Pacific Woodtech Corporation v. Semsak ( 2019 )

1 2 UNITED STATES DISTRICT COURT FOR THE 3 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 4 ) 5 PACIFIC WOODTECH CORPORATION, ) A Washington Corporation, ) CASE NO. 2:19-cv-01984-BJR 6 ) Plaintiff ) 7 ) ORDER GRANTING IN PART AND v. ) DENYING IN PART MOTION FOR 8 ) TEMPORARY RESTRAINING ORDER DANIEL SEMSAK, ) AND ORDER TO SHOW CAUSE 9 ) Defendant. ) 10 ____________________________________) 11 12 I. INTRODUCTION 13 Before the Court is Plaintiff Pacific Woodtech Corporation’s motion for temporary 14 restraining order and order to show cause. Dkt. No. 6. Having reviewed the motion, the 15 declarations included thereto, and the record of the case as it exists, the Court with grant in part 16 and deny in part Plaintiff’s motion. The reasoning for the Court’s decision follows. 17 II. BACKGROUND 18 Plaintiff is a Washington state corporation and represents itself as a “leading manufacturer 19 of engineered wood products, specifically LVL and I-Joists.” Dkt. No. 1 at ¶ 1; see also id. at ¶ 6. 20 21 Defendant is a former executive who, until October of this year, worked for Plaintiff. See id. at ¶ 22 7. His last position at the company was as Northeast and Northwest Business Development 23 Manager. Id. 24 In this position, Plaintiff represents that Defendant had access to a “wide variety of 25 1 [Plaintiff’s] most confidential, proprietary, and trade secret information.” Id. at ¶ 9. According to 1 Plaintiff, Defendant agreed to be bound by Plaintiff’s confidentiality policies, including that he 2 3 would not “divulge or transmit any of [Plaintiff’s] confidential or trade secrets.” Id. at ¶ 8 see also 4 Dkt. No. 6 at 5–6 (providing an excerpt from Plaintiff’s employment handbook addressing 5 Confidential and Proprietary Information). 6 According to Plaintiff, on October 9, 2019, Defendant informed Plaintiff that he was 7 leaving their employ. Dkt. No. 1 at ¶ 10. Defendant informed Plaintiff that he would be taking a 8 position with Plaintiff’s industry competitor, Murphy Company (“Murphy”). Dkt. No. 6 at 2, 6. 9 Before leaving, Plaintiff’s CEO, James Enright, reminded Defendant of his obligations to return 10 11 all property belonging to Plaintiff and not to misappropriate company trade secrets. Dkt. No. 1 at 12 ¶ 11. 13 Shortly thereafter, members of Plaintiff’s company attended an industry trade show and 14 while there were informed that Defendant was present at the show and was divulging Plaintiff’s 15 “confidential [] pricing strategies involving current [] customers.” Id. at 12. 16 Plaintiff responded with a cease and desist letter instructing Defendant to cease divulgence 17 18 of company trade secrets and requesting that he return any company property. Id. at ¶ 13; see also 19 Dkt. No. 1-1 (cease and desist letter). In reply, Defendant sent a letter reaffirming his commitment 20 not to disclose or misuse Plaintiff’s confidential and proprietary information and enclosing a thumb 21 drive which he represented contained “all the written information related to” his employment with 22 Plaintiff, “confidential or otherwise,” that he retained after leaving the company. Dkt. No. 1 at ¶ 23 14; see also Dkt. No. 1-2 (Defendant’s response letter). 24 Plaintiff then hired a third-party expert who conducted a forensic analysis of Plaintiff’s 25 2 computer-related activities in his final weeks with the company. According to Plaintiff, the 1 analysis revealed that Defendant “downloaded sensitive [] Trade Secrets onto multiple flash drives 2 3 that [Defendant] took with him when he left” Plaintiff’s employ. Dkt. No. 1 at ¶ 15; see also Dkt. 4 No. 6 at 9 (providing tabular logs of downloaded materials). Plaintiff represents that there is “no 5 reason for any [of Plaintiff’s] employee[s] to download such data.” Dkt. No. 6 at 9. 6 Based on the foregoing, Plaintiff filed the current suit. Plaintiff’s complaint, filed on 7 December 4, 2015, asserts causes of action for (1) theft of trade secrets under the Defend Trade 8 Secrets Act, 18 U.S.C. § 1832 et seq.; (2) misappropriation of trade secrets under Washington 9 Revised Code (“RCW”) 19.108; (3) breach of duties of loyalty and confidentiality; and (4) 10 11 replevin. Dkt. No. 1 at ¶¶ 20–43. On December 5, 2015, Plaintiff moved for a temporary 12 restraining order which: (1) enjoins Defendant from disclosing or using Plaintiff’s confidential 13 information and trade secrets; (2) requires Defendant to turn over “all of [Plaintiff’s] confidential 14 information and trade secrets . . . as well as all of [Defendant]’s personal computers and 15 [Defendant]’s work computers” so that Plaintiff may image them to preserve evidence, identify to 16 whom else Defendant may have passed trade secrets, and to prevent further disclosure; (3) requires 17 18 Defendant to preserve all evidence; (4) requires Murphy to preserve all evidence; and (5) requires 19 Defendant to show cause as to why a preliminary injunction preventing him from possessing, 20 disclosing, or using Plaintiff’s confidential and trade secrets is not warranted. Dkt. No. 6 at 3–4. 21 III. LEGAL STANDARD 22 Federal Rule of Civil Procedure (“FRCP”) 65(b) empowers federal district courts to issue 23 temporary restraining orders (“TRO”). FED. R. CIV. P. 65(b); see also Local Rules W.D. Wash. 24 LCR 65(b). 25 3 To obtain a TRO, the movant must “meet the standards for issuing a preliminary 1 injunction.” Navigant Consulting, Inc. v. Milliman, Inc., No. 18-1154, 2018 WL 3751983, at *3 2 3 (W.D. Wash. Aug. 8, 2018). This includes the requirement that the movant show that (1) it is 4 likely to succeed on the merits of its claims, (2) it is likely to suffer irreparable harm in the absence 5 of preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the 6 public interest. Id. (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). 7 Local Western District of Washington Court Rule 65 states that “[m]otions for temporary 8 restraining orders without notice to and an opportunity to be heard by the adverse party are 9 disfavored and will rarely be granted.” Local Rules W.D. Wash. LCR 65(b)(1). Plaintiff’s motion 10 11 indicates that it has notified Plaintiff of this lawsuit and the pending motion. Dkt. No. 6 at 4. 12 Further, the Court will order the parties to appear on Wednesday, December 11, 2019 at 9 a.m. via 13 teleconference to discuss the terms of this order. The Court encourages Defendant, if he requires 14 additional time, to seek leave from the Court in modifying the time and date of the conference, 15 including for the purpose of retaining counsel. 16 IV. DISCUSSION 17 A. Likelihood of Success on the Merits 18 19 Plaintiff is likely to succeed on the merits of at least some of its claims. For example, 20 Plaintiff advances a claim for misappropriation of trade secrets under RCW 19.108, which permits 21 an injunction of “[a]ctual or threatened misappropriation” WASH. REV. CODE § 19.108.020(1); see 22 also Earthbound Corp. v. MiTek USA, Inc., No. 16-1150 RSM, 2016 WL 4418013, at *9 (W.D. 23 Wash. Aug. 19, 2016). The statute defines both “trade secrets” and “misappropriation.” See 24 WASH. REV. CODE § 19.108.010(2), (4). 25 4 In its motion, Plaintiff asserts that Defendant has misappropriated proprietary information 1 likely to constitute trade secrets under Washington law including “intellectual property related to 2 3 [Plaintiff]’s new and developmental products; customer and sales information (including key 4 contacts, order history and preferences, and other confidential customer information); pricing 5 information and strategies; financial information and analyses; market competitive analyses; 6 business, sales, and marketing strategies; and operations information.” Dkt. No. 6 at 6. See 7 Earthbound, 2016 WL 4418013, at *9–*10 (holding that “detailed information about [Plaintiff]’s 8 current and prospective customers, pending projects, bids, pricing, product design, and other 9 elements of its business constitute trade secrets”). The Court finds that Plaintiff has demonstrated 10 11 a likelihood of success on the merits. 12 B. Irreparable Harm 13 Plaintiffs asserts irreparable harm in the form of “losing clients, profit margin, [and] 14 revenue.” Dkt. No. 6 at 15. Such loses easily constitute irreparable harm. See Navigant, 2018 15 WL 3751983, at *4 (quoting Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 841 16 (9th Cir. 2001) (“The potential to lose customers, employees, goodwill, and revenue ‘certainly 17 support[s] a finding of the possibility of irreparable harm.’”). The Court finds that Plaintiff has 18 19 demonstrated the likelihood of irreparable harm if the TRO is not granted. 20 C. Balance of the Equities 21 The balance of the equities also points in Plaintiff’s favor. The relief that the Court will 22 grant in the form of the temporary retraining order against further dissemination of trade secrets 23 and preservation of evidence merely preserves the status quo. See Navigant, 2018 WL 3751983, 24 at *4 (“[t]here is minimal prejudice to Defendants because the TRO simply preserves the status 25 5 quo”). As such, there is minimal harm to Defendant or Murphy, as Defendant may continue his 1 employment with Murphy. See id. (finding minimal harm where order “does not prevent [former 2 3 employee] from continuing to work for [new employer”). The Court finds that the balance tips in 4 Plaintiff’s favor. 5 D. Public Interest 6 Finally, misappropriation of trade secrets is “harmful not only to the individual or entity 7 whose secrets are purloined, but also to the public.” Earthbound, 2016 WL 4418013, at *10. 8 Therefore, it is in the public interest to grant the TRO. 9 E. Bond 10 Federal courts may only grant TROs if “the movant gives security in an amount that the 11 12 court considers proper to pay the costs and damages sustained by any party found to have been 13 wrongfully enjoined or restrained.” FED. R. CIV. P. 65(c). This requirement, however, may be 14 waived where the Court concludes “there is no realistic likelihood of harm to the defendant from 15 enjoining his or her conduct.” Navigant, 2018 WL 3751983, at *4 (citing Jorgensen v. Cassiday, 16 320 F.3d 906, 919 (9th Cir. 2003)). As the Court will merely order Defendant not to further 17 disclose trade secrets, the Court finds that there is minimal damage to be sustained from its order. 18 19 As such, the Court will not require a security bond. 20 V. CONCLUSION 21 The Court will grant Plaintiff relief in the form of enjoining future dissemination of its 22 trade secrets. Also, the Court will grant Plaintiff’s requests to have Defendant and Murphy 23 preserve the evidence in whatever form currently available. Further relief the Court will not grant 24 at this time. Therefore, the Court GRANTS in part and DENIES in part Plaintiff’s motion for 25 6 temporary restraining order and order to show cause, Dkt. No. 6, and orders as follows: 1 1. Defendant is enjoined from disclosing or using Plaintiff’s confidential information and 2 3 trade secrets; 4 2. Plaintiff’s request for an order requiring Defendant to turn over his personal and work 5 computers is DENIED; 6 3. Defendant is required to preserve all evidence in whatever form currently available 7 related to Defendant’s confidential information; 8 4. Murphy Company is required to preserve all evidence in whatever form currently 9 available related to Defendant’s confidential information; 10 11 5. The parties are to appear for a hearing to discuss the terms of this order via 12 teleconference on Wednesday, December 11, 2019 at 9 a.m., and; 13 6. Plaintiff shall serve a copy of this order on Defendant and Murphy Company. 14 15 DATED this 6th day of December, 2019. 16 17 _______________________________ 18 BARBARA J. ROTHSTEIN UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 7