General Parts Distribution, LLC v. St. Clair
MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 12/14/2011. (nss, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
DEC 1 4 20:1
CLERK, U.S. DISTRICTCOURT
GENERAL PARTS DISTRIBUTION, LLC,
KENNETH S ST. CLAIR,
Civil Action No. l1-cv-03556-JFM
Presently pending before the Court is Plaintiff General Parts Distribution, LLC ("General
Parts")' motion for a temporary restraining order and preliminary injunctive relief against
Defendant Kenneth S. St. Clair ("St. Clair") for breach of restrictive covenants. See Doc. NO.2.
For the following reasons, a temporary restraining order will be granted and the Court will hold a
preliminary injunction hearing within the next fourteen days.
Plaintiff General Parts brings three claims against Defendant St. Clair, alleging breach of
contract and misappropriation of trade secrets in violation of the Maryland Uniform Trade
Secrets Act. CompI. ~ 36-59. The claims relate to the alleged misappropriation of General Parts'
trade secrets by St. Clair, a former General Parts employee who signed non-competition and
confidentiality agreements with General Parts and now works for the Federated Location
("Federated"), a direct competitor of General Parts in the Waldorf, Maryland area. Id. at ~ 27,
General Parts sells and supplies replacement products, accessories, supplies and
equipment for virtually all makes of automobiles and also distributes and sells tools, equipment,
chemicals, paint and accessories. ld. at ~ 6. Federated is a newly opened location with no prior
sales market in Waldorf. ld. at ~ 29. General Parts' alleges that St. Clair is directly competing
with General Parts in his employment with Federated because he is cultivating relationships with
and selling patis tO,the same customers with whom he interacted and to whom he sold products
during his employment with General Parts. ld. at ~ 31.
St. Clair started as ajoint venture partner with CARQUEST. ld. at ~ 31. As a Store
Manager, St. Clair was responsible for maintaining, expanding and soliciting customers and
selling products to customers in and around Waldorf. ld. at ~ 19. As part of this relationship, St.
Clair signed a Joint Venture Agreement which contained a Covenant Not to Compete, on August
See Doc. NO.1 Ex. 1. The agreement sought to prevent St. Clair from working for a
competitor within a IS-mile radius of the principal location of CARQUEST for a period of 1.5
years after leaving employment. On January 30, 2001, CARQUEST merged with several other
corporate entities to form General Parts, which assumed the rights and liabilities under St. Clair's
agreement with CARQUEST. Compi. ~ 16.
On or around October 8, 2005, while working as an Associate Store Manager at General
Parts' CARQUEST Auto Parts' store in Waldorf, St. Clair signed a Stock Agreement which
contained a Covenant Not to Solicit/Not to Disclose. ld. at ~ 17,22. The agreement prevented St.
Clair from disclosing General Parts' customer lists or soliciting business from its Key Account
List for a period of 1.5 years after leaving employment. See Doc. NO.1 Ex. 2. In November
2011, St. Clair left General Parts and went to work for Federated. Compi. ~ 26, 27. Shortly
thereafter, General Parts filed the instant action.
In its Complaint, General Parts alleges that St. Clair has breached the Joint Venture
Agreement's Non-Compete Covenant by becoming employed by Federated and seeking to
compete with General Parts in the sale of auto parts within the Waldorf market (Count I). In
addition, General Parts alleges that St. Clair is now soliciting General Parts' business customers
to cease doing business with General Parts and to do business with Federated in violation of the
Stock Agreement (Count II). Specifically, General Parts alleges that on December 2, 2011, St.
Clair admitted to the Store Manager for General Parts' Waldorf store that he had contacted at
least one General Parts customer following his resignation. Jd. at ~ 32. Finally, General Parts
alleges that St. Clair's actions violate the Maryland Uniform Trade Secret Act (Count III).
Contemporaneously with the filing of its Complaint, General Parts filed a Motion for a
temporary restraining order ("TRO") and preliminary injunctive relief. Doc. NO.2. St. Clair was
served with the Complaint and TRO motion the same day it was filed with the Court, on
December 12, 2011. The Court attempted to reach Defendant to schedule an emergency
telephonic hearing but was unsuccessful. Accordingly, the Court will now reach the merits of
General Parts' Motion for a TRO and will schedule a hearing within the next fourteen days to
address General Parts' Motion for a preliminary injunction.
Standard of Review
"While a preliminary injunction preserves the status quo pending a final trial on the
merits, a temporary restraining order is intended to preserve the status quo only until a
preliminary injunction hearing can be held." Hoechst Dia/oil Co. v. Nan Ya Plastics Corp., 174
F.3d 411, 422 (4th Cir. 1999). Federal Rule of Civil Procedure 65(b) deals with TROs and is
designed to ensure that parties against whom an order is issued who have not received notice are
given an opportunity to present their case within 14 days after issuance of the TRO. See Fed. R.
Civ. P. 65(b)(2).
The standard for granting a TRO under Rule 65(b) is the same as for granting a
preliminary injunction. See, e.g., Sindram v. City o/Takoma Park Police, Civ. No. PJM-10-681,
2010 WL 1375353, at *2 (D. Md. Mar. 26, 2010). To obtain a TRO, the moving party must show
that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the
absence of preliminary relief; (3) the balance of equities tips in its favor; and (4) an injunction is
in the public interest. Real Truth About Obama, Inc. v. Fed. Election Comm 'n, 575 F.3d 342, 346
(4th Cir. 2009) vacated on other grounds by ---- U.S. ----, 130 S.Ct. 2371 (2010) and reissued in
part, 607 F.3d 355 (4th Cir. 2010) (quoting Winter v. Natural Res. De! Council, Inc.; 555 U.S. 7,
(2008)). The moving party bears the burden of showing all four factors. Id. at 345-46.
General Parts' Motion
Where a Court finds that a defendant has received notice of the application for restraining
order, it may convert a TRO motion into a motion for preliminary injunction. See CVI/Beta
Ventures, Inc. v. Custom Optical Frames, Inc., 859 F. Supp. 945,948-49 (D. Md. 1994) (treating
a motion for a TRO as a motion for preliminary injunction where the defendants had notice of
the suit for more than four months). In the instant action, General Parts served St. Clair with
General Parts' Motion for TRO yesterday, concurrently with the Complaint. However, St. Clair
cannot be reached to discuss the TRO, and counsel for General Parts have no knowledge as to
whether St. Clair has yet obtained representation. For this reason, the Court finds that St. Clair
has not had sufficient notice and opportunity to be heard in this matter and accordingly declines
to treat the present determination as one for a preliminary injunction. Rather, the Court will only
consider General Parts' Motion for a TRO at this juncture and intends to hold a hearing before
the expiration of the TRO to consider General Parts' Motion for preliminary injunction.
Likelihood of Success on the Merits
a. Breach of Contract Claims
General Parts must make a "clear showing that it is likely to succeed at trial on the
merits." Real Truth, 575 F.3d at 351. General Parts' first two claims are based on breaches of
restrictive covenants in the Joint Venture Agreement and the Stock Agreement. Under Maryland
law, to enforce a restrictive covenant, "(1) the employer must have a legally protected interest,
(2) the restrictive covenant must be no wider in scope and duration than is reasonably necessary
to protect the employer's interest, (3) the covenant cannot impose an undue hardship on the
employee, and (4) the covenant cannot violate public policy." Deutsche Post Global Mail, Ltd. v.
Conrad, 116 F. App'x 435,438 (4th Cir. 2004) (citing Silver v. Goldberger, 188 A.2d 155, 15859 (1963)). Whether a particular restraint is reasonable depends on the specific facts of the case.
Ruhl v. F.A. Bartlett Tree Expert Co., 225 A.2d 288, 291 (1967).
General Parts focuses on the language of the covenants. The Joint Venture Agreement
provides that St. Clair may not, for a period of 1.5 years after termination, "compete" with his
employer "either as a principal, employee or agent in a business which competes" with his
employer "in the geographic area within a 15 mile radius of the principallocation(s)"
employer. Doc. NO.1 Ex. 1. The Stock Agreement provides that St. Clair may not, for a period
of 1.5 years after termination, "disclose the Corporation's customer lists, either directly or
indirectly" or "solicit business from the Corporation's Key Account List." Doc. NO.1 Ex. 2.
The Fourth Circuit, applying Maryland law, has agreed that the "plain meaning of
'solicit' requires the initiation of contact." Mona Elec. Group, Inc. v. Truland Servo Corp., 56 F.
App'x 108, 11 0 (4th Cir. 2003) (per curiam). General Parts alleges that on or about December 2,
2011, St. Clair admitted to an employee of General Parts that he had contacted at least one
General Parts customer following his resignation. CompI. ~ 32. Thus, St. Clair has solicited at
least one of General Parts' customers.
Moreover, General Parts' allegations strongly suggest that St. Clair is competing for
General Parts' customers. General Parts alleges that several of its customers have contacted its
Waldorf store since St. Clair's resignation and inquired into the circumstances surrounding St.
Clair's departure and subsequent employment with Federated. Id. This suggests that the
customers' interest in General Parts was predicated on St. Clair's employment there, and that
those same customers may now be interested in defecting to Federated. That General Palis'
customers are aware of St. Clair's new employment mere weeks after his resignation is also
indicative of solicitation.
(1) Legally Protected Interest
Employers "have a protectable interest in preventing an employee from using the contacts
established during employment to pirate the employer's customers." Holloway, 572 A.2d at 515.
St. Clair had access to confidential customer information and was responsible for developing,
extending and maintaining good relationships with customers for and on behalf of General Parts.
CompI. ~ 11. Accordingly, the Court finds that General Parts had a legally protected interest in
preventing St. Clair from using these relationships to bring new business to Federated.
"A covenant not to compete is enforceable if its duration and geographic area are only so
broad as is reasonably necessary to protect the employer's business ... " lntelus Corp. v. Barton,
7 F. Supp. 2d 635, 641 (D Md. 1998) (citing Holloway v. Faw, Casson & Co., 572 A.2d 510,515
(1990». The Joint Venture Agreement restricts S1. Clair's ability to compete with General Parts
for 1.5 years and within a IS-mile radius. Doc. No. 1 Ex. 1. The Stock Agreement restricts S1.
Clair from soliciting General Parts' customers or disclosing confidential information for 1.5
years. Doc. NO.1. Ex. 2. Other Maryland cases have enforced provisions of similar duration and
geographic scope. See PADCO Advisors, Inc. v. Omdahl, 179 F. Supp. 2d 600, 606 (D. Md.
2002) (enforcing a two-year non-compete restriction); see also lntelus Corp. v. Barton, 7 F.
Supp. 2d 635, 641 (D. Md. 1998) (enforcing a restriction with no geographic limitation where
the plaintiff competed for business on a national, ifnot global basis).
Moreover, the Court finds that the scope of the proscribed activity is properly bounded.
General Parts does not seek to prohibit S1. Clair from working in any capacity with any
company, including Federated, that competes with General Parts. Rather, General Parts merely
seeks to 'prohibit S1. Clair from competing for customers within a IS-mile radius, and from
soliciting General Parts' customers and sharing General Parts' confidential information with
Federated. These prohibitions are reasonably necessary to protect General Parts' customer
goodwill and are narrowly tailored to that end. Accordingly, the Court finds that the restrictions
contained in the Joint Venture Agreement and Stock Agreement are reasonable.
(3) Undue Hardship
As discussed supra, the Court finds that the restrictive covenants are sufficiently narrow
that they pose no undue hardship on S1. Clair. Under the TRO S1. Clair needn't cease his
employment with Federated, as long as he can work for Federated outside the IS-mile radius set
forth in the Joint Venture Agreement.
and is merely restricted
St. Clair may continue to solicit new clients for
in his ability to solicit General Parts' customers.
(4) Public Policy
[T]he public has an interest in the enforcement
Intelus, 7 F. Supp. 2d at 642. Because the Court has determined
public policy considerations
General Parts has shown sufficient
that the covenants
at issue are
weigh in favor of enforcement.
of success on the merits to sustain its
breach of contract claims.
of Trade Secrets Claim
Uniform Trade Secrets Act ("MUTSA")
provides statutory remedies
of trade secrets. Under the statute, "misappropriation"
[d]isclosure or use of a trade secret of another ... by a person who ... [a]t the time
of disclosure or use, knew or had reason to know that the person's knowledge of
the trade secret was ... [a]quired under circumstances giving rise to a duty to
maintain its secrecy or limit its use[.]
Md. Code Ann., Com. Law ~ 11-1201(c)
(West 2011). MUTSA defines "trade secret" as:
information ... that: (1) derives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and (2) [i]s the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
Id. at ~ 11-1201 (e). Maryland comis have recognized
Inc. v. Jones, Civ. No. WMN-lO-1042,
is no question that a customer
2010 WL 3895380,
list can constitute
lists as trade secrets. MCS Servs.,
at *6 (D. Md. Oct. 1,2010)
a trade secret.") (quoting Home Paramount Pest
Control Cos. v. FMC Corp., 107 F. Supp. 2d 684, 692 (D. Md. 2000)).
In the instant action, St. Clair was aware of his obligation to keep confidential General
Parts' customer lists, which General Parts considered trade secrets, so Federated's acquisition of
any of General Parts' trade secrets could plausibly constitute misappropriation. General Parts
alleges that while employed by General Parts, St. Clair had access to confidential customer
information, including customer-specific information relating to buying history and trends, cost
information, pricing information, training materials and concepts, sales reporting data and
strategic and marketing plans. Compi. ~ 53. General Parts alleges that disclosure of such trade
secret information is inevitable as a result of St. Clair's actions and apparent job duties in his
new employment with Federated. Id. at ~ 57.
Furthermore, General Parts has alleged sufficient facts upon which the Court can find that
the customer lists constitute trade secrets under the MUTSA. General Parts alleges that the
extensive customer-specific information it has gathered is of great economic value to it. Id. at
~ 54. General Parts additionally contends that it has made reasonable efforts to protect the
confidentiality of this information, including the restrictive covenants contained in St. Clair's
Joint Venture Agreement and Stock Agreement. Id. ~ 55. Accordingly, General Parts has shown
a likelihood of success on the merits of its Misappropriation of Trade Secrets claim.
Irreparable harm is generally found where the moving party suffers a harm that cannot be
compensated by an award of money damages. See Hughes Network Sys., Inc. v. InterDigital
Commc 'ns Corp., 17 F.3d 691, 694 (4th Cir. 1994). "When the failure to grant preliminary relief
creates the possibility of permanent loss of customers to a competitor or the loss of goodwill, the
irreparable injury prong is satisfied." Wacha via Ins. Serv., Inc. v. Hinds, Civ. No. WDQ-07-
2114,2007 WL 6624661, at *3 (D. Md. Aug. 30,2007) (quoting Multi-Channel TV Cable Co. v.
Charlottesville Quality Cable Operating Co., 22 F.3d 546,552 (4th Cir. 1994)). Irreparable harm
must be "neither remote nor speculative, but actual and imminent." Direx Israel, Ltd. v.
Breakthrough Med. Corp., 952 F.2d 802, 812 (4th Cir. 1991) (quotation and citation omitted).
In the instant action, General Parts contends that it will suffer irreparable harm because
St. Clair possesses confidential and proprietary information that is the business' lifeline, and if
St. Clair continues to solicit General Parts' customers, General Parts will lose goodwill amongst
those customers, potentially lose current and future business opportunities, and will lose the
value of the confidential, proprietary and strategic information it entrusted to St. Clair.
General Parts has demonstrated a probability that it will lose customers to Federated
absent injunctive relief. On December 2, 2011, St. Clair admitted to an employee of General
Parts that he had contacted at least one General Parts customer following his resignation. Compl.
~ 32. General Parts also alleges that several other customers have contacted one of its stores
following St. Clair's resignation inquiring into the circumstances surrounding his departure and
subsequent employment with Federated. Id. The fact that other customers are interested inSt.
Clair's new employment and that St. Clair is reaching out to General Parts' customers suggests
that General Parts faces an imminent and actual risk of losing these customers to Federated. The
fact that St. Clair is employed in th~ same position at Federated that he was at General Parts, and
that he has already reached out to a General Parts' customer, suggests that there is a great risk
that St. Clair has already or will soon misappropriate General Parts' inside information,
including its customer lists. Accordingly, General Parts has established a likelihood of
irreparable harm in the absence of immediate injunctive relief.
Balance of the Equities
General Parts contends that the balance of the equities is one-sided in its favor because it
faces irreparable harm absent a TRO, while the reasonable scope of the TRO suggests the harm
to St. Clair will be minimal at best. The Court agrees. As discussed above, the Court finds that
the restrictive provisions in the Joint Venture Agreement and Stock Agreement are narrowly
tailored to protect General Parts' legitimate business interests and are reasonable in scope.
General Parts is not seeking to altogether prevent St. Clair fro'm continuing his employment with
Federated, as long as he works outside the geographic limit set forth in his agreement and does
not solicit his former General Parts customers.
"The public interest prong has been equated with preserving the status quo until the
merits can be fully considered by the trial court." Wachovia Ins. Servs., 2007 WL 6624661, at *9
(citation omitted). As the Court discussed supra, the public interest in the instant action weighs
in favor of enforcing the Agreements' reasonable contractual restrictions. Because the balance of
harms and likelihood of success on the merits weigh in favor of General Parts, the Court finds
that the public interest is served by preserving the status quo and granting General Parts' motion
for a TRO.
For the foregoing reasons, General Parts' motion for a TRO will be granted and the Court
will set a date for a hearing on General Parts' motion for a preliminary injunction. A separate
Order will follow.
Jr., clo 1. Frederick
United States District Judge
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