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Maxim Defense Industries, LLC v. Kunsky

United States District Court, D. Minnesota

May 23, 2019

Maxim Defense Industries, LLC, Plaintiff,
v.
Jake Kunsky, and Unconventional Equipment Solutions, LLC, Defendants.

          MEMORANDUM AND ORDER

          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on Plaintiff's Motion for a Temporary Restraining Order. Because Defendants had notice of the Motion and an opportunity to respond, the Court will consider the Motion as one for a Preliminary Injunction under Rule 65(a). For the following reasons, the Motion is denied.

         BACKGROUND

         Plaintiff Maxim Defense Industries, LLC, is a Minnesota-based developer and manufacturer of firearms and firearm accessories. Defendant Jake Kunsky and his company, Defendant Unconventional Equipment Solutions, LLC (“UES”), provide consulting services for companies and governments in the development of firearms and accessories. Kunsky is an Army veteran who served in Iraq; he lives in Idaho and UES is an Idaho LLC.

         In 2017, Maxim hired UES to provide consulting services. Maxim provided UES with a Consulting Agreement (Compl. (Docket No. 1-1) Ex. A.), which Kunsky signed on UES's behalf. Kunsky is the owner and sole member of UES. This Agreement contains several provisions relevant to Maxim's requested injunctive relief. First, UES agreed not to “use [Maxim's] Confidential Information for any purpose whatsoever other than the performance of the Services or disclose the Confidential Information to any third party.” (Compl. Ex. A. § 3.3.3.) UES also agreed to “deliver to [Maxim] all of [Maxim's] property or Confidential Information in tangible form that [UES] may have in its possession or control” when the Agreement terminated or expired. (Id. § 3.3.4.) The Agreement also contained non-competition and non-solicitation provisions, requiring UES not to compete with Maxim or solicit Maxim's customers or employees for one year after the Agreement's termination. (Id. §§ 5.3.5, 5.3.6.) Finally, the Agreement provided that a violation of either the confidentiality or the non-competition/non-solicitation provisions “would cause immediate and irreparable harm to [Maxim] for which money damages would be inadequate” and therefore Maxim “will be entitled to injunctive relief for [UES's] breach of any of its obligations under [these provisions] without proof of actual damages and without the posting of bond or other security.” (Id. § 10.)

         The Agreement also contemplated that Kunsky would become a Maxim employee after a year. (Id. §1.1.3(C).) In that section, Maxim agreed to hire Kunsky “as an executive of Research & Development” and represented that the parties would enter into a new employment contract before the start date of that position. (Id.)

         The copy of the Agreement appended to Maxim's Complaint contains only Kunsky's signature; the signature line for Maxim is blank. Moreover, the confidentiality provisions allow UES to “retain one copy of the Confidential Information in its legal files.” (Id. § 3.3.4.) The Agreement expired on November 1, 2018 (id. § 11), although it also contains a “survival” provision: “The representations, warranties, indemnities and other obligations which by their nature or context are intended to survive payment and/or termination of this Agreement shall survive.” (Id. §14.)

         In May 2018, Kunsky became an employee of Maxim. The parties did not enter into any employment contract to govern their new relationship. Kunsky claims that Michael Windfeldt, Maxim's owner, repeatedly promised Kunsky an equity stake in Maxim, but that equity stake never materialized. After Maxim suspended Kunsky in late January 2019, it asked him to sign a new consulting agreement with a new non-competition agreement. Kunsky claims that when he refused, Maxim fired him, and then tried to get him to sign a separation agreement that assigned all of Kunsky's work to Maxim, and contained more non-compete and non-solicitation provisions. He did not sign those agreements. Maxim insinuates that Kunsky created a hostile work environment for its other employees, and that it was forced to terminate his employment.

         Maxim demanded that Kunsky return his iPhone and computer. According to Maxim, Kunsky initially refused to return these devices to Maxim, but has now done so. However, Maxim asserts that all of the data on the devices was deleted, and a forensic analysis shows that various storage devices were connected to the computer after Kunsky was fired. Maxim also provided Kunsky with an Apple Time Capsule; Kunsky has not returned that device to Maxim but claims that he has given it to his attorneys for safekeeping.

         Maxim seeks an injunction requiring Kunsky to comply with the restrictive covenants in the Consulting Agreement, as well as to return the Apple Time Capsule and provide Maxim with all of the storage devices that were connected to the devices discussed above.

         DISCUSSION

         Maxim initially argues that an injunction is appropriate because of the parties' relationship. According to Maxim, an injunction will merely maintain the status quo and will be coextensive with the terms of the parties' contract. But as discussed both above and below, there are questions about whether there is a valid contract between the parties, and if there is, what the terms of that contract are. And injunctive relief is not appropriate merely because of the parties' pre-existing contractual relationship. E.g., Wave Form Sys., Inc. v. AMS Sales Corp., 73 F.Supp.3d 1052, 1063 (D. Minn. 2014) (Montgomery, J.) (denying preliminary injunction despite movant's argument that preserving the parties' contractual relationship would preserve the status quo and be in the public interest). While the parties' contractual relationship may be a consideration in evaluating the balance of harms or where the public interest lies, it is not itself an independent reason to grant or deny injunctive relief.

         A preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). When deciding whether to issue an injunction, courts consider four factors: (1) the threat of irreparable harm to the movant; (2) the balance of harm the injunction would have on the movant and the opposing party; (3) the probability that movant will succeed on the merits; and (4) the public interest. Dataphase Sys., Inc. v. CL Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981). While no factor is dispositive, “the absence of a likelihood of success on the merits strongly suggests that preliminary injunctive relief should be denied.” Barrett v. Claycomb, 705 F.3d 315, 320 (8th Cir. 2013).

         A. Likelihood of ...


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