Court Opinion

ID: 165354
Source: CourtListenerOpinion
Date Created: 2010-08-14 08:49:24+00
Date Added: 2024-06-11T17:18:44.323108
License: Public Domain

F I L E D
                                                       United States Court of Appeals
                                                               Tenth Circuit
                UNITED STATES COURT OF APPEALS
                                                              DEC 16 2004
                            TENTH CIRCUIT
                                                          PATRICK FISHER
                                                                    Clerk

ZEE MEDICAL, INC., a California
corporation,

           Plaintiff-Counter-
           Defendant-Appellant,

McKESSON CORPORATION, a
Delaware corporation,

          Plaintiff-Appellant,

v.                                             No. 04-1255
                                           (District of Colorado)
MICHELLE MILLER, an individual;         (D.C. No. 04-M-533 (OES))
FIRST AID 2000, LLC, a Colorado
corporation,

          Defendants-
          Counter-Claimants-Third-
          Party-Plaintiffs-Appellees,

v.

ART RECEK; BETSY CRAIG,

          Third-Party-Defendants.
                            ORDER AND JUDGMENT *

Before MURPHY, BALDOCK, and TYMKOVICH, Circuit Judges.

I.    Introduction

      Defendant, Michelle Miller, worked as a sales representative for Plaintiff,

Zee Medical, Inc. (“Zee Medical”) from 1995 until she was terminated in

December 2003. A few weeks after her termination, Miller took a position as a

sales representative with defendant, First Aid 2000 (“FA2000”).        Zee Medical

brought suit against Miller and FA2000, alleging violations of the terms of two

covenants not to compete and a confidentiality agreement signed by Miller.

Thereafter, Zee Medical filed a motion seeking a preliminary injunction. The

district court denied the motion and Zee Medical appealed.

      Exercising jurisdiction pursuant to 28 U.S.C. § 1292(a)(1), we      affirm the

denial of Zee Medical’s motion for a preliminary injunction.

II.   Factual Background

      Both Zee Medical and FA2000 sell first aid and safety items to companies

required by the Occupational Safety and Health Act to stock such items in first aid

       *
        This order and judgment is not binding precedent, except under the
 doctrines of law of the case, res judicata and collateral estoppel. The court
 generally disfavors the citation of orders and judgments; nevertheless, an order
 and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                           -2-
kits. At the time she was hired by Zee Medical, Miller signed a covenant not to

compete and a confidentiality agreement. She signed a second covenant not to

compete on May 31, 2000. The covenants not to compete prohibit Miller from

engaging in direct competition with Zee Medical in her former sales territory and

from soliciting her former Zee Medical customers on behalf of a competitor.

While employed at Zee Medical, Miller used a hand-held computer that contained

product pricing and detailed customer information. Miller returned the computer

when she was terminated. She was also given customer lists, monthly sales

reports, and other reports generated, in part, from the information she entered into

her computer.

      According to Miller, she has contacted approximately sixty of her former

customers and approximately thirty have switched to FA2000. Zee Medical

asserts that in February 2004 alone, Miller solicited ninety-five of her former

customers and that it has lost fifty percent of its customers in Miller’s former

territory to FA2000 since Miller began working there.

      Zee Medical filed suit against Miller and FA2000 in March 2004, alleging

claims for injunctive relief and damages. On March 26, 2004, Zee Medical sought

a preliminary injunction preventing Miller from working for FA2000 until the

conclusion of a trial on the merits. It also sought to bar Miller and FA2000 from

disclosing or utilizing information it alleged was confidential, proprietary, or a

                                           -3-
trade secret. The district court denied Zee Medical’s motion and this appeal

followed.

III.   Discussion

       A.     Amount in Controversy

       As a preliminary matter, Miller and FA2000 argue that the district court did

not have jurisdiction over this lawsuit because the amount in controversy does not

exceed $75,000. See 28 U.S.C. § 1332. They base this argument solely on their

assertion that at the time of the preliminary injunction hearing, they presented

uncontested evidence that the total sales to former Zee Medical customers totaled

only $7,000, with the net profit substantially less than that amount. Having

reviewed Zee Medical’s complaint, we are satisfied that federal jurisdiction is

proper. Given the extensive claims made by Zee Medical in its complaint and the

remedies available under those claims, it cannot be said with legal certainty that

Zee Medical would recover less than $75,000 if it prevails in this matter. See

Woodmen of the World Life Ins. Society v. Manganaro, 342 F.3d 1213, 1216 (10th

Cir. 2003).

       B.     Denial of Preliminary Injunction

       Ordinarily, this court reviews the denial of a motion for a preliminary

injunction for abuse of discretion. Heideman v. S. Salt Lake City, 348 F.3d 1182,

1188 (10th Cir. 2003). Zee Medical, however, argues that the district court

                                         -4-
applied the wrong standard when it ruled on the motion. See id. at 1188-89

(holding that when the “three harm factors tip decidedly in [the movant’s] favor,

the probability of success requirement is somewhat relaxed” and the “movant need

only show questions going to the merits so serious, substantial, difficult and

doubtful, as to make them a fair ground for litigation.” (citations and quotations

omitted)). Even if we assume for purposes of this appeal that the district court

applied an incorrect standard, we conclude that the denial of Zee Medical’s motion

for preliminary injunction was proper. See SCFC ILC, Inc. v. Visa USA, Inc., 969

F.2d 1096, 1100 (10th Cir. 1991) (holding that when the district court applies the

wrong preliminary injunction standard, this court may review the record to

determine whether the injunction is justified).

      Pursuant to Colorado law, a covenant not to compete is not enforceable

unless one of four statutory exceptions applies. See Colo. Rev. Stat. § 8-2-113(2).

Zee Medical argues that the covenants not to compete signed by Miller are

enforceable because they seek to protect trade secrets, one of the statutory

exceptions. Id. § 8-2-113(2)(b). Having reviewed the record and the arguments of

the parties, it is clear that Zee Medical is not entitled to a preliminary injunction

because it has failed to raise “questions going to the merits so serious, substantial,

                                           -5-
difficult and doubtful as to make them fair ground for litigation. 2 Koerpel v.

Heckler, 797 F.2d 858, 867 (10th Cir. 1986). Specifically, we have considerable

doubt that Zee Medical will be able to demonstrate that the covenants not to

compete are enforceable because they seek to protect trade secrets.

      The district court’s order denying Zee Medical’s motion for a preliminary

injunction is affirmed.

                                                ENTERED FOR THE COURT

                                                Michael R. Murphy
                                                Circuit Judge

       Zee Medical also summarily asserts that Miller breached the
       2

confidentiality agreement and the district court erred by not granting a
preliminary injunction premised on that alleged breach. Zee Medical’s failure to
support this argument with points and authorities or to include any analysis of the
four preliminary injunction factors compels the conclusion that the argument is
waived. See Phillips v. Calhoun, 956 F.2d 949, 953-54 (10th Cir. 1992).

                                          -6-