At a TRO hearing in Federal Court in Georgia that took place yesterday, July 12, 2022, in the Defend Trade Secrets Act ("DTSA") case of R.L. Young, LLC v. Undisputed Consulting, LLC et al., the plaintiff/former employer urged the trial court to issue a temporary restraining order in order to prevent the defendant competitor from using 30,000 confidential, trade secret files that it contends were illicitly downloaded by Michael Walker - plaintiff's former employee, and a founding member of the defendant.
It has been reported that the judge outlined her reasoning for declining the former employer's request for injunctive relief - and apparently, in her view, it wasn't a particularly close call. Judging by what this judge said, I don't blame her for ruling the way she did. It also provides a nice roadmap for parties and practitioners for how to analyze and approach TRO applications.
Why the Court Declined to Issue a TRO Against the Defendants, Notwithstanding the Evidence that Numerous Files Were Downloaded and Not Returned to Plaintiff
According to the news report (I checked, and it's not memorialized in the Court's electronic docket anywhere), here's what the Court said:
"It seems to me that there's a lack of evidence that the documents at issue are trade secrets and a lack of evidence that those secrets were used or are being used, so the likelihood of success on the merits is unlikely ... It also sounds like Young & Associates had many chances to challenge the files and attempt to get them back. That there has been such a delay in doing so, does damage the irreparable harm argument."
In terms of practical takeaways, there's a bit to unpack here, because although this statement is rather succinct, it does touch on a few different issues that parties need to be aware of when considering whether they have the evidence they need to seek a TRO, or, on the flip side of the coin, some potential avenues to attack an adversary's application for injunctive relief.
By way of background, in order to be entitled to a TRO, the party seeking the injunctive relief is, generally speaking, required to demonstrate the following three (3) things - and not just by a preponderance of the evidence (i.e., that you are more likely right than wrong) - but must do so by clear and convincing evidence:
- a likelihood of success on the merits of the action;
- the danger of irreparable injury in the absence of preliminary injunctive relief; and,
- a balance of equities in favor of the moving party.
See, e.g., Nobu Next Door, LLC v. Fine Arts Housing, Inc., 4 N.Y.3d 839, 840, 800 N.Y.S.2d 48, 49, 833 N.E.2d 191, 192 (2005).
In this particular instance, the Court was highlighting three (3) different areas where the plaintiff's application fell short:
- First, and most important, the plaintiff apparently failed to submit competent evidence that the defendants actually used any of its purportedly stolen confidential, trade secret data. And without that proof, there was no justification to issuing a TRO;
- Second, the plaintiff failed to show that any of the data that the defendants supposedly took qualified as a "trade secret" in the first instance; and,
- Third, and finally, by "sleeping" on their rights for a fair amount of time rather than actively seeking to recover the allegedly stolen trade secrets, the plaintiff undercut their own arguments that absent a TRO they stand to sustain immediate, irreparable harm.
