IDG USA, LLC v. Schupp , 416 F. App'x 86 ( 2011 )


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  •      10-3405-cv (L)
    IDG USA, LLC v. Schupp
    UNITED STATES COURT OF APPEALS
    FOR THE SECOND CIRCUIT
    SUMMARY ORDER
    RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
    ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
    PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
    DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
    ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
    SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
    1            At a stated term of the United States Court of Appeals
    2       for the Second Circuit, held at the Daniel Patrick Moynihan
    3       United States Courthouse, 500 Pearl Street, in the City of
    4       New York, on the 25th day of March, two thousand eleven.
    5
    6       PRESENT: DENNIS JACOBS,
    7                              Chief Judge,
    8                ROSEMARY S. POOLER,
    9                PETER W. HALL,
    10                              Circuit Judges.
    11
    12       - - - - - - - - - - - - - - - - - - - -X
    13       IDG USA, LLC,
    14
    15                    Plaintiff-Counter-Defendant-
    16                    Appellee,
    17
    18                    -v.-                                        10-3405-cv (L)
    19                                                                10-3955-cv (Con)
    20       KEVIN J. SCHUPP,
    21
    22                Defendant-Counter-Claimant-
    23                Appellant.
    24       - - - - - - - - - - - - - - - - - - - -X
    25
    26       FOR APPELLANT:            Linda H. Joseph
    27                                 Schroder, Joseph & Associates LLP
    28                                 Buffalo, NY
    1
    1
    2   FOR APPELLEE:     Kevin Joseph English
    3                     Christopher L. Hayes (on brief)
    4                     Phillips Lytle LLP
    5                     Buffalo, NY
    6
    7
    8        Appeal from the grant of a preliminary injunction by
    9   the United States District Court for the Western District of
    10   New York (Skretny, J.).
    11
    12        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
    13   AND DECREED that the district court’s decision is AFFIRMED
    14   in part, VACATED in part, and REMANDED in part.
    15
    16        The Appellant, Kevin Schupp, appeals the district
    17   court’s grant of a preliminary injunction preventing him
    18   from: (1) working for competitors of the Appellee, IDG USA,
    19   LLC (“IDG”), in a capacity similar to the one he had while
    20   at IDG; (2) soliciting IDG customers that he managed while
    21   at IDG; and (3) disclosing IDG’s trade secrets and
    22   confidential information. We assume the parties’
    23   familiarity with the underlying facts, the procedural
    24   history, and the issues presented for review.
    25
    26        We review a district court’s grant of a preliminary
    27   injunction for abuse of discretion. Metro. Taxicab Bd. of
    28   Trade v. City of New York, 
    615 F.3d 152
    , 156 (2d Cir. 2010).
    29   A grant of preliminary relief is an abuse of discretion
    30   when: (1) the decision rests on an error of law; (2) the
    31   decision rests on a clearly erroneous factual finding; or
    32   (3) the decision, though not the product of a legal error or
    33   clearly erroneous factual finding, cannot be located within
    34   the range of permissible decisions. Sec & Exch. Comm’n v.
    35   Dorozhko, 
    574 F.3d 42
    , 45 (2d Cir. 2009).
    36
    37        To obtain a preliminary injunction, a party must
    38   establish both “irreparable harm absent injunctive relief,
    39   and either a likelihood of success on the merits, or a
    40   serious question going to the merits to make them a fair
    41   ground for trial, with a balance of hardships tipping
    42   decidedly in [its] favor.” Almontaser v. N.Y.C. Dep’t of
    43   Educ., 
    519 F.3d 505
    , 508 (2d Cir. 2008) (quoting Louis
    44   Vuitton Malletier v. Dooney & Bourke, Inc., 
    454 F.3d 108
    ,
    45   113-14 (2d Cir. 2006)). The district court was well within
    46   its discretion to conclude that IDG had shown a likelihood
    47   of success on the merits and irreparable harm. Therefore,
    2
    1   the district court properly issued a preliminary injunction
    2   against Schupp.
    3
    4        Schupp argues that IDG cannot show a likelihood of
    5   success on the merits because (i) the non-compete agreement
    6   (“NCA”) with him is inherently unenforceable, (ii) he never
    7   breached the NCA, and (iii) IDG breached the NCA thereby
    8   making it unenforceable against him. An NCA is enforceable
    9   if its restrictions are reasonable. BDO Siedman v.
    10   Hirshberg, 
    93 N.Y.2d 382
    , 388 (1999). A restriction is
    11   reasonable if it is no more than is needed to protect the
    12   employer’s legitimate interests, it imposes no undue
    13   hardship on the employee, and it does not injure the public.
    14   
    Id. at 388-89.
    Under New York law, an employer has a
    15   legitimate interest in both its relationships with its
    16   customers and its trade secrets. 
    Id. at 389,
    391. The
    17   limited term and scope of the NCA at issue here do not
    18   offend public policy. Therefore, the district court did not
    19   abuse its discretion in concluding that the NCA is
    20   enforceable.
    21
    22        The district court was within its discretion to
    23   conclude on the evidence presented at the preliminary
    24   injunction proceedings that Schupp breached the NCA. IDG
    25   presented substantial evidence that, immediately after he
    26   left IDG, Schupp began working nearby for one of IDG’s
    27   competitors, soliciting IDG’s clients, and disclosing IDG’s
    28   confidential information. This evidence is sufficient to
    29   reasonably conclude that Schupp violated the non-compete,
    30   non-solicit, and non-disclosure provisions of the NCA.
    31
    32        The district court was also within its discretion to
    33   conclude on the record of the preliminary proceedings that
    34   IDG did not breach the NCA. Schupp’s sole consideration for
    35   signing the NCA was a one-time payment of $3,000 by IDG,
    36   which IDG paid and Schupp accepted. Schupp’s constructive
    37   termination claim fails because he did not establish that
    38   IDG intentionally created a work environment so unpleasant
    39   that a reasonable person in Schupp’s position would feel
    40   compelled to resign. See Morris v. Schroder Capital Mgmt.
    41   Int’l, 
    7 N.Y.3d 616
    , 622 (2006) (“[T]he atmosphere in the
    42   workplace must be so intolerable as to compel a reasonable
    43   person to leave.”). In any event, Schupp was employed “at
    44   will.”
    45
    46        To establish irreparable harm, a plaintiff must
    47   establish both that an injury is likely absent the
    3
    1   injunction and that the injury cannot be adequately remedied
    2   with money damages. Grand River Enter. Six Nations, Ltd. v.
    3   Pryor, 
    481 F.3d 60
    , 66 (2d Cir. 2007); Moore v. Consol.
    4   Edison Co., 
    409 F.3d 506
    , 510 (2d Cir. 2005). Threatened
    5   dissemination of trade secrets generally creates a
    6   presumption of irreparable harm. See FMC Corp. v. Taiwan
    7   Tainan Giant Indus. Co., 
    730 F.2d 61
    , 63 (2d Cir. 1984) (per
    8   curiam). IDG presented substantial evidence that Schupp was
    9   disseminating IDG’s secrets, including to IDG’s customers
    10   and one of IDG’s primary competitors. The district court
    11   was within its discretion to conclude that IDG satisfied the
    12   irreparable harm requirement and that a preliminary
    13   injunction was justified.
    14
    15        However, while the district court was within its
    16   discretion to issue a preliminary injunction, the terms of
    17   the injunction fail to meet the specificity requirement of
    18   Federal Rule of Civil Procedure Rule 65(d) for two reasons.
    19
    20        First, the district court’s injunction insufficiently
    21   specified the trade secrets and confidential information
    22   that Schupp is forbidden to disclose. To satisfy Rule
    23   65(d), “the party enjoined must be able to ascertain from
    24   the four corners of the order precisely what acts are
    25   forbidden.” Sanders v. Air Line Pilots Ass’n Int’l, 473
    
    26 F.2d 244
    , 247 (2d Cir. 1972). An injunction that simply
    27   prohibits the disclosure of trade secrets or confidential
    28   information, with no additional description of what secrets
    29   or confidential information are to be protected, is
    30   insufficiently specific to satisfy Rule 65(d). Corning Inc.
    31   v. PicVue Elecs., Ltd., 
    365 F.3d 156
    , 157-58 (2d Cir. 2004).
    32   Because with respect to trade secrets and confidential
    33   information, the district court’s injunction here is no more
    34   specific than the one rejected in Corning, we vacate that
    35   portion of the preliminary injunction and remand to the
    36   district court to add additional specificity. The district
    37   court may consider tracking the words of the NCA, which
    38   defines trade secrets and confidential information. While
    39   an order granting a preliminary injunction may not
    40   incorporate extrinsic documents by reference, it can track
    41   language from such documents in order to add specificity to
    42   the injunction. The language in the NCA should be
    43   sufficient to satisfy Corning and Rule 65(d).
    44
    45        Second, the district court’s injunction does not
    46   specify the duration of any of its prohibitions. We remand
    47   for that amendment. The district court should consider that
    4
    1   the non-compete and non-solicit clauses of the NCA--but not
    2   the non-disclosure clause--have a one-year limit. The
    3   district court therefore should consider whether the
    4   prohibitions of these two clauses remain current. If on
    5   remand the district court determines that any of the time
    6   limits have expired, the district court should further
    7   modify the terms of the preliminary injunction to
    8   accommodate such circumstances.
    9
    10        Finally, we reject Schupp’s argument that the district
    11   court’s preliminary injunction is somehow invalid because
    12   the court failed to require IDG to post a bond until after
    13   Schupp specifically requested one almost a month after the
    14   preliminary injunction first issued. While the bond should
    15   have been required sua sponte at the time the injunction
    16   first issued (or the district court should have explained
    17   when issuing the injunction why no bond was being imposed),
    18   such error is harmless because the district has now required
    19   such a bond.
    20
    21        We hereby AFFIRM the district court’s grant of a
    22   preliminary injunction, but we VACATE in part and REMAND the
    23   district court’s specific injunctive order with instructions
    24   to further specify the nature of the confidential
    25   information and trade secrets that the Appellant is enjoined
    26   from disclosing and duration of each of the injunction’s
    27   prohibitions.
    28
    29
    30                              FOR THE COURT:
    31                              CATHERINE O’HAGAN WOLFE, CLERK
    32
    5