Bass, Berry & Sims attorney Chris Lazarini provided insight on a case involving a plaintiff’s request for a temporary restraining order (TRO) against former employees who allegedly stole confidential client contact information prior to resigning from the plaintiff’s firm. The plaintiff sought the TRO to stop the former employees from soliciting and stealing clients. The court considered the following four factors in deciding whether to grant temporary injunctive relief – likelihood of success on the merits, irreparable harm, harm to others, and public interest. Balancing these factors – two weighing for defendants, and two weighing for plaintiff, the court concludes plaintiff should have limited injunctive relief and enters a TRO.
Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SOLA, please visit the SOLA website to sign up for the newsletter.
Fort Washington Investment Advisors, Inc. vs. Adkins, No. 1:19-cv-685 (S.D. Ohio, 9/5/19)
*A temporary restraining order preserves the status quo pending a reasoned resolution of the dispute.
**The four factors considered when temporary injunctive relief is requested – likelihood of success on the merits, irreparable harm, harm to others, and public interest – are to be balanced, and are not prerequisites.
Plaintiff is an Ohio-based investment advisor. Defendants are former employees, both of whom had signed confidentiality agreements upon joining Plaintiff and one of whom had signed a non-solicitation agreement. During their employment, both Defendants had access to Plaintiff’s client information. After resigning from Plaintiff, Defendants immediately joined Wells Fargo Clearing Services, LLC, and, allegedly helped by Well Fargo’s employees, contacted certain of their former clients to inform them of their change in employment. After at least three clients transferred their accounts from Plaintiff to Wells Fargo, Plaintiff sued on claims of breach of contract, misappropriation of trade secrets, and computer fraud. Defendants denied using Plaintiff’s allegedly confidential information to contact clients and denied soliciting business from those they contacted; however, Plaintiff alleged that in the weeks leading to the resignations, one Defendant “accessed, printed, and/or deleted certain client files” from its “confidential client database.”
Here, the Court considers Plaintiff’s TRO request. Defendants did not object to entry of an order temporarily enjoining them and anyone acting in concert with them from soliciting Plaintiff’s clients and/or using any of Plaintiff’s confidential information to solicit clients. Defendants opposed, however, Plaintiff’’ request that the order also enjoin Defendants from “having any contact with any of [Plaintiff’s] clients[.]” Noting Plaintiff’s “heavy burden” to show entitlement to injunctive relief, the Court examines the four factors for such relief. On the likelihood of success on the merits, and notwithstanding Defendants’ denials, the Court finds Plaintiff made a reasonably strong argument that Defendants breached the confidentiality agreements when they shared client information with Wells Fargo and used it to contact clients.
The Court similarly finds Plaintiff would suffer irreparable harm absent the TRO, as three clients had transferred and others might do the same if the allegedly improper contact continued. However, the Court finds Defendants, their clients, and the public would be harmed by an overly restrictive TRO, like one having a blanket “no contact” rule instead of one distinguishing between clients contacted by Defendants and those who initiated contact on their own accord. Similarly, the Court finds the public’s interest in free and fair competition and the right to choose one’s own investment advisor would be chilled by a blanket “no contact” injunction.
Balancing these factors – two weighing for Defendants, and two weighing for Plaintiff, the Court concludes Plaintiff should have limited injunctive relief and enters a TRO prohibiting Defendants and anyone acting in concert with them from soliciting Plaintiff’s clients, using Plaintiff’s confidential information to solicit those clients, and contacting clients, excluding those who initiate contact with Defendants of their own free will without direct or indirect prompting or solicitation from Defendants. The Court also orders Defendants to advise Plaintiff and the Court if they have any information that “may constitute” Plaintiff’s confidential, trade secret, or proprietary information and to post a $233,000 bond.
The Court denied Plaintiff’s request for an order compelling Defendants to deliver to the Court for in camera inspection and preservation their personal and/or company-issued electronic devices, because “a temporary restraining order maintains the status quo; it does not provide affirmative relief.”