Herff Jones, Inc. v. Oklahoma Graduate Services, Inc.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
June 26, 2007
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
HERFF JONES, INC., an Indiana
corporation,
Plaintiff-Appellant,
v. No. 06-6322
(D.C. No. 06-CV-709-M )
OK LAH OM A G RA DU ATE (W .D. Okla.)
SERVICES, INC., an Oklahoma
corporation; WILLIA M R . LIERMAN,
SR .; K A Y Y OR K LIER MA N ;
W ILLIA M R. LIERM AN, JR.;
RO BERT A RTH UR M CCA BE;
R ICHA RD BLA CK STO CK ,
Defendants-Appellees.
OR D ER AND JUDGM ENT *
Before H E N RY and A ND ER SO N, Circuit Judges, and BROR BY, Senior Circuit
Judge.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent w ith Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Invoking this court’s interlocutory jurisdiction under 28 U.S.C.
§ 1292(a)(1), plaintiff-appellant Herff Jones, Inc. appeals the order entered by the
district court denying its motion under Fed. R. Civ. P. 65(a) for a preliminary
injunction. 1 Finding no abuse of discretion by the district court, we affirm. 2
I.
Herff Jones filed its initial complaint in this matter in June 2006 and an
amended complaint in August 2006. In its amended complaint, Herff Jones
alleged that the district court had subject matter jurisdiction over this action under
28 U.S.C. § 1332, and it asserted state-law claims against defendants for breach
of contract, breach of fiduciary duty, tortious interference w ith business relations,
fraud, fraudulent concealment/constructive fraud, promissory estoppel, unjust
enrichment, breach of implied covenant of good faith and fair dealing, violation
1
In its motion for a preliminary injunction, Herff Jones requested that the
district court initially enter a temporary restraining order under Fed. R. Civ. P.
65(b). The district court denied Herff Jones’s request for a temporary restraining
order, and we do not have jurisdiction under § 1292(a)(1) to review that ruling.
See Populist Party v. Herschler, 746 F.2d 656, 661 n.2 (10th Cir. 1984); 15A
W right, M iller & Cooper, Federal Practice and Procedure § 3914.3, at 521
(2d ed. 1992) (“It long has been settled as a general matter that § 1292(a)(1)
permits appeal from decisions with respect to preliminary injunctions, but not
from temporary restraining order decisions.”).
2
Defendant Blackstock argues that this appeal should be dismissed as moot
because the time period for obtaining orders for the scholastic products that are at
issue in this case has already passed. See Blackstock Response Br. at 10-12. W e
disagree. As H erff Jones has pointed out in its reply brief, because “there is still
the prospect of placing [certain] contracts and preventing deliveries of products
generated through wrongful conduct, this appeal is not moot.” Reply Br. at 13.
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of Oklahoma’s Uniform Trade Secrets Act, violation of Oklahoma’s Deceptive
Trade Practices Act, and civil conspiracy. See Aplt. App., Vol. 1 at 19-28. Herff
Jones also filed a motion for a preliminary injunction under Fed. R. Civ. P. 65(a),
requesting that the district court enter an injunction “prohibiting the D efendants,
their officers, agents, servants, employees and attorneys, and those in active
concert or participation with them, from soliciting the purchase or sale of
products and services from established customers of Herff Jones.” Id. at 85.
Herff Jones requested that the injunction have “a duration of at least one (1)
year.” Id. at 86. Herff Jones further specified the scope of the requested
preliminary injunction in seven separate paragraphs. Id. at 85-86.
On September 1, 2006, the district court held a hearing on Herff Jones’s
motion for a preliminary injunction, and it subsequently entered an order denying
the motion on September 12, 2006. In its order, the district court summarized the
background of this case as follow s:
Plaintiff is in the business of selling scholastic products
including among other things class rings, fine papers, caps and
gowns, yearbooks and senior jewelry. Plaintiff’s customers include
public and private schools, colleges, and individual students.
Plaintiff markets its products through independent sales
representatives.
Defendant W illiam “Dick” Lierman, Sr. (“Lierman, Sr.”) sold
Plaintiff’s products as a sales representative from July of 1990 to
April of 2006 pursuant to a Sales Representative A greement. In
April of 2006, Lierman, Sr. incorporated Defendant Oklahoma
Graduate Services (“OGS”) and continued to sell Plaintiff’s products
pursuant to a Corporate Sales Agreement having substantially the
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same terms as the Sales Representative Agreement which was
terminated. [A pparently, Lierman, Sr. gave notice terminating his
Sales Agreement in mid-June of 2006.] Defendant Kay Lierman is a
consenting shareholder of OGS.
Defendant Richard Blackstock (“Blackstock”) sold Plaintiff’s
products pursuant to a Sales Representative Agreement from 1990 to
2006. Although Blackstock plans to retire from the sale of scholastic
products, he continues to represent Plaintiff as a sales representative.
[Blackstock gave notice of termination to Plaintiff on July 14, 2006
implicitly acknowledging the requirement of sixty (60) days notice.
As such, Blackstock’s representation of Plaintiff will end on
September 14, 2006.] Defendant Robert M cCabe (“M cCabe”) has
sold Plaintiff’s products pursuant to an Associate Sales
Representative Agreement in association with Lierman, Sr. and/or
OGS since A ugust of 1990. Defendant William Rick Lierman, Jr.
(“Lierman, Jr.”) has also been an associate sales representative
employed by Lierman, Sr. and/or OGS since August 24, 1995
pursuant to an Associate Sales Representative Agreement.
Plaintiff asserts that Defendants began competing with
Plaintiff while they were still associated with Plaintiff as sales
representatives, that Lierman, Sr. and M cCabe denied they were
planning to leave Plaintiff and join Plaintiff’s competitor, Jostens,
and that Lierman, Sr. and Blackstock misrepresented their reasons for
terminating their sales agreements. Further, Plaintiff asserts that
Blackstock sold his business to M cCabe in violation of his sales
agreement which provides Plaintiff with the first right and option to
purchase the business.
Also, Plaintiff asserts that M cCabe and Lierman, Sr. are in
direct competition with Plaintiff for the same customers, that
Lierman, Sr. has tried to cancel orders for announcements submitted
by him during the previous school year, and that customers have
been cancelling meetings scheduled to allow Plaintiff’s
representatives to meet with upperclassmen and to take their orders
for class rings and other senior products. Finally, Plaintiff asserts
[that] all Defendants continue to call on Plaintiff’s customers using
Plaintiff’s confidential customer list.
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Aplt. App., Vol. II at 668-70 (two footnotes inserted into quoted text in brackets;
one footnote omitted).
After correctly setting forth the standards for granting a preliminary
injunction, id. at 671, the district court denied H erff Jones’s motion for a
preliminary injunction, concluding that it would “not be irreparably harmed if the
Court denies the relief sought,” id. at 672, and that “the balance of harms element
weighs heavily in favor of Defendants,” id. at 675. Herff Jones is now appealing
the denial of its motion for a preliminary injunction. W e have jurisdiction to
review the district court’s interlocutory order under 28 U.S.C. § 1292(a)(1).
II.
“As a preliminary injunction is an extraordinary remedy, the right to relief
must be clear and unequivocal.” Schrier v. Univ. of Colo., 427 F.3d 1253, 1258
(10th Cir. 2005) (quotation omitted). In order for a party to be entitled to a
preliminary injunction, that party must show the following:
(1) he or she will suffer irreparable injury unless the injunction
issues; (2) the threatened injury outweighs whatever damage the
proposed injunction may cause the opposing party; (3) the injunction,
if issued, would not be adverse to the public interest; and (4) there is
a substantial likelihood of success on the merits.
Nova Health Sys. v. Edmondson, 460 F.3d 1295, 1298 (10th Cir. 2006) (quotation
omitted). “The denial of a preliminary injunction will be upheld where the
movant has failed sufficiently to establish any one of the four criteria.” Black
Fire Fighters Ass’n v. City of Dallas, 905 F.2d 63, 65 (5th Cir. 1990).
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“W e review the district court’s denial of a preliminary injunction for an
abuse of discretion.” Nova Health Sys., 460 F.3d at 1299. “A district court
abuses its discretion where it commits a legal error or relies on clearly erroneous
factual findings, or where there is no rational basis in the evidence for its ruling.”
Davis v. M ineta, 302 F.3d 1104, 1111 (10th Cir. 2002) (citation omitted).
“Although either an error of law or an error of fact may constitute an abuse of
discretion, we review the district court’s findings in these two areas under
different standards; ‘[w]e examine the district court’s underlying factual findings
for clear error, and its legal determinations de novo.’” Nova Health Sys., 460
F.3d at 1299 (quoting Davis, 302 F.3d at 1111). “W e have also described abuse
of discretion as an arbitrary, capricious, whimsical, or manifestly unreasonable
judgment.” Schrier, 427 F.3d at 1258 (quotation omitted).
III.
In its order denying Herff Jones’s motion for a preliminary injunction, the
district court analyzed the issue of whether “the threatened injury outweighs
whatever damage the proposed injunction may cause [defendants],” Nova Health
Sys., 460 F.3d at 1298, as follow s:
Plaintiff asserts that the “threat to Herff Jones is great if
Defendants are permitted to continue soliciting customers of Herff
Jones.” Additionally, Plaintiff asserts that “[o]pportunities to
compete for products of this nature are, as a practical matter, limited
to the beginning of the school year. . . . Consequently, M ay 1
through October 30 is a critical time for Herff Jones to obtain orders
for the following school year from its customers.” Plaintiff’s M otion
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at 9-10. In light of these assertions, the Court finds that if Plaintiff
were to get the relief it seeks, Defendants would be foreclosed from
competing in the arena for an entire year. As such, the Court finds
that Defendants w ill suffer a great harm because they would in
essence be prevented from competing at all. On the other hand, if
Plaintiff is denied the requested relief, both Plaintiff and Defendants
can compete freely for customers. Accordingly, the Court finds that
the balance of harms element weighs heavily in favor of D efendants.
Aplt. A pp., Vol. II at 674-75.
Having carefully reviewed the parties’ briefs, the record on appeal, and the
pertinent law, we conclude that the district court did not commit a legal or clear
factual error when it determined that “the balance of harms element weighs
heavily in favor of Defendants.” Id. at 675. W e therefore affirm the district
court’s denial of H erff-Jones’s motion for a preliminary injunction on that basis,
and we do not need to determine whether the district court abused its discretion
when it concluded that Herff Jones had not suffered any irreparable harm as a
result of defendants’ alleged wrongdoing. See Black Fire Fighters Ass’n,
905 F.2d at 65. In fact, for purposes of resolving this appeal, we have assumed,
without deciding, that Herff Jones has suffered some level of irreparable harm in
the form of lost customer good will and/or misappropriated confidential
proprietary information.
That said, we also believe there are good reasons for limiting the weight to
be given to the irreparable harm factor. First, even if Herff Jones has incurred an
intangible loss of customer good will that is not readily ascertainable, it
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nonetheless appears that Herff Jones can easily determine the precise number of
its prior customers that have transferred their business to defendants and/or Herff
Jones’s main competitor, Jostens. As a result, assuming that Herff Jones can
successfully establish defendants’ liability for such transfers, a question we are
not deciding, Herff Jones can then be separately compensated with money
damages for the loss of each individual customer. Second, even if some of Herff
Jones’s internal customer and price information contains confidential proprietary
information that could qualify as trade secrets, Herff Jones has not put forth any
evidence showing that defendants are relying on and using that internal
information to solicit its customers. Instead, based on the limited record that is
presently before this court, it appears to be just as likely that defendants are
simply relying on their own knowledge and experience and/or information that is
readily available in the public domain.
In sum, we conclude that the district court did not abuse its discretion in
denying Herff Jones’s motion for a preliminary injunction. W e are not expressing
any opinions as to the merits of the various claims in this case, however, and
those claims remain to be litigated in the district court.
IV.
For the reasons set forth herein, we AFFIRM the order entered by the
district court denying Herff Jones’s motion for a preliminary injunction. W e
D EN Y the motions filed by Herff Jones to expedite this appeal as moot. W e
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G R A N T Herff Jones’s motion to file certain appendix documents under seal. W e
also G R A N T Herff Jones’s motion to withdraw its request for oral argument.
Entered for the Court
Robert H. Henry
Circuit Judge
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