United States District Court, E.D. North Carolina, Western Division
SPIRAX SARCO, INC. and SPIRAX-SARCO ENGINEERING, PLC, Plaintiffs,
SSI ENGINEERING, INC., SSI SERVICES, INC., BRYAN JOHNSON, BENJAMIN DONALD LEWIS and MICHELLE H. LEWIS, Defendants.
JAMES C. FOX, Senior District Judge.
This matter is before the court on the Plaintiffs Motion for Temporary Restraining Order and Preliminary Injunction [DE-25]. In an order filed October 23, 2014 [DE-51], which was modified by the court's October 27, 2014, order [DE-53], the court allowed the motion, in part, as to its first request for relief: an order enjoining Defendants from any use, copying, or disclosure of Spirax data that presently is in the custody of Clark Walton. As to the second category for relief in the motion, the court invited more briefing. The parties have complied, and after reviewing the briefing and the record, the court concludes that the Motion [DE-25] is DENIED as to the additional requested relief.
I. Standard of Review
The standard of review for a motion for a temporary restraining order and motion for preliminary injunction are the same. A preliminary injunction is an extraordinary interlocutory remedy, the purpose of which is to protect the status quo and prevent irreparable harm during the pendency of a lawsuit. In re Microsoft Corp Antitrust Litig., 333 F.3d 517, 524-25 (4th Cir. 2003). A court, in its discretion, may issue a preliminary injunction only if the moving party clearly establishes the following factors: (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 (2008); West Virginia Ass'n of Club Owners & Fraternal Servs., Inc. v. Musgrave, 553 F.3d 292, 298 (4th Cir. 2009).
Plaintiffs are Spirax Sarco Inc., and Spirax-Sarco Engineering, PLC. Spirax-Sarco is a Delaware corporation with its principal place of business in South Carolina. It manufactures goods and sells services for control and efficient use of steam, air, and other industrial fluids to industrial and commercial users in the United States. Spirax-Sarco Engineering, PLC is a UK-based engineering company and the parent of Spirax Sarco, Inc. The court will refer to them collectively as "Spirax" or "Plaintiffs."
Defendant Bryan Johnson is a former employee of Spirax Sarco, Inc. He was hired as a District Sales Manager for Spirax on June 1, 1998. Spirax alleges that at the time of his hire, he was bound to a covenant of non-solicitation, pursuant to which he agreed that for the 12-month period following his employment with Spirax, he would not solicit any customers upon whom he had called in the last two years ofhis employment with Spirax. Plaintiffs also allege that Johnson was bound a covenant of confidentiality, pursuant to which he agreed to protect proprietary and trade secret information belonging to Spirax in accordance with specified policies and procedures. Spirax, however, has no signed copy of either agreement. Defendants have proffered evidence that Johnson refused to sign a non-compete. See Decl. of Jacenko [DE-48] ¶ 16.
During the course of his employment, Johnson was the Spirax employee handling the relationship with Defendant SSI Engineering, Inc. on Spirax's behalf from December 2013 until his resignation on May 27, 2014. Bryan Johnson contends that at the time of his resignation, he was in discussions with Mark McGinn, the new Vice President of Sales for Spirax, regarding a transition from an employee with Spirax to an Independent Manufacturer Representative ("IMR") in North Carolina and South Carolina for Spirax.
SSI Engineering, Inc. had a Consulting Agreement with Spirax Sarco, Inc., which it terminated by letter dated May 30, 2014. Defendants Benjamin Lewis and Michelle Lewis, who are married, are the principals of SSI Engineering, Inc. and SSI Services. Following Johnson's resignation from Spirax, he went to work for SSI Services as an outside sales manager.
On June 2, 2014, two employees retrieved the laptop issued to Johnson by Spirax. Later that week, IT employees reviewed the laptop and were suspicious that Johnson had deleted files, so the laptop was sent to a third-party for forensic analysis. That analysis revealed that two external electronic storage devices were connected to the laptop on May 26, 2014 (the day before Johnson resigned), and that he copied approximately 11, 000 files on May 12 and 19, 000 files on May 26. He also deleted 18, 000 files on May 26.
The record indicates that Spirax Sarco, Inc., was in contact with an attorney for Johnson in July 2014. Johnson denied having any confidential information. His attorney also stated that Johnson used the laptop for personal use in addition to business use, and the information downloaded was photographs, personal emails, and other items and not confidential Spirax information.
Spirax disputed the characterization of the files being personal information. Eventually Johnson hired different counsel-the same attorney now representing him in this court-and the parties agreed to a protocol regarding the disputed information. Under this protocol, the parties authorized a third party, Clark Walton, to take possession of the two electronic devices Johnson used to download files, as well as a Dropbox account he used to store electronic files. Under the parties' agreement, Walton made one copy of the content of each of the electronic devices and the Dropbox account ("the Copy"). Walton then delivered the Copy of the two electronic devices and the Dropbox account to Johnson and his attorney on September 11, 2014. Walton retained possession of the originals. The parties agreed that Johnson, with his attorney, would remove information that belonged solely to him by transferring the information from the copy to a new device ("the Johnson device"). Johnson and his attorney also kept a list of all the files removed. On September 25, 2014, the removal process was complete, and the next day Johnson's attorney sent the list to Spirax. Johnson and his attorney then sent the Copy and the Johnson device to Walton, who verified in writing the items that were transferred from the Copy to Johnson's device. Walton then moved the information remaining on the Copy to a new Spirax device, and sent that to Spirax, along with the password information for Dropbox account. The record indicates that the transfer of possession of the Dropbox account occurred on September 26, 2014.
When Spirax later reviewed the list of files transferred from the Copy to the Johnson device, it believed that Johnson was continuing to assert ownership over information that actually belonged to Spirax. It also reviewed the Dropbox account, and discovered that Johnson had deleted or removed hundreds of photo files from the Dropbox account between September 2 and 3, 2014.
Additionally, Plaintiffs contend that Defendants were bidding on projects against Spirax. The Amended Complaint and record indicates that Spirax knew about this behavior since at least early June. In August 2014 Spirax also learned that Defendants were bidding on a project with one of their customers. After ...