MAXIMUM QUALITY FOODS, INC. v. DIMARIA et al
Filing
27
OPINION fld. Signed by Judge Jose L. Linares on 12/10/14. (sr, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MAXIMUM QUALITY FOODS, 1NC.,
Civil Action No.: 14-6546 (JLL)
Plaintiffs,
V.
JOSEPH
DIMARIA
PROVISIONS, INC.,
&
WILLOW
OPINION
Defendants.
LINARES, District Judge.
This matter comes before the Court by way of the application of Plaintiff Maximum
Quality Foods, Inc. (“Plaintiff’)’s Order to Show Cause pursuant to Federal Rule of Civil
Procedure 65 and Local Rule of Civil Procedure 65.1 as to why Defendants Joseph DiMaria
(“DiMaria”) and Willow Provisions Inc. (“Willow”) (Collectively “Defendants”) should not be
temporarily and preliminarily enjoined from, inter alia, using or disclosing confidential and
proprietary information and/or trade secrets of Plaintiff. The Court has considered the
submissions of both parties in support and in opposition to the present application, as well as the
arguments presented by the parties at oral argument held on November 24, 2014. Based on the
foregoing reasons, Plaintiff’s application is denied.
I. BACKGROUND
Plaintiffs filed the instant Complaint and application for an Order to Show Cause in this
matter in the Superior Court of New Jersey, Chancery Division, Union County on October 16,
2014. (ECF No. 1:1-2). Defendants removed this matter to this Court on October 22, 2014. (Id.)
Plaintiff is a regional food distribution business located primarily in Linden, New Jersey. (Comp.
at ¶ 2). DiMaria is the sole owner and operator of Willow, as well as a former employee of
Plaintiff, (Id. at ¶ 3). Willow is a regional food distribution business located in New York. (Id. at
¶ 4). On August 26, 2014, Plaintiff executed an “Asset Purchase Agreement” (“APA”) with
DiMaria and Willow in which Plaintiff purchased all customer lists, and all files, records, and
documents relating to the customers of Willow, as well as Willow’s good will in connection with
Defendants’ business. (Id. at ¶ 7). Plaintiffs also paid Defendants $250,000 and entered into an
“Employment Agreement” with DiMaria, pursuant to which he would be a salesman for Plaintiff
and aid in the transition of customers. (Id.) Both the APA and the Employment Agreement
contain non-competition covenants. (Id.)
Plaintiff alleges that DiMaria intentionally disregarded the APA and Employment
agreement by continuing to service, through Willow, the very same customers Plaintiff acquired
through the APA. (Id. at ¶J 8-10). DiMaria diverted product sales from Plaintiff to Willow,
collected revenues related to such sales without remitting them to Plaintiff, and serviced said
customers by purchasing products from vendors and providing deliveries to the customers
through Willow. (Id.) When Plaintiff reached out to these customers regarding their pending or
anticipated orders, Plaintiff was informed that the customers already received their products and
no longer needed delivery from Plaintiff. (Id. at ¶ 11). Plaintiff contends that when Plaintiff’s
owner and president Gary Roccaro confronted DiMaria regarding his alleged breach, DiMaria
admitted to servicing the customers through Willow. (Id.)
On October 12, 2014, Plaintiff reached out to thirty six (36) customers whose sales
relationships were acquired by Plaintiff through the APA, for Monday orders. (Id. at 12). Many
of those customers informed Plaintiff that they would call DiMaria directly or that DiMaria
would call them directly for an order, thereby circumventing Plaintiff. (Id.) Out of the thirty six
customer who normally purchase products weekly on Sunday, Plaintiff only received three (3)
orders, two of which were returned when the customers informed Plaintiff that DiMaria had
already delivered the products. (Id). Plaintiffs also allege that on September 24, 2014, DiMaria
improperly retained and has continued to use the customer list, which Plaintiff acquired from
Defendants as part of the customer information and records listed in the APA. (Id. at 53). On
¶
October 17, 2014, DiMaria received a letter from Plaintiff terminating his employment. (DiMaria
Cert.
¶ 29).
On October 31, 2014, this Court granted Plaintiff’s application for temporary restraints,
requiring Defendants to:
1. Return all of Plaintiffs proprietary information immediately, and any information
derived therefrom, including all copies thereof whether in hard copy, electronic form
or computer readable form; and
2. Preserve all documents and other evidence, including files, data, or communications
in electronic form.
(ECF No. 6 at 3).
II. LEGAL STANDARD
Federal Rule of Civil Procedure 65 permits District Courts to grant temporary restrain
ing
orders. Fed.R.Civ.P. 65(b). Injunctive relief is an” ‘extraordinary remedy’ and ‘should
be
granted only in limited circumstances.’ “Kos Pharms. Inc. v. Andrx Corp., 369 F.3d
700, 708
(3d Cir.2004) (quoting Am. Tel. & Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d
1421,
1427 (3d Cir.1994)). A court may grant an injunction only if a party shows: “(1)
a likelihood of
success on the merits; (2) that it will suffer irreparable harm if the injunction is denied;
(3) that
granting preliminary relief will not result in even greater harm to the nonmoving party; and (4)
that the public interest favors such relief.” Kos Pharms., 369 F.3d at 708. A party must produce
sufficient evidence of all four factors—and a district court should weigh all four—prior to
granting injunctive relief. Winback, 42 F.3d at 1427. However, “[ajs a practical matter, if a
plaintiff demonstrates both a likelihood of success and irreparable injury, it almost always will
be the case that the public interest will favor the plaintiff.” Id. at 1427, n. 8.
III. DISCUSSION
In this case, the Court need only analyze the second factor of the preliminary injunction
analysis, as Plaintiff has failed to show that it will suffer irreparable harm as a result of
Defendant’s alleged breach of the APA. In order to demonstrate irreparable harm the plaintiff
must demonstrate potential harm which cannot be redressed by a legal or an equitable remedy
following a trial. The preliminary injunction must be the only way of protecting the plaintiff
from harm. See e.g., Weinberger v. Romero—Barcelo, 456 U.S. 305, 312 (1982); Continental
Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 356 and n. 9 (3d Cir.1980).
Plaintiff argues that because the APA specifically acknowledges that a breach of the
restrictive covenants will cause irreparable harm, the element of irreparable harm is met.
Moreover, Plaintiff contends that because DiMaria is using his previous customer relationships
to continue selling to the customers instead of transitioning them to Plaintiff, he has caused
Plaintiff irreparable harm. Finally, Plaintiff cites case law for the proposition that by exploiting
the sensitive and confidential information, DiMaria is causing irreparable harm. Defendants
argue that Plaintiff has failed to demonstrate that Plaintiff has caused irreparable harm because
Plaintiff fails to establish that any of its alleged damages cannot be compensated via monetary
reward. This Court agrees with Defendants.
As an initial matter, the Court rejects the contention that the parties have established
irreparable harm by agreement. Paragraph 6.16 of the APA states, “the parties agree that
irreparable damage would occur in the event any provision of this agreement is not performed in
accordance with the terms.
. .“
Plaintiff argues that this language is sufficient to establish
irreparable harm, relying on Nat’l Starch & Chem. Corp. v. Parker Chem. Corp., 219 N.J. Super.
158, 163, 530 A.2d 31, 33 (App. Div. 1987). Although this case makes mention of an employee
signing a similar agreement with a similar provision, the Court only emphasizes that the
employee in that case understood that there would be no way to determine how much damage his
disclosure of trade secrets involving envelope adhesive would cause. Nowhere does the Court
state that parties may establish irreparable harm through contract.
Moreover, this Court has stated that “[a] contractual provision simply cannot act as a
substitute for a finding by this Court that determines whether a preliminary injunction is proper.”
Laidlaw, Inc. v. Student Transp. ofAmerica, Inc., 20 F.Supp.2d 727, 758 (D.N.J.1998). As such,
while the Court does take the language of the Non—Competition Agreement into consideration as
part of its analysis of irreparable harm, it rejects the contention that such language may substitute
for the preliminary injunction analysis to be made by this Court.
The Court now turns to Plaintiff’s second argument for irreparable harm: the loss of its
customer base. Plaintiff cites case law for the proposition that by exploiting the sensitive and
confidential information, DiMaria is causing irreparable harm. Each of the cases referenced by
Plaintift however, involved either the loss of trade secrets, or the infringement of a plaintiffs
trademark, not a customer base and/or list. See National Starch, 530 A.2d at 33 (“Here, we are
satisfied that the record adequately supports the reasonableness of a preliminary determination
by the Chancery judge that [the defendant] knew trade secrets of [the plaintiff], and that under
the circumstances there was sufficient likelihood of inevitable disclosure”)(emphasis added); Kos
Pharm., Inc.
Andrx Corp., 369 F.3d 700, 726 (3d Cir. 2004) (Reversing the District Court’s
denial of a preliminary injunction based upon trademark infringement because “potential damage
to
...
reputation or goodwill or likely confusion between parties’ marks” is irreparable
injury.”)( Emphasis added).
This District has, however, addressed claims of irreparable harm that are factually similar
to those made by Plaintiff. In Apollo Technologies v. Centrosphere Industrial, the district court
found that irreparable harm had not been established where the defendant’s breach resulted in the
loss of existing contracts and potential subsequent contracts. 805 F.Supp. at 1206—11. (Emphasis
added). The court concluded that such losses were readily compensable by monetary damages,
noting that such damages could be computed based on either the plaintiffs proposed contract
amount or the price received by the contract winner. Id. at 1209. The court further noted that any
loss from potential contracts was “entirely speculative.” Id. Plaintiff’s claims of irreparable harm
fail for similar reasons.
Plaintiff primarily alleges loss of business due to Plaintiff’s interference with its contracts
with existing customers. The value of the business lost is thus readily ascertainable through
discovery should this matter reach that stage of litigation. Moreover, Defendant has complied
with the Court’s Order and returned the confidential information at issue to Plaintiff. (DiMaria
Cert.
¶ 42).
Without the confidential information at issue in his possession, the Court finds that
Plaintiff has failed to demonstrate that Plaintiff has caused irreparable harm that cannot be
remedied monetarily. All of the required elements for a preliminary injunction to be issued
by
this Court have not been satisfied. Therefore, Plaintiff’s application is denied.
IV. CONCLUSION
For the reasons herein expressed, Plaintiff’s application is denied.
An appropriate Order accompanies this Opinion.
DATE: December / ) 2014
,
States District Judge
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