In deciding whether to issue a TRO, a court must consider 1) a likelihood of success on the merits; 2) likelihood of irreparable injury if injunctive relief is not granted; 3) balance of hardships; and 4) advancement of the public interest.
Edward D. Jones & Co. LP vs. Peterson, No. 19-1968 (D. Nev., 11/12/19).
Defendant Michael Peterson was hired as a financial advisor by Edward Jones in 2006. At that time, he signed an employment agreement which provided, inter alia, that he would be given Edward Jones’ confidential, proprietary, and trade secret information during the course of his employment and that he would return this material upon the termination of his employment. It also provided that he would not solicit any Edward Jones customer whom he served for one year after his employment terminated. In October 2019, Peterson resigned and joined Ameriprise. After Edward Jones determined that Peterson was violating the employment agreement, it filed suit against him, alleging violation of the federal Defend Trade Secrets Act (DTSA), Nevada’s codification of the Uniform Trade Secrets Act (UTSA), breach of contract, and injunctive relief.
It now seeks a temporary restraining order (TRO) against Peterson barring him from continued violation of the employment agreement pending the outcome of a FINRA arbitration that Edward Jones filed against him. In the complaint, Edward Jones alleged that Peterson copied a report that provided all the details about the customers that he serviced, that it was unable to locate the report, that Peterson solicited at least eleven of his customers, and sent transfer documents to fifteen others. The TRO is granted.
In deciding whether to issue a TRO, a court must consider 1) a likelihood of success on the merits; 2) likelihood of irreparable injury if injunctive relief is not granted; 3) balance of hardships; and 4) advancement of the public interest. Here, all four elements are met. First, Edward Jones is likely to succeed in showing that Peterson misappropriated trade secrets and confidential information to solicit Edward Jones’ customers. Under the DTSA and UTSA, the customer list that Peterson has allegedly used and continues to use to solicit Edward Jones’ current customers likely qualifies as a trade secret subject to protection. Further, Peterson’s alleged communications with Edward Jones’ current customers are likely in violation of the non-solicitation agreement.
Second, allowing Peterson to continue to use Edward Jones’ trade secrets and confidential information would result in immediate and irreparable injury to Edward Jones in the form of loss of income, loss of goodwill, damage to its reputation, and damage to its business relationships. Third, the balance of hardships favors Edward Jones. Denying Edward Jones’ request for a TRO would cause significant hardship to Edward Jones due to the irreparable harm that would likely result from Peterson’s continued use of its trade secrets and confidential information. Further, granting the request will not cause significant hardship to Peterson because he still will be able to continue working for Ameriprise, but will only be barred from using Edward Jones’ trade secrets and confidential information and from soliciting Edward Jones’ customers.
Fourth, public policy weighs in favor of issuing a TRO because there is a well recognized public interest in protecting trade secrets. The Court also declines to require Edward Jones to post a bond. Given the likelihood that Edward Jones will succeed on the merits and the limited hardship that a TRO will impose, there is a low probability that Peterson will suffer damages caused by an improperly granted TRO.
(P. Dubow: In some jurisdictions, a one-year bar against soliciting customers is not enforceable because of the hardship that it might impose on the employee. That may be the case here. Given that Peterson worked for Edward Jones for thirteen years, it is likely that many of his customers were initially solicited by him as opposed to having been delivered to him by Edward Jones. Not being able to contact these customers for one year could be a hardship.)
(SOLA Ref. No. 2019-46-02)
NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.
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