Court Opinion

ID: 6218072
Source: CourtListenerOpinion
Date Created: 2022-02-10 17:00:37.724866+00
Date Added: 2024-06-11T08:57:15.431290
License: Public Domain

Appellate Case: 20-1384     Document: 010110643602      Date Filed: 02/10/2022    Page: 1
                                                                                 FILED
                                                                     United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                        Tenth Circuit

                              FOR THE TENTH CIRCUIT                       February 10, 2022
                          _________________________________
                                                                         Christopher M. Wolpert
                                                                             Clerk of Court
  KEYBANK NATIONAL ASSOCIATION,

        Plaintiff - Appellant,

  v.                                                         No. 20-1384
                                                (D.C. No. 1:19-CV-03714-CMA-SKC)
  CHARLES H. WILLIAMS; TIMOTHY                                (D. Colo.)
  WELDON,

        Defendants - Appellees.
                       _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before HARTZ, McHUGH, and CARSON, Circuit Judges.
                   _________________________________

       This is an appeal from the denial of a preliminary injunction in a business tort

 case. KeyBank National Association (KeyBank) sued two of its former employees,

 Charles Williams and Timothy Weldon (Appellees), after they left KeyBank to work

 for a competitor, Newmark Knight Frank. KeyBank alleged that Appellees breached

 their non-compete agreements and used its trade secrets and confidential information

 to divert business from KeyBank to Newmark. KeyBank moved for a preliminary

       *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 20-1384   Document: 010110643602       Date Filed: 02/10/2022     Page: 2

 injunction to prevent Appellees from doing business with and soliciting KeyBank’s

 customers and misappropriating its trade secret and confidential information. The

 district court denied the motion, concluding KeyBank failed to show a probability of

 irreparable harm. KeyBank now appeals that order. The underlying litigation is

 ongoing, but we have jurisdiction under 28 U.S.C. § 1292(a)(1) to review the district

 court’s denial of the preliminary injunction motion. We affirm.

                                   BACKGROUND

       Appellees worked in KeyBank’s Commercial Real Estate Division until they

 resigned in January 2019 and immediately began working for Newmark. While

 employed with KeyBank, they each signed confidentiality agreements prohibiting

 them from disclosing any KeyBank trade secrets and providing that upon termination

 of their employment, they would return all documents, data, and information

 containing trade secrets. In addition, at numerous times during their employment,

 they received restricted stock awards for their performance. To accept the awards,

 they electronically accepted the terms and conditions contained in stock award

 agreements, including non-compete provisions prohibiting them from soliciting or

 doing business with any existing or prospective KeyBank customer they interacted

 with or learned of during the course of their employment at KeyBank. The non-

 compete agreements expired in January 2020—one year after the termination of their

 employment with KeyBank.

       Before accepting the job with Newmark, Williams emailed Newmark to

 facilitate the determination of the sign-on bonus Newmark would offer to Williams

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 and Weldon. Williams’s email included information regarding his, Weldon’s, and a

 colleague’s production at KeyBank. He initially emailed Newmark PDFs of

 production data he had copied and pasted from KeyBank’s 2016, 2017 and 2018

 Pipeline Reports. These reports, which were maintained in Excel spreadsheets,

 contained statistical and financial data on mortgage-specific transactions involving

 numerous KeyBank clients. According to KeyBank, the Pipeline Reports contain

 confidential and trade secret data. The PDFs Williams sent Newmark did not include

 all of the information on the spreadsheet. He later gave Newmark the Pipeline

 Reports in an Excel spreadsheet so it could more easily transfer the information into

 its system for purposes of determining the sign-on bonus amounts. Williams

 attempted to hide numerous columns on the spreadsheet so only those from the PDF

 were revealed in the spreadsheet he gave Newmark. But the hidden columns could

 be unhidden, meaning he unwittingly gave Newmark KeyBank’s full Pipeline

 Reports.

       Appellees both knew the Pipeline Reports were confidential and were not to be

 shared outside of KeyBank. They maintained that they did not know there was

 hidden information in the spreadsheets until it was discovered during the course of

 the litigation. They also maintained that no one at Newmark knew about or saw any

 of the hidden information. During their initial nineteen months of working at

 Newmark, Appellees closed seven deals involving KeyBank clients.

       KeyBank filed its complaint in December 2019, alleging that Appellees

 violated their non-compete and confidentiality agreements and misappropriated its

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 trade secrets.1 About a month later, KeyBank filed a motion for a preliminary

 injunction pursuant to Fed. R. Civ. P. 65, seeking to enjoin Appellees from (1) doing

 business with or soliciting any KeyBank customers for a period of time

 commensurate with the duration of their alleged noncompliance with their

 non-compete agreements; and (2) misappropriating KeyBank’s trade secret and

 confidential information, by, among other things, soliciting and doing business with

 its customers.

       After a hearing, the magistrate judge issued a report and recommendation that

 the district court grant the motion in part and deny it in part. He found the Pipeline

 Reports were confidential and recommended that the court order Appellees to either

 return them to KeyBank or destroy them, but he recommended that the court

 otherwise deny the motion because KeyBank failed to show it would suffer

 irreparable injury if the injunction were denied. The magistrate judge gave four

 reasons for his irreparable-harm finding. First, there was no evidence Appellees had

 used KeyBank’s confidential information to compete with KeyBank or divert its

 customers to Newmark. The magistrate judge explained that KeyBank and Newmark

 shared common customers, Appellees closed only seven deals for Newmark that

 involved KeyBank customers, and there was no evidence that Appellees used the

 Pipeline Reports to secure those deals. He also found that even if those deals were

       1
         KeyBank asserted claims against both defendants for breach of contract and
 misappropriation of trade secrets, and against Williams for intentional interference
 with a business relationship and breach of the duty of loyalty.
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 the result of misappropriation or unlawful competition, any injury KeyBank suffered

 could be quantified and compensated by money damages after trial. The second

 reason the magistrate judge gave for finding no irreparable harm was that there was

 no evidence of any current or ongoing use or misappropriation of its confidential

 information. Third, there was no evidence that KeyBank lost competitive advantage

 as a result of Appellees’ alleged unlawful competition or misappropriation of

 confidential information—it continued to do business with the customers involved in

 the deals Appellees closed for Newmark, and by at least one measure, its industry

 ranking was below Newmark’s in 2018 but jumped ahead in 2019. Finally, the

 magistrate judge found that KeyBank’s delay in seeking the injunction undercut its

 irreparable-harm claim. He noted that KeyBank learned of Appellees’ possible

 breach of their non-compete and trade secret agreements in early to mid-2019 but did

 not file suit until December 2019 and did not seek injunctive relief until January

 2020—a year after Appellees left KeyBank and just days before their restricted

 periods expired.

        Considering KeyBank’s objections to the report and recommendation and

 reviewing the question de novo, see 28 U.S.C. § 636(b)(1), the district court adopted

 the magistrate judge’s factual findings and agreed that KeyBank failed to show

 irreparable harm. Specifically, the court concluded that KeyBank’s alleged harm was

 “inherently theoretical,” noting that it argued in its objections that the threat of

 Appellees’ solicitation of its customers or use of its confidential information

 warranted injunctive relief, but it presented no evidence that Appellees were

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 “currently using or misappropriating” that information. R., vol. II at 301. The court

 also agreed with the magistrate judge that KeyBank’s delay in seeking relief “heavily

 weighs against the issuance of a preliminary injunction,” because waiting to seek an

 injunction until one year after Appellees started working for Newmark and just days

 before their non-compete provisions expired showed no “sense of urgency.” Id. at

 302 (emphasis and internal quotation marks omitted).

       Based on its determination that KeyBank failed to show irreparable harm, the

 court denied the preliminary injunction motion in its entirety, including the request

 that Appellees be ordered to return or destroy the Pipeline Reports.

                                     DISCUSSION

       KeyBank contends the district court’s irreparable-harm determination

 constitutes an abuse of discretion because (1) the court disregarded evidence that

 KeyBank suffered actual and unquantifiable injury in the form of diminished

 customer relations, goodwill, and competitive standing; and (2) the record does not

 support the finding that KeyBank delayed seeking relief. KeyBank also challenges

 the district court’s rejection of the magistrate judge’s recommendation to order

 Appellees to return or destroy the Pipeline Reports.

                                     Legal Standards

       “We review the decision to deny a motion for a preliminary injunction for

 abuse of discretion.” Schrier v. Univ. of Colo., 427 F.3d 1253, 1258 (10th Cir.

 2005). A district court abuses its discretion when its decision “is premised on an

 erroneous conclusion of law or where there is no rational basis in the evidence for the

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 ruling.” First W. Cap. Mgmt. Co. v. Malamed, 874 F.3d 1136, 1140 (10th Cir. 2017)

 (internal quotation marks omitted). We review the district court’s factual findings for

 clear error and its legal conclusions de novo. Id. at 1140-41. “The district court’s

 discretion in this context is necessarily broad and a strong showing of abuse must be

 made to reverse it.” FTC v. Accusearch Inc., 570 F.3d 1187, 1201 (10th Cir. 2009)

 (internal quotation marks omitted).

       A preliminary injunction “is an extraordinary remedy” that may be granted

 only when “the right to relief [is] clear and unequivocal.” Schrier, 427 F.3d at 1258

 (internal quotation marks omitted). To obtain an injunction, the moving party must

 show it “will suffer irreparable injury if the injunction is denied.” First W. Cap.

 Mgmt. Co., 874 F.3d at 1141 (internal quotation marks omitted). “To constitute

 irreparable harm, an injury must be certain, great, actual and not theoretical.”

 Schrier, 427 F.3d at 1267 (internal quotation marks omitted). The burden of showing

 irreparable harm is not “an easy burden to fulfill.” Dominion Video Satellite, Inc. v.

 Echostar Satellite Corp., 356 F.3d 1256, 1262 (10th Cir. 2004) (internal quotation

 marks omitted).

       The purpose of a preliminary injunction is to “preserve the relative positions of

 the parties until a trial on the merits can be held,” Schrier, 427 F.3d at 1258 (internal

 quotation marks omitted), “not to remedy past harm,” id. at 1267. Thus, the movant

 must demonstrate “a significant risk” that it will experience future harm that “cannot

 be compensated after the fact by money damages.” First W. Cap. Mgmt. Co.,

 874 F.3d at 1141 (internal quotation marks omitted). In determining whether the

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 movant has shown irreparable harm, a district court may consider “the difficulty in

 calculating damages” and the “existence of intangible harms such as loss of goodwill

 or competitive market position.” Dominion Video, 356 F.3d at 1264. Harm to

 goodwill can be irreparable even where the party seeking relief has not lost the

 customer entirely. See Sw. Stainless, LP v. Sappington, 582 F.3d 1176, 1191-92

 (10th Cir. 2009). But economic loss, including the loss of business, “usually does

 not, in and of itself, constitute irreparable harm.” Port City Props. v. Union Pac.

 R.R. Co., 518 F.3d 1186, 1190 (10th Cir. 2008) (internal quotation marks omitted);

 see also First W. Cap. Mgmt. Co., 874 F.3d at 1140, 1143 (concluding district court

 abused its discretion by granting preliminary injunction despite finding that any

 damages caused by former employee’s use of plaintiff’s client list to solicit its clients

 would be quantifiable and that money damages “would adequately make the company

 whole” (brackets and internal quotation marks omitted)).

                                      Application

       As an initial matter, we acknowledge Appellees’ argument that even if

 KeyBank could establish irreparable injury, it could not obtain the injunctive relief

 sought—essentially, an extension of their expired restrictive periods under the

 non-compete agreements. Addressing this argument would require us to resolve

 choice-of-law and enforceability issues that the parties continue to disagree about in

 the underlying litigation and that KeyBank contends we lack jurisdiction to decide

 because the district court did not address them in the preliminary-injunction order.

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 We need not resolve any of these issues, however, because we find no abuse of

 discretion in the district court’s irreparable-harm determination.2

      1. Intangible Injury

       KeyBank first contends the district court’s finding that any injury it suffered

 was either theoretical or could be compensated by money damages ignores

 KeyBank’s evidence that it suffered intangible injury in the form of diminished

 customer relationships, goodwill, and competitive standing. In support, it relies

 primarily on evidence it contends establishes that Appellees took and had unfettered

 access to the Pipeline Reports, solicited and closed deals with KeyBank customers,

 and continue to use KeyBank’s confidential information to divert business to

 Newmark. KeyBank says “[n]one of this is theoretical. It was real.” Aplt. Opening

 Br. at 37 (emphasis omitted). But the question is not whether Appellees’ alleged

 wrongful conduct was real or theoretical. The question is whether their conduct

 caused and will continue to cause actual injury that cannot be compensated with

 money damages. See Dominion Video, 356 F.3d at 1263-64 (recognizing that

 irreparable harm “do[es] not automatically” arise from the breach of exclusivity,

 non-compete, and non-disclosure agreements).

       2
          The choice-of-law and enforceability issues go to whether KeyBank can
 show a likelihood of success on the merits—a preliminary injunction factor the
 district court did not need to reach after concluding KeyBank failed to show
 irreparable harm. See First W. Cap. Mgmt. Co., 874 F.3d at 1141 (explaining that
 “because a showing of probable irreparable harm is the single most important
 prerequisite for the issuance of a preliminary injunction, the moving party must first
 demonstrate that such injury is likely before the other requirements will be
 considered” (internal quotation marks omitted)).
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        KeyBank’s insistence that Appellees’ past conduct and continued possession

  of the Pipeline Reports necessarily cost it future business and goodwill that cannot be

  measured is insufficient to establish the requisite irreparable harm. See id. at 1264-

  65 (district court abused its discretion in granting preliminary injunction where it

  found irreparable harm based solely on defendant’s breach of exclusivity agreement

  and rejected plaintiff’s assertions that it was losing customers, competitive position,

  and goodwill). And contrary to KeyBank’s contention that the district court ignored

  its evidence and arguments, the record shows that the court considered KeyBank’s

  evidence and was simply not persuaded by its argument that it would suffer

  irreparable injury absent injunctive relief. The court found no evidence that

  Appellees are using KeyBank’s confidential information to solicit its customers and

  divert business to Newmark or that KeyBank has suffered or will suffer lost goodwill

  or competitive standing. KeyBank’s disagreement with those findings does not

  establish that the court ignored KeyBank’s evidence or that its findings are clearly

  erroneous.

        Nor does KeyBank’s disagreement with the court’s ruling support the

  contention that the court “ignore[d] binding” precedent, Aplt. Opening Br. at 36. Our

  precedent recognizes that the loss of competitive standing or goodwill can give rise

  to irreparable injury. But “not all plaintiffs who have already suffered lost

  customers, stolen trade secrets, or intangible injury can show a sufficient probability

  of future irreparable harm to warrant a preliminary injunction.” DTC Energy Grp.,

  Inc. v. Hirschfeld, 912 F.3d 1263, 1271 (10th Cir. 2018). The district court

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  concluded that KeyBank failed to make that showing, and we find no abuse of

  discretion in its determination. See id. at 1271-73 (affirming denial of preliminary

  injunction based on loss of customers, loss of goodwill, and erosion of competitive

  position where plaintiff “did not establish a probability of future irreparable harm”

  and the prior loss of customers and “general decline of [plaintiff’s] value as a

  business can be quantified in money damages”); Schrier, 427 F.3d at 1267 (affirming

  denial of preliminary injunction even though plaintiff alleged irreparable harm from

  “loss of prestige, academic reputation[,] [and] professional opportunities,” because it

  failed to identify “evidence in the record showing actual or significant risk” that

  those harms would occur in the future).

        The fact that Appellees’ non-compete and trade secret agreements

  acknowledge that a breach “may cause serious damage and irreparable injury”

  supporting a claim for injunctive relief, see R., vol. II at 289-90 (internal quotation

  marks omitted), does not require a different result. The parties’ recognition that

  irreparable harm could occur does not mean it did.

       2. KeyBank’s Delay in Seeking Relief

        KeyBank next takes issue with the district court’s finding that its delay in

  seeking injunctive relief undercut its irreparable-harm claim. It disagrees with the

  court’s finding that it learned of Appellees’ possible breach of their noncompete and

  trade secret agreements in early to mid-2019, insisting it “received the first concrete

  evidence that Williams had breached his restrictive covenant” in September 2019.

  Aplt. Opening Br. at 43. But the record indicates that KeyBank believed Weldon was

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  contacting KeyBank customers as early as February 2019, and it sent both Appellees

  correspondence in September and October reminding them of the restrictive

  covenants and obligations to KeyBank, yet waited several more months to file suit

  and seek a preliminary injunction. The district court’s factual finding that KeyBank

  delayed seeking relief was thus not clearly erroneous.

         Contrary to KeyBank’s contention, the district court did not find that

  KeyBank’s delay was fatal to its irreparable-harm claim. Rather, the court held that

  KeyBank’s failure to seek relief earlier was inconsistent with its irreparable-injury

  claim and was one of several factors that weighed against issuing an injunction.

  Delay in seeking relief does not conclusively refute a showing of irreparable harm,

  but under the circumstances presented here, we find no abuse of discretion in the

  district court’s determination that waiting to file suit until a year after Appellees

  started working for a competitor and days before their non-compete agreements

  expired undermined KeyBank’s assertion that time was of the essence. See Fish v.

  Kobach, 840 F.3d 710, 753 (10th Cir. 2016) (explaining that delay in seeking

  preliminary relief can cut against finding irreparable injury); GTE Corp. v. Williams,

  731 F.2d 676, 679 (10th Cir. 1984) (holding that delay in seeking an injunction can

  be “an important factor in determining irreparable harm”).

         We are not persuaded otherwise by the fact that KeyBank was engaged in

  settlement negotiations with Appellees for about three months before filing suit.

  Pursuing settlement discussions before seeking injunctive relief is not “fatal to [a]

  claim of irreparable injury.” Kan. Health Care Ass’n, Inc. v. Kan. Dep’t of Soc. &

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  Rehab. Servs., 31 F.3d 1536, 1544 (10th Cir. 1994); see also RoDa Drilling Co. v.

  Siegal, 552 F.3d 1203, 1212 (10th Cir. 2009) (delay in seeking an injunction “was

  not unreasonable and did not alter the irreparable harm analysis” where it stemmed

  from the parties’ attempts to resolve the dispute, not plaintiff’s “decision merely to

  sit on its rights” (internal quotation marks omitted)). But it was not unreasonable for

  the district court to conclude that “the duration of the parties’ settlement efforts

  shows that [KeyBank] is not facing imminent and irreparable harm” because if it had

  been, it likely “would have immediately sought injunctive relief when it discovered

  [Appellees’] alleged wrongdoing” and before their restrictive covenants expired. R.,

  vol. II at 302.

       3. Return of Pipeline Reports

         KeyBank’s final contention is that the district court erred in rejecting the

  magistrate judge’s recommendation that the motion for preliminary injunction be

  granted to the extent it seeks the return or destruction of the Pipeline Reports. That

  recommendation was based on the magistrate judge’s conclusion that the “Pipeline

  Reports are confidential information belonging to KeyBank.” Id. at 279. But the

  possession of confidential information does not justify injunctive relief absent a

  showing of irreparable harm, and because KeyBank failed to show irreparable harm,

  the district court properly denied the motion in its entirety. See First W. Cap. Mgmt.

  Co., 874 F.3d at 1143 (“Without showing irreparable harm, [a plaintiff] cannot obtain

  a preliminary injunction.”).

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                                    CONCLUSION

        We affirm the district court’s order denying the motion for preliminary

  injunction. We make permanent our provisional order granting KeyBank’s

  unopposed motion to seal Exhibits 56, 58A, 59A, 60A, 61A, 61B, 61C and 61C1.

                                            Entered for the Court

                                            Joel M. Carson III
                                            Circuit Judge

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