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Sky Capital Group, LLC v. Rojas

March 2, 2010

SKY CAPITAL GROUP, LLC, AN IDAHO LIMITED LIABILITY COMPANY, D/B/A ROADY'S TRUCK STOPS, PLAINTIFF,
v.
LAURA ROJAS, AN INDIVIDUAL; CHUCK WITZEL, AN INDIVIDUAL; JOHN DOES 1-10; AND JOHN DOE CORPS 1-10, DEFENDANTS.



The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge

MEMORANDUM ORDER

Before the Court in the above-entitled matter is the Plaintiff's second motion for preliminary injunction, motion to amend complaint, and Defendants' motion to strike. The parties have filed their responsive briefing on the motions and the matters are ripe for the Court's consideration. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, the motions shall be decided on the record before this Court without oral argument. Local Rule 7.1(d)(2)(ii).

Factual and Procedural Background

On February 3, 2009, the Plaintiff, Sky Capital Group, LLC, d/b/a Roady's Truck Stops (hereinafter "Roady's"), filed a complaint in Idaho state court against the Defendants, Laura Rojas and Chuck Witzel, who were employees of two companies purchased by Roady's in early 2007.*fn1 After Roady's purchased the two companies, it hired the Defendants as Roady's employees and retained them in their positions as Regional Managers. (Dkt. No. 1, p. 3). On November 24, 2008, both Defendants ended their employment with Roady's. Thereafter, Roady's alleges the Defendants unlawfully accessed Roady's administrative and email servers for the purpose of stealing trade secrets and other proprietary information. (Dkt. No. 1, Ex. 11). Specifically, Roady's contends that the Defendants accessed and stole their secret and proprietary information in the form of customer lists, pricing information, and marketing information. Roady's claims the Defendants engaged in such conduct for the purpose of starting their own company, Interstate Truck Stop Network (ITN), to directly compete with Roady's. As a result, Roady's initiated this lawsuit against the Defendants claiming: Breach of Idaho Trade Secrets Act; Tortious Interference with Prospective Economic Advantage; Tortious Interference with Contract; Unfair Competition; Conversion; Breach of Contract and Implied Covenants; and Slander and Business Disparagement. (Dkt. No. 1).*fn2 Roady's also filed a motion for preliminary injunction seeking to enjoin the Defendants from "using, disclosing, or transmitting any and all information improperly procured while Defendants were employed with Roady's, and improperly procured through access to Roady's computer systems and e-mail servers after terminating their employment with Roady's. The information includes but is not limited to: customer lists, vendor lists, pricing information, marketing information and other valuable customer and company information." (Dkt. No. 3, pp. 1-2). The Court denied that motion on May 14, 2009. (Dkt. No. 31)

Roady's has now filed its second motion for preliminary injunction seeking to enjoin the Defendants and ITN from "contacting any of Roady's current customers in violation of a valid non-compete agreement" and "from interfering with Roady's current contracts." (Dkt. No. 35, p. 2). In addition, Roady's has moved for leave to amend their complaint to add ITN as a named Defendant, amend its jurisdictional allegations, add a cause of action for violation of the computer fraud abuse act, add additional allegations supporting its conversion and unfair competition causes of action, and to amend its request for preliminary injunction. (Dkt. No. 36, p. 2). Defendants oppose the second motion for preliminary injunction and oppose the motion to amend the complaint to the extent that it seeks to add ITN as a named Defendant. (Dkt. No. 37, 40).

Analysis

I. Second Motion for Preliminary Injunction

A. Standard of Law

Preliminary injunctions are designed to preserve the status quo pending the ultimate outcome of litigation and to prevent irreparable harm. See Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1422 (9th Cir. 1984). They are governed by Federal Rule of Civil Procedure 65(a). While courts are given considerable discretion in deciding whether a preliminary injunction should enter, injunctive relief is not obtained as a matter of right and it is considered to be an extraordinary remedy that should not be granted unless the movant, by a clear showing, carries the burden of persuasion. SeeSampson v. Murray, 415 U.S. 61 (1974); Brotherhood of Locomotive Engineers v. Missouri-Kansas-Texas R. Co., 363 U.S. 528 (1960); and Stanley v. Univ. of Southern California, 13 F.3d 1313 (9th Cir. 1994). "A preliminary injunction is an 'extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.'" Saini v. International Game Tech., 434 F.Supp.2d 913, 919 (D. Nev. 2006) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (quoting 11A Charles Alan Wright & Arthur Miller, Federal Practice & Procedure § 2948 (2d ed.1995)).

Until recently the preliminary injunction standard in the Ninth Circuit was that a party is entitled to a preliminary injunction when it can demonstrate either: (1) a combination of probable success on the merits and the possibility of irreparable injury, or (2) the existence of serious questions going to the merits, where the balance of hardships tips sharply in plaintiff's favor. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1204-05 (9th Cir. 2000). The Supreme Court, however, found the "possibility of irreparable harm" standard to be too lenient and held that a plaintiff must demonstrate that irreparable injury is "likely in the absence of an injunction." Winter v. Natural Resources Defense Council, ___ U.S. ___, 129 S.Ct. 365, 375 (2008). "Issuing a preliminary injunction based only a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Id. at 375-76 (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). Because a preliminary injunction is an extraordinary remedy, "[i]n each case, courts 'must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief.'" Id. at 376 (citing Amoco Production Co. v. Gambell, 480 U.S. 531, 542 (1987)). "In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction." Id. at 376-77 (citations and quotations omitted). Thus, no longer are plaintiffs granted the presumption of irreparable harm upon a showing of a likelihood of success on the merits. Instead, plaintiffs seeking a preliminary injunction must establish they are likely to succeed on the merits, that they are likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. Jacobsen v. Katzer, CV 06-01905-JSW, 2009 WL 29881 *8 (N.D. Cal. Jan. 5, 2009). The Ninth Circuit recently recognized the applicability of the Winter decision in this Circuit and stating the rule as: "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." See American Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir 2009) (quoting Winter, 129 S.Ct. at 374). This Court will apply the standard articulated in Winter and recognized in this Circuit.

B. Discussion

The Court's Order on the first motion for preliminary injunction concluded that Roady's had not demonstrated a likelihood of success on the merits of some of its claim but had done so on certain of their other claims. (Dkt. No. 31). The Court denied that motion for preliminary injunction because it found that Roady's had not shown a likelihood of irreparable damage. Roady's now contends that because the Court's prior Order denying preliminary injunction concluded that it was likely to succeed on it claims for breach of contract and tortious interference, it need now only demonstrate irreparable injury in order to obtain a preliminary injunction. (Dkt. No. 35, p. 4). Roady's argues this second motion for preliminary injunction is distinct from the first in that the relief is not based on alleged trade secret violations but is, instead, sought to "stop Defendants from breaching valid and enforceable covenant not to compete, and to otherwise stop Defendants from unlawfully interfering with contracts between Roady's and its current customers." (Dkt. No. 35, p. 3). Roady's argues it is suffering irreparable damage from the Defendant's continued violations of the non-compete agreement and continued interferences with Roady's current contracts such that Roady's is unable to meet some of its purchasing obligations in its vendor agreements which is, they argue, immediately threatening to Roady's business model and viability. (Dkt. No. 35, p. 3).

The harm is irreparable, Roady's maintains, because it is not monetary but, instead, a loss of buying power in the form of leverage to negotiate discounts with national vendors. These vendor agreements have quotas requiring Roady's to purchase a certain amount of goods or services. (Dkt. No. 35, p. 6). The loss of customers, Roady's argues, impacts its ability to fulfill these quotas and could result in a loss of vendor agreements which, in turn, places Roady's entire business model in immediate jeopardy. Roady's points to thirty of its previous customers, amounting to ten percent of its market share, that they claim have terminated their contracts with Roady's. Of these customers, Roady's asserts, "a great majority" are now listed as ITN customers.*fn3 Defendants ...


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