Total Quality Logistics, LLC v. Riffe

TOTAL QUALITY LOGISTICS, LLC, Plaintiff, v. WILLIAM J. RIFFE, et al., Defendants.

Case No. 1:19-cv-23

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

October 28, 2019

Judge Timothy S. Black

ORDER GRANTING PLAINTIFF'S RENEWED MOTION FOR PRELIMINARY INJUNCTION (Doc. 28)

This civil case is before the Court on Plaintiff's renewed motion for preliminary injunction (Doc. 28) and the parties' responsive memoranda (Docs. 36, 42, 43).

I. BACKGROUND

Plaintiff Total Quality Logistics ("TQL")'s renewed motion for preliminary injunction seeks to enjoin former employee, William "Ross" Riffe, from further violating the terms of his "Employee Non-Compete, Confidentiality, and Non-Solicitation Agreement" ("Non-Compete Agreement"), and seeks to prohibit Defendants Del Mar Packing, LLC, Del Mar Farms (collectively "Del Mar"), and Hustle Logistics, LLC ("Hustle") from misappropriating TQL's trade secrets and tortiously interfering with TQL's contractual relationship with Riffe. (Doc. 28).

TQL is an Ohio limited liability company with its principal place of business in Cincinnati, Ohio. (Doc. 2 at ¶ 14). TQL provides freight brokering and third-party logistics services to customers in the continental United States. (Id. at ¶ 3). Riffe, a Kentucky resident, was employed by TQL from January 9, 2012 until he voluntarily terminated his employment on July 6, 2018. (Id. at ¶¶ 3, 6, 15, 32). While at TQL, Riffe held several job titles, including Logistics Account Executive Trainee ("Broker Trainee"), Logistics Account Executive ("Broker"), and Sales Group Leader. (Id. at ¶ 3). During his time at TQL, Riffe participated in a training program (provided to all Broker Trainees) on topics including TQL's services, pricing structure, sales strategies, customers, and general operations. (Id. at ¶ 4). Riffe's work exposed him to TQL's trade secrets and confidential information, such as financial records, terms of business dealings, and customer lists. (Id. at ¶¶ 5, 36). While at TQL, Riffe had extensive contact with TQL customer, Del Mar, whose point of contact was Brian Wright. (Id. at ¶ 5).

When Riffe began his employment with TQL in 2012, he signed a Non-Compete Agreement, which contains the following one-year restrictive covenant:

Employee will not directly or indirectly, own, operate, maintain, consult with, be employed by (including self-employment), engage in, or have any other interest (whether as an owner, shareholder, officer, director, partner, member employee, joint venturer, beneficiary, independent contractor, agent, or any other interest) in any Competing Business (as defined below), except the ownership of less than 1 % of the outstanding equity securities of any publicly-held corporation or entity; and

Employee will not directly or indirectly, either as an employee, agent, consultant, contractor, officer, owner, or in any other capacity or manner whatsoever, whether or not for compensation, participate in any transportation-intermediary business that provides services in the Continental United States, including but not limited to any person or organization that provides shipping, third-party logistics, freight brokerage, truck brokerage, or supply-chain management services . . .

(Id. at 23-24 ¶ 9(b)(i)-(ii)). The Agreement defines the term "Competing Business" as "any person, firm, corporation, or entity that is engaged in shipping, third-party logistics, freight brokerage, truck brokerage, or supply-chain management services in the Continental United States." (Id. at 25 ¶ 9(f)). The Agreement also prohibits Riffe from soliciting any TQL customers or motor carriers, taking action to divert business from TQL, interfering with or attempting to disrupt TQL's relationships, or soliciting TQL employees or former employees. (Id. at 24 ¶ 9(b)(iii)-(v)). Moreover, the Agreement protects against disclosure of TQL's confidential information, with Riffe agreeing not to use or disclose confidential information to any individual or business other than TQL, and to return confidential information in his possession upon termination of employment. (Id. at 22 ¶¶ 5-6, 24 ¶ 9(c)).

After Riffe left TQL, he began working for Del Mar, a TQL customer. (Id. at ¶¶ 5-6). Plaintiff's complaint alleges that shortly after Riffe's departure, TQL noticed a sharp decline in business generated by Del Mar and at least one other TQL customer. (Id. at ¶¶ 7, 49). TQL later learned that Del Mar had begun using the brokering services of a new, California limited liability company—"Hustle"—formed by TQL's contact at Del Mar, Brian Wright. (Id. at ¶¶ 8, 20, 51). TQL's complaint notes that Hustle received brokerage authority from the Federal Motor Carrier Safety Administration (FMCSA) sixteen days after Riffe left TQL. (Id. at ¶ 51). The complaint also alleges that Hustle's website lists the same phone and fax numbers as Del Mar, and that Brian Wright is listed as the registrant for Hustle on the California Secretary of State's website. (Id. at ¶ 52). In addition, TQL alleges that Wright is listed as Hustle's manager in a 2018 Statement of Information form. (Id. at ¶ 53). Based on these facts, TQL asserts that Riffe assisted in forming Hustle, a direct competitor of TQL, by using TQL's confidential information and trade secrets, and solicited TQL's customers, including Del Mar. (Id. at ¶ 56). Further, TQL alleges that Riffe is actually working for both Del Mar and Hustle, in a position that is substantially similar to his position as a broker for TQL. (Id. at ¶ 57). The complaint seeks injunctive relief based on a breach of contract claim asserted against Riffe for violating his Non-Compete Agreement (Count II) (Id. at ¶¶ 66-70), and also seeks injunctive relief based on claims asserted against Del Mar and Hustle for tortious interference with a contract and violation of the Ohio Uniform Trade Secrets Act, Ohio Revised Code § 1333.61, et seq. (Counts III-IV) (Id. at ¶¶ 71-82).

TQL filed its complaint in the Clermont County Court of Common Pleas, which entered a temporary restraining order in December 2018 (Doc. 1-1 at 128), prior to Defendants' removal of the case on January 8, 2019 (Doc. 1). After removing the case, Defendants filed a motion to dissolve the temporary restraining order. (Doc. 5). This Court denied the motion as moot, finding the restraining order had already expired. (Doc. 8). Then, on May 31, 2019, the Court set a case schedule, allowing for discovery and setting a deadline by which Plaintiff could renew its motion for preliminary injunction, originally filed in state court.

Now, in Plaintiff's renewed motion for preliminary injunction, TQL reasserts its prior request to enjoin Riffe from further violating his Non-Compete Agreement and to enjoin Del Mar and Hustle from misappropriating TQL's trade secrets and tortiously interfering with TQL's contractual relationship with Riffe. (Doc. 28).

II. STANDARD OF REVIEW

Plaintiff bears the heavy burden of demonstrating its entitlement to injunctive relief. The purpose of a preliminary injunction is to preserve the status quo pending a final decision on the merits. Louisiana-Pacific Corp. v. James Hardie Bldg. Prods., 928 F.3d 514, 517 (6th Cir. 2019) (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008)). An "injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it." Overstreet v. Lexington-Fayette Urban Cty. Gov't, 305 F.3d 566, 573 (6th Cir. 2002). Accordingly, Plaintiff must establish its case by "clear and convincing evidence." Ohio A. Phillip Randolf Inst. v. Husted, 350 F. Supp. 3d 662, 670 (S.D. Ohio 2018) (citing Damon's Rests., Inc. v. Eileen K. Inc., 461 F. Supp. 2d 607, 621 (S.D. Ohio 2006)). In other words, Plaintiff's evidence must "more than outweigh the [opposing] evidence" and must "persuade the court that its claims are highly probable." Id.

Nevertheless, Plaintiff need not "prove [its] case in full." Total Quality Logistics, LLC v. III's Hotshot, Inc., No. 1:17-cv-352, 2017 WL 5972001, at *2 (S.D. Ohio Dec. 1, 2017) (citing Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535, 542 (6th Cir. 2007)). "[I]t is ordinarily sufficient if the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful as to make them a fair ground for litigation and thus for more deliberate investigation." Id. (quoting Northeast Ohio Coalition v. Husted, 696 F.3d 580, 591 (6th Cir. 2012)).

In determining whether to grant injunctive relief, courts weigh the following four factors: "(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury absent the injunction; (3) whether the injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuance of an injunction." Louisiana-Pacific Corp., 928 F.3d at 517. When a plaintiff shows some likelihood of success on the merits, a court should balance these factors rather than tally them. Id. (citing S. Glazer's Distribs. of Ohio, LLC v. Great Lakes Brewing Co., 860 F.3d 844, 849 (6th Cir. 2017)). Although no one factor is controlling, "a court must not issue a preliminary injunction where the movant presents no likelihood of merits success." Id.; Gonzales v. Bd. of Med. Exam'rs, 225 F.3d 620, 625 (6th Cir. 2000).

III. ANALYSIS

A. Likelihood of Success on the Merits

a. Claims against Riffe

Plaintiff's renewed motion for preliminary injunction seeks to enjoin Riffe from further violating his Non-Compete Agreement with TQL, specifically alleging that Riffe breached the Agreement by leaving TQL to work for Del Mar and Hustle, soliciting TQL customers, and sharing TQL's confidential information and trade secrets. (Doc. 28 at 26-27). In short, TQL argues that Hustle, the brokerage firm created by Del Mar employee, Brian Wright, is not a distinct entity, but rather, an...