United States District Court, M.D. North Carolina
SUPERIOR PERFORMERS, INC. d/b/a NATIONAL AGENTS ALLIANCE, Plaintiff,
SHAWN L. MEAIKE, MARC J. MEADE, BRYANT STONE, FRANK EUFEMIA, JAIME EUFEMIA, and MICHAEL SIZER, Defendants.
MEMORANDUM OPINION AND ORDER
JAMES A. BEATY, Jr., District Judge.
This matter is before the Court on a Motion for Preliminary Injunction [Doc. #13] filed by Plaintiff Superior Performers, Inc., d/b/a National Agents Alliance ("Plaintiff" or "NAA"). Defendants are Shawn L. Meaike, Marc J. Meade, Bryant Stone, Frank Eufemia, Jaime Eufemia, and Michael Sizer ("Defendants"). The Court previously granted Plaintiff's Motion for Temporary Restraining Order ("TRO") [Doc. #36], which expires upon issuance of this Order, pursuant to the Court's statement to that effect at the March 5, 2014 hearing on Plaintiff's Motion for Preliminary Injunction. Thereafter, the ruling of the Court in the present Order will govern the parties, unless there are future Orders by the Court.
In response to Plaintiff's Motion for Preliminary Injunction, Defendants filed a Response in Opposition to Plaintiff's Motion for Preliminary Injunction [Doc. #48] with declarations by each Defendant, a "Supplemental Brief" in Opposition to the Motion for Preliminary Injunction and Motion to Compel Letters Related to the TRO or the March 5, 2014 Hearing [Doc. #68], a Reply to Plaintiff's Response to the Supplemental Brief [Doc. #75], and two Motions to Strike [Docs. #44, #65] the affidavits and declarations that Plaintiff filed in support of its Motion for Preliminary Injunction. Additionally, Plaintiff filed a Reply to Defendants' Response in Opposition to Plaintiff's Motion for Preliminary Injunction [Doc. #57], supplemental evidence in addition to that which was filed with the Motion for Preliminary Injunction, a Response to Defendants' Supplemental Brief [Doc. #70], and a Response in Opposition to Defendants' first Motion to Strike [Doc. #56]. These Motions are ripe for review,  upon conclusion of the Court's March 5, 2014 hearing on the Motion for Preliminary Injunction [Doc. #13]. For the reasons set forth below, the Court will grant in part and deny in part Plaintiff's Motion for Preliminary Injunction [Doc. #13], deny Defendants' Motions to Strike [Docs. #44, #65], and deny as moot Defendants' Motion to Compel [Doc. #68].
I. FACTUAL BACKGROUND
For purposes of disposing of Plaintiff's Motion for Preliminary Injunction, the evidence presented thus far tends to show the following facts. Plaintiff, doing business as National Agents Alliance ("NAA"), is an Independent Marketing Organization and Managing General Agent for various life insurance companies. Plaintiff earns a portion of the commissions made by NAA agents selling life insurance issued by those insurance companies. NAA agents also recruit other agents to work for NAA, and the recruiting agents then earn an extra commission on sales made by any new agents they recruit. The newly recruited agents are called "Downline Agents, " and when they join, both the Downline Agent and the recruiting agent sign an Agent Agreement with Plaintiff. In the course of working for Plaintiff, agents are required to, among other things, buy "leads" (names and contact information for people who are supposedly interested in buying insurance) from Plaintiff, and then cold call those leads in hopes of eventually selling life insurance to those individuals.
When Defendants individually began working as NAA agents, they each signed an Agent Agreement with Plaintiff. Then in order to access the website where the leads are retrieved, they had to periodically electronically sign, or "click through, " an Agent Agreement to reaffirm their consent to its terms and conditions. In multiple Agent Agreements clicked through by each Defendant, including the most recent Agreements, there is a restrictive covenant that purports to restrict these agents' freedom to interact with any current NAA employee or independent contractor. (E.g., Ex. A - Pl.'s Mot. for Prelim. Inj. [Doc. #15-1], ¶ 15 at 10.) This restrictive covenant reads as follows:
Non-Solicitation of Employees and Independent Contractors. During the Restriction Period, the Independent Contractor shall not, directly or indirectly: (a) solicit for the provision of services or employment any employee or independent contractor of NAA or its Affiliates, (b) advise or recommend to any other person that they employ or solicit for provision of services any employee or independent contractor of NAA or its Affiliates, or (c) encourage or advise such employees or independent contractors to sever, discontinue or not renew any agreement or relationship to NAA or its Affiliates, or (d) otherwise establish or seek to establish any business relationship with any such employee or independent contractor relating to the sale of Life Insurance Products.
(Id.) The Agent Agreement defines the restriction period as "the period of time Independent Contractor provides services to NAA or services as a down-line agent of NAA and for a period of two (2) years following the termination of Independent Contractor's provision of such services." (Id. ¶ 10g at 9.)
Additionally, Defendant Meaike, Defendant Meade, and Defendant Stone also entered into Management Agreements, which included a restrictive covenant with nearly identical restrictions. (E.g., Ex. B - Pl.'s Mot. for Prelim. Inj. [Doc. #15-2], ¶ 8 at 5.) The restrictive covenant in these Agreements reads as follows:
Non-Solicitation of Employees and Independent Contractors. During the period of time Independent Contractor provides services to or for the Company and for a period of two (2) years following the termination of Independent Contractor's provision of services to the Company, the Independent Contractor shall not, directly or indirectly, solicit for provision of services, advise or recommend to any other person that they employ or solicit for provision of services, or otherwise establish or seek to establish any business relationship relating to the sale of insurance products with, any employee of the Company or of its affiliates or any other independent contractor or of its affiliates, or encourage or advise such employees or independent contractors to sever, discount or not renew any agreement or relationship to the Company.
Each Defendant's independent contractor relationship with Plaintiff was terminated in either December 2013 or January 2014. Each Defendant has now joined Defendant Meaike's new venture, Family First Life ("FFL"). As of the March 5, 2014 hearing, it appears that approximately 186 of Plaintiff's current and former agents have signed on to work with FFL. (Sheckells Aff. [Doc. #59], ¶ 6 at 2.) Of those 186, approximately 121 of them are current NAA agents now working for FFL. (Id.) Plaintiff alleges that, at a minimum, Defendants are in violation of the restrictive covenant because they have "otherwise establish[ed]" a business relationship with these 121 current NAA employees or independent contractors. Plaintiffs also allege that some or all of these 121 agents were solicited directly or indirectly by Defendants, which Defendants dispute.
The Court previously granted Plaintiff's Motion for TRO [Doc. #36], which remained in effect from the March 5, 2014 hearing until this Order was issued. At the March 5, 2014 hearing on Plaintiff's Motion for Preliminary Injunction [Doc. #13], the Court heard arguments as to the Motion and the Court has reviewed evidence submitted by both parties. Plaintiff's Motion for Preliminary Injunction rests on its breach of contract claim. Specifically, Plaintiff seeks to continue enjoining Defendants "and those in active concert with them" from the following conduct:
(1) Soliciting for the provision of services or employment any employee or independent contractor of NAA;
(2) Encouraging or advising such employees or independent contractors to sever, discontinue or not renew any agreement or relationship to NAA; and
(3) Otherwise seeking to establish any business relationship with any such employee or independent contractor relating to the sale of life insurance products.
(Pl.'s Mot. for Prelim. Inj. [Doc. #13], at 1-2.) Plaintiff later contended in its Reply and at the hearing that its unfair and deceptive trade practices claim forms a separate basis for injunctive relief. (Pl.'s Reply to Def.'s Resp. to Mot. for Prelim. Inj. [Doc. #57], at 9.) However, the only basis upon which Plaintiff sought preliminary injunctive relief in its Motion for Preliminary Injunction was on the breach of contract claim. Therefore, the Court will not consider the alternative basis for injunctive relief raised for the first time in Plaintiff's Reply Brief. See Fed.R.Civ.P. 7(b)(1)(B) ("A request for a court order must be made by motion. The motion must:... state with particularity the grounds for seeking the order....").
II. MOTIONS TO STRIKE
Prior to considering the merits of Plaintiff's Motion for Preliminary Injunction, the Court notes that Defendants filed two Motions to Strike Plaintiff's evidence in whole or in part, arguing that the affidavits submitted in support of the Motion for Preliminary Injunction were either untimely presented or they contain inadmissible hearsay, speculation, and/or a lack of first-hand knowledge. (Mots. to Strike [Docs. #44, #65].) While Federal Rule of Civil Procedure 6(c)(2) does require any supporting affidavits to be served with a motion, the Court has discretion to consider affidavits that were not filed with the accompanying motions in preliminary injunction hearings. See 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2949, at 237 (2013) ("Rule 6(c)(2) requires any supporting affidavits to be served with the motion.... Although the timing requirements are applied flexibly in practice, the underlying principle of giving the party opposing the application notice and an adequate opportunity to respond is carefully honored by the courts."). The Court set the preliminary injunction hearing date shortly after issuing the TRO, and Plaintiff submitted its Reply [Doc. #57] and all of the affidavits at least two days before the hearing (and well in advance of the reply deadline), which allowed the Court and defense counsel at least some time to review all the arguments and evidence prior to the hearing. Therefore, the Court will exercise its discretion and consider all of Plaintiff's evidence, despite the untimely filings.
Furthermore, the Court has discretion to consider evidence that would otherwise be inadmissible at trial. See Univ. of Tex. v. Camenisch , 451 U.S. 390, 395, 101 S.Ct. 1830 (1981) ("[A] preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits."); Wright, Miller & Kane, supra, § 2949, at 239-40 ("[I]n practice[, ] affidavits usually are accepted on a preliminary injunction motion without regard to the strict standards of Rule 56(c)(4), and[ ]hearsay evidence also may be considered."). The Court, therefore, in its discretion, will consider Plaintiff's evidentiary submissions at this stage without regard to whether they meet the strict evidentiary requirements in place at either the summary judgment or trial stage. As such, the Court will deny Defendants' Motions to Strike [Docs. #44, #65].
III. ADEQUACY OF PLEADINGS
As previously discussed, Plaintiff's Motion for Preliminary Injunction [Doc. #13] relies solely on the breach of contract claim in the current operative Complaint (see Am. Compl. [Doc. #11], ¶¶ 22-28), and therefore, the Court is only considering the Motion for Preliminary Injunction as it relates to the Amended Complaint's sole breach of contract claim. However, the Court notes that the Amended Complaint does not actually assert any facts specific to the "otherwise establish a business relationship" language in the restrictive covenant, nor does the breach of contract cause of action assert that Defendants violated their contract by merely establishing a business relationship with Plaintiff's current agents. Rather, the Amended Complaint's breach of contract claim appears limited to the recruitment/solicitation portion of the restrictive covenant at issue in Plaintiff's Motion for Preliminary Injunction.
Federal Rule of Civil Procedure 8(a) requires a "pleading that states a claim for relief" to include "a short and plain statement of the claim showing that the pleader is entitled to relief" and "a demand for the relief sought, which may include relief in the alternative or different types of relief." The statement of the claim must give the defendant "fair notice" of the claim and the "grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). However, Federal Rule of Civil Procedure 15(b)(2) allows for a party to try an issue not raised in the pleadings, as long as the parties expressly or impliedly consented to amending the pleadings in such a way. Fed.R.Civ.P. 15(b)(2). The plain language of Rule 15(b)(2) suggests that the non-pled issue must have gone to trial. Fed.R.Civ.P. 15(b)(2) ("When an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings." (emphasis added)); Feldman v. Pro Football, Inc. , 419 F.Appx. 381, 389 (4th Cir. 2011). However, the Fourth Circuit has affirmed a district court's grant of summary judgment on an issue raised for the first time in a party's motion for summary judgment, citing Rule 15(b)(2). People for the Ethical Treatment of Animals v. Doughney , 263 F.3d 359, 367-68 (4th Cir. 2001). Yet, at the preliminary injunction stage, courts are not making official findings of fact or adjudications on the merits, and therefore, courts are more likely looking to Rule 15(a)(2) in determining whether or not to allow a party to amend its pleading. Fed.R.Civ.P. 15(a)(2) ("In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.").
Plaintiff's allegations in both its Motion for TRO [Doc. #36] and its Motion for Preliminary Injunction [Doc. #13] provided notice to Defendants that it was seeking injunctive relief as to the "otherwise establishing a business relationship" language in the restrictive covenant. Furthermore, the "otherwise establish a business relationship" language of the covenant arose several times at the hearing and Defendants never objected on the basis that it was not alleged in the Amended Complaint. Finally, the Amended Complaint was specific enough for Defendants to readily identify which restrictive covenant Plaintiff was seeking to enforce-a covenant which, upon reading, clearly encompasses the "otherwise establish a business relationship" language. Therefore, the Court concludes that Defendants had sufficient notice of this factual basis for Plaintiff's request for preliminary injunction, as will be discussed later, even though this specific language of the restrictive covenant was not discussed in the operative Complaint.
IV. PRELIMINARY INJUNCTION
Injunctive relief is an extraordinary remedy that may be awarded only upon a clear showing that the plaintiff is entitled to such relief. Mazurek v. Armstrong , 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2948, at 129-30 (2d ed. 1995)). In order to obtain a preliminary injunction, a movant must establish that: (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365 (2008). The Court will now consider each of these elements in turn.
A. Likelihood of Success on the Merits
Parties seeking a preliminary injunction must demonstrate that they are likely to succeed on the merits. Winter , 555 U.S. at 20, 129 S.Ct. at 374. This inquiry requires that the movant make a "clear showing" that he or she is likely to succeed at trial, though that does not require the movant to show a certainty of success. Pashby v. Delia , 709 F.3d 307, 321 (4th Cir. 2013). Plaintiff contends that it is likely to succeed on the merits of its breach of ...