Kforce Inc. v. Beacon Hill Staffing Group LLC, et al

Filing 45

MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that plaintiff's motion for preliminary injunction [# 23 ] is denied. This case will be referred to mediation by separate Order. Signed by District Judge Catherine D. Perry on 01/08/2015. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
KFORCE INC.,
Plaintiff,
vs.
BEACON HILL STAFFING GROUP
LLC., et al.,
Defendants.

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Case No. 4: 14 CV 1880 CDP

MEMORANDUM AND ORDER
Kforce and Beacon Hill are competitors in the staffing agency business.
Gary Hahn was an account manager at Kforce until he went to work for Beacon
Hill. When he joined Kforce, Hahn signed an employment agreement which
contained non-disclosure and non-solicitation provisions. Kforce complains that
Hahn has violated these provisions by stealing its confidential client information
and soliciting Kforce clients while at Beacon Hill, and it seeks preliminary
injunctive relief against both Hahn and Beacon Hill. After a hearing on November
13, 2014, I denied Kforce’s request for a temporary restraining order and ordered
limited and expedited discovery on Kforce’s motion for preliminary injunction. I
held a hearing on the motion on December 18, 2014, during which both sides

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presented evidence by live testimony1 and exhibits, argued the motion, and
submitted written briefs as instructed by the Court. After due consideration of all
the evidence, I must deny preliminary injunctive relief for the reasons that follow.
Background Facts2
Kforce and Beacon Hill are staffing agencies engaged in the business of
placing personnel (“candidates”) with companies seeking to fill job openings
(“clients”). Kforce is a large, publicly traded staffing firm with 62 offices across
the United States and 40 to 50 full time employees in its St. Louis office. Beacon
Hill is a smaller firm with a recently opened office in St. Louis. It currently
employs five people in St. Louis, including Hahn. This case involves placement
for information technology positions. Staffing agencies identify prospective
customers, access available job openings, and find candidates for the job openings.
Their revenue is derived from successfully placing candidates at clients. Most
staffing agencies operate similarly, with a recruiting side to recruit candidates and

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Kforce presented the testimony of three witnesses: defendant Gary Hahn; its managing director
on the technical side, Bonita Daughaday; and Pat Burgess, Beacon Hill’s division manager.
Beacon Hill also called Hahn and two of his former co-workers, Ryan Harris and Adam Riggs, to
testify.
2

Any facts found in this Memorandum and Order are for deciding the preliminary injunction
motion only, and this Memorandum and Order does not relieve any party of the burden of
proving any facts in support of its claims or defenses on summary judgment or at trial and may
not be relied upon for that purpose.

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a sales side to deal with clients and find job openings. Account managers like
Hahn work the sales side of the business.
The staffing industry is highly competitive, and there is substantial customer
and client overlap within the industry. Companies often request multiple staffing
agencies to assist in filling the same job opening.3 Stated otherwise, this means
that the same company could be a client of both Kforce and Beacon Hill. For
example, Beacon Hill’s division manager Pat Burgess testified that about 50
staffing firms place candidates at Express Scripts, and about 20 staffing firms place
candidates at Charter, one of the top employers of contract employees in the area.4
To do business with Charter a staffing agency apparently must first be vetted by a
third-party vendor called Zero Chaos. Once a staffing agency gets approved by
Zero Chaos and an agreement is put in place, it may then compete with other
approved staffing agencies to place candidates at Charter. Based on the testimony
it appears that this type of arrangement is common with many companies using
staffing agencies, such as Magellan Health Services, Inc. 5
3

Evidence of this was submitted at the hearing. Defendants’ Exhibit H is an email sent from Jim
Keller, a program manager at Charter, to numerous people at multiple staffing agencies –
including Hahn and two Kforce employees – seeking to hire an information technology
contractor.
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Hahn estimated that Charter has over 100 hiring managers for information technology services
in over 25 hiring groups and about 400-500 information technology contractors placed by
staffing agencies at any given time.
5

It appears that staffing agencies may also be able to place candidates at Charter if they have a
master services agreement in place, which is apparently different than Zero Chaos. (Pl.’s Exh.

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Account managers find job vacancies in various ways. Sometimes,
companies post their job openings on their websites and on public job-posting
websites such as Careerbuilder, LinkedIn, Monster.com, Dice.com, or Craigslist.
Account managers use this publicly available information as a common tool for
locating potential clients. Account managers also call companies requesting hiring
information and make cold sales calls on the hiring managers. They may also rely
on candidates that they have successfully placed on a job to notify them of new job
openings. Account managers may also receive emails or phone calls from
companies about job openings. Sometimes these emails are sent to numerous
staffing agencies, and sometimes they are sent to a particular account manager.
Occasionally, a company may send notice of a job opening to an account manager
and claim that it is an “exclusive” posting, but there is no way to verify the
accuracy of that statement.6 Usually, however, the job postings are public and
posted online.
At the hearing, the parties differed on their positions as to the relative
importance of an account manager’s personal relationships with the client’s hiring
40). However, the parties did not explain this at the hearing, and so the Court will not consider
this fact in its reasoning.
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At the TRO hearing, Kforce also explained that sometimes account managers received “first
calls” about job postings from clients, which is basically advance notice of a soon-to-be
announced job posting. However, there was no evidence of this presented at the preliminary
injunction hearing, and Kforce seems to have abandoned any request for relief based on
allegations of first calls.

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managers. According to Kforce, it has invested considerable time and expense in
developing and maintaining relationships on the client side of the business. Kforce
claims that its account managers have extensive and repeated contacts with its
clients, and that they are “responsible for facilitating activities associated with
matching candidates to client job openings.” Kforce contends that it compiles
“confidential” client information to assist its account managers, and this
information “includes such things as confidential communications among
management personnel, valuable compilations and information regarding clients
and prospective clients (including client contact information, client preferences and
needs, and client rates), compilations of employment candidates and prospective
employment candidates, Kforce’s financial and budgetary information, and
information related to marketing strategy.” In support of a preliminary injunction,
Kforce argues that “an extremely valuable segment of [its] confidential
information is the information . . . regarding the identity of Kforce’s clients and
candidates, the purchase activity of Kforce’s clients, pricing information,
compensation information, key contact information and personnel, and other
proprietary, customer-specific information regarding Kforce’s clients and
candidates.” To protect this information, Kforce restricts access to only certain
employees with authorized log-ins and passwords.

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According to Hahn and Beacon Hill, an account manager’s personal
relationships are secondary to the primary goal of placing candidates with clients.
Defendants maintain that the information used by account managers to do this is
not confidential, but is publicly available and can easily be found on the internet.
Before joining Kforce, Hahn worked at another staffing firm called
Signature Consultants with Bonita Daughaday. Daughaday is the current
managing director of Kforce’s technical division. She testified at the hearing.
When Daughaday left Signature for Kforce, she solicited Hahn to work for Kforce.
According to Hahn, Daughaday told him “not to worry” about the non-compete
and non-solicitation agreement he had signed with Signature because it was “not
enforceable.” Daughaday denied this. She also hired two other Signature
employees, Ryan Harris and Adam Riggs, to work for Kforce. They had the same
restrictive covenants as Hahn. Both Harris and Riggs testified at the hearing.
Riggs claimed that Daughaday also told him not to worry about his restrictive
covenants with Signature.
On September 17, 2012, Hahn began working for Kforce. His employment
agreement is signed and dated the same day. The agreement contains the
following non-disclosure provisions:
6. Confidential Information. The EMPLOYEE recognizes and
acknowledges that the FIRM has, through the expenditure of
substantial time, effort and money, developed, compiled, and/or
acquired certain confidential information and trade secrets which are
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of great value to the FIRM in its operations. The EMPLOYEE further
acknowledges and understands that in the course of performing
his/her duties for the FIRM, he/she will receive and/or have access to
the trade secrets and other confidential information of the FIRM.
The EMPLOYEE agrees that he/she will not make any use of, take,
download, publish or disclose, or authorize anyone to use, take,
publish or disclose, any of the FIRM’s trade secrets or other
confidential information, for any reason, except to the extent
authorized and required in the course of performing his/her duties on
behalf of the FIRM. Upon request of the FIRM, the EMPLOYEE will
promptly return or destroy all expressions of trade secrets and
confidential information in his/her possession and control.
EMPLOYEE shall cooperate with the FIRM’s efforts to verify such
return or destruction.
As used herein, the term “trade secrets and other confidential
information” shall include, without limitation: (a) client or prospective
client lists and client or prospective client contact information
(including but not limited to business cards, contact persons, and
hiring managers); (b) client job openings and job orders and client
pricing information; (c) actual or prospective applicant, employment
candidate, employee or consultant lists; (d) actual or prospective
applicant, employment candidate, employee or consultant
qualifications, contact information, and resumes; (e) actual or
prospective applicant, employment candidate, employee or consultant
compensation and benefits; and (f) other client, applicant,
employment candidate, employee or consultant data or information.
Hahn’s Kforce employment agreement also contains the following non-solicitation
covenant:
a) Covenants relating to clients: the EMPLOYEE agrees that upon
termination of his/her employment for any reason, the
EMPLOYEE will not, for a period of twelve (12) months from the
date of termination, directly or indirectly solicit or accept business
that is competitive with the FIRM from any client with whom the
EMPLOYEE had contact while employed by the FIRM, nor will
the EMPLOYEE for such period directly or indirectly attempt to
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divert or assist others to divert any such client’s business from the
FIRM to a competitor.
Hahn testified that he did not read his employment agreement before signing it.
Hahn described his job at Kforce as mainly identifying potential customers
from public sources such as company and industry websites, social media, and cold
calls. Hahn would then contact the person within the customer company
responsible for hiring. Hahn stated that the name of the hiring person at any
customer company is not confidential and is obtainable simply by calling the
company and asking to speak to the person in charge of hiring. If Hahn was
successful, the company would send him an order to fill a job opening with a
description of the candidate’s required qualifications. Hahn was also given
specific clients or accounts to work, which included Charter, Magellan, Brown
Shoe Company, Inc., Graybar Electric Company, Inc., Enterprise Rent-a-Car
Company, Sigma Aldrich Corporation, City of St. Charles, Saint Louis University,
and Olin Brass. Hahn testified that he had worked with Charter before he joined
Kforce, and that he also knew Mike Carlock, a hiring manager at Magellan, before
working at Kforce.
Kforce claims that, while he was employed there, Hahn developed
relationships with key hiring managers at Magellan, including Jay Pendergraft and
Diane Wintermann, and Charter managers Ben Marti, Jim Hollman, Dwayne
Thomas, Jim Keller, Christina Elliot, Teresa Rehm, Randy Rush, and Lamarr
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Gordon. Hahn developed these relationships through emails, phone calls, on-site
visits, lunches, and other social outings. Kforce claims that Hahn’s efforts gave it
“a better understanding of the teams within Charter and Magellan and the
individuals who made up these teams” which allowed it “to understand the
different phases of the software development and other IT projects on which
Charter and Magellan were working and the duration of the different phases which,
in turn, allowed Kforce to instruct its employees on how to better recruit” for these
companies. There is a dispute in the evidence as to whether Hahn’s efforts resulted
in increased placements at Charter by Kforce. Kforce said that they did, but
Doughaday admitted that Kforce’s Charter placements increased after Hahn left.
Hahn claims that he had only “a few” placements with Charter during his
employment with Kforce, and none were through his contact with Jim Keller.
Hahn claims he was unhappy at Kforce because he did not get the support he
needed to service his customers and because Kforce kept lowering his salary.
Kforce maintains that the salary reductions were in accordance with the
compensation provisions of Hahn’s employment agreement. In March of 2014,
Hahn was recruited for another staffing agency, and in April of 2014 he accepted a
job with Beacon Hill. His last day was April 11, 2014.

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Prior to his departure, Hahn emailed Kforce documents, including client
target lists and organizational charts, to his home account.7 Hahn claimed he
needed this information because he was working from home. Kforce claims these
documents contain confidential information. They were introduced at the hearing
as Plaintiff’s Exhibits 10 and 11. Kforce also complains that Hahn solicited its
clients before his departure. Attached to its complaint as evidence of this alleged
solicitation is an email exchange between Hahn and Jim Keller, a program
manager for Charter, informing him that he is leaving Kforce and inviting him to
meet his replacement at Kforce, Kristen Roach. The initial email was also copied
to Roach. In the email exchange, Hahn goes on to invite Keller to play in a golf
tournament sponsored by Beacon Hill. On April 10, 2014, Hahn emailed Diane
Wintermann at Magellan Health Services to inform her of his last day and that
Roach was to be his replacement. Again, this email was also copied to Roach. In
a later email not copied to Roach, Hahn informs Wintermann that he is moving to
Beacon Hill and “will make sure to send you my contact information when I get
settled.” While still employed at Kforce, Hahn also forwarded to his home email
account and to Burgess, his soon-to-be boss at Beacon Hill, a job posting for the
City of St. Charles that he obtained as a Kforce account manager. Hahn tells

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Although I denied Kforce’s request for a temporary restraining order, I ordered Hahn to return
these documents to Kforce, which he did.

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Burgess that it is an immediate hire and provides him with the profiles of potential
candidates to fill the position. (Pl.’s Exhs. 18 and 19).
Hahn began working for Beacon Hill as an account manager on April 14,
2014. Hahn signed an employment agreement – which he also claims he did not
read – with Beacon Hill which contains similar confidentiality provisions to the
one at issue. The Beacon Hill agreement also contains a non-compete provision
more restrictive in nature than the non-solicitation provision in the Kforce
agreement. (Pl.’s Exh. 23). Beacon Hill’s largest accounts are Express Scripts,
Unisys, Maritz, and Charter. Hahn primarily works the Charter and Magellan
accounts. During his first few days at Beacon Hill, Hahn emailed his new contact
information to hiring managers at Charter and Magellan, invited some to a Beacon
Hill golf tournament, and asked Carlock to lunch. (Pl.’s Exhs. 24 and 27). Hahn
also emailed Burgess and others at Beacon Hill about “strategies to win Charter”
and Keller’s hiring preferences. (Pl.’s Exh. 25). Burgess testified that Charter was
a “target” for Beacon Hill and that it had a request for proposal from Charter
before Hahn started. However, Beacon Hill did not complete the necessary
paperwork in order to do business with Charter until July 9, 2014, and it had no
placements with Charter before Hahn arrived. Burgess credited Hahn with getting
Charter as a client. (Pl.’s Exh. 40). Since Hahn arrived, Beacon Hill has placed
four candidates with Charter, with a fifth placement pending. Burgess claimed to
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be familiar with Magellan from his work at another staffing agency, but Beacon
Hill had placed no candidates at Magellan before Hahn’s arrival. After Hahn
started, Beacon Hill placed one candidate at Magellan for three days. Beacon Hill
has also placed one candidate with the City of St. Charles. Burgess testified that
Hahn’s placements at Charter have generated about $40,000.00 in revenue for
Beacon Hill, and that Magellan has cost it money. Burgess testified that he rates
Hahn’s performance a “C.” Burgess also testified that Hahn never showed him
Kforce’s organizational charts, but that type of information was available on a
subscription website called discover.org, of which Beacon Hill is a member.
Kforce alleges that it had no notice of Hahn’s solicitation of its clients until
he was spotted having lunch with Charter hiring manager Gordon in late August of
this year. Doughaday testified that Hahn actively concealed his activities by telling
her that he was not servicing the same clients he serviced at Kforce. Kforce first
searched Hahn’s email account for suspicious activities on September 10, 2014,
when it discovered the emails he forwarded to his personal account. Kforce’s
attorneys sent a letter to Beacon Hill on September 24, 2014, informing it of
Hahn’s non-disclosure and non-solicitation agreements and his alleged breach of
those covenants. Kforce’s attorneys sent a similar letter to Hahn on September 29,
2014, claiming that Kforce only “recently learned” that Hahn went to work for
Beacon Hill. On October 14, 2014, Keller sent a job proposal for Charter to
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Hahn’s old Kforce email address instead of his new Beacon Hill email address.
Kforce filed its complaint against Hahn and Beacon Hill on November 6, 2014,
alleging breach of contract, tortious interference with contract, breach of fiduciary
duty, and misappropriation of trade secrets. Kforce seeks injunctive and monetary
relief.
Preliminary Injunction Standard
“The primary function of a preliminary injunction is to preserve the status
quo until, upon final hearing, a court may grant full, effective relief.” Kansas City
So. Trans. Co., Inc. v. Teamsters Local Union # 41, 126 F.3d 1059, 1066 (8th Cir.
1997) (citation omitted). “A plaintiff seeking a preliminary injunction must
establish that he is likely to succeed on the merits, that he is likely to suffer
irreparable harm in the absence of preliminary relief, that the balance of equities
tips in his favor, and that an injunction is in the public interest.” Winter v. Natural
Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S. Ct. 365, 374 (2008). In the Eighth
Circuit, these four factors are known as the “ Dataphase ” factors, based upon the
1981 en banc case, Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th
Cir. 1981). In each case, the factors must be balanced to determine whether they
tilt toward or away from granting injunctive relief. West Pub. Co. v. Mead Data
Cent., Inc., 799 F.2d 1219, 1222 (8th Cir. 1986). The party requesting injunctive
relief bears the “complete burden” of proving that an injunction should be granted.
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Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418 (8th Cir. 1987). Injunctive
relief is “an extraordinary remedy that may only be awarded upon a clear showing
that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22.
Discussion
At the preliminary injunction stage, Kforce must establish a substantial
likelihood of prevailing on the merits of its claims. Planned Parenthood Minn.v.
Rounds, 530 F.3d 724, 732 (8th Cir. 2008). Kforce brings Missouri state law
claims for breach of contract, tortious interference with contractual or business
relationships, breach of fiduciary duty and/or the duty of loyalty, and
misappropriation of trade secrets against Hahn. Kforce also alleges tortious
interference and misappropriation of trade secrets claims against Beacon Hill. To
prevail on a breach of contract claim under Missouri law, a plaintiff must
demonstrate (1) the existence and terms of a contract; (2) that the plaintiff
performed or tendered performance of the contract; (3) a breach of the contract by
defendant; and (4) resulting damages. Keveney v. Missouri Military Academy, 304
S.W.3d 98, 104 (Mo. banc 2010). “Much has been written about an employee’s
covenant against working for his employer’s competitors. Agreements of this kind
restrain commerce and limit the employee’s freedom to pursue his or her trade.
Enforcement of such agreements, therefore, is carefully restricted.” Osage Glass,
Inc. v. Donovan, 693 S.W.2d 71, 73-74 (Mo. banc 1985). The Missouri Supreme
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Court has identified the following four “valid and conflicting concerns” at issue in
the enforcement of non-compete agreements:
First, the employer needs to be able to engage a highly trained
workforce to be competitive and profitable, without fear that the
employee will use the employer’s business secrets against it or steal
the employer's customers after leaving employment. Second, the
employee must be mobile in order to provide for his or her family and
to advance his or her career in an ever-changing marketplace. This
mobility is dependent upon the ability of the employee to take his or
her increasing skills and put them to work from one employer to the
next. Third, the law favors the freedom of parties to value their
respective interests in negotiated contracts. And fourth, contracts in
restraint of trade are unlawful.
Healthcare Services of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 609 610 (Mo. banc 2006) (internal citations omitted). In Missouri, restrictive
covenants are enforceable only to the extent that they are demonstratively
reasonable by protecting an employer from unfair competition without imposing
unreasonable restraint on the former employee. Armstrong v. Cape Girardeau
Physician Associates, 49 S.W.3d 821, 825 (Mo. Ct. App. 2001). “An employer
may only seek to protect certain narrowly defined and well-recognized interests,
namely its trade secrets and its stock in customers.” Id. “The enforcing party must
also show that the agreement is reasonable in scope, both as to place and as to
time.” Id. “The burden of demonstrating the covenant’s validity is on the party
seeking to enforce it.” Id.

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Under the Missouri Uniform Trade Secrets Act (which forms the basis of
Kforce’s misappropriation of trade secrets claim against Hahn and Beacon Hill), a
“trade secret” consists of:
information, including but not limited to, technical or nontechnical
data, a formula, pattern, compilation, program, device, method,
technique, or process that:
(a) Derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by
proper means by other persons who can obtain economic value form
its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Mo. Rev. Stat. § 417.453 (2000). See also, Lyn-Flex West, Inc. v. Dieckhaus, 24
S.W.3d 693, 697-698 (Mo. Ct. App. 1999) (A “trade secret,” according to Missouri
law, is information -- including but not limited to -- technical or nontechnical data,
a formula, pattern, compilation, program, device, method, technique, or process
that derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by other
persons who can obtain economic value from its disclosure or use). Furthermore,
in order to be considered a trade secret, the information must be the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Conseco Finance Servicing Corp. v. North American Mortgage Co. 381 F.3d 811,

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819 (8th Cir. 2004). The following factors should be considered in determining
whether an employer’s given information is a trade secret:
(1) the extent to which the information is known outside of his
business; (2) the extent to which it is known by employees and others
involved in his business; (3) the extent of measures taken by him to
guard the secrecy of the information; (4) the value of the information
to him and to his competitors; (5) the amount of effort or money
expended by him in developing the information; (6) the ease or
difficulty with which the information could be properly acquired or
duplicated by others.
Copeland, 198 S.W.3d at 610 (internal citations omitted).
The employer bears the burden of proof to substantiate its asserted interest in
its trade secrets. Mo-Kan Central Recovery Co. v. Hedenkamp, 671 S.W.2d 396,
400 (Mo. Ct. App. 1984). Evidence of purported “trade secrets” must be more
than general assertions, but must be sufficiently specific to allow a determination
by the court. Copeland, 198 S.W.3d at 610. See also, Baxter Intern., Inc. v.
Morris, 976 F.2d 1189, 1194 (8th Cir. 1992) (“The burden of proving the existence
of trade secrets lies with the party seeking protection.”). Additionally, “[u]nder
Missouri law, the restraint imposed on a former employee to protect trade secrets
must not be greater than required for the protection of the former employer.” Id.
While a former employer is not required to await actual harm before seeking relief,
injunctive relief “must be based on a real apprehension that future acts are not just
threatened but in all probability will be committed.” Id. (internal quotation marks
and citation omitted).
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While employed with Kforce, Hahn owed a duty of loyalty to Kforce. Under
Nat’l Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 41 (Mo. banc 1966), every
employee owes his or her employer a duty of loyalty. Id.; see also Rest. (2d)
Agency, sec. 387 (1958). The Missouri Supreme Court has described the duty of
loyalty in the broad and general terms of section 387 of the Restatement (2d) of
Agency, stating, “[an employee] must not, while employed, act contrary to the
employer’s interests.” Trieman, 409 S.W.2d at 41; Scanwell Freight Express STL,
Inc. v. Chan, 162 S.W.3d 477, 479 (Mo. banc 2005). See also, Synergetics, Inc. v.
Hurst, 477 F.3d 949, 959 (8th Cir. 2007) (“A breach of the duty of loyalty arises
when the employee goes beyond the mere planning and preparation and actually
engages in direct competition, which, by definition, is to gain advantage over a
competitor.”) (internal quotation marks and citation omitted). Although permitted
to make arrangements to compete with an employer prior to termination of
employment, an employee may not use confidential information peculiar to or
acquired from his employer, nor may the employee solicit customers for his rival
company. See Chan, 162 S.W.3d at 481 (citing Restatement (Second) of Agency, §
393 cmt. e (1958)).
“Under Missouri law, intentional interference with a contract or business
relationship requires proof of (1) a contract or valid business expectancy, (2)
defendant’s knowledge of the contract or relationship, (3) a breach induced or
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caused by defendant’s intentional interference, (4) absence of justification, and (5)
damages.” Hurst, 477 F.3d at 959 (citing Rice v. Hodapp, 919 S.W.2d 240, 245
(Mo. banc 1996)). “While lawful competition would be a defense, competing by
improper means, including the use of a misappropriated trade secret obtained in
violation of a fiduciary duty is not a valid justification.” Dieckhaus, 24 S.W.3d at
700 (citing Briner Elec. Co. v. Sachs Elec. Co., 680 S.W.2d 737, 741 (Mo. Ct.
App. 1984)).
Whether Kforce may enforce its restrictive covenants under Missouri law,
whether it has any protectable trade secrets, and whether it may restrict Hahn
and/or Beacon Hill from soliciting clients of Kforce are complex and hotly
contested factual disputes, and at this juncture the Court is unable to say that either
side is likely to prevail at trial. To the extent credibility is a factor, I did not find
any of the witnesses particularly credible.
On the breach of contract, tortious interference, and misappropriation of
trade secrets claims, Hahn and Beacon Hill have presented evidence that the
information Hahn allegedly misappropriated is not protectable because it is widely
available to the public, known by account managers generally in the staffing
agency business, and easily ascertainable by other sources. Hahn testified that the
names of hiring managers are generally available to the public, either through
websites or by calling companies. Although Burgess did not see plaintiff’s
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Exhibits 10 and 11 – the Kforce documents emailed by Hahn to his home email
account – he testified that the type of information they contain (the names of hiring
managers, company structure, and hiring needs) is readily available publicly and
through a subscription website used by staffing agencies, including Beacon Hill.
After reviewing plaintiff’s Exhibits 10 and 11, the Court finds defendants’
characterization of this information more credible at this time than Kforce’s, as the
information contained within does not appear the type protected as confidential
trade secrets. Kforce may not rely on the non-compete agreement itself to
establish the secrecy of the information. “In order for a non-compete agreement to
preclude disclosure of trade secrets, those secrets must exist; they do not exist by
virtue of the agreement itself.” Tank Tech, Inc. v. Neal, 2007 WL 2137817, *7 (E.
D. Mo. July 23, 2007). To the extent Hahn’s mental impressions of certain hiring
managers are included in these documents, that is not the type of information
Kforce may prevent Hahn from using. See Victoria’s Secret Stores, Inc. v. May
Dept. Stores Co., 157 S.W.3d 256, 262 (Mo. Ct. App. 2005) (“The protection [of
covenants not to compete] does not extend to knowledge that is the natural product
of the employment or known throughout the industry, but only to trade secrets or
influences over customers.”).
As for Kforce’s argument that it is entitled to protect its customer contacts,
“the rationale for protecting customer contacts is that in the sales industry, a
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customer’s goodwill toward a company is often attached to the employer’s
individual sales representative, and the employer’s product or service becomes
associated in the customer’s mind with that representative.” Brown v. Rollett
Bros. Trucking Co., Inc., 291 S.W.3d 766, 774 (Mo. Ct. App. 2009) (internal
quotation marks and citation omitted). “An employer must show that the employee
had contacts of the kind enabling him to influence customers.” Id. at 775. Here,
however, there is evidence that it is not the account manager’s relationship with the
client’s hiring managers, but the staffing agency’s ability to successfully deliver
candidates, which leads to increased placements. While Kforce presented evidence
that Hahn had contact with the hiring managers of Charter, Magellan, and others, it
did not present any evidence that this contact actually led to any placements for
Kforce. Hahn testified that he had few placements at Charter, and Daughaday
admitted that Kforce’s placements at Charter increased after Hahn left. Stated
otherwise, there is no evidence that Hahn had any opportunity for actually
influencing hiring managers to select a Kforce candidate over a competing
agency’s candidate. Instead, the evidence showed that the job postings were often
publicly available or emailed to account managers at multiple staffing agencies at
the same time. For example, defendants’ Exhibit H is an email sent from Keller at
Charter to numerous people at multiple staffing agencies, including Hahn at
Beacon Hill and two Kforce employees, seeking to hire an IT contractor. On this
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record, there is no evidence that Hahn’s contact with customers was such that it
enabled Hahn to entice a client’s business away from Kforce in favor of Beacon
Hill. Rather, the evidence at this point suggests that in this industry the decision as
to which staffing agency gets the placement fee is dependent upon the staffing
agency’s ability to produce the candidate selected for placement – an area in which
Hahn was admittedly not involved – and not the account manager who received the
job posting. Moreover, many of the clients of Kforce – including Charter – are just
as easily considered to be clients of Beacon Hill. For example, Burgess testified
that about 20 staffing firms place candidates at Charter, which has over 100 hiring
managers for information technology services in over 25 hiring groups with about
400-500 IT contractors at any given time. Neither Kforce nor Beacon Hill has
exclusive or guaranteed contracts for placement at Charter. Given the competitive
realities of this industry, the Court cannot conclude at this time that Hahn and
Beacon Hill should be precluded from competing for placements at Charter along
with Kforce and other staffing agencies. The same is true of Magellan and the
other clients mentioned by Kforce.
Kforce’s likelihood of success is stronger on its breach of duty claim, given
Hahn’s admission that he forwarded a job posting he received at Kforce to Beacon
Hill while still employed at Kforce. At this time, though, the evidence on this
claim appears to be limited in scope to this isolated incident. However, I need not
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resolve the complex issue of whether Kforce is likely to succeed on the merits of
its claims as I find that the motion must be denied because Kforce has not
demonstrated that it is likely to suffer irreparable injury in the absence of
injunctive relief.
“The threshold inquiry is whether the movant has shown the threat of
irreparable injury.” Modern Computer Sys., Inc. v. Modern Banking Sys., Inc., 871
F.2d 734, 738 (8th Cir. 1989) (en banc). “The failure to show irreparable harm is,
by itself, a sufficient ground upon which to deny a preliminary injunction . . . .” Id.
Irreparable harm must be certain and imminent such 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. 1996). Possible or speculative harm is not sufficient. Local Union No. 884,
United Rubber, Cork, Linoleum, & Plastic Workers of Am. v.
Bridgestone/Firestone, Inc., 61 F.3d 1347, 1355 (8th Cir. 1995). When there is an
adequate remedy at law, a preliminary injunction is not appropriate. Modern
Computer Sys., 871 F.2d at 738.
Here, Kforce’s claims irreparable harm are undercut by the fact that any
potential sales wrongfully diverted from Kforce to Beacon Hill through Hahn’s
efforts can be quantified and therefore compensated in the form of money
damages. For example, if the City of St. Charles placement by Beacon Hill is
shown to be the result of Hahn sending the job posting to Beacon Hill while still
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employed at Kforce, the lost commission can be calculated and awarded to Kforce
as damages for Hahn’s breach of duty of loyalty. The same is true of any other
placements that are shown to be the result of Hahn’s improper use of confidential
information or breach of any enforceable covenants. “Irreparable harm occurs
when a party has no adequate remedy at law, typically because its injuries cannot
be fully compensated through an award of damages.” Gen. Motors Corp. v. Harry
Brown’s, LLC, 563 F.3d 312, 319 (8th Cir. 2009). Here, Kforce has presented
nothing more than the possibility of harm resulting from Hahn and Beacon Hill’s
activities. Mere speculative harm is an insufficient basis upon which to grant
injunctive relief, particularly where the alleged damages are capable of
ascertainment. As Kforce can be fully compensated for any alleged loss through
an award of money damages, injunctive relief must be denied.
When the lack of irreparable harm is considered in conjunction with the
remaining Dataphase factors, I do not find that the balance of equities favors
injunctive relief. Kforce has no exclusive placement contract with Charter or
Magellan or any of the other clients discussed at the preliminary injunction
hearing. It merely has the same right to compete for placements as Beacon Hill.
To enjoin not only Hahn but also Beacon Hill from soliciting clients serviced
equally by Kforce and Beacon Hill would inequitably stymie competition and
award Kforce a windfall it would not otherwise enjoy in this market. Both parties
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discussed “unclean hands” at length during the preliminary injunction hearing.
Although I am not finding at this time that any party acted inequitably, I simply
note that all witnesses who testified were very familiar with the way this industry
works and some may have used that knowledge to their benefit irrespective of what
their contractual obligations may have actually required of them. At the very least,
this knowledge should have prompted Kforce to investigate Hahn’s activities and
act on any alleged improprieties in a more a timely fashion.8 The potential harm to
Hahn if an injunction were granted outweighs the potential harm to Kforce if
injunctive relief is denied, as an injunction prohibiting Hahn from working his two
major accounts (Charter and Magellan) would effectively preclude him from
working for Beacon Hill. To the extent the public interest is considered, this factor
is neutral, as public policy favors the enforcement of contracts but also frowns
upon restraints against trade. For all these reasons, injunctive relief is not
warranted.9

8

For this reason, even if I had granted injunctive relief I would not have extended it for a year
from the date of the injunction as requested by Kforce.
9

Again, I stress that these findings are preliminary in nature and made solely for purposes of
deciding the pending motion and should in no way be construed as either an endorsement of
defendants’ activities or a condemnation of plaintiff’s case.

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Finally, the Court believes that this is a case ripe for early referral to
mediation. This is a case that should be settled, so the Court expects all counsel
and parties to use their best efforts and work cooperatively to do just that.
Accordingly,
IT IS HEREBY ORDERED that plaintiff’s motion for preliminary
injunction [#23] is denied.
This case will be referred to mediation by separate Order.

_______________________________
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 8th day of January, 2015.

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