Storz Management Co. v. Carey ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 STORZ MANAGEMENT COMPANY, a No. 2:18-cv-00068-TLN-DB California Corporation, and STORZ 12 REALTY, INC., 13 Plaintiffs, ORDER DENYING PLAINTIFFS’ MOTION FOR PRELIMINARY 14 v. INJUNCTION 15 ANDREW CAREY, an individual, and MARK WEINER, an individual, 16 Defendants. 17 18 19 This matter is before the Court on Plaintiffs Storz Management Company (“SMC”) and 20 Storz Realty, Inc.’s (“SRI”) (collectively, “Plaintiffs”) Motion for Preliminary Injunction. (ECF 21 No. 8.) Defendants Andrew Carey (“Carey”) and Mark Weiner (“Weiner”) (collectively, 22 “Defendants”) filed an opposition. (ECF No. 23.) Plaintiffs filed a reply. (ECF No. 25.) For the 23 reasons set forth below, Plaintiffs’ Motion for Preliminary Injunction is DENIED. 24 /// 25 /// 26 /// 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 Plaintiffs allege that Defendants, who were SMC’s Chief Executive Officer and Chief 3 Financial Officer/Chief Operating Officer, secretly started a competing business — called 4 “Monolith” — while employed by SMC. (ECF No. 7 at 2.) Plaintiffs filed a First Amended 5 Complaint (“FAC”) on January 30, 2018, stating claims for: (1) violation of the Defend Trade 6 Secrets Act; (2) breach of fiduciary duty; (3) breach of contract; (4) breach of implied covenant of 7 good faith and fair dealing; (5) intentional interference with contractual relationship; (6) fraud; (7) 8 violation of California’s Unfair Competition Law; and (8) violation of the Computer Fraud and 9 Abuse Act. (See id.) That same day, Plaintiffs filed the instant Motion for Preliminary 10 Injunction. (ECF No. 8.) 11 II. STANDARD OF LAW 12 Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear 13 showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555 14 U.S. 7, 22 (2008) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). “The 15 purpose of a preliminary injunction is merely to preserve the relative positions of the parties until 16 a trial on the merits can be held.” Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981) 17 (emphasis added); see also Costa Mesa City Employee’s Assn. v. City of Costa Mesa, 209 Cal. 18 App. 4th 298, 305 (2012) (“The purpose of such an order is to preserve the status quo until a final 19 determination following a trial.”) (internal quotation marks omitted); GoTo.com, Inc. v. Walt 20 Disney, Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (“The status quo ante litem refers not simply to 21 any situation before the filing of a lawsuit, but instead to the last uncontested status which 22 preceded the pending controversy.”) (internal quotation marks omitted). In cases where the 23 movant seeks to alter the status quo, preliminary injunction is disfavored and a higher level of 24 scrutiny must apply. Schrier v. University of Co., 427 F.3d 1253, 1259 (10th Cir. 2005). 25 Preliminary injunction is not automatically denied simply because the movant seeks to alter the 26 status quo, but instead the movant must meet heightened scrutiny. Tom Doherty Associates, Inc. 27 v.Saban Entertainment, Inc., 60 F.3d 27, 33–34 (2d Cir. 1995). 28 /// 1 “A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed 2 on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, 3 [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” 4 Winter, 555 U.S. at 20. A plaintiff must “make a showing on all four prongs” of the Winter test 5 to obtain a preliminary injunction. All. for the Wild Rockies v. Cottrell (Alliance), 632 F.3d 1127, 6 1135 (9th Cir. 2011). In evaluating a plaintiff’s motion for preliminary injunction, a district court 7 may weigh the plaintiff’s showings on the Winter elements using a sliding-scale approach. Id. A 8 stronger showing on the balance of the hardships may support issuing a preliminary injunction 9 even where the plaintiff shows that there are “serious questions on the merits...so long as the 10 plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the 11 public interest.” Id. Simply put, a plaintiff must demonstrate, “that [if] serious questions going to 12 the merits were raised [then] the balance of hardships [must] tip[ ] sharply in the plaintiff’s 13 favor,” in order to succeed in a request for preliminary injunction. Id. at 1134–35. 14 III. ANALYSIS 15 Plaintiffs argue they will suffer three types of irreparable harm in the absence of an 16 injunction: (1) serious monetary harm; (2) loss of future business opportunities; and (3) 17 reputational harm. (ECF No. 8-1 at 23.) In opposition, Defendants argue that Plaintiffs have not 18 shown irreparable harm because they only complain of past conduct and alleged harm. (ECF No. 19 23 at 20.) The Court agrees with Defendants. 20 “Purely economic harms are generally not irreparable, as money lost may be recovered 21 later, in the ordinary course of litigation.” Idaho v. Coeur d’Alene Tribe, 794 F.3d 1039, 1046 22 (9th Cir. 2015). Plaintiffs must “establish that remedies available at law, such as monetary 23 damages, are inadequate to compensate” for the injury arising from Defendants’ conduct. Herb 24 Reed Enter., LLC v. Fla. Entm’t Mgmt., Inc. (Herb Reed), 736 F.3d 1239, 1249–50 (9th Cir. 25 2013) (citation omitted). 26 In the instant case, Plaintiffs allege “Defendants have successfully poached 18 of 27 Plaintiffs’ fee managed clients, which represents over $452,000 in lost revenue annually.” (ECF 28 No. 8-1 at 23.) Yet Plaintiffs fail to explain why monetary damages would be inadequate to 1 remedy this alleged harm. See Herb Reed, 736 F.3d at 1249–50. Absent any argument or 2 evidence to the contrary, it appears Plaintiffs are capable of calculating and recovering monetary 3 damages “in the ordinary course of litigation.” Idaho, 794 F.3d at 1046. Therefore, Plaintiffs’ 4 alleged monetary harm is not a proper basis for granting an injunction. 5 Plaintiffs’ other alleged harms are also insufficient to warrant an injunction. Plaintiffs 6 summarily argue they “will continue to lose future business opportunities” and “are suffering 7 reputational harm as a result of Defendants’ wrongful actions.” (ECF No. 8-1 at 23.) These 8 conclusory statements are too speculative to establish irreparable injury. See Goldie’s Bookstore, 9 Inc. v. Superior Court of State of Cal., 739 F.2d 466, 472 (9th Cir. 1984) (concluding that in the 10 absence of factual support, the harm of losing goodwill and “untold” customers was too 11 speculative to constitute irreparable injury). Plaintiffs vaguely mention Defendants prepared an 12 investment circular that contained false information about SMC — namely, that SMC was an 13 affiliate of Monolith and supported Monolith’s operations. (ECF No. 8-1 at 23–24.) But it is 14 unclear how or even if such representations would cause damage to SMC’s reputation. 15 Plaintiffs cite eBay, Inc. v. Bidder’s Edge, Inc., 100 F. Supp. 2d 1058, 1066 (N.D. Cal. 16 2000), to argue “[h]arm resulting from lost profits and lost customer goodwill is irreparable 17 because it is neither easily calculable, nor easily compensable and is therefore an appropriate 18 basis for injunctive relief.” (ECF No. 8-1 at 22–23.) However, eBay is not persuasive. Like 19 several other cases cited by Plaintiffs, eBay predated Winter and applied a lesser standard, finding 20 among other things that the plaintiff had “at least established a possibility of irreparable harm” 21 based on loss of goodwill. eBay, 100 F. Supp. 2d at 1066 (emphasis added). Moreover, eBay 22 was factually distinct, the plaintiff provided considerable evidence of harm, and the defendant did 23 not “seriously contest” that lost customer goodwill constituted irreparable harm in that case. See 24 id. at 1065–66. Plaintiffs’ reliance on Pyro Spectaculars North, Inc. v. Souza, 861 F. Supp. 2d 25 1079 (E.D. Cal. 2012), is similarly unpersuasive. (ECF No. 25 at 8.) In Pyro, the defendant 26 admitted to funneling information from his old employer to his new employer to formulate 27 proposals to the old employer’s clients. 100 F. Supp 2d at 1092. There has been no such 28 admission in this case, and Plaintiffs’ factual allegations remain in dispute. 1 Plaintiffs cite various other cases for the general propositions that damage to goodwill, 2 | future business opportunities, or reputation may constitute irreparable harm. (See ECF No. 8-1 at 3 | 22-24; see also ECF No. 25 at 8.) But Plaintiffs have not fully developed their arguments or 4 | provided sufficient evidence “to demonstrate that irreparable injury is likely in the absence of an 5 | injunction” in this specific case. Winter, 555 U.S. at 22 (emphasis in original). Therefore, the 6 | Court need not and does not address Plaintiffs’ arguments as to the other prongs of the Winter 7 | test. See Alliance, 632 F.3d at 1132, 1135 (“[A] preliminary injunction requires a showing of 8 | likely irreparable injury.”). 9 IV. CONCLUSION 10 For the foregoing reasons, the Court DENIES Plaintiffs’ Motion for 11 | Preliminary Injunction. (ECF No. 8.) 12 13 ITIS SO ORDERED. DATED: February 19, 2021 14 A /) fs 6 al Pig 7 Troy L. Nuhlep United States District Judge 18 19 20 21 22 23 24 25 26 27 28