at issue in prior hearings or
motions.
As to Rowland, the SAC alleges that Rowland breached a
separate 2011 "Unit Award Agreement," which he entered into with
non-party W3 Holdings, a Delaware entity that acquired Total
Safety around the same time. (Rec. Doc. 97-1 at 11, 39-40). Total
Safety further alleges that under this Unit Award Agreement,
Rowland received profit interests in exchange for his promise to
refrain from competing with or soliciting Total Safety's
customers in a defined geographic area that explicitly included
Calcasieu Parish. (Rec. Doc. 97-1 at 12).2 Finally, the SAC

2
The agreement itself does not mention Total Safety by name.
(The agreement in full is at Rec. Doc. 97-3). Rather, the non-solicitation and
non-compete provisions, which appear in an exhibit to the Unit Award
Agreement, provide that Rowland would not compete with or solicit from "the
Company," elsewhere defined as W3 Holdings. (Rec. Doc. 97-3 at 2 & 9).

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alleges that in January of 2014, several months after initiation
of this suit and roughly a month after the preliminary injunction
hearing, Rowland violated the Unit Award agreement by soliciting
customers in Calcasieu Parish. Id. at 40. On these grounds Total
Safety also seeks a third TRO and expanded preliminary injunction
restricting Rowland from, inter alia, (i) working for 24 Hour
Safety, (ii) soliciting business from Total Safety's customers,
and (iii) soliciting Total Safety's employees within certain
parishes, including Calcasieu, which are covered by the Unit
Award Agreement but not by the Employment Agreement. (Rec. Doc.
98-1).
The Court now reviews the law, alleged facts, and
contentions concerning both Total Safety's request for leave to
file a complaint and accompanying motion for a TRO and
preliminary injunction hearing.
DISCUSSION
I. Plaintiff's Motion for Leave to File Second Amended Complaint
“[A] party may amend its pleading only with the opposing
party's written consent or the court's leave. The court should
freely give leave when justice so requires.” Fed.R.Civ.P.
15(a)(2). “Whether to grant leave to amend a complaint is
entrusted to the sound discretion of the district court [.]”
Ballard v. Devon Energy Prod. Co., L.P., 678 F.3d 360, 364 (5th
Cir. 2012). "The trial court can consider many factors in

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exercising its discretion, 'such as undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the
amendment, futility of the amendment.'" Pan-Islamic Trade Corp.
v. Exxon Corp., 632 F.2d 539, 546 (5th Cir. 1980)(quoting Foman
v. Davis, 371 U.S. 178, 182 (1962)(abrogated on other grounds by
Associated Gen. Contractors of Cal., Inc. v. Cal. State Council
of Carpenters, 459 U.S. 519, 536 n. 33 (1983).
Here, in seeking leave to file a second amended complaint,
Plaintiff briefly argues that both defendants consented to such
leave. (Rec. Doc. 97 at 1). In short, Plaintiff argues that both
Defendants consented by proposing a scheduling order that would
allow parties to amend complaints or counterclaims until 30 days
after a scheduling order issued. Id.

The Court does not read

such general proposals as consent to the amendment at issue here.
This contention, moreover, is most obviously contradicted by the
fact that both Defendants have strenuously opposed allowing the
amendment in numerous filings. (Rec. Docs. 107-110, 112). Thus,
whether leave should be granted is left to the sound discretion
of the Court.
The Defendants argue that leave should be denied on the
grounds that the amendments sought are futile, follow undue
delay, and would cause prejudice to both Defendants and the

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Court. (Rec. Docs. 107 & 108). These contentions are addressed in
turn below.
A. Futility of the Amendments
Leave to amend should be denied if the amendments would be
futile and subject to immediate dismissal. Pan-Islamic Trade
Corp., 632 F.2d at 546 ("Clearly, if a complaint as amended is
subject to dismissal, leave to amend need not be given.") Thus,
when reviewing a claim of futility, the court will assume the
truth of the complaint's allegations. See, e.g., SmithKline
Beecham Corp. v. Geneva Pharm., Inc., 287 F. Supp. 2d 576, 581
(E.D. Pa. 2002).
The Defendants contend that Plaintiff's breach against
Rowland for violating the Unit Agreement is futile on several
grounds. First, Rowland argues that Total Safety lacks standing
to enforce the Unit Agreement. (Rec. Doc. 108 at 6). In support,
he cites no authorities, but emphasizes the salient fact that
Total Safety is neither named by nor a party to that agreement.
Id. At this juncture, however, Plaintiff's breach claim as
premised on the Unit Agreement should not be "dismissed" for lack
of standing because "it is well settled that a person who is not
a party to a contract may nevertheless have standing to enforce
the contract if it was made for that person's benefit." Kona
Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 602 (5th Cir.
2000). At this juncture, where the Court considers only whether

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to grant leave to amend and the hurdles are low,

Plaintiff's

proposed second amended complaint contains allegations sufficient
to find that the contract was made for its benefit. Language in
the restrictive covenants of the Unit Award Agreement suggests
that the purpose of those covenants are to protect value to W3
holdings and "its affiliates" (Rec. Doc. 97-3 at 5), and Total
Safety alleges that it is one of those "subsidiaries/affiliates"
(Rec Doc. 97-1 at 11). Accordingly, the amended breach claim is
not futile for lack of standing. The Court notes, however, that
Defendants will not be barred from addressing this standing issue
in other motions once all parties have had more time to research
and prepare.
Next, the Defendants contend the amended breach claim is
futile because it is unenforceable under La. Rev. Stat. 23:921.
In short, the Defendants argue that Unit Agreement is
unenforceable because W3 Holding is not Rowland's employer, is
not in engaging in business similar to that of 24 Hour safety,
and is not engaging in that industries within relevant parishes
as required by La. Rev. Stat. 23:921. While these arguments raise
grave doubts about the validity of Total Safety's amended breach
claim, as discussed in the section below, the Court finds the
claim sufficiently stated to allow the amendment.
For similar reasons Defendants' remaining contentions
regarding the futility of the amended breach claim–-whether

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consideration exists and whether the terms of that agreement
reach Total Safety (Rec. Docs. 107 at 3-5 & 108 at 9)–-are again
insufficient to deny Plaintiff leave to amend as to that claim.
These arguments delve too deeply into the disputed merits of the
factual and legal claims, which the Court considers more properly
addressed through further briefs and upon motions for dismissal
or summary judgment.
As for Plaintiff's Specific Performance claim against 24
Hour Safety, the Court finds this claim as near to frivolousness
and bad faith as a claim can be without the inducing the
requisite consequences. In brief, Total Safety claims to be a
third-party beneficiary to 24 Hour Safety's indemnity agreement
with Rowland, under which the former allegedly agreed to
indemnify the latter against damages potentially owed to Total
Safety. (Rec. Doc. 97-1 at 41 to 42). The Supreme Court of
Louisiana has delineated three requirements for such claims. See
Joseph v. Hosp. Serv. Dist. No. 2 of Parish of St. Mary, 939 So.
2d 1206, 1212 (La. 2006). The first and "primary question" is
whether the contract clearly manifests an intention to benefit a
third party. Id.

It is not necessary that this intention be in

writing, Id. at 1215, but a it is "never presumed" and will "only
be found when the contract clearly contemplates the benefit to"
the putative third-party beneficiary. Chevron U.S.A., Inc. v.
Traillour Oil Co., 987 F.2d 1138, 1147 (5th Cir. 1993)(emphasis

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in original). Additionally, there must be "certainty as to the
benefit provided the third party," and the benefit must not be "a
mere incident of the contract between the promisor and the
promisee." Joseph, 939 So. 2d at 1212. Here, basic common sense,
not to mention 24 Hour Safety's memoranda, is enough to discern
that such clear and certain intent will almost certainly not be
found. Nevertheless, since that agreement is not in the record
and its terms have not been sufficiently addressed, the Court
leaves resolution of this issue for another day. Total Safety is
warned, however, that it is pushing the envelope dangerously
close to meritless legal theories.
B. Untimeliness & Prejudice
Defendants also argue that leave should be denied because it
was sought in an untimely manner and to the prejudice of both
Defendants and the Court. (Rec. Docs. 107 at 5-7 & 108 at 4-5).
Their argument is essentially that Plaintiff has known of the
Unit Agreement since before the inception of this suit and
therefore should have previously sought recovery for and
injunctions protective of its breach. In so arguing the
Defendants fail, however, to acknowledge that the claim arises
from facts alleged to have happened in January of 2014, when
Rowland allegedly solicited Total Safety's customer in Calcasieu
Parish, well after this suit began and roughly a month after the
preliminary injunction hearing. (Rec. Doc. 97-1 at 40).

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Simply

put, the facts alleged establish that Plaintiff's claim under the
Unit Agreement had not accrued until after the hearing concluded
and after a preliminary injunction issued.
For the above and other reasons it is therefore ORDERED that
Plaintiff's Motion to File Second Amended Complaint is GRANTED.
(Rec. Doc. 97).
II. Plaintiff's Motion For Temporary Restraining Order and Order
to Show Cause for Preliminary Injunction
IT IS FURTHER ORDERED that Plaintiff's Motion for a
Temporary Restraining Order and Preliminary Junction is DENIED.
Total Safety seeks a third TRO and expanded preliminary
injunction restricting Rowland from, inter alia, (i) working for
24 Hour Safety, (ii) soliciting business from Total Safety's
customers, and (iii) soliciting Total Safety's employees within
certain parishes enumerated in the Unit Award Agreement. (Rec.
Doc. 98-1).
Rule 65 of the Federal Rules of Civil Procedure governs both
preliminary injunctions and temporary restraining orders. A party
requesting either form of relief must demonstrate: 1) a
substantial likelihood of success on the merits, 2) a substantial
threat that failure to grant the injunction will result in
irreparable injury, 3) the threatened injury must outweigh any
damage that the injunction will cause to the adverse party, and
4) the injunction must not have an adverse effect on the public
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interest. City of Meridian v. Algernon Blair, Inc., 721 F.2d 525,
527 (5th Cir.1983). A temporary restraining order is an
“extraordinary remedy and should be granted only if the movant
has clearly carried the burden of persuasion with respect to all
four factors.” Allied Mktg. Group, Inc. v. CDL Mktg., Inc., 878
F.2d 806, 809 (5th Cir.1989)
Here, Plaintiff has failed to carry that burden. Primarily,
Plaintiff has not established a likelihood of success on the
merits. As indicated above, the Court has grave doubts that the
restrictive covenants in the Unit Award Agreement are enforceable
under Louisiana law. Louisiana has a "longstanding policy against
covenants not to compete[,]" which is codified at La. RS 23:921.
Team Envtl. Servs., Inc. v. Addison, 2 F.3d 124, 126-27 (5th Cir.
1993). That statute provides that contracts restraining anyone's
"lawful profession, trade, or business of any kind . . . shall be
null and void" unless one of several statutory exceptions apply.
La. RS 23:921(A)(1). Given Louisiana's strong policy against such
contracts, they must "strictly comply" with the terms of those
exceptions to be enforceable. Team Envtl. Services, Inc., 2 F.3d
at 126-27 (citation and quotations omitted).
The only relevant exception here is found at La. RS
23:921(c), which provides:
Any person . . . who is employed as an agent, servant,
or employee may agree with his employer to refrain from
. . . engaging in a business similar to that of the
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employer and/or from soliciting customers of the
employer within a specified parish or [or other areas]
so long as the employer carries on a like business
therein, not to exceed a period of two years from
termination of employment.
La. RS 23:921(c)(emphasis added).3
Total Safety has not alleged and it does not appear for now
that W3 Holdings is Rowland's employer. Moreover, Total safety
has not alleged facts sufficiently establishing other
requirements set forth in the statute. Given the 5th Circuit's
mandate that restrictive covenants strictly comply with La. RS
23:921 and Louisiana's longstanding policy against enforcement of
such agreements, the Court finds that Total Safety has not
established a reasonable probability of success on the merits of
its breach claim premised on the Unit Award Agreement.4
Conclusion
Plaintiff has alleged facts and made argument sufficient to
allow amendment but fails to demonstrate probability of success
on the ultimate merits.

3
It remains possible that the exception provided in La. RS 23:921(L),
which allows for certain restrictive covenants between limited liability
companies and their members, will apply since W3 Holdings is a LLC. However,
Total Safety has not alleged that Rowland was a member of that entity, only
that he received "profit interests" in exchange for certain promises.
Moreover, as the terms of subsection (L) largely mirror those of subsection
(C), the outcome would be the same for the above-mentioned and other reasons.
4

Total Safety is again warned that seeking further leave to make
cursory allegations to satisfy these elements will be subject to strict review
under applicable laws. Moreover, the Court will not countenance piecemeal
amendments that disrupt orderly process or efforts that tend to keep alive
terminable claims in perpetuity.

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IT IS ORDERED that Plaintiff's Motion for Leave to File
Second Amended Complaint (Rec. Doc. 97) is GRANTED
IT IS FURTHER ORDERED that Plaintiff's Motion for a
Temporary Restraining Order and Preliminary Junction Hearing
(Rec. Doc. 98) is DENIED.
IT IS FURTHER ORDERED that Total Safety's Motions for Leave
to File replies (Rec. Docs. 111 & 114) and Rowland's Motion for
Leave to File a supplemental memorandum and Motion to Strike
Total Safety's reply (Rec. Docs. 112 & 113) are DISMISSED as moot.

New Orleans, Louisiana, this 24th day of February, 2014.

____________________________
UNITED STATES DISTRICT JUDGE

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