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Ameritox, Ltd. v. Savelich

United States District Court, D. Maryland, Northern Division

March 11, 2015

AMERITOX, LTD., Plaintiff,
v.
ROBERT SAVELICH, Defendant

Page 390

For Ameritox, Ltd., Plaintiff: Kaiser H Chowdhry, LEAD ATTORNEY, Morgan Lewis and Bockius LLP, Washington, DC; Benjamin H Field, Blair Joseph Robinson, Michael S Burkhardt, PRO HAC VICE, Morgan Lewis and Bockius LLP, Philadelphia, PA.

For Robert Savelich, Defendant: John Edward McCann, Jr, Stephanie Kaye Baron, LEAD ATTORNEYS, Miles and Stockbridge PC, Baltimore, MD.

Page 391

MEMORANDUM OPINION

William D. Quarles, Jr., United States District Judge.

Ameritox, Ltd. (" Ameritox" )[1] sued Robert Savelich for breach of contract and other claims. ECF No. 1.[2] On February 25, 2015, the Court granted Ameritox's motion for a temporary restraining order (" TRO" ). ECF No. 12.[3] On March 9, 2015, the Court held a preliminary injunction

Page 392

hearing. ECF No. 19.[4] For the following reasons Ameritox's motion for a preliminary injunction will be denied.[5]

I. Background

From April 16, 2010 to January 2015, Savelich worked for Ameritox as a District Manager responsible for the Northwest district. ECF No. 9-5 (" Hopkins Decl." ) ¶ ¶ 6, 12.[6] On April 12, 2010, Savelich signed a Confidentiality[7] and Noncompetition[8] Agreement (" Agreement" ).[9] Id. ¶ 7; Hopkins Ex. 2.[10] On April 13, 2010 Savelich signed an Employee Agreement on Inventions, Improvements, Copyright, and Trade Secrets (" Trade Secrets Agreement" ),[11] and an Employee Confidentiality and HIPAA Privacy Agreement (" HIPAA

Page 393

Agreement" ).[12] Id. ¶ ¶ 8, 9; Hopkins Ex's. 3, 4.[13] All agreements were signed by Savelich at his Oregon home. Savelich Decl. ¶ 10.

On December 19, 2014, Savelich informed James Tully, Ameritox Regional Manager, that he would be resigning from Ameritox to work for Ameritox's competitor, Physicians Choice Laboratory Services (" PCLS" ). ECF No. 10-4 (Tully Decl.) ¶ 25; Tully Ex. 1 (Savelich resignation email). Savelich told Tully that he did not think the Agreement would present any issues because PCLS focuses on different product lines, although Savelich would be responsible for Washington, Oregon, and other western states. Tully Decl. ¶ ¶ 26-27.[14]

In February 2015, upon learning that a PCLS recruiter had solicited an Ameritox employee, and had mentioned its successful recruitment of Savelich, Ameritox reviewed Savelich's Ameritox email account. Id. ¶ ¶ 29-30; see also ECF No. 9-6 (" Carr Decl." ) (describing the efforts of Eric Carr, Network, Security and Compliance Manager, to search for emails from Savelich's work account to external accounts). Ameritox learned that, on December 23, 2014, and December 29, 2014, Savelich had sent several emails from his work account to his personal account,[15] to which he allegedly attached Confidential Information.[16] They include:

o A December 23, 2014 email with the subject line " IMS.7z," to which Savelich attached a spreadsheet containing data on about 35,000 healthcare providers in Savelich's region. ECF No. 20 (" Field Decl." ) ¶ 5; Field Ex.'s A, A -1; Tully Decl. ¶ 32(a).[17] Those providers are Ameritox's past, present, and potential customers. Tully Decl. ¶ 32(a). Ameritox purchased the health provider information from IMS Health (" IMS" ). Tully Decl. ¶ 9. Savelich also attached customer lists from Ameritox's proprietary " Territory Management Tool" (" TMT" ). Field Decl. ¶ 5(b); Field Ex. A-2; Tully Decl. ¶ ¶ 11, 32(b).
o A December 23, 2014 email with the subject line " Business Plans and Pipelines.7z," to which Savelich attached account data for certain Ameritox customers,

Page 394

and notes on customers Ameritox had been targeting. Field Decl. ¶ 6; Field Ex.'s B, B-l, B-2; Tully Decl. ¶ 3 2 (d), (e).
o A December 23, 2014 email with the subject line " Jan 2013 one day meeting.7z," to which Savelich attached Ameritox's compensation rates for various services. Field Decl. ¶ 9; Field Ex.'s E, E-l; Tully Decl. ¶ 32(e).
o A December 29, 2014 email with the subject line " Emailing: Interview Guide," to which Savelich attached Ameritox's " Basic Interview Guide: Version 1.3." Field Decl. ¶ 10; Field Ex.'s F, F-l. The Interview Guide " contains customizable questions, checklists, [and] sample questions" designed " to help recruit sales employees best suited to implement Ameritox's sales strategies." Field Ex. F-l at 1; Tully Decl. ¶ 32(g).
o A December 29, 2014 email with the subject line " AAA New Business Development.7z." Field Ex. C. Savelich attached several spreadsheets containing information on Ameritox customers' account type, account name, anticipated volume per month, and notes about the customers' accounts. Field Decl. ¶ 7(a); Field Ex. C-l; Tully Decl. ¶ 32(c). Savelich also attached information on Ameritox business targets in his region. Field Decl. ¶ 7(b); Field Ex. C-2; Tully Decl. ¶ 32(h).
o A December 29, 2014 email with the subject line " Roberto.7z," to which he attached Ameritox's confidential " Financial Practice Profile" prepared for the State of Oregon. Field Decl. ¶ 8(a); Field Ex.'s D. D-l. Savelich also attached a lengthy PowerPoint presentation titled " A Proposal for a Comprehensive Approach to Chronic Opioid Management," which Ameritox had prepared for Aetna. Field. Ex. D-2. Ameritox had developed the PowerPoint as part of its " efforts to expand its business with major health insurance providers." Tully Decl. ¶ 32(f).

On February 23, 2015, Ameritox sued Savelich for breach of contract, misappropriation of trade secrets, and breach of duty of loyalty. ECF No. 1. That day, Ameritox moved for a TRO and preliminary injunction barring Savelich from, among other things, soliciting or attempting to solicit Ameritox customers or employees, or using or disclosing Ameritox's documents, information, or data. ECF Nos. 8, 10 (amended). On February 25, 2015, the Court granted the TRO. ECF No. 12. On February 26, 2015, the Court granted in part and denied in part Ameritox's motion to expedite discovery. ECF No. 17.[18]

On March 3, 2015, Savelich began producing electronic information, and has returned about 370 pages of hard copy documents to Ameritox, including those listed above. ECF Nos. 24-1 at 8 n. 4; 24-3 (" Supp. Field Decl." ) ¶ 4 .[19] On March 4, 2015, Savelich produced additional documents,

Page 395

including his PCLS offer letter,[20] emails between Savelich and PCLS,[21] and answers to interrogatories. Supp. Field Decl. ¶ ¶ 5-10.

According to Savelich, from December 19, 2014 to the present, he has not had contact with current or former Ameritox customers, but has had contact with several Ameritox employees. ECF No. 25-5 at 22-24.[22]

II. Analysis

A. Preliminary Injunction Standard

Preliminary injunctive relief is an " extraordinary remed[y] involving the exercise of very far-reaching power [and is] to be granted only sparingly and in limited circumstances." MicroStrategy Inc. v. Motorola, Inc., 245 F.3d 335, 339 (4th Cir. 2001) (internal quotation marks omitted).

Page 396

Because such relief " requires that a district court, acting on an incomplete record, order a party to act, or refrain from acting, in a certain way," " [t]he danger of a mistake in this setting is substantial." Hughes Network Sys., Inc. v. InterDigital Commc'ns Corp., 17 F.3d 691, 693 (4th Cir. 1994) (internal quotation marks omitted).

To obtain preliminary injunctive relief, the movant must demonstrate that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm absent such relief; (3) the balance of equities favors it; and (4) the relief sought is in the public interest. See Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 346 (4th Cir. 2009), vacated on other grounds, 559 U.S. 1089, 130 S.Ct. 2371, 176 L.Ed.2d 764 (2010), reinstated in relevant part on remand, 607 F.3d 355 (4th Cir. 2010) (per curiam).

B. Ameritox's Motion

1. Contractual Claims

a. Choice of Law

As a preliminary matter, the Court must determine what state's law governs Ameritox's contract claims. Here, the Agreement contained a choice-of-law provision requiring the application of Maryland law. See Hopkins Ex. 2 ¶ 7. Under Maryland law,[23] this Court should presume that a parties' choice of law is enforceable. See Ground Zero Museum Workshop v. Wilson, 813 F.Supp.2d 678, 696 (D. Md. 2011); Henry v. Gateway, Inc., 187 Md.App. 647, 979 A.2d 287, 297 (Md. Ct. Spec. App.2009) (" Maryland appellate courts have long recognized the ability of parties to specify in their contracts which state's law will apply." ).

However, Savelich contends that this Court should apply Oregon law to the Agreement because it violated Oregon's statutory notice provision and, thus, is contrary to fundamental Oregon policy. ECF No. 28 at 23; Hr'g Tr at 14-20. Ameritox contends that the nonsolicitation and confidentiality covenants at issue are not subject to Oregon's notice provision. Hr'g Tr. at 3-5.

Section 187 of the Restatement (Second) of Conflict of Laws, to which Maryland subscribes,[24] provides that:

[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless. . . the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue....

Restatement (Second) of Conflict of Laws § 187(2) (b) (1971) (emphasis added); Ciena Corp. v. Jarrard, 203 F.3d 312, 323-24 (4th Cir. 2000); Hunter Grp., Inc. v. Smith, 9 F.App'x 215 (4th Cir. 2001).[25]

Page 397

When " the law chosen by the parties would make enforceable a contract flatly unenforceable in the state whose law would otherwise apply, to honor the choice-of-law provision would trench upon that state's fundamental policy." Barnes Grp., Inc. v. C & C Products, Inc., 716 F.2d 1023, 1031 (4th Cir. 1983)(citation and internal quotation marks omitted).

In the absence of the Agreement's choice-of-law provision, Oregon law would apply.[26] Under Oregon law, " [a] noncompetition agreement entered into between an employer and employee is voidable and may not be enforced by a court of this state unless . . . [t]he employer informs the employee in a written employment offer received by the employee at least two weeks before the first day of the employee's employment that a noncompetition agreement is required as a condition of employment." Or. Rev. Stat. § 653.295(1)(emphasis added).

A " noncompetition agreement" is defined as:

an agreement, written or oral, express or implied, between an employer and employee under which the employee agrees that the employee, either alone or as an employee of another person, will not compete with the employer in providing products, processes or services that are similar to the employer's products, processes or services for a period of time or within a specified geographic area after termination of employment.

§ 653.295 (7) (d) (emphasis added). " [A]n agreement restraining an employee from directly or indirectly soliciting business from former clients or prospective clients should be construed as a non-competition agreement." Naegeli Reporting Corp. v. Petersen, No. 3:11-1138-HA, 2011 WL 11785484, at *3 (D. Or. Dec. 5, 2011) (emphasis added). However, § 653.295(1) does not apply to " [a] covenant not to solicit employees of the employer or solicit or transact business with customers of the employer." § 653.295(4). Additionally, the statute does not " restrict [] the right of any person to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws." § 653.295(5).

Here, the Agreement bars Savelich from soliciting " any client of Ameritox." Hopkins Ex. 2 ¶ 2. According to Savelich, that language arguably includes former clients, rendering the covenant a noncompete--and, thus, void--under Naegeli. Hr'g Tr. at 20. Ameritox contends that the covenant only covers " existing customers." Hr'g Tr. at 4.

This Court has previously acknowledged the ambiguity of " any." See Paice LLC, et al. v. The Ford Motor Co., Civil Case No. WDQ-14-492, Docket No. 79 (D. Md. Nov. 6, 2014). Here, however, it

Page 398

makes sense to construe " client" as referring to current clients; former or prospective " clients" are not--or are no longer--Ameritox's " clients." [27] Thus, only the noncompete covenant--not the customer or employee nonsolicitation covenants[28]--is subject to § 653.295(l)'s two week notice provision.[29] Ameritox is not seeking to enforce the noncompete covenant. See ECF Nos. 24; 24-2 at 2; see also Hr'g Tr. at 3. Accordingly, the nonsolicitation covenants are not void under Oregon law for lack of two weeks' notice.[30]

Because the provisions at issue are not " contrary to [Oregon's] fundamental policy," the Court need not decide whether Oregon would have a " materially greater interest" than Maryland. See Restatement (Second) of Conflict of Laws § 187(2)(b). Accordingly, Maryland law applies to the Agreement.[31]

b. Likelihood of Success on the Merits

Ameritox asserts that Savelich breached the Agreement's confidentiality and employee nonsolicitation covenants. ECF No. 24-1 at 16-17.[32] Savelich contends that they are unenforceable under Maryland law. ECF No. 28 at 22.

To enforce a restrictive covenant under Maryland law, " (1) the employer must have a legally protected interest,[33] (2) the restrictive covenant must be no wider in scope and duration than is reasonably necessary to protect the employer's interest, (3) the covenant cannot impose an undue hardship on the employee, and (4) the covenant cannot violate public policy." Deutsche Post Global Mail, Ltd. v. Conrad,

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116 F.App'x 435, 438 (4th Cir. 2004) ( citing Silver v. Goldberger, 231 Md. 1, 6-8, 188 A.2d 155, 158-59 (Md. 1963)). Savelich contends that the covenants exceed the scope reasonably necessary to protect Ameritox's interests. ECF No. 28 at 27-31; Hr'g Tr. at 22.

i. Nonsolicitation Covenants

Savelich contends that the customer nonsolicitation covenant is overbroad as to " soliciting, urging, and inducing 'clients.'" ECF No. 28 at 27. Savelich argues that the covenant includes those who first become clients during the oneyear post-termination period, with whom Savelich has had no prior contact, and includes clients in at least one state (Oklahoma) where Savelich never provided services. Id. at 27. Savelich further argues that " client" is temporally vague. Id. Ameritox argues that the customer nonsolicitation covenant is not overbroad because it is limited to " existing customers and only customers that were in [Savelich's] districts." Hr'g Tr. at 4.

Under the customer nonsolicitation covenant, Savelich may not:

directly or indirectly solicit, entice or induce any client of Ameritox within the states of AZ, CA, CO, ID, MI, NM, NV, OK, OR, TX, UT, WA, WY which are states within my purview . .., to become a client, customer, distributor, licensor, licensee or reseller of any other person, firm or corporation other than Ameritox with respect to products and/or services then sold or under development by Ameritox or to reduce or cease doing business with Ameritox.

Hopkins Ex. 2 ¶ 2.

Maryland has enforced restrictive covenants barring solicitation of all of an employer's clients. See Fowler v. Printers II, Inc., 89 Md.App. 448, 465, 598 A.2d 794, 802 (1991) (noting that Maryland courts have enforced non-compete agreements barring solicitation of " all customers" of a former employer, not just those with whom the former employee had worked); Tuttle v. Riggs-Warfield-Roloson, Inc., 251 Md. 45, 47, 246 A.2d 588, 589 (1968) (upholding covenant barring the former employee, for two years, from " engaging either directly or indirectly . . . with [the employer's] customers" ). When the scope of the covenant is facially reasonable, the court will examine the facts and circumstances of the individual case. See Millward v. Gerstung Int'l Sport Ed., Inc., 268 Md. 483, 487, 302 A.2d 14, 16 (1973).

Here, the customer nonsolicitation covenant bars Savelich from soliciting any client in two states--Oklahoma and Nevada-- where Savelich never provided services. See Tully Decl. ¶ 21; Hopkins Ex. 2 ¶ 2.[34] Though the covenant does not extend to all of Ameritox's nationwide customers, it does extend further than is necessary to protect Ameritox's interest in preventing Savelich from using the goodwill generated during his employment with Ameritox. See Deutsche Post Global Mail, Ltd. v. Conrad, 292 F.Supp.2d 748, 755 (D. Md. 2003) aff'd on other grounds, 116 F.App'x 435 (4th Cir. 2004)(declining to enforce nonsolicitation of all clients when former employer had a global client base, and employees " developed comparatively few customer relationships in the limited area of Maryland, Virginia, and Washington, D.C." ); Holloway v. Faw, Casson & Co., 78 Md.App. 205, 222, 552 A.2d 1311, 1319 (1989) aff'd in part, rev'd in part, 319 Md. 324, 572 A.2d 510 (1990) (finding unreasonable in scope a customer nonsolicitation provision that barred employee from engaging

Page 400

with former employer's clients with which employee had no dealings).

" If a restrictive covenant is unnecessarily broad, a court may blue pencil or excise language to reduce the covenant's reach to reasonable limits." Deutsche Post, 116 F.App'x at 439 (citing Tawney, 47 A.2d at 379; Fowler, 598 A.2d at 802). However, " [a] court [may] only blue pencil a restrictive covenant if the offending provision is neatly severable." Id. Although " offending provision[s]" may be stricken, see id., " Maryland courts have excised restrictions that render a covenant overbroad only in circumstances in which the restrictions are contained in a separate clause or separate sentence." See id. (declining to strike " the dominant language or words from a single-sentence restrictive covenant, leaving only a narrower example of the original, broader restriction" ).[35]

Accordingly, the customer nonsolicitation covenant is overly broad, and Ameritox has not shown that it is likely to succeed on the merits in enforcing it.

Savelich also contends that the employee nonsolicitation covenant is overly broad because it applies to " any employee at any level in any location." Id. at 30. Ameritox argues that the employee nonsolicitation covenant is " narrowly tailored to . . . current employees or employees who have left within the last six months." Hr'g Tr. at 5.

That covenant bars Savelich from " directly or indirectly solicit[ing], recruit[ing] or hir[ing] any employee of Ameritox . . . to work for a third party other than Ameritox or engage in any activity that would cause any employee to violate any agreement with Ameritox." Hopkins Ex. 2 ¶ 2 (emphasis added).

" [T]o be enforceable, restrictive covenants must be specifically targeted at preventing former employees from trading on the goodwill they generated during their former employment." Allegis Grp., Inc. v. Jordan, Civil No. GLR-12-2535, 2014 WL 2612604, at *9 (D.Md. June 10, 2014)( citing Deutsche Post, 116 F.App'x at 439; MCS Services, Inc. v. Jones, No. WMN-10-1042, 2010 WL 3895380, at *3 (D.Md. Oct. 1, 2010)).

By barring Savelich from soliciting any Ameritox employees, the covenant is not narrowly tailored to preventing Savelich from trading on his goodwill. At the hearing, Ameritox did not argue that the covenant was limited to employees with whom Savelich had worked; indeed, Ameritox affirmed that it covered " any current employees." See Hr'g Tr. at 5-6, 37. Accordingly, the employee nonsolicitation covenant is overly broad, and Ameritox has not shown that it will succeed in its enforcement. See Jordan, 2014 WL 2612604 at *9 (declining to enforce an employee nonsolicitation provision when the employer had not shown that the employee worked or interacted with those encompassed by the provision).[36]

Page 401

ii. Confidentiality Covenant

Savelich contends that the confidentiality covenant is overly broad because it includes information generally known in the industry, and is impermissibly vague. ECF No. 28 at 31.

The confidentiality covenant bars Savelich from using, removing, or disclosing " Confidential Information," including " without limitation, information and knowledge pertaining to services offered, innovations, ideas, plans, trade secrets, proprietary information, marketing and sales methods and systems, sales and profit figures, customer and client lists, Ameritox employee lists, and relationships between Ameritox and its affiliates and other customers, clients, suppliers, and others. . . . " Hopkins Ex. 2 ¶ 3.

Maryland recognizes " that restrictive covenants may be applied" to protect against " the future misuse of trade secrets, routes or lists of clients, or solicitation of customers." Becker v. Bailey, 268 Md. 93, 97, 299 A.2d 835, 838 (1973). However, under Maryland law, " questions arise as to the enforceability of the Confidentiality Provisions by virtue of their having wider breadth than the [Maryland Uniform Trade Secrets Act (" MUTSA" )] ." Structural Pres. Sys., LLC v. Andrews, No. CIV.A. MJG-12-1850, 2013 WL 3820023, at *4 (D. Md. July 23, 2013)(citing Fowler, 598 A.2d at 794).

The MUTSA protects " information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that . . . [d]erives independent economic value, actual or potential, from not being generally known . . . and . . . [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy." Md. Code Ann., Com. Law § ll-1201(e).

Although certain enumerated items of Ameritox's " Confidential Information" are encompassed by the MUTSA, some of it arguably extends, in some ill-defined fashion, beyond the MUTSA's scope; for example, knowledge or information about mere services offered by Ameritox, its ideas, and plans, and, potentially, its marketing and sales methods (to the extent those are in the public domain). As Savelich asserts, some of that knowledge is generally known in the industry, or within his general knowledge. ECF No. 28 at 31; see U.S. Foodservice, Inc. v. Marzich, Civil Case No. 06-0007 (N.D.Ill. Sept. 2, 2008)(applying Maryland law to hold unenforceable an " overly ambitious" confidentiality provision that extended beyond what was reasonably necessary to protect business interests and presented an undue burden on the employee); [37] Hage, 2011 WL 2746713, at *2 (" An employee needs firm, solid guidance on what he can and cannot do if he leaves his employer." ).

Accordingly, the confidentiality covenant is overly broad, and Ameritox has not shown that it is likely to succeed on the merits of its enforcement.[38]

Page 402

2. Misappropriation of Trade Secrets

a. Likelihood of Success

Under Oregon's and Maryland's Uniform Trade Secrets Law,[39] " trade secret" means

information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that:
(a) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Or. Rev. Stat. § 646.461(4); Md. Code Ann., Com. Law § 11-1201(e).

Ameritox asserts that the information Savelich emailed to his personal email account " constitutes trade secrets under Maryland and Oregon law." ECF No. 24-1 at 20; see also ECF No. 1 ¶ 51. Ameritox further asserts that Savelich is " using the knowledge and information . . . to assist PCLS in developing and replicating Ameritox's processes." Id. Savelich contends that " [t]here is no factual support to show a likelihood of success" on this claim. ECF No. 28 at 34.

Savelich appears to concede that IMS health provider information, spreadsheets containing customer information, and customer data from Ameritox's TMT interface are Ameritox trade secrets. See ECF No. 28 at 34 ( citing Tully Decl. ¶ ¶ 9-12 as " the only nonconclusory factual support" for Ameritox's information qualifying as trade secrets). Savelich asserts that Ameritox has not shown that any other " broader category of information" constitutes trade secrets. Id.

Courts have deemed customer information trade secrets when an employer has invested time and resources in its development. See NaturaLawn of Am., Inc. v. W. Grp., LLC, 484 F.Supp.2d 392, 399 (D. Md. 2007); Padco Advisors, Inc. v. Omdahl, 179 F.Supp.2d 600 (D. Md. 2002); Dial Temp. Help Serv., Inc. v. Shrock, 946 F.Supp. 847, 854 (D. Or. 1996).

Here, Ameritox bought its IMS health provider directory and " spent considerable resources" developing a proprietary tool-- TMT--to utilize its customer data. Tully Decl. ¶ ¶ 10-11. Ameritox took steps to maintain its secrecy by storing the IMS directory on its network and requiring a password to access the data. Hr'g Tr. at 6. Ameritox's customer data is a trade secret.

Courts are divided, however, on whether financial or pricing information is a trade secret. Compare Optic Graphics, Inc. v. Agee, 87 Md.App. 770, 591 A.2d 578, cert, denied, 324 Md. 658, 598 A.2d 465 (1991) (pricing information was not a trade secret), with LeJeune v. Coin Acceptors, Inc., 381 Md. 288, 309-10, 849 A.2d 451, 463-64 (2004) (cost and profit information was a trade secret). Crucial to the analysis is the extent to which the company seeking to protect the data has shown that it " [d]erives independent economic value . . . from not being generally known to the

Page 403

public or to other persons who can obtain economic value from its disclosure or use." See Montgomery County Ass'n of Realtors, Inc. v. Realty Photo Master Corp., 878 F.Supp. 804, 814 (D. Md. 1995), aff'd, 91 F.3d 132 (4th Cir. 1996) (holding that a realtor association's database was not a " trade secret" because it had been " distributed widely to its realtor members and potential purchasers" ); Optic Graphics, 591 A.2d at 587 (pricing information and market strategy were not trade secrets when plaintiff had not shown that it derived economic value from them).

Here, Ameritox asserts--in a conclusionary fashion--that " confidential pricing information" is a trade secret. ECF No. 24-1 at 20. However, it has not explained how it derives economic value from the information. Accordingly, Ameritox has shown that its customer information--but not any other information--is a trade secret.

" Misappropriation" of a trade secret includes improper acquisition, " [d]isclosure or use of a trade secret . . . without express or implied consent by a person who . . . [a]t the time of disclosure or use, knew or had reason to know that the person's knowledge of the trade secret was . . . [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or . . . [d]erived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use." § 646.461(2); § 11-1201(c).

Ameritox asserts that Savelich has used (or intends to use) its customer information " to assist PCLS in developing business and replicating Ameritox's processes." ECF No. 24-1 at 20; see also ECF No. 1 ¶ 55. Emails provided by Ameritox appear to show Savelich and Marks (from PCLS) using Ameritox's IMS data to help PCLS build its own database. Supp. Field Decl. ¶ 10; Supp. Field Ex.'s F, G. Accordingly, Ameritox has shown that Savelich misappropriated its protected IMS trade secret information.

b. Irreparable Harm

Although irreparable harm may be found when " the failure to grant preliminary relief creates the possibility of permanent loss of customers to a competitor or the loss of goodwill," see Gen. Parts Distribution, LLC v. St. Clair, No. ll-CV-03556-JFM, 2011 WL 6296746, at *6 (D. Md. Dec. 14, 2011), " harm is not 'irreparable' if it can be compensated by money damages." Pers. v. Mayor & City Council of Baltimore, 437 F.Supp.2d 476, 479 (D. Md. 2006).

As to Savelich's misappropriation of customer information (which, as explained above, is the only claim the Court has found Ameritox likely to succeed on), Ameritox has not shown that irreparable harm is likely or that monetary damages are insufficient. The emails Ameritox provided merely show that PCLS is attempting to replicate the manner in which Ameritox buys and organizes its customer information. Supp. Field Decl. ¶ 9; Supp. Field Ex. F. Ameritox has not shown that it is losing, or imminently will lose, customers.

Ameritox relies on Bowe Bell & Howell Co. v. Harris, 145 F.App'x 401, 403 (4th Cir. 2005), where the Fourth Circuit affirmed a preliminary injunction when one defendant emailed a customer list to another defendant, thus likely misappropriating a trade secret, to support the proposition that it is likely to suffer irreparable harm. There, however, the Fourth Circuit balanced the respective harms under the Blackwelder test that is no longer used in this Circuit. See id. Moreover, the Fourth Circuit found that the balance of hardships favored the injunction " because the evidence demonstrated a likelihood of success on the merits . . . [that] could not be compensated by money damages alone."

Page 404

Id. at 403-04. Under current law, the Court must find irreparable harm distinct from the likelihood of success on the merits. See Real Truth About Obama, 575 F.3d at 346. As stated above, Ameritox has not shown the inadequacy of money damages for the misappropriation at issue.[40]

Additionally, in compliance with the TRO, Savelich has, or will, return documents containing confidential and proprietary information and trade secrets to Ameritox, and all such data will be erased from Savelich's email accounts and computing devices. See supra note 19. Although Ameritox contends an injunction is proper because information that Savelich misappropriated " likely resides in his head--he cannot simply pretend it does not exist," ECF No. 24-1 at 15, " absent a special and enforceable duty, an alert salesperson is not required to undergo a prefrontal lobotomy," Amex Distrib. Co. v. Mascari, 150 Ariz. 510, 517, 724 P.2d 596, 603 (Ct.App. 1986). Moreover, Maryland does not recognize the doctrine of " inevitable disclosure" that would support an injunction to prevent " threatened future disclosure or use of a trade secret." [41]

Accordingly, Ameritos has not made a " clear showing" of irreparable harm arising from Savelich's misappropriation of customer data. See Real Truth About Obama, 575 F.3d at 345.

3. Duty of Loyalty

" Employees have a duty of loyalty to the employer." Institutional Mgmt. Corp. v. Translation Sys., Inc., 456 F.Supp. 661, 670 (D. Md. 1978). " The misuse of confidential information [may] constitute a breach of [the duty of loyalty]." Fundamental Admin. Servs., LLC v. Anderson, No. CIV. JKB-13-1708, 2014 WL 5797125, at *3 (D. Md. Nov. 6, 2014)( citing Dworkin v. Blumenthal, 77 Md.App. 774, 551 A.2d 947, 949 (Md. Ct. Spec. App.1989)). However, the MUTSA is the " exclusive remedy for civil claims based on misappropriation of trade secrets," and, thus, " preempts at least some common law claims for breach of fiduciary duty." Allstate Ins. Co. v. Warns, No. CIV. CCB-111846, 2012 WL 681792, at *8 (D. Md. Feb. 29, 2012); Com. Law § 11-1207(a). Accordingly, the Court need not address whether Ameritox is entitled to an injunction under a theory of breach of duty of loyalty apart from its analysis of whether Ameritox is entitled to an injunction based on statutory misappropriation.

Page 405

III. Conclusion

For the reasons stated above, Ameritox's motion for a preliminary injunction will be denied.

ORDER

For the reasons discussed in the accompanying Memorandum Opinion, it is, this 11th day of March, 2015, ORDERED that:

1. Ameritox's motion for a preliminary injunction (ECF No. 24), BE, and HEREBY IS, DENIED;
2. Ameritox's emergency motion to seal exhibits (ECF No. 26), BE, and HEREBY IS, GRANTED;
3. Savelich's emergency motion for an extension of time (ECF No. 27), BE, and HEREBY IS, GRANTED; and
4. The Clerk of the Court shall send copies of this Memorandum Opinion and Order to counsel for the parties.


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