BURKE v. Cumulus Media Inc
Filing
27
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S 8 MOTIONS FOR PRLELIMINARY INJUNCTIONS. Signed by District Judge Thomas L. Ludington. (DPar)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
JOHNNY BURKE,
Plaintiff/Counter-Defendant,
v
Case No. 16-cv-11220
Honorable Thomas L. Ludington
CUMULUS MEDIA, INC.,
Defendant/Counter-Plaintiff.
and
BONNIE HOLZHEI,
Plaintiff/Counter-Defendant,
v
Case No. 16-cv-11221
Honorable Thomas L. Ludington
CUMULUS MEDIA, INC.,
Defendant/Counter-Plaintiff.
__________________________________________/
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTIONS
FOR PRLELIMINARY INJUNCTIONS
On February 18, 2016 Plaintiffs Johnny Burke and Bonnie Holzhei (together “Plaintiffs”)
commenced separate actions against their former employer, Defendant Cumulus Media, in
Michigan state court in the county of Saginaw. See Burke v. Cumulus Media, Inc., 16-cv-11220
(April 4, 2016), ECF No. 1; Holzhei v. Cumulus Media, Inc., 16-cv-11221 (April 4, 2016), ECF
No. 1. Plaintiffs allege that Defendant terminated their employment as morning radio hosts at a
local broadcast station, WHNN-FM/96.1 of Saginaw, Michigan (“WHNN”), because of their
ages in violation of the Elliot Larsen Civil Rights Act, M.C.L. § 37.2101 et seq. (“ELCRA”).
Plaintiff Holzhei also claims that Defendants discriminated against her because of her gender in
violation of ELCRA. Defendant removed the actions to this Court on April 4, 2016, asserting
diversity jurisdiction under 28 U.S.C. § 1332.
On April 11, 2016 Defendant Cumulus Media filed answers to Plaintiffs’ complaints,
along with fourteen counterclaims. See ECF No. 4.
Defendant’s counterclaims rest on
allegations that, by broadcasting an internet morning show following their termination, Plaintiffs
are in violation of non-compete agreements between the parties and have impermissibly accessed
Defendant’s confidential business information. Id. Defendant then filed motions for preliminary
injunctions against each Plaintiff on April 18, 2016, seeking an order (1) enjoining Plaintiffs
from continuing to broadcast the Internet Show in violation of their employment agreements; (2)
enjoining Plaintiffs from continuing to use Cumulus’s confidential information, continuing to use
the name “Blondie”, and continuing to solicit Cumulus’s current and former advertisers; (3)
requiring Plaintiffs to make a detailed accounting of income generated from their competing
activities; (4) requiring Plaintiffs to return all of Cumulus’s confidential documentation and any
record of trade secrets; (5) allowing the immediate commencement of discovery; and, as to
Holzhei alone (6) awarding Cumulus attorney’s fees, costs and interest pursuant to her
employment agreement. See ECF No. 8.
I.
The material facts are not in dispute. WHNN is a broadcast station that has operated out
of the Saginaw area for more than six decades. See Countercl. ¶ 10. WHNN was originally
owned and operated by Citadel Broadcasting. In 2011 Defendant Cumulus acquired Citadel
Broadcasting, thereby becoming the owner and operator of numerous Michigan-based radio
stations including WHNN. Id. at ¶ 8. Following the acquisition Cumulus continued to use the
call sign WHNN in association with all programming on the broadcasting station. Id. at ¶ 11.
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A.
Plaintiffs Burke and Holzhei are residents of Saginaw Michigan. See Compl. ¶ 5. Burke,
who had served as a radio host on WHNN for around two decades, was known for the morning
radio show he hosted, “Johnny Burke and the Morning Crew” (the “Radio Show”). See
Countercl. ¶ 13. The Radio Show featured regular on-air participants, including Plaintiff Holzhei
who appeared under the alias “Blondie.” Id. at ¶¶ 14-15. The Radio Show followed a regular
format, with distinctive, recurrent segments based on the time of day or the day of the week. Id.
at ¶¶ 16-17. Defendant’s witness Julia Richardson acknowledged that Plaintiffs are “legends” in
local radio.
i.
Prior to Cumulus’s acquisition of Citadel Broadcasting, on March 16, 2010 Holzhei
entered into an employment agreement with Citadel Broadcasting.
See H. Employment
Agreement, ECF No. 8 Ex. A. Pursuant to the agreement, Holzhei earned $31,000 in annual
compensation. Id. at ¶ 4. From March 16, 2010 to March 15, 2011, Holzhei could only be
terminated for specific cause or through use of specific procedures, after which the employment
reverted to “at-will.” Id. at ¶¶ 2, 8.
Holzhei’s employment agreement contains the following non-compete agreement that
prevents her from competing with Defendant Cumulus for an unconditional period of one year
following the termination of their employment relationship:
To the extent permitted by law, Employee agrees that while employed by the
Company and following termination of Employee’s employment for any reason
that for a period of at least three (3) months, plus an additional three (3) months
for each additional year of employment with the Company, not to exceed a
maximum of one (1) year, Employee shall refrain, directly or indirectly, whether
as principal, agent, consultant, contractor, employee, or otherwise, alone or in
association with or on behalf of other(s), from appearing, performing, or allowing
Employee’s voice or picture to be heard, broadcast, used, or transmitted live or by
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recording in or on any radio station located within the Restricted Area. For
purposes of this Section 12(b), “any radio station located within[ ] the Restricted
Area” shall be defined to mean a radio station whose main transmitter is located
within a sixty (60) mile radius of the Station’s main transmitter. The terms of this
Section shall survive any termination or expiration of this Agreement. Employee
acknowledges and agrees that the obligations set forth in this Section 12 will not
in any way preclude Employee upon termination of employment from engaging in
a lawful profession, trade, or business of any kind, or from becoming gainfully
employed. Employee understands and agrees that 10 percent (10%) of
Employee’s salary… is being paid by Employer in consideration for the post-term
protection and exclusivity provisions of this Agreement as well as for the other
covenants set forth in this Agreement.
See Employment Agreement ¶ 12(b). Her employment agreement also contains the following
provisions limiting her ability to solicit Defendant’s customers and employees for a one-year
period:
(a) Non-Solicitation of Customers. Employee agrees that during his/her
employment with the Company and for a period of one (1) year following
termination of Employee’s employment with the Company for any reason,
Employee will not, without the express written consent of Employer, directly
or indirectly, either on Employee’s own or on behalf of any other person or
entity, contact, solicit, call upon, communicate with, or attempt to
communicate with any employee, contractor, or agent of any customer of
Employer for purposes of providing any service competitive with Employer’s
business. The terms of this section shall survive any termination or expiration
of this Agreement.
(b) Non-Solicitation of Employees. Employee agrees that during his/her
employment with the Company and for a period of one (1) year following
termination of Employee’s employment with the Company for any reason,
Employee will not directly or indirectly, either on Employee’s own behalf or
any other person or entity Solicit… any person who is at the time or within the
immediately preceding thirty (30) days was an employee of Employer. The
term “Solicit” shall be defined to include the following: (i) hire or employ,
offer to hire or employ, or attempt to hire or employ; (ii) assist any person in
hiring or employing; (iii) contract with; or (iv) induce to leave employment.
The terms of this section shall survive any termination or expiration of this
Agreement.
Id. at ¶ 13. Holzhei’s employment agreement also contains a restrictive “Advertising and
Publicity” provision:
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Employee agrees that Employer has the exclusive right to use and license others
to use Employee’s name, professional name, nickname, recorded voice,
biographical material, performances, portraits, pictures, and likeness for purposes
of trade, advertising, promotion and publicity in connection with the institutions,
services and products of Employer and its sponsors; provided, however, that no
direct endorsement by Employee of any product or service shall be used without
Employee’s consent. Employee agrees that Employee shall not use or authorize
the use of Employee’s name, professional name, nickname, recorded voice,
biographical material, performances, portrait, picture, or likeness to advertise,
promote, or publicize in any manner, any institution, product, or service for any
person or entity other than Employer or its affiliated entities without obtaining the
prior express written consent of Employer. Employee shall not authorize or
release any advertising or promotional matter or any other publicity in any form
with reference to Employee’s services hereunder or the Programs of Employer
without Employer’s prior express written approval.
Id. at ¶ 14.
Holzhei’s employment agreement also contains the following “Property Rights”
provision. Pursuant to that provision, any program and announcement created and rendered by
Holzhei as part of her employment “(including every format, idea, theme, script, characteristic,
element thereof)” is solely and exclusively owned by the employer. Id. at ¶ 15(a). That provision
further provides:
[a]t no time, during the Term or thereafter, shall Employee, directly or indirectly,
render any service on or in connection with any radio program that is identified by
any name or title confusingly similar to the name or title of a program on or in
connection with which Employee has rendered services for Employer or station.
Notwithstanding the foregoing, Employer shall have no control over the use by
Employee of Employee’s real name or any other intellectual property owned by
Employee after termination or expiration of this Agreement.
Id.
Holzhei’s employment agreement also contains a provision restricting her ability to use
certain confidential information as follows:
Employee acknowledges that, in the course of Employee’s employment,
Employee shall have access to and be entrusted with confidential information,
trade secrets, records, data, specifications…and other knowledge, including, but
not limited to, business plans, marketing plans and methods, special pricing or
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rate arrangements, programming strategies, studies or surveys, proprietary
research, financial affairs…customer or advertising lists, current or prospective
customer/advertiser contacts and preferences, and programming or promotional
plans ([“Confidential Information”]) owned by or in the possession of Employer.
All confidential information shall be and remain the sole and exclusive property
of Employer[.] Employee agrees that during his/her employment with the
Company and for a two (2) year period after Employee’s termination of
employment for any reason, Employee shall not, without the prior written consent
of Employer, disclose to any individual or entity for any reason or purpose
whatsoever, or use for [her] own benefit or for the benefit of any other person or
business…any Confidential Information of Employer.”
Id. at ¶ 16.
Finally, Holzhei’s Employment Agreement contains a provision specifically authorizing
her employer to seek injunctive relief and monetary damages in the event of a breach of the
agreement:
Employee recognizes that the services to be rendered by Employee hereunder are
of special, unique, unusual, extraordinary and intellectual character, are of an
artistic and professional nature, require skill of the highest order, and further are
of peculiar value, the loss of which cannot be adequately compensated for in
damages…in the event of any breach of the provisions of this Agreement by the
Employee, Employer shall be entitled, if it so elects, to institute and prosecute
proceedings…to obtain damages, attorney’s fees, costs, to enforce specific
performance of such provisions, to restrain and/or enjoin Employee[.] Because a
remedy at law for any breach of this provision may be inadequate, Employee
agrees that…Employer shall have the remedies of a restraining order, injunction
or other equitable relief to enforce the provisions hereof without posting bond and
without the showing of irreparable injury.
Id. at ¶ 18.
Holzhei’s Employment Agreement specifically states that it is assignable to any entity
that succeeds to ownership of the employer, and that such assignment could be effected without
consent of Holzhei and without any additional consideration or notice to Holzhei. Id. at ¶ 19.
ii.
Unlike Holzhei, Burke entered into a new employment agreement with Defendant in
2012. On June 21, 2012 Scott Meier, the regional vice president of Defendant Cumulus, sent a
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memorandum to Burke regarding his compensation plan. See B. Compensation Memo, ECF No.
4 Ex. B. The plan provided that Burke would have a base salary of $125,000 per year. Id. Five
percent of Burke’s base salary was to be in consideration for Burke’s agreement to be bound by a
exclusive negotiation provision and a six-month non-compete agreement. Id. The non-compete
agreement provided, in relevant part:
For a period of 6 months after the termination of your employment with Cumulus,
you shall not enter into the employment of, perform services for, enter into any
oral or written agreement for services with, give or accept an option for services
or grant or receive future rights of any kind to provide services to or from any
person or entity engaged in the operation, promotion, or marketing of commercial
radio, unless and until you have first promptly disclosed the terms thereof to
Cumulus and offered in writing to resume your reemployment with Cumulus on
terms that are substantially similar to those of any bona fide offer that you have
received or option or rights that you intend to grant or accept.
Id. The compensation memorandum also contained a termination provision, providing “[a]t the
time your employment ends, you will be paid your Base Salary through your last day worked.”
Id. The compensation memorandum concluded with a space for Burke’s signature, above which
is set forth:
I understand and voluntarily accept the foregoing compensation plan as outlined
above. I acknowledge that this Memorandum, the Cumulus Handbook, and the
Confidentiality, Non-Competition, and Non-Solicitation Agreement set forth the
full terms of my employment with Cumulus, and supersedes all previous
inconsistent agreements, understandings, terms or conditions, either express or
implied. I further understand that my Market Manager can modify this
compensation plan at any time without notice, unless required by law. Finally, I
acknowledge the fact that nothing in this document alters the fact I am an “at
will” employee, meaning that Cumulus or I may terminate this employment
relationship any any time for any reason.
Id. Burke signed the compensation memorandum on June 25, 2012.
Burke also entered into a Confidentiality, Non-Competition, and Non-Solicitation
Agreement (Burke’s “employment agreement”), as referenced in the compensation
memorandum. See B. Employment Agreement, ECF No. 8 Ex. A. The employment agreement
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was signed by the regional vice president of Citadel Broadcasting on June 27, 2012, and by
Plaintiff Burke on an unspecified date. After acknowledging that Burke’s employment was to
remain “at-will,” the employment agreement provides as follows:
WHEREAS Employee and the Company agree that the approval, acceptance, and
goodwill developed by the Company’s program directors and radio announcers
with the Company’s listening audience and customers/sponsors is a valuable asset
of the Company’s business, and essential to the Company’s success in its highly
competitive market;
WHEREAS Employee will develop such approval, acceptance, and goodwill for
the Company and at the Company’s expense;
WHEREAS Employee and the Company agree that the Company’s confidential
business information is also a valuable asset of the Company’s business, and
essential to the Company’s competitive success;
WHEREAS Employee will have access to the Company’s confidential business
information;
WHEREAS the Company would suffer irreparable harm if Employee were to
misuse the approval, acceptance, and goodwill that Employee develops on the
Company’s behalf, or the confidential information that Employee obtains while in
the Company’s employ, to compete unfairly against the Company;
WHEREAS Employee has gained, or will gain, relationships with other Company
employees and knowledge of the Company’s relationships with other employees,
which relationships and knowledge could be misused to disrupt the Company’s
operations if Employee were to solicit other employees for employment by a
Competitor of the Company;
Id.
Burke’s employment agreement contains a number of definitions. Id. at ¶1. It defines the
“Company Business” as “the operation, promotion, and marketing of commercial radio stations.”
Id. It defines the “Business Area” as “the area within a 50-mile radius of the Company’s
WHNN-FM transmitter located at 9622 Dutcher Road in Fairgrove, MI” and provides that
“Employee and the Company agree that Employee has carried out or will carry out the Company
Business throughout the Business Area by broadcasting programming and advertising heard
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throughout the Business Area, by soliciting sponsors/customers from throughout the Business
Area, and/or by organizing or conducting promotional events throughout the Business Area.” Id.
“Competing Business” is defined as “any person (including Employee) or entity carrying on a
business that is the same or essentially the same as the Company Business.” “Confidential
Information” is defined as
All information that: (i) the Company endeavors to keep secret; and (ii) has
commercial value to the Company or is of such a nature that its unauthorized
disclosure would be detrimental to the Company’s interest, including, for
instance, the Company’s information concerning price and discount arrangements
with sponsors/customers, information concerning sponsors’/customers’ particular
needs, preferences and interests (and how the Company uses such information to
maintain a competitive advantage), marketing plans, business strategies,
promotion plans, financial information, forecasts, and personnel information.
Confidential Information does not include information that (i) is in or enters the
public domain other than by breach of this Agreement; or (ii) is known or
becomes known to Employee from a source other than the Company provided that
the source does not make the information known to the Employee in violation of a
contractual or other legal duty owed to the Company.
Id.
The final definition provided in the employment agreement, “Job Duties” includes
“[p]erforming a daily live on-air shift on the Station Monday-Friday, as determined and directed
by the Company from time to time” and “working on show preparation and production.” Id.
Burke was to “render all artistic, creative, and professional services for the Company and for the
Station, including without limitation, for the production of programming on behalf of the
Company and the Station.” Id. Burke also agreed “that Employee has been assigned and will
carry out these Job Duties on Behalf of the Company.” Id.
The employment agreement then contains four provisions governing Burke’s conduct for
the duration of his employment and for a period following the termination of his employment.
First, there is a provision requiring the protection of Cumulus’s confidential information:
Non-Disclosure. During Employee’s employment by the Company, and for one
year after termination of such employment, Employee shall not, directly or
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indirectly, disclose any Confidential Information to any person or entity, or use or
allow others to use through Employee any Confidential Information, except as
necessary for performance of Employee’s Job Duties.
Id. at ¶ 2.1. Second, Burke’s employment agreement contains the following agreement not to
compete:
AGREEMENT NOT TO COMPETE. While employed by the Company, and
for 6 months following termination of such employment (“Non-Compete Period”)
Employee shall not, directly or indirectly, within the Business Area, engage in
any activities the same or essentially the same as Employee’s Job Duties for any
Competing Business; provided, however, in the event the Company terminates
Employee without “Cause”…, the Non-Compete Period shall be enforceable
against Employee for a period of up to 6 months only in the event and to the
extent that the Company, in its discretion, elects to pay to Employee his base
salary during such period. Employee further agrees that during the pendency of
any litigation to enforce this Section [], including all appeals, the non-compete
period identified herein shall automatically be tolled for such period of time until
the litigation is fully and finally resolved.
Id. at ¶ 3. Third, the employment agreement contains an agreement not to solicit customers:
AGREEMENT NOT TO SOLICIT CUSTOMERS. During Employee’s
employment by the Company and for 6 months following termination of such
employment, Employee shall not, directly or indirectly, for any Competing
Business, solicit, for the purpose of selling advertising time, any customer of the
Company whom Employee had Contact on the Company’s behalf during the two
years preceding Employee’s termination of Employment.
Id. at ¶ 4. Like the agreement not to compete, the agreement not to solicit customers also
contains a provision tolling the 6-month period during the pendency of any litigation. Id. Unlike
the agreement not to compete, the agreement not to solicit customers is not conditioned on the
Company’s election to pay Burke his base salary during the 6-month period. Id.
Finally, Burke’s employment agreement contains an agreement not to solicit fellow
employees:
AGREEMENT NOT TO SOLICIT EMPLOYEES. During Employee’s
employment by the Company and for 6 months following termination of such
employment, Employee shall not, directly or indirectly, solicit for employment by
a Competing Business any of the Company’s sales, programming, managerial, or
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on-air employees with whom Employee dealt during the 12 months preceding
Employee’s termination of employment with the Company.
Id. at ¶ 5. Like the preceding, the agreement not to solicit customers also contains a provision
polling the 6-month period during the pendency of any litigation, but is not conditioned on the
Company’s election to pay Burke his base salary during the 6-month period. Id.
As part of his employment agreement, Burke agreed that the preceding provisions were
“reasonably necessary to protect the Company’s property and business interests, and that
Employee’s breach of any of [the] provisions will cause the Company to suffer irreparable loss
and damage.” Id. at ¶ 8. He therefore agreed that “if Employee breaches or threatens to breach
any of the provisions…, the Company shall be entitled to immediate injunctive relief to enforce
this Agreement, money damages for whatever harm such breach causes the Company, and
whatever other remedies are available.” Id. Burke also agreed “to pay all costs, expenses, and/or
charges, including reasonable attorneys’ fees, incurred by the Company in successfully enforcing
any of the provisions hereof.” Id. at ¶ 14.
iii.
The differences between the two Plaintiff’s employment agreements are material to this
action. While Burke earned a base salary of $125,000 per year, Holzhei earned a base salary of
only $31,200. Despite the fact that Holzhei received significantly less compensation than Burke,
she is subject to a more extensive non-compete agreement than Burke. While Burke’s noncompete prevents him from competing with Defendant for a period of 6-months after the
termination of his employment only if Defendant chooses to pay him for that 6-month period,
Holzhei’s Employment Agreement prevents her from competing with Defendant Cumulus for an
unconditional period of one year. In its preliminary injunctions motions, Defendant only seeks to
enforce Holzhei’s non-compete, and not Burke’s. Holzhei’s employment agreement is more
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restrictive than Burke’s in other ways as well, containing a longer term non-solicitation
provision, greater restrictions on her use of Cumulus’s information, and specific restrictions on
her ability to use Cumulus’s intellectual property, and her name, professional name, and
nickname for advertising and publicity purposes.
B.
Defendant alleges that after the Radio Show received declining ratings in 2013, it
encouraged Burke and Holzhei to use alternative broadcasting technology to enhance the show,
including recording Podcasts and posting video content on Facebook and Periscope. See
Countercl. ¶¶ 18-21. Defendant also alleges that it also encouraged Burke to play more music on
the show. See Tr. While Plaintiffs accepted the recommendation to promote the Radio Show and
broadcasting content on Periscope in 2015, Defendant alleges that Plaintiffs rejected its
recommendation that they play more music. Id. at ¶ 21.
Defendant Cumulus terminated Plaintiffs’ employment on January 15, 2016. Defendant
alleges that Plaintiffs were terminated after the Radio Show continued to receive declining
ratings, and after Plaintiffs refused to accept Defendant’s suggestion to play more music. See
Countercl. ¶¶ 18-21. Plaintiffs allege that they were terminated because of their ages in violation
of ELCRA, as evidenced by the fact that Defendant Cumulus replaced them with two individuals
in their 30’s. See Coml. ¶¶ 19-20. Plaintiff Holzhei also argues that Defendant discriminated
against her because of her gender in violation of ELCRA.
Soon after their terminations, Holzhei and Burke began webcasting a morning audio
show via Periscope called “Johnny and Blondie Live” (the “Internet Show”). See Resp. to Mot.
1, ECF No. 13. The Internet Show follows a similar format to the former Radio Show, and
Holzhei continues to use the name “Blondie.” Id. Defendant alleges that the Internet Show
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features the same promotional events, guests, programming content, theme, and schedule as the
former radio show. See Mot for Prelim. Inj. 3. Defendant further alleges that Plaintiffs use
Cumulus’s FCC registered call sign “WHNN” in association with their Internet Show. Id.
Finally, Defendant alleges Plaintiffs have solicited Cumulus’s advertisers by using Cumulus’s
confidential information in violation of the Employment Agreement, and that Cumulus has
already lost at least one advertiser due to their conduct. Id.
C.
In response to their terminations, on February 18, 2016 each Plaintiff filed suit against
Defendant Cumulus in Saginaw County Court. Cumulus removed the actions to this Court on
April 4, 2016 asserting diversity jurisdiction under 28 U.S.C. § 1332. See ECF No. 1. Also on
that date Cumulus sent cease and desist letters to Plaintiffs, arguing that through broadcasting
“Johnny and Blondie Live” they were in violation of non-compete provisions contained in the
parties’ employment agreements.
Defendant Cumulus filed answers to Plaintiffs’ complaints on April 11, 2016. See ECF
No. 3. Cumulus also filed the following fourteen counterclaims relating to the broadcast of
“Johnnie and Blondie Live”: (1) Breach of provisions in the parties’ employment agreements
restricting their ability to compete with Cumulus; (2) Tortious interference with Cumulus’s
contracts with sponsors and advertisers; (3) Tortious interference with business relationships and
expectancies with Cumulus’s listener base, customers, sponsors, and potential sponsors; (4)
Unjust enrichment; (5) Unfair competition; (6) Violation of the Michigan Consumer Protection
Act; (7) Misappropriation of trade secrets in violation of Michigan’s Uniform Trade Secrets Act,
M.C.L. § 445.1901 et seq. (“UTSA”); (8) Violation of the Anti-Cybersquatting Protection Act,
15 U.S.C. § 1125(a), through the use of the call sign “WHNN”; (9) Trademark infringement;
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(10) Statutory conversion of confidential information under M.C.L. § 600.2919(a); (11)
Common law conversion of proprietary, confidential information; (12) Civil conspiracy to
commit the foregoing; (13) A request for accurate accounting of Plaintiffs’ books and records to
determine the extent of damages; and (14) a request for injunctive relief. See Countercl. ¶¶ 77162.
Defendant then filed a motion for a preliminary injunction against each Plaintiff on April
18, 2016. See Mot. for Prelim. Inj., ECF No. 8. In its motions Cumulus requests orders
preliminarily enjoining Plaintiffs from using Cumulus’s confidential information and soliciting
Cumulus’s advertisers, requiring Plaintiffs to make a detailed accounting of income generated
from the internet show, requiring Plaintiffs to return any and all of Cumulus’s proprietary and
confidential documentation, allowing the parties to immediately commence discovery, and
directing the payment of fees and costs. Id. As to Holzhei alone Defendant also seeks an order
preliminarily enjoining her from continuing to violate her non-compete agreement.
II.
A preliminary injunction is an extraordinary remedy “which should be granted only if the
movant carries his or her burden of proving that the circumstances clearly demand it.” Overstreet
v. Lexington-Fayette Urban Co. Gov’t, 305 F.3d 566, 573 (6th Cir. 2002). To determine whether
a preliminary injunction should issue, the Court must consider four factors: (1) the movant’s
likelihood of success on the merits; (2) whether the movant will suffer irreparable harm without
the injunction; (3) whether granting the injunction will cause substantial harm to others; and (4)
the impact of the injunction on the public interest. Workman v. Bredesen, 486 F.3d 896, 905 (6th
Cir. 2007). These four factors “are factors to be balanced not prerequisites that must be met.” Six
Clinics Holding Corp., II v. Cafcomp Syst., 119 F.3d 393, 400 (6th Cir. 1997).
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A.
Defendant first argues that a preliminary injunction should be entered as to its claim that
Holzhei breached the non-compete provision of her contract. To establish a breach of contract
claim under Michigan law, a claimant must demonstrate “(1) that there was a contract, (2) that
the other party breached the contract and, (3) that the party asserting breach of contract suffered
damages as a result of the breach.” Dunn v. Bennett, 846 N.W.2d 75 (Mich.Ct.App.2013).
Agreements not to compete are specifically authorized under Michigan law in the
following circumstances:
An employer may obtain from an employee an agreement or covenant which
protects an employer’s reasonable competitive business interests and expressly
prohibits an employee from engaging in employment or a line of business after
termination of employment if the agreement or covenant is reasonable as to its
duration, geographical area, and the type of employment or line of business. To
the extent any such agreement or covenant is found to be unreasonable in any
respect, a court may limit the agreement to render it reasonable in light of the
circumstances in which it was made and specifically enforce the agreement as
limited.
M.C.L. § 445.774a. While agreements limiting competition are expressly authorized by statute,
they are disfavored in Michigan as restraints on commerce, and are only enforceable to the extent
they are reasonable. See Coates v. Bastian Bros., Inc., 741 N.W.2d 539, 545 (Mich. Ct. App.
2007). “To be reasonable in relation to an employer’s competitive business interest, a restrictive
covenant must protect against the employee’s gaining some unfair advantage in competition with
the employer, but not prohibit the employee from using general knowledge or skill.” St. Clair
Med., P.C. v. Borgiel, 270 715 N.W.2d 914, 919 (Mich. Ct. App. 2006). “The burden of
demonstrating the validity of the agreement is on the party seeking enforcement.” Coates, 741
N.W.2d at 545.
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While Defendant does not seek to enforce Burke’s non-compete agreement because it has
elected not to pay Burke the compensation required by his agreement, Defendant does seek to
enforce the provision of Holzhei’s employment agreement prohibiting her from competing
against Cumulus within a year of her termination. That provision prohibits Holzhei from
“appearing, performing, or allowing Employee’s voice or picture to be heard, broadcast, used, or
transmitted live or by recording in or on any radio station located within the Restricted Area.”
H. Employment Agreement ¶12(b). That section specifically defines “any radio station located
within[ ] the Restricted Area” as “a radio station whose main transmitter is located within a sixty
(60) mile radius of the Station’s main transmitter….” Id. Unlike the non-compete agreement
found in Burke’s employment agreement, Holzhei’s non-compete agreement does not contain
language prohibiting her from engaging in business that is “essentially the same” as a radio
business.
Plaintiff alleges that the non-compete covenant does not apply because the Internet Show
is not a “radio station” as defined by the contract. Plaintiff also argues that internet streaming is
significantly different from heavily regulated, geographically limited radio activities. Plaintiff is
correct that the language of the employment agreement only prohibits Holzhei from engaging in
competitive radio business for a period of one year. It does not apply to broadcasts on any other
medium, including television or internet. Holzhei’s non-compete agreement does not apply to her
conduct related to the Internet Show.
B.
As explained above, Holzhei’s non-compete agreement does not apply to her activities
with the Internet Show, and Cumulus has not paid for the right to exercise Burke’s non-compete
agreement. For these reasons, Burke and Holzhei are allowed to engage in competition with
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Defendant. In order to succeed in restraining Plaintiffs’ competition, then, Cumulus must show
that some aspect of the competition is in violation of another express contract term restricting
competition or otherwise prohibited by law.
i.
Defendant posits a number of theories as to how Plaintiffs’ competition is in violation of
express contract terms between the parties. First, Cumulus argues that Plaintiffs have breached
the provisions of their employment agreements requiring them to maintain Cumulus’s
confidential information. In its papers Cumulus does not identify any particular way in which
Plaintiffs have failed to maintain confidentiality, arguing generally that Plaintiffs are using its
confidential, proprietary information and trade secrets in broadcasting the Internet Show, as
evidenced by the similarities between that show and the former Radio Show. However, the
general format of the Radio Show is not proprietary or confidential by its very nature, given that
it is broadcasted to the public. Defendants thus cannot argue that they made any effort to keep
the Radio Show format secret.
At the preliminary injunction hearing, Defendant argued that both Plaintiffs had access to
Cumulus’s shared drive that contains confidential information.
Cumulus also argued that
Plaintiffs had access to proprietary Neilson ratings for which Cumulus paid around $10,000 a
month, that Plaintiff’s had access to “Remote Sheets” containing confidential information
regarding customer pricing, and that Plaintiffs were provided with confidential show prep
services while employed at Cumulus.
Even assuming that Plaintiffs had access to this
confidential information, Defendant has presented no evidence that Plaintiffs used, much less
wrongfully used that information in producing their Internet Show. The mere fact that Plaintiffs
have advertisers on the Internet Show does not mean that they wrongfully used confidential
- 17 -
information to obtain those advertisers. Similarly, the mere fact that Cumulus purchased show
prep services for Plaintiffs during their employment does not mean that Plaintiffs are prohibited
from purchasing their own show prep services for the Internet Show. Indeed, Burke testified that
he currently subscribes to his own show prep services for the Internet Show. Because Defendant
has not established that the confidentiality provisions were breached, it has not shown a
likelihood of success on its claims that Plaintiffs breached contract provisions requiring them to
maintain the confidentiality of Cumulus’s information.
ii.
Defendant also argues that it is likely to succeed on the merits of its claim that Plaintiffs
breached the provisions of their employment agreements prohibiting them from soliciting
Cumulus’s employees by contracting with each other to perform the Internet Show. At the
hearing, Burke and Holzhei each testified that they did not discuss webcasting the Internet show
until after their employment with Cumulus had been terminated. Burke alone was involved in
the initial Internet Show webcast, which took place the Tuesday following Plaintiffs’
termination. Holzhei testified that Burke invited her to join him in webcasting the Internet Show
in order to say goodbye to their former listeners, and that the Internet Show then evolved into a
program in its own right. In its reply, Defendant concedes that Holzhei did not agree to join
Burke in broadcasting the Internet Show until “after her employment with Cumulus ended.” See
Reply 7, ECF No. 17.
The non-solicitation provision in Burke’s contract prevents him from soliciting for a
period of six months “any of [Cumulus’s] sales, programming, managerial, or on-air employees
with whom Employee dealt with during the 12 months preceding Employee’s termination of
employment with [Cumulus].” B. Employment Agreement. ¶ 4. By its terms, Burke’s non-
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solicitation has not been violated, as Holzhei was not an employee of Cumulus when he invited
her to take part in the Internet Show. The provision of Burke’s contract prohibiting solicitation of
employees applies to just that – employees. Nothing in that agreement prevents Burke from
soliciting Cumulus’s former employees.
The non-solicitation provision found in Holzhei’s employment agreement is more
restrictive than the one found in Burke’s. That provision prohibits her from soliciting “any
person who is at the time or within the immediately preceding thirty (30) days was an employee
of Employer” for a period of one year after the termination of her employment. The provision
defines “solicit” to include the following: “(i) hire or employ, offer to hire or employ, or attempt
to hire or employ; (ii) assist any person in hiring or employing; (iii) contract with; or (iv) induce
to leave employment.” H. Employment Agreement ¶ 13. Because Defendant has presented no
evidence that the first, third, or fourth definitions of solicit apply, Defendant’s claim must rest on
the third definition of solicitation.
Defendant has shown a likelihood of success on this claim. By agreeing to webcast the
Internet Show with Burke, Holzhei entered into an agreement, however informal, with Burke,
who at the time had been employed by Cumulus within the immediately preceding thirty days.
Plaintiff Holzhei has not objected to the enforceability of the non-solicitation provision or its
broad definitions of “solicitation”. Defendant has therefore demonstrated a likelihood of success
on this claim.
iii.
Next, Defendant argues that it is likely to succeed on the merits of its claims that
Plaintiffs breached the provisions of their contracts prohibiting them from soliciting Cumulus’s
customers. Plaintiffs do not dispute that they obtained sponsors, some of which had previously
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advertised with Cumulus. Again, because there are no non-compete agreements at issue in this
case, Plaintiffs are allowed to generally compete with Defendant, and are thus allowed to solicit
advertisers.
Plaintiffs simply may not solicit advertisers in violation of their contractual
agreements with Defendant not to solicit Defendant Cumulus’s customers/advertisers.
Plaintiffs contend that any solicitations are not in violation of the contracts because the
internet webcast is not a business that is “competitive” with Cumulus under the agreements, as
evidenced by the agreements’ geographic scopes. Plaintiffs also argue that they did not breach
the non-solicitation provisions because Defendant Cumulus’s former advertisers voluntarily
approached them without any solicitation on Plaintiffs’ part.
1.
In terms of form and content, the radio show and the internet show are similar. Both are
audio shows, aired in the morning, and featuring Burke and Holzei. While the Internet Show
features some different segments, different types of music, and no recorded commercials, Burke
has admitted that he uses segments on his Internet Show that were formerly featured on the
Radio Show. See Burke Aff., ECF No. 13 Ex. A. Despite the fact that the Internet Show does not
contain any recorded commercials, it still features advertising in exchange for sponsorship. Id.
Fundamentally, both shows are morning audio shows that follow a commercial talk show format.
Plaintiffs argue that, despite these similarities, the Internet Show cannot be considered
“competitive” with Defendant’s radio business because the content is broadcast by a different
vehicle: namely internet streaming instead of radio waves. In support of this claim Plaintiffs
emphasize numerous cases that distinguish the FCC’s licensing and regulation requirements
from the open and unregulated internet. See, e.g., Reno v. ACLU, 521 U.S. 844, 869 (1997)
(noting that the internet is not supervised by a federal agency), Comcast Corp. v. FCC, 600 F.3d
- 20 -
642, 646 (D.C. Cir. 2010) (vacating an attempted regulatory order over the Internet). They also
point to regulations suggesting that the term “commercial radio stations” refers only to AM or
FM radio broadcasts. See 47 C.F.R. 73.3555 (limiting local ownership for AM and FM radio
broadcast stations).
Plaintiffs also emphasize a non-binding 2012 case decided in Ohio state court, Deluca v.
D.A. Peterson, Inc. In Deluca, like in the present case, the plaintiffs were two morning radio
hosts for an FM radio station whose employment contracts were subject to non-compete
agreements.
Id.
After their contracts with the radio station expired, the plaintiffs began
broadcasting an audio show via internet podcasts three mornings per week. Id. 3 After the
plaintiffs brought suit, the defendant counterclaimed that the plaintiffs were in breach of the
parties’ non-compete agreement that prevented them from engaging in the same or “essentially
the same” business for a given period, and moved for an order preliminarily enjoining the
plaintiffs from broadcasting their internet audio show. The Ohio state court concluded that the
plaintiffs’ internet webcast could not be considered the same or essentially the same business as
the defendant’s radio business. Id. at 7. In so finding, the Ohio state court found the fact that
radio broadcasts were subject to different regulations than internet broadcasts persuasive. Id.
Defendant responds that differences in regulatory structure between internet and radio
broadcasts are irrelevant for the purpose of considering whether Plaintiffs are carrying on a
business that is competitive with Cumulus’s business. Defendant is correct. To hold otherwise
would be to elevate form over substance and ignore the economic realities of an industry that is
increasingly shifting to the internet medium. The Internet Show is “competitive” with the Radio
Show.
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2.
Plaintiffs next argue that, because internet signals have no geographic limits, the
geographic scope of the Non-Compete Agreement is unreasonable as applied to the Internet
Show. This argument is somewhat in conflict with Burke’s admissions that the Internet Show
features “local homegrown artists”, presumably from the Saginaw area, and that they use many
of the same segments from the former radio show. See Burke Aff., ECF No. 13 Ex. A. The fact
that the Internet has a global reach does not mean that producers of internet media may not have
a local target audience, and in fact may. Evidence suggesting that Plaintiffs’ show targets
customers, advertisers, and listeners within the radius established by the Employment Agreement
weighs in favor of Defendant Cumulus.
3.
Finally, Plaintiffs argue that they have not solicited any of Cumulus’s sponsors in
violation of the employment agreements because all of the Internet Show sponsors have initiated
the advertising relationship. See Burke Aff. 7. At the preliminary injunction hearing Defendants
presented some evidence that Plaintiffs had developed advertising relationships with customers
that previously advertised with Cumulus. However, Defendant presented no evidence that those
relationships were the result of contractually prohibited conduct on the part of Plaintiffs. Instead,
with the exception of their agent Katherine Best’s attempt to solicit B’s Boutique, the testimony
consistently demonstrated that all advertisers had initiated their relationships with Plaintiffs, not
the other way around. Defendant has therefore only shown a likelihood of success on a narrow
claim that Plaintiff’s attempted to solicit B’s Boutique in violation of their contracts.
- 22 -
iv.
Finally, Defendant alleges that it is likely to succeed on the merits of its claim that
Holzhei breached the provision of her contract prohibiting her use of Cumulus’s intellectual
property. See H. Employment Agreement ¶ 15. Defendant does not raise a similar claim against
Plaintiff Burke because there is no comparable provision in his employment agreement.
Defendant argues that Holzhei is using protected programming and segments owned by
Cumulus, and that she continues to impermissibly go by the name “Blondie” on the Internet
Show.
Defendant has not shown a likelihood of success on its claim that Holzhei has breached
her employment agreement by continuing to go by the nickname Blondie. Defendant presented
no evidence that it developed the nickname or any features of the Blondie character. Instead, it
is undisputed that Blondie has been Holzhei’s nickname since she was a child. Because there is
no evidence that the nickname Blondie was “created or developed” pursuant to Holzhei’s
employment with Cumulus, her continued use of that name is not prohibited by her employment
agreement. H. Employment Agreement ¶ 15(a).
Defendant also argues that Holzhei’s breached this provision of her employment
agreement by holding a promotional bus tour similar to promotional bus tours Cumulus had held.
Defendant presented no evidence that it had any intellectual property rights to the bus tour event.
Instead, Defendant’s witness testified that bus tours are a somewhat common event in the radio
industry.
Defendant Cumulus also presented no evidence that Plaintiffs use any show segments
owned by Cumulus. Burke testified that Plaintiffs continue to use “The Friday Morning Primal
Scream” and “The Butthead Bulletin” segments. Importantly, however, Defendant did not refute
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Burke’s testimony that he created those segments prior to his employment with Cumulus.
Accordingly, there is no evidence that those segments were “created or developed” pursuant to
Holzhei’s employment agreement. The only segment used by Plaintiffs on the Internet Show that
was arguably created during the course of their employment with Cumulus is “The Tweet of the
Day” segment. Defendant presented some evidence that Plaintiffs developed that segment with
the help of Cumulus show prep services. Defendant has shown a substantial likelihood of success
only on the narrow claim that the continued to use the “Tweet of the Day” segment is wrongful
under Holzhei’s employment agreement. See H. Employment Agreement ¶ 15(a).
B.
In addition to its breach of contract claims, Defendant argues that Plaintiffs’ competition
is otherwise unfair or prohibited under various Michigan and federal laws. Defendant first
argues that there is a substantial likelihood that it will succeed on its claim that Plaintiffs
misappropriated trade secrets in violation of UTSA. UTSA defines “Trade secret” as
information, including a formula, program, method, technique or process, that both “(i) [d]erives
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 “(ii) [i]s the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.” M.C.L. § 445.1902(d). UTSA specifically authorizes the
entry of injunctions where there is actual or threatened misappropriation. See M.C.L. § 445.1903.
Cumulus again argues generally that Plaintiffs have used its confidential, proprietary
information and trade secrets by mirroring the radio show’s format, content, and personas and by
openly exploiting Cumulus’ social media accounts to promote its internet show. As explained
above, the general format of the Radio Show is not protected by the UTSA because Defendant
- 24 -
has taken no steps to keep the format secret. And while exploitation of social media accounts
may be in violation of some other law, it does not fall within the parameters of the UTSA. In
these regards Cumulus has not identified any information that is not generally known or readily
ascertainable, nor any reasonable efforts it has undertaken to maintain the secrecy of such
information.
Cumulus again argues that Plaintiffs’ access to confidential information such as Nielson
Ratings and Remote Sheets demonstrate a likelihood of success on its UTSA claims.
As
discussed above, while Cumulus has argued that Plaintiffs had access to confidential information
such as Nielson Ratings and Remote Sheets, Cumulus has presented no evidence that Plaintiffs
wrongfully used such confidential information. Defendant therefore has not presented sufficient
evidence to demonstrate a likelihood of success on its UTSA claims.
C.
Defendant Cumulus also alleges that there is a substantial likelihood that it will succeed
on its claim of statutory conversion under Michigan law. Michigan Compiled Law §
600.2919(a)(1) authorizes treble damages, along with costs and reasonable attorney fees, where a
party proves it was damaged by “[a]nother person’s stealing or embezzling property or
converting property to the other person’s own use.” Id.
As discussed above, Defendant has not demonstrated a likelihood of success on its claims
that Plaintiffs have wrongfully used confidential information such as Neilson Ratings or Remote
Sheets. Defendant also has not demonstrated a likelihood of success on its claims that Holzhei’s
use of the nickname Blondie is wrongful, or that the Plaintiffs’ continued use of “The Friday
Morning Primal Scream” and “The Butthead Bulletin” segments is wrongful. While Defendant
attempted to argue that Plaintiffs had wrongfully converted a photograph from its website,
- 25 -
Defendant did not rebut Plaintiffs’ suggestion that they obtained the photograph from the
photographer: the actual owner of the photograph. The only intellectual property arguably
converted by Plaintiffs is “The Tweet of the Day” segment and Burke’s use of the call sign
WHNN in his Twitter and Periscope accounts.
D.
Defendant Cumulus also alleges that Plaintiffs are engaging in unfair competition in
violation of the Lanham Act, 15 U.S.C. § 1125(a).1 The Lanham Act provides as follows:
(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or
device, or any combination thereof, or any false designation of origin, false or
misleading description of fact, or false or misleading representation of fact,
which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to
the affiliation, connection, or association of such person with another
person, or as to the origin, sponsorship, or approval of his or her
goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of his or her or another
person’s goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is
likely to be damaged by such act.
Id. The Lanham Act prohibits “false or misleading representation[s] of fact” in commercial
advertising, and applies to qualified unregistered trademarks. See Two Pesos, Inc. v. Taco
Cabana, Inc., 505 U.S. 763, 768-69, (1992).
1
Defendant has brought three counterclaims under the Lanham Act. As its fifth counterclaim Defendant claims
“Unfair Competition” under 15 U.S.C. 1125(a). Defendant’s eighth counterclaim falling under the “Anti
Cybersquatting Protection Act” relates to Burke’s Twitter and Periscope activities and again cites 15 U.S.C. 1125(a).
Finally, Defendant’s ninth counterclaim alleges “Trademark infringement” based on the same activities under the
same act.
- 26 -
i.
In order to establish a claim under the act, Cumulus first must establish the existence of a
valid and legally protectable trademark qualifying under § 2 of the Lanham Act. See DeGidio v.
W. Grp. Corp., 355 F.3d 506, 509 (6th Cir. 2004). To do so, Cumulus must demonstrate a mark
that “(1) is inherently distinctive or (2) has acquired distinctiveness through secondary meaning.”
Two Pesos, 505 U.S. at 7. Marks that are “arbitrary,” “fanciful,” or “suggestive” are likely to be
“inherently distinctive” and protectable. See Leelanau Wine Cellars, Ltd. v. Black & Red, Inc.,
502 F.3d 504, 512 (6th Cir. 2007). On the other hand, generic terms almost never qualify for
trademark protection. Id. Falling between these two poles are marks that are descriptive but not
inherently distinctive, which may be protectable under the act if they develop a secondary
meaning. Id.
Plaintiffs do not dispute Defendant’s claim that the WHNN mark is distinctive such that
it is a qualified unregistered mark subject to protection under the Act, and indeed, WHNN is a
qualifying mark under the act. Defendant’s claim that Holzhei’s nickname “Blondie” constitutes
a qualified unregistered trademark is without merit. Blondie is not a distinctive mark, but instead
a generic and descriptive name for women with blonde hair. Nor has Defendant shown that
“Blondie” has acquired secondary meaning. Finally, as discussed above, Defendant has not
shown any proprietary interest in Holzhei’s nickname “Blondie” since it is undisputed that it has
been Holzhei’s nickname since she was a child, and there is no evidence that the nickname
Blondie was created or developed pursuant to Holzhei’s employment agreement with Cumulus.
ii.
Having demonstrated that the call sign WHNN is a qualifying unregistered trademark,
Cumulus next must show that Burke’s use of the WHNN mark is “likely to cause confusion or to
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cause mistake”. See Two Pesos, 505 U.S. at 768-69 (holding likelihood of confusion is the
critical element of federal trademark infringement claim). Defendant emphasizes the fact that
Burke continued to use Cumulus’s call sign WHNN as part of his personal Twitter handle and
Periscope username. At the hearing Burke testified that he had been unable to change his
Twitter handle on his own, and that he had to contact Twitter support to have the handle
changed. Burke testified that the change was accomplished at some time in April, and that
WHNN no longer appears on either his Twitter or Periscope account.
Defendant alleges that Plaintiffs’ continuing use of its “Facebook page, pictures, call
sign, programming, promotional materials, show elements, and events” is likely to cause
confusion or mistake concerning the origin of the services and goods. See Compl. ¶¶ 98-104. At
the hearing, Defendant also emphasized an April Fool’s Day incident in which Plaintiffs
broadcasted their internet show from Cumulus’s parking lot after days of teasing their listeners
that they were “returning to WHNN.” Having shown both a qualifying mark and a likelihood of
confusion, Defendant has established a likelihood of success on this claim.
E.
Relatedly, Defendant Cumulus alleges that it is likely to succeed on its claim that
Plaintiffs will be unjustly enriched if allowed to continue their unfair competition. Unjust
enrichment is a common law remedy whereby the law implies a contract in order to prevent
unjust enrichment, specifically when one party inequitably receives and retains a benefit from
another. See Martin v. East Lansing School Dist., 483 N.W.2d 656 (Mich. Ct. App. 1992). To
proceed on such a claim, a plaintiff must establish (1) the receipt of a benefit by defendant from
plaintiff, and (2) an inequity resulting to plaintiff because of the retention of the benefit by
defendant. Barber v. SMH (US), Inc., 509 N.W.2d 791 (Mich. Ct. App. 1993). “However, a
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contract will be implied only if there is no express contract covering the same subject matter.”
Belle Isle Grill Corp. v. Detroit, 666 N.W.2d 271 (Mich. Ct. App. 2003). In other words, the law
will not imply a contract where there is an express contract between the same parties on the same
subject matter. Morris Pumps v. Centerline Piping, Inc., 729 N.W.2d 898 (Mich. Ct. App. 2006)
(quoting 42 CJS IMPLIED AND CONSTRUCTIVE CONTRACTS § 34, p. 33).
It is undisputed that express contracts exist between Plaintiff and Defendant concerning
anti-competitive behavior. The employment agreements specifically address Plaintiffs’ duties to
maintain Cumulus’s confidential information and the limits on their ability to compete with
Cumulus following the termination of the employment relationships.
The employment
agreements also establish remedies in the event they are breached. Because an express contract
exists between the parties, Defendant cannot prevail on its claim of unjust enrichment.
F.
Defendant also argues that its tortious interference claims can form the basis for its
request for injunctive relief. In its counterclaims Defendant alleges both tortious interference
with a contractual relationship and tortious interference with a business relationship or
expectancy.
i.
With regard to its claims that Plaintiffs tortuously interference with contractual
relationships, Cumulus argues that Plaintiffs tortuously interfered with each other’s contracts
limiting post-employment competition. To proceed on a claim of tortious interference with a
contractual relationship, a plaintiff must establish three elements: “(1) the existence of a contract,
(2) a breach of the contract, and (3) an unjustified instigation of the breach by the [interferer].”
- 29 -
Health Call of Detroit v. Atrium Home & Health Care Servs., Inc., 706 N.W.2d 843, 849 (Mich.
2005).
Defendant’s claim that Holzhei interfered with Burke’s employment agreement depends
on the breach of contract analysis found in Part II.B. infra. That analysis shows Cumulus is only
likely to succeed on the single breach of contract theory that Burke wrongfully solicited B’s
Boutiques. To establish a claim of tortious interference against Holzhei, then, Defendant must
show that this breach was instigated by Holzhei. Defendant has not even alleged that the
solicitation of B’s Boutiques for the Internet Show bus tour was instigated by Holzhei.
Defendant is therefore unlikely to succeed on its claim that Holzhei tortuously interfered with
Burke’s employment agreement.
Defendant is more likely to succeed on its claim that Plaintiff Burke tortuously interfered
with Plaintiff Holzhei’s employment agreement. As demonstrated above, Cumulus is likely to
succeed on its claims that Holzhei breached her employment agreement in the following ways:
(1) soliciting B’s boutiques; (2) soliciting (or contracting with) Burke within 30 days of the
termination of his employment with Cumulus; and (3) continuing to employ “The Tweet of the
Day” segment. Defendant also presented evidence that those breaches were at the instigation of
Burke, who initially invited Holzhei to take part in the Periscope webcast, and who was referred
to as “the leader of the pack” at the hearing.
ii.
With regard to its tortuous interference with valid business expectancy claims, Defendant
Cumulus alleges that Plaintiffs interfered with relationships Cumulus had with its customers and
suppliers. The elements of tortious interference with a business relationship or expectancy are
“(1) the existence of a valid business relationship or expectancy that is not necessarily predicated
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on an enforceable contract, (2) knowledge of the relationship or expectancy on the part of the
defendant interferer, (3) an intentional interference by the defendant inducing or causing a breach
or termination of the relationship or expectancy, and (4) resulting damage to the party whose
relationship or expectancy was disrupted. Id. at 849.
Defendant alleges that Plaintiffs were aware of its relationships with its sponsors and
customers, that Plaintiffs intentionally interfered with those relationships, and that Defendant has
been harmed by the interference. As explained above, with the exception of Katherine Best’s
attempt to solicit B’s Boutique, the testimony consistently demonstrated that all advertisers had
initiated their relationships with Plaintiffs, and that there was no wrongful solicitation on the part
of Plaintiffs. Defendant has not shown a strong likelihood of success on its claim that Plaintiffs
tortuously interfered with its business relationship with B’s Boutique because Defendant has
claimed neither a breach nor termination of its business expectancy with B’s Boutique or any
resulting damage.
III.
The first preliminary injunction factor required the Court to consider Defendant
Cumulus’s likelihood of success on the merits of its various claims. From that analysis, it
appears that Cumulus has a likelihood of success on the following claims against Plaintiff Burke:
(1) Breach of contractual provision preventing him from soliciting customers based on the
solicitation of B’s Boutique; (2) violation of the Lanham Act based on Plaintiffs’ use of the
WHNN call sign; and (3) tortious interference with Holzhei’s employment agreement with
Cumulus. Cumulus has also demonstrated a strong likelihood of success on the following claims
against Plaintiff Holzhei: (1) Breach of contractual provision preventing her from soliciting
customers based on the solicitation of B’s Boutique; (2) Breach of contractual provision
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preventing her from soliciting former Cumulus employees based on her contracting with Burke;
(3) Breach of contractual provision preventing her from using Cumulus’s intellectual property
based on the continued use of “The Tweet of the Day”; and (4) Violation of the Lanham Act
based on Plaintiffs’ use of the WHNN call sign. Defendant has also shown some likelihood of
success on its claims of statutory conversion and tortious interference with business expectancies
against both Plaintiffs.
The next relevant factor is whether the movant will suffer irreparable harm without the
injunction. See Workman, 486 F.3d at 905. As part of their employment agreements, both Burke
and Holzhei agreed that any breach of their employment agreements would result in irreparable
harm to Defendant, in which case Defendant would be entitled to injunctive relief to enforce the
employment agreements. See H. Employment Agreement ¶ 18; B. Employment Agreement ¶ 8.
As part of their employment with Defendant, Plaintiffs thus agreed to the satisfaction of the
second preliminary injunction factor as it pertains to any violations of the employment
agreements. Burke thus effectively agreed that his solicitation of Defendant’s former sponsors
would cause Defendant irreparable harm warranting an injunction.
For her part, Holzhei
effectively agreed that soliciting Defendant’s former sponsors, contracting with Burke within 30days of the termination of his employment with Cumulus, and continued use of “The Tweet of
the Day segment” would cause Defendant irreparable harm warranting an injunction. The Court
notes however that the 30-day period in which Holzhei was prevented from contracting with
Burke has passed, and therefore any further collaboration between Burke and Holzhei will not
fall within the contractual prohibition. Thus while Defendant may be entitled to damages from
her breach of that agreement, there is no contractual justification for enjoining future
collaborations.
- 32 -
While it does not fall within the preliminary injunction clause of Burke’s contract,
Plaintiff’s use of the WHNN call sign is also likely to cause Defendant irreparable harm to the
likelihood of confusion of sponsors and listeners alike.
III.
The third preliminary injunction factor is whether granting the injunction will cause
substantial harm to others. Neither Burke nor Holzhei has shown that substantial harm will
result if they are enjoined from soliciting Defendant’s current and former advertisers as set forth
in their respective employment agreements, or if they are enjoined from continuing to use “The
Tweet of the Day” segment, or any other segment created or developed pursuant to their
employment agreements. Plaintiffs have also not shown that they will be substantially harmed if
enjoined from using the WHNN call sign. On the other hand, Plaintiff Holzhei would be
substantially harmed if prevented from using her nickname “Blondie” or from entering into any
future agreements with Burke.
IV.
Finally, issuing a preliminary injunction in these limited ways will not negatively impact
the public interest. Agreements that reasonably restrain competition in order to protect an
employer’s legitimate business interests are specifically authorized under Michigan law, thus
enforcing such contractual provisions is in the public interest.
Similarly, protecting valid
intellectual property rights, contractual relationships, and business expectancies is in the public
interest.
- 33 -
V.
Accordingly, it is ORDERED that Defendant Cumulus’s motions for preliminary
injunctions as to each Plaintiff, ECF No. 8, are GRANTED IN PART AND DENIED IN
PART.
It is further ORDERED that Plaintiffs Burke and Holzhei are PRELIMINARILY
ENJOINED from soliciting Cumulus’s current and former advertisers as specified in their
respective employment agreements, including B’s Boutique.
It is further ORDERED that Plaintiffs Burke and Holzhei are PRELIMINARILY
ENJOINED from using the WHNN call sign, or making any false representation during their
program that they are or will be “returning to WHNN.”
It is further ORDERED that Plaintiffs Burke and Holzhei are PRELIMIARILY
ENJOINED from using “The Tweet of the Day” segment, or any other segment created or
developed pursuant to the terms of their employment with Defendant.
It is further ORDERED that Defendant Cumulus’s request for the immediate
commencement of discovery is DENIED as moot.
It is further ORDERED that Defendant Cumulus’s request to preliminarily enjoin
Holzhei from using the nickname “Blondie” is DENIED.
It is further ORDERED that Defendant Cumulus’s request to require Plaintiffs to make a
detailed accounting of income generated from their competing activities is DENIED without
prejudice.
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It is further ORDERED that Defendant Cumulus’s request that it be awarded attorney’s
fees, costs, and interest under ¶ 17 of Plaintiff Holzhei’s employment agreement is DENIED
without prejudice.
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: July 15, 2016
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on July 15, 2016.
s/Julie Owens
JULIE OWENS, Case Manager
Acting in the absence of Michael Sian
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