Sunbelt Rentals, Inc. v. McAndrews

552 F.Supp.3d 319

SUNBELT RENTALS, INC., Plaintiff,

v.James MCANDREWS, Defendant.

Civil No. 3:21cv774 (JBA)

United States District Court, D. Connecticut.

Signed August 5, 2021

Ivo Becica, Cherry Hill, NJ, Matthew Adam Green, Obermayer Rebmann Maxwell & Hippel, Mt. Laurel, NJ, Michael S. Pepperman, Obermayer Rebmann Maxwell & Hippel, Philadelphia, PA, Stacey L. Pitcher, Obermayer Rebmann Maxwell & Hippel, LLP, New Haven, CT, for Plaintiff.

Christopher L. Jefford, Kiernan Trebach, LLP, Stephen E. Hughes, Bonner Kiernan Trebach & Crociata, LLP, Boston, MA, for Defendant.

RULING DENYING PLAINTIFF'S MOTION FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

Janet Bond Arterton, U.S.D.J.

Sunbelt Rentals, Inc. brings this lawsuit against its former employee James McAndrews for breach of a noncompetition agreement, violation of the federal Defend Trade Secrets Act and the Connecticut Uniform Trade Secrets Act, and unjust enrichment. (Compl. [Doc. # 1].) Sunbelt now moves for a temporary restraining order and preliminary injunction to enjoin Defendant from continuing his employment at Riggs Distler and otherwise violating his employment agreement. (Mem. in Supp. of Mot. for TRO and Prelim. Inj.

[Doc. # 8].) The Court held an evidentiary hearing on June 23 and June 25, 2021 to consider both requested forms of relief.

I. Background

Plaintiff describes itself as "a national market leader in the extremely competitive business of renting and selling equipment and tools for use in the manufacturing, industrial, and construction industries." (Compl. ¶ 17.) In July 2018, Plaintiff purchased Mabey, Inc., a company that provided ground protection services for construction sites along the East Coast. (Id. ¶ 28.) As a part of the acquisition, Plaintiff hired many Mabey employees, including Defendant, who then served as a "National Account Manager for the North East" for Mabey. (Id. ¶¶ 30-31.) Defendant was hired as a Site Access Solutions Strategic Customer Manager in Sunbelt's Ground Protection Division, (id. ¶ 32), and he was internally assigned to a regional cost center that serviced Sunbelt's Spartanburg, South Carolina; Vidor, Texas; Bakersfield, California; Jessup, Maryland; Whitewater, Wisconsin; Jacksonville, Florida; and Trainer, Pennsylvania stores. (Compl. ¶ 50.) In this position, Defendant was responsible for, inter alia , "preparing and submitting matting/ground protection service proposals (bids) to line contractors, or directly to end clients (typically large utilities), who would either accept or reject Sunbelt's bid." (Id. ¶ 34.) Pursuant to these duties, "Defendant received various confidential business materials from Sunbelt" and was "instrumental in developing and influencing strategy taken to pursue and win business." (Id. ¶ 38.) As a condition of employment, Defendant was required to sign an agreement with "noncompetition, nonsolicitation, and confidentiality covenants." (Id. ¶ 39.)

In Section 5.2.4 of the Employment Agreement, Defendant promised, for one year after the date of expiration or termination of the Agreement, not to directly or indirectly

compete with the Corporation, its successors and assigns by engaging, directly or indirectly, in the Business as conducted at the Designated Stores or in a business substantially similar to the Business as conducted at the Designated Stores within the ‘Territory.’

(Employment Agreement, Ex. 1 to Compl. [Doc. # 1-1] at 5.) The Business is defined as

(i) selling and renting equipment, tools, climate control units, scaffolding, oil & gas equipment (including, but not limited to, man lifts, generators, light towers, trash trailers, shocks subs, test separators, shower trailers, trash pumps, 3 inch water pumps, 6 inch water pumps, water transfer services, fuel trailers, air compressors, water stations, RV pack (light tower/water station combination,) trailer houses, sewer systems, etc.) and parts for use in the manufacturing, industrial and construction industries, [and] ... (iv) the provision of related services, including, but not limited to, the erecting and dismantling of scaffolding, providing crane trucks, delivery of OCTG goods, delivery of frac valves, burner installation and repair, test separator repair, catering services and portable restroom services.

(Id. at 3.) And the Territory is defined as

the geographical area within a fifty (50) mile radius of any of the Corporation's stores in which, or in connection with, Employee performed or was responsible for performing services at any time during the twelve (12) month period immediately preceding the termination or expiration of this Agreement for any reason (the ‘Designated Stores’).

(Id. at 5.)

Section 9 contains a severability clause which provides that

The provisions of this Agreement, particularly Paragraphs 5 and 6 [which set out the restrictive covenants and intellectual property rights], are hereby deemed by the parties to be severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity or enforceability of the other provisions hereof.

(Id. at 7.)

Defendant signed this Agreement on October 21, 2018. (Id. at 8.)

On April 26, 2021, Defendant resigned from Sunbelt and stated his intent to begin work for Riggs Distler as the General Manager of Environmental Construction and Matting. (Compl. ¶ 103.) Plaintiff contends that Riggs Distler is a competitor as described in section 5 of the employment agreement with Defendant, and his employment with Riggs thus violates the noncompetition covenant. (See id. ¶ 106.) Despite Plaintiff reminding Defendant of the noncompetition agreement, Defendant gave no "indication that [he] will cease and desist from working for Riggs in a competitive capacity." (Id. ¶ 119.)

Shortly before Defendant resigned from Sunbelt, he forwarded from his work email to his personal email numerous documents that contained Plaintiff's confidential information. (See id. ¶¶ 75-91.) In addition, Defendant had "connected several flash/USB drives to his Sunbelt laptop on multiple occasions between January 2021 and his resignation on April 26, 2021. (Id. ¶ 94.) Defendant copied numerous files containing Plaintiff's confidential information on that zip drive regarding various matting projects. (Id. ¶¶ 92-107.) Plaintiff claims Defendant had no legitimate reason or authority to use a zip drive as a part of his job and did not turn in any zip drives or portable storage devices at the time of his resignation. (Id. ¶ 100.) Based on these circumstances, Plaintiff believes that Defendant is using the zip drives to "misappropriate Sunbelt's confidential information" for the benefit of Riggs Distler, his new employer, (id. ¶¶ 101-102), while Defendant insists that he copied the documents onto zip drives only so he could print them at the local Staples as he worked from home and did not have a high-quality printer there, (McAndrews Affidavit, Ex. A to Def.’s Mem. in Opp. [Doc. # 21-1] ¶ 55.)

II. Legal Standard

a. Temporary Restraining Order

"The purpose of a temporary restraining order is to preserve an existing situation in status quo until the court has an opportunity to pass upon the merits of the demand for a preliminary injunction." Pan Am. World Airways, Inc. v. Flight Engineers’ Intern. Ass'n, PAA Chapter, AFL-CIO , 306 F.2d 840, 842 (2d Cir. 1962) "Such an order is necessarily limited to a very brief period because what may later prove to be a right of the party who is restrained is suspended before even a tentative adjudication as to that right has been had." Id. at 843. "The Court must examine whether the movants have demonstrated a threat of irreparable harm that will occur immediately to justify a temporary restraining order, while the temporal context of a preliminary injunction takes a longer view." Omnistone Corp. v. Cuomo , 485 F. Supp. 3d 365, 367-368 (E.D.N.Y. 2020).

b. Preliminary Injunction

Aside from the temporal distinction, the standards for obtaining a preliminary injunction and a temporary restraining order are the same. See id. at 367. To obtain such relief, a plaintiff "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). The Court's broad discretion is required in determining whether to order relief because such relief "is an extraordinary and drastic remedy." Grand River Enter. Six Nations, Ltd. v. Pryor , 481 F.3d 60, 66 (2d Cir. 2007).

III. Discussion

a. Likelihood of Success on the Merits

i. Breach of Contract

To prevail on a claim for breach of contract, a plaintiff must establish "the formation of an agreement, performance by one party, breach of the agreement by the other party[,] and damages." Bouchard v. Sundberg , 80 Conn. App. 180, 189, 834 A.2d 744 (2003). Defendant McAndrews maintains that Plaintiff's noncompetition agreement is invalid and unenforceable under Connecticut law because it unreasonably bars him from engaging in a wide range of work not reasonably related to Plaintiff's legitimate interests. (Def.’s Mem. at 13.)

In order to be valid and binding, a covenant which restricts the activities of an employee following the termination of his employment must be partial and restricted in its operation in respect either to time or place, and must be reasonable – that is, it should afford only a fair protection to the interest of the party in whose favor it is made and must not be so large in its operation as to interfere with the interests of the public. The interests of the employee himself must also be protected, and a restrictive covenant is unenforceable if by its terms the employee is precluded from pursuing his occupation and thus prevented from supporting himself and his family.

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