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Jarrett Industries, Inc v. Delta Packaging, Inc.

United States District Court, D. Maryland

December 16, 2014

JARRETT INDUSTRIES, INC
v.
DELTA PACKAGING, INC. et al.

MEMORANDUM AND ORDER

WILLIAM M. NICKERSON, Senior District Judge.

Before the Court is a motion for preliminary injunction filed by Plaintiff Jarrett Industries, Inc. (Jarrett). ECF No. 4. Defendants have opposed the motion and a hearing was held on the motion on December 9, 2014. For the reasons that follow, the motion will be denied.

I. FACTUAL AND PROCEDURAL BACKGROUND

This action arises out of the decision of Defendant Allen Schwartz to leave his position as a sales representative with Jarrett in September of this year and to take a position as a sales representative with Defendant Delta Packaging, Inc. (Delta) a week or so later. Both Jarrett and Delta are in the packaging materials industry although, as explained below, they function in very different capacities within that industry. Jarrett filed this action in the Circuit Court for Baltimore County on or about November 6, 2014, and alleged in its Complaint that, by entering into employment with Delta, Schwartz violated various confidentiality, non-competition, and nonsolicitation covenants in his employment contract. Compl. ¶ 11. Jarrett also alleges that Delta was bound by and violated certain non-competition and non-solicitation provisions contained on the back of purchase orders that had been submitted to Delta by Jarrett. Id . ¶ 16. Jarrett had purchased corrugated packaging materials from Delta for more than fifteen years using these purchase orders.

Jarrett further alleged in its Complaint that, "prior to terminating his employment with Jarrett, Schwartz began contacting customers and prospective customers of Jarrett and solicited them to conduct business with Delta instead, " id. ¶ 18, and that "[a]fter terminating his employment, Schwartz continued to use Jarrett's confidential information to solicit Jarrett's past and existing customers and prospective customers to conduct business with Delta instead." Id . ¶ 19. Based upon these allegations, Jarrett asserted the following claims: Intentional Interference with Business Relationships against Schwartz and Delta (Count I); Breach of Contract against Schwartz (Count II); Breach of Contract against Delta (Count III); and, Intentional Interference with Contractual Relations against Delta (Count IV).

On November 17, 2014, Jarrett filed its Motion for Temporary Restraining Order and Preliminary Injunction. ECF No. 4. Defendants removed the action to this Court on November 20, 2014, on the basis of this Court's diversity jurisdiction. After removal, Defendants filed an opposition to Jarrett's motion. ECF No. 15. At the hearing on the motion, Jarrett presented a single witness, its president, Leslie Leeb. Defendants presented the testimony of Defendant Schwartz, as well as Delta's president, Samuel Willman.

As a preliminary observation, the Court notes that it found both Schwartz and Willman to be particularly straightforward and credible witnesses. Schwartz testified that on September 8, 2014, he met with his direct supervisor, Alan Soskin, and handed him his letter of resignation. Consistent with the terms of his employment contract with Jarrett, the letter stated that he was giving Jarrett his 30 day notice. At that meeting, he also turned over to Soskin his company laptop, along with the stick drive and paper files containing information about his customers. He testified that he subsequently had his home computer swiped to remove all information pertaining to Jarrett and its customers as well.

Jarrett decided not to extend Schwartz's employment for the thirty day notice period. At Soskin's request, Schwartz did come into Jarrett's offices the next day to go over client information with the sales representative that would be taking over his accounts. He also provided Jarrett with his e-mail contact list so that Jarrett could contact his former customers to inform them he had resigned and that they should no longer send requests to that e-mail address. In the weeks that followed, Schwartz did receive a few e-mails and cellphone calls from former customers and, in each instance, he forwarded them to Jarrett.

Schwartz testified that he made all of his former customers aware that he had a non-compete provision in his Jarrett contract and that he would not be able to continue to handle their business. He also made Delta aware of the non-compete and Willman testified that neither Schwartz nor any other Delta sales representative is soliciting any of Schwartz's former customers for business. Furthermore, if any of Schwartz's former customers contact Delta to do business, Delta is asking to be excused from the relationship until this legal dispute is resolved.

During the brief period between Schwartz's beginning his employment at Delta and the commencement of this litigation, Delta did have some contact with customers that had been serviced by Schwartz while he was at Jarrett, although that contact did not appear to have involved Schwartz. Willman testified that one of Schwartz's former customers, Fila, contacted Delta to inquire about purchasing packaging material. Willman believes that one of Delta's other sales representatives may have previously contacted Fila. Fila placed an order with Delta but Delta cancelled that order once it received a cease and desist order from Jarrett's counsel. Delta was also contacted by a few other Jarrett customers, including the Johns Hopkins Applied Physics Lab, but, in each instance, Delta asked to be excused from the relationship until this litigation is resolved.

While it appears undisputed that Delta is not selling and has not sold to any of Jarrett's customers, Jarrett's president, Leslie Leeb, testified that she believes that her company has been irreparably harmed because it has lost several of its customers that had been serviced by Schwartz, including Fila and the Johns Hopkins Applied Physics Lab. Leeb also testified that one particular prospective customer that Schwartz had been soliciting for about two years, Teleflex, will not return Jarrett's calls. Leeb stated that she believed that Teleflex would generate millions of dollars for Jarrett. Leeb further testified that it is her understanding or assumption that these relationships were lost because, in some shape or form, either directly or indirectly, Schwartz had interfered with those relationships. She also states that she believes that Schwartz has shared Jarrett's confidential and proprietary information with Delta and encouraged Delta to go after those clients.

In its motion for a preliminary injunction, Jarrett asks the Court to restrain and enjoin Schwartz: from working for any of its competitors, including Delta; or, from soliciting any customer, vendor, supplier, or prospective customer of Jarrett to do business with any other entity or to stop doing business with Jarrett. It also asks that the Court restrain and enjoin Delta from employing Schwartz or soliciting any customer, vendor, supplier, or prospective customer of Jarrett.

II. LEGAL STANDARD

The Fourth Circuit has observed that a preliminary injunction is "an extraordinary remedy involving the exercise of a very far-reaching power, which is to be applied only in the limited circumstances which clearly demand it." Centro Tepeyac v. Montgomery Cnty., 722 F.3d 184, 188 (4th Cir. 2013) (quotation marks and citation omitted.) Such extraordinary relief is granted only on a clear showing of entitlement. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam). To obtain a preliminary injunction under Rule 65(a), the movant must satisfy all four factors articulated by the Supreme Court in Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008): (1) that the movant is "likely to succeed on the merits, " (2) that the movant is "likely to suffer irreparable harm in the absence of ...


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