Opinion
Case No.: SACV 22-00184-CJC (JDEx)
2022-04-27
SITRUS TECHNOLOGY CORPORATION, Plaintiff, v. Michael Quynh LE and Does 1–50, Defendant.
Richard Liu, Sijiu Ren, Innovative Legal Services, P.C., Los Angeles, CA, for Plaintiff. Bruce Aric Fields, Fei Pang, Law Offices of Fei Pang, Arcadia, CA, for Defendant Michael Quynh Le.
Richard Liu, Sijiu Ren, Innovative Legal Services, P.C., Los Angeles, CA, for Plaintiff.
Bruce Aric Fields, Fei Pang, Law Offices of Fei Pang, Arcadia, CA, for Defendant Michael Quynh Le.
ORDER DENYING PRELIMINARY INJUNCTION WITHOUT PREJUDICE
CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE
I. INTRODUCTION & BACKGROUND
On February 4, 2022, Plaintiff Sitrus Technology Corporation filed this action alleging that Defendants Michael Quynh Le and unnamed does violated the Defend Trade Secrets Act, Computer Fraud and Abuse Act, California's Uniform Trade Secrets Act, and California's Comprehensive Computer Data Access and Fraud Act. (Dkt. 1 [Complaint].) Plaintiff also brought claims for breach of contract and conversion. (Id. ) Plaintiff simultaneously filed an ex parte application for a temporary restraining order ("TRO") against Defendant Le and for an order to show cause ("OSC") regarding a preliminary injunction. (Dkt. 7 [Plaintiff's Ex Parte Application for a Temporary Restraining Order and Order to Show Cause Regarding Preliminary Injunction].)
Plaintiff, a fabless design company, explained that Defendant—Plaintiff's former Chief Technology Officer and corporate secretary—had misappropriated Plaintiff's devices and trade secrets for Defendant's personal gain after he voluntarily resigned from the company. (Dkt. 7-1 at 2, 6; Dkt. 7-2 [Declaration of Dr. Hui Wang, hereinafter "Wang Decl."] ¶ 2.) The devices included 24 laptops, 15 servers, and a "number of proprietary and highly valuable protype chips and circuit boards." (Id. at 2; Wang Decl.¶ 7.) Plaintiff's trade secrets on these devices include research and development data, product design database, schematics, simulation results, design layout, software, channel models, system architecture for applications, customer data and feedback, product development plans, and source code. (Id. at 3; Wang Decl. ¶¶ 18–20.) Despite Plaintiff's requests to Defendant that he return its devices, Defendant refused. (Dkt. 1 [Complaint] ¶¶ 33–50.)
Plaintiff also explained that Defendant breached an Employee Proprietary Information and Inventions Agreement he signed in connection with his employment which required him to return Plaintiff's property upon his resignation. (Id. at 6–7; Wang Decl. ¶ 6; Dkt. 1-1, Exhibit 2 [Employee Proprietary Information and Inventions Agreement, hereinafter "Proprietary Agreement"] §§ 6,7.) The Proprietary Agreement specified that Plaintiff could seek an injunction to require the return of its devices should Defendant fail to do so. (Id. at 7; Proprietary Agreement §§ 6,7.)
Plaintiff further alleged that Defendant was likely misappropriating Plaintiff's trade secrets to start a competing business. Plaintiff stated that Defendant was using Plaintiff's office space in Irvine, California, with Plaintiff's former employees, immediately after Plaintiff closed down its Irvine branch. (Id. at 8.)
Based on these facts and others, the Court granted Plaintiff's ex parte application for a temporary restraining order and issued an order to show cause as to why a preliminary injunction should not issue. (Dkt. 30 [TRO]; Dkt. 31 [Order Granting Plaintiff's Ex Parte Application for a TRO and OSC, hereinafter "TRO Order"].) The TRO restrained and enjoined Defendant Le from:
1. Refusing to return Plaintiff's devices and property currently in Defendant's possession, including but not limited to Company computers, laptops, servers, cameras, furniture, equipment, records, passwords and logins to all Plaintiff's devices and equipment, and other Company assets;
2. Accessing, transferring, moving, destroying, or otherwise altering highly sensitive Company confidential and proprietary information, Company trade secrets, and other Company intangible assets;
3. Accessing, transferring, moving, copying, altering, editing, destroying, or otherwise disposing paper or electronic communications or business records whether in hard copy or stored on Company's devices, on the cloud, or elsewhere; and
4. Denying or interfering with the access of Plaintiff and its agents, employees, counsel, or any other authorized persons to Plaintiff's office located at 400 Spectrum Center Dr., Suite 1240, Irvine, California 92618.
(TRO at 2–3.) The Court instructed Defendant to file a response or opposition to the OSC by March 21, 2022. (Id. at 1.) Plaintiff was instructed to file a reply by March 23, 2022. (Id. ) A hearing was set for March 28, 2022. (Id. )
On March 21, 2022, Defendant requested that the Court continue his deadline to file a response to the OSC. (Dkt. 34.) Defendant represented that he had "completely complied with the Court's Order and turned over all computers and servers containing data and technology pursuant to the court order at [Plaintiff's] former office located in Irvine[,] California." (Id. at 2.) Defendant also informed the Court that he and Plaintiff were working on a stipulation to continue the hearing on the preliminary injunction for 30 days because Plaintiff's counsel hired a forensic analyst team to verify the data on the server and needed more time to complete its review. (Id. ) Since Plaintiff did not object to the request and there was good cause to do so, the Court granted Defendant a two-day extension. (Dkt. 36.)
On March 23, 2022, Defendant filed his response to the OSC and again requested a 30-day extension so that Plaintiff could complete its forensic analysis of the devices Defendant turned over. (Dkt. 37.) Again, Plaintiff did not object and since the TRO enjoined Defendant, rather than Plaintiff, the Court granted a 30-day extension and continued the hearing to April 29, 2022. (Dkt. 38.) The Court provided Plaintiff until April 22, 2022 to file a reply in support of the grant of a preliminary injunction. (Id. )
On April 22, 2022, Plaintiff filed its reply, arguing that Defendant has not complied with the TRO and as such a preliminary injunction is warranted under the Winter factors. (Dkt. 41 [Plaintiff's Reply ISO Preliminary Injunction, hereinafter "Reply"].) Plaintiff represents that its forensics evidence shows that Defendant intentionally deleted and misappropriated Plaintiff's proprietary information and Defendant has attempted to cover his tracks by removing log files (files that show actions performed on an electronic device) from Plaintiff's devices. (Id. at 1.) Plaintiff also insists that Defendant has perjured himself and that Defendant is still withholding Defendant's trade secrets and proprietary information. (Id. ) Defendant opposes these contentions. (Dkt. 42-2 [Declaration of Defendant Michael Quynh Le, hereinafter "Le Decl."].) For the following reasons, the Court DENIES Plaintiff's request for a preliminary injunction WITHOUT PREJUDICE and VACATES the TRO.
Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See Fed. R. Civ. P. 78 ; Local Rule 7-15. Accordingly, the hearing set for April 29, 2022 at 1:30 p.m. is hereby vacated and off calendar.
II. LEGAL STANDARD
A preliminary injunction is an extraordinary and drastic remedy that may only be awarded upon a clear showing that the moving party is entitled to relief. See Mazurek v. Armstrong , 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997). The purpose of a preliminary injunction is to "preserve the status quo and the rights of the parties until a final judgment on the merits can be rendered." Vera v. Pfiffer , 2020 WL 5027991, at *1 (C.D. Cal. July 23, 2020). To obtain a preliminary injunction, the plaintiff must establish (1) that it is likely to succeed on the merits, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest. Winter v. Nat'l Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) ; see Stuhlbarg Int'l Sales Co. v. John D. Brush & Co. , 240 F.3d 832, 839 n.7 (9th Cir. 2001) (explaining that the standard for issuing a temporary restraining order is "substantially identical" to that for issuing a preliminary injunction). The Ninth Circuit balances these factors using a "sliding scale" approach, where "a stronger showing of one element may offset a weaker showing of another." All. for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1131 (9th Cir. 2011). However, the plaintiff must "make a showing on all four prongs." Id. at 1135.
A plaintiff's burden is "doubly demanding" if seeking a mandatory injunction. Garcia v. Google, Inc. , 786 F.3d 733, 740 (9th Cir. 2015). Such relief is "subject to heightened scrutiny and should not be issued unless the facts and law clearly favor the moving party. " Dahl v. HEM Pharmaceuticals Corp. , 7 F.3d 1399, 1403 (9th Cir. 1993) (emphasis added).
III. DISCUSSION
A. Plaintiff Has Not Shown A Likelihood Of Irreparable Harm
To obtain a preliminary injunction, a plaintiff must show that irreparable harm is likely, rather than just possible, in the absence of preliminary relief. Winter , 555 U.S. at 20, 129 S.Ct. 365. Though courts may "presume[ ] that [a] Plaintiff will suffer irreparable harm if its proprietary information is misappropriated[,]" W. Directories, Inc. v. Golden Guide Directories, Inc. , 2009 WL 1625945, at *6 (N.D. Cal. June 8, 2009), "a plaintiff must demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief[,]" Caribbean Marine Servs. Co., Inc. v. Baldrige , 844 F.2d 668, 674 (9th Cir. 1988) (emphasis added).
Plaintiff has failed to show that irreparable harm is likely rather than merely possible based upon Defendant's post-TRO conduct. Plaintiff represents that its forensic findings show that Defendant has intentionally and purposefully deleted, misappropriated, and possibly transferred Plaintiff's trade secrets and is likely still withholding Plaintiff's sensitive proprietary information. (Reply at 4.) To support this, Plaintiff explained that on January 2, 2022, January 12, 2022, and January 28, 2022, Plaintiff instructed Defendant not to alter or delete the data on Plaintiff's devices. (Id. ; Dkt. 41-1 [Declaration of Richard Q. Liu, hereinafter "Liu Decl."] ¶ 7.) Despite these instructions, Plaintiff maintains that its latest forensic findings show that ten (10) of the fifteen (15) laptops were "mostly reformatted in late January 2022." (Id. ) When Plaintiff's forensic analysts examined the servers, they found that after February 2022 "all the log files are missing the latest activities, indicating Defendant actively deleted his log files to cover his actions to [Plaintiff] in the days prior to [Plaintiff's] retrieval." (Id. at 5; Liu Decl. ¶ 8.) Without the log files, Plaintiff represents that its forensic analysts will have difficulty finding out (at this time) whether Defendant had transferred Plaintiff's proprietary information to other devices or storage spaces. (Id. at 6.) This leads Plaintiff to conclude that "[t]he only plausible explanation for such missing log files is Defendant ... surreptitiously deleted them to cover his tracks." (Id. at 6–7.)
But Plaintiff is seeking extraordinary relief based upon speculation about improper conduct Defendant might possibly have done. As Plaintiff concedes, its final forensics report is incomplete. (Id. at 4; "Liu Decl." ¶ 4 [Plaintiff's forensic analyst team "has conducted, and is still conducting , forensic analysis of the Company devices recovered."] [emphasis added].) Though its forensics team is currently working on recovering deleted information from the devices, (id. ; Liu Decl. ¶ 9), until those files are recovered neither Plaintiff nor the Court can determine whether Defendant did transfer or copy files onto other devices he is still withholding nor what trade secret information is in those files, if any. Indeed, Plaintiff practically concedes that its forensics analyst is merely guessing at what might account for missing files. (See Liu Decl. ¶ 8 ["The forensic analyst suggest that the log files might be purposedly cleared."] [emphasis added].)
Defendant contests Plaintiff's representation of the facts and bolsters this Court's finding that Plaintiff's alleged risk of injury is speculative. Defendant, who holds a Ph.D. in electrical engineering from the University of California, Davis, provides that on or around December 29, 2021, Dr. Hui Wang, Plaintiff's Chief Executive Officer, and Defendant reached a "settlement deal." (Le Decl. ¶ 6(a).) As part of that arrangement, Defendant was permitted to use and keep all office equipment, including Plaintiff's servers, with the only constraint being that he delete the data on the devices. (Id. ) On or around January 2, 2022, Dr. Wang sent Defendant an email asking that he keep the devices as is, but Defendant had already begun to modify and delete the data as Plaintiff requested. (Id. ¶ 6(b).) Defendant represents at that point it was difficult, if not impossible, to undo the operations he had already begun. (Id. ) Defendant also provides that most of the laptops at issue "had already been wiped clean prior to January 29th for return[,]" accounting for the "reformatted" status of the devices Plaintiff complains of in its Reply. (Id. ¶ 7.) Defendant also offers that he is not sure which specific "log files" Plaintiff is referencing, nor what server they would have been located. (Id. ¶ 8.) But he suggests that one possibility is that there are no log files after February 2022 because the server was shut down at that point, so it would make sense that the last log entries are from that date since log files are not stored when the server is not running. (Id. ) He also maintains that he was "not actively deleting, copying, or altering data up to and through that date." (Id. )
Without more evidence, the Court cannot make a finding at this time that Plaintiff is likely to suffer irreparable injury absent a preliminary injunction. The TRO in this case lasted for nearly two months, far longer than the typical period of 14 days. Fed. R. Civ. P. 65(b)(2) ; (see TRO [Dated March 1, 2022].) The extension was made at Defendant's request and for good cause shown, providing Plaintiff's forensic analysts team plenty of time to find some evidence that shows it is likely that Defendant has misappropriated its trade secret information. But restored laptops and "missing" log files that may have never existed in the first place is not enough to show a likelihood of irreparable injury or that injury is imminent. Caribbean Marine Servs. Co., Inc. v. Baldrige , 844 F.2d 668, 674 (9th Cir. 1988) (emphasis added). Instead, the evidence shows that Defendant has complied with the TRO in full, turning over the devices when ordered to do so.
B. Plaintiff Has Not Met the Exacting Standard Required for A Mandatory Injunction
There are additional considerations preventing the issuance of a preliminary injunction. Plaintiff seeks a mandatory, rather than a prohibitory injunction. Specifically, Plaintiff requests that the Court enjoin Defendant from "[r]efusing to return Plaintiff's devices and property currently in Defendant's possession, including but not limited to Company computers, laptops, servers, cameras, furniture, equipment, records, passwords and logins to all Plaintiff's devices and equipment, and other Company assets[.]" Though phrased awkwardly, this would essentially require Defendant to affirmatively turnover trade secret information in his possession. As the Ninth Circuit has explained, and reiterated, mandatory injunctions are those that go "beyond ‘maintaining the status quo’ " and are thus "subject to a higher standard than prohibitory injunctions," permissible when " ‘extreme or very serious damage will result’ that is not ‘capable of compensation in damages,’ and the merits of the case are not ‘doubtful.’ " Hernandez v. Sessions , 872 F.3d 976, 998–99 (9th Cir. 2017) (quoting Marlyn Nutraceuticals, Inc.v. Mucos Pharma GmbH & Co. , 571 F.3d 873, 879 (9th Cir. 2009) (quotation marks omitted)). But as described above, Plaintiff has not shown that "extreme or very serious damage" will result absent a preliminary injunction, nor that the current "status quo" between the parties " ‘is exactly what will inflict the irreparable injury upon [Plaintiff].’ " Id. at 999 (quoting Friends for All Children, Inc. v. Lockheed Aircraft Corp. , 746 F.2d 816, 830 n.21 (D.C. Cir. 1984) ). At this point, Plaintiff's preliminary injunction would require Defendant to turnover trade secret information that he may or may not have, on devices that may or may not exist, which may or may not be in Defendant's possession. This is hardly the type of situation the mandatory injunction was designed, or is able, to properly remedy.
C. Plaintiff May Renew Its Request for a Preliminary Injunction
That is not to say that Plaintiff may not at some point, perhaps upon completion of its forensic analysis, discover information that shows a likelihood of irreparable harm that warrants a mandatory injunction. Indeed, the Court has already found that Plaintiff has made a sufficient showing on the other Winter factors and has no issue with Plaintiff renewing its request if it is able to provide a sufficient showing of irreparable harm to the Court. (See TRO Order.) Until that time, the Court cannot grant a preliminary injunction.
IV. CONCLUSION
For the foregoing reasons, the Court DENIES a preliminary injunction WITHOUT PREJUDICE . The Court VACATES the TRO issued against Defendant Le.