Movement Mortgage, LLC v. Ward et al
Filing
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ORDER granting 4 Motion for TRO. Motion Hearing set for 2/19/2014 at 11:00 a.m.. Signed by District Judge Robert J. Conrad, Jr on 2/5/2014. (eef)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:14-cv-23-RJC-DCK
MOVEMENT MORTGAGE, LLC,
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Plaintiff,
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v.
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JARED WARD; JUAN CARLOS KELLEY;
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JASON STEGNER; and NEW PENN
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FINANCIAL, LLC.,
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Defendants.
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__________________________________________)
ORDER
THIS MATTER comes before the Court on Plaintiff Movement Mortgage, LLC’s (MM)
Motions for Temporary Restraining Order and Preliminary Injunction (Doc. 4), which was filed
on January 23, 2014. Plaintiff MM filed its complaint in this Court on January 17, 2014. (Doc.
1). At present, it appears that three of the four named Defendants have been served in this case:
New Penn Financial (New Penn) on January 24, 2014; Juan Carlos Kelley (Kelley) on January
26, 2014; and, Jason Stegner (Stegner) on January 27, 2014. (Docs. 7-9). It does not appear that
Defendant Jared Ward (Ward) has been served as of yet.
I.
BACKGROUND
Alleging irreparable harm at the hands of Defendants, Plaintiff seeks a temporary
restraining order or preliminary injunction from this Court enjoining Defendants from various
actions, including: from soliciting MM’s current employees to leave the company; from
soliciting MM’s referral sources for the purposes of obtaining business; and, from inducing
MM’s referral sources and customers to cease doing business with MM. (Doc. 4).
The facts, summarized here in briefest form, are these: MM and New Penn operate in the
same field of business as mortgage bankers, and appear to be direct competitors. (Doc. 11:
Amended Complaint ¶¶12; 62-68). MM is a limited liability corporation (LLC) organized under
Delaware law and with a principal place of business in Charlotte, North Carolina. (Id. ¶2).
MM’s two principal members are residents of North Carolina and Virginia, respectively. (Id.).
New Penn is a limited liability company organized under Delaware law with its principal place
of business in Pennsylvania. (Id. ¶6). The individual Defendants, Ward, Kelley, and Stegner,
are citizens of Georgia, California, and Pennsylvania, respectively. (Id. ¶¶3-5). Plaintiff submits
that this Court possesses subject matter jurisdiction based upon 28 U.S.C. § 1332. (Id. ¶7).
The three individual Defendants, Ward, Kelley and Stegner were high-level employees of
MM, who recently left the company to work for New Penn. (Id. ¶ 18; 26; 27; 35; 36; 43).
Plaintiff alleges that, since leaving MM, they have contacted several current MM employees and
solicited them to leave MM and take on employment with New Penn. (Id. 64-68). At least three
MM employees have recently terminated their employment and have begun working for New
Penn. (Id. ¶67). Plaintiff has attached as exhibits restrictive covenants signed by Defendants
Ward, Kelley and Stegner, each of which includes, inter alia, provisions that restrict the
solicitation of MM’s employees for a period of twelve (12) months. (Docs. 11:2-4). Plaintiff
also alleges that the Defendants have, in violation of these restrictive covenants, solicited
business from customers and referral sources of Plaintiff. (Doc. 11 ¶¶20-25; 28-34; 37-42).
Plaintiff attached the relevant agreements which prohibit any attempts to solicit business from a
referral source of Plaintiff’s for three (3) months following departure from the company. (Doc.
11:2-4).
At present, Defendants have not filed any responses with this Court.
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II.
DISCUSSION
Rule 65(b) provides that, upon a proper showing, a court may issue a temporary
restraining order without notice to the adverse party. FED. R. CIV. P. 65(b). Because Defendants
have not been provided adequate notice and time to respond, the instant motion will be regarded
as one for a temporary restraining order. “[W]hether an interlocutory injunction is labeled a
TRO or a preliminary injunction is not of particular moment, so long as the opposing party is
given notice and an opportunity to oppose that is commensurate with the duration of the
injunction.” Ciena Corp. v. Jarrad, 203 F.3d 312, 320 (4th Cir. 2000). A “preliminary injunction
preserves the status quo pending a final trial on the merits, [while] a temporary restraining order
is intended to preserve the status quo only until a preliminary injunction hearing can be held.”
Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 422 (4th Cir. 1999).
A.
Temporary Restraining Order
A temporary restraining order is an “emergency procedure and is appropriate only when
the applicant is in need of immediate relief.” 11A Charles Wright, Arthur Miller & Mary Kane,
Federal Practice and Procedure § 2951 (2d ed). It is an “extraordinary and drastic remedy”
never awarded as a matter of right. Munaf v. Geren, 553 U.S. 674, 689-90 (2008) (citations
omitted). In each case, courts “must balance the competing claims of injury and must consider
the effect on each party of the granting or withholding such request.” Amoco Production Co. v.
Gambell, 480 U.S. 531, 542 (2008). An injunction is a matter of equitable discretion; it does not
follow from success on the merits as a matter of course. Weinberger v. Romero-Barcelo, 456
U.S. 305, 313 (1982) (“[A] federal judge sitting as chancellor is not mechanically obligated to
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grant an injunction for every violation of law.”).
A plaintiff seeking a temporary restraining order must establish four elements, including
that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in absence
of preliminary relief; (3) the balance of equities tips in its favor; and, (4) an injunction is in the
public interest. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008).
Notwithstanding the one-sided nature of the material presented in this matter, the Plaintiff
has made a cogent case for success on the merits. Plaintiff has alleged violations of restrictive
covenants and included the relevant agreements as attachments to a verified complaint. The
actions alleged against the individual Defendants fall squarely within the provisions of the
restrictive covenants which Defendants signed upon accepting employment with Plaintiff.
Plaintiff has likewise made a clear showing of irreparable harm including: the permanent
loss of several employees; the loss of several key referral sources; lost revenue, and diminished
future business. Additionally, Plaintiff contends that monetary damages do not provide
appropriate redress as it is difficult to calculate revenue declines associated with the loss of
employees, referral sources, and goodwill. Indeed, the revenue most affected is that which is
singularly incapable of precise calculation: the loss of potential future business. For the limited
purposes of the restraining order, this showing is sufficient to establish irreparable harm.
The balance of equities presents the most pressing inquiry in this matter, especially in
light of the effect that a restraining order could have on New Penn’s business operations. “In
each case, courts ‘must balance the competing claims of injury and must consider the effect on
each party of the granting or withholding of the requested relief.’” Winter, 555 U.S. at 24
(quoting Amoco Production, 480 U.S. at 542). Plaintiff argues convincingly that enjoining
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Defendants from soliciting MM’s current employees does not place a substantial burden on any
Defendant as it merely enjoins them from activity that they have no legal right to engage in
otherwise. Based on the facts presented by the Plaintiff, enjoining such solicitations does not
risk upsetting the legitimate business operations of New Penn.
The more difficult question for the Court is how to balance the equities on the issue of
communications to third parties, including business partners, referral sources and active
customers. Taking the facts presented as true, Plaintiff has made a cogent showing that it will
suffer irreparable harm unless this Court enjoins certain communications between the
Defendants and third parties. The Fourth Circuit has recognized the deleterious effects caused
by parties soliciting the customers or clients of former employees in contravention of agreements
prohibiting such. “The customers cannot be ‘unsolicited.’” Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Bradley, 756 F.2d 1048, 1054. A non-solicitation clause “requires immediate
application to have any effect. An injunction even a few days after solicitation has begun is
unsatisfactory because the damage is done.” Id.
Conversely, even a narrowly tailored injunction risks infringing upon the legitimate
business operations of the Defendants. The Court, at present, has no means of knowing which of
New Penn’s business relationships are legitimate, and which are the product of illicit activity.
What the Court does have knowledge of, however, are the confines of the restrictive covenants
signed by the individual Defendants. “The traditional office of a preliminary injunction is to
protect the status quo and prevent irreparable harm during the pendency of a lawsuit ultimately
to preserve the court’s ability to render a meaningful judgment on the merits.” See, e.g., Omega
World Travel, Inc. v. Trans World Airlines, 111 F.3d 14, 16 (4th Cir. 1997). “Indeed, the
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maintenance of the status quo is justified only insofar as it aids the court in granting final relief.”
Hazardous Waste Treatment Council v. South Carolina, 945 F.2d 781, 788 (4th Cir. 1991).
Ultimately, the risk of damage to New Penn is mitigated by the temporary nature of any
injunction and by the existence of restrictive covenants which set meaningful parameters around
the type of actions to be enjoined.
Finally, the public interest question does not appear to be of great import in this case as
the dispute seems localized to two private businesses competing with one another in the same
market. “The public has an interest in ensuring that contracts are enforced.” UBS Painewebber,
Inc. v. Aiken, 197 F.Supp.2d 436, 448 (W.D.N.C. 2002).
III.
CONCLUSION
Having considered the four factors spelled out in Winter, the Court finds that an order
under Rule 65(b) temporarily restraining Defendants is appropriate to preserve the status quo
until the parties can be heard by this Court on the issue of whether to issue a preliminary
injunction.
IT IS, THEREFORE, ORDERED that:
1.
Plaintiff’s Motion for a Temporary Restraining Order (Doc. No. 4) is
GRANTED.
2.
Defendants Jared Ward, Juan Carlos Kelley, Jason Stegner, and New Penn
Financial are hereby RESTRAINED from soliciting any Movement Mortgage
employee to leave his/her employment with that firm.
3.
Defendants Jared Ward, Juan Carlos Kelley, and Jason Stegner are
RESTRAINED from soliciting or assisting in the solicitation of the business of
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any customer, referral source, or other person who has a business relationship
with Movement Mortgage, LLC for the purchase of any products or services
competing with those products and services offered and sold by the Company.
4.
Defendants Jared Ward, Juan Carlos Kelley, and Jason Stegner are
RESTRAINED from inducing or attempting to induce any person or entity,
including any customer, referral source, or other person who has an agreement or
business relationship with the company to cease doing business in whole or in
part with Movement Mortgage, LLC.
5.
Defendant New Penn is RESTRAINED from utilizing Defendants Jared Ward,
Juan Carlos Kelley, and Jason Stegner, or any other individual bound by
restrictive covenants contained in an agreement with Movement Mortgage, LLC
to directly or indirectly solicit Movement’s realtor partners and referral sources
for purposes of engaging in residential home mortgage business with New Penn.
6.
This Temporary Restraining Order will expire on FEBRUARY 19, 2014 at 11:00
a.m., unless within such time it is extended for good cause shown, or unless
defendants consent to an extension. A hearing on whether to convert this Order to
a Preliminary Injunction is set for FEBRUARY 19, 2014 AT 11:00 a.m.
7.
This order will not be deemed effective against Defendant Jared Ward until
service of process in this action is rendered upon him.
8.
All restraints ordered herein will remain in full force and effect until the
expiration of this order or unless specifically revoked by this Court.
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9.
A copy of this order will be immediately served by the United States Marshal on
Defendants.
Signed: February 5, 2014 at 10:33 a.m.
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