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holding that even publicly available information may be valuable due to work required to compile it
Summary of this case from Office Depot, Inc. v. Impact Office Products, LLCOpinion
Case No. 09-60202-CV.
April 22, 2009
Jason Robert Nickerson, Joan Marie Canny, Morgan Lewis Bockius LLP, Miami, FL, for Plaintiff.
Frank Christopher Simone, Sherman Law Offices, Franklin Lewis Zemel, Arnstein Lehr, Fort Lauderdale, FL, Gary William Pollack, Bretton I. Pollack, Gary W. Pollack PA, Miami, FL, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ORDER GRANTING IN PART MOTION FOR PRELIMINARY INJUNCTION
THIS CAUSE is before the Court upon Plaintiff's Motion for a Preliminary Injunction [DE 3], Defendants' Motion to Dismiss [DE 57], Plaintiff's Motion to Strike Affidavit [DE 100], Plaintiff's Motion for Adverse Inference or Injunction due to Spoliation [DE 102/104], Plaintiff's Motion to Amend and Supplement Preliminary Injunctive Relief [DE 128], and Plaintiff's Motion to Strike Supplemental Memorandum [DE 146]. The Court has carefully considered the motions, responses, replies, the argument of counsel and the evidence presented on March 26, 2009 and April 2, 2009, including the credibility of witnesses, and is otherwise fully advised in the premises.
I. BACKGROUND
The parties are competitors in the condominium property management business in Florida. Plaintiff The Continental Group ("TCG" or "Plaintiff") alleges that Defendants KW Property Management, Inc., KW Holding One, LLC, The Grand Preserve at Naples LLC (collectively, the "KW Defendants") hired away Defendant Marcy Kravit from TCG and that acting as an agent of the KW Defendants she downloaded proprietary information from Plaintiff's computer system prior to her departure. Several other employees of Plaintiff were hired away as well though they are not named as Defendants in this action.
As discussed later, the Court is dismissing Defendants KW Holding One, LLC, The Grand Preserve at Naples LLC. When the Court refers only to KW Property Management, Inc., it will be called "KW."
Plaintiff's Verified Complaint contains claims for violations of the Computer Fraud and Abuse Act ("CFAA") (Count I) against all Defendants, breach of restrictive covenant contracts against Kravit (Count II), tortious interference against all Defendants as to customer relationships (Counts III), tortious interference against the KW Defendants for interfering with the restrictive covenant agreements between Plaintiff and Kravit (and other former TCG employees) (Count IV), and misappropriation of trade secrets (Count V).
The Court granted Plaintiff's motion for expedited discovery prior to the evidentiary hearing on the preliminary injunction motion. Plaintiff's computer forensic expert was allowed to image Defendants' computers, resulting in some document production following a privilege review. During a March 9, 2009 hearing on discovery matters, Plaintiff's counsel represented at that time that a preliminary injunction was not being sought as to Count III regarding tortious interference with customers, but rather on the CFAA claim, the breach of contract claim, and the tortious interference claim as it relates to the restrictive employee covenants. However, Plaintiff sought to broaden the scope of injunctive relief on the eve of the hearing. As a preliminary matter, even if there were competent evidence to support such relief, the Court concludes that it would be improper to base an injunction on customer interference.
II. FINDINGS OF FACT
The Court has received proposed findings of fact from each party. These documents have been filed in the docket of this case and served on all opposing parties [DE's 141, 142, and 144]. Due to the detailed nature of the evidence in support of the preliminary injunction motion, the Court does incorporate verbatim certain portions of Plaintiff's Proposed Findings, though this Court has made an independent judgment that these findings are correct. Cf. Bright v. Westmoreland County, 380 F.3d 729 (3rd Cir. 2004).
A. Kravit's employment with TCG B. Defendant Kravit copied and removed voluminous electronic files from TCG Id. Id. Id. Id. Id. Id. See C. Kravit removed TCG files which she had no business purpose accessing at TCG D. Kravit removed and accessed files relating to the solicitation of TCG employees E. Kravit and the KW Defendants en- gaged in activities in violation of Kravit's prohibition on solicitation of TCG employees F. The KW Defendants knowingly in- terfered and continue to interfere with enforceable restrictive cove- nant agreements of Defendant Krav- it G. Defendants have used and dissemi- nated valuable confidential busi- ness information removed by Kravit and Niemeier from TCG H. Kravit was at all pertinent times an agent of KW Property Management
"Metadata" is data regarding the properties of a document, including when it was created, last modified, deleted, etc.
III. CONCLUSIONS OF LAW A. Preliminary Injunction Standard
In order to obtain a preliminary injunction, TCG must establish the following four elements: (1) a substantial likelihood that it will prevail on the merits; (2) a substantial threat that it will suffer irreparable injury if the injunction is not granted; (3) the threatened injury to plaintiff outweighs the threatened harm the injunction may do to the defendants; and (4) granting the preliminary injunction will not disserve the public interest. Church v. City of Huntsville, 30 F.3d 1332, 1342 (11th Cir. 1994). Because a "preliminary injunction is an extraordinary and drastic remedy," it is "not to be granted until the movant clearly carries the burden of persuasion as to the four prerequisites." Id. (quoting Northeastern Fl. Chapter of the Ass'n of Gen. Contractors of Am. v. City of Jacksonville, 896 F.2d 1283, 1285 (11th Cir. 1990)); see also McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998).TCG seeks a preliminary injunction to force the KW Defendants to be restrained from retaining or using any TCG confidential information, that the KW Defendants' computers should be "wiped clean," as Defendants cannot be trusted not to use the information to solicit clients in the future, that Defendants should terminate the employment of Defendant Kravit, as well as three other non-party employees, and that Defendant Kravit be enjoined from working in the property management field in Florida. Defendants argue that TCG is simply trying to restrain their competition, that Defendant has already agreed not to use any of TCG's information, and that the claims should be dismissed for failure to state a claim.
B. Motion to Dismiss Standard
At the opposite end of the burden spectrum, the Court is also deciding Defendants' Motion to Dismiss for failure to state a claim and for lack of subject matter jurisdiction. The Court previously ruled that because the merits of TCG's CFAA claim are intertwined with the subject matter jurisdiction question, the Court would hear the preliminary injunction motion at the same time as the motion to dismiss. Pursuant to the United States Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), to survive a motion to dismiss for failure to state a claim, a complaint must now contain factual allegations which are "enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true." 127 S.Ct. at 1965. Taking the facts as true, a court may grant a motion to dismiss when, "on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action." Marshall Cty. Bd. of Educ. v. Marshall Cty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993). On a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, the Court may weigh the competing facts brought forth by the parties.
C. CFAA Claim
Plaintiff asserts that a preliminary injunction should issue based upon the CFAA claim because Defendant Kravit, acting as an agent of the KW Defendants, exceeded her authority and access to TCG's protected computers, causing loss or damage in investigation and remediation costs in excess of $5,000. The CFAA authorizes a civil action by one "who suffers damage or loss by reason of a violation of this section . . . against the violator to obtain compensatory damages and injunctive relief or other equitable relief." 18 U.S.C. § 1030(g).
The alleged violations in this case are: (1) That Kravit "intentionally access[ed] a computer without authorization or exceed[ed] authorized access, and thereby obtained information from any protected computer" ( 18 U.S.C. § 1030(a)(2)(c)); and (2) Kravit "knowingly and with intent to defraud, access[ed] a protected computer without authorization, or exceed[ed] authorization, and by means of such conduct furthers the intended fraud and obtains anything of value. . . ." 18 U.S.C. § 1030(a)(4). Defendants raise several arguments in opposition to Plaintiff's assertions in both their motion to dismiss and opposition to the preliminary injunction motion.
1. "Protected Computer"
Defendants argue that because TCG only does business in Florida, Plaintiff cannot show an interstate commerce nexus to their protected computer. A "protected computer" is defined as a computer "which is used in or affecting interstate or foreign commerce or communication. . . ." 18 U.S.C. § 1030(e)(2)(B). The KW Defendants assert that the TCG computer system only connects TCG offices within the state of Florida and does not affect interstate commerce. Plaintiff relies on case law stating that any connection to the Internet is part of an interstate communication systems. United States v. Trotter, 478 F.3d 918, 921 (8th Cir. 2007); Paradigm Alliance Inc. v. Celeritas Technologies, LLC, 248 F.R.D. 598, 601 (D.Kan. 2008). Defendants argue that Congress could not have intended so broad a reach, and limited jurisdiction to computers used in interest commerce. Nordstrom Consulting, Inc. v. M S Technologies, Inc., 2008 WL 623660 (N.D.Ill. Mar. 4, 2008).
Plaintiff alleges that its former employee, Defendant Marcy Kravit, acted as an agent for the KW Defendants when she accessed Plaintiff's computer system while exceeding her authorization for such access. Complaint, ¶¶ 39, 45, 47 and 61.
There is a split of authority on this issue, but the greater weight of authority favors Plaintiff on this issue. A connection to the internet is "affecting interstate commerce or communication." 18 U.S.C. § 1030(e)(2)(B). In addition, the evidence showed that TCG uses its internet connection to communicate with First Management Partners, its largest shareholder, who is based in a state other than Florida, particularly in connection with development of its green initiative. On the issue of whether TCG's computer is a "protected computer," not only can Plaintiff defeat Defendant's motion to dismiss as there is more than enough evidence to raise its claims beyond a speculative level, but Plaintiff has shown a substantial likelihood of success that its computers are in fact "protected computers" under the CFAA.
2. $5,000 Jurisdictional Limit
A civil action under the CFAA may only be brought if it involves a loss aggregating at least $5,000 in value. See 18 U.S.C. § 1030(g) (referring back to § 1030(c)(4)(A)(I)). Thus, a plaintiff must show "damage" or "loss" of at least $5,000. The evidence is clear that Plaintiff has paid over that amount to its computer forensic consultant to investigate the integrity of its computers following Kravit's alleged unauthorized access. Defendants argue that this cost is insufficient to meet the jurisdictional threshold absent evidence that the computers themselves were damaged, or that any "loss" must be the result of an interruption of service.
Loss is defined in the CFAA as "any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service." 18 U.S.C. § 1030(e)(11) (emphasis added). The key question here is whether there are two ways of determining loss, one before the "and" that is not modified by "interruption of service," and one after wherein any loss must be the result of interruption of service. In Cohen v. Gulfstream Training Academy, 2008 WL 961472 (S.D.Fla. Apr. 9, 2008) (J. Cohn), this Court ruled that lost profits could not be recovered because such loss was not incurred because of interruption of service. However, the arguments made by TCG regarding two distinct methods of proving loss were not presented in that proceeding.
There is a significant split of authority on this issue, with some courts stating that investigative costs such as TCG has proved herein are "reasonable" costs and are recoverable "loss," while others limit such "loss" to interruption of service, and not mere downloading of documents as in the present case. Plaintiff relies upon Frees, Inc. v. McMillian, 2007 WL 2264457 (W.D.La. Aug. 6, 2007), and cases cited therein, to support its argument. See also Nexans Wires S.A. v. Sark-USA, Inc., 166 Fed.Appx 559, 562-63 (2nd Cir. 2006). Defendant relies upon the decision in Cohen, as well as Resdev, LLC v. Lot Builders Ass'n, Inc., 2005 WL 1924743 (M.D.Fla. Aug. 10, 2005), which concludes that any "loss" must be as a result of interruption of service.
This issue is a statutory interpretation question. Although there are no published appellate court decisions, there is a slight lean toward Plaintiff's position based upon the number of cases in which district courts have reached the issue. This Court, however, concludes that all loss must be as a result of "interruption of service." Otherwise, it would appear that the second half of the "loss" definition is surplusage. If loss could be any reasonable cost without any interruption of service, then why would there even be a second half to the definition that limits some costs to an interruption of service. Rather, the better reading (though reasonable minds surely can differ until the Court of Appeals decides the issue) appears to be that all "loss" must be the result of an interruption of service. This conclusion is supported by the legislative intent in the CFAA, a criminal statute, to address interruption of service and damage to protected computers.
Plaintiff also asserts that the cost of its forensic investigation is "damage" under the CFAA. The term "damage" is defined as "any impairment to the integrity or availability of data, a program, a system or information." 18 U.S.C. § 1030(e)(8). Again, there is a split of authority as to whether actual damage must occur. Plaintiff relies upon HUB Group, Inc. v. Clancy, 2006 WL 208684 (E.D.Pa. Jan. 25, 2006), which simply states that unauthorized access can be damage. However, Defendants rely upon Condux International v. Haugum, 2008 WL 5244818, *8 (D.Minn., Dec. 15, 2008) which concludes that the plain language of the statute requires "some alteration of or diminution to the integrity, stability, or accessibility of the computer data itself" to be damage under the CFAA. This Court again agrees with the Defendants, based upon the plain language of the statute that the data must be impaired and not merely copied.
3. Unauthorized Access or Exceeded Authority
In the event the Court's legal interpretation of the jurisdictional amount is incorrect, and because the parties have fully briefed the issues and developed a factual record for purposes of the preliminary injunction, the Court will reach the remaining CFAA issues. Defendants allege that Plaintiff cannot show that Kravit exceeded her authority to access files that she already had access to for her job. The evidence shows that although Plaintiff's computer system had tiered levels of access policed by use of usernames and passwords, Plaintiff's access level was high enough to be able to access all the files she is accused of downloading. There was some testimony that some of the data was outside her geographic scope of her job duties, but not apparently above her computer access level.
Plaintiff has a stronger argument that Kravit exceeded her authority under TCG's written policies to access certain files after she began negotiating with KW for a new position. There is another split of authority as to whether a person who already has access exceeds their authority as defined in the CFAA when merely copying files from their work computer. 18 U.S.C. § 1030(e)(6) (the term "exceeds authorized access" means "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.").
Defendants rely upon Bridal Expo, Inc. v. van Florestein, 2009 WL 255862, *9-11 (S.D.Tex. Feb. 3, 2009) and Condux International, 2008 WL 5244818 at *4. These decisions conclude that Congress' plain language put the emphasis on the "use" of the access, such as mere downloading, rather than the "intent" of the departing employee or any implied "duty" of fair dealing. Plaintiff relies upon International Airport Centers, LLC v. Citrin, 440 F.3d 418, 420-21 (7th Cir. 2006) and Hewlett-Packard Co. v. Byd:Sign, Inc., 2007 WL 275476 (E.D.Tex. Jan. 25, 2007). These cases stand for the proposition that once an employee is working for himself or another, his authority to access the computer ends, even if he or she is still employed at the present employer.
TCG argues that Defendants' cases can be distinguished because it is the written computer access policies maintained by Plaintiff in its Employee Handbook that determine whether Kravit exceeded her authority to access. Plaintiff's Exhibit 136. In this case, those policies state that the computers "are provided for business use," and any equipment is provided "to be used solely for the Company's [TCG's] purposes."
This Court concludes that Plaintiff has shown a substantial likelihood of success that Defendant Kravit did exceed her authorization in downloading various files identified in ¶¶ 17-27 above. Though the district court decisions on this issue are in dispute, an employer such as TCG clearly has a right to control and define authorization to access its own computer systems. In this case, the cases cited by Defendants can be distinguished because Plaintiff has shown that Kravit downloaded files that she did not need for her remaining business purposes for TCG during a time when she was actively negotiating to leave TCG and be employed by KW (and, during a time when KW's principals clearly believed Kravit was coming to work for them).
4. "Fraud" in CFAA not properly plead
Defendants also seek dismissal of the § 1030(a)(4) claim because Plaintiff did not plead fraud with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure and the claim is barred by the Economic Loss Rule. Plaintiff argues that Rule 9(b) does not apply to the CFAA claim because this claim is not a typical fraud claim subject to Rule 9(b), and, even if the Economic Loss Rule applies, this claim is an independent statutory claim from the breach of contract claim. As to Rule 9(b) one court has held that it does not apply. P.C. of Yonkers, Inc. v. Celebrations!, 2007 WL 708978, *6 (D.N.J. Mar. 5, 2007). Plaintiff also asserts that its Complaint does in fact plead Kravit's "fraud" with particularity.
The Court concludes that while Plaintiff has sufficiently plead the claim to withstand Defendants' motion to dismiss on this claim, Plaintiff has failed to show a substantial likelihood of success that Kravit took the computer files "with intent to defraud" TCG. Rather, she took the files because she believed they would be useful to her personally in her new position, and therefore by extension, help her new company compete with TCG.
5. Whether Kravit was KW's Agent for Downloads
The KW Defendants challenge Plaintiff's allegations that Kravit was acting as an agent for the KW Defendants when she downloaded information just prior to her departure from TCG. Defendants argue they had no control over Kravit's actions as she had not started to work for them.
The evidence presented at the evidentiary hearing does not show a direct link that the KW principals directed Kravit to copy any of TCG's files. Although KW's principals clearly knew that hiring Kravit would give them a competitive edge over TCG, Plaintiff has not shown a substantial likelihood of success on the merits of the CFAA claim that Kravit's downloading of the files was done with the knowledge or even tacit approval of anyone at KW. Though Kravit may have been an agent of KW regarding the solicitation of TCG's employees, a fact necessary for injunctive relief on the tortious interference claim, Plaintiffs have not made a sufficient evidentiary link to award relief against KW on the CFAA claim.
D. Plaintiff's Motion for Adverse Inference
Plaintiff seeks an adverse inference that the files taken by Kravit from TCG's computers were taken not in furtherance of TCG business purposes but with the intention to use the information in her new employment with KW, and, that the files were actually used in Kravit's employment with KW. Plaintiff asserts it is entitled to this adverse inference because Kravit last accessed these files after being placed on notice of this litigation and because she intentionally destroyed metadata evidence relating to her use of the files after being put on notice that these files were relevant and highly material to TCG's claims in this case.
This Court concludes that Plaintiff has not met its burden of showing bad faith to support the extraordinary remedy of an adverse inference. Penalty Kick Management, Ltd. v. Coca Cola Co., 318 F.3d 1284, 1294 (11th Cir. 2003). Although not all of Defendant Kravit's testimony is fully credible, her testimony regarding her lack of knowledge that accessing files would destroy metadata embedded within documents on her portable devices is credible. Such metadata evidence is not obvious to non-computer professionals. Although this lawsuit had just been filed a few days before her access on February 14, 2009, and her counsel should have been on notice to preserve all evidence, including electronic evidence, Defendant Kravit's actions at that time do not rise to the level required for a finding of spoliation of evidence. Therefore, Plaintiff's motion for adverse inference is denied.
E. Breach of contract and tortious interference claims
Although the Court's conclusion that Plaintiff has failed to prove the jurisdictional amount of $5,000 means Plaintiff's CFAA claim must be dismissed, this Court will exercise supplemental jurisdiction and proceed to rule upon the motion for preliminary injunction regarding the state court claims. 28 U.S.C. § 1367.
On these claims, TCG asserts that Defendants have obtained TCG's valuable confidential information in violation of the restrictive covenant contract between TCG and Kravit, and that the KW Defendants have tortiously interfered with that contract in obtaining and using TCG's information. The specific information alleged to have been taken by Marcy Kravit, a district manager in the property management business, in the month prior to her departure from TCG and new employment at KW, is described in the Findings of Fact above. Defendants assert that Plaintiff has failed to establish a legitimate business interest because most of the allegedly confidential information is commonly known in the industry and is publicly available, in that association boards routinely release this information received from property managers to any resident who requests it. If this information is "confidential," then irreparable injury is presumed.
In Autonation, Inc. v. O'Brien, 347 F.Supp.2d 1299, 1304 (S.D.Fla. 2004), Judge Dimitrouleas upheld a restrictive covenant. He stated:
Under Section 542.335 of the Florida Statutes, restrictive covenants are valid if the employer can prove: (1) the existence of one or more legitimate business interests justifying the restrictive covenant; and (2) that the contractually specified restraint is reasonably necessary to protect the established interests of the employer. North American Products Corp. v. Moore, 196 F.Supp.2d 1217, 1228 (M.D.Fla. 2002). If the employer can establish its prima facie case, the burden shifts to the employee to show that the restriction is overbroad, overlong, or otherwise not reasonably necessary to protect the established interests of the employer. Fla. Stat. 542.335(1)(c). Additionally, when the employer establishes a legitimate business interest, irreparable injury must be presumed and the burden shifts to the employee to establish the absence of such injury. Fla. Stat. 542.335(1)(j); North American Products Corp., 196 F.Supp.2d at 1228; Don King Prods., Inc. v. Chavez, 717 So.2d 1094, 1095 (Fla. 4th DCA 1998).
Pursuant to Florida's statute, "legitimate business interests" include: trade secrets, valuable confidential business information, substantial relationships with specific prospective or existing customers, customer goodwill, and extraordinary or specialized training. Fla. Stat. 542.335(1)(b). Moreover, courts are statutorily required to construe a restrictive covenant in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement. Fla. Stat. 542.335(1)(h); AutoNation, Inc. v. Maki, 2004 WL 1925479, *3 (Fla. Cir.Ct. Aug. 25, 2004).
In Florida, confidential business information is considered a legitimate business interest that can be protected by a restrictive covenant in an employment contract. New Horizons Computer Learning Centers, Inc. v. Silicon Valley, 2003 WL 23654790, *6 (M.D.Fla. Nov. 12, 2003). However, information that is commonly known in the industry and not unique to the allegedly injured party is not confidential and is not entitled to protection. Anich Indus., Inc. v. Raney, 751 So.2d 767, 771 (Fla. 5th DCA 2000) (citing Keel v. Quality Med. Syst., Inc., 515 So.2d 337-38 (Fla. 3d DCA 1987))
Florida Statutes Section 542.335 also defines "legitimate business interest" as including the following: "Valuable confidential business or professional information that otherwise does not qualify as trade secrets," "substantial relationships with specific prospective or existing customers, patients, or clients," "customer, patient, or client goodwill associated with . . . a specific geographic location or a specific marketing or trade area," and "extraordinary or specialized training."
1. Confidential Information
Plaintiff asserts that it has proven that numerous materials taken by Defendant Kravit and used by KW contain valuable confidential business or professional information. Although viewed in isolation much of this information could be discovered by competitors by contacting condominium associations or industry sources, the Court concludes that the work and labor expended by Plaintiff in compiling the information, whether board contacts in a county, on-site employee checklists, hurricane preparedness, or environmentally related ("green") improvements, plus Plaintiff's judgment as to the inclusion of the selected information, raises the level of the information to valuable confidential business information in their final compiled form. Thus, such compilations are valuable for a business or a competing business. In this case, KW has benefitted from its receipt, via Kravit, of the compiled information detailed in the Findings of Fact section of this Order. These compilations have not only saved KW numerous work hours in obtaining the information and in deciding what to include in the contacts lists, checklists, procedures, and other on-site documents, but have instantly made KW's on-site operations appear more professional to the client base of both TCG and KW. Thus, the information also qualifies as having a legitimate business interest in client goodwill associated with the specific marketing or trade area of property management for condominium associations. The Court concludes that Plaintiff has shown a substantial likelihood of success on the merits that it has a legitimate business interest in its non-compete, nonsolicitation agreement with Defendant Kravit and that Kravit breached the contract by using documents belonging to TCG in her employment with KW.
To draw an analogy from copyright law, compilations can even be copyrightable. Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340, 356, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991), citing 17 U.S.C. § 101 ("A `compilation' is a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship. . . .").
2. Solicitation of Employees
TCG has also provided sufficient evidence of a breach of the non-solicitation clause of Kravit's contract with TCG by Kravit's provision of resumes of TCG employees to KW principals for purposes of KW's hiring of these TCG employees. Paragraph 2.b. of Kravit's contract with TCG prohibits Kravit on behalf of or in conjunction with any competing business from "directly or indirectly, alone or in any capacity, solicit or in any manner attempt to solicit or induce any person(s) employed by Continental to leave such employment." TCG has shown a legitimate business purpose for this prohibition under Fla. Stat. § 542.335 due to the loss of goodwill of clients by having TCG on-site property managers switch to KW. Property managers are the on-site representatives at these condominium buildings who develop positive relationships with the governing boards of the condominium, a critical consideration when these governing boards vote to extend or terminate a management contract.
Kravit testified that she never initiated contact with any of her former TCG colleagues or subordinates. However, the documents obtained from Kravit and KW's computers show that Kravit actively participated in forwarding resumes of TCG employees to the KW principals for purposes of KW hiring away these TCG employees. See ¶¶ 36-38, infra. The Court concludes that Plaintiff has shown a substantial likelihood of success that Kravit breached her contract with TCG by indirectly soliciting TCG employees.
3. Tortious Interference by KW
KW argues that as a non-party to Kravit's contract, it cannot be held liable without Plaintiff proving the elements of a tortious interference claim. "One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract (citing to Restatement). . . ." Gossard v. Adia Services, Inc., 723 So.2d 182, 184 (Fla. 1998), (citing Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812, 814 (Fla. 1994)); International Sales Service, Inc. v. Austral Insulated Products, Inc., 262 F.3d 1152, 1154 (11th Cir. 2001).
Turning first to the claim in Count IV that KW interfered with the non-compete contract between Kravit and TCG, it is clear that KW hired Kravit with knowledge that she was a party to a non-compete, non-solicitation contract with TCG. KW engaged in a month-long contract negotiation with Kravit while she was still employed at TCG, with full knowledge of her agreement with TCG. As described above, this contract had a legitimate business interest.
The KW Defendants argue that the restriction on Kravit's employment is overbroad, overlong, or otherwise not reasonably necessary to protect the established interests of TCG. The contract as written would ban Defendant Kravit from working in property management in Florida for two years. While the Court will reduce these restrictions, the KW Defendants have not shown that some ban on their employment of Kravit is unreasonable. TCG has already shown how enforcement of its contract is necessary to protect its interests in TCG's compilations of information that Kravit took from TCG and brought to KW, benefitting KW at the expense of TCG.
Kravit and the KW Defendants took a chance that the TCG contract would not be enforced. The Court concludes that Plaintiff has shown a substantial likelihood of success on the merits of its claim that KW Property Management, Inc. tortiously interfered with the Kravit-TCG contract for Kravit not to compete with TCG.
With respect to solicitation of employees, KW argues that it never induced any TCG employees to leave TCG and work for KW. However, TCG need only prove that KW induced Kravit to breach her contract with TCG. On this issue the evidence shows that KW did induce Kravit to forward resumes of TCG employees to KW's principals (Mssrs. Kaplan, White and Cox), which computer metadata evidence shows Kravit obtained while still working at TCG, a fact that had to have been known by the KW principals. These TCG employees were clearly brought to the attention of KW's principals for purposes of hiring those individuals to work for KW to further KW's business interests at the expense of TCG. See ¶¶ 36-38, infra. There is also evidence that certain former TCG employees now work for KW. Id. The Court therefore concludes on the record before it that TCG has shown by a substantial likelihood of success on the merits that KW did induce such a breach by Kravit of the nonsolicitation provisions in the agreement.
The Court also concludes that of the KW entities listed as Defendants, there is no credible evidence linking Defendants KW Holding One, LLC and The Grand Preserve at Naples, LLC to Marcy Kravit's actions or the property management business of KW Property Management, Inc. Therefore, these Defendants are dismissed from this action. Any further reference to "KW" refers only to KW Property Management, Inc.
4. Other Contract Defenses
Defendant Kravit makes additional arguments that the contract she signed at the beginning of her employment was no longer valid at the time she left in December of 2008. First, she asserts that because TCG breached her agreement or had unclean hands due to Kravit's negative treatment by TCG in the "mezuzah incident" in March of 2007, TCG can no longer enforce the agreement. The Court disagrees.The equitable doctrine of "unclean hands" provides that: "one who has acted in bad faith, resorted to trickery and deception, or been guilty of fraud, injustice or unfairness will appeal in vain to a court of conscience, even though in his wrongdoing he may have kept himself strictly within the law." Matter of Garfinkle, 672 F.2d 1340, 1346, n. 7 (11th Cir. 1982), (quoting Peninsula Land Co. v. Howard, 149 Fla. 772, 6 So.2d 384, 389 (1941)). Although TCG may have been unfair in not allowing Kravit to publicly clear her name in that she personally opposed the condominium board's decision to direct a resident to remove a mezuzah, this incident, occurring over 18 months prior to the events which gave rise to this lawsuit, did not rise to the level of unclean hands so as to deny the present claim by TCG for breach of contract.
Another defense Kravit asserts is that the contract terminated in March of 2007 due to her resignation at that time. However, the evidence is clear that Kravit was promoted by TCG before the termination date that Kravit herself set in her resignation letter. Thus, her employment continued under the initial agreement.
A third defense invoked by Kravit is that since TCG never conducted an exit interview with her in December of 2008, pursuant to TCG's employment policies, TCG waived any claim to those materials, and, Kravit had no notice what "confidential" materials she was supposed to return. Although the TCG's employment policies do state that exit interviews shall occur, the failure to conduct an exit interview does not trump the specific language in the parties' contract that Kravit had an affirmative obligation to return "any and all information, materials, or equipment in whatever form, that constitutes, contains, or relates in any way to Confidential Information. . . ." Plaintiff's Exhibit 132, ¶ 1c. Therefore, none of the defenses posed by Defendant Kravit forestall the provision of a remedy for breach of contract.
As a corollary argument, Kravit asserts that because TCG never requested return of materials when she resigned in March of 2007, she had no reason to believe she had a duty to return them in December, 2008. As noted above, Kravit never left TCG's employment in March of 2007.
F. Remaining Preliminary Injunction Elements
Having found that Plaintiff has a substantial likelihood of success on the merits of its breach of contract against Defendant Kravit, the Court turns to the other elements required for issuance of a preliminary injunction.
1. Irreparable Harm
For violations of a covenant not to compete or solicit in compliance with Florida Statutes Section 542.335, upon a showing of legitimate business interest as in this case, irreparable harm is presumed, though Defendants can rebut this presumption. As discussed above, Plaintiff has shown that the compilation of otherwise publicly available information can be protected as confidential information and the solicitation of TCG employees harms client goodwill. Defendants argue that Plaintiff has not shown the threat of further harm. However, the retention of the information taken by Kravit and given to KW does provide a threat of future harm to TCG, albeit KW has agreed to not use any of the TCG information and not solicit any employees. The Court concludes that Defendants have not rebutted the presumption of irreparable harm.
2. Balance of the Harm to the Parties
Defendants argue that TCG cannot (as of yet) quantify any measurable damages due to loss of any clients, yet they seek to ban Marcy Kravit from working in Florida in her chosen field for a period of two years. While the Court acknowledges that Marcy Kravit would be harmed by such a remedy, it is Defendant Kravit who breached her contract with TCG and provided TCG's competitor, KW, with large amounts of useful information for KW to systematically take over TCG's clients. This information includes pricing of product (burden rates), employee retention (TCG employee salary information), and client contact lists (board president information). The nature of the property management business is such that clients typically cannot immediately change management companies but must wait for the contract to come up for renewal. The Court does not find that TCG must wait until their client contracts are not renewed before seeking injunctive relief against a former employee and her new employer for clear breaches of a contract not to compete, solicit clients or employees, or take confidential information. Thus, some injunctive relief is necessary to enforce the contracts.
3. Public Interest
Defendants assert that restraining competition between KW and TCG will injure the public at large. While this statement is true, the public interest also requires adherence to contracts and fair competition. In this case, the employment of Kravit by KW, a direct competitor of TCG, along with the many TCG work-product documents brought by Kravit to KW and used by KW to improve their services, all done in violation of the Kravit-TCG contract, requires injunctive relief to remedy these breaches that does outweigh the public interest in business competition.
G. Injunctive Relief
Defendants assert that the injunctive relief sought by Plaintiff is overbroad, as TCG seeks enforcement of a restriction in every county in Florida where it operates, which encompasses most of the state, even though Marcy Kravit only worked in Broward and Miami-Dade counties. In addition, KW asserts that there is no evidence of KW's involvement of Kravit's downloading of TCG information warranting a remedy that the KW computers be "wiped clean." The Court agrees.
As to injunctive relief against Defendant Marcy Kravit, Defendant Kravit shall be enjoined from competing with TCG by engaging in property management and/or maintenance services in Miami-Dade, Broward or Palm Beach counties from now through December 11, 2010. The Court concludes that limiting the restriction to the three counties in South Florida is reasonable, while enforcing a state-wide ban is not reasonable. Nearly all of the location specific information that Kravit took from TCG relates to properties in these three counties. Though the more general information (hurricane preparedness, green initiatives and on-site checklists) would be applicable state-wide, the Court finds that enforcement within the three South Florida counties is a stern, but appropriate remedy at this preliminary injunction stage. Defendant Kravit worked in both Miami-Dade and Broward counties for TCG, and had in her possession a list of most of TCG's client contacts for Palm Beach County.
As to the temporal scope of the injunction, to the extent Plaintiff seeks the two year period to begin now, as opposed to back when Kravit left the employ of Plaintiff on December 11, 2008, the Court concludes that restarting the two year period would be overbroad.
The remaining portions of the preliminary injunctive relief ordered by the Court comport with the relief agreed to by the KW Defendants in their response to Plaintiff's Motion for Preliminary Injunction. See pp. 2-4 of Defendant's Response to Plaintiff's Motion for Preliminary Injunction [DE 58]. Thus, Defendants KW Property Management, Inc. and Marcy Kravit, individually and collectively, together with their respective officers, agents, servants, employees, attorneys, accountants, and all persons acting in concert with them or under their inducement, encouragement or persuasion, are enjoined and restrained from performing any of the following acts, directly or indirectly, on their own behalf or on behalf of any third party:
a. retaining any confidential, proprietary or valuable information belonging to Plaintiff that is stored or maintained in tangible form (including computer files, CDs, electronic files on removal media, or in any other electronic form, and hard copy documents) and instead returning all such documents, comput- er files and other data to Plaintiff; b. using or causing to be used, or disclos- ing in any manner, any electronically- stored information obtained from the Plaintiff, including without limitation client and prospective client informa- tion, financial information, personal identifying information, employee in- formation, and information relating to or regarding Plaintiff's business; c. modifying, deleting, altering, or de- stroying any of Plaintiff's files, doc- uments or data obtained or removed from Plaintiff, or reflecting information accessed at or obtained from Plaintiff, including any confidential or valuable information, and including documents or other evidence reflecting the remov- al, use or disclosure of any confidential information, including but not limited to printed documents and documents or data in any electronic format, how- ever, stored, including any type of computer, disk, storage device or otherwise, or destroying evidence of the transfer, copying, use or disclosure of such information; d. for a period of two years, contacting any of TCG's clients for the purpose of diverting, soliciting, negotiating or contracting for property management or maintenance services (TCG to file a sealed list of such clients as they exist- ed on December 11, 2008); e. for a period of two years, soliciting or attempting to solicit or induce any TCG employee to leave TCG's employ- ment; f. for a period of two years, diverting, soliciting, or taking away any client of TCG for the purpose of selling proper- ty management or maintenance ser- vices