Concentric LLC v. Jacquelyn A. Mages & Am. Power Sys.

ORDER

William E. Duffin, U.S. Magistrate Judge

1. Background

Defendant Jacquelyn Mages began working for Courtney Industrial Battery in March of 1991. (ECF No. 18, 11.) She worked for Courtney Industrial for twenty-eight years, until it was sold to ABT Power Management, LLC-now known as plaintiff Concentric, LLC-in 2019. (Id., 14.)

When Concentric acquired Courtney Industrial, it offered Mages "a position as a 'Reserve Power Sales' representative." (ECF No. 18, 1 8.) Mages accepted the offer and eventually signed an Employment Agreement with Concentric. (Id., 110.) The Agreement contained several provisions that are relevant here: a Non-Competition

2

provision, a Non-Solicitation provision, and a Confidentiality provision. (ECF No. 5 at 2; see also ECF No. 5-1 at 11.)

Under Section 1 of the Employment Agreement (the "Confidentiality Provision"), Mages "acknowledge[d] that [she] would not have access to Protected Information but for [her] employment with [Concentric, ]" and, accordingly, made the following promises:

(i) Promise to Protect. Employee promises to protect and maintain the confidentiality of Protected Information while employed by Company. Employee will follow all Company policies and procedures for the protection and security of information. Employee also will immediately report to management any potential or actual security breach of loss

(ii) Promise to Return. Employee agrees to return any and all materials reflecting Protected Information that he or she may possess (as well as all Company-owned equipment and materials) immediately upon termination of employment or upon demand by Company

(iii) Promise Not To Use Or Disclose Employee agrees not to use or disclose, except as required by law, any Protected Information for two years after the end of Employee's employment but only for so long as such Protected Information remains confidential and not generally known to, and not readily ascertainable through proper and lawful means

(ECF No. 5-1, 1 l.b.)

The Employment Agreement defines "Protected Information" as:

[Concentric] information not generally known to, and which is not readily ascertainable through proper means by, third parties including, without limitation, all of the following; customer lists, client lists, prospect lists, financial statements and reports, code and software and the methods and techniques to develop code and software, business processes, future

3

market and product plans, product and service pricing, information about the performance, personal circumstances and/or compensation of other employees of [Concentric] or its affiliates, and other [Concentric] know-how and trade secrets. Protected Information includes negative know-how, which is information about what [Concentric] tried that did not work, if that information is not generally known or easily ascertainable by third parties.

(ECF No. 5-1, 1 l.a. (i).)

Section 4 of the Employment Agreement (the "Non-Solicitation Provision") states:

Non-interference with Certain Customers. [Mages] agrees that during his or her employment with [Concentric], and for a period of two years after the voluntary or involuntary termination of employment with [Concentric] for any reason whatsoever, [Mages] shall not, either personally or in conjunction with others either (a) solicit, interfere with, or endeavor to cause any Protected Customer (as defined in the next sentence) to terminate its business with company, or (b) solicit, otherwise induce or attempt to induce any Protected Customer to obtain goods or services from another (including Employee) or sell or provide goods or services to a Protected Customer if, in either case, those goods or services are competitive with goods or services the Protected Customer obtained from [Concentric] in the 12 months preceding the termination of [Mages'] employment with [Concentric].

(ECF No. 5-1, 14.) A "Protected Customer" is defined in the Employment Agreement as "any customer of [Concentric] for which [Mages] or someone acting under [Mages's] direct supervision provided services or about which [Mages] received any Protected Information, in either case within the last 12 months preceding the termination of [Mages's] employment with [Concentric]." (Id.)

4

Finally, Section 5 of the Employment Agreement (the "Non-Compete Provision") states:

Non-Competition. [Mages] agrees that he or she shall not render services or assistance to any competitor (as defined below) of the [Concentric] or of any present or future parent, subsidiary or other affiliate of the [Concentric] (collectively, "Affiliate") (a) during the term of Employee's employment with the [Concentric] or with any Affiliate, and (b) for a period of one (1) year after the termination of such employment if such post-employment services or assistance to a Competitor involve any of the following:

(i) for an Employee whose principal business function for the Company or any Affiliate during the one year prior to the termination of Employee's employment with the [Concentric] or such Affiliate ("the Relevant Period") is sales or marketing directly to customers of the [Concentric] or such Affiliate, selling, marketing products or services competitive with those Employee sold or marketed on behalf of the [Concentric] or Affiliate for whom Employee worked, to any of the [Concentric's] or such Affiliate's customers for which Employee had responsibility or with which Employee had regular contact, whether in person or through any communications technology, at any time during the Relevant Period . . . [or]

(iii) for an Employee who during the Relevant Period serves the [Concentric] or any Affiliate in a capacity not described in subsections (i) or (ii), providing services to a Competitor of the [Concentric] or such Affiliate in any capacity in which confidential information of the [Concentric] or such Affiliate that Employee learned during the Relevant Period, would reasonably be considered useful to the Competitor.

(ECF No. 5-1, 1 5.) "Competitor" is defined in the Employment Agreement as any company that is:

(a) engaged in or preparing to engage in either of the following businesses in the states of North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, or Iowa:

5

(i) reserve power battery systems utilized in the industries of telecommunications, petro chemical, healthcare, and data centers, or

(ii) industrial motive power business, including batteries and charging systems utilized in the industries of material handling, sweepers/scrubbers, personnel carriers, automated guided vehicles, and laser guided vehicles; or

(b) engaged in or preparing to engage in competition with any other business in which the Company or any Affiliate is engaged, in any state or territory of the United States in which the Company or any Affiliate is so engaged, but only if such business accounted for at least 10% of the revenues of the Company and its subsidiaries, on a consolidated basis, during the Relevant Period.

(Id.)

As a Reserve Power Sales representative, Mages sold power systems, including commercial batteries, to Concentric customers across the Midwest. (ECF No. 5 at 1.) Her position afforded her "access to Concentric's confidential information, including ... information concerning Concentric's power-system products, price points, customer identities, customer contacts, and customer purchase history and preferences." (Id. at 1-2; ECF No. 5-1, 112.) She held that position for two years before resigning, telling Concentric "that her personality did not fit with the Concentric culture." (ECF No. 18, 113.)

Mages is now employed at defendant American Power Systems, Inc., a company that, like Concentric, sells "power systems and other power supply equipment." (ECF No. 5 at 8.) On May 18, 2021, a representative from a customer called TDS Telecom emailed Mages and one of her American Power co-workers to ascertain the status of a

6

battery purchase order. (ECF No. 5-1 at 58.) Mages replied with a ship date. (Id.) TDS responded, saying it needed the batteries sooner. (Id.) Mages explained that the "factory is back logged and has parts issues as well as labor issues" and that "some batteries are 16-20 weeks out." (Id. at 57.) TDS asked to cancel the order (Id. at 56), and Mages did so (Id.).

Concerned that it had placed duplicative orders, with two apparently going to American Power and one to Concentric, TDS emailed Concentric. (ECF No. 5-1 at 40-41.) From those emails Concentric learned that one of TDS's purchase orders had gone to Mages at American Power. (Id. at 40.)

Concentric consequently brought this action against Mages and American Power. Concentric alleges that Mages breached her Employment Agreement by "failing to and refusing to return Concentric's confidential information immediately upon her resignation and upon demand by Concentric; soliciting Concentric's customer, who Mages serviced at Concentric within the last twelve months preceding her resignation, to do business with [American Power]; and servicing such customer in competition with Concentric." (ECF No. 1, 1 43.) It also alleges that American Power tortiously interfered with its contract with Mages, and that Mages and American Power tortiously interfered with its contract with TDS Telecom. (Id. at 12-14.)

On August 12, 2021, two days after filing its complaint, Concentric moved for a temporary restraining order and a preliminary injunction, arguing that both "are

7

necessary to ensure that Concentric will not suffer further irreparable harm by Mages' failure and refusal to honor...