The Prudential Insurance Company of America et al v. Sandvold
Filing
20
ORDER granting in part 2 Motion for TRO (Written Opinion). Signed by Senior Judge David S. Doty on 1/25/2012. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-132(DSD/JJK)
The Prudential Insurance
Company of America and
Pruco Securities, LLC,
Plaintiffs,
ORDER
v.
Terry C. Sandvold,
Defendant.
Anthony Paduano, Esq., Leonard Weintraub, Esq. and
Paduano & Weintraub LLP, 1251 Avenue of the Americas
Ninth Floor, New York, NY 10020 and Norah E. Olson
Bluvshtein, Esq., Theresa M. Thompson, Esq. and
Fredrikson & Byron, PA, 200 South Sixth Street, Suite
4000, Minneapolis, MN 55402, counsel for plaintiffs.
Thomas E. Jamison, Esq., Douglas L. Elsaas, Esq., Adam A.
Gillette, Esq. and Fruth, Jamison & Elsaas, 3902 IDS
Center, 80 South Eighth Street, Minneapolis, MN 55402,
counsel for defendant.
This matter came before the court on January 20, 2012, upon
the motion for a temporary restraining order (TRO) by plaintiff The
Prudential Insurance Company of America and Pruco Securities, LLC
(collectively, Prudential).
Prudential and defendant Terry C.
Sandvold appeared through counsel.
Based on a review of the file,
record and proceedings herein, and for the following reasons, the
court grants the TRO in part.
BACKGROUND
This matter arises out of the termination of Sandvold by
Prudential on January 17, 2012.
Prudential is an insurance and
financial services firm that had employed Sandvold since September
1986.
See Compl. ¶ 12.
Prior to termination, Sandvold conducted
business as Sandvold and Associates, working from a private office
in St. Louis Park, Minnesota. Id. Sandovld’s office employed four
associate producers that were affiliated with Prudential and twelve
marketing assistants that were directly employed by Sandvold. Id.;
Nelson Decl. ¶ 5. The office serviced approximately 4,300 clients.
Compl. ¶ 12; Nelson Decl. ¶ 5
Prudential
first
investigated
Sandvold
for
violations of
Prudential policies in late 2010 through January 2011.
¶ 13.
See Compl.
As a result of this investigation, Sandvold was placed on
probation by Prudential in March 2011.
Id.
Prudential continued
investigation of Sandvold’s office in late 2011, and discovered
numerous
additional
procedures.1
violations
of
Prudential
policies
and
This investigation resulted in the termination of
Sandvold’s affiliation with Prudential on January 17, 2012.
1
Prudential alleges, among other things, violations of: use
of improper client signatures, failure to report written customer
complaints, removal and destruction of customer records, unapproved
correspondence to Prudential customers and unlicenced employees
executing transactions. See Compl. ¶ 14.
2
At the time of termination, a Career Special Agent’s Contract
(Special Agent Contract), signed on January 16, 1989, was in
effect.
Section 6(g) of the Special Agent Contract states:
Accounts and Records: All books, accounts,
computer and/or other records, documents
vouchers, letters received, and all other
items provided by the Company, and relating to
or connected with the business of the Company
or a subsidiary Company, shall be the property
of the Company.
Upon termination of this
Contract by either party, for any reason ...
the Agent shall immediately return to the
Company all accounts and records as defined
above. The Agent shall at all times, up to
and including the return of said accounts and
records to the Company, preserve and protect
the confidentiality of such accounts, records
and other items.
Nelson Decl. Ex. 1, at 5 (emphasis added).
producers
and
twelve
marketing
confidentiality provisions.
The four associate
assistants
signed
similar
See Compl. ¶ 18.
At the time of termination, Prudential requested the return of
all proprietary information, but Sandvold refused to provide client
files
and
did
not
specialist
to
access
Prudential
alleges
proprietary
“clients’
allow
names,
Sandvold’s
these
business
home
Prudential’s
and
files
information
technology
computers.
See
are
confidential
client
addresses,
“highly
information”
e-mail
id.
that
addresses,
¶
27.
and
includes
telephone
numbers, income, net worth, social security numbers, birth dates,
contract renewal dates, account statements, financial investments
and asset allocation.” Id. ¶ 22.
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On January 17, 2012, Prudential moved for a TRO, and the court
scheduled a hearing for January 20, 2012.
Following the partial
oral grant of the motion after argument, the court advised the
parties to submit a joint proposed order, or separate proposals if
agreement could not be reached, by January 24, 2012.
The parties
did not reach agreement, and the court now addresses the motion.
DISCUSSION
A TRO is an extraordinary equitable remedy, and the movant
bears the burden of establishing its propriety.
v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
See Watkins Inc.
The court considers
four factors in determining whether a TRO should issue: (1) the
threat of irreparable harm to the movant in the absence of relief,
(2) the balance between that harm and the harm that the relief may
cause the non-moving party, (3) the likelihood of the movant’s
ultimate success on the merits and (4) the public interest.
See
Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 114 (8th
Cir. 1981) (en banc).
I.
Irreparable Harm
Prudential argues that Sandvold’s use of proprietary customer
information will result in irreparable harm. For irreparable harm,
“a party must show that the harm is certain and great and of such
imminence that there is a clear and present need for equitable
relief.”
Iowa Utils. Bd. v. F.C.C., 109 F.3d 418, 425 (8th Cir.
4
1996).
“[P]otential loss of goodwill qualifies as irreparable
harm.” Id. at 426. Based on Sandvold’s possession of Prudential’s
proprietary information, Prudential has demonstrated that without
equitable relief it is likely to suffer irreparable harm to its
goodwill. See, e.g., Wells Fargo Invs., LLC v. Bengtson, No. 0:07cv-3192, 2007 WL 2007997, at *2 (D. Minn. July 9, 2007) (noting
that the ability to safeguard “confidential [financial services
client] information is intangible”). Therefore, this factor weighs
in favor of Prudential.
II.
Balance of Harms
The court has already determined that plaintiff’s goodwill is
harmed by defendant’s acts. Balanced against that harm is the harm
to Sandvold’s ability to operate Sandvold and Associates.
Such
harm is lessened, however, because Sandvold and Associates may
continue to operate and compete lawfully and because there is no
evidence in the record that a TRO will prevent Sandvold and
Associates from continuing to operate.2
Cf. CDI Energy Servs.,
Inc. v. W. River Pumps, Inc., 567 F.3d 398, 403 (8th Cir. 2009)
(holding
that
balance
of
harms
favored
defendant
when
it
“appear[ed] undisputed that an injunction would put the defendants
out of business”).
Therefore, this factor weighs in favor of
plaintiffs.
2
This is especially true given that the ordered relief allows
Sandvold to keep all client files.
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III.
Likelihood of Success on the Merits
The court next considers the likelihood that the movant will
prevail on the merits.
S & M Constructors, Inc. v. Foley Co., 959
F.2d 97, 98 (8th Cir. 1992).
A TRO “motion is too early a stage of
the proceedings to woodenly assess a movant’s probability of
success on the merits with mathematical precision.”
Gen. Mills,
Inc. v. Kellogg Co., 824 F.2d 622, 624 (8th Cir. 1987).
The court
does not decide whether the movant will ultimately win, or if a
greater than fifty-percent likelihood of success exists.
See
Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371
(8th Cir. 1991).
Prudential alleges claims for breach of contract, violation of
the Minnesota Uniform Trade Secret Act and conversion.
Prudential
need only demonstrate that it is likely to succeed on one claim in
order to satisfy this prong of Dataphase.
See United Healthcare
Ins. Co. v. AdvancePCS, 316 F.3d 737, 742–43 (8th Cir. 2002).
It
Sandvold
is
a
requirement
return
“all
of
books,
the Special
accounts,
Agent
computer
Contract that
and/or
other
records, documents, vouchers, letters received, and all other items
provided by the Company, and relating to or connected with the
business of the Company” upon termination.
5.
Nelson Decl. Ex. 1, at
Sandvold argues that Prudential’s property includes only those
things that were both “provided by” and “relating to or connected
with business of” Prudential.
See Def.’s Resp. 10.
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The court
disagrees,
because
such
an
interpretation
would
render
following sentence of the Special Agent Contract meaningless.
the
It
states that upon termination the agent shall return all “accounts
and records as defined above.”
Nelson Decl. Ex. 1, at 5.
Although not defined in the Special Agent Contract, accounts and
records, especially in the context of a financial services firm,
require continual service and updating and could not be entirely
“provided by the Company.” The court interprets contracts to avoid
absurd results and to give meaning to all provisions of a contract.
See Brookfield Trade Ctr., Inc. V. Cnty. of Ramsey, 584 N.W.2d 390,
394 (Minn. 1998).
Therefore, because plaintiff is likely to
succeed in their breach of contract claim, this factor weighs in
favor of Prudential.
IV.
Public Interest
The public interest does not strongly favor one party over the
other.
There
agreements.
is
a
public
interest
in
upholding
contractual
See Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc.,
336 F.3d 801, 805 (8th Cir. 2003).
There also is a public
interest, however, in unrestrained competition.
See Calvin Klein
Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 505 (8th Cir.
1987).
Here, it appears that Sandvold may be engaging in unfair
competition.
Prudential.
Therefore,
the
public
interest
factor
favors
Accordingly, based upon a balancing of the four
Dataphase factors, a TRO is warranted.
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CONCLUSION
Based on the above and the proposed orders submitted by both
parties, IT IS HEREBY ORDERED that:
1.
The motion for a temporary restraining order [ECF No. 2]
is granted in part.
2.
Defendant
shall
return
to
plaintiffs
all
hardware,
software and other physical property (which, as addressed in
paragraph 3 below, does not include client files) belonging to
plaintiffs within one day of the issuance of this order.
3.
Defendant shall make available for copying, imaging or
duplicating by plaintiffs all documents related to Prudential’s
customers, policyholders and accountholders that are in defendant’s
and
Sandvold
determination
and
by
Associates’
either
the
files.
court
Pending
or
the
any
subsequent
Financial
Industry
Regulatory Authority (FINRA) arbitration panel, defendant shall
retain the originals of the documents in the manner they were kept
as of January 17, 2012. The parties shall cooperate concerning the
process for copying, imaging or duplicating the documents, which
will occur at Sandvold and Associates’ offices in St. Louis Park,
Minnesota.
The parties may each designate lawyers or other agents
to supervise the copying, imaging or duplicating process.
4.
The
copying,
imaging
or
duplicating
may
commence
immediately, but in no event later than January 30, 2012, and shall
be completed as soon as reasonably possible.
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5.
Plaintiffs shall bear all costs relating to the copying,
imaging or duplicating of the documents.
6.
Plaintiffs shall post a bond of $5,000.00 pursuant to
Federal Rule of Civil Procedure 65 within two business days of the
issuance of this order.
7.
This order shall be binding upon the parties and all
those acting at the direction of the parties, including but not
limited to their employees, representatives and agents.
8.
Defendant shall preserve and not alter or destroy any
Prudential client files, records or other documents in defendant’s
possession or the possession of defendant’s employees, agents and
representatives.
The parties shall preserve and protect all
electronic data as required by the Federal Rules of Civil Procedure
that relate in any way to this litigation and shall suspend any
automatic destruction of any such electronic data.
9.
The parties are hereby granted leave to engage in mutual
expedited discovery.
10.
This order shall remain in full force and effect until
such time as a FINRA arbitration panel issues a final decision on
Prudential’s request for permanent injunctive relief, or this Court
specifically orders otherwise.
Dated:
January 25, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
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