Audio-Video Group, LLC v. Green
Filing
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MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 2/26/14. (gwalk, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
AUDIO-VIDEO GROUP, LLC,
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Plaintiff,
v.
CHRISTOPHER GREEN
Defendant.
1:14cv169 (JCC/TCB)
M E M O R A N D U M
O P I N I O N
This matter is before the Court on Plaintiff AudioVideo Group, LLC’s (“AVG” or “Plaintiff”) Emergency Motion for
Temporary Restraining Order and Preliminary Injunction.
2, 3.]
[Dkts.
For the following reasons, the Court will grant in part
and deny in part Plaintiff’s Motion for a Temporary Restraining
Order and will set a date for a hearing on Plaintiff’s Motion
for Preliminary Injunction.
I.
Background
Plaintiff AVG is a Maryland company with its principal
place of business in Frederick, Maryland.
1.)
(Compl. [Dkt. 1] ¶
All of the membership interests in AVG are owned by Eric J.
Johnson (“Johnson”), a citizen of Maryland.
(Compl. ¶ 1.)
AVG
is an audiovisual systems integrator, which provides
“audiovisual design and installation services, equipment rental
1
and purchase, training and seminars” among other services to
customers in Maryland, Northern Virginia, Washington, D.C.,
Southern Pennsylvania and West Virginia.
(Compl. ¶ 2.)
Defendant Christopher Green (“Defendant” or “Green”) was
employed as a sales engineer at AVG from June 2006 until January
6, 2014.
(Compl. ¶ 9.)
In this capacity, Green sold to
“prospective and actual buyers seeking audio and video
solutions.”
(Compl. ¶ 9.)
In his role at AVG, Green had access
to non-public information regarding AVG’s business models and
customer base.
(Compl. ¶ 12.)
At the time Green was first hired by AVG, he signed a
Confidentiality Agreement, effective for a period of ten years
after the date that AVG last disclosed confidential information
to Green. 1
(Compl. ¶¶ 13, 16.)
terminated Green.
On January 6, 2014, AVG
Shortly thereafter, AVG accessed Green’s
company laptop and found proposals and invoices for audio video
services performed by Green for customers and potential
customers of AVG.
(Johnson Decl. [Dkt. 5] ¶ 25.)
Thirty-four
customers invoiced by Green were also customers to whom AVG had
provided quotations or had actually provided audio video
services.
(Johnson Decl. ¶ 30.)
1
The Confidentiality Agreement states: “Confidential Information shall
include all data, materials, products, technology, computer programs,
specifications, manuals, business plans, software, marketing plans, financial
information, and other information disclosed or submitted, orally, in writing
or by any other media, to Recipient by Owner. Confidential Information
disclosed orally shall be identified as such within five (5) days of
disclosure.” (Confidentiality Agreement [Dkt. 1-1.] ¶ 1.)
2
Additionally, AVG alleges that at the time Green was
terminated he was in the process of quoting 29 separate projects
to existing or potential customers.
(Johnson Decl. ¶ 33.)
Green returned only six of the files related to those projects.
(Johnson Decl. ¶ 33.)
AVG alleges that Green is now employed as
a Sales Engineer for AV/COM Integrators, a competitor of AVG.
On February 18, 2014, AVG brought suit against Green
alleging: (1) breach of the duty of loyalty; (2) tortious
interference with business relationships; (3) breach of contract
stemming from the Confidentiality Agreement; (4) violation of
the Virginia Uniform Trade Secrets Act; (5) violation of the
Maryland Uniform Trade Secrets Act; (6) conversion; and (7)
accounting.
[Dkt. 1.]
Contemporaneously with the filing of its Complaint,
AVG filed a motion pursuant to Rule 65(b) of the Federal Rules
of Civil Procedure, for a temporary restraining order (“TRO”)
and preliminary injunction that would: (1) prohibit Green from
soliciting or providing audiovisual services to any customers or
former customers of AVG; (2) order Green to return all property
of AVG still in his possession; (3) enjoin Green from using his
current cellphone number in connection with the provision of
audiovisual services; (4) enjoin Green from disclosing
confidential or proprietary information; and (5) direct Green to
return to AVG the original and all copies of AVG’s confidential
3
and proprietary information.
Injunction [Dkts. 2-3].)
(Mot. for TRO and Preliminary
AVG’s motions were accompanied by a
brief in support, [Dkt. 4], and the declaration of AVG’s founder
and president, Johnson, [Dkt. 5].
summons was issued to Green. 2
Also on February 18, 2014, a
[Dkt. 7.]
On February 24, 2014, Defendant filed his First Motion
to Continue February 25, 2014 Hearing.
[Dkt. 10.]
That same
day, Plaintiff filed an affidavit in support of its motion for
preliminary injunction and temporary restraining order [Dkt.
12], and an opposition to Defendant’s motion to continue, [Dkt
13.].
Plaintiff’s motion for a TRO is now before the Court.
II. Standard of Review
“The standard for granting either a TRO or a
preliminary injunction is the same.”
Moore v. Kempthorne, 464
F. Supp. 2d 519, 525 (E.D. Va. 2006) (citations 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.”
2
Winter v. Natural Res.
AVG originally filed its motion for a TRO without notice to Defendant
pursuant to Federal Rule of Civil Procedure 65(b)(1) and submitted an
Attorney Rule 65 Certificate setting forth the reasons why notice to
Defendant should not be required. On February 18, 2014, Plaintiff served
Defendant with the summons and a copy of the Complaint. On February 21,
2014, in accordance with instructions from chambers, Plaintiff served
Defendant with the motion for a TRO and preliminary injunction. (Def.’s Mot.
to Continue Hearing ¶ 4; Pl.’s Opp’n to Mot. to Continue Hearing ¶¶ 2-4.)
4
Def. Counsel, 555 U.S. 7, 20 (2008); see also Real Truth About
Obama, Inc. v. Fed. Election Comm’n, 575 F.3d 342, 346 (4th Cir.
2009) (citing Winter, 129 S. Ct. at 374), vacated on other
grounds, 130 S. Ct. 2371 (2010), reinstated in relevant part,
607 F.3d 355 (4th Cir. 2010).
III.
Analysis
A. Jurisdiction
As an initial matter, this Court has jurisdiction over
this case pursuant to 28 U.S.C. § 1332(a), as the parties are
diverse and the amount in controversy exceeds $75,000.00.
(Compl. ¶¶ 1, 4.)
B. TRO and Preliminary Injunction
1. Likelihood of Success on the Merits
A plaintiff seeking a TRO must first establish that it
is likely to succeed on the merits.
Here, Plaintiff brings
seven claims: (1) breach of duty of loyalty; (2) tortious
interference with business relationship; (3) breach of
confidentiality agreement; (4) violation of Virginia Uniform
Trade Secrets Act; (5) violation of Maryland Uniform Trade
Secrets Act; (6) conversion; and (7) accounting.
Where multiple
causes of action are alleged, Plaintiff need only show
likelihood of success on one claim to justify injunctive relief.
McNeil-PPC v. Granutec, Inc., 919 F. Supp. 198, 201 (E.D.N.C.
1995) (citing Nabisco Brands, Inc. v. Conusa Corp., 722 F. Supp.
5
1287, 1292 n.4 (M.D.N.C. 1989)), aff’d, 892 F.2d 74 (4th Cir.
1989).
However, “in cases where the request for preliminary
relief encompasses both an injunction to maintain the status quo
and to provide mandatory relief, as here, the two requests must
be reviewed separately, with the request for mandatory relief
being subjected to a more exacting standard of review.”
Cornwell v. Sachs, 99 F. Supp. 2d 695, 703 (E.D. Va. 2000)
(emphasis omitted) (quoting Tiffany v. Forbes Customer Boats,
Inc., 959 F.2d 232, 1992 WL 67348, at *7 (4th Cir. Apr. 6, 1992)
(unpublished table decision)).
In its motion, Plaintiff focuses
on four of its seven claims: breach of the duty of loyalty,
tortious interference with business relationships and violation
of the Virginia or Maryland Uniform Trade Secrets Act.
The
Court will begin with the breach of the duty of loyalty.
a. Duty of Loyalty
Plaintiff’s Count I alleges breach of the fiduciary
duty of loyalty.
“The Supreme Court of Virginia has ‘long
recognized that under the common law an employee, including an
employee-at-will, owes a fiduciary duty of loyalty to his
employer during his employment.’”
Combined Ins. Co. v. Wiest,
578 F. Supp. 2d. 822, 832 (W.D. Va. 2008) (quoting Williams v.
Dominion Tech. Partners, LLC, 265 Va. 280 (2003)).
Despite the
general right of employees to prepare to compete with their
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employers, Virginia courts have found that “under certain
circumstances, the exercise of that right may constitute a
breach of fiduciary duty.”
Va. 35, 42 (2000).
Feddeman & Co v. Langan Assocs., 260
In Feddeman, the Supreme Court of Virginia
noted, “liability for breach of fiduciary duty has been imposed
when the employees or directors misappropriated trade secrets,
misused confidential information and solicited an employer’s
clients or other employees prior to termination of employment.”
Id.
Here, it is likely that Plaintiff would succeed on the
merits of this claim.
Plaintiff has submitted evidence that
during Green’s employment with AVG, Green was competing with his
employer.
In his declaration Johnson relates that after Green
was terminated, the company accessed Green’s laptop and found
numerous invoices for audio video services “performed directly
by Green himself, or indirectly through competitors of AVG, to
actual or potential customers of AVG.”
(Johnson Decl. ¶ 25;
Johnson Decl. Ex. B.)
These invoices date back to August 2006.
(Johnson Decl. ¶ 26.)
On the basis of these facts, Plaintiff is
likely to succeed on the merits of its claim that Green breached
his fiduciary duty of loyalty.
b. Tortious Interference with Business
Relationship
To prevail on a claim of tortious interference with a
business relationship, a plaintiff must show: (1) the existence
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of a business relationship or expectancy, with a probability of
future economic benefit to plaintiff; (2) defendant’s knowledge
of the expectancy; (3) a reasonable certainty that absent the
defendant’s misconduct, the plaintiff would have realized the
expectancy; and (4) damage to the plaintiff.
Stone Castle Fin.
Inc. v. Friedman, Billings, Ramsey & Co., Inc., 191 F. Supp. 2d
652, 660 (E.D. Va. 2002).
Moreover, in cases involving a
business expectancy, “a plaintiff must also demonstrate that the
defendant employed ‘improper methods’ in causing the alleged
interference.”
E.I. Dupont de Nemours & Co. v. Kolon Indus.
Inc., 688 F. Supp. 2d 443, 453 (E.D. Va. 2009).
Plaintiff is likewise likely to succeed on the merits
of this claim.
The facts provided in Johnson’s affidavit
indicate that Green was a fulltime employee of AVG.
In this
capacity, Green knew of AVG’s business relationships with
customers or potential customers.
(Pl.’s Mem. at 6.)
Nevertheless, Green provided audio video services to customers
or potential customers of AVG during his employment.
Decl. ¶ 27.)
(Johnson
Specifically, Green personally invoiced thirty-
four customers to whom AVG had provided quotations for service,
or had actually provided audio video services.
30.)
(Johnson Decl. ¶
Plaintiff is likely to be able to show that absent Green’s
activities, at least one of these customers or potential
customer would have continued with AVG.
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(Pl.’s Mem. at 6-7.)
c. Misappropriation of Trade Secrets
Plaintiff has alleged violations of the Virginia
Uniform Trade Secrets Act (“VUTSA”) and the Maryland Uniform
Trade Secrets Act (“MUTSA”).
For present purposes the Court
will not conduct a lengthy inquiry into which state’s law
applies, other than to note that the alleged misappropriation
appears to have occurred in Virginia.
Nevertheless, “the same
analysis would apply under either Virginia or Maryland law as
both states have adopted trade secret statutes which closely
track the Uniform Trade Secrets Act.”
Motor City Bagels, L.L.C.
v. Am. Bagel Co., 50 F. Supp. 2d 460, 478 (D. Md. 1999).
To establish a claim under the VUTSA, a plaintiff must
establish that (1) the information in question constitutes a
trade secret and (2) the defendant misappropriated it.
Microstrategy v. Bus. Objects, S.A., 331 F. Supp. 2d 396, 416
(E.D. Va. 2004).
The first question, then, is whether Plaintiff
is likely to succeed on a showing that the information in
question constitutes trade secrets.
The VUTSA defines a “trade
secret” as:
information, including but not limited to, a
formula,
pattern,
compilation,
program,
device, method, technique, or process, that:
[d]erives 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, and [i]s the subject of efforts that
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are reasonable under
maintain its secrecy.
the
circumstances
to
Va. Code § 59.1–336.
“The case law is clear that just about anything can
constitute a trade secret under the right set of facts.”
MicroStrategy, 331 F. Supp. 2d at 416.
Nevertheless, an alleged
trade secret must “meet all the criteria listed in the statute:
(1) independent economic value; (2) not known or readily
ascertainable by proper means; and (3) subject to reasonable
efforts to maintain secrecy.”
Trident Products and Servs., LLC
v. Canadian Soiless Wholesale LTD, 859 F. Supp. 2d 771, 778
(E.D. Va. 2012).
Here, Plaintiff will likely be able to show
that at least some of its confidential information, including
“AVG’s models and methods for pricing, its specifications,
business means, marketing plans, [and] financial cost structure”
constitutes trade secrets.
(Johnson Decl. ¶¶ 13, 14.)
The Court therefore moves to the question of whether
the Plaintiff is likely to succeed on the element of
misappropriation.
The VUTSA recognizes misappropriation under
two circumstances: (1) improper acquisition of a trade secret or
(2) disclosure or use of a trade secret.
336.
See Va. Code § 59.1–
As is pertinent to this case, misappropriation of trade
secrets consists of the disclosure or use of the trade secret of
another by a person who, at the time of disclosure or use, “knew
or had reason to know that his knowledge of the trade secret was
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. . . [a]cquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use.”
Colello v. Geographic
Servs., Inc., 283 Va. 56, 70-71 (2012) (quoting Va. Code Ann. §
59.1–336).
Plaintiff will likely be able to show that Defendant
improperly used AVG’s trade secret information, despite being
under a duty to maintain its secrecy.
Under the Confidentiality
Agreement, Green had a duty to hold AVG’s confidential
information in confidence and not use such information other
than for purposes of business with AVG.
Confidentiality Agreement ¶ 2.)
(Johnson Decl. ¶ 17;
Nevertheless, AVG alleges that
Green has used AVG’s trade secret information in attempting to
obtain “at least one of the customers with in-process quotes.”
(Johnson Decl. ¶ 34.)
d. Conversion
Count VI of the Complaint alleges conversion.
“In
Virginia, a party bringing claims for conversion must allege
facts that show any wrongful exercise or assumption of authority
over another’s goods, depriving him of their possession as well
as any act of dominion wrongfully exerted over property in
denial of the owner’s rights.”
Global Bankcard Servs. Inc. v.
Global Merchant Servs., Inc., No. 1:11-cv-00110, 2011 WL
2268057, at *5 (E.D. Va. June 7, 2011) (citations omitted).
the basis of its conversion claim and the terms of the
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On
Confidentiality Agreement, Plaintiff seeks a TRO directing Green
to immediately return to AVG all confidential and proprietary
information belonging to AVG.
(Proposed TRO at 2.)
The
Confidentiality Agreement provides that “[u]pon request of
Owner, Recipient shall return all Confidential Information
received in written or tangible form, including copies, or
reproductions or other media containing such Confidential
Information, within ten (10) days of such request.”
(Confidentiality Agreement ¶ 2.B.)
The likelihood of success on the merits required for
mandatory injunctive relief has been described as requiring a
showing “clear and convincing on the part of the plaintiff.”
Tiffany, 1999 WL 67358, at *8 (quoting Mycalex Corp. of Am. v.
Pemco Corp., 159 F.2d 907, 912 (4th Cir. 1947)).
Thus, “if
there is doubt as to the probability of plaintiff’s ultimate
success, a request for preliminary mandatory relief must be
denied.”
Cornwell, 99 F. Supp. 2d at 704 (internal quotation
marks omitted).
Based upon the evidence before the Court,
including Johnson’s declaration, AVG has made a clear and
convincing showing that it is likely to succeed on the merits.
AVG has put forth evidence showing that Green is wrongfully
exercising dominion over the 23 in-process project files.
evidence stands unrebutted.
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This
2. Irreparable Harm
The plaintiff must “make a clear showing that it is
likely to be irreparably harmed absent preliminary relief.”
Real Truth About Obama, 575 F.3d at 347 (emphasis added).
“[G]enerally irreparable injury is suffered when monetary
damages are difficult to ascertain or are inadequate.”
Multi-
Channel TV Cable Co. v. Charlottesville Quality Cable Operating
Co., 22 F.3d 546, 551 (4th Cir. 1994) (quoting Danielson v.
Local 275, 479 F.2d 1033, 1037 (2d Cir. 1973)).
“When the
failure to grant preliminary relief creates the possibility of
permanent loss of customers to a competitor or the loss of
goodwill, the irreparable injury prong is satisfied.”
552.
Id. at
Irreparable harm must be “neither remote nor speculative,
but actual and imminent.”
Direx Israel, Ltd. v. Breakthrough
Med. Corp., 952 F.2d 802, 812 (4th Cir. 1991) (quotation and
citation omitted).
In the instant action, AVG contends that it will
suffer irreparable harm because Green possesses confidential
information relating to in-process projects.
(Pl.’s Mem. at 8.)
Johnson states that Green remains in possession of approximately
23 folders relating to “existing or potential customers of AVG.”
(Johnson Decl. ¶ 33.)
Additionally, “upon information and
belief, Green has contacted at least one of the customers with
in-process quotes” after he was terminated from AVG.
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(Johnson
Decl. ¶ 34.)
Based upon Green’s alleged history of competing
with AVG during his employment and Johnson’s statement that
Green has contracted at least one customer with an in-process
quote, it is probable that AVG stands to lose customers to
Green.
Green’s actions stand to irreparably harm AVG not
because Green is competing with AVG, but because he seeks to use
information generated by AVG to obtain AVG’s existing or
potential customers.
See Wachovia Servs., Inc. v. Hinds, Civil
No. WDQ-07-2114, 2007 WL 6624661, at *4 (D. Md. Aug. 30 2007).
Accordingly, Plaintiff is warranted in seeking injunctive relief
with regard to property of AVG still in Green’s possession, and
the use or disclosure of AVG’s confidential and proprietary
information.
3. Balance of Equities / Public Interest
Under the facts alleged the balance of equities tips
heavily in favor of an injunction.
If it is true that Green is
contractually barred from using confidential information that he
learned while in AVG’s employ, then Green loses nothing by an
injunction prohibiting from doing so.
AVG, on the other hand,
argues that if Green uses AVG’s confidential information to
reach out “to those in-process sales leads he was working on
while at AVG with the information generated while he was
employed at AVG, he may very well obtain the business of such
customers.”
(Pl.’s Mem. at 8.)
Moreover, “[p]ublic interest
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favors the protection of confidential business information and
the enforcement of valid contracts.”
ABT, Inc. v. Juszcyk, No.
5:09cv119, 2010 WL 3156542, at *9 (W.D.N.C. Aug. 10, 2010).
Therefore, considering the legitimate interests at stake, the
balance of equities and the public interest both warrant
enjoining Green from using or disclosing confidential
information in a manner that would violate the Confidentiality
Agreement.
However, AVG’s request that the Court prohibit Green
from providing audiovisual services to customers or former
customers of AVG is more relief than it is entitled to.
In
essence, Plaintiff seeks to enforce a non-solicitation agreement
that does not exist.
To the extent that Plaintiff seeks an
injunction preventing Green from soliciting customers or
potential customers of AVG without using confidential
information, Plaintiff’s motion is denied.
Likewise, Plaintiff’s motion for a TRO preventing
Green from using his cellphone in connection with the sale of
audio video services is denied.
Such relief would act to
prevent Green from working in the audio video market, and would
work an unwarranted and significant hardship on Defendant.
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IV.
Conclusion
For these reasons, the Court will grant in part and
deny in part Plaintiff’s Motion for a TRO and will set a date
for a hearing on Plaintiff’s Motion for a preliminary
injunction.
An appropriate Order will issue.
February 26, 2014
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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