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Mid-America Business Systems v. Sanderson

United States District Court, D. Minnesota

October 6, 2017

MID-AMERICA BUSINESS SYSTEMS, Plaintiff,
v.
KEVIN SANDERSON, KARDEX HANDLING SOLUTIONS, LLC, RICHARD HUTSON, and KARDEX REMSTAR, LLC, Defendants.

          David H. Redden and John A. Fabian, III, FABIAN MAY & ANDERSON, PLLP, for plaintiff.

          Daniel L. Lowin, MESSERLI & KRAMER P.A., for defendants.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER

          JOHN R. TUNHEIM Chief Judge

         Plaintiff Mid-America Business Systems (“Mid-America”) brings this action against its former employee, Kevin Sanderson; his new employer, Kardex Handling Solutions, LLC (“KHS”); Kardex Remstar, LLC (“Kardex Remstar”), and Richard Hutson, Senior Director of Sales for KHS. Mid-America alleges that Sanderson breached the client non-solicitation, employee non-solicitation, and confidentiality clauses of a contract he signed when he became a full-time employee at Mid-America. Mid-America also alleges that Sanderson tortiously interfered with Mid-America's prospective economic advantage and misappropriated Mid-America's trade secrets in violation of the Minnesota Uniform Trade Secrets Act (“MUTSA”) and the Federal Defend Trade Secrets Act (“FDTSA”). Mid-America alleges that KHS tortiously interfered with the contract signed by Sanderson, tortiously interfered with Mid-America's prospective economic advantage, and violated the MUTSA and the FDTSA. Mid-America accuses KHS and Hutson of defamation. Finally, Mid-America alleges that Kardex Remstar breached the employee non-solicitation clause of the companies' settlement agreement by hiring Sanderson through KHS.

         Mid-America now moves for a temporary restraining order (“TRO”) enjoining Sanderson from soliciting Mid-America's clients and employees, enjoining KHS from procuring breaches of Sanderson's contract, and enjoining both Sanderson and KHS from misappropriating Mid-America's trade secrets. Mid-America also seeks expedited discovery for a preliminary-injunction hearing.

         Because the Court will find that Mid-America has not met its burden of showing a likelihood of success on the merits and a likelihood of irreparable harm to justify the extreme remedy of a TRO, the Court will deny Mid-America's motion for a TRO and deny its request for expedited discovery for a preliminary-injunction hearing.

         FACTUAL BACKGROUND

          I. THE PARTIES

         Mid-America is a “leading provider of large-scale storage and organization systems.” (Decl. of Gil Roscoe Sr. (“Roscoe Decl.”) ¶ 2, Aug. 22, 2017, Docket No. 7.) Kevin Sanderson worked for Mid-America as a service technician from June 2007 to November 2016. (Id. ¶¶ 3, 20-21; Decl. of Kevin Sanderson (“Sanderson Decl.”) ¶¶ 2, 8, Sept. 13, 2017, Docket No. 27.) Sanderson began working for KHS as a service technician in March 2017. (Sanderson Decl. ¶ 12.) KHS is majority owned by Kardex Remstar, which is the North American arm of a Swiss company that manufactures automated storage and retrieval systems. (Decl. of Mark Dunaway (“Dunaway Decl.”) ¶¶ 1-2, Sept. 13, 2017, Docket No. 29.) Kardex Remstar operates internationally through networks of authorized dealers, of which KHS is one. (Id.)

         Mid-America was previously an authorized dealer for Kardex Remstar and was the exclusive dealer for Kardex storage and retrieval systems in a region covering parts of Indiana, Illinois, Minnesota, Wisconsin, North Dakota, and South Dakota. (Id. ¶ 3.) In November 2016, Kardex Remstar sent Mid-America of a list of deficiencies to cure and objectives to accomplish so that Mid-America could maintain its status as an authorized dealer. (Id. ¶ 4.) Kardex Remstar terminated its dealer contract with Mid-America on February 13, 2017, because Mid-America “failed to timely cure those deficiencies.” (Id.) KHS then became Kardex Remstar's authorized dealer for most of the region Mid-America had previously covered. (Id.)

         II. SANDERSON'S EMPLOYMENT AT MID-AMERICA

         The parties dispute the terms of Sanderson's initial employment agreement: Sanderson says he was hired as a permanent employee in June 2007, while Mid-America claims that Sanderson was initially hired as a temporary employee and subject to a three-month probationary period. (Sanderson Decl. ¶ 2; Roscoe Decl. ¶ 3.) Mid-America admits, however, that the probationary period was an “unwritten policy” when it hired Sanderson. (Second Decl. of Gil Roscoe Sr., ¶ 2, Sept. 18, 2017, Docket No. 38.) Sanderson denies ever being subject to a probationary period. (Sanderson Decl. ¶ 2.)

         Mid-America alleges that Sanderson signed a “Non-Compete Agreement” when he became a full-time employee in September 2007, at which time Mid-America gave him additional training, access to confidential information, and pay increases.[1] (Roscoe Decl. ¶ 5.) Had he not signed the agreement, Mid-America would have terminated his employment. (Id.) Sanderson denies entering into any such agreement and has “no memory” of signing it. (Sanderson Decl. ¶ 2.)

         During his employment, Mid-America sent Sanderson to Maine to be trained at a Kardex Remstar facility and also gave him further training specific to Kardex machines and products. (Id. ¶ 5; Roscoe Decl. ¶ 7.) In 2010, Sanderson became a “certified” Kardex Remstar technician, and Mid-America promoted him to Lead Service Technician. (Roscoe Decl. ¶ 6; Sanderson Decl. ¶ 6.) Sanderson asserts that his job involved only service work and that he was not involved in sales or solicitation of business. (Sanderson Decl. ¶ 4.) Mid-America claims that it trained Sanderson in a role focused on “selling and servicing” Kardex machines and alleges that some internal training that Mid-America gave him dealt with sales. (Roscoe Decl. ¶¶ 7-8.)

         Mid-America also alleges that it gave Sanderson access to non-public information regarding its customers, costs, pricing, operations, and business processes. (Id. ¶ 9.) This information included customer names and locations, customer preferences, maintenance and warranty schedules, and information about cost, pricing, and margins on new equipment - all information that Mid-America deems “confidential.”[2] (Id.) This information also included an internal sales manual “containing extensive cost and price information for virtually all of Mid-America's parts and services.” (Id. ¶ 10.) Mid-America asserts that the information in the internal sales manual provides a competitive advantage and that the company takes steps to protect this information, including requiring employees to sign confidentiality and non-compete agreements. (Id. ¶¶ 11-12.) Mid-America says that its customer relationships, which it has spent years developing, are also safe-guarded by these agreements. (Id. ¶¶ 13-14.)

         Sanderson left his employment at Mid-America on Monday, November 7, 2016. (Id. ¶¶ 20-21.) The parties dispute why Sanderson left, although the reasons are not relevant to the present motion. Mid-America believes that, prior to leaving, Sanderson copied or transferred confidential information from his company-issued laptop and cell phone and then deleted data to “cover his tracks and impede Mid-America's ability to maintain service continuity for the customers he served.” (Id. ¶ 22.) Sanderson denies transferring any data from the company electronics or taking anything confidential or proprietary, claiming that he ran a factory reset on the cell phone to remove his personal information and that he did not delete anything from the laptop. (Sanderson Decl. ¶ 9.)

         III. SANDERSON'S EMPLOYMENT AT KHS

         Sanderson began working for KHS as a service technician in March 2017. (Id. ¶ 12.) His job is to “install and service Kardex Remstar products.” (Decl. of Richard Hutson (“Hutson Decl.”) ¶ 2, Sept. 13, 2017, Docket No. 28.) He is not involved in sales or soliciting business. (Id.) However, Mid-America alleges that Sanderson has been soliciting its customers.

         First, Mid-America alleges that Sanderson made a service call at Viking Drill and Tool (“Viking”) in May or June 2017 and “convinced it to cancel a planned purchase of a $100, 000 machine from Mid-America.” (Roscoe Decl. ¶ 25.) Mid-America learned about Sanderson's work from a Viking employee who showed Mid-America repair work that Sanderson had performed on Viking's old machine “to dissuade it from buying a new machine from Mid-America.” (Id.) Mid-America finds Sanderson's contact with Viking “suspect” because Viking uses a “legacy” version of Kardex's machines that predates Kardex's Customer Relationship Management program (“CRM”). (Id.) Mid-America alleges that, because Vikings information was not in the CRM, Kardex Remstar did not know that Viking had Kardex machines, thus Kardex Remstar could not have told KHS that Viking needed service. (Id.)

         KHS denies these allegations, asserting that a Viking employee left a voicemail for KHS stating that Viking had some questions and wanted someone to look at its Kardex Remstar machine. (Hutson Decl. ¶ 5.) KHS assigned the work order to Sanderson because Viking was in his territory. (Id. ¶ 5.) Sanderson denies reaching out to Viking and denies attempting to solicit or sell the company anything. (Sanderson Decl. ¶ 14.) He claims that he told Viking that it would likely need to purchase a replacement machine soon because his repair was temporary. (Id.) KHS emphasizes that it was logical for Viking to call KHS ...


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