Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc.
6 Cal. App. 5th 1178
| Cal. Ct. App. | 2016Background
- VitaVet (NuVet Labs) hired IDS to develop a new customer/employee software system under a consulting agreement and a statement of work; IDS agreed work would be "work made for hire" and VitaVet would own the outputs, and IDS agreed to deliver source code and technical design documents on request.
- Payment was staged; VitaVet paid initial installments but withheld the final $80,000 after IDS missed deadlines and delivered an allegedly incomplete product; VitaVet never accepted the final deliverable because IDS refused to turn over source code or a final Technical Design Document.
- IDS sued VitaVet for breach and related claims; VitaVet filed counterclaims including breach and sought a permanent injunction compelling delivery of the current source code and technical documents and return of confidential materials.
- The trial court granted a preliminary injunction ordering IDS to deliver the most current application, database, migration scripts, source code, and Technical Design Document and to refrain from disclosing VitaVet confidential information, conditioned on VitaVet posting a bond for the contract balance.
- IDS appealed, arguing (1) lack of substantial evidence to support the injunction and (2) the injunction unlawfully altered the status quo and effectively adjudicated the merits.
Issues
| Issue | Plaintiff's Argument (VitaVet) | Defendant's Argument (IDS) | Held |
|---|---|---|---|
| Whether VitaVet likely to prevail on breach-of-contract claim | Contract assigned IDS work product to VitaVet and allowed VitaVet to obtain copies; IDS breached by withholding source code | VitaVet failed to perform (didn't pay final installment), so cannot prevail | Court: VitaVet likely to prevail; payment was conditioned on "acceptance," which never occurred because software was unusable without source code |
| Whether balance of interim harms favors injunction | Denial would leave VitaVet unable to use new system, causing business losses; IDS would suffer little because software custom and unusable to IDS; bond protects monetary harm | Injunction harms IDS by altering status quo and harming negotiating leverage | Court: Balance favors VitaVet; any bargaining-position loss not legally cognizable; bond mitigates monetary risk |
| Whether preliminary injunction altering the status quo is permissible | Needed to prevent irreparable operational harm and to effect contract rights | Such an injunction is effectively a de facto permanent injunction and deprives IDS of trial rights | Court: Such mandatory injunctions are allowed only in "extreme cases" but this is one; trial rights preserved because merits still to be adjudicated |
| Whether record/evidence supported injunction (verification/affidavits) | VitaVet offered a sworn affidavit from its COO with specifics of harm | Cross-complaint unverified; affidavit allegedly conclusory | Court: Evidence sufficient; injunction based on verified affidavit and substantial evidence |
Key Cases Cited
- City of Corona v. AMG Outdoor Advertising, Inc., 244 Cal.App.4th 291 (Cal. Ct. App.) (mandatory injunctions that change the status quo are reserved for "extreme cases")
- Oiye v. Fox, 211 Cal.App.4th 1036 (Cal. Ct. App.) (court may issue a preliminary injunction that mandates affirmative acts changing the status quo)
- SB Liberty, LLC v. Isla Verde Assn., Inc., 217 Cal.App.4th 272 (Cal. Ct. App.) (standard of review for preliminary injunctions)
- King v. Meese, 43 Cal.3d 1217 (Cal. 1987) (sliding-scale approach to likelihood of success vs. interim harm)
- Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (Cal. 2011) (elements for breach of contract claim)
- Continental Baking Co. v. Katz, 68 Cal.2d 512 (Cal. 1968) (granting or denying a preliminary injunction is not a final adjudication of ultimate rights)
- IT Corp. v. County of Imperial, 35 Cal.3d 63 (Cal. 1983) (preliminary injunction does not eliminate full trial on merits)