Cpi Card Grp., Inc. v. John Dwyer, Multi Packaging Solutions, Inc.

294 F.Supp.3d 791

CPI CARD GROUP, INC., and CPI Card Group–Minnesota, Inc., Plaintiffs,

v.John DWYER, Multi Packaging Solutions, Inc., John Searfoss, and Ken Glinert, Defendants.

File No. 17–cv–03983 (SRN/FLN)

United States District Court, D. Minnesota.

Signed December 29, 2017

Filed February 20, 2018

Karen D. McDaniel, James J. Long, and Lisa Colburn, Briggs & Morgan, PA, 80 South 8th Street, Ste. 2200, Minneapolis, MN 55402, for Plaintiffs.

Ryan A. Olson, Richard R. Voelbel, and Scott D. Blake, Felhaber, Larson, Fenlon & Vogt, PA, 220 South Sixth Street, Ste. 2200, Minneapolis, MN 55402 for Defendant John Dwyer.

Brian T. Benkstein, Gina K. Janeiro, and Janet M. Olawsky, Jackson Lewis P.C., 150 South Fifth Street, Ste. 3500, Minneapolis, MN 55402, for Defendants Multi Packaging Solutions, Inc., John Searfoss, and Ken Glinert.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, United States District JudgeCurrently before the Court are the Motion for a Preliminary Injunction ("Pls.' PI Mot.") [Doc. No. 143] filed on November 7, 2017 by Plaintiffs CPI Card Group, Inc. and CPI Card Group–Minnesota, Inc. (collectively, "CPI" or "Plaintiffs"), and the Motion for Partial Dismissal [Doc. No. 48] filed by Defendants Multi Packaging Solutions, Inc. ("MPS") and John Searfoss ("Searfoss"). For the reasons set forth below, CPI's Motion for a Preliminary Injunction is granted and MPS and Searfoss's Motion for Partial Dismissal is granted in part and denied in part as detailed herein.

I. BACKGROUND

Before CPI filed its Motion for a Preliminary Injunction, the parties engaged in some expedited discovery. In support of their respective positions on the motion, each party submitted evidence, including affidavits, deposition testimony and exhibits. Based on that record, and oral argument held on November 27, 2017, the Court recites below its preliminary findings of fact relevant to this motion. See Calvin Klein Cosmetics Corp. v. Parfums de Coeur, Ltd. , 824 F.2d 665, 667 (8th Cir. 1987) (noting the district court's use of supporting materials, including affidavits and depositions of experts, to rule on the motion for a preliminary injunction). The Court notes, however, that the facts recited herein are not final determinations of disputed matters binding in later stages of litigation. It is a "general rule that ‘the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.’ " Henderson v. Bodine Aluminum, Inc. , 70 F.3d 958, 962 (8th Cir. 1995) (quoting Univ. of Tex. v. Camenisch , 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) ).

A. Parties

Plaintiff CPI Card Group, Inc. is incorporated in Delaware and has a principal place of business in Colorado. (Am. Complaint [Doc. No. 11] ¶ 3.) Plaintiff CPI Card Group–Minnesota, Inc. is incorporated in Minnesota and also has its principal place of business here. (Id. ) CPI asserts that it is a leader in the business of "transaction cards," which include credit and debit cards, prepaid cards, phone cards, rebate or reward cards, and transit cards. (see Id. ¶ 13; see also Ex. A of Decl. of Mira Vats–Fournier ("Vats–Fournier Decl.") [Doc. No. 163], Dep. of John Dwyer ("Dwyer Dep.") at A66/14.¹ ) In the transaction card industry, cards may be categorized as "open loop" or "closed loop." (Decl. of Margaret O'Leary ("O'Leary Decl.") [Doc. No. 158] ¶ 27.) "Open loop" cards are those which can be used at any location, e.g. , Visa or American Express. (Id. ) In contrast, "closed loop" cards can only be used at a singular retailer, such as Starbucks or Home Depot. (Id. ) CPI also asserts that it is focused on both closed loop and open loop cards because "[t]here is significant overlap in customers," and the needs of those customers are similar. (Id. )

Defendant MPS, which is incorporated in Delaware and has its principal place of business in New York, (Am. Compl. ¶ 5), is also involved in the transaction card industry, (Decl. of Ken Glinert ("Glinert Decl.") [Doc. No. 174] ¶ 4). MPS is a "print and packaging company" and "manufactures and designs folding cartons, labels, rigid packaging, displays, inserts, and transaction cards." (Id. ¶ 2.) As part of its transaction card business, MPS also provides closed loop and open loop cards. (Id. ¶ 5). MPS and CPI are fierce competitors in what is a very competitive transaction card industry. (O'Leary Decl. ¶ 3.)

Defendants Searfoss and Kenneth Glinert ("Glinert") are currently Senior Vice Presidents of Sales at MPS. (Ex. A of Vats–Fournier Decl., Dep. of John Searfoss ("Searfoss Dep.") at A38/13; Id. , Dep. of Kenneth Glinert ("Glinert Dep.") at A3/11.) Searfoss has worked for MPS for approximately one year. (Searfoss Dep. at A37/12.) His position for MPS involves "strategy, operation, and technology." (Id. at A38/13.) Glinert has been employed by MPS since approximately 2006 and is currently responsible for transaction card sales. (Glinert Dep. at A3–4/11–13.) Searfoss and Glinert work together building strategies for the technologies that MPS will bring to market in 2018. (Searfoss Dep. at A39/19–20.)

Defendant John Dwyer ("Dwyer") has worked in the transaction card industry since 2004 and currently works for MPS. (Dwyer Dep. at A66/14.) Immediately before that, he worked for CPI for a period of thirteen years. (Id. at A66/13.) Although his last day of employment at CPI is heavily disputed,² as are many of the events leading up to his resignation, Dwyer voluntarily resigned from CPI in late spring of 2017. (See Third Decl. of John Dwyer ("Third Dwyer Decl.") [Doc. No. 170] ¶ 4.) Even before resigning from CPI, however, he signed an employment agreement with MPS. (Id. ¶ 3.)

At CPI, Dwyer was a Senior Account Executive. (Dwyer Dep. at A66/15.) In that role, his responsibilities included "managing client relationships, prospecting new clients and customers," as well as heavy involvement in production and servicing of accounts. (Id. ) While at CPI, Dwyer had a "steady group of base customers," whom Dwyer would "call on," or meet with personally, to sell them new and existing transaction card products. (Id. at A66–67/16–18.)

At least as related to these clients, Dwyer was exposed to a slew of information which CPI categorizes as CPI confidential. He knew the pricing of the CPI products he sold, as well as the pricing "strategy" for certain products; information that, as "a general rule," Dwyer acknowledges was CPI confidential information. (Id. at A67–68/19–22.) In addition to confidential pricing schemes, Dwyer was also exposed to design specifications and strategic plans at CPI, certain aspects of which Dwyer acknowledges were deemed CPI confidential. (Id. at A68/24, A69/25.) He was also exposed to information related to revenue and profits as well as information about products in development and not yet released to market—information which Dwyer again understands to have been CPI confidential information. (Id. at A69/26–27.)

Now, at MPS, Dwyer's duties are primarily focused on WestRock, the entity that recently purchased MPS. (Third Dwyer Decl. ¶ 14.) These responsibilities include: "serving as a liaison between MPS and WestRock's enterprise group focusing on key enterprise accounts; ... assessment of potential synergies between MPS and WestRock; retail management and data analytics associated with merchandising displays; and development of new product opportunities focused on connected packaging, consumer promotions, and products focused on the insurance industry; ... sale activities related to merchandising display sales, and closed-loop product sales with MPS's current customers and prospects in the closed-loop space." (Id. ) Dwyer maintains that his current job duties "are substantially different" from his prior duties at CPI. (Id. ¶ 15.)

B. Dwyer's Employment Agreements with CPI

Because of the confidential nature of many aspects of CPI's business, as well as the heavy competition in the field, CPI protects its confidential and trade secret information, in part, through the use of contractual agreements with its employees. (O'Leary Decl. ¶ 8.) As relevant here, Dwyer signed three such employment agreements: (1) a "Confidentiality and Nonsolicitation Agreement" ("Confidentiality Agreement"), (see Am. Compl., Ex. A [Doc. No. 11–1] ); (2) an Option Award Agreement ("Option Agreement"), (see id. , Ex. B [Doc. No. 11–2] ); and (3) a Restricted Stock Unit Agreement ("Unit Agreement"), (see id. , Ex. C [Doc. No. 11–3] ), (collectively, the "Original Agreements"). Generally speaking, these agreements imposed on Dwyer confidentiality, non-solicitation, and non-compete obligations, as explained below.

1. Confidentiality

The confidentiality, or non-disclosure, obligations imposed on Dwyer by the Confidentiality Agreement are quite extensive. The Confidentiality Agreement prohibits Dwyer from misusing or disclosing any CPI confidential information as defined therein. (See Confidentiality Agreement ¶¶ 1–2.) Specifically, the agreement prohibits Dwyer, during and after his employment, from using, disclosing, duplicating, recording, or reproducing confidential information "except as ordinarily necessary" for the performance of his work duties or unless CPI expressly directs him to do so. (Id. ¶ 2.) These confidentiality obligations are further reinforced by the Option Agreement, which also prohibits Dwyer from disclosing or using CPI confidential information, except as related to and required by Dwyer's performance duties at CPI. (Option Agreement ¶ 10(a).) The Option Agreement also tasks Dwyer with safeguarding and protecting CPI confidential information against disclosure, misuse, espionage, loss, and theft. (Id. )

2. Non–Solicitation

The Original Agreements also imposed non-solicitation obligations on Dwyer. The Confidentiality Agreement prohibited Dwyer—for 1 year following termination of employment—from "directly or indirectly solicit[ing], on [his] own behalf or on behalf of another, (a) any of [C...