In re Document Technologies Litigation, 275 F. Supp. 3d 454

Background

DTI (Document Technologies/Epiq) provides e-discovery services; it acquired Epiq in Sept. 2016. Several senior salespeople (West, Parker, Kreger, Hosford) had signed Epiq employment agreements with 1‑year noncompete, nonsolicit, nondisclosure, and return-of-materials covenants. All were at‑will employees.
The four Individual Defendants negotiated to join competitor LDiscovery; LDiscovery offered large signing bonuses to be paid during a one‑year "Sabbatical" before they would begin work in Jan. 2018 and agreed to indemnify them against legal claims related to the transition (subject to exceptions).
DTI sued the Individual Defendants and LDiscovery seeking a preliminary injunction, alleging tortious interference, trade‑secret misappropriation, and breaches of the restrictive covenants. The court consolidated related actions and held a three‑day evidentiary hearing.
Key contested factual points: (a) thumb drives and laptop backups retained or returned by defendants; (b) an invoice spreadsheet DTI voluntarily sent to Kreger after his resignation and which he forwarded to the others; (c) a rudimentary client spreadsheet circulated among the defendants but never completed or used.
Forensic evidence and witness testimony persuaded the court that retained materials were the product of inadvertence or explanation (e.g., backup drive provided by employer, lost phone), that DTI itself had provided certain documents, and that defendants did not disclose or use trade secrets or solicit customers during the restricted period.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether LDiscovery tortiously induced breaches / misappropriated trade secrets by indemnifying and paying bonuses	LDiscovery induced breaches by promising indemnity and large payments to induce wrongful conduct	Indemnity is conditional (excluded if court finds misconduct); payments are ordinary compensation for lost income and not an inducement to wrongdoing	Denied — no likelihood of success; indemnity conditioned on wrongdoing and payments lawful recruitment practice
Whether Individual Defendants misappropriated trade secrets / improperly retained confidential info	Defs retained and copied proprietary files (thumb drives, invoices, CRM access) to use at new employer	Retention was inadvertent or consensual (DTI gave invoice list; backups provided by DTI; lost devices); no evidence of access/use or disclosure to LDiscovery	Denied — no likelihood of success; forensic evidence and testimony showed no improper use or disclosure
Whether Individual Defendants breached non‑competition covenants by preparing to work for LDiscovery	DTI: executing agreements and preparing client lists/strategy shows breach and impending competition	Defs: preparation to compete is permissible; preparatory acts alone don’t injure employer absent solicitation or use of employer resources/secrets	Denied — New York law permits preparatory acts; no evidence of detrimental impact or use of trade secrets
Whether employee and client nonsolicitation clauses are enforceable and breached	DTI: coordinated job search increased risk of mass poaching; defendants solicited employees/clients	Defs: nonsolicit clause overbroad and unenforceable as to at‑will employees; communications innocuous or involved employees already leaving; no solicitations of clients for business	Denied — nonsolicit covenant unreasonable and unenforceable as written; no showing of irreparable harm or actual solicitation

Key Cases Cited

JBR, Inc. v. Keurig Green Mountain, Inc., [citation="618 F. App'x 31"] (2d Cir. 2015) (standard for preliminary injunction and extraordinary nature of relief)
Sussman v. Crawford, 488 F.3d 136 (2d Cir. 2007) (preliminary injunction burden described)
Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010) (preliminary injunction factors)
N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38 (2d Cir. 1999) (elements of trade‑secret misappropriation under New York law)
BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (limits on legitimate employer interests justifying restrictive covenants)
Reed, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303 (N.Y. 1976) (protections for confidential customer lists and narrow scope of enforceable restraints)
Walter Karl, Inc. v. Wood, 137 A.D.2d 22 (N.Y. App. Div.) (preparatory acts for later competition permitted)
Duane Jones Co. v. Burke, 306 N.Y. 172 (N.Y. 1954) (when coordinated mass resignations and solicitations may constitute actionable breach)
Town & Country House & Home Serv., Inc. v. Newbery, 3 N.Y.2d 554 (N.Y. 1957) (limitations on claims based on coordinated departures)