Genesis 1 Oil Services LLC v. Wismann Group, LLC
8:20-cv-02114
| C.D. Cal. | Mar 23, 2021Background
- Genesis 1 Oil Services LLC was formed in Sept. 2019 by Tivoli (15%), Slingshot (42.5%), and Wismann Group/Wismann (42.5%) to commercialize an Oil Separation Technology (OST/CP3); Tivoli agreed to fund $500,000.
- The Oil Services Contract contemplated that the SPV (Genesis) "would enter into an exclusive ... license" for the OST; managers were Smith, Adelman, and Wismann.
- Genesis paid WG $322,000 under an Open Invoice Agreement for a prototype and a trade-secret report, but WG/ Wismann allegedly failed to deliver and later marketed the OST as their own (CP3).
- Genesis conducted confidential demonstrations to potential customers (including Belize clients) under NDAs and developed a client pipeline (claimed to be worth tens of millions).
- Plaintiffs sued asserting DTSA trade-secret misappropriation, breach of contract, breach of fiduciary duty, and related claims; Plaintiffs sought a preliminary injunction.
- The court found Plaintiffs likely to succeed on their DTSA claim (OST and client information), determined irreparable harm, balanced equities and public interest in Plaintiffs’ favor, set bond at $200,000, and entered a broad preliminary injunction restraining WG/Wismann from using, marketing, transferring, soliciting with, or disclosing OST/Genesis client information.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ownership of trade secrets (OST and client list) | Genesis holds protectable trade secrets: OST as exclusive-licensee under the Oil Services Contract; client information developed at cost and kept confidential. | Contract was an unenforceable "agreement to agree"; no written exclusive license; Genesis is a new SPV with no customer history. | Court: Plaintiffs likely own trade-secret interests in both OST and client information; contract and parties’ post-signing conduct support an exclusive-license interpretation. |
| Misappropriation (acquisition/use by improper means) | Defendants attended confidential demos, solicited Genesis’s Belize contacts, and marketed OST as CP3—constituting improper use and breach of fiduciary duty. | WG denies contacting Genesis clients and contends it holds rights to OST. | Court: Plaintiffs likely can show misappropriation of client information and OST based on circumstantial evidence and fiduciary-duty context. |
| Irreparable harm | Loss of customers, goodwill, and the pending Belize MOU cannot be adequately remedied by damages; threat of OST transfer/sale heightens harm. | Alleged injunction would take Defendants’ property and cause large business losses. | Court: Irreparable harm established; loss of clients and goodwill and threatened disclosure support injunction. |
| Balance of equities & public interest (including bond) | Genesis relied on the contract; harm to Genesis outweighs speculative injury to Defendants; public interest favors protection of trade secrets. | Defendants will suffer huge, unspecified losses if enjoined; request $7.5M bond plus fees. | Court: Equities and public interest favor Plaintiffs; ordered injunction and set bond at $200,000 (rejected Defendants’ $7.5M figure). |
Key Cases Cited
- Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008) (four-factor preliminary-injunction test; movant must show likelihood of success and irreparable harm).
- Univ. of Tex. v. Camenisch, 451 U.S. 390 (1981) (purpose of preliminary injunction is to preserve relative positions pending trial).
- Munaf v. Geren, 553 U.S. 674 (2008) (preliminary injunction is an extraordinary remedy).
- Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) ("serious questions" sliding-scale approach in Ninth Circuit for injunctions).
- MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993) (customer lists can qualify as trade secrets).
- Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) (protection of trade secrets serves public interest).
- Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) (district courts may consider hearsay in preliminary-injunction proceedings).
- Cable & Computer Tech., Inc. v. Lockheed Sanders, Inc., 214 F.3d 1030 (9th Cir. 2000) ("agreement to agree" doctrine under California law).
- Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) (district court must make findings of fact and conclusions of law when granting preliminary relief).
- Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832 (9th Cir. 2001) (threatened loss of prospective customers supports irreparable harm).