Digital Generation, Inc. v. Boring
869 F. Supp. 2d 761
N.D. Tex.2012Background
- DG filed suit Jan 31, 2012 seeking injunctive relief and initiated related arbitration against former DG employee Boring; arbitration and this action arise from alleged breaches of a post-employment restrictive covenants agreement.
- DG seeks to prevent solicitation of customers, disclosure of confidential information, and recruitment of DG employees for 12–13 months post-employment.
- Boring resigned Dec 19, 2011 for Extreme Reach and began new employment Jan 3, 2012; DG alleges he solicited DG clients, disclosed confidential information, and recruited DG staff.
- Arbitration clause permits court injunctive relief to prevent continuation of violations, and arbitrator may also grant injunctive relief; DG sought ex parte TRO and preliminary injunction.
- Court denied Boring’s motion to dismiss for lack of personal jurisdiction, found implied consent to jurisdiction by agreeing to arbitrate in Dallas, Texas, and proceeded to resolve the injunction request.
- Court concluded DG failed to show likelihood of success or irreparable harm, dismissed action with prejudice to permit arbitration under the agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has authority to grant injunctive relief during arbitration | DG argues arbitration does not bar court relief; arbitration clause permits court injunctive relief to prevent continuation of violations. | Boring argues injunctive relief should await arbitration merits; court should not intervene mid-arbitration. | Court concludes injunctive relief may be considered but finds lack of likelihood of success. |
| Whether the nonsolicitation covenant is enforceable as ancillary to an otherwise enforceable agreement | DG contends new consideration made covenant enforceable; DG provided confidential information post-signing. | Boring contends no new consideration, covenant not to compete unenforceable. | Nonsolicitation covenant unenforceable; DG failed to prove ancillary enforceability. |
| Whether DG is entitled to preliminary injunction for alleged solicitation of customers | Boring violated paragraph 4 by soliciting DG customers; DG seeks injunctive relief pre-arbitration. | Record lacks proof that alleged solicitations targeted DG customers within two years prior to departure. | DG not entitled to preliminary injunction for solicitation. |
| Whether DG is entitled to preliminary injunction for alleged disclosure of confidential information | Boring disclosed DG confidential information; threatened irreparable harm. | DG failed to show substantial likelihood of success and irreparable harm; evidence weak. | DG not entitled to preliminary injunction for disclosure. |
| Whether DG is entitled to preliminary injunction for alleged recruitment of DG employees | Boring recruited DG employee; threatens irreparable harm. | DG failed to prove irreparable harm and likelihood of success; injunction denied. |
Key Cases Cited
- PaineWebber Inc. v. The Chase Manhattan Private Bank (Switzerland), 260 F.3d 453 (5th Cir. 2001) (implied consent to arbitration; enforceability of arbitration agreements with injunctive relief)
- RGI, Inc. v. Tucker & Associates, Incorporated, 858 F.2d 227 (5th Cir. 1988) (status quo during arbitration; injunctive relief considerations under FAA)
- Lawrence v. Comprehensive Bus. Servs. Co., 833 F.2d 1159 (5th Cir. 1987) (arbitration-related injunctive relief doctrine)
- Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1987) (minimum contacts and fair play as due process factors)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (minimum contacts and reasonableness)
- World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) (purposeful availment and foreseeability in jurisdiction)
- Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291 (5th Cir. 1999) (distinguishing specific vs. general jurisdiction)
- Tex. Bus. & Com. Code Ann. § 15.50 et seq., Texas Covenant Not to Compete Act () (statutory standards for validity/enforceability of noncompete agreements)