GovConnection, Inc. et al v. Mereos

Filing 14

MEMORANDUM OPINION AND ORDER granting 2 Plaintiffs' Emergency Motion for Ex Parte Temporary Restraining Order filed by PC Connection, Inc., GovConnection, Inc. Signed by Judge Paul W. Grimm on 3/22/2017. (kns, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
PC CONNECTION, INC. and
GOVCONNECTION, INC.,

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Plaintiffs,
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v.

Case No.: PWG-17-635
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CHRISTOPHER MEREOS,
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Defendant.
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MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiffs’ renewed Emergency Motion for Ex Parte
Temporary Restraining Oder, which seeks injunctive relief to protect trade secrets and
confidential information allegedly taken by the companies’ former employee, Defendant
Christopher Mereos. Pls.’ Mot., ECF No. 2. Because Mereos has been served and failed to
appear at a hearing held on March 21, 2017, I now construe the Motion as a Motion for a
Preliminary Injunction.

At the aforementioned hearing, I held that the Plaintiffs had

demonstrated a likelihood that Mereos violated an enforceable non-disclosure agreement by
taking proprietary information from the company, which if disclosed to the companies’
competitors would likely result in irreparable harm to their business. Accordingly, I granted
Plaintiffs preliminary-injunctive relief. This Memorandum Opinion and Order memorializes that
ruling.
Background
Plaintiff GovConnection, Inc. (“GovConnection”) is the wholly-owned subsidiary of
Plaintiff PC Connection, Inc. (“PC Connection”).

Together, the companies sell software,

hardware, and services to private businesses and government entities, with GovConnection
handling the companies’ public-sector work. Verified Compl. ¶ 15, ECF No. 1. On September
23, 2011, GovConnection hired Mereos as a Sales Support Associate and promoted him to
Account Manager in 2013. Id. ¶¶ 20–21. As part of Mereos’s in-processing, he signed an
Employee Agreement (“Agreement”) which, among other things, contained the following
nondisclosure agreement (as well as a non-competition agreement not presently at issue):
2.1

Nondisclosure and Nonuse of Confidential Information. I agree that all
Confidential Information, as defined bellow, which I create or to which I
have access as a result of my employment and other associations with the
Company is and shall remain the sole and exclusive property of PC
Connection. I agree that, except as required for the proper performance of
my regular duties for the Company, as expressly authorized in writing in
advance by the Company, or as required by applicable law, I will never,
directly or indirectly, use or disclose any Confidential Information. I
understand and agree that this restriction shall continue to apply after
termination of my employment or this Agreement, howsoever caused. . . .

2.2.

Use and Return of Documents. I agree that all documents, records and
files, in any media of whatever kind and description, relating to the
business, present or otherwise, of PC Connection and any copies
(including without limitation electronic), in whole or in part, thereof (the
“Documents” and each individual, a “Document”), whether or not
prepared by me, shall be the sole and exclusive property of the Company.
Except as required for the proper performance of my regular duties for PC
Connection or as expressly authorized in writing in advance by the
Company, I will not copy and Documents or remove any Documents or
copies or derivatives thereof from the premises of the Company. I will
safeguard, and return to the Company immediately upon termination of
my employment, and/or at such times specified by the Company, all
Documents and other property of the Company, and all documents,
records and files of its customers, subcontractors, vendors, and suppliers
(“Third-Party Document” and individually a “Third-Party Document”), as
well as all other property of such customers, subcontractors, vendors and
suppliers, then in my possession or control. . . .

Agr. ¶ 2, Verified Compl. Ex. A., ECF No. 1-2.
According to GovConnect Vice President of Government Sales (and Mereos’s
supervisor), Jeffrey Trent, who testified at the hearing, at some point during Mereos’s tenure, the
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employee’s performance and attendance became a concern, and the company placed him on a
performance improvement plan designed to help him address his deficiencies. On February 17,
2017, Mereos informed Trent that he wished to resign his employment because he did not
believe that he would ever be taken off the improvement plan. At the time of his resignation,
Mereos dishonestly told Trent that he planned to take a job at his uncle’s property-management
company. That same day, Mereos participated in an exit interview and signed a Termination
Certification, as required by the Agreement. Verified Compl. ¶ 29; Termination Certification,
Verified Compl. Ex. B., ECF No. 1-3; Agr. ¶ 5. By signing the Termination Certification,
Mereos untruthfully represented:
I do not have in my possession, nor have I failed to return, any devices, records,
data, notes, reports, proposals, lists, correspondence, . . . materials, equipment,
other documents or property, or reproductions of any of the aforementioned items,
including without limitation any such items in electronic form, belonging to PC
Connection, Inc., its subsidiaries, affiliates, successors or assigns (together, the
“Company”).
I further certify that I have complied with all of the terms of the
Company’s Employee Agreement signed by me (the “Agreement”) . . . .
I further agree that, in compliance with the Agreement, I will preserve as
confidential all Confidential Information (as defined therein), including without
limitation, trade secrets, confidential knowledge, data, or other proprietary
information relating to products, processes, know-how, . . . databases,
. . . customer lists, business plans, financial information or other subject matters
pertaining to any business of the Company or any of its employees, customers,
consultants or licenses.
Termination Certification.
Trent testified that a routine review of Mereos’s work-email account revealed that emails
had been deleted from the two weeks prior to Mereos’s resignation. GovConnection recovered
the deleted emails from its backup systems and determined that Mereos had sent at least four
hundred emails to unsecured, external email addresses, many of them to the email address

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[e-mail].

See Verified Compl. ¶ 31.

Mereos attached to these emails

proprietary information such as his own and other salespersons’ customer lists containing
customer email addresses and nicknames; customer email communications; spreadsheets
generated from a customer-relationship-management (CRM) site called CallBack that detailed
expiration dates for customers’ software licenses, price-margin data, and GovConnection’s
assessment of the likelihood that the company would secure deals with particular customers; and
login information. See Verified Compl. ¶ 33. Trent testified that the information contained in
the emails, if used in a way that violated the Agreement, could provide GovConnection’s
competitors a roadmap for stealing the company’s business by allowing competitors to undercut
license-renewal efforts; focus their sales efforts on customers with whom GovConnection has
less established relationships; and take advantage of price-margin information.
Based

on

information

provided

by

Mereos’s

wife,

Vicki

Mereos,

during

GovConnection’s efforts to effect service, the company learned that Mereos had taken a job with
Lexmark, a manufacturer that sells its products through resellers, including GovConnection and
its competitors. Further review of the information that Mereos forwarded to external email
accounts identified a spreadsheet that detailed every GovConnection quote involving a Lexmark
product since 2010, a spreadsheet that could only have been generated through a specific search
of the CRM database using the keyword “Lexmark.” Plaintiffs’ counsel Erik Winton spoke to
Lexmark’s General Counsel, who confirmed that the company had hired Mereos but without
knowledge that Mereos was subject to a non-competition agreement. He iterated that Lexmark
did not wish to jeopardize its business relationship with GovConnection. Shortly thereafter,
Lexmark’s General Counsel notified Winton that the company had terminated Mereos’s
employment for failure to disclose his contractual obligations to GovConnection. Consequently,

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GovConnection does not know if Mereos has secured employment elsewhere or what he has
done with the company’s proprietary information.
On March 6, 2017, Plaintiffs filed a Verified Complaint along with an Emergency
Motion for Ex Parte Temporary Restraining Oder. Verified Compl.; Pls.’ Mot. I denied without
prejudice Plaintiffs’ request for an emergency ex parte hearing, holding that they had failed to
justify their failure to notify Mereos of the proceeding pursuant to Fed. R. Civ. P. 65(b)(1)(A)’s
requirements. ECF No. 7. But I scheduled a hearing for the following week and ordered the
Plaintiffs to provide Mereos with actual knowledge of the proceedings. Id. Inclement weather
delayed the hearing until March 21, 2017. ECF No. 11. At the hearing, I determined that
Mereos was attempting to evade GovConnection’s multiple efforts to effect service but found
that Plaintiffs had nonetheless done so by serving Vicki Mereos, who accepted service on
Mereos’s behalf, see ECF No. 6, and by leaving the relevant papers with an individual that
GovConnection’s process server visually identified as Mereos using a photograph provided by
the company, see ECF No. 12. Accordingly, since Mereos had actual knowledge of but failed to
attend the hearing, I determined that the Court could issue a preliminary injunction upon a
sufficient evidentiary showing by the Plaintiffs. See Fed. R. Civ. P. 65(a)(1).
Standard of Review
The purpose of a preliminary injunction is to “protect the status quo and to prevent
irreparable harm during the pendency of a lawsuit, ultimately to preserve the court’s ability to
render a meaningful judgment on the merits.” In re Microsoft Corp. Antitrust Litig., 333 F.3d
517, 525 (4th Cir. 2003). As a preliminary injunction is “an extraordinary remedy . . . [, it] may
only be rewarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Nat.
Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). To obtain a preliminary injunction, the plaintiff

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must “establish that [1] he is likely to succeed on the merits, [2] he is likely to suffer irreparable
harm in the absence of preliminary relief, [3] the balance of equities tips in his favor, and [4] an
injunction is in the public interest.” Id. at 20; see also Dewhurst v. Century Aluminum Co.,
649 F.3d 287, 290 (4th Cir. 2011).
Prior to 2009, the Fourth Circuit followed a “balance of hardship” approach to
preliminary injunctions, considering all four Winter elements, but “allow[ing] each requirement
to be conditionally redefined” in a “flexible interplay” depending on how the other requirements
were met.

Real Truth About Obama, Inc. v. Fed. Election Comm’n, 575 F.3d 342, 347

(4th Cir. 2009) (citing Blackwelder Furniture Co. of Statesville v. Seilig Mfg. Co., 550 F.2d 189,
196 (4th Cir. 1977)). Real Truth invalidated this approach, however, and it “may no longer be
applied” in the Fourth Circuit.

Id.

Plaintiffs must therefore satisfy each requirement as

articulated. Id.
Discussion
Likelihood of Success on the Merits
Plaintiffs have robustly shown that they are likely to succeed on merits. New Hampshire
law governs the Employee Agreement. Agr. ¶ 12. The Supreme Court of New Hampshire has
analyzed the enforceability of non-disclosure agreements under the same test that the state’s
courts use to assess the enforceability of non-competition agreements.

ACAS Acquisitions

(Precitech) Inc. v. Hobert, 923 A.2d 1076, 1089 (N.H. 2007) (“While we have never expressly
stated that the three-part test applicable to non-competition agreements applies to non-disclosure
agreements, for purposes of this opinion we will assume that it does.”). Under that test, an
agreement is enforceable if “[1] the restriction is [no] greater than necessary to protect the
legitimate interests of the employer; [2] . . . the restriction imposes [no] undue hardship upon the

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employee; and [3] . . . the restriction is [not] injurious to the public interest. Id. at 1084 (citing
Merrimack Valley Wood Prods, Inc. v. Near, 876 A.2d 757, 762 (N.H. 2005)). A business has “a
legitimate interest in preventing its . . . sales [representative] from aiding in the marketing and
sales of competitive products for a competitive business.” Id. at 1090. The Agreement only
prohibits the disclosure of “Confidential Information” created or accessed during an employee’s
tenure. Agr. ¶ 2.1. And the Agreement defines the operative term to include only information
“not generally known by others with whom the Company competes or does business, or with
whom it plans to compete or do business, and any information, which if disclosed, would assist
in competition against the Company.” Id. ¶ 6. At this early stage in the litigation, I conclude
that GovConnection’s non-disclosure agreement is sufficiently narrowly tailored such that it does
not strike me as overly broad, unduly burdensome, or injurious to the public.
Plaintiffs have also provided evidence that Mereos signed a non-disclosure agreement,
Agr. 10, and that he falsely certified that he had complied with his obligations under the
Agreement but had in fact forwarded customer lists and CallBack-generated spreadsheets to a
non-secured, external email address, see Termination Certification; Verified Compl. ¶¶ 31, 33.
These allegations, if true, would violate the Agreement’s prohibition on “remov[ing] any
Documents or copies or derivatives thereof from the premises of the Company,” Agr. ¶ 2.2, and
would run counter to Mereos’s certification that he did not, upon his termination “have in [his]
possession, nor . . . failed to return, any . . . records, data, . . . other documents or property, or
reproductions of any of the aforementioned items, including without limitation any such items in
electronic form belonging to PC Connection, Inc,” Termination Certification. Accordingly,
Plaintiffs have demonstrated a likelihood of success on the merits.

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Irreparable Harm
As Mr. Trent’s hearing testimony vividly illustrated, the customer lists, pricing data,
licensing-expiration information, and probability estimates that Mereos appears to have
misappropriated could provide GovConnection’s competitors with a roadmap for stealing the
company’s business. Armed with the sort of information that Mereos allegedly forwarded to an
external email account, other information-technology resellers could unjustly benefit from the
data that GovConnection has generated through years of customer cultivation. See Verified
Compl. ¶ 35. Competitors could also undercut the advantages that GovConnection possesses as
an incumbent pursuing software-license renewals and cut advantageous deals based on the
company’s pricing data.

Given the surreptitious manner in which Mereos obtained

GovConnnection’s proprietary information in the two weeks prior to his resignation and his
subsequent deception concerning his actions, Verified Compl. ¶ 31, and especially in light of Mr.
Trent’s testimony that Mereos specifically and purposefully created spreadsheets containing
information about a company that hired him shortly after his resignation, Plaintiffs have
demonstrated a significant likelihood that irreparable harm will flow to their business in the
absence of preliminary-injunctive relief.
Balance of Equities
The equities tip in the Plaintiffs’ favor because the Agreement only applies to
information “not generally known by others with whom the Company competes or does
business, or with whom it plans to compete or do business, and any information, which if
disclosed, would assist in competition against the Company.”

Id. ¶ 6.

Accordingly, the

Agreement does not restrict Mereos from using information that is publicly available or
generally known in the industry that he acquired during his tenure with GovConnection. Thus, a

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preliminary injunction enforcing the Agreement during the pendency of the case would not
impose undue hardship on him.
Public Interest
“[T]he public has an interest in enforcing restrictive covenants that protect business
interests . . . .” Bowe Bell & Howell Co. v. Harris, 145 F. App’x 401, 404 (4th Cir. 2005).
Because I find, at least preliminarily, that the Agreement is narrowly tailored to protect the
Plaintiffs’ legitimate business interests, enforcing the Agreement will serve the public interest.
Conclusion
Plaintiffs have demonstrated that all of the Winter factors weigh in favor of granting them
preliminary-injunctive relief. I will therefore grant their Motion.
ORDER
Accordingly, for the reasons stated in this Memorandum Opinion and Order, it is this 22nd
day of March, 2017, hereby ORDERED that:
1. Plaintiffs’ Emergency Motion for Ex Parte Temporary Restraining Oder, which I
construe as a Motion for a Preliminary Injunction, IS GRANTED;
2. Defendant IS REQUIRED to comply with the terms of the Agreement, including the
provisions on non-disclosure of confidential information;
3. Defendant IS ENJOINED from destroying, deleting, altering, or otherwise failing to
preserve any evidence that may be relevant to the resolution of the issues raised in the
Verified Complaint;
4. Defendant IS ENJOINED from disseminating Plaintiffs’ confidential information, as
defined by the Agreement, to any person or entity;

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5. Defendant SHALL immediately return to Plaintiffs all of their confidential
information and trade secrets, and all documents or information derived from the
same, whether in paper form or contained on any external electronic storage devices,
including but not limited to any personal computers, tablets, USB devices, or any
other electronic storage device and/or media;
6. Defendant SHALL immediately permit an independent computer forensic specialist
designated by the Plaintiffs, a representative from Plaintiffs, and Plaintiffs’ counsel to
obtain access to the Defendant’s computers and computer systems, wherever they are
located, and make a forensic image of any devices or applications containing
electronically stored information (“ESI”), including but not limited to laptop
computers, desktop computers, servers, removable media and storage devices, tablets,
mobile telephones, backup storage devices and cloud-based applications, in
Defendant’s possession, custody, and control, and deliver the same to the designated
computer forensic specialist and shall provide all cooperation and assistance to enable
said forensic images to be made, including but not limited to providing any and all
necessary passwords and/or any other authentication information;
7. After forensic imaging is complete, the Parties ARE REQUIRED to engage in
discussions regarding the manner in which forensic review will be conducted of the
computers and electronic storage devices preserved and forensically copied pursuant
to this Order. In the event that the Parties are unable to reach an agreement regarding
the protocol for forensic review within seven (7) days of the Order being issued, then
the Parties SHALL SUBMIT to the Court their respective proposed versions of the
forensic protocol, and the Court shall determine the protocol to be followed;

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8. The forensic copies made pursuant to this Order SHALL be held in escrow by
Plaintiff’s designated forensic expert, pending the parties’ agreement, or the Court’s
Order, regarding the manner in which a forensic review will be conducted;
9. Plaintiffs MAY OBTAIN early discovery if Defendant fails to comply with this
Order;
10. Plaintiffs SHALL PROVIDE a copy of this Memorandum Opinion and Order to the
Defendant.

/S/
Paul W. Grimm
United States District Judge

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