United States District Court, D. Minnesota
M. MORRIS, MORRIS & MORRIS, P.S.C., AND JANET M. OLAWSKY,
JESSICA M. MARSH, AND LAURA J. MCKNIGHT, JACKSON LEWIS P.C.,
M. SHARP AND LAWRENCE P. SCHAEFER, SCHAEFER HALLEEN LLC FOR
MEMORANDUM OPINION AND ORDER
R. TUNHEIM CHIEF JUDGE
Management Registry, Inc. (“MRI”) brought this
diversity action against A.W. Companies, Inc.
(“A.W.”), Allan and Wendy Brown, and Eric Berg
for events that transpired after MRI acquired numerous
business entities from Mr. Brown and two other non-parties.
It was generally understood - but not necessarily agreed -
that Mr. Brown's wife, Wendy Brown, would purchase some
of those entities from MRI after the acquisition. Ms.
Brown's purchase never happened.
the negotiations between MRI and Ms. Brown broke down, Mr.
Brown - who had been previously hired by MRI in relation to
the acquisition - resigned or was fired. Allan and Wendy
Brown promptly formed A.W. and employed Mr. Berg, who had
worked for one of the entities that MRI acquired and that Ms.
Brown was planning to purchase. A.W. began hiring other
employees that had worked for the company that Ms. Brown
planned to purchase, and A.W. began servicing clients.
filed this action alleging numerous business-related causes
of action. Simultaneous with its complaint, MRI moved for a
temporary restraining order (“TRO”) and
preliminary injunction. The Court granted MRI an ex parte TRO
against the Defendants to preserve the status quo pending a
response from the Defendants. The Court heard from MRI and
Defendants on whether the Court should convert the TRO to a
preliminary injunction. Because there were factual disputes
that prevented the Court from finding that MRI was likely to
succeed on the merits of its claims and because MRI failed to
show irreparable harm absent preliminary relief, the Court
vacated the TRO and denied MRI's motion for a preliminary
memorandum opinion further details the Court's rationale
for vacating the TRO and denying MRI's motion.
moves under Federal Rule of Civil Procedure 62(c) for an
injunction pending appeal. For substantially the same reasons
that the Court vacated the TRO and denied MRI's motion
for a preliminary injunction, the Court will deny MRI's
Rule 62(c) motion.
a healthcare, professional, and general-labor staffing
company comprised of approximately thirty smaller staffing
companies. (Pl.'s Mem. in Supp. of Mot. for Prelim. Inj.
(“Pl.'s Mem.”) at 2-3, Nov. 3, 2017, Docket
No. 7.) In 2017, MRI began negotiating the
purchase of twelve more staffing companies for which Mr.
Brown served as president and co-owner. (Id. at 3;
see Compl. ¶¶ 18, 21, Exs. A & B, Nov.
3, 2017, Docket No. 1.) Before that acquisition closed, MRI
hired Mr. Brown to help lead the companies that MRI's
would acquire. (See Compl. ¶¶ 18-20, Ex.
A.) At that time there was also an understanding that, after
closing, MRI would sell one of the twelve acquired companies,
titled AllStaff Recruiting, Inc. (“ARI”), to Mr.
Brown's wife, Wendy Brown. (Decl. of Wendy Brown
(“W. Brown Decl.”) ¶ 4, Nov. 10, 2017,
Docket No. 25; Decl. of Allan Brown (“A. Brown
Decl.”) ¶ 17, Nov. 10, 2017, Docket No. 26.) ARI
operates in Minnesota and services clients in Minnesota and
the surrounding states. (See W. Brown Decl. ¶
September 11, 2017, MRI's acquisition closed. (Compl.
¶ 16.) Ms. Brown's purchase of ARI did not take
place on September 11; rather, MRI and Ms. Brown had an
understanding that she would purchase ARI within 30 days of
September 11 on mostly agreed-to terms. (W. Brown Decl.
¶¶ 3-4; see Id. ¶ 8, Ex. 4.) There
was never a written agreement regarding Ms. Brown's
purchase of ARI from MRI. (Defs.' Opp. at 17, Nov. 10,
2017, Docket No. 23.) According to Ms. Brown, she and MRI
agreed that, during the 30-day period following closing, she
was to “run ARI as its CEO” and “Eric Berg
would be second-in-command.” (W. Brown Decl. ¶ 5.)
Also during that 30-day period, all revenue from ARI was to
be credited to Ms. Brown. (Id. ¶ 6.) Moreover,
in an email from MRI's controller to Ms. Brown, MRI's
controller referred to ARI employees as “your
people” and “your employees.” (Id.
¶ 6, Ex. 3.) MRI claims that it never knew that Ms.
Brown was holding herself out as the CEO of ARI after
September 11. (Decl. of Tim Malone (“Malone
Decl.”) ¶¶ 44-45, Nov. 15, 2017, Docket No.
Eric Berg was employed starting in 2015 by AllStaff
Solutions, Inc., which was one of the entities that MRI would
acquire. (See Compl. ¶¶ 50-51, Ex. C.) A
few days after closing, MRI sent ARI's employees packets
of employment-related paperwork. (See, e.g., Decl.
of Eric Berg (“Berg Decl.”) ¶ 19, Nov. 10,
2017, Docket No. 27..) Neither Mr. Berg nor any of ARI's
employees ever signed those employment agreements with MRI.
(See, e.g., id.; see also n.2.
supra.) Nevertheless, MRI continued to pay those
employees. (See Decl. of Susan LaCoe ¶¶
7-10, Nov. 15, 2017, Docket No. 39.)
to late October, MRI's negotiations with Ms. Brown broke
down. (Pl.'s Mem. at 6.) According to Defendants, MRI
demanded that it would only sell ARI if Ms. Brown agreed not
to service any clients outside of Minnesota - a condition
that was never part of the original understanding, and that
would have forced ARI to forfeit more than half its revenue.
(W. Brown Decl. ¶¶ 27-29.) MRI maintains that
negotiations broke down because the Defendants insisted that
they be allowed to operate outside of Minnesota after having
led MRI to believe that ARI only had clients in Minnesota.
(Malone Decl. ¶¶ 20-26.) On October 27, Ms. Brown
and MRI were at an impasse, and MRI alleges that Mr. Brown
resigned from MRI on that day. (Id. ¶¶
38-40.) Mr. Brown maintains that he did not resign - that he
showed up for work the following Monday, October 30, and was
fired. (A. Brown Decl. ¶¶ 50-53.)
and Wendy Brown formed A.W. on October 30 for the admitted
purpose of directly competing with MRI. (Defs.' Opp. at
11.) A.W. hired Mr. Berg and began to get the newly formed
business up and running. (Berg Decl. ¶ 23, Ex. 4.) Ms.
Brown asked the ARI employees to work for A.W. and to bring
client files and computers with them for the purpose of
continuing to service ARI clients. (See W. Brown
Decl. ¶¶ 36-37, 41, 44-45.) According to MRI, Ms.
Brown used these employees to steal MRI property. (Pl.'s
Mem. at 10-11.) Defendants maintain that those files and
computers belong to clients, not to MRI. (Defs.' Opp. at
MRI alleges that Defendants began soliciting MRI clients and
servicing them - clients that were previously ARI clients.
(See Malone Decl. ¶¶ 46-49.) Defendants,
however, maintain they were up front and honest with those
clients and that the clients chose to continue working with
A.W. because those “clients simply made the
understandable decision to continue working with the team
they had a productive relationship with.” (Defs.'
Opp. at 14.)
the conduct of the Browns, A.W., and Mr. Berg in late 2017
that gave rise to this lawsuit.
filed this action on Friday, November 3, 2017. MRI asserts
claims for tortious interference and unfair competition
against A.W.; claims for breach of contract, breach of the
duty of loyalty, and fraudulent misrepresentation against Mr.
Brown and Mr. Berg; and claims for civil conspiracy, unjust
enrichment, and computer fraud against all Defendants.
(Compl. ¶¶ 90-140.)
with its complaint, MRI filed a motion for a temporary
restraining order, which the Court granted - also on Friday,
November 3 - to maintain the status quo. (Order, Nov. 3,
2017, Docket No. 16.) MRI asked the Court to convert the TRO
into a preliminary injunction. Because there were factual
disputes that prevented the Court from finding that MRI was
likely to succeed on the merits of its claims, and because
MRI failed to show irreparable harm absent preliminary
relief, the Court vacated the ex parte temporary restraining
order and denied MRI's motion for a preliminary
injunction. (Order, Nov. 17, 2017, Docket No. 53.)
appealed the Court's November 17 Order to the Eighth
Circuit. (See Notice of Appeal to Eighth Circuit,
Nov. 29, 2017, Docket No. 64.) MRI then filed a motion under
Federal Rule of Civil Procedure 62(c) for an injunction
pending appeal. (See Pl.'s Mot. for Prelim. Inj.
Pending Appeal, Dec. 4, 2017, Docket No. 67.)