Digital Ally, Inc. v. Corum

          MEMORANDUM AND ORDER

          DANIEL D. CRABTREE UNITED STATES DISTRICT JUDGE.

         Plaintiff Digital Ally, Inc. brings this lawsuit against defendant Daniel Corum, its former employee. Mr. Corum now works for plaintiff's competitor, TASER International, Inc. (“TASER”), ^[1] asserting claims of tortious interference, breach of contract, and violation of the Kansas Uniform Trade Secrets Act. This matter comes before the court on plaintiff's Motion for Temporary Restraining Order^[2] and for Preliminary Injunction (Doc. 5). On February 24, 2017, the court conducted an evidentiary hearing on the motion. After considering the evidence, submissions, parties' arguments, and parties' supplemental briefs, the court is now prepared to rule. For reasons explained below, the court denies plaintiff's Motion.

         I. Factual Background

         Plaintiff is a 150-employee company that specializes in manufacturing video recording devices. Plaintiff sells these devices to law enforcement departments and other commercial users like taxicab and private ambulance companies. Plaintiff's cameras can be embedded in its clients' rearview mirrors or worn on a person's body. According to plaintiff, a unique feature of some of plaintiff's cameras enables them to turn themselves on automatically. Plaintiff calls this technology “VuLink.” The VuLink camera reacts to a specific triggering event such as an officer drawing a weapon or turning on a siren. When the triggering event occurs, the camera begins to record automatically without any direction by the law enforcement officer.

         Plaintiff employed Mr. Corum from December 7, 2015 to August 16, 2016. Mr. Corum worked in a sales and support oriented role working primarily with plaintiff's prospective commercial clients. Mr. Corum's role never changed during the eight months he worked for plaintiff. Mr. Corum contends he never worked with any of plaintiff's law enforcement clients.

         Plaintiff gave Mr. Corum two weeks of general training when he started working. As part of his employment, Mr. Corum signed an employment contract that included a covenant not to compete (“the agreement”). This agreement provided that:

The Employee acknowledges that during Employee's employment with Digital Ally, Employee, at the expense of Digital Ally, will be specially trained in Digital Ally's business, will establish favorable relations with Digital Ally's customers, clients, accounts and vendors and will use and have access to Digital Ally's Trade Secret Information;

In consideration of such training, relations and access, and to further protect Digital Ally's Trade Secret Information and other confidential information, Employee agrees that during the term of Employee's employment by Digital Ally, and for a period of two years from and after the voluntary or involuntary termination of such employment, for any or no reason, employee will not directly or indirectly, without the express written consent of Digital Ally, except when and as directed to in the performance of employee's duties under this agreement:

Own, manage, operate, control or have any interest, financial or otherwise, in or act as an officer, director, partner, principal member, manager, shareholder, employee, agent representative, consultant or independent contractor of, or in any way assist any person or entity in the conduct of any business or enterprise which competes with the digital and electronic products of Digital Ally. Digital Ally sells and distributes its products throughout the United States and internationally;

Directly or indirectly solicit or divert, or attempt to solicit or divert, any customer, clients, or accounts of Digital Ally;

Directly or indirectly use or disclose to any person, firm, or corporation, the names or addresses of any of the customers, clients or accounts of Digital Ally.

Doc. 8 at 4.

         In August 2016, Mr. Corum quit his job with plaintiff to work for plaintiff's competitor, TASER. Mr. Corum currently works remotely for TASER from his home in Springfield, Missouri, as a network technician. As a network technician, Mr. Corum is responsible for implementing TASER's “Fleet” system in its law enforcement clients. The Fleet system is an in-vehicle recording device. Mr. Corum described his role at TASER as an “advisor to law enforcement departments who are existing TASER clients.” Doc. 7 at 4. In other words, Mr. Corum helps TASER clients increase the number of Fleet systems used in their department vehicles. Third parties manufacture the routers that support the Fleet system. In his role, Mr. Corum also serves as the liaison between the client and the third-party router manufacturer. Mr. Corum does not make sales of TASER's products.

         Plaintiff and TASER are involved in a separate lawsuit about plaintiff's VuLink technology. Plaintiff sued TASER claiming patent infringement, commercial bribery, and unfair/anti-competitive acts or practices-all relating to the auto-activation technology. This case is still pending before Judge Murguia of our court.

         Here, plaintiff claims Mr. Corum breached the employment contract he signed when he began working for plaintiff. Plaintiff seeks a preliminary injunction preventing Mr. Corum from providing TASER services. Specifically, plaintiff seeks an injunction: (1) prohibiting Mr. Corum from using any confidential information he learned working for plaintiff to compete with plaintiff unfairly; (2) requiring Mr. Corum to return all the confidential information he has in his possession; (3) prohibiting Mr. Corum from selling or attempting to sell TASER products similar to its products to plaintiff's customers; and (4) prohibiting Mr. Corum from continuing to work for TASER.

         II. Legal Standard

         Federal Rule of Civil Procedure 65(a) authorizes district courts to issue preliminary injunctions. The relief afforded under this rule has a limited purpose-a preliminary injunction is “merely to preserve the relative positions of the parties until a trial on the merits can be held.” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). To prevail on a motion for preliminary injunction, the movant must demonstrate that: (1) it is substantially likely to succeed on the merits; (2) it will suffer irreparable injury if the injunction is denied; (3) its threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction, if issued, will not be adverse to the public interest. Winter v. Nat'l Res. Defense Council, Inc., 555 U.S. 7, 20 (2008); Verlo v. Martinez, 820 F.3d 1113, 1126 (10th Cir. 2016).

         Whether to grant a preliminary injunction rests within the court's sound discretion. Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1070 (10th Cir. 2009). But, a preliminary injunction is an extraordinary remedy. Winter, 555 U.S. at 24. So, the right to such relief must be “clear and unequivocal.” Petrella v. Brownback, 787 F.3d 1242, 1256 (10th Cir. 2015) (quoting Beltronics, USA, Inc., 562 F.3d at 1070). “In general, ‘a preliminary injunction . . . is the exception rather than the rule.'” Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1226 (10th Cir. 2007) (quoting GTE Corp. v. Williams, 731 F.2d 676, 678 (10th Cir. 1984)).

         III. Analysis

         Plaintiff seeks an injunction that: (1) prohibits Mr. Corum from using confidential information he learned working for plaintiff to compete with plaintiff unfairly; (2) requiring Mr. Corum to return any of plaintiff's confidential information in his possession; (3) prohibiting Mr. Corum from selling or attempting to sell similar products to plaintiff's customers; and (4) prohibiting Mr. Corum from continuing to work for TASER.

         “[C]ourts have consistently noted that ‘[b]ecause a showing of probable irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction, the moving party must first demonstrate that such injury is likely before the other requirements for the issuance of an injunction will be considered.'” Dominion Video Satellite v. Echostar Satellite Corp., 356 F.3d 1256, 1260-61 (10th Cir. 2004) (quoting Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990)). The court thus begins the analysis by asking whether plaintiff will suffer irreparable harm without the injunction it seeks.

         A. Irreparable Harm

         Irreparable harm “‘does not readily lend itself to definition.'” Id. at 1262 (quoting Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234, 1250 (10th Cir. 2001)). And proving irreparable harm is not “‘an easy burden to fulfill.'” Id. (quoting Greater Yellowstone Coal. v. Flowers, 321 F.3d 1250, 1258 (10th Cir. 2003)). So, to “constitute irreparable harm, an injury must be certain, great, actual ‘and not theoretical.'” Heideman v. S. Salt Lake City, 348 F.3d 1182, 1189 (10th Cir. 2003) (quoting Wisc. Gas Co. v. F.E.R.C., 758 F.2d 669, 674 (D.C. Cir. 1985)). “Irreparable harm is not harm that is merely serious or substantial.” Id. (citations and internal quotation marks omitted).

         Instead, a plaintiff establishes irreparable harm by demonstrating “‘a significant risk that he or she will experience harm that cannot be compensated after the fact by monetary damages.'” RoDa Drilling Co. v. Siegal, 552 F.3d 1203, 1210 (10th Cir. 2009) (quoting Greater Yellowstone, 321 F.3d at 1258). A claim of “purely speculative” harm will not suffice; instead, a plaintiff must show that “significant risk of irreparable harm” is present to meet the burden. Id. (quoting Greater Yellowstone, 321 F.3d at 1260)). Moreover, wholly conclusory statements do not amount to irreparable harm. Dominion Video, 356 F.3d at 1261. The court must determine if the irreparable harm theorized by plaintiff's injunction motion is likely to take place before a ruling on the merits. RoDa Drilling Co., 552 F.3d at 1210 (quoting Greater Yellowstone, 321 F.3d at 1260)).

         A plaintiff may establish irreparable harm by “such factors as the difficulty in calculating damages, the loss of a unique product, and existence of intangible harms such as loss of goodwill or competitive market position.” Dominion Video, 256 F.3d at 1264; see also Hill's Pet Nutrition, Inc. v. Nutro Prod., Inc., 258 F.Supp.2d 1197, 1205 (D. Kan. 2003) (“[L]oss of customers, loss of goodwill, and threats to a business' viability can constitute irreparable harm.” (citations and internal quotation marks omitted)).

         Here, plaintiff asserts it will suffer irreparable harm without an injunction because it will lose its competitive market position. As support, plaintiff relies on Advisors Excel, LLC v. Zagula Kay Consulting, LLC, No. 15-4010-DDC-KGS, 2015 WL 736344, at *1 (D. Kan. Feb. 20, 2015). In Zagula, this court issued a preliminary injunction, in part, because the plaintiff produced sufficient evidence to show that it would suffer an irreparable harm if the injunction did not issue. Zagula, 2015 WL 736344, at *1, *3-*4. Like plaintiff in this case, the Zagula plaintiff asserted that they would lose competitive market position. Id. at *4. The Zagula plaintiff demonstrated that the defendant planned to recruit some of its employees to a new competing business. Id. And the Zagula plaintiff also cited specific examples in its industry where a company recruited one of its competitor's employees and the recruitment “snowballed, ” causing other employees to follow suit. Id. By citing examples, the Zagula plaintiff demonstrated that the snowballing threat was real, “not just a theoretical or speculative possibility.” Id. (citing Heideman v. S. Salt Lake Cty., 348 F.3d 1182, 1189 (10th Cir. 2003)).

         In contrast, plaintiff here relies just on a theoretical or speculative possibility that it will suffer loss of customers, goodwill, and threats to business viability if the injunction does not issue. Unlike Zagula, plaintiff has produced no evidence that Mr. Corum planned to recruit any of plaintiff's employees. Nor has plaintiff produced evidence that leads the court to conclude that a real threat of snowballing exists. In its supplemental brief, plaintiff asserts that Mr. Corum admits he was recruited to TASER by a “head hunter” while working for plaintiff. Doc. 17 at 5. But at the February 24 hearing, Mr. Corum testified that he sought out the third party recruiter who sent him to TASER. At the February 24 hearing, Stanton Ross, plaintiff's CEO, testified that some of plaintiff's employees have been contacted by TASER. But Mr. Ross's testimony did not identify any specific examples when other employees have left plaintiff to work for TASER-other than Mr. Corum. So, no evidence of a real threat of “snowballing” exists in the record.

         Plaintiff also attempts to show irreparable harm by emphasizing the tight competition between it and TASER. In its supplemental brief, plaintiff contends this “is not a case in which a former employee has chosen to work [for] another entity, ” but one where an employee has “change[d] uniforms” in a “war.” Id. 17 at 16. Plaintiff asserts that TASER has managed to make itself competitive in the market only by infringing on two of its patents (the issue being litigated before Judge Murguia). And, plaintiff asserts Mr. Corum knows of its trade secrets that he could divulge to TASER and provide it with an unfair competitive edge. Id. at 15. It appears plaintiff is trying to establish irreparable harm by suggesting that Mr. Corum's employment with TASER is part of the reason TASER has excelled quickly in the body camera market. But plaintiff has adduced no evidence linking Mr. Corum's work for plaintiff to the devices at issue in the patent litigation. Mr. Corum worked in a sales role for commercial clients while employed by plaintiff, and he now works as a networking technician for TASER's law enforcement clients.^[3] Plaintiff cannot demonstrate the irreparable harm necessary to enforce a preliminary injunction merely by asserting that Mr. Corum left to work for its competitor. Wholly conclusory and speculative statements, no matter how vividly argued, do not amount to irreparable harm.

         The fact that plaintiff and TASER are marketplace competitors might have justified a preliminary injunction that prohibits Mr. Corum from using confidential information to compete unfairly with plaintiff or ordering Mr. Corum to return confidential information that he has in his possession. But plaintiff has not sustained its burden to show that Mr. Corum possesses any confidential information, or that he is using that confidential information to compete with plaintiff. In sum, plaintiff has not met its burden to demonstrate that it will suffer irreparable harm without an injunction.

         B. ...