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EPRO Services, Inc. v. Regenesis Bioremediation Products

United States District Court, D. Kansas

August 28, 2019

EPRO SERVICES, INC., Plaintiff,
v.
REGENESIS BIOREMEDIATION PRODUCTS, Defendant.

          MEMORANDUM AND ORDER

          ERIC F. MELGREN UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendant Regenesis Bioremediation Products' Motion to Dissolve a Temporary Restraining Order (Doc. 3). Plaintiff EPRO Services, Inc. (“EPRO”) originally filed the underlying case in Sedgwick County District Court on August 23, 2019, additionally seeking and obtaining a Temporary Restraining Order. Regenesis promptly removed that case to this Court and moved to dissolve the TRO and compel arbitration. The Court considered counsels' arguments on the motion to dissolve in a hearing on August 27, 2019. For the reasons stated at the hearing, and summarized below, the Court grants-as of the close of the August 27 hearing-Regenesis' motion to dissolve.

         I. Factual and Procedural Background

         EPRO is a Kansas corporation that manufacturers and sells chemical products used to prevent hazardous chemical leaks at brownfield construction sites. Regenesis is a California corporation that markets and sells bioremediation products to environmental consulting, engineering, and construction firms. EPRO and Regenesis entered into a Joint Marketing Agreement (“JMA”) under which Regenesis agreed to market EPRO's System III, a product that seals brownfield construction sites to prevent environmentally dangerous gasses from leaking out. The JMA granted Regenesis the exclusive right to promote, market, distribute, and sell this product, which Regenesis later trademarked as GEO-SEAL.[1]

         In addition to the substantive rights and obligations mentioned above, the JMA includes an arbitration provision which states:

Paragraph XXII. Miscellaneous, c. Disputes: In the event that any disagreement arises between the parties hereto with reference to this Agreement upon which the parties cannot agree, then such disagreement shall be referred to binding arbitration, which shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

         After some time, Regenesis began selling its own proprietary product, named Nitra-Seal, which it allegedly marketed to certain customers as superior to GEO-SEAL. As a result, a dispute arose amongst the parties as to whether Regenesis had improperly used its position of trust with EPRO to effectively copy GEO-SEAL and sell it under a different brand. On Friday, August 23, 2019, EPRO filed a lawsuit in Sedgwick County District Court alleging that Regenesis misappropriated EPRO's confidential and proprietary information, trade secrets, and intellectual property in violation of the Kansas Uniform Trade Secrets Act, [2] breached its fiduciary duty to EPRO, converted EPRO's property, and breached the JMA.[3]

         In addition to filing suit on August 23, EPRO sought and obtained a TRO enjoining Regenesis from: (1) using or reproducing EPRO's confidential and proprietary information and trade secrets; (2) directly or indirectly destroying or removing EPRO's confidential and proprietary information and trade secrets, documents, information, or data; (3) directly or indirectly using the GEO-SEAL trademark; and (4) disparaging or otherwise implying that GEO-SEAL is less than suited for use in brownfield construction projects.

         Regenesis promptly removed the case to this Court, seeking to dissolve the TRO and compel arbitration. Regenesis argues that the Court should dissolve the TRO because (1) the state court lacked proper jurisdiction to issue the TRO; (2) the TRO was issued without notice and there was no justifiable basis to issue the TRO; and (3) EPRO's Verified Petition lacks any showing of irreparable injury, loss, or damage that would result if the TRO is dissolved. The Court considered counsels' arguments in a hearing on August 27, 2019. For the reasons stated below, the Court grants Regenesis's motion.

         II. Legal Standard

         All injunctions, including temporary restraining orders, issued by a state court “prior to . . . removal . . . remain in full force and effect until dissolved or modified by the district court.”[4]However, once an action is removed from state court, “federal rather than state law governs the future course of proceedings, notwithstanding state court orders issued prior to removal.”[5]Furthermore, when evaluating a motion to dissolve a temporary restraining order issued by a state court before removal, “federal law is applied as though the action was originally commenced [in federal court].”[6] Federal courts reviewing a TRO issued by a state court before removal have the authority to dissolve the TRO.[7]

         Under Federal Rule of Civil Procedure 65(b)(4), the party against whom a temporary restraining order has issued may move to dissolve or modify the order, and the court must then promptly hear and decide the motion.[8] In seeking continued injunctive relief, the plaintiff has the burden of showing a right to the relief.[9] The motion to dissolve may be granted where the temporary restraining order was improperly issued.[10]

         III. Analysis

         For the purposes of this motion only, the Court assumes that this matter will ultimately be sent to arbitration. The Court further assumes that it has the ability to preliminarily grant injunctive relief prior to directing that the case be arbitrated. Following those assumptions, however, the Court concludes that EPRO has not sufficiently shown that ...


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