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Sea, Ltd. v. Cornetto

United States District Court, D. Maryland

June 15, 2018

SEA, LTD., Plaintiff
v.
ANTHONY CORNETTO, Defendant

          MEMORANDUM AND TEMPORARY RESTRAINING ORDER

          James K. Bredar, Chief Judge.

         This case was filed on June 14, 2018. by Plaintiff SEA. Ltd. ("S-E-A") against Anthony Cornetto. (Compl., ECF No. 1.) Filed with the complaint was S-E-A's motion for temporary restraining order (“TRO”) and preliminary injunction. (ECF No. 2.) The Court set a hearing for today and directed S-E-A to provide prompt notice of the order entered yesterday scheduling the hearing. (Order. June 14, 2018. ECF No. 6.) S-E-A's counsel this morning at the hearing indicated he had emailed Cornetto at the address provided by Cornetto to S-E-A and also attempted telephone contact. The courtroom deputy also tried telephoning Cornetto this morning, but only got voice mail. Cornetto did not attend this morning's hearing. The Court is persuaded by the written materials in the record and by counsel's argument at the hearing that S-E-A has satisfied the requirements for a TRO. Accordingly, the Court will grant the motion insofar as it requests the entry of a TRO. will reserve ruling on the motion insofar as it requests a preliminary injunction, and will set a hearing to consider whether to enter preliminary injunctive relief.

         I. Factual Allegations

         As alleged in S-E-A's verified complaint, S-E-A is a company that provides forensic consulting and causal/failure analysis services to clients in insurance, legal, and manufacturing industries in multiple locations, including Maryland. (Compl. ¶ 5.) Cornetto worked for S-E-A first in its office in Millersville. Maryland, and later in its office in Glen Burnie. Maryland. (Id. ¶ 2.) Cornetto began employment in 1999 with a corporate predecessor of S-E-A and worked for that entity until 2003. (Id. ¶ 18.) Prior to that employment. Cornetto had no experience working as an accident reconstruction forensic consultant or in the subspecialty of conspicuity.[1] (Id. ¶19.) Neither did he have any clients in the State of Maryland. (Id.) All of Cornetto's technical training "came from and at the expense of S-E-A." (Id.)

         Around September 2003, "S-E-A. through an affiliated entity (S-E-A Acquisitions Holding. LLC), acquired Cornetto's then-employer, at which point Cornetto became both an employee as well as an owner of the Company." (Id. ¶ 20.) He borrowed $50, 000 to purchase one membership share in S-E-A and this transaction was memorialized in a promissory note. (Id. ¶ 21.) Cornetto agreed, as a condition of receiving the loan and having the opportunity to become an owner, not to compete with S-E-A. (Id.)

         Due to the specialized nature of S-E-A's services, it "invests considerable money and time in training its forensic consultants, to. among other things, ensure they can competently and credibly perform services for the Company's clients in a manner that is consistent with sound scientific or engineering principles and [are] able to withstand cross-examination." (Id. ¶ 6.) Cornetto received several years of training in order to work independently on projects. (Id. ¶ 7.) In addition to receiving training in forensic analysis. Cornetto received training to develop his area of special expertise, conspicuity, as well as training in computer animations and imaging sciences. (Id. ¶ 9.)

         S-E-A's forensic consultants "become inexorably and intimately knowledgeable about. among other things. S-E-A's clients, the contacts for those [clients], the specific types of cases that they handle, the financial information regarding its clients' rates, and the needs, preferences. likes, and dislikes of such clients." (Id. ¶ 13.) As an employee and owner of S-E-A, Cornetto was privy to that valuable information as well as to the company's business plans, strategies, and revenues. (Id. ¶¶ 22, 24, 26.) Over the years, "S-E-A has invested substantial time and money to acquire and build its reputation, image and relationships with its clients and business contacts, and has an established and valuable reputation, trade and patronage." which have "significant economic value to S-E-A, and would be of significant economic value to competitors in the forensic engineering business." (Id. ¶ 15.)

         To protect its legitimate business interests in all of the foregoing. S-E-A requires its forensic consultants to sign restrictive covenants and nondisclosure agreements as a condition of employment and/or ownership in S-E-A. (Id. ¶ 16.) Some of these covenants and agreements "were assets of S-E-A's predecessors that were acquired by and assigned to S-E-A." (Id. ¶ 17.) On September 2. 2008. Cornetto executed an Employment and Confidential Information Agreement with S-E-A in which he agreed, for a period of two years following termination of his employment, not to accept directly or indirectly any new assignments or to provide any services to clients for whom Cornetto provided any client services in the twenty-four months prior to his termination date. (Id. ¶ 23.)

         Over time. S-E-A paid Cornetto approximately $202, 272 in cash distributions in return for his initial $50, 000 investment and his purchase of additional shares; he also received shares as bonuses in connection with those purchases. (Id. ¶ 27.) Around June 2016. Cornetto informed S-E-A that he was resigning and he wanted S-E-A to purchase his membership units. (Id. ¶ 28.) As a condition of S-E-A's repurchase of his membership units, Cornetto and S-E-A executed a Noncompetition and Nondisclosure Agreement on June 12. 2016. in which Cornetto agreed, for the ensuing five years, not to directly or indirectly compete with S-E-A by starting his own company that is engaged in business the same as or similar to S-E-A's business, by working for anyone engaged in such business, or being an owner, officer, independent contractor, or creditor of any entity engaged in such business; the restriction was effective within the geographic territory defined as "any area which is within one hundred (100) miles of any office [of] the Company." (Id. ¶ 29.) Further. Cornetto agreed to cooperate with S-E-A on cases or projects in which he was involved and would receive compensation as an independent contractor for that work. (Id. ¶¶ 30 33.) Additionally, this agreement mandated a duty of confidentiality on Cornetto so that he would not divulge or use any of S-E-A's confidential information, including client information. (Id. ¶ 31.) To fulfill a duty under the September 2. 2003. Agreement, S-E-A provided Cornetto with a list of S-E-A clients whom he had agreed not to solicit. (Id. ¶ 34.)

         Upon information and belief. S-E-A alleges Cornetto set up a competing business. Momenta, LLC. on August 13, 2016. (Id. ¶ 36.) On May 17, 2018, a S-E-A client, identified as such on the nonsolicitation list given by S-E-A to Cornetto at his departure from the company. forwarded an email message to Cornetto at his old S-E-A email address: the substance of the email referred to "a traffic reconstruction expert consultant project, which is precisely what Cornetto did for this same client within the last 24 months of his employment with S-E-A." (Id. ¶ 38.) S-E-A maintains and monitors Cornetto"s old email address "because he still has ongoing cases that he handles pursuant to his independent contractor agreement." (Id. ¶ 38.) S-E-A forwarded the email directly to Cornetto and asked if it was for an S-E-A case. (Id. ¶ 39.) Cornetto's response indicated the client's email was sent accidentally to the S-E-A email address and that S-E-A should delete all associated emails because they might contain confidential client information. (Id.) The May 17 email prompted S-E-A to investigate Cornetto's activities, which S-E-A concluded were in violation of his noncompetition obligations. (Id. ¶ 40.)

         Momenta LLC's Articles of Organization indicate it is engaged in the same or similar business of providing services as Cornetto provided when employed by S-E-A. (Id. ¶ 41.) Although Momenta LLC lists a business address of Cumberland. Maryland. S-E-A's investigation indicates that Cornetto is actively engaging in business with Maryland clients from his home address in Severna Park, Maryland, which is approximately eleven miles from his former S-E-A office location. (Id. ¶ 44.) In the hearing, S-E-A's counsel contended the Cumberland address (updated from Momenta's original address of Cornetto's Severna Park home) is a mere subterfuge. S-E-A spoke with both Cornetto and the client referenced in the May 17. 2018. email, but "[n]either would confirm that Cornetto was not violating his obligations to S-E-A. In a conversation with Cornetto on June 8, 2018, for the purpose of obtaining an explanation from him about the May 17. 2018 Email, he refused to discuss its substance, saying only that he had a different interpretation." (¶ 45.)

         In investigating Cornetto's activities, S-E-A discovered another email, also dated May 17. 2018. similarly referencing Cornetto's work for another S-E-A client for whom Cornetto had provided services in the twenty-four months prior to his termination and who was also on the nonsolicitation list. (Id. ¶ 46.) In addition. S-E-A found a Linkedln posting indicating Cornetto had provided consulting services to another S-E-A client in the area of accident reconstruction and conspicuity; this client was also included in the nonsolicitation list. (Id. ¶ 47.)

         II. Standard for Preliminary Injunctive Relief

         In Winter v. Natural Resources Defense Council. Inc.,555 U.S. 7 (2008). the Supreme Court set forth the following ...


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