United Subcontractors, Inc. v. Simons
1:17-cv-00243
W.D.N.C.Sep 7, 2017Background
- Plaintiff United Subcontractors, Inc. (USI) sought an ex parte temporary restraining order (TRO) against former employee Michael C. Simons for alleged breaches of a restrictive covenant agreement.
- The agreement prohibited disclosure of USI’s confidential information, solicitation of USI customers/employees, and competing during its term.
- USI presented emails and other exhibits alleging Simons intended to use confidential customer information at his new employer and had solicited USI employees.
- USI argued immediate, irreparable harm would result if a competitor obtained its confidential customer information.
- The court found USI made the required prima facie showing on likelihood of success, irreparable harm, balance of hardships, and public interest, and issued an ex parte TRO.
- The TRO (1) barred Simons from using or disclosing confidential information, (2) enjoined solicitation or business dealings with USI customers/prospects/vendors, and (3) prohibited competition for the order’s duration; a preliminary-injunction hearing was set within 14 days and USI posted $5,000 bond.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Simons breached the restrictive covenant | Simons used confidential USI customer information and solicited employees for a competitor | Denies or contests enforcement (not detailed in record), but had taken new employment | Court found record sufficient to support likelihood of breach and success on merits |
| Whether USI would suffer irreparable harm absent relief | Exposure of customer/trade-secret info to competitor gives lasting marketplace advantage | Defendant would suffer loss of employment/income temporarily | Court found irreparable harm likely and agreed USI’s interest favored TRO (agreement conceded irreparable harm) |
| Balance of hardships | Harm to USI (loss of customers, cascading job losses) outweighs brief harm to Simons | Continued employment and income loss for Simons | Court found hardships favor plaintiff and issuance of TRO appropriate |
| Public interest in issuing injunction | Protecting enforceable covenants and confidential business information serves public interest | Public interest in ability to work, but not at expense of misappropriated trade secrets | Court found public interest favors enforcing lawful restrictive covenants and protecting confidential information |
Key Cases Cited
- Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411 (4th Cir. 1999) (standards for preliminary injunction/TRO analyzed)
- League of Women Voters of N. Carolina v. N. Carolina, 769 F.3d 224 (4th Cir. 2014) (articulating preliminary-injunction factors and Winter standard)
- Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008) (establishing standards for preliminary injunctive relief)
- Toro Co. v. Textron, Inc., 703 F. Supp. 417 (W.D.N.C. 1987) (conversion of TRO to preliminary-injunction hearing procedure)