HR STAFFING CONSULTANTS, LLC et al v. BUTTS

Filing 66

MEMORANDUM/ORDER granting 58 Motion to Reduce Security on Preliminary Injunction; that the portion of the order (ECF No. 40) that set the amount of security at $300,000 is hereby amended, and that the required security is reduced to $10,000. The clerk shall release the balance of the posted security (i.e., $290,000) (finance notified). Signed by Judge Kevin McNulty on 8/25/15. (DD, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

HR STAFFING CONSULTANTS, LLC, and
Upstream Healthcare Management of
New Jersey, LLC,
Plaintiffs,

Civ. No. 2:15-3155
(KM)(JBC)

MEMORANDUM AND ORDER

V.

Richard BUTTS,
Defendant.

KEVIN MCNULTY, U.S.D.J.:

This matter comes before the Court on the motion (ECF No. 58) of
Plaintiffs HR Staffing Consultants, LLC (“HR Staffing”) and Upstream
Healthcare Management of New Jersey, LLC (“Upstream”), to reduce the
security required to maintain this Court’s June 2, 2014 preliminary
inj unction.’
On June 2, 2015, I entered a preliminary injunction order
restraining Mr. Butts from:
1. Being employed by CarePoint Health Management Associates,
LLC (“CHMA”), and/or any entities affiliated by common
ownership with CHMA (collectively, “CarePoint”), within the
Counties of Hudson, Bergen, Essex, Passaic, and Union
Counties, for the period June 1, 2015 through May 31, 2016;
I write this memorandum opinion primarily for the parties. Familiarity
with the case is assumed. My previous opinion, granting a preliminary
injunction to Plaintiffs, contains background information for this case. (See ECF
No. 39)
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and
2. Disclosing to CarePoint any confidential or proprietary
information, or trade secrets, of Plaintiffs.
(ECF No. 40) That order also required Plaintiffs, pursuant to Fed. R. Civ.
P. 65(c), to post security in the amount of $300,000 (representing Mr.
Butts’s annual salary at CarePoint), within 30 days after June 2, 2015.
(Id.)
On July 1, 2015, Plaintiffs did post security in the amount of
$300,000. (ECF Nos. 52, 53)
Since that time, I have learned that Mr. Butts has continued his
employment with CarePoint, albeit in a different capacity. In light of Mr.
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Butts’s continued employment, Upstream and HR Staffing request that
this Court reduce the amount of the security. Mr. Butts admits that his
“current salary of $300,000 is the same as the security provided in the
injunction” (Def. Opp. 1, ECF No. 59)

—

i.e., the same as his salary prior

to the entry of the injunction.
Pursuant to the Federal Rules, this Court “may issue a preliminary
injunction

.

.

.

only if the movant gives security in an amount that the

court considers proper to pay the costs and damages sustained by any
party found to have been wrongfully enjoined.

.

.

.“

Fed. R. Civ. P. 65(c).

The Third Circuit has “strictly interpreted the bond requirement of
Rule 65(c) and [has] recognized that such a bond ‘provides a fund to use
to compensate incorrectly enjoined defendants.”’ Elliott v. Kiesewetter, 98
F.3d 47, 59 (3d Cir. 1996) (quoting Hoxworth

t’.

Blinder, Robinson & Co.,

Inc., 903 F.2d 186, 210 (3d Cir. 1990)).
Upstream and HR Staffing characterize this capacity as one that
“supposedly” does not violate the preliminary injunction order. (P1. Mot. 1, ECF
No. 58) On June 8, 2015, 1 held a telephone conference regarding Upstream and
HR Staffing’s concerns about Mr. Butts’s current employment. Upstream and
HR Staffing have not made any motion asserting a violation of the preliminary
injunction.
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Although the amount of the bond is left to the discretion of
the court, the posting requirement is much less
discretionary. While there are exceptions, the instances in
which a bond may not be required are so rare that the
requirement is almost mandatory. We have held previously
that absent circumstances where there is no risk of
monetary loss to the defendant, the failure of a district court
to require a successful applicant to post a bond constitutes
reversible error.
Hoxworth, 903 F’.2d at 210 (quoting Frank’s GMC Truck Center, Inc. v.
General Motors Corp., 847 F.2d 100, 103 (3d Cir. 1988)). As Butts points
out, the Third Circuit has “never excused a District Court from requiring
a bond where an injunction prevents commercial, money-making
activities.” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 426 (3d
Cir. 2010).
My injunction excluded Butts from his current position for a year.
As I saw the matter at the time, the likely effect of an erroneous
injunction would be a year of unemployment, and the loss of a year’s
income—a rough measure, to be sure, but reasonable. Hence I fixed the
amount of the bond at one year’s salary.
As Butts himself concedes, he continues to earn a $300,000
annual salary from CarePoint—precisely the salary he was earning before.
(Id. 1 (“Mr. Butts’s current salary of $300,000 is the same as the security
provided in the injunction.”)) In short, he stands to lose little or nothing,
financially speaking, from an erroneous injunction.
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I will therefore reduce the amount of the bond to $10,000, which
should more than cover any incidental damages should the preliminary
Butts argues that HR Staffing and Upstream agreed to the $300,000
security amount knowing that Mr. Butts would continue to work for CarePoint
and earn the same salary. Based on the email exchange between the parties, I
am not persuaded that was the case. (P1. Mot. Ex. A, ECF No. 58-2; Def.
app.
Ex. A, ECF No. 59-1) Certainly this Court was not aware of Mr. Butts’s current
salary, or CarePoint’s plans to maintain his employment, at the time the
preliminary injunction order issued.
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injunction be reversed on appeal. I note that the United State
s Court of
Appeals has denied a stay, but ordered expedited briefing,
and has
scheduled the case for oral argument in September.

ORDER
For the foregoing reasons,
IT IS this 25th day of August, 2015,
ORDERED that the portion of my order (ECF No. 40) that
set the
amount of security at $300,000 is hereby amended, and
that the
required security is reduced to $10,000. The clerk shall
release the
balance of the posted security (i.e., $290,000).

K VIN MCNULTY
United States District J

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