Zee Medical, Inc. v. Miller

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 16 2004
TENTH CIRCUIT
PATRICK FISHER
Clerk
ZEE MEDICAL, INC., a California
corporation,
Plaintiff-Counter-
Defendant-Appellant,
McKESSON CORPORATION, a
Delaware corporation,
Plaintiff-Appellant,
v. No. 04-1255
(District of Colorado)
MICHELLE MILLER, an individual; (D.C. No. 04-M-533 (OES))
FIRST AID 2000, LLC, a Colorado
corporation,
Defendants-
Counter-Claimants-Third-
Party-Plaintiffs-Appellees,
v.
ART RECEK; BETSY CRAIG,
Third-Party-Defendants.
ORDER AND JUDGMENT *
Before MURPHY, BALDOCK, and TYMKOVICH, Circuit Judges.
I. Introduction
Defendant, Michelle Miller, worked as a sales representative for Plaintiff,
Zee Medical, Inc. (“Zee Medical”) from 1995 until she was terminated in
December 2003. A few weeks after her termination, Miller took a position as a
sales representative with defendant, First Aid 2000 (“FA2000”). Zee Medical
brought suit against Miller and FA2000, alleging violations of the terms of two
covenants not to compete and a confidentiality agreement signed by Miller.
Thereafter, Zee Medical filed a motion seeking a preliminary injunction. The
district court denied the motion and Zee Medical appealed.
Exercising jurisdiction pursuant to 28 U.S.C. § 1292(a)(1), we affirm the
denial of Zee Medical’s motion for a preliminary injunction.
II. Factual Background
Both Zee Medical and FA2000 sell first aid and safety items to companies
required by the Occupational Safety and Health Act to stock such items in first aid
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
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kits. At the time she was hired by Zee Medical, Miller signed a covenant not to
compete and a confidentiality agreement. She signed a second covenant not to
compete on May 31, 2000. The covenants not to compete prohibit Miller from
engaging in direct competition with Zee Medical in her former sales territory and
from soliciting her former Zee Medical customers on behalf of a competitor.
While employed at Zee Medical, Miller used a hand-held computer that contained
product pricing and detailed customer information. Miller returned the computer
when she was terminated. She was also given customer lists, monthly sales
reports, and other reports generated, in part, from the information she entered into
her computer.
According to Miller, she has contacted approximately sixty of her former
customers and approximately thirty have switched to FA2000. Zee Medical
asserts that in February 2004 alone, Miller solicited ninety-five of her former
customers and that it has lost fifty percent of its customers in Miller’s former
territory to FA2000 since Miller began working there.
Zee Medical filed suit against Miller and FA2000 in March 2004, alleging
claims for injunctive relief and damages. On March 26, 2004, Zee Medical sought
a preliminary injunction preventing Miller from working for FA2000 until the
conclusion of a trial on the merits. It also sought to bar Miller and FA2000 from
disclosing or utilizing information it alleged was confidential, proprietary, or a
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trade secret. The district court denied Zee Medical’s motion and this appeal
followed.
III. Discussion
A. Amount in Controversy
As a preliminary matter, Miller and FA2000 argue that the district court did
not have jurisdiction over this lawsuit because the amount in controversy does not
exceed $75,000. See 28 U.S.C. § 1332. They base this argument solely on their
assertion that at the time of the preliminary injunction hearing, they presented
uncontested evidence that the total sales to former Zee Medical customers totaled
only $7,000, with the net profit substantially less than that amount. Having
reviewed Zee Medical’s complaint, we are satisfied that federal jurisdiction is
proper. Given the extensive claims made by Zee Medical in its complaint and the
remedies available under those claims, it cannot be said with legal certainty that
Zee Medical would recover less than $75,000 if it prevails in this matter. See
Woodmen of the World Life Ins. Society v. Manganaro, 342 F.3d 1213, 1216 (10th
Cir. 2003).
B. Denial of Preliminary Injunction
Ordinarily, this court reviews the denial of a motion for a preliminary
injunction for abuse of discretion. Heideman v. S. Salt Lake City, 348 F.3d 1182,
1188 (10th Cir. 2003). Zee Medical, however, argues that the district court
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applied the wrong standard when it ruled on the motion. See id. at 1188-89(holding that when the “three harm factors tip decidedly in [the movant’s] favor,
the probability of success requirement is somewhat relaxed” and the “movant need
only show questions going to the merits so serious, substantial, difficult and
doubtful, as to make them a fair ground for litigation.” (citations and quotations
omitted)). Even if we assume for purposes of this appeal that the district court
applied an incorrect standard, we conclude that the denial of Zee Medical’s motion
for preliminary injunction was proper. See SCFC ILC, Inc. v. Visa USA, Inc., 969
F.2d 1096, 1100 (10th Cir. 1991) (holding that when the district court applies the
wrong preliminary injunction standard, this court may review the record to
determine whether the injunction is justified).
Pursuant to Colorado law, a covenant not to compete is not enforceable
unless one of four statutory exceptions applies. See Colo. Rev. Stat. § 8-2-113(2).
Zee Medical argues that the covenants not to compete signed by Miller are
enforceable because they seek to protect trade secrets, one of the statutory
exceptions. Id. § 8-2-113(2)(b). Having reviewed the record and the arguments of
the parties, it is clear that Zee Medical is not entitled to a preliminary injunction
because it has failed to raise “questions going to the merits so serious, substantial,
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difficult and doubtful as to make them fair ground for litigation. 2 Koerpel v.
Heckler, 797 F.2d 858, 867 (10th Cir. 1986). Specifically, we have considerable
doubt that Zee Medical will be able to demonstrate that the covenants not to
compete are enforceable because they seek to protect trade secrets.
The district court’s order denying Zee Medical’s motion for a preliminary
injunction is affirmed.
ENTERED FOR THE COURT
Michael R. Murphy
Circuit Judge
Zee Medical also summarily asserts that Miller breached the
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confidentiality agreement and the district court erred by not granting a
preliminary injunction premised on that alleged breach. Zee Medical’s failure to
support this argument with points and authorities or to include any analysis of the
four preliminary injunction factors compels the conclusion that the argument is
waived. See Phillips v. Calhoun, 956 F.2d 949, 953-54 (10th Cir. 1992).
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