SUSAN RICHARD NELSON, United States District Judge
I. BACKGROUND
Before CPI filed its Motion for a Preliminary Injunction, the parties engaged in some expedited discovery. In support of their respective positions on the motion, each party submitted evidence, including affidavits, deposition testimony and exhibits. Based on that record, and oral argument held on November 27, 2017, the Court recites below its preliminary findings of fact relevant to this motion. See Calvin Klein Cosmetics Corp. v. Parfums de Coeur, Ltd. ,
A. Parties
Plaintiff CPI Card Group, Inc. is incorporated in Delaware and has a principal place of business in Colorado. (Am. Complaint [Doc. No. 11] ¶ 3.) Plaintiff CPI Card Group-Minnesota, Inc. is incorporated in Minnesota and also has its principal place of business here. (Id. ) CPI asserts that it is a leader in the business of "transaction cards," which include credit and debit cards, prepaid cards, phone cards, rebate or reward cards, and transit cards. (see Id. ¶ 13; see also Ex. A of Decl. of Mira Vats-Fournier ("Vats-Fournier Decl.") [Doc. No. 163], Dep. of John Dwyer ("Dwyer Dep.") at A66/14.
Defendant MPS, which is incorporated in Delaware and has its principal place of
Defendants Searfoss and Kenneth Glinert ("Glinert") are currently Senior Vice Presidents of Sales at MPS. (Ex. A of Vats-Fournier Decl., Dep. of John Searfoss ("Searfoss Dep.") at A38/13; Id. , Dep. of Kenneth Glinert ("Glinert Dep.") at A3/11.) Searfoss has worked for MPS for approximately one year. (Searfoss Dep. at A37/12.) His position for MPS involves "strategy, operation, and technology." (Id. at A38/13.) Glinert has been employed by MPS since approximately 2006 and is currently responsible for transaction card sales. (Glinert Dep. at A3-4/11-13.) Searfoss and Glinert work together building strategies for the technologies that MPS will bring to market in 2018. (Searfoss Dep. at A39/19-20.)
Defendant John Dwyer ("Dwyer") has worked in the transaction card industry since 2004 and currently works for MPS. (Dwyer Dep. at A66/14.) Immediately before that, he worked for CPI for a period of thirteen years. (Id. at A66/13.) Although his last day of employment at CPI is heavily disputed,
At CPI, Dwyer was a Senior Account Executive. (Dwyer Dep. at A66/15.) In that role, his responsibilities included "managing client relationships, prospecting new clients and customers," as well as heavy involvement in production and servicing of accounts. (Id. ) While at CPI, Dwyer had a "steady group of base customers," whom Dwyer would "call on," or meet with personally, to sell them new and existing transaction card products. (Id. at A66-67/16-18.)
At least as related to these clients, Dwyer was exposed to a slew of information which CPI categorizes as CPI confidential. He knew the pricing of the CPI products he sold, as well as the pricing "strategy" for certain products; information that, as "a general rule," Dwyer acknowledges was CPI confidential information. (Id. at A67-68/19-22.) In addition to confidential pricing schemes, Dwyer was also exposed to design specifications and strategic plans at CPI, certain aspects of which Dwyer acknowledges were deemed CPI confidential. (Id. at A68/24, A69/25.) He was also exposed to information related to revenue and profits as well as information about products in development and not yet released to market-information which Dwyer again understands to have been CPI confidential information. (Id. at A69/26-27.)
Now, at MPS, Dwyer's duties are primarily focused on WestRock, the entity that recently purchased MPS. (Third Dwyer Decl. ¶ 14.) These responsibilities include: "serving as a liaison between MPS and WestRock's enterprise group focusing on key enterprise accounts; ... assessment of potential synergies between MPS and WestRock; retail management and data analytics associated with merchandising displays; and development of new product opportunities focused on connected
B. Dwyer's Employment Agreements with CPI
Because of the confidential nature of many aspects of CPI's business, as well as the heavy competition in the field, CPI protects its confidential and trade secret information, in part, through the use of contractual agreements with its employees. (O'Leary Decl. ¶ 8.) As relevant here, Dwyer signed three such employment agreements: (1) a "Confidentiality and Nonsolicitation Agreement" ("Confidentiality Agreement"), (see Am. Compl., Ex. A [Doc. No. 11-1] ); (2) an Option Award Agreement ("Option Agreement"), (see id. , Ex. B [Doc. No. 11-2] ); and (3) a Restricted Stock Unit Agreement ("Unit Agreement"), (see id. , Ex. C [Doc. No. 11-3] ), (collectively, the "Original Agreements"). Generally speaking, these agreements imposed on Dwyer confidentiality, non-solicitation, and non-compete obligations, as explained below.
1. Confidentiality
The confidentiality, or non-disclosure, obligations imposed on Dwyer by the Confidentiality Agreement are quite extensive. The Confidentiality Agreement prohibits Dwyer from misusing or disclosing any CPI confidential information as defined therein. (See Confidentiality Agreement ¶¶ 1-2.) Specifically, the agreement prohibits Dwyer, during and after his employment, from using, disclosing, duplicating, recording, or reproducing confidential information "except as ordinarily necessary" for the performance of his work duties or unless CPI expressly directs him to do so. (Id. ¶ 2.) These confidentiality obligations are further reinforced by the Option Agreement, which also prohibits Dwyer from disclosing or using CPI confidential information, except as related to and required by Dwyer's performance duties at CPI. (Option Agreement ¶ 10(a).) The Option Agreement also tasks Dwyer with safeguarding and protecting CPI confidential information against disclosure, misuse, espionage, loss, and theft. (Id. )
2. Non-Solicitation
The Original Agreements also imposed non-solicitation obligations on Dwyer. The Confidentiality Agreement prohibited Dwyer-for 1 year following termination of employment-from "directly or indirectly solicit[ing], on [his] own behalf or on behalf of another, (a) any of [CPI's] then-current customers, or (b) any of [CPI's] potential customers for whom [he] had contact or provided services, either directly or indirectly." (Confidentiality Agreement ¶ 7.) This clause covered "products in development, developed, manufactured or sold" by CPI before Dwyer left CPI. (Id. )
The Option Agreement's non-solicitation provisions, effective for two years after Dwyer left CPI, prohibited Dwyer from "call[ing] on, solicit[ing] or servic[ing] any customer, supplier, licensee, licensor or other business relation of [CPI] in order to induce or attempt to induce any such [p]erson to cease doing business with [CPI], or in any way interfere with the relationship between" CPI and any of these third parties. (Option Agreement ¶ 10(c).) The Unit Agreement also prohibited Dwyer, inter alia , for one year after leaving CPI, from soliciting, among others, customers, former customers, and active prospects of the "Business" of CPI within the "Restricted Territory," as well as from selling products or services for any business that competes with the "Business" of CPI, again within
3. Non-Compete
Finally, the Original Agreements also included strict non-compete provisions. The Option Agreement required Dwyer to abstain from working for a competitor for two years after leaving CPI. (See Option Agreement ¶ 10(b).) Specifically, this agreement provided that "[Dwyer] shall not, directly or indirectly, either for himself or for or through any other [p]erson, participate in any business or enterprise in a 'Competitive Business,' " a term defined to "include any company, person or entity that is involved in, seeks to become involved in or competes with the Business in the Restricted Territory." (Id. ¶ 10(b).) "Business," in turn, is defined through an extensive list of the many aspects of the transaction card industry. (See id. )
The Unit Agreement also prohibited Dwyer, for one year after leaving CPI, from "enter[ing] into or engag[ing] in any business that competes with the Business within the Restricted Territory," or "counsel[ing], promot[ing] or assist[ing], financially or otherwise, any person engaged in any business that competes with the Business within the Restricted Territory." (Unit Agreement ¶¶ 6(a)(i)(A), (D).) This agreement again defines the terms "Business" and "Restricted Territory." (Id. ¶ 6(b).)
C. Dwyer Leaves CPI to Work for MPS
Dwyer contends that, at some point, he became frustrated with the compensation plan at CPI and communicated that frustration-and intent to leave CPI if his compensation did not improve-to his supervisor, Margaret O'Leary ("O'Leary"), in January of 2016. (Third Dwyer Decl. ¶ 1.) Dwyer claims that O'Leary told him to "give her one year to fix the compensation plan," but that the new plan she presented to him more than a year later was, in his view, even worse. (Id. ¶¶ 1-2.)
Meanwhile, according to Searfoss, at least by December 2016, "there was word on the street that [Dwyer] was not happy" at CPI. (Searfoss Dep. at A43/33.) At that time, Searfoss approached Dwyer about a position with MPS, (Id. at A42/32), and the two began to negotiate Dwyer's eventual employment with MPS, (see Ex. A of Vats-Fournier Decl. (Ex. 19 (Dec. 23, 2016 email from Searfoss to Dwyer) ) at A200-10.) In February of 2017, Searfoss sent Dwyer the outline of an offer for employment. (Id. (Ex. 18 (Feb. 8, 2017 email from Searfoss to Dwyer) ) at A197.) At some point, the now-President of MPS, Marc Shore, also became involved in recruiting and hiring Dwyer. (Searfoss Dep. at A43/33-34.) Shore reviewed details of Dwyer's eventual compensation offer as well as the non-compete covenants to which Dwyer was bound before passing the information on to MPS's attorneys for review. (Id. ) Finally, on March 27, 2017, Dwyer signed an employment agreement with MPS. (See Ex. A of Vats-Fournier Decl. (Ex. 20 (MPS-Dwyer Employment Agreement) ) at A202-15.) Per the employment agreement, Dwyer was to start work for MPS in April of 2017. (Id. at A203.)
On March 29, 2017-two days after he signed his employment agreement with MPS-Dwyer sent O'Leary an email tendering his resignation from CPI. (Id. (Ex. 33 (Mar. 29, 2017 email from Dwyer to O'Leary) ) at A303.) He did not, however, state that he had already signed an employment agreement with MPS. (Id. ) Instead, Dwyer represented to O'Leary that he needed to take some time to figure out his future plans, implying he did not have another opportunity already lined up. (Id. ) Dwyer wrote to O'Leary, "It is time for me to decide what the next chapter of my
After Dwyer resigned, O'Leary asked him to remain at CPI for a temporary period to assist with transitioning his clients. (O'Leary Decl. ¶ 9; Third Dwyer Decl. ¶ 5.) Dwyer obtained MPS's agreement to postpone his start date, and then agreed to stay at CPI temporarily. (Third Dwyer Decl. ¶¶ 6-7.) Dwyer contends that in exchange for staying on longer, he asked to have certain provisions of the Original Agreements renegotiated and revised. (Id. ¶ 6; O'Leary Decl. ¶ 9.) Though the circumstances surrounding the negotiations are heavily disputed, CPI and Dwyer ultimately executed an amendment (the "Amendment") to the Original Agreements, as described below. At no time throughout these negotiations did Dwyer disclose the fact that he had already signed an employment agreement with CPI's competitor MPS.
D. The Amendment with CPI
On May 12, 2017, Dwyer and CPI signed the Amendment, which made significant changes to Dwyer's non-compete and non-solicitation obligations to CPI. (See Am. Compl., Ex. D, Amendment [Doc. No. 11-4].) The Amendment, however, did not alter Dwyer's confidentiality obligations under the Original Agreements. (See id. ). The Amendment appears to release Dwyer of the non-compete obligations he had under the Original Agreements. In relevant part, the Amendment provides that "Sections 10(b) and (c) of the Option Award Agreement" and "Section[s] 6(i) and (ii) of the Restricted Stock Unit Agreement"-sections imposing both non-compete and non-solicitation obligations-"shall be deleted in their entirety and replaced" by narrower non-solicitation provisions-but no non-compete provisions-effective until March 29, 2018. (See Amendment ¶¶ 4, 8.) In relevant part, the replacement non-solicitation language in the Amendment prohibits Dwyer from "directly or indirectly, either for himself or any other [p]erson, solicit[ing]" two categories of CPI clients:
"(1) clients producing revenue for CPI Holdings, Inc. on or before March 29, 2017 that [Dwyer] directly managed or consulted on in the areas of card fulfillment and eServices, and
(2) clients producing revenue for CPI Card Group-Minnesota, Inc. on or before March 29, 2017 in the business segment of open loop prepaid retail packaging."
(Id. ¶ 4(b) (replacing non-compete & non-solicitation provisions of the Option Agreement), ¶ 8 (doing same as to Unit Agreement).) The non-solicitation provision of the Confidentiality Agreement was also replaced by identical language. (See id. ¶ 7.) In short, the Amendment appears to remove Dwyer's non-compete obligations under the Original Agreements, leaves unaltered his confidentiality obligations, and significantly narrows his non-solicitation restrictions.
CPI was unaware of Dwyer's employment agreement with MPS while it negotiated the Amendment with Dwyer. (O'Leary Decl. ¶ 9.) In fact, O'Leary states that CPI would never have negotiated the Amendment, or asked Dwyer to continue working for CPI for a transitional period, had Dwyer disclosed that he had already accepted a position with MPS. (Id. ) MPS, on the other hand, was aware of Dwyer's negotiation of the Amendment, as Dwyer kept MPS closely informed on the progress of negotiations. (See, e.g. , Ex. A of Vats-Fournier Decl. (Ex. 39 (May 5, 2017 email thread between Dwyer, Searfoss, and Glinert) ) at A346-48.) In fact, the evidence suggests that Dwyer, Glinert, and Searfoss contemplated steps to keep details about Dwyer's future employment plans hidden from CPI at least until
Searfoss had a similar exchange with Dwyer. On May 1, 2017, Searfoss texted Dwyer, "Just sat down with Adam DeMalignon and he told me you were coming to work for MPS! He wouldn't tell me who told him but I think Sev knows. I hope you get your document signed before anyone finds this out." (Ex. A of Vats-Fournier Decl. (Ex. 24 (text messages) ) at A240, row 1679.) Presumably, the "document" Searfoss referred to was the Amendment.
The Amendment contains apparently contradictory language regarding its effective date. On one hand, the Amendment states that it is "made effective on the 12th day of May, 2017." (Amendment at 2.) On the other hand, it states, "Provided the SATISFYING EVENT defined in Paragraph 3 of this Amendment is met, this Amendment shall become effective on June 17, 2017," but "[i]n the event the SATISFYING EVENT ... is not met, this Amendment shall be null and void." (Id. ¶ 2.) The "satisfying event" would be met if: (1) "Dwyer w[ould] continue providing services to [CPI] up to and including June 16, 2017"; (2) Dwyer physically reported to work "up to and including May 16, 2017, after which, he w[ould] receive payment for accrued vacation ... until such accrued vacation is exhausted on or about June 16, 2017"; and (3) between May 13, 2017 and June 16, 2017, inclusive, Dwyer-although not required to physically report to CPI-"w[ould] make himself available by phone, email, or in-person, on an as needed basis to assist in addressing any job-related issues incident to his employment with [CPI]." (Id. ¶ 3.)
E. The Alleged Trade Secret Misappropriation & Violation of Confidentiality, Non-Compete, and Non-Solicitation Obligations
In the months before and after his resignation from CPI, but before officially starting work for MPS,
CPI first points to an email entitled "Opportunity" which Dwyer sent to Searfoss on January 9, 2017 while negotiations for Dwyer's employment with MPS were underway. (Ex. A of Vats-Fournier Decl. (Ex. 22 (Decl. of John Searfoss ("Searfoss Decl.") Ex. A) ) at A224.) This email described a "fulfillment opportunity" for [REDACTED], contained [REDACTED]'s contact information, and included a suggestion by Dwyer to Searfoss that MPS should "get right on this as it could be your foot in the door." (Id. ) According to CPI, this email constitutes a breach of Dwyer's confidentiality and non-compete obligations under the Original Agreements long before the Amendment. (Pls.' PI Mem. at 6-7.)
Next, CPI points to two emails which Dwyer sent in March of 2017 related to a [REDACTED] CPI was developing for [REDACTED]. (Id. at 8-9.) On March 10, 2017, Dwyer emailed Searfoss from his personal Gmail account, attaching a document labeled [REDACTED]," and telling Searfoss: "Check out this patent... [REDACTED]" (Id. ; Ex. A of Vats-Fournier Decl. (Ex. 37 (Mar. 10, 2017 email from Dwyer to Searfoss) ) at A330.) The patent in question was then under licensing negotiations between [REDACTED] and CPI-negotiations that Dwyer was in fact spearheading on behalf CPI. (O'Leary Decl. ¶ 19; Dwyer Dep. at A84/85-86.) Then, on March 21, 2017, about a week before resigning from CPI, Dwyer sent another email to Searfoss, telling Searfoss that Dwyer needed to talk to him about a PowerPoint presentation attached to the email titled [REDACTED] (Ex. A of Vats-Fournier Decl. (Ex. 40 (March 21 email from Dwyer to Searfoss) ) at A349-355.) Dwyer had apparently received that presentation from a [REDACTED] after the two had discussed it the day before. (O'Leary Decl. ¶ 16.) CPI claims that these emails constitute a breach of Dwyer's confidentiality and non-compete obligations and also constitute the misappropriation of trade secrets and confidential information, again long before the Amendment was in effect. (Pls.' Reply Supp. Mot. Prelim. Inj. ("Pls.' PI Reply") [Doc. No. 184] at 1, 3.)
The next set of evidence that CPI points to is a series of emails that Dwyer forwarded from his CPI email account to his personal Gmail account on March 29, 2017, minutes before he emailed his resignation to O'Leary. (Pls.' PI Mem. at 6-7.) These emails contained attachments to various presentations and CPI documents, many of which are marked as CPI confidential. (See Ex. A of Vats-Fournier Decl. (Exs. 33-36 (March 29 emails from Dwyer to Dwyer) ) at A304-29.) Again, CPI contends that Dwyer misappropriated trade secrets and breached his duty of confidentiality by forwarding these emails to his personal account. (Pls.' PI Reply at 1-2.)
Finally, CPI points to two PowerPoint presentations that Dwyer prepared and sent to Searfoss and Glinert on May 18th and June 1st, respectively, while he was still providing as-needed services to CPI. (Pls.' PI Mem. at 7.) Dwyer first forwarded these presentations from his CPI email account to his personal Gmail account, and then within a few minutes forwarded those same presentations to Searfoss and Glinert from Gmail. (Compare Ex. A of Vats-Fournier Decl. (Ex. 7 (May 18 email from Dwyer to Dwyer) ) at A133-37, and id. (Ex. 10 (June 1 email from Dwyer to Dwyer) ) at A146-57, with id. (Ex. 8 (May 18 email from Dwyer to Searfoss and Glinert) ) at A138-42, and id. (Ex. 11 (June 1 email from Dwyer to Searfoss and Glinert) ) at A158-77.) CPI contends that these presentations include CPI trade secrets and confidential information, as well as information on CPI products not yet
F. Forensic Investigation and Procedural Posture
At some point after these events, CPI conducted a forensic examination of Dwyer's CPI email account and learned about the emails Dwyer had forwarded to his personal Gmail account, including the May 18th and June 1st emails. (Am. Compl., Ex. E (litigation hold letter from CPI to Dwyer) [Doc. No. 11-5] at 2.) On July 13, 2017, the law firm of Winston & Straw ("Winston"), then counsel for CPI, sent Dwyer a litigation hold letter. (Id. ) This letter also demanded that Dwyer cooperate with CPI's computer forensic vendor, FTI Consulting ("FTI"), "to accomplish removal and remediation of all electronic copies of CPI's materials from all [his] personal electronic devices, email accounts, external drives and cloud based storage sites where they may reside." (Id. at 2, 4.)
On July 18, the law firm of Kramer Levin, who was then representing Dwyer, responded to Winston's demand letter. (Am. Compl., Ex. F (Dwyer response to litigation hold letter) [Doc. No. 11-6] at 18.) A few days later, the parties began an email discussion and reached an agreement (the "ESI Agreement") pursuant to which FTI would locate and forensically remove CPI's materials from Dwyer's personal electronic devices, email accounts, external drives, and cloud-based storage devices. (Dwyer's Opp'n at 8.) FTI conducted this forensic examination and deleted CPI-related information and documents from Dwyer's devices. (Id. )
Following the FTI forensic examination, attempts between the parties to reach an out-of-court resolution broke down, and on August 25, 2017, local counsel Briggs and Morgan ("Briggs") initiated this lawsuit on behalf of CPI, alleging claims against Dwyer, MPS, Searfoss, and Glinert.
Meanwhile, on September 21, 2017, both sides filed motions before this Court. Defendants MPS and Searfoss moved to dismiss two counts of the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (See MPS and Searfoss Mot. Partial. Dismissal.) First, MPS and Searfoss urge the Court to dismiss CPI's claim for Fraudulent Inducement of the Amendment as against the two of them,
For its part, CPI moved for a preliminary injunction [Doc. No. 55]. Winston alone submitted and signed CPI's motion, (see id. at 4), and it alone signed CPI's memorandum in opposition to the Motion for Partial Dismissal filed by MPS and Searfoss.
On October 27, 2017, Magistrate Judge Franklin L. Noel issued an Order disqualifying Winston-but not Briggs-from representing CPI. (See Oct. 27, 2017 Magistrate Judge Order ("MJ Order") [Doc. No. 124].)
On November 7, 2017, Briggs filed the instant Motion for a Preliminary Injunction on behalf of CPI [Doc. No. 143]. CPI urges the Court to enjoin all Defendants from "deliberate and extensive misappropriation of CPI's trade secrets and other confidential business information." (Pls.' PI Mot. at 1.) CPI further seeks to enjoin Dwyer from working, directly or indirectly, in MPS's transaction card industry during the pendency of this lawsuit. (CPI Proposed Order [Doc. No. 152] at 2.) Finally, CPI seeks the return of any of its confidential, proprietary, or trade secret information that may still be in Defendants' possession. (Id. at 3.)
CPI contends that it has and will continue to suffer irreparable harm if Defendants are not enjoined. (Pls.' PI Mem. at 12-18.) It also argues that it is likely to succeed on the merits of at least seven of its claims: Counts I and II, Misappropriation of Trade Secrets in violation of federal and state law (asserted against all Defendants), (see id. at 19-22); Count III, Fraudulent Inducement of the Amendment (asserted against Dwyer, Searfoss, and MPS), (see id. at 23-25); Counts IV-VI, Breach of the Non-Disclosure, Non-Competition, and Non-Solicitation Covenants in the Original Agreements, respectively (asserted against Dwyer), (see id. at 22-25); and Count VIII, Tortious Interference with Contract (asserted against the MPS Defendants), (see id. at 26-28). On November 17, Briggs also filed a new response on behalf of CPI opposing MPS and Searfoss's Motion for Partial Dismissal. (Pls.' Opp'n Partial Dismissal [Doc. No. 165].) The Court now turns to the parties' respective motions.
II. DISCUSSION
A. Preliminary Injunction
1. Legal Standard
"A preliminary injunction is an extraordinary remedy never awarded as a matter of right." Winter v. Nat. Res. Def. Council, Inc. ,
2. Likelihood of Success on the Merits
"An injunction cannot issue if there is no chance on the merits." Mid-Am. Real Estate Co. v. Ia. Realty Co. ,
a. Misappropriation of CPI Trade Secrets (All Defendants)
CPI first argues that it is likely to succeed on its claims of misappropriation of trade secrets in violation of the Defend Trade Secrets Act ("DTSA"),
A "trade secret" is defined in both the DTSA and the MUTSA as "information" that "(1) is not generally known or readily ascertainable, (2) has value as a result of its secrecy, and (3) is the subject of reasonable efforts under the circumstances to protect its secrecy." Wyeth v. Nat. Biologics, Inc. ,
CPI points to three major categories of information which it claims are trade secrets that were misappropriated by Dwyer and the MPS Defendants. Each is addressed in turn.
i. March Emails Relating to the [REDACTED] Solution
CPI argues that all Defendants are liable for trade secret misappropriation because of two emails Dwyer sent to Searfoss on March 10 and 21 containing details of a [REDACTED] that CPI was developing for [REDACTED] (Pls.' PI Mem. at 8-10, 21.) The March 10th email, titled [REDACTED] included a CPI patent then under licensing negotiations between CPI and [REDACTED]-negotiations that Dwyer was spearheading on behalf of CPI. (Ex. A of Vats-Fournier Decl. (Ex. 37 (Mar. 10, 2017 email from Dwyer to Searfoss) ) at A330.) In the email, Dwyer stated to Searfoss that the idea was gaining traction at [REDACTED]. The March 21st email included the PowerPoint presentation titled [REDACTED] (id. (Ex. 40 (March 21 email from Dwyer to Searfoss) ) at A349-355), which Dwyer received directly from a [REDACTED].
In essence, CPI argues that the [REDACTED] reflected in the [REDACTED] PowerPoint presentation is a trade secret because it was unknown to MPS at that time and CPI has not released the solution to market yet. (See Pls.' PI Mem. at 9-10, 21.) CPI then argues that it was misappropriation because Dwyer and Searfoss discussed it, with Searfoss testifying that the nature of those discussions were "[t]hat [REDACTED] was negotiating a licensing agreement with CPI to use this methodology, and [Dwyer] wanted to know if we were capable of doing it." (Searfoss Dep. at A46/47.)
Here, although the issue is close, and further evidence may persuade the Court otherwise, the Court concludes that CPI has not demonstrated a fair chance of ultimately showing that the information contained in these emails is protectable as a trade secret. Although CPI's potential solution for any given customer likely has actual or potential economic value to a competitor before that solution is released to market, CPI must still meet the final element of a trade secret-that it made "efforts that are reasonable under the circumstances to maintain its secrecy." Minn. Stat. § 325C.01, subdiv. 5. That, CPI has failed to do.
Beyond stating that it considers "[REDACTED] interest in [CPI's] patent and CPI and [REDACTED] development of an application to use CPI's patent and the specific solution developed at CPI for [REDACTED] to be CPI confidential information," (O'Leary Decl. ¶ 19), and generally pointing to the measures it takes to protect confidential information, (see generally Decl. of Jay Arbabha [Doc. No. 146] ), CPI has not shown a likelihood of proving that it took reasonable measures to protect the secrecy of the contents of this particular presentation. See Electro-Craft Corp. v. Controlled Motion, Inc. ,
Although Dwyer's transmission of this information to MPS without even sending it to O'Leary, and MPS's willingness to capitalize on this information while Dwyer was still employed by CPI, strikes the Court as wrongful and is likely actionable on other grounds, "[w]ithout a proven trade secret[,] there can be no action for misappropriation, even if defendants' actions were wrongful." Electro-Craft ,
ii. Forwarded Emails
Next, CPI contends that Dwyer is liable for trade secret misappropriation because he forwarded to his personal Gmail account, minutes before resigning, a series of emails with information clearly marked CPI confidential. (PIs.' PI Mem. at 6-7.) In response, Dwyer contends that these emails do not constitute trade secrets, and that regardless, there was no misappropriation because he did not forward the emails to CPI and his intent in retaining that information was benign. (Dwyer's Opp'n at 20-21; Third Dwyer Decl. ¶ 18.) He contends that he forwarded these emails to his personal account "in case clients and/or service teams needed answers regarding on-going projects after [he] resigned, as [he] did not know whether [he] would continue to work during the two-week notice period." (Third Dwyer Decl. ¶ 18.)
Here, the Court again concludes that CPI has not shown a fair chance of prevailing on this claim, at this time, on this record. At the outset, the Court notes that CPI does not sufficiently identify why the information contained in these emails qualifies as a trade secret. CPI generalizes that all the information at issue "constitutes CPI trade secrets and confidential information" because "[t]his is the type of information from which a competitor could derive advantage because it has actual or potential economic value," and because it "is information which CPI takes steps to protect as confidential." (O'Leary Decl. ¶ 20.) But generalized assertions and "cursory descriptions" do not meet CPI's burden of showing that legitimate trade secrets are at stake. Menzies Aviation (USA), Inc. v. Wilcox ,
But even if this Court concluded that CPI is likely to establish that these emails contained trade secrets, CPI still faces an uphill battle to demonstrate that Dwyer or MPS misappropriated them. Although the Court questions Dwyer's candor in claiming that he forwarded these emails to himself for the benefit of CPI's customers, CPI has not presented any evidence showing that Dwyer forwarded these emails to MPS or otherwise personally used the information in a manner that is likely to constitute "misappropriation" under the applicable statutes. Absent evidence of use or disclosure, CPI would need to show "acquisition" by "improper means," again defined to include "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage...." Minn. Stat. § 325C.01, subdiv. 2. Notably, Dwyer's Confidentiality Agreement did not per se prohibit him from forwarding emails to his personal email account. And absent this express prohibition-or again evidence of use or disclosure-the Court is hard-pressed to conclude that Dwyer's behavior falls under the definition of "improper means." See
iii. "Strategic Plan" & "Market Opportunities" Presentations
Finally, CPI alleges that Dwyer misappropriated trade secrets by sending two presentations to Searfoss and Glinert on May 18 and June 1 which it claims "focused on soliciting CPI customers, and included reference to a number of CPI trade secrets, including products not yet released to market by CPI and information relating to technology on which CPI is seeking a patent."
This time, CPI points out specific information contained in the presentations that it contends is protectable as a trade secret. First, [REDACTED] According to O'Leary, [REDACTED] Second, CPI contends that the presentation also references the [REDACTED] and reiterates that this is a form of fraud control that [REDACTED] CPI are implementing-based on CPI's patent-and which has not been released to the market yet, (O'Leary Decl. ¶ 14). Next, CPI claims that the presentation's mention of [REDACTED] technology, (see Ex. A of Vats-Fournier Decl. (Ex. 11 (June 1 email from Dwyer to Searfoss and Glinert-presentation) ) at A163), is a reference to "another concept [that] CPI is working on that has not been rolled out to the market and will not be until February, 2018," and of which Dwyer was aware while at CPI, (O'Leary Decl. ¶ 14). Finally, CPI contends that the presentation's reference to a [REDACTED] is again a reference to CPI's technology for which it is currently in the process of securing a patent, (O'Leary Decl. ¶ 14).
Dwyer vigorously disputes CPI's characterization of the contents of the presentation. (See Dwyer's Opp'n at 21-22.) He claims that the items he referenced in the PowerPoint are not CPI trade secrets, but rather "common industry buzz words," (id. at 22), and that the presentation as a whole simply contained his ideas and "was a personal business plan [he] created in
On these facts, and without a fuller record, the Court again is unable to conclude that CPI has met its burden of establishing a fair chance of success on the merits because Dwyer has presented sufficient evidence to call into question CPI's contention that the presentation disclosed CPI trade secrets. Based on Dwyer's sworn testimony, buttressed in part by the testimony of Searfoss and Glinert, the Court is not yet convinced that the concepts mentioned in the presentation were not "generally known to" others in the industry. See Minn. Stat. § 325C.01, subdiv. 5. It is well established that information which is generally known to the public or within an industry, or is readily ascertainable, is not a trade secret. Lexis-Nexis v. Beer ,
Here, in addition to Dwyer's contentions, Glinert testified that he had some intellectual property related to [REDACTED] Similarly, Searfoss testified that he is familiar with the concept of [REDACTED] Given the limited and conflicting testimony, the Court is unable to conclude at this time that CPI is likely to succeed on the merits of this claim. See Lexis-Nexis ,
In sum, for the purposes of this motion, the Court concludes that CPI has not met its burden of establishing a fair chance of success on the merits on its trade secret misappropriation claim. Nevertheless, as discussed infra and as set out in Section III of this Order, because CPI meets its burden of proof with respect to its breach
b. Breach of Confidentiality Agreement (Dwyer)
To ultimately prevail on a breach-of-contract claim under Minnesota law, a plaintiff must demonstrate the "(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to his right to demand performance by the defendant, and (3) breach of the contract by defendant."
Here, CPI has clearly shown that Dwyer likely violated the confidentiality provisions of the Confidentiality Agreement on numerous occasions. The agreement prohibits Dwyer, during and after his employment, from using, disclosing, duplicating, recording, or reproducing confidential information that he "learn[ed] or acquire[d] during [his] employment except as ordinarily necessary for [him] to perform [his] assigned duties on behalf of [CPI] or unless [CPI] expressly directs [him] to do so." (Confidentiality Agreement ¶ 2.a.) It further provides that Dwyer would "treat information as confidential when it is labeled "confidential" or 'trade secret,' " or "if, under the circumstances, [he] know[s] or ha[s] reason to know that [CPI] intends to keep that type of information confidential." (Id. ¶ 2.b.) Confidential information, in turn, is defined to mean:
[A]ny information not generally known in CPI Card Group's business or readily ascertainable by proper means by others, including CPI Card Group competitors ..., and includes trade secrets. It includes ... the names of CPI Card Group ... customers and suppliers and the nature of CPI Card Group's relationships with them, for example, types and amounts of products acquired from or supplied to CPI Card Group. It includes information about CPI Card Group processes and products, including information relating to its research, development, manufacturing, engineering, marketing, and selling.
(Id. ¶ 1.)
Beginning with at least the email that Dwyer sent to Searfoss on January 9, 2017, Dwyer likely breached the Confidentiality Agreement. This email contained details of a fulfillment opportunity for
Next, Dwyer also likely violated the Confidentiality Agreement by forwarding CPI confidential information from his CPI email to his personal Gmail account minutes before he resigned from CPI. While it is true that the Confidentiality Agreement did not expressly prohibit Dwyer from forwarding emails to himself, it did prohibit Dwyer from taking action as to confidential information "except as ordinarily necessary" to perform his job duties. (Confidentiality Agreement ¶ 2.a.) Given Dwyer's plan to resign less than ten minutes later, it is unlikely he forwarded those emails without nefarious intent, i.e. , to fulfill any remaining performance duties at CPI.
Finally, Dwyer also likely violated the terms of the agreement by sending, prior to his resignation, details of the [REDACTED] that CPI was developing in conjunction with [REDACTED]. Again, the Confidentiality Agreement expressly states that CPI considers the nature of CPI's relationship with its clients to be confidential.
c. Breach of Option Agreement & Unit Agreement (Dwyer)
CPI next argues that it is likely to succeed on the merits of its claim that Dwyer breached his non-compete and non-solicitation duties under the Original Agreements. (See Pls.' PI Mem. at 23-25.) CPI also contends that it is likely to show that those agreements remain operative because Dwyer procured the Amendment through fraud, rendering the Amendment null and void. Although, as explained below, the Court finds that Dwyer likely breached his duties under the Option Agreement and the Unit Agreement even before the Amendment was signed, because of the relief sought by CPI, the Court finds it necessary to reach the issue of whether the Amendment is likely null and void.
At the outset, however, although not briefed by the parties, the Court must address the choice-of-law provision contained in the Option and the Unit Agreements. The Option Agreement provides that it "will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware...." (Option Agreement ¶ 19.) The Unit Agreement contains similar language. (Unit Agreement ¶ 15(f).) A federal court exercising supplemental jurisdiction over state law claims in a federal question action must apply the substantive law of the forum state, including its choice-of-law rules. See MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co. ,
Minnesota generally enforces choice of law provisions, applying the substantive law agreed to by the parties. See Schwan's Sales Enters., Inc. v. SIG Pack, Inc. ,
Where a plaintiff's tort claims are closely related to the interpretation of the contract and fall within the ambit of the express agreement, those tort claims are also properly subject to the contract's choice of law clause. In other words, under Minnesota law, if analysis of the claims connected to a contract involves interpretation of the contract, then the forum will apply the contractual choice-of-law provisions to the tort claims.
Superior Edge, Inc. v. Monsanto Co. ,
In this instance, CPI's claim that the Amendment was procured by fraud is unrelated to the interpretation of the Option and Unit Agreements, and this Court will thus apply Minnesota law. To succeed on its fraud claim in Minnesota, CPI must ultimately prove: "(1) a false representation by [Dwyer] of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made without knowing whether it was true or false; (3) with the intention to induce [CPI] to act in reliance thereon; (4) that the representation caused [CPI] to act in reliance thereon; and (5) that [CPI] suffered pecuniary damages as a result of the reliance." Valspar Refinish, Inc. v. Gaylord's, Inc. ,
Here, the Court agrees with CPI that it has a fair chance of prevailing on its fraud claim against Dwyer.
But more importantly, there is additional evidence to suggest that up until the date when the parties signed the Amendment (May 12), Dwyer maintained an intent to mislead CPI so that negotiations could continue. As just one example, responding to Glinert's concern that CPI
Next, the Court also concludes that CPI is likely to prevail on its claim that Dwyer breached the non-compete and non-solicitation provisions of the Option and the Unit Agreements even before the Amendment was signed. In this instance, the Court will apply Delaware law to CPI's breach of contract claims because they are governed by the choice of law provision in the agreements.
Under Delaware law, a party moving for injunctive relief based on a breach of restrictive covenants must show evidence of a breach and the enforceability of the covenants. See TP Group-CI, Inc. v. Vetecnik , No. 1:16-CV-00623-RGA,
Next, under Delaware law, to be enforceable, restrictive covenants "must (1) meet general contract law requirements, (2) be reasonable in scope and duration, (3) advance a legitimate economic interest of the party enforcing the covenant, and (4) survive a balance of the equities."
Here, the restrictive covenants meet these requirements. First, they meet general contract law requirements because Dwyer promised to abide by the non-compete and non-solicitation provisions in exchange for a stock option and a stock award. See
In sum, the Court concludes that, for the purposes of this motion, CPI has shown a fair chance of prevailing on the merits of its claim against Dwyer for fraudulent inducement of the amendment and for breach of the restrictive covenants in the Option Agreement and the Unit Agreement.
d. Tortious Interference with Contract (Searfoss and Glinert)
On this claim, the Court need not determine whether Minnesota or Delaware law ultimately governs because the law in both states is essentially the same. To succeed on a claim for tortious interference with contract, CPI must show "(1) the existence of a contract; (2) the alleged wrongdoer's knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages." E-Shops Corp. v. U.S. Bank Ass'n ,
In their depositions, Searfoss and Glinert acknowledged that they understood from the beginning of the process of hiring Dwyer that he had certain contractual obligations to CPI, including those of non-disclosure and non-compete. (Glinert Dep. at A16/63-64; Searfoss Dep. at A45/41.) With respect to Searfoss, this Court finds that he actively pursued information and advice from Dwyer related to confidential CPI matters for the benefit of MPS. For example, on April 12, a month before the Amendment was signed, Dwyer texted to Searfoss: "Here is what my designer came up with for a [REDACTED] To this, Searfoss responded, "Looks good ... I would like to run these [REDACTED] for efficiencies...." (Id. , Entry No. 1862.) At his deposition, Searfoss indicated that he understood this exchange to relate to the [REDACTED] and that Searfoss "was looking to design something more efficient, which was related to the envelope business." (Searfoss Dep. at A56/85-86.) This Court is hard-pressed to find that this does not provide fair grounds for showing that Searfoss tortiously interfered with Dwyer's contractual obligations to CPI.
Similarly, this Court finds that CPI has carried its burden as to Glinert. On April 20, again before the Amendment was signed, Dwyer emailed to Glinert, as well as another individual per Glinert's direction,
In sum, after thoroughly reviewing the record before it and the parties' arguments, the Court concludes that CPI has shown a likelihood of success on the merits on several counts, favoring CPI's request for injunctive relief.
3. Irreparable Harm
To receive injunctive relief, the moving party must also show that it faces a sufficient threat of irreparable harm. Bandag, Inc. v. Jack's Tire & Oil, Inc. ,
Under Delaware law, "contractual stipulations as to irreparable harm alone suffice to establish that element for the purpose of issuing preliminary injunctive relief." Cirrus Holding Co. v. Cirrus Indus., Inc. ,
Here, the Option Agreement and the Unit Agreement include a stipulation that if Dwyer were to breach the restrictive covenants, CPI would suffer irreparable harm. The Option Agreement provides that "[Dwyer's] services to [CPI] are unique in nature and of an extraordinary value to [CPI], and ... [CPI] could be irreparably damaged if [Dwyer] were to provide similar services to any person or entity competing with [CPI] or engaged in a similar business." (Option Agreement ¶ 10(b).) Similarly, Dwyer acknowledged in the Unit Agreement that he "has been entrusted with access to trade secrets and confidential information that, if made available to non-[CPI] employees, would cause irreparable harm to [CPI] ...." (Unit Agreement ¶ 6(a)(iv).) In this same agreement, Dwyer stipulated that "[i]n the event of [his] actual or threatened breach," "[CPI] will be entitled to provisional and injunctive relief in addition to any other available remedies at law or equity." (Id. ¶ 6(d)(iii).) Under Delaware law, these stipulations suffice for a finding of irreparable harm.
But even without these stipulations, CPI has demonstrated that Dwyer's breach of the restrictive covenants has caused and will continue to cause irreparable harm. The record reflects that Dwyer engaged in chronic violations of the confidentiality and non-compete obligations he had to CPI. Although Dwyer and MPS repeatedly stress that MPS never pursued some of these leads, there is conflicting evidence in the record. And it is difficult, if not impossible, to quantify the monetary harm that sharing this kind of information caused or will cause CPI. In her second declaration, O'Leary further describes how
Minnesota law is in accord with a finding of irreparable harm in this case. In Minnesota, "[i]rreparable injury can be inferred from the breach of a restrictive covenant if the former employee came into contact with the employer's customers in a way which obtains a personal hold on the good will of the business." Medtronic, Inc. v. Advanced Bionics Corp. ,
Here, there is ample evidence to suggest that Dwyer had a personal hold on the good will of CPI's business such that irreparable harm can be inferred. For instance, Dwyer himself indicated that his responsibilities at CPI included managing client relationships, prospecting new clients and customers, as well as heavy involvement in production and servicing of accounts. Dwyer would call on these clients and meet with them personally. Other evidence suggests that Dwyer even considered some of these customers his friends. Moreover, Glinert testified that MPS hired Dwyer because he was considered a "good salesperson and team player." (Glinert Dep. at A13/49.) These words would ring hollow unless, through his position at CPI, Dwyer had established a track record of forming meaningful relationships with the customers he serviced.
In sum, the Court finds that this factor also weighs strongly in favor of granting injunctive relief.
When considering the balance of harms, courts must weigh "the threat to each of the parties' rights and economic interests that would result from either granting or denying the preliminary injunction." Cenveo Corp. v. S. Graphic Sys., Inc. , No. 08-5521 (JRT/AJB),
As the Court already described, CPI would be irreparably harmed absent an injunction. The same, however, is not true for Dwyer or MPS. CPI stated its amenability to enforcing the restrictive covenants in the Original Agreements only to the extent they prevent Dwyer from working in MPS's transaction card business. (Pls.' PI Mem. at 16.) Thus, Dwyer will not be restricted from working for MPS generally or earning a living. In fact, MPS and Dwyer contend that Dwyer's primary responsibilities do not primarily relate to transaction cards, and that they are "substantially different" from those he had at CPI, minimizing any harm that they might incur. (See Third Dwyer Decl. ¶¶ 14-15.) Accordingly, the balance of the equities also favors the entry of an injunction.
5. Public Interest
The public has a strong interest in preserving and fostering business competition. See Lasermaster Corp. v. Sentinel Imaging, Inc. ,
Here, the Court again concludes that given the extent of Dwyer's and the MPS Defendants' wrongful conduct, protecting CPI's confidential information and legitimate business interests outweighs the temporary restrictions on Dwyer's employment options and MPS's related business activities. As such, CPI's Motion for a Preliminary Injunction is granted as detailed in Section III of this Order.
B. Motion for Partial Dismissal
1. Standard of Review
On a motion to dismiss under Rule 12(b)(6), the Court accepts as true the factual allegations in the complaint and construes all reasonable inferences arising therefrom most favorably to the plaintiff. Hager v. Ark. Dep't of Health ,
To survive a motion to dismiss, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly ,
In addition to the standards set forth above, Rule 9(b) mandates a heightened pleading standard with respect to fraud-based claims. See Drobnak v. Andersen Corp. ,
2. Fraudulent Inducement Claim Against MPS and Searfoss (Count III)
MPS argues that CPI's claim against MPS and Searfoss for fraudulent inducement of the Amendment (Count III) must be dismissed because CPI failed to meet the particularity requirements of Rule 9(b). (See MPS and Searfoss Dismissal Mem.) Specifically, MPS alleges that CPI does not identify any alleged misrepresentations made by MPS or Searfoss, and absent any alleged misrepresentation, MPS's claim does not state a claim for fraudulent inducement. (Id. at 7-8.)
CPI disagrees. It contends that Minnesota does not require proof of a direct misrepresentation to impose liability for
This Court agrees with MPS and Searfoss and finds that Count III of the Amended Complaint does not meet the particularity requirement of Rule 9(b) as to them. CPI's complaint is devoid of any "who, what, where, when, and how" of MPS and Searfoss's alleged fraudulent inducement. The potentially relevant parts of the complaint state:
65. Dwyer's misappropriation of CPI's trade secrets and other confidential business information was part of a persistent, well-orchestrated campaign of unfair competition by MPS, Searfoss, and Glinert. MPS, Searfoss, and Glinert, through their systematic, concerted, and unlawful efforts, are attempting to move business from CPI to MPS.
66. In furtherance of MPS' scheme, Dwyer conspired with MPS, Searfoss, and Glinert to misappropriate CPI confidential information and to target CPI clients in furtherance of MPS' corporate interests while still employed by CPI.
67. Dwyer's collusion with MPS, Searfoss, and Glinert started well before the termination of his employment with CPI on June 16, 2017. For example, Dwyer sent a copy of the Confidentiality and Nonsolicitation Agreement to Searfoss on January 4, 2017, from his personal email account (mr.j.dwyer@gmail.com).
(Am. Compl. ¶¶ 65-67.) And none of the paragraphs under Count III in the Amended Complaint contain a single factual assertion that would support the fraudulent inducement claim against MPS and Searfoss. (See Am. Compl. ¶¶ 117-22.) Moreover, the Court rejects CPI's contention that its allegation of a civil conspiracy (Count X) saves its fraud claim under Rule 9(b). The allegations under Count X likewise do not contain any factual allegations that comply with the particularity requirements of that Rule.
Therefore, these Defendants' Motion for Partial Dismissal as to Count III is granted. However, in view of the liberal pleading standards of the Federal Rules of Civil Procedure, and because the date for amending pleadings has not been set, let alone passed, the Court grants the motion without prejudice and allows CPI, per their request, leave to amend the Amended Complaint to attempt to add sufficient facts to support its fraud claim.
3. Unfair Competition Claim Against MPS (Count IX)
Next, MPS argues that CPI's claim for unfair competition must be dismissed, asserting that in Minnesota, a claim for unfair competition is not an independent cause of action. (MPS and Searfoss Dismissal Mem. at 8.) Rather, MPS asserts that this claim is entirely "parasitic" and requires identifying an underlying tort that is not duplicative of other counts in the complaint. (Id. n. 4 (citing United Wild Rice, Inc. v. Nelson ,
CPI again disagrees. It contends that while "an unfair competition claim cannot be wholly duplicative of another claim," it is permitted when non-duplicative tortious behavior is alleged. (Pls.' Opp'n Dismissal at 5.) CPI contends that it has alleged two non-duplicative grounds to support its unfair competition claim: (1) that MPS improperly obtained and used confidential information;
The Court agrees with CPI, and finds that its claim that MPS engaged in unfair competition does not warrant dismissal at this stage. At the outset, MPS and Searfoss's contention that unfair competition is not an independent cause of action in Minnesota is not quite on point. See Radisson Hotels Int'l, Inc. v. Westin Hotel Co. ,
Here, the Court is persuaded that, at this stage in litigation, CPI has sufficiently identified at least two underlying torts that may support its claim of unfair competition which do not wholly duplicate other counts in the complaint. First, CPI alleges that MPS obtained and used confidential information to unfairly compete with CPI. (Am. Comp. ¶ 174.) As thoroughly discussed above, disclosure, misuse, or acquisition of confidential information is not necessarily actionable as misappropriation of trade secrets . Otherwise stated, confidential information is broader than trade secret information, and thus a claim of unfair competition based on misuse of confidential information is not wholly subsumed by a trade secrets misappropriation claim. See Radisson Hotels ,
Moreover, CPI has also alleged that MPS tortiously "interfere[d] with CPI's current and prospective relationships with its customers," and does not allege this tort as a standalone count in its complaint.
III. ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED THAT:
1. Plaintiffs' Motion for a Preliminary Injunction is GRANTED as follows:
a. Defendants Dwyer, Searfoss, Glinert, and MPS whether alone, through a corporate entity, or in concert with others, including any officer, agent, employee, and/or representative of MPS, are restrained from directly or indirectly:
i. Communicating, disclosing, divulging, or furnishing any of CPI's confidential and proprietary information or trade secrets to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever; or
ii. Using any of CPI's confidential and proprietary information or trade secrets;
b. Defendant Dwyer, additionally, whether alone, through a corporate entity, or in concert with others, including any officer, agent, employee, and/or representative of MPS, is restrained from directly or indirectly working in or being exposed to, any aspect of MPS's transaction card business. Moreover:
i. MPS and Dwyer are instructed to work with their counsel to create a plan to ensure that Dwyer is walled off from information relating to MPS's transaction card business, similar to the ethical walls that attorneys use in private practice.
ii. That plan shall be submitted to this Court within fourteen (14) days of the date of this Order, and CPI shall have an opportunity toreview and lodge any objections to the plan.
iii. The plan shall include an enumeration of the steps that MPS proposes to take to wall off Dwyer as described herein; the communication plan to inform MPS employees and others who need to know of this wall; and the measures with respect to IT to ensure that Dwyer is not exposed to information about MPS's transaction business in electronic communications.
c. Defendants Dwyer, Searfoss, Glinert, and MPS shall return all documents containing CPI's confidential, proprietary, or trade secret information in their possession and control no later than seven (7) business days following the date of entry of this Order.
d. Defendants Dwyer, Searfoss, Glinert, and MPS shall execute declarations under oath that they no longer possess any documents containing CPI's confidential, proprietary, or trade secret information.
2. MPS and Searfoss's Motion for Partial Dismissal pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) [Doc. No. 48] is GRANTED in part and DENIED in part as follows:
a. Plaintiffs' Count III (Fraudulent Inducement of the Amendment) is DISMISSED as to Defendants MPS and Searfoss WITHOUT PREJUDICE ; and
b. MPS and Searfoss's Motion for Partial Dismissal is DENIED as to Count XI (Unfair Competition).
3. This Order is filed under seal. Within fourteen (14) days of the date of this Order, the parties are ORDERED to show cause as to why the Order should remain under seal, and if so, which portions of the Order should remain sealed and for how long. The parties will file briefs, under seal, each no longer than seven (7) pages, on this subject. Each party will also file, again under seal, a copy of this Order showing its proposed redactions. If the parties agree on these issues, they may file under seal a joint brief and/or proposed Redacted order.
Notes
Throughout this Order, the Court will cite to the depositions found in Exhibit A of the Declaration of Mira Vats-Fournier with the following convention: the ECF page number of the exhibit will be preceded by an "A," followed by a slash and the internal page number of the deposition. For example, the citation associated with this footnote refers to page 14 of Dwyer's deposition found at ECF page number 66 of Exhibit A to the Vats-Fournier Declaration.
See discussion in Section I.E, infra .
Dwyer maintains that his last day of active employment at CPI was May 16, 2017-or the last day he was to physically report to work at CPI per the Amendment. (Third Dwyer Decl. ¶ 11.) CPI, however, maintains that Dwyer's last day of employment at CPI was June 16, 2017, or the last day he was to provide as-needed services to CPI. (Am. Compl. ¶ 4.) It appears to be uncontroverted, however, that Dwyer officially began working with MPS on June 5, 2017. (Third Dwyer Decl. ¶ 14.)
The Court will refer to MPS, Searfoss, and Glinert collectively as the "MPS Defendants." "Defendants," in turn, will refer to these defendants plus Dwyer.
On September 8, CPI filed the Amended Complaint, now the operative complaint in this litigation. (See Am. Compl.)
The Amended Complaint does not assert Count III against Glinert. (See Am. Compl. ¶¶ 117-22.)
Magistrate Judge Noel found that Winston had improperly reviewed and used confidential and attorney-client privileged information belonging to Dwyer. (MJ Order at 7-12.) He found Winston's conduct prejudicial to the administration of justice and in violation of the Minnesota Rules of Professional Conduct, warranting disqualification as CPI's counsel. (Id. at 12.) However, Magistrate Judge Noel found that the conduct of Briggs did not merit disqualification. (Id. )
So far as the Court can discern, the June 1st presentation duplicates some of the content of the May 18th presentation and adds additional content. Because CPI focuses its arguments on the contents of Exhibit 11, the June 1st presentation, so does the Court.
The Court underscores that it is not making final factual findings as to the evidence on this claim. In addition to the evidence described above, there abounds plenty of evidence that calls into question the arguments of all parties. But given the extraordinary nature of preliminary injunctions, "in weighing an application for a preliminary injunction, to doubt is to deny." Evening News Pub. Co. v. Allied Newspaper Carriers of N. J. ,
Although CPI also claims that Dwyer breached the non-disclosure provisions of the Option Agreement, (Am. Compl. ¶¶ 123-133 (Count IV) ), for ease of analysis, the Court will focus only on the Confidentiality Agreement.
The Confidentiality Agreement provides that it "shall be construed and interpreted according to the laws of the State of Minnesota." (Confidentiality Agreement ¶ 13.)
In any event, Delaware law on this fraud claim is substantially the same. In Delaware, to prevail in a claim for fraud, a plaintiff must show: "1) a false representation, usually one of fact ...; 2) the defendant's knowledge or belief that the representation was false, or was made with reckless indifference to the truth; 3) an intent to induce the plaintiff to act or to refrain from acting; 4) the plaintiff's action or inaction taken in justifiable reliance upon the representation; and 5) damage to the plaintiff as a result of such reliance." Hauspie v. Stonington Partners, Inc. ,
The Court reaches this conclusion as to Dwyer only, and does not address CPI's fraud claim against MPS and Searfoss. As to MPS and Searfoss, this claim is dismissed without prejudice as discussed in Section II.B.2, infra .
It is unclear whether the other individual was an attorney, but Glinert states that this list of customers was being provided to MPS attorneys. (Glinert Dep. at A18-19/72-74.)
Moreover, the Court finds unpersuasive Defendants' efforts to cast CPI's motion as being preoccupied with historical events. As already described, these events allow the Court to infer irreparable harm, even if it had not otherwise found evidence of actual past and future irreparable harm. For similar reasons, the Court need not address CPI's alternative argument that it should draw a negative inference against MPS based on the parties' discovery disputes. (Pls.' Reply at 6-10.) The Court expresses no opinion on this issue.
CPI asserts that it now has information to add Glinert as a defendant on that count, and it will be permitted to do so as well.
CPI does allege tortious interference with contract against the MPS Defendants. (Am. Compl. ¶¶ 161-66 (Count VIII).) However, Minnesota recognizes both tortious interference of contract as well as "tortious interference with prospective economic advantage." Gieseke ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc. ,
Although CPI alleges that MPS "interfered with CPI's current and prospective business relationships with its customers," the Minnesota Supreme Court recently explained that "the phrase 'tortious interference with prospective economic advantage' most accurately describes the cause of action," and this Court encourages the parties to follow this convention. See