Akron Paint & Varnish, Inc. v. Budd

Filing 4

Memorandum Opinion and Temporary Restraining Order. (Related Doc # 1 ). Judge Sara Lioi on 12/13/2016. (P,J)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

AKRON PAINT & VARNISH, INC., d/b/a
APV Engineered Coatings,

PLAINTIFF,
vs.

MIRANDA BUDD,

DEFENDANT.

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CASE NO. 5:16CV2944

JUDGE SARA LIOI

MEMORANDUM OPINION AND
TEMPORARY RESTRAINING
ORDER

On December 5, 2016, plaintiff Akron Paint & Varnish, Inc. (“plaintiff” or “Akron
Paint”) filed a breach of contract action in the Summit County Court of Common Pleas against
defendant Miranda Budd (“defendant” or “Budd”). (Doc. No. 1-1 (Complaint).) On the same
day, plaintiff also filed a motion for a temporary restraining order in state court. (Doc. No. 1-3
(Motion [“Mot.”]) and 1-4 (Memorandum in Support [“Mem.]).)
Defendant removed the action to federal court on December 7, 2016 on the basis of
diversity jurisdiction. (Doc. No. 1 (Notice of Removal).) The Court conducted two telephonic
conferences with counsel in an effort to facilitate a short-term agreement that would obviate the
need for a temporary restraining order. When counsel advised that the parties were unable to
enter into a stipulation, the Court took plaintiff’s motion for a temporary restraining order under
advisement.
Based on the information before the Court, including plaintiff’s moving papers, and

pursuant to Federal Rule of Civil Procedure 65(b), the Court finds that a limited temporary
restraining order is warranted for the reasons set forth below.
According to the complaint, Akron Paint “is an industrial leader in the field of the design
and manufacturer of paints, paint additives, high performance coatings, caulks, seals, industrial
ink, lubricants, primers, dyes, adhesives, and decals.” (Complaint ¶ 3.) Its principal place of
business is in Akron, Ohio, and its factory and laboratory are also located in Akron. (Id. ¶¶ 1, 3,
4.) Still, it does business “throughout the United States, Mexico, South America, Asia, and
Australia.” (Id. ¶ 4.)
Budd is a former employee of Akron Paint, where she was employed as a chemist (Id. ¶
8.) Upon her hire, Budd’s duties encompassed “product design, providing input for
corrective/preventative actions, providing input on supplier selection, participation in internal
audits to insure the continued improvement of the system, providing technical support and
troubleshooting.” (Id.)
During the course of her employment with Akron Paint, Budd signed an “Employee
Invention and Confidential Information Agreement” and an “Agreement Not to Complete.”
(Doc. No. 1-1 [“Non-compete Agreement”] at 17-19; Doc. No. 1-1 [“Confidentiality
Agreement”] at 21-22.) The Non-compete Agreement, which is the focus of the present motion,
prohibits defendant from “engag[ing] in or contribut[ing] h[er] knowledge to any work or
business that involves a product . . . , which is then directly competitive with” plaintiff’s coatings
products for a period of three years from the date of termination. (Non-compete Agreement at
17.) It does not, however, contain a per se prohibition on working for a competitor during the
restrictive period. Also for the same three year period, the agreement prohibits defendant from
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soliciting, diverting, or performing any services for any customer of plaintiff’s “with respect to”
the “engineered coatings business only[.]” (Id.) The non-compete agreement provides that its
terms are governed by Ohio law. (Id. at 19.)
Budd voluntarily terminated her employment with Akron Paint in December, 2015.
(Complaint ¶ 12.) In “late October, 2016,” plaintiff discovered that defendant has taken a
position as an account manager with Stahl (USA) Corporation (“Stahl (USA)”), a Dutch
corporation, with its U.S. headquarters located in Peabody, Massachusetts. (Mem. at 27; see
Complaint ¶ 12.) Stahl (USA) “holds itself out as a leader in the coatings industry.” (Complaint ¶
13.) Stahl (USA) competes with plaintiff throughout the United States and other parts of the
world, and it is plaintiff’s position that Stahl (USA) is its “number one competitor.” (Id. ¶¶ 13,
14.)
According to plaintiff, defendant’s employment with Stahl (USA) “has caused irreparable
damage to [Akron Paint] by giving Stahl (USA) [] an unfair business advantage and by creating
confusion in the marketplace.” (Mem. at 27.) Plaintiff insists that to permit defendant “to
approach customers and to compare and contrast the advantages of doing business with Stahl visà-vis [Akron Paint] [would cause] irreparable harm to” plaintiff. (Id. at 27-28.)
In determining whether to award temporary injunctive relief, such as a temporary
restraining order, this Court must consider the following factors: (1) whether plaintiff has a
substantial likelihood or probability of success on the merits; (2) whether plaintiff will suffer
irreparable injury if the relief is not granted; (3) whether the injunctive relief would unjustifiably
harm a third party; and (4) whether the public interest would be served by issuing the injunctive
relief. Mason Cnty. Med. Ass’n v. Knebel, 563 F.2d 256, 261 (6th Cir. 1977); In re: Eagle-Picher
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Indus., Inc., 963 F.2d 855, 858 (6th Cir. 1992).
With respect to the first factor, the Court finds that plaintiff is likely to succeed, at least in
part, on its claim of breach of the non-compete agreement. At this stage in the litigation, little is
known about Budd’s current job duties and how they may or may not violate the non-complete
agreement. Nonetheless, it is likely that defendant’s sales position with Stahl (USA) would
require defendant “to contribute [her] knowledge to [] work or business that involves a [coatings]
product” that competes with a product offered by Akron Paint. Given the fact that plaintiff and
Stahl (USA) are direct competitors, it is also likely that defendant’s current position would cause
her to have impermissible contact with one of plaintiff’s customers in the coatings industry.
Still, the Court observes that some of the language of the restrictive covenant is very
broad. While the agreement is limited to products of the “coatings business,” it appears to
prohibit any activity that “involves” these products in any way. Additionally, while the period of
the restrictive covenant is limited to 3 years from the date of separation, there is no geographic
limitation on the reach of the covenant. See MP TotalCare Servs., Inc. v. Mattimoe, 648 F. Supp.
2d 956, 963 (N.D. Ohio 2009) (identifying temporal and spatial limitations as factors to consider
in determining the reasonableness of non-compete covenants under Ohio law) (citations
omitted). Though plaintiff represents that both it and Stahl (USA) compete nationally and
internationally, it is unclear whether their coatings products compete on this level. At this early
stage in the litigation, the Court is far from convinced that plaintiff will be entitled to enforce the
agreement as written.
Assuming that plaintiff can prove some violation of the agreement, the Court finds that
plaintiff will suffer irreparable harm should defendant be permitted to continue to violate the
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non-compete agreement. Courts have found that the breach of a non-compete agreement and the
unauthorized solicitation of customers constitutes irreparable injury. Basicomputer Corp. v.
Scott, 937 F.2d 507, 512 (6th Cir. 1992).
Third, the Court finds that the irreparable harm that plaintiff will suffer without a
temporary restraining order outweighs any inconvenience defendant may suffer. Defendant was
aware when she accepted employment with Stahl (USA) that she was still subject to the terms of
the non-compete agreement she previously signed with plaintiff, and, as set forth below, the
Court’s temporary restraining order only requires defendant to limit (and not terminate) her
employment with Stahl (USA). Moreover, the Court intends to schedule this matter for a
preliminary injunction hearing in early 2017. Thus, any inconvenience to defendant in limiting
her employment with Stahl (USA) in the interim must give way to the irreparable damage that
could result from defendant’s potential violation of the parties’ non-compete agreement.
Fourth and finally, the Court finds that the temporary restraining order will benefit the
public interest of upholding contracts. There is an interest in requiring defendant to uphold her
legal obligations under the contract to the extent that those obligations do not offend governing
state law. See generally Patio Enclosures, Inc. v. Herbst, 39 F. App’x 964, 970 (6th Cir. 2002)
(public interest in enforcement of reasonable non-compete agreements).
By its motion, plaintiff seeks a temporary order prohibiting defendant from working for
Stahl (USA) in any capacity until the Court can conduct an evidentiary hearing on its request for
a preliminary injunction. Yet, the restrictive covenant does not preclude defendant from working
for competitors; instead, it merely prohibits her from working with competitive coatings products
or customers of such products. While the motion is extremely thin as to any supporting facts
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demonstrating that defendant is in violation of her covenant, she is still bound by the agreement.
Ultimately, the Court finds that the balance of the relevant factors favors the issuance of a
temporary restraining order that protects plaintiff’s business and proprietary interests, as defined
by the parties’ agreement, while permitting defendant to remain employed in some noncompeting capacity at Stahl (USA). Additionally, the Court always remains free to modify any
agreement to “the extent necessary to protect the employer’s legitimate interest and then enforce
the covenant as modified.” See MP TotalCare Servs., Inc., 648 F. Supp. 2d at 963 (citations
omitted). Therefore, the Court finds that a temporary restraining order limited to coatings
products is warranted.
Accordingly, IT IS ORDERED that defendant is enjoined as follows:
Defendant is prohibited from soliciting or servicing customers of plaintiff’s
engineered coatings products;
Defendant is prohibited from performing any service that promotes a coatings
product offered for sale by Stahl (USA); and
Defendant is prohibited from using or disclosing any trade secret or confidential
information of plaintiff’s that defendant may have acquired during her
employment with plaintiff.1
Defendant is not, however, prohibited from working for or offering any services
to Stahl (USA), to the extent such service or employment does not involve
coatings products.

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There is no allegation, let alone supporting fact, to suggest that defendant has disclosed any trade secrets or
confidential or proprietary information. Nonetheless, Budd remains subject to the confidentiality agreement she
signed while still employed by Akron Paint.
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This order is in effect for a period of fourteen (14) days. Fed. R. Civ. P. 65(b)(2).
IT IS SO ORDERED.

Dated: December 13, 2016
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE

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