DM Trans, LLC v. Lindsey Scott ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-3101
DM TRANS, LLC d/b/a
ARRIVE LOGISTICS,
Plaintiff-Appellant,
v.
LINDSEY B. SCOTT, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:21-cv-03634 — Harry D. Leinenweber, Judge.
____________________
ARGUED APRIL 21, 2022 — DECIDED JUNE 28, 2022
____________________
Before EASTERBROOK, ROVNER, and BRENNAN, Circuit
Judges.
BRENNAN, Circuit Judge. DM Trans, LLC (which does
business as Arrive Logistics, or “Arrive”) and Traffic Tech, Inc.
compete to help customers coordinate shipments of goods.
Six employees at Arrive departed for Traffic Tech despite
restrictive covenants. Arrive sued the six individuals and
Traffic Tech for injunctive relief, claiming irreparable harm
2 No. 21-3101
because the individuals had breached their restrictive
covenants and misappropriated trade secrets. The district
court sided with the defendants and denied Arrive’s motion
for a preliminary injunction. Because Arrive has an adequate
remedy at law for each of its claimed injuries, and therefore
faces no irreparable harm, we affirm the denial of injunctive
relief.
I
A. Factual Background
Arrive and Traffic Tech are rivals in the third-party
logistics industry. Brokers such as Arrive and Traffic Tech
serve as middlemen tasked with arranging certain details of
agreements between customers (who ship goods) and carriers
(who transport them). The brokers submit bids to customers,
many of which solicit bids from multiple brokers.
Both Arrive and Traffic Tech employ more than one
hundred entry-level sales representatives in the Chicago area,
and they retain many more nationwide. Those employees
often contact potential customers to ask for their business.
Beyond Arrive and Traffic Tech, hundreds of third-party
logistics companies compete with one another just in the
Chicago area.
Between 2017 and 2019, each of the six individual
defendants—Lindsey Scott, Frank Hernandez, Matthew
Duffy, Bryan Klepperich, Jake Hoffman, and Scott Mayer—
joined Arrive as an entry-level employee. Though their job
titles differed slightly, a significant proportion of each
individual defendant’s responsibilities was to cold call
potential customers (other than Duffy, who worked on
pricing). While employed at Arrive, the six individuals sought
No. 21-3101 3
management-level positions and raises that Arrive was not
willing to provide.
All six individuals had access during their employment to
Arrive’s software platform, called Accelerate. Accelerate
contained information about customers, including their
contact information, buying history and trends, and
preferences. Arrive began to use Accelerate in March 2020,
around the onset of the COVID-19 pandemic. Accelerate was
updated continuously with new data such as shipment
information and sales metrics. As time passed the same type
of information remained on Accelerate, though in near-real
time, new data—such as shipments and employee sales
metrics—were added. Because Arrive’s employees began
working remotely during the early stages of the pandemic,
they used personal devices for all work-related tasks from
that point forward, including tasks that involved accessing
and using Accelerate. Arrive did not request that the six
individuals delete company data from their personal devices
upon their departure from the company, a point to which we
will return.
When each individual defendant joined Arrive, he or she
was required to sign an employment agreement containing
restrictive covenants. Those agreements included non-
competition provisions (lasting for six months after the
termination of employment) and non-solicitation provisions
(lasting for twelve months after the same date).
At different times between December 2020 and January
2021, Arrive required the individual defendants to sign
updated employment agreements (“the 2020–21 employment
agreements”), which included new restrictive covenants. The
2020–21 employment agreements provided for the same
4 No. 21-3101
temporal non-competition and non-solicitation obligations as
the previous agreements. The updated non-competition
provisions prohibited the employees from “[e]ngag[ing] or
participat[ing] in the rendering of services which are the same
or similar to the services Employee provided over the last
two … years of employment with the Company in any aspect
of the Business in the Territory,” which as defined in the
agreements consists of the 48 contiguous states and the
District of Columbia. Additionally, the 2020–21 employment
agreements stated: “In the event of any breach by Employee
of [the non-competition or non-solicitation obligations], the
time periods of such restrictive covenants shall be further
extended in an amount equal to the time period of the
breach.”
The 2020–21 employment agreements also contained a
broad arbitration provision under which all disputes—other
than actions filed by Arrive or its affiliates, seeking injunctive
relief—must be settled by binding arbitration. The parties do
not contest the validity of this arbitration provision.
Throughout spring 2021, each of the individual
defendants resigned from Arrive and joined Traffic Tech.
Lindsey Scott was the first to learn about an opportunity at
Traffic Tech when a third-party recruiter contacted her. Scott’s
offer from Traffic Tech afforded her a more attractive job title,
greater responsibility, and approximately $50,000 in
additional compensation than her position at Arrive. She
started at Traffic Tech on May 3, 2021.
The remaining individual defendants (aside from Duffy)
also learned of job opportunities at Traffic Tech through a
No. 21-3101 5
third-party recruiter. 1 Nearly all the individual defendants
were offered more senior positions at Traffic Tech.
B. Procedural History
Arrive, headquartered in Texas, filed its original complaint
in June 2021 against five of the individual defendants in the
United States District Court for the Western District of Texas;
neither Hoffman nor Traffic Tech was sued. The complaint
alleged the defendants had breached their contractual
obligations under the 2020–21 employment agreements. It
also alleged violations of the federal Defend Trade Secrets
Act; violations of the Texas Uniform Trade Secrets Act; and
tortious interference with current and prospective customer
relations and business relations.
Arrive’s original complaint sought injunctive relief in
several respects, including prohibiting the individual
defendants from working for Traffic Tech or any other
company providing services in the third-party logistics
industry within the nation’s 48 contiguous states. Along with
its complaint, Arrive moved for a temporary restraining
order.
After a telephonic hearing, the Texas district court denied
Arrive’s request for a TRO. That court ordered the parties to
brief a jurisdictional issue, as well as conduct expedited
discovery, in advance of an expected preliminary-injunction
hearing. In the meantime, the court granted the defendants’
motion to transfer the case to the United States District Court
for the Northern District of Illinois.
1 Duffy had previously worked for Traffic Tech and was contacted by a
former colleague about returning there.
6 No. 21-3101
Arrive then filed its operative Second Amended
Complaint, adding Traffic Tech as a defendant and including
new allegations of tortious interference with contract and
unjust enrichment against Traffic Tech. The next month,
Arrive moved for a preliminary injunction. Following the
completion of expedited discovery and a hearing, the Illinois
district court denied injunctive relief in an opinion and order.
Applying Texas contract law, the court concluded that
Arrive was unlikely to succeed on the merits of its breach of
contract claims because the individual defendants’ non-
solicitation and non-competition obligations were likely
unenforceable. Likewise, the court explained that Arrive had
a low probability of success on its trade secrets claims because
it had not sufficiently identified the purported trade secrets or
taken reasonable steps to maintain the secrecy of its
information. The district court also found insufficient
evidence of irreparable harm. Finally, the court reasoned that
the balance of harms favored the individual defendants,
because in its view an injunction would functionally require
them to stop working for Traffic Tech. Arrive now appeals
that denial of Arrive’s preliminary injunction motion.
II
We begin with jurisdiction. The parties are correct that the
district court had federal question jurisdiction over the claims
for injunctive relief under the Defend Trade Secrets Act, 18
U.S.C. § 1836(b)(3), and supplemental jurisdiction over
Arrive’s state-law claims under 28 U.S.C. § 1367. But there are
two additional concerns: the appealability of the court’s order
denying injunctive relief, and mootness.
No. 21-3101 7
A. Appeals from the Denial of Injunctive Relief
Though the parties do not dispute that the district court’s
denial of injunctive relief may be appealed, “federal courts
have an independent obligation at each stage of the
proceedings to ensure that they have subject matter
jurisdiction over the dispute.” Olson v. Bemis Co., 800 F.3d 296,
300 (7th Cir. 2015) (citations omitted). Under 28 U.S.C.
§ 1292(a)(1), this court has jurisdiction to adjudicate an appeal
from a district court’s order “refusing” to issue a preliminary
injunction, even where no final judgment has issued. That
statute is a limited exception to the final-judgment rule, and
we construe it narrowly. Albert v. Trans Union Corp., 346 F.3d
734, 737 (7th Cir. 2003). Where the district court’s order
“stripped the case of its equitable component,” the Court of
Appeals has jurisdiction to consider an interlocutory appeal
based on the denial of injunctive relief. Chicago Joe’s Tea Room,
LLC v. Vill. of Broadview, 894 F.3d 807, 812 (7th Cir. 2018)
(citation omitted).
Here, the district court’s order denied Arrive’s motion for
a preliminary injunction in full. The court did not qualify its
order by stating that any claims remained pending before it,
and the parties do not contest that the order disposed of each
of Arrive’s claims for injunctive relief. Thus, the district court
stripped the case of its equitable component, 2 and we have
appellate jurisdiction under 28 U.S.C. § 1292(a).
2 By the terms of the 2020–21 employment agreements, Arrive’s requests
for injunctive relief constitute the sole component of the disputes between
Arrive and the individual defendants that may be resolved through
litigation, rather than by arbitration.
8 No. 21-3101
B. Mootness
The defendants also contend that certain aspects of this
appeal are moot. Because Article III forbids federal courts
from deciding moot questions or abstract propositions,
mootness is a jurisdictional inquiry that must be resolved at
the outset of an appeal. Stone v. Bd. of Election Comm’rs for City
of Chicago, 643 F.3d 543, 545 (7th Cir. 2011) (citing North
Carolina v. Rice, 404 U.S. 244, 246 (1971)). If our court cannot
grant the litigants any effectual relief, the appeal is moot, W.
Ill. Serv. Coordination v. Ill. Dep’t of Hum. Servs., 941 F.3d 299,
302 (7th Cir. 2019), and we are to vacate the order under
review and remand with instructions to dismiss for lack of
jurisdiction. Auto Driveaway Franchise Sys., LLC v. Auto
Driveaway Richmond, LLC, 928 F.3d 670, 674 (7th Cir. 2019)
(citing United States v. Munsingwear, Inc., 340 U.S. 36, 39–40
(1950)).
Where an appeal involves multiple distinct issues, a single
issue may become moot while the remainder of the dispute
between the parties does not. Home Care Providers, Inc. v.
Hemmelgarn, 861 F.3d 615, 621 (7th Cir. 2017) (citing Univ. of
Texas v. Camenisch, 451 U.S. 390, 393–94, 398 (1981)). The
defendants argue that aspects of this case are moot, so they
bear the burden of persuasion on that point. Id. at 620–21
(citation omitted); Portalatin v. Blatt, Hasenmiller, Leibsker &
Moore, LLC, 900 F.3d 377, 383 (7th Cir. 2018).
The defendants offer two reasons why Arrive’s claims for
breach of contract under Texas law are moot. First, the non-
competition provisions of the individual defendants’
restrictive covenants have expired, while the non-solicitation
provisions have lapsed for each individual defendant except
Duffy. Second, the defendants represent that three of the
No. 21-3101 9
individual defendants are no longer employed at Traffic Tech,
which they believe renders moot the breach-of-contract
claims against those defendants.
Arrive disagrees. It cites the tolling provision of the 2020–
21 employment agreements, which purports to extend the
effective time period of the restrictive covenants “in an
amount equal to the time period of the breach.” According to
Arrive, there is a live controversy regarding whether the
individual defendants should be enjoined from breaching the
restrictive covenants. Even if the tolling provision is
unenforceable, Arrive contends, this court should use its
equitable power to extend the effective time periods of the
restrictive covenants. With respect to the individual
defendants who no longer work for Traffic Tech, Arrive
argues the claims for breach of contract are also not moot. In
the absence of an injunction, those individual defendants
could work for Traffic Tech once again, or they could violate
their restrictive covenants while employed at another third-
party logistics company.
The first mootness issue is the closer of the two. In the
defendants’ view, Texas law renders the tolling provisions in
the restrictive covenants unenforceable, while Arrive
interprets Texas law differently. Ultimately, that question
need not be resolved because, under Texas law, “a district
court may exercise its equitable power to craft an injunction
that extends beyond the expiration of the covenant not to
compete.” Merritt Hawkins & Assocs., L.L.C. v. Gresham, 861
F.3d 143, 158 (5th Cir. 2017) (citing Guy Carpenter & Co., Inc. v.
Provenzale, 334 F.3d 459, 464 (5th Cir. 2003)); see also Premier
Indus. Corp. v. Tex. Indus. Fastener Co., 450 F.2d 444, 448 (5th
Cir. 1971) (“Appellants’ argument that the trial judge
10 No. 21-3101
exceeded his discretion by enjoining the appellants beyond
the time specified in the … contract is without merit.”). Texas
intermediate appellate courts have likewise observed that
state law gives trial courts the equitable authority to extend
the duration of restrictive covenants. See Sadler Clinic Ass'n,
P.A. v. Hart, 403 S.W.3d 891, 898–99 (Tex. App. 2013); Farmer
v. Holley, 237 S.W.3d 758, 761 (Tex. App. 2007).
Thus, the expiration of the time period of a former
employee’s restrictive covenants does not render moot an
employer’s request for an injunction to prevent the former
employee from violating those restrictive covenants. Guy
Carpenter, 334 F.3d at 464. If we were to remand this case to
the district court, that court would have equitable authority
to enjoin the individual defendants even if the tolling
provision of the 2020–21 employment agreements were
unenforceable under Texas law. See id.As for the second mootness issue, a court could still grant
Arrive effectual relief in the form of an injunction, even
though certain individual defendants no longer work for
Traffic Tech. Injunctive relief could prohibit them from
violating their restrictive covenants, either as employees of
Traffic Tech (if they were to be rehired there) or as employees
of another Arrive competitor in the third-party logistics
industry.
In sum, the defendants have not carried their burden of
persuasion to show the appeal is moot as to Arrive’s claims
for breach of contract. See Home Care Providers, 861 F.3d at 620–
21; Portalatin, 900 F.3d at 383. We have jurisdiction over this
appeal in its entirety.
No. 21-3101 11
III
We review a district court’s decision to deny a preliminary
injunction for abuse of discretion. Life Spine, Inc. v. Aegis Spine,
Inc., 8 F.4th 531, 539 (7th Cir. 2021). “Absent legal or factual
errors, we afford ‘great deference’ to the court’s decision.” Id.(citation omitted); see also Stuller, Inc. v. Steak N Shake Enters.,
Inc., 695 F.3d 676, 678 (7th Cir. 2012) (same). Within this
context, the district court’s legal conclusions are reviewed de
novo, and its findings of fact are reviewed for clear error.
Stuller, Inc., 695 F.3d at 678.
To obtain a preliminary injunction, the moving party must
show that it is likely to succeed on the merits, that it has no
adequate remedy at law, and that it will suffer irreparable
harm in the absence of an injunction. Life Spine, 8 F.4th at 539.
The moving party’s likelihood of prevailing on the merits
must exceed “a mere possibility of success.” Id. at 540
(quoting Ill. Republican Party v. Pritzker, 973 F.3d 760, 762 (7th
Cir. 2020)). A finding of irreparable harm to the moving party,
if the injunction is denied, is “a threshold requirement for
granting a preliminary injunction.” Id. at 545; Foodcomm Int’l
v. Barry, 328 F.3d 300, 304 (7th Cir. 2003). Harm is irreparable
if legal remedies available to the movant are inadequate,
meaning they are seriously deficient as compared to the harm
suffered. Life Spine, 8 F.4th at 545.
Because irreparable harm is a threshold requirement for
granting injunctive relief, we first analyze whether the district
court erred in concluding Arrive had not shown irreparable
harm. If the district court did not err in that respect, it was
within its discretion to deny the requested injunction. See
Lawson Prods., Inc. v. Avnet, Inc., 782 F.2d 1429, 1440–41 (7th
Cir. 1986) (affirming the district court’s denial of a
12 No. 21-3101
preliminary injunction based on the absence of irreparable
harm alone).
Arrive offers two reasons for why it faces irreparable harm
in the absence of an injunction. First, it contends the lost sales
and business opportunities arising from the individual
defendants’ alleged breaches of their restrictive covenants are
incalculable. Second, Arrive submits that the individual
defendants’ use of its confidential information is a separate,
independent form of irreparable harm. After considering
these arguments, we discuss the impact of Arrive’s failure to
request the deletion of allegedly confidential information on
its assertion of irreparable harm.
A. Lost Profits and Lost Opportunities
Arrive argues that lost sales, which are traceable to
employees’ violations of restrictive covenants, invariably
qualify as irreparable harm to the former employer. In
support of its argument, Arrive relies primarily on Hess
Newmark Owens Wolf, Inc. v. Owens, 415 F.3d 630 (7th Cir.
2005), and Turnell v. CentiMark Corp., 796 F.3d 656 (7th Cir.
2015). The defendants counter that lost sales generally do not
constitute irreparable harm, particularly where business
records enable the plaintiff corporation to calculate the
amount of lost sales. According to the defendants, the record
contains more than enough evidence to support the district
court’s factual finding that money damages could
compensate Arrive for lost sales attributable to their actions.
Our court recently observed that “harm stemming from
lost customers or contracts may be quantifiable if the lost
customers or contracts are identifiable.” Life Spine, 8 F.4th at
546. The district court noted that Traffic Tech identified
No. 21-3101 13
thirteen discrete customers who had contact with the
individual defendants and provided sales to Traffic Tech; two
of those customers transferred business to Traffic Tech for
reasons conceded to be unrelated to any violation of the
restrictive covenants at issue. For the remaining eleven
customers, the district court found the technology and
recordkeeping capabilities of Arrive and Traffic Tech would
make it “a straightforward process to calculate whether sales
volumes of any of the eleven businesses moved from Arrive
and to Traffic Tech.”
Where an appellant’s argument for reversing a district
court’s ruling on a preliminary injunction motion concerns a
factual finding, the appellant must meet the demanding clear-
error standard. See id. at 539, 541–42. The pertinent question
is whether the district court clearly erred in finding that the
customers at issue, and Arrive’s lost sales and profits with
respect to those customers, were identifiable. Yet on appeal,
Arrive does not show the district court erred, much less
clearly erred, in making these findings. Arrive fundamentally
fails to engage with the district court’s analysis. The company
does not discuss the eleven discrete customers identified by
Traffic Tech and the district court. Nor does it meaningfully
explain why the court was wrong to reason that the
differences in sales—between the periods before and after the
individual defendants left Arrive and joined Traffic Tech—
could easily be calculated.
The two cases on which Arrive relies, Hess Newmark and
Turnell, are inapposite. Here, the parties can identify the
eleven customers and calculate the extent to which they
shifted their business from Arrive to Traffic Tech following
the individual defendants’ departure from Arrive. In Hess
14 No. 21-3101
Newmark, a principal in a movie-promotion firm violated her
restrictive covenant by diverting business opportunities to
the firm’s rival and assisting the rival in setting up new
offices. 415 F.3d at 631–32. This court held that the harm to the
firm was irreparable because “[c]ompetition changes
probabilities” such that “[the firm] will not be able to identify
which contracts slipped from its grasp.” Id. at 632–33. But
here, probabilities are not at issue because the parties were
able to identify the eleven customers which had transferred
specific volumes of business from Arrive to Traffic Tech.
Thus, Hess Newmark does not assist Arrive.
In Turnell, a high-level executive in the commercial-
roofing business (Turnell) accepted a position with a
competitor after his employer fired him. By accepting the new
position and soliciting customers on behalf of his former
employer’s competitor, Turnell violated his restrictive
covenants. See 796 F.3d at 659–60. The district court entered a
relatively narrow preliminary injunction, id. at 660–61, and
this court found no abuse of discretion and affirmed. Id. at
662, 667. Importantly, even after Turnell appealed, “[n]either
party ha[d] quantified” the harm to the former employer
stemming from lost customer relationships and proprietary
information. Id. at 666. By contrast, both Traffic Tech and the
district court have posited a straightforward method for
quantifying the financial harm to Arrive that is traceable to
the individual defendants’ allegedly wrongful solicitation of
the eleven at-issue customers. Arrive has not meaningfully
contested the quantifiability of those losses. Turnell is thus
also not on point.
Further, Arrive submits that it suffers irreparable harm
because it loses “a potential opportunity” whenever a
No. 21-3101 15
prospective customer speaks with the individual defendants
and Traffic Tech, rather than Arrive, about potentially
handling a shipment. According to Arrive, this harm is
impossible to quantify—and thus irreparable—as it includes
the loss of opportunities to bid on shipments that are
ultimately not handled by either Arrive or the defendants.
The defendants respond that Arrive forfeited this “lost
opportunities” argument, which they also contend is
incorrect on the merits.
The defendants are correct that Arrive forfeited its
argument regarding lost opportunities. Issues and arguments
raised for the first time on appeal are forfeited, as are
arguments that are not sufficiently developed. Scheidler v.
Indiana, 914 F.3d 535, 540 (7th Cir. 2019); see also Jarrard v. CDI
Telecomms., Inc., 408 F.3d 905, 916 (7th Cir. 2005) (requiring
citation to relevant authority and meaningful argument to
defeat forfeiture). Though Arrive briefly mentioned the word
“opportunities” in its motion for injunctive relief, it did not
cite pertinent authority (such as Hess Newmark) or offer any
meaningful reasoning relating to the argument it now
advances.
Even if this argument had not been forfeited, lost
opportunities cannot support a showing of irreparable harm
under the circumstances presented here. The type of harm
Arrive alleges would ultimately translate into lost profits,
albeit indirectly, as in the end there is no economic value to
opportunities that are not converted to sales. Resisting this
reasoning, Arrive points to the deposition testimony of its
corporate representative, Scott Sandager. But Sandager
merely offered the conclusory statement that “every time
Lindsey [Scott] talks to a shipper that we’ve walked through,
16 No. 21-3101
could be an opportunity where previously they would have
talked to Arrive. So it’s really very challenging to indicate
that.” This testimony reflects an inadmissible legal conclusion
which restates the legal argument Arrive now advances. 3
Sandager’s testimony does not serve as competent evidence
that explains how lost opportunities, which do not ultimately
translate into agreements to handle shipments, could qualify
as irreparable harm traceable to the defendants’ actions.
A district court is within its discretion to find an adequate
remedy at law, and thus no irreparable harm, where the
corporation seeking injunctive relief can reasonably estimate
the value of its lost profits. Lawson Prods., 782 F.2d at 1440.
Arrive does not dispute that it can reasonably estimate the
value of profits it lost from the business the eleven customers
at-issue transferred to Traffic Tech. The district court was
therefore within its discretion to conclude monetary damages
were an adequate remedy at law.
B. Use of Confidential Information
Arrive also asserts that, beyond lost sales and profits, the
defendants’ use of Arrive’s confidential information itself
qualifies as irreparable harm. For that proposition, Arrive
cites only two district-court cases: Aon PLC v. Infinite Equity,
Inc., 2021 WL 4192072 (N.D. Ill. Sept. 15, 2021), and Vendavo,
Inc. v. Long, 397 F. Supp. 3d 1115 (N.D. Ill. 2019). Like here,
those cases involved claims for breach of contract and
misappropriation of trade secrets brought by corporations
against former employees and their new employers. In
3
Cf. Good Shepherd Manor Found., Inc. v. City of Momence, 323 F.3d 557, 564
(7th Cir. 2003) (observing that a witness’s testimony “as to legal
conclusions that will determine the outcome of the case is inadmissible”).
No. 21-3101 17
finding that a likelihood of irreparable harm had been shown,
both courts reasoned it would not be possible to determine
the costs the plaintiff company incurred—or the defendant
company avoided—to learn about client needs and
preferences. Aon, 2021 WL 4192072, at *26–28; Vendavo, 397 F.
Supp. 3d at 1144.
To begin, Arrive argues as though Aon and Vendavo are
binding authority on this court, which of course they are not.
A district court’s decision “does not have stare decisis effect;
it is not a precedent.” Midlock v. Apple Vacations W., Inc., 406
F.3d 453, 457 (7th Cir. 2005) (citations omitted). “It may be a
wise, well-reasoned decision that persuades by the quality of
its reasoning, but … [t]he fact of such a decision is not a reason
for following it.” Id. at 458. We consider whether Aon and
Vendavo are on point and persuasive on the proposition for
which Arrive cites them.
Aon differs from this case in an important respect. There,
the court relied on factual findings about the risk of “a
complete loss” of client relationships in concluding that the
defendants’ use of confidential client information supported
a finding of irreparable harm. 2021 WL 4192072, at *27 (citing
Foodcomm, 328 F.3d at 304). But there is no evidence to support
a complete loss of Arrive’s client relationships. Arrive makes
no such allegation.
Vendavo is not entirely on point either. The trial court’s
finding of irreparable harm there rested on its assessment that
the former employee’s new position would result in the
“inevitable disclosure” of trade secrets. 397 F. Supp. 3d at
1142, 1144. By contrast, here the trial court examined the
record and found Arrive had not sufficiently shown that any
18 No. 21-3101
of its proffered categories of information qualified as trade
secrets. Moreover, the evidence before us does not support
any assertion of the inevitable disclosure of trade secrets
because the individual defendants’ jobs at Traffic Tech were
management-level positions for which their responsibilities
differed significantly from those they had at Arrive. Just
because the individual defendants remained in the third-
party logistics industry does not mean they would inevitably
disclose trade secrets.
To the extent the courts in Aon and Vendavo concluded or
suggested that a former employee’s use of confidential
information is independently sufficient to support a finding
of irreparable harm, we decline to adopt that analysis.
Regardless of what costs were incurred or avoided in the past,
a future threat of irreparable harm must exist to warrant
injunctive relief. See Lawson Prods., 782 F.2d at 1440–41. That
is, the movant must show it “will suffer” irreparable harm in
the absence of an injunction. Stuller, Inc., 695 F.3d at 678. In
some cases, a former employee’s use of an employer’s
confidential information could support a finding of
irreparable harm to the former employer. But there must be a
causal mechanism to support such a finding. For instance, in
a typical dispute of this sort, the former employee’s use of
confidential information could harm the employer by causing
a loss of profits or customer relationships. In such a case, the
employer must show the lost profits or lost customer
relationships cannot be calculated with any reasonable degree
of certainty. See, e.g., Life Spine, 8 F.4th at 545–46.
As just discussed, the only mechanism Arrive posits for
how the individual defendants’ use of Arrive’s confidential
information could give rise to future irreparable harm is
No. 21-3101 19
through lost sales and profits. Yet, those lost sales and profits
relate to eleven identifiable customers, and they can be
quantified using a straightforward process. So, Arrive’s lost
sales and profits do not support a finding of irreparable harm.
For these reasons, the district court was within its
discretion to conclude that Arrive had an adequate remedy at
law and would suffer no irreparable harm in the absence of
an injunction. Because that “threshold requirement” for
injunctive relief was not met, Life Spine, 8 F.4th at 545, the
district court did not abuse its discretion in denying the
requested preliminary injunction. 4 See Lawson Prods., 782 F.2d
at 1440–41.
C. Arrive’s Failure to Protect its Information
Arrive contends the defendants’ use of its confidential
information requires a finding of irreparable harm, and it
argues the district court clearly erred in concluding otherwise.
But the company’s conduct upon the individual defendants’
departures tells a different story.
Because of policies that Arrive put in place at the onset of
the pandemic, the individual defendants had access to the
Accelerate platform on their personal devices. Thus, as a
result of Arrive’s business decisions, the individual
defendants were able to use their personal devices to retrieve
and download the categories of information the company
categorizes as trade secrets. Arrive does not contest this.
4The parties disagree about whether the district court erred in concluding
that Arrive was not likely to succeed on the merits of its claims for breach
of contract against the individual defendants. We do not address that
dispute because we resolve this case on other grounds.
20 No. 21-3101
Nevertheless, a human resources manager conducted exit
interviews of Scott, Mayer, Hernandez, and Hoffman without
asking them to produce their personal devices for inspection,
state whether they had company data on those devices, or
remove company data. Defendants also maintain that they
were willing to return or destroy the information Arrive
characterizes as confidential, but they were unable to do so
because of a litigation hold. Arrive failed to take basic steps to
prevent the individual defendants from possessing its
purportedly confidential information. So, the company’s
claim that their possession qualifies as irreparable harm rings
hollow. Arrive could have prevented the claimed harm by
taking greater care in executing information-security
procedures prior to, or immediately following, the
termination of the individual defendants’ employment. 5 Even
though Arrive failed to do so, the defendants have offered the
company the opportunity to remedy the harm by turning
over or destroying the information at issue. Arrive has
evidently refused that offer. Accordingly, it cannot show
5
As the district court noted, to succeed on a claim for misappropriation of
trade secrets, a company must take reasonable measures to protect the
secrecy of its information. This requirement is codified within the Defend
Trade Secrets Act as part of the definition of the term “trade secret.” 18
U.S.C. § 1839(3)(A). Courts evaluate the question of whether efforts to
keep information confidential were sufficient “on a case-by-case basis,
considering the efforts taken and the costs, benefits, and practicalities of
the circumstances.” Tax Track Sys. Corp. v. New Inv. World, Inc., 478 F.3d
783, 787 (7th Cir. 2007); see also Rockwell Graphic Sys., Inc. v. DEV Indus.,
Inc., 925 F.2d 174, 179–80 (7th Cir. 1991). In some circumstances, judgment
as a matter of law for defendants is appropriate because it is “readily
apparent that reasonable measures simply were not taken.” Tax Track, 478
F.3d at 787. This could be such a case, considering the facts.
No. 21-3101 21
irreparable harm arising from the defendants’ alleged use of
the information claimed to be confidential.
IV
Arrive focuses primarily on the district court’s denial of
injunctive relief on its claims for breach of contract and, to a
lesser extent, its claims for misappropriation of trade secrets.
Although the absence of irreparable harm independently
precludes Arrive from obtaining a preliminary injunction
based on those claims, for completeness we also consider
whether the district court abused its discretion in balancing
the relative harms. We discuss Arrive’s tortious interference
claims as well.
A. Balancing of Harms
If the movant makes the required threshold showings of
irreparable harm and a likelihood of success on the merits, the
court then weighs “the irreparable harm the moving party
will endure if the preliminary injunction is wrongfully denied
versus the irreparable harm to the nonmoving party if it is
wrongfully granted” and “the effects, if any, that the grant or
denial of the preliminary injunction would have on
nonparties.” Turnell, 796 F.3d at 662 (citations omitted). Under
this “sliding scale” approach, “the more likely [the moving
party] is to win, the less the balance of harms must weigh in
his favor; the less likely he is to win, the more it must weigh
in his favor.” Id. Unless the district court’s legal conclusions
were incorrect or its findings of fact were clearly erroneous,
we afford the court’s ultimate decision “great deference.” Life
Spine, 8 F.4th at 539; Speech First, Inc. v. Killeen, 968 F.3d 628,
638 (7th Cir. 2020).
22 No. 21-3101
In balancing the harms here, the district court reasoned
that Arrive would potentially suffer moderate financial
harm—much of which had already occurred by the time the
preliminary injunction motion was ripe for decision—if the
injunction were denied. On the other hand, the court believed
the individual defendants “would be heavily harmed”
because they would have to cease their work with Traffic Tech
if an injunction were issued. Thus, the court concluded that
the balance of harms favored the denial of injunctive relief,
“particularly as there is a low likelihood of success on the
merits” of Arrive’s claims for breach of contract and
misappropriation of trade secrets.
On appeal, Arrive asserts the district court abused its
discretion when balancing the harms. According to Arrive,
the court failed to sufficiently acknowledge the possibility
that Traffic Tech could have assigned the individual
defendants to work “outside of the continental United
States,” or it could have exclusively allocated them tasks
related to “service offerings that Arrive does not provide its
customers.”
That argument does not persuade. It would be highly
impractical for the individual defendants to work for Traffic
Tech outside the continental United States, so the district
court did not abuse its discretion when it did not seriously
consider that possibility. Similarly, the record belies Arrive’s
assertion that the requested injunction would not have put the
individual defendants out of work since they could have been
employed with Traffic Tech in a different capacity. Upon
joining Traffic Tech, the individual defendants had
management-level responsibilities, which were quite
different from those they held at Arrive. Nevertheless, Arrive
No. 21-3101 23
sued them. And during this litigation Arrive has attempted to
emphasize any minor or tangential similarities in job duties.
This indicates the district court was correct to conclude that
the injunction Arrive requested would have functionally
rendered the individual defendants unemployed.
Arrive required the individual defendants to sign broad
restrictive covenants. While litigating this case, Arrive has
taken aggressive positions that, if accepted, would strain the
limits of those contracts. We do not rule on whether the
restrictive covenants are enforceable. Yet, when balancing the
relative harms, the district court was well within its discretion
to consider and weigh the deleterious effects that an
injunction enforcing the restrictive covenants against the
individual defendants would impose on them. See Life Spine,
8 F.4th at 546 (affirming the district court’s balancing of
harms).
Nor do Arrive’s other arguments about the district court’s
balancing of harms fare any better. The company contends the
court abused its discretion by noting Arrive had already
suffered much of its claimed economic harm by the time the
court decided its motion. But Arrive cites no authority for the
proposition that a trial court may not consider whether harm
to the movant has already occurred, as opposed to having the
potential to occur in the future. To the contrary, the court’s
interpretation is consistent with our case law requiring a
party moving for injunctive relief to show it “will suffer”
irreparable harm in the absence of such relief. Speech First, 968
F.3d at 637; Stuller, Inc., 695 F.3d at 678.
And again, Arrive cannot rely on the defendants’ alleged
use of confidential information to show irreparable harm
24 No. 21-3101
when that purported harm would not have been possible but
for the company’s own carelessness. Arrive failed to take
basic steps to ensure that the individual defendants would
not have access to confidential information after their
employment, and it has declined their offer to return or
destroy such information during this litigation. These
weaknesses in Arrive’s assertion of irreparable harm further
support the conclusion that the district court acted within its
discretion in balancing the relative harms.
Our decision today does not foreclose Arrive’s ability to
recover from the individual defendants. Under the 2020–21
employment agreements, Arrive’s claims against the
individual defendants are subject to arbitration. Those
proceedings are currently pending, and the merits of the
disputes will be resolved in that forum. Before the arbitrator,
Arrive will have ample opportunity to offer proof as to the
extent of the economic harms it has suffered. But given the
balance of harms, the district court was within its discretion
to deny injunctive relief.
B. Tortious Interference Claims
Finally, we assess Arrive’s claims for tortious interference.
Two sets of claims are at issue: tortious interference with
current and prospective economic advantage (against all
defendants) and tortious interference with contract (against
Traffic Tech). These claims were pleaded in the Second
Amended Complaint, and briefed in Arrive’s preliminary
injunction motion, but they were not decided by the district
court. The district court did not give a reason why it did not
address these claims, nor have we located such a reason in the
record.
No. 21-3101 25
Although the district court should have decided Arrive’s
tortious interference claims, this omission does not alter our
decision to affirm the denial of the preliminary injunction for
two reasons. First, in advancing these claims, Arrive alleges
the same type of harm as with its breach of contract and trade
secrets claims—lost profits, diminished customer
relationships, and the use of Arrive’s confidential
information. Because those harms are not irreparable, for the
reasons previously discussed, the district court did not abuse
its discretion by declining to issue an injunction to halt the
alleged tortious interference. Second, the district court
carefully balanced the harms. Under that balancing analysis,
the district court was within its discretion to deny an
injunction to preserve the individual defendants’ ability to
earn a living.
The tortious interference claims against the individual
defendants, then, are likewise subject to arbitration under the
2020–21 employment agreements. Still, this does not preclude
Arrive from recovering monetary damages against Traffic
Tech.
V
We have jurisdiction to hear this appeal from the denial of
a motion for a preliminary injunction. The entire appeal
presents a live controversy because under Texas law, the
district court had equitable authority to extend the terms of
the individual defendants’ restrictive covenants.
Arrive has failed to meet the threshold requirement of
irreparable harm. The district court did not err in concluding
that lost sales and profits, which allegedly resulted from the
defendants’ wrongful conduct, could be compensated
26 No. 21-3101
through monetary damages. Nor did Arrive show irreparable
harm through lost opportunities or the individual
defendants’ use of confidential information, both of which are
harms that would ultimately manifest in the form of
calculable lost sales and profits. Thus, there was no
irreparable harm, and the district court was correct to deny
the requested injunction. Further, even if Arrive had shown
irreparable harm, the trial court did not abuse its discretion in
balancing the relative harms.
For these reasons, we AFFIRM the district court’s denial of
the motion for a preliminary injunction.