OPINION AND ORDER ON PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION
APAC Teleservices, Inc. (APAC) and Access Direct Telemarketing, Inc. (Access Direct) are competitors in the outsource telemarketing industry. In addition to outsource telemarketing, APAC also provides inbound telemarketing services. Access Direct does not currently have an inbound telemarketing operation, but it plans to have one soon. According to Access Direct’s Chief Executive Officer, Thomas Cardella, Access Direct had been searching for someone to head up its Inbound department for some time before it hired Shawn McRae as Vice-President in charge of Inbound Telemarketing operations. McRae was working for APAC before he left to take this position with Access Direct.
A simple way of explaining “outsource telemarketing” is that it means that one company makes telephone calls on behalf of another company to generate business. For instance, handling telesales for certain long-distance providers is an example of outsource telemarketing. On the flip side, “inbound telemarketing” means that a company receives incoming calls from customers on behalf of another company.' An example of inbound telemarketing is receiving and handling customer services inquiries for another company.
Shawn McRae began working as a technology consultant for APAC in late August or September of 1996. By October, he had moved to APAC’s office in Cedar Rapids, Iowa, where he worked in the Information Technology (IT) department as a consultant for a specific project called the “G-Prime Advanced Technology Platform Project for AT & T.” In January of 1997 he began working as a full-time APAC employee, continuing his work in the IT department as one of the head “architects” for the ATP Project for AT & T, and on another project using Computer Telephony Integration (CTI). When he became a full-time employee he signed a nondisclosure agreement,
1
and four
Both McRae and Access Direct assert that McRae was hired into an operations position at Access Direct, where he will be Vice-President of Inbound Telemarketing. In contrast, APAC claims that McRae’s title as Vice-President of Inbound Telemarketing is a cover-up to hide the fact that his job at Access Direct is similar to what he did at APAC, and that Access Direct really hired McRae into a technological position as Chief Information Officer. Because APAC believes that neither McRae nor Access Direct are being forthright about the extent to which McRae’s new job is similar to his old job, and because APAC asserts that McRae was privy to APAC trade secrets that would be beneficial to Access Direct, APAC believes it inevitable that McRae will disclose APAC’s trade secrets to Access Direct.
APAC therefore alleges various breach of contract claims, including breach of a non-competition agreement and breach of á nondisclosure agreement, as well as violations of the Iowa Trade Secrets Act and tortious interference. APAC seeks a preliminary injunction to bar McRae from employment with Access Direct and to enforce the nondisclosure agreement.
At this stage, the sole issue before the Court is whether to grant the preliminary injunction.
Background
Companies like APAC, whose livelihood depends on their ability to link their technology with their clients’ technology (i.e., APAC’s ability to have its computers “talk to” its clients’ computers), must work to integrate their existing technology with their clients’ technology. One way to achieve this integration is to buy off-the-shelf products which will automatically allow the two systems to talk to each other. Another way is to customize the off-the-shelf products in order to tailor those products to more efficiently serve both companies’ needs.
When McRae worked at APAC, he was primarily responsible for two projects involving such integration. His main project was the Advanced Technology Platform (ATP) Project for AT & T. ATP is a personal-computer-based, windows-driven product that allows a telemarketer to broaden the scope of services that it can offer to its customers. What this basically means is that ATP uses an off-the-shelf, windows-driven product to help APAC’s technology work with, or talk to, AT & T’s technology. In order to do this, the off-the-shelf product must be modified so that it can do the best possible job getting the two systems to work together. McRae was an integral part of the ATP team. He was one of the lead architects in charge of designing necessary modifications to tailor the off-the-shelf products so that they could best serve AT & T’s needs. The ATP Project that McRae helped to develop for AT & T was for outbound telemarketing services.
McRae’s other project at APAC used Computer Telephony Integration (CTI), which is basically an interface that allows phone systems to talk with computer systems. For example, using the telephone to check the balance of a bank account is one kind of CTI: the customer places a telephone call, and that telephone call connects with a computer where bank account information is located. CTI allows computer systems to launch, transfer, route, or receive telephone calls. It also allows computer applications to receive and use data from telephone systems, such as caller-ID or punched-in numbers. CTI is capable of capturing and reporting the number, type, and results of calls received or launched. When McRae worked at APAC, he spent five or six weeks evaluating vendors, testing different off-the-shelf products, and participating in the selection of vendors for APAC’s CTI. This work was primarily geared toward inbound services.
As Vice-President of Inbound at Access Direct, McRae asserts that his job is radically different than what he was doing at APAC. At APAC he worked in the information technology department and was primarily focused on outbound telemarketing; at Access Direct, he works in an operations capacity focused exclusively on inbound telemarketing. At APAC he helped to select and adapt off-the-shelf products to meet the joint needs of APAC and APAC’s clients; at Access Direct he works with clients to decide what kinds of information the clients need to know and how Access Direct can best forecast their clients’ needs and provide information back to them. Instead of testing off-the-shelf products and tailoring those products to meet specific client’s needs, now all McRae has to do is to tell the IT department what the Inbound department needs to be able to do, and the IT department has sole responsibility to design the solution. 2 In addition, in his new job McRae will determine demographic locations, attendance policies, scheduling, financial budgets, and profit margins. He will also work with other departments, such as IT and human resources, to decide how the Inbound department is going to train its staff, and he will hire and fire employees.
At the hearing on this motion, McRae testified that none of his responsibilities at Access Direct are similar to what he did at APAC, but APAC adamantly disagrees.
Discussion
A. Choice of Law
This Court has diversity jurisdiction over this ease pursuant to 28 U.S.C. § 1332, so Iowa’s choice-of-law rules govern.
See Baxter Int’l, Inc. v. Morris,
First, the Court turns to Iowa’s choice-of-law rules to decide whether Illinois or Iowa law should be applied to the breach of contract, noncompetition issue. Under Iowa law, if the parties to a contract have selected the law that will apply to their contract, the court follows a three-step process to determine whether to honor that selection of law.
Curtis 1000, Inc. v. Youngblade,
APAC contends, and the defendants have not argued otherwise, that the parties’ choice of law, Illinois law, satisfies these requirements. Although Iowa law would apply in default under the most significant relationships analysis, Iowa does not necessarily have a materially greater interest in the outcome than does Illinois, and applying Illinois law would not be contrary to a fundamental policy of Iowa. Taking these factors into consideration, in addition to the fact that the defendants have not challenged APAC’s assertion that Illinois law should govern, the Court agrees that Illinois law governs the
Second, the Court examines Iowa’s choice-of-law rules to determine what law applies to the tort of misappropriation of trade secrets (i.e., violating the nondisclosure clause through inevitable disclosure of trade secrets). In a torts ease, Iowa courts apply the “most significant relationships” test.
Veasley v. CRST Int’l, Inc.,
(a) the place where the injury occurred;
(b) the place where the conduct causing the injury occurred;
(c) the domicile, residence, nationality, place of incorporation, and place of business of the parties; and
(d) the place where the relationship, if any, between the parties is centered.
See Veasley,
Here, the location of McRae’s conduct is primarily Iowa. He has been working in APAC’s Cedar Rapids office since October 1996; in September 1997, he left APAC to work for Access Direct, which is an Iowa corporation. APAC contends, and the defendants have not argued otherwise, that because Iowa has the most significant relationships, the Iowa Trade Secrets Act should apply. Having found that most of the conduct at issue for the trade secret misappropriation claims took place in Iowa and that Iowa meets the “significant relationships” test, this Court finds that the Iowa Trade Secrets Act applies. 3
This Court will thus apply Illinois law to analyze the eovenant-not-to-eompete issue, and it will apply the Iowa Trade Secrets Act to analyze the misappropriation of trade secrets claim.
ll. Preliminary Injunction Standards
To decide whether to grant the motion for a preliminary injunction, the Court must consider: (1) the probability that APAC will succeed on the merits; (2) the threat of irreparable harm to APAC; (3) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; and (4) the public interest.
See Dataphase Sys., Inc. v. C L Sys., Inc.,
The primary function of a preliminary injunction is to preserve the status quo until, upon final hearing, a court may grant full, effective relief, if warranted.
Sanborn Mfg. Co., Inc. v. Campbell HausfeldtScott Fetzer Co.,
C. Analysis of Datapkase Factors
1.Probability that APAC Will Succeed on the Merits
In deciding whether to grant a preliminary injunction, the Court’s initial estimation of the strength of the plaintiffs case plays a role, but it is not determinative. The probability of success does not require that the party seeking relief prove a greater than fifty percent likelihood that it will succeed on the merits.
Datapkase Sys. Inc.,
a. Restrictive Covenant Claim: Breach of Covenant Not to Compete
The noncompetition agreement at issue in this case reads, in pertinent part:
Non-competition: Employee covenants that during his employment and for a period of twenty four (24) months after the termination thereof for any reason whatsoever, Employee shall not, directly or indirectly, in the 48 contiguous states of the United States, on his own account, or as an employee ... engage in, or aid or assist anyone in the conduct of a business competitive with that of Employer in which Employee is in (i) a capacity similar to Employee’s capacity during his employment with Employer or (ii) a capacity in which it is likely that Employee will disclose Employer’s Proprietary Information or Client Information.
Pl.’s Ex. 5, Dep. Ex. 8, ¶ 4.
Under Illinois law, the question of whether a restrictive covenant is enforceable is a question of law.
Lawrence and Allen, Inc. v. Cambridge Human Resource Group, Inc.,
1. ancillary to either a sales agreement or an employment agreement,
2. supported by adequate consideration,
3. reasonable in geographic and temporal scope, and
4. necessary to protect the employer’s legitimate business interest.
See Applied Micro, Inc. v. SJI Fulfillment, Inc.,
Before this Court even begins to analyze these criteria, however, this Court must examine whether APAC has made the necessary showing to prove that McRae’s new position at Access Direct calls his covenant not to compete into question: that is, whether McRae’s new job is similar in capacity to his former job at APAC, or whether he is likely to disclose APAC’s proprietary information or client information to Access Direct. If APAC fails to prove that either of these two situations exist, it is unnecessary for this Court to examine whether APAC has otherwise proven each of the next four criteria.
(i) Whether McRae’s new job at Access Direct is similar to his old job at APAC
At first blush, McRae’s new job does not appear to be similar to his old job: an information technology position where he was primarily responsible for outbound services is different from an operations position where he is exclusively responsible for inbound services. The thrust of APAC’s argument is not that the two jobs are similar, however. APAC basically asserts that it does not matter whether the literal description of the two jobs is similar, because McRae cannot be trusted to do the job that he says he is going to do.
To prove that McRae is untrustworthy, APAC cites several examples of outright lies
In response, Thomas Cardella, who is both Chief Executive Officer of Access Direct and the person who hired McRae, admits that McRae was deceitful during his negotiations with Access Direct. McRae misrepresented his vacation time (and possibly his salary) when negotiating for a job with Access Direct, and McRae originally told Cardella that McRae had not signed a noncompetition agreement at APAC, but Cardella later learned that McRae had signed such a document. Additionally, McRae failed to tell Cardella that three days after McRae had signed his contract with Access Direct, APAC promoted him to Director of Professional Services and Consulting, and that McRae attended a meeting accepting that position, even though he had already signed a contract to leave APAC to work for Access Direct. 4
Besides lying to Cardella, several APAC employees also testified that when McRae left APAC he told them that he was becoming Chief Information Officer of Access Direct. In contrast, both Cardella and McRae testified that McRae had never even been offered that position. Cardella explained that he had agreed to include a provision in McRae’s contract in which he would “career path” McRae into a position as Chief Information Officer, but once Cardella discovered that McRae had signed a covenant not compete when he worked at APAC, Cardella pulled McRae aside and said that he could not “career path” McRae into such a position, so they removed that clause from McRae’s contract.
This Court finds credible the testimony that APAC has presented about McRae’s deceit in his contract negotiations with Access Direct. McRae told several lies and failed to disclose pertinent information when he was negotiating for his new job. This Court also finds it credible that after McRae had accepted a job at Access Direct, McRae told several APAC employees that he was going to become Access Direct’s Chief Information Officer.
Having proven these facts, APAC next argues that these facts show that Access Direct actually hired McRae to work as Chief Information Officer, but later changed his job title to Vice-President of Inbound in order to avoid litigation. As further evidence, APAC argues that it is incredible to believe that Access Direct hired McRae at a salary of $90,000 per year to be Vice-President of Inbound operations, when McRae has very limited experience in operations. APAC thereby asserts that this Court should enjoin McRae from working in any capacity with Access Direct because it is unbelievable that McRae is really doing the job that he says he is doing.
Although APAC has shown that McRae was deceitful during his negotiations with both Access Direct and APAC, APAC has not presented sufficient evidence to prove that Access Direct was in any way eomplicit in that deceit, or that Access Direct actually hired McRae as anything but Vice-President of Inbound. McRae lied to Access Direct almost as much as he lied to APAC, and while it may be true that McRae told APAC colleagues that he was becoming Chief Information Officer at Access Direct, this Court finds that Access Direct neither hired nor intended to hire McRae as its CIO. Whatever McRae said to former colleagues about taking a job as CIO was simply “puffing” to make it seem as if he was getting a better job than he was. Cardella had agreed to “career path” McRae into a position as Chief Information Officer, but Cardella did not hire McRae into such a position. McRae loosely interpreted Cardella’s contractual promise (which was later removed) that he might someday become CIO to say that he was taking a job as CIO, because McRae knew that the CIO title would sound impressive to his former coworkers.
In short, while this Court could use McRae’s untrustworthiness in his negotiations to disbelieve McRae’s testimony that he is not actually going to work as Vice-President of Inbound for Access Direct, this Court declines to do so. 5 McRae lied about his salary and vacation to land a good job with Access Direct, and he wanted to “career path” into a position as Chief Information Officer, but the Court is not convinced that APAC will ultimately succeed in proving that Access Direct hired McRae as anything but Vice-President of Inbound, working in an operations position. Nor is this Court convinced that Access Direct is scheming to employ McRae under a pseudo-job description in order to capitalize on whatever proprietary technological information that McRae may know. APAC is understandably upset with McRae for lying to it and for deserting APAC to work for its competitor, but McRae’s job at Access Direct is in a different capacity than what he was doing at APAC.
(ii) Whether disclosure of trade secrets is likely
Even if McRae’s job at Access Direct is in a different capacity than what he was doing at his former job, APAC could still prove that McRae violated the noncompetition agreement by showing that in his new job, it is likely that he will disclose APAC’s proprietary or client information. See Restrictive Covenant Agreement, Pl.’s Ex. 5, Dep. Ex. 8, ¶ 4 (“Employee covenants that ... [he] shall not ... assist anyone in the conduct of a business competitive with that of Employer in which Employee is in ... a capacity in which it is likely that Employee will disclose Employer’s Proprietary Information or Client Information”). APAC argues that McRae’s job will inevitably lead to such disclosure, 6 while the defendants assert that it will not.
The main case that APAC relies upon to support its position that McRae’s untrustworthiness alone is enough to find that he will inevitably disclose trade secrets is
PepsiCo, Inc. v. Redmond,
In affirming the district court’s decision, the Seventh Circuit noted that Pepsico was likely to prevail on its statutory trade secret misappropriation claim because of the combination of “the demonstrated inevitability that Redmond would rely on ... trade secrets in his new job [and] the district court’s reluctance to believe that Redmond would refrain from disclosing these trade secrets in his new position (or that Quaker would ensure that Redmond did not disclose them).”
Moreover, even though the PepsiCo district court felt that Redmond might inevitably disclose information, it did not enjoin Redmond from working in any capacity whatsoever with Quaker. Instead, the court enjoined Redmond from assuming any duties related to beverage pricing, marketing, and distribution—the areas with which Redmond had been most intimately involved when he worked at Pepsico. Here, APAC asks this Court to enjoin McRae from working in any capacity at all for Access Direct, even though all of McRae’s work at APAC was in information technology, and even though McRae was primarily focused on APAC’s outbound department and had minimal exposure to APAC’s inbound department.
Another important difference between
PepsiCo
and this case is that Redmond conceded that his new position at Quaker might present him with a decision that could be influenced by certain confidential information that he obtained while working for Pepsico.
And last, it is noteworthy that the Seventh Circuit Court of Appeals refused to consider Pepsico’s argument that Quaker “may well
In addition to
PepsiCo,
APAC cites three Iowa cases to support its position:
Diversified Fastening Systems, Inc. v. Rogge,
In
Norand,
the district court found inevitable disclosure after the defendant “announced his intention to resign his position ... with plaintiff and to take a similar position with [a competitor company].”
And last, in
Uncle B’s Bakery,
the court found disclosure inevitable after noting that “the secret or confidential information from Uncle B’s Bakery known to [the former employee] covers every aspect of Uncle B’s Bakery operations, and is far more extensive than the body of ‘secret’ information known to the defendant employees enjoined from employment with competitors in any decision of the Iowa Supreme Court of which this court is aware.”
What appears most useful about McRae’s experience with CTI on the inbound side is that he became familiar -with various off-the-shelf products that are currently available on the market. As will be discussed infra, McRae would violate both the noncompetition covenant and the nondisclosure agreement if he used his technological knowledge to modify these off-the-shelf products to meet the needs of Access Direct’s Inbound operation, but that is not what his job at Access Direct entails. In McRae’s new job, he will simply tell the IT department at Access Direct what his department needs, and the IT department will have total responsibility to design the solution. While his knowledge of available off-the-shelf products may make him more articulate in expressing his needs to the IT department, ultimately
Having found that APAC has not proven that a threat of inevitable disclosure exists or that McRae’s job responsibilities at Access Direct are in a similar capacity to his former job, APAC is not likely to succeed in proving that the covenant not to compete should be enforced. This Court therefore declines to examine the four criteria relevant to the enforceability of the covenant not to compete, because McRae’s position at Access Direct does not violate either the “similar capacity” or “likely to disclose” subsections which are necessary to trigger such an analysis. 9
b. Nondisclosure Claim: Trade Secrets and the Nondisclosure Agreement
At the hearing on this motion for preliminary injunction, McRae stated that to the extent that he has knowledge of information that would be subject to the nondisclosure agreement, he has honored and will continue to honor the nondisclosure agreement. McRae also agreed that the design of the ATP G-Prime Project is proprietary to APAC. The issue this Court must therefore resolve is whether APAC is likely to prove that the nondisclosure agreement covers any information besides the design of the ATP G-Prime Project.
The nondisclosure agreement at issue in this case reads, in pertinent part:
CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that the information, including, but not limited to trade secrets, technical data, marketing techniques, human resources and training materials ... and methods of doing business ... are valuable and unique assets. Employee will not (except as required in the course of employment), during the term of this Agreement or anytime thereafter, for any reason, use or disclose to any person, firm, corporation, association, or any other entity any such information, including but not limited to trade secrets [etc.], for any reason or purpose whatsoever____
CUSTOMERS. During the term of this Agreement ... and for a period of eighteen (18) months thereafter, Employee will not, directly or indirectly ... offer or provide to any person, firm, corporation, association or any other entity, which is or had been a customer of APAC Teleservices, any products or services which are or had been provided by APAC Teleservices orwhich are similar to or competitive with such products or services----
Pl.’s Ex. 2, Dep. Ex. 5, at 1.
Whether or not any information that McRae knew constitutes a trade secret is a mixed question of law and fact.
Economy Roofing & Insulating v. Zumaris,
Under the plain language of [Iowa Code section 550.2(4)], “trade secret” is defined as “information” and eight examples of this term are provided. Although these examples cover items normally associated with the production of goods, “trade secrets” are not limited to the listed examples----One commentator explains:
Trade secrets can range from customer information to financial information, to information about manufacturing processes to the composition of products. There is virtually no category of information that cannot, as long as the information is protected from disclosure to the public, constitute a trade secret.
We believe that a broad range of business data and facts which, if kept secret, provide the holder with an economic advantage over competitors or others, qualify as trade secrets. US West Communications, Inc. v. Office of Consumer Advocate,498 N.W.2d 711 , 714 (Iowa 1993) (citations omitted).
Economy Roofing,
After determining the legal aspect of this mixed-fact-and-law question by deciding whether the information fits the definition provided in § 550.2(4), the factual aspect of the question arises from the remaining part of the definition of trade secret found in subsections (a) and (b) of § 550.2(4). Id. at 648-49. The Court must decide whether the information is both of the following:
a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use.
b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
See Economy Roofing,
With these legal and factual standards in mind, the Court has examined each of the plaintiffs purported trade secrets. (See Pl.’s Post-Hearing Brief, Doc. #25.) The following list contains the purported trade secrets that APAC is most likely to prove constitute protected trade secrets because they pass both the legal and factual inquiries:
(1) Design and other proprietary information about the ATP G-Prime Project for AT&T;
(2) APAC’s future business direction—e.g., the development and introduction of the Consulting and Professional Services division that McRae developed and that McRae was going to direct;
(3) All proprietary programming and configuration of off-the-shelf products that McRae programmed or configured, or assisted in programming or configuring, or otherwise supervised or participated (in any capacity) while working for APAC as either a consultant or full-time employee;
(4) Knowledge of the architecture for and portfolio of hardware, network, applications, and development that APAC has used, is currently using, or has recently acquired, and what kind of architecture forand portfolio of hardware, network, applications, and development that APAC intends to use in the future to remain competitive; and
(5) Any specific programming, design, or other proprietary work McRae did to tailor CTI to the specific needs of clients (e.g., Comp-U-Serve) when he worked on inbound or outbound projects for APAC.
Legally, APAC is most likely to prove that the above-listed items are trade secrets because these items fit the statutory list of trade secrets as defined in Iowa Code § 550.2(4). Factually, APAC is likely to be able to show that it derives independent economic value from these secrets because the confidential programming codes, designs, and future business direction are unknown to, and not readily ascertainable by, Access Direct.
See 205 Corp.,
The purported trade secrets which APAC is unlikely to prevail on the merits of proving to be protected trade secrets, and which this Court does not recognize as protected trade secrets for purposes of this preliminary injunction, 11 are the following:
(1) McRae’s professional knowledge of how to adapt off-the-shelf products to meet specific needs, insofar as that skill might be applicable to his position in Operations;
(2) McRae’s general knowledge and skill of how to overcome obstacles and “engineer blind alleys”, insofar as that skill might be applicable to his position in Operations;
(S) The general knowledge base that McRae has acquired of different products that are currently available on the market;
(4) General knowledge of APAC’s strategy for bringing new products to market; and
(5) General knowledge of how APAC proposes to clients.
Even if this list passed the legal analysis by fitting the statutory definition of trade secrets under Iowa Code § 550.2(4), it would not pass the factual analysis. Most importantly, APAC has failed to show that it derived economic value because these items were unknown to, and not readily ascertainable by, another corporation who would profit from their disclosure and use.
See 205 Corp.,
c. Summary
The bottom line is that McRae left a technical position in information technology at APAC to assume an operations position for a competitor company. Although McRae lied to both APAC and Access Direct in order to negotiate a good job at Access Direct, APAC has not demonstrated a probability of success on the merits that either (1) McRae or Access Direct is lying about the job responsibilities that McRae’s new position at Access Direct entails, or that (2) McRae’s new posi
In contrast, APAC has demonstrated a probability of success on the merits that McRae has knowledge of some APAC trade secrets and that those secrets are protected by the nondisclosure agreement. This Court believes that enforcement of the nondisclosure agreement is sufficient to protect APAC’s trade secrets, and that McRae’s knowledge of APAC trade secrets does not provide a sufficient basis for enjoining him from working for Access Direct.
2. Irreparable Harm to APAC
The Court next analyzes the degree of harm, if any, that APAC would suffer if not granted a preliminary injunction. In the Eighth Circuit, the party moving for a preliminary injunction can show irreparable harm by showing that the movant has no adequate remedy at law.
Baker Elec. Coop.,
Here, the restrictive covenant agreement which contains the noncompetition clause specifies that a “breach of these restrictions will irreparably and continually damage Employer for which money damages may not be adequate.” Pl.’s Ex. 5, Dep. Ex. 8, t8(b). Although a violation of the restrictive covenant could thus constitute irreparable harm,
see, e.g., Curtis 1000,
Next, the remedies specified in the nondisclosure agreement are as follows:
REMEDIES. If Employee shall breach or fail to perform any term, condition or duty in this Agreement required to be observed or performed by Employee, then in such event, APAC Teleservices shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any breach of this Agreement, or to enforce the specific performance thereof by Employee, or to enjoin Employee from committing any breach of this Agreement, but nothing herein contained shall be construed to prevent APAC Teleservices from seeking such other remedy, in the courts, in case of any breach of this Agreement by Employee, as APAC Teleservices may elect and invoke.
Pl.’s Ex. 2, Dep. Ex. 5, at 2. Although the language in this remedies clause does not specifically state that breach of the nondisclosure clause will cause irreparable harm to APAC, the defendants have not argued that a valid breach of the nondisclosure agreement would not irreparably harm APAC. Instead, the defendants assert that because McRae will guard the few trade secrets that he knows by adhering to the nondisclosure clause, APAC will not be irreparably harmed.
Having already found a substantial likelihood that APAC will prevail in showing that McRae does have knowledge of some APAC trade secrets, this Court is cognizant of the fact that the disclosure of even a single trade secret could be enough to cause APAC irreparable harm.
See Union Carbide Corp. v. UGI Corp.,
Because McRae does know some APAC trade secrets, a preliminary injunction enforcing the nondisclosure agreement with respect to those secrets is necessary to protect APAC from the irreparable harm that would occur if McRae disclosed those secrets to Access Direct. Provided that McRae complies with the nondisclosure agreement, which this Court believes he will, allowing McRae to work for Access Direct as Vice-President of Inbound during the pendency of this litigation would not irreparably harm APAC. 12
3. Balance of Harms
a. Nondisclosure Agreement
To the extent that this Court has found that APAC is likely to prevail in showing that McRae does have knowledge of some trade secrets and that those trade secrets must be protected by the nondisclosure agreement, this Court has found that APAC would likely suffer irreparable harm if those trade secrets were disclosed.
Because McRae willingly “reaffirmed” the nondisclosure agreement when he testified at the hearing on this motion (see Post-Hearing Brf. of Defs., at 5-6), this Court finds that McRae would not be severely harmed—if harmed at all—by enforcement of the nondisclosure agreement.
b. Restrictive Covenant Not to Compete
This Court has found that APAC will not suffer irreparable harm by McRae’s working as Vice-President of Inbound for APAC (as explained above). In contrast, if APAC’s motion to enforce the noncompete agreement were granted, the Court would enjoin McRae from working in any capacity at all at Access Direct during the pendency of this litigation. At the least, an employee forced to undertake another job search must experience the trials and tribulations that such a search entails, even if the search is ultimately brief.
This Court has no reason to question whether McRae is readily employable, and in the unlikely event that a trial on the merits results in enforcement of the noncompete agreement, he may eventually have to use his employability to find another job. For the pendency of this litigation, however, this Court is not persuaded that the balance of harms tips in APAC’s favor, especially because McRae is working in a different capacity than he did at APAC, and because enforcement of the nondisclosure agreement adequately safeguards APAC’s interests.
4. Public Interest
When determining whether public interest prevents enforcement of a restrictive covenant not to compete, Illinois courts seek to ensure that the former employee’s products or services will continue to be available to the public.
Gillespie v. Carbondale and Manon Eye Centers, Ltd.,
When determining the public’s interest in enforcing a nondisclosure agreement, Iowa courts have recognized that the public interest is served by preventing the unauthorized disclosure of trade secrets.
Diversified Fastening,
Accordingly, the public interest is best served by allowing McRae to work as Vice-President of Inbound for Access Direct dining the pendency of this litigation, provided that he agrees to abide by the nondisclosure agreement to protect the specific trade secrets this Court has listed supra.
D. Conclusions
Based on all of the evidence before it, this Court concludes that McRae has not disclosed or misrepresented any trade secrets or proprietary information at this point in time. This Court also finds that McRae can fulfill his employment obligations at Access Direct as Vice-President of Inbound while also abiding by the nondisclosure agreement, that Access Direct does not intend to elicit secret information from McRae, and that any trade secrets that McRae knows may not even be useful to Access Direct.
See Baxter Int’l,
This Court also finds that McRae’s position as Vice-President of Inbound Telemarketing operations at Access Direct is in a different capacity than was his former job with APAC, and that his new job is not in a capacity in which it is likely that McRae will disclose APAC’s proprietary information or client information. To the extent that McRae has knowledge of APAC trade secrets, those secrets are adequately safeguarded by enforcement of the nondisclosure agreement.
Accordingly, it is ORDERED:
APAC’s motion for a preliminary injunction shall be denied in part and granted in part.
(1) It shall be DENIED insofar as this Court declines to enjoin McRae from working in any capacity for Access Direct during the pendency of this litigation. McRae can continue to work as Vice-President of Inbound Telemarketing, in the operations division of Access Direct.
(2) It shaH be GRANTED as follows. During the pendency of litigation, McRae shall honor the nondisclosure agreement that he signed with APAC Teleservices, Inc., by not disclosing the following information:
(a) Design and other proprietary information about the ATP G-Prime Project for AT&T;
(b) APAC’s future business direction— e.g., the development and introduction of the Consulting and Professional Services division that McRae developed and that McRae was going to direct;
(c) All proprietary programming and configuration of off-the-shelf products that McRae programmed or configured, or assisted in programming or configuring, or otherwise supervised or participated in (in any capacity) while working for APAC as either a consultant or employee;
(d) McRae’s knowledge of the architecture for and portfolio of hardware, network, applications, and development that APAC has used, is currently using, or has recently acquired;
(e) McRae’s knowledge of the architecture for and portfolio of hardware, network, applications, and development that APAC intends to use in the future to remain competitive; and
(f) Any specific programming, design, or other proprietary work McRae did to tailor CTI to the specific needs of clients (e.g., Comp-U-Serve) when he worked on inbound or outbound projects for APAC.
This Court also notes that McRae may use his general knowledge of the availability of different off-the-shelf products and the customization possibilities of those products to articulate the kinds of processes that might be useful in his Inbound department, but McRae can neither customize the off-shelf products, nor instruct the IT personnel in how to customize those products, for a period of twenty-four months from the date that he left APAC.
Notes
. Testimony at the hearing established that the company which facilitated McRae’s work as a
. The defendants' cross-examination of Raymond Zukowski, who is charge of the inbound division at APAC, illustrates this point:
Q: Isn’t it correct, sir, that as the director of inbound, you don't concern yourself with the nuts-and-bolts technology of the hardware and software, correct?
A: Most of the time, you're correct.
Q: You’re a customer of theirs, and you go and say, all right, guys, here's what I want to do, this is my objective, go out and find me the hardware and software ... tell me if you can do it, is that a fair statement?
A: That's a fair statement.
. This Court also notes that even if Illinois law, and not Iowa law, applied to the trade secrets issue, both Iowa and Illinois courts recognize that a plaintiff can prove trade secret misappropriation by proving inevitable disclosure.
See
Iowa Code 550.3(1) (codifying protection against threatened misappropriation) and
PepsiCo, Inc. v. Redmond,
. Not only did McRae fail to disclose this information to Cardella before he began his first day of work at Access Direct, but Cardella testified at the hearing on this motion that McRae’s admission of this fact during his direct examination by APAC was the first time that Cardella had become aware of it.
. APAC relies heavily on
PepsiCo, Inc. v. Redmond,
. APAC did not specifically brief this point when it analyzed the applicable law affecting the restrictive covenant. See APAC Teleservices, Inc.’s Brief Regarding Applicable Law, Doc. #18. Instead, APAC assumed that McRae had violated either subsection (i) or (ii) of the restrictive covenant, and that the sole issue before this Court was whether the restrictive covenant was enforceable. To this end, APAC analyzed the four criteria that Illinois courts use to decide whether a restrictive covenant is enforceable, not whether McRae would be "likely to disclose” confidential information.
In APAC’s analysis of the trade secret misappropriation claim, as well as in its Post-Hearing Brief {see Docs. #18, 25), APAC argued that McRae will "inevitably” disclose trade secrets if he works for Access Direct. This Court has read that argument broadly in order to decide whether the analysis supports APAC’s claim that McRae violated the noncompetition agreement because he is "likely” to disclose proprietary information. This Court has therefore assumed for the purposes of this analysis that "likely to disclose” is the same as "inevitably will disclose.”
.In
PepsiCo,
a former managerial employee named Redmond left Pepsico to work for Quaker Oats.
. The cross-examination of Jeff Miller, the director of the ATP Platform at APAC, illustrates this point:
Q: When you talked about taking the software or the package off the shelf and you could buy that and then it had to be tailored, in doing that tailoring, would you call Mr. Zukowski and ask him to do the tailoring that needed to be done for the design aspects of it?
A: No, I would not.
Q: Isn’t he the vice-president of inbound operations for APAC?
A: I believe that's correct.
Q: And he wouldn't have anything to do with that kind of operation?
A: His organization would give us the business rules of which (sic) to tailor the software, but he would not do the tailoring himself.
Q: IT would do the tailoring?
A: That is correct.
Q: So if Mr. McRae was vice-president of inbound, you wouldn’t expect him to do the tailoring, would you?
A: No, I would not.
. While not dispositive, this Court has also considered the fact that McRae had worked at APAC as a full-time employee since January 1997, doing essentially the same duties until he left in September 1997, and that APAC did not ask him to sign a noncompetition agreement until April 1997. According to APAC's attorney, Walter Lipsman, employees are asked to sign restrictive covenants such as the one McRae signed when they receive a stock option grant of a thousand shares or more. Lipsman further testified that if McRae had refused to sign the original one thousand option stock offer (and thus had not signed the accompanying restrictive covenant agreement connected to that stock option), McRae would not have been fired because of it. See also Complaint ¶¶ 18-19.
Based on these facts, it appears that the stock options, and not any knowledge of trade secrets that McRae might have had, precipitated APAC’s desire to have McRae sign the noncompetition agreement. In light of this, the argument that APAC asked McRae to sign the competition agreement in order to safeguard trade secrets and confidential information seems somewhat disingenuous.
. A court's determination that information is or is not a trade secret in the course of a preliminary injunction hearing is not a "final” determination on the merits of the question, and such a determination does not remove the issue from contention at a trial on the merits.
See Economy Roofing,
. See footnote 10, supra.
. As Judge Learned Hand observed in
Harley & Lund Corp.
v.
Murray Rubber Co.,