Opinion
05 Civ. 1286 (CSH).
February 8, 2005
MEMORANDUM OPINION
This action was removed by defendants from New York State Supreme Court to this Court on the basis of diversity of citizenship, which is sufficiently alleged in the pleadings and confirmed by the representations of counsel for the parties during the hearing described infra.
I. PROCEDURAL HISTORY
Plaintiff Wenner Media LLC ("Wenner"), which publishes a magazine, seeks a preliminary injunction which principally would enjoin its former employee, the individual defendant Nicola McCarthy Evans (referred to as "McCarthy" in the pleadings and herein), from accepting employment with the corporate defendant Northern Shell North America Limited ("NS America"), which intends to publish a competing magazine, during the balance of McCarthy's two-year employment contract as executive editor of Wenner's magazine.Wenner moved for a temporary restraining order ("TRO") pursuant to Fed.R.Civ.P., Rule 65(b). Counsel for Wenner and counsel for the defendants had been in contact with each other and exchanged correspondence before Wenner made that motion. Wenner's counsel gave counsel for defendants notice of their intention to apply for a TRO.
The same law firm represents the three corporate defendants and the individual defendant.
Counsel for the parties appeared before this Court for a hearing on February 3, 2005. They produced affidavits of witnesses with knowledge of the events and documentary exhibits, from which counsel for Wenner argued that a TRO should issue and counsel for defendants argued that it should not.
Having heard the submissions of counsel and examined the relevant documents, the Court granted Wenner's motion and signed a TRO which directed defendant McCarthy "to comply with paragraphs 6 and 7 of the written employment agreement she entered into with Wenner Media, dated April 1, 2004"; enjoined her from "working for a competing magazine in the United States" until April 25, 2006; enjoined the corporate defendants (collectively "Northern Shell") from employing McCarthy "at a competing publication" until that date; enjoined the defendants from "directly or indirectly soliciting any employees" of Wenner to leave Wenner until that date; enjoined defendants from using or disclosing Wenner's "confidential, proprietary and trade secret information"; and directed defendants "to immediately return" any Wenner property.
That is the end date of McCarthy's two-year employment contract with Wenner.
This opinion sets forth the Court's preliminary findings of fact and its conclusions of law which constitute the grounds of these actions.
II. FINDINGS OF FACT
On the basis of the affidavits, exhibits, and oral submissions of counsel at the February 3, 2005 hearing, the Court makes the following preliminary findings of fact.Wenner publishes in the United States a magazine called Us Weekly. Us Weekly is the sort of magazine known to the publishing trade as a "celebrity magazine." As the phrase would suggest, a celebrity magazine is devoted to articles and photographs about individuals who have attained the status of a celebrity, most often in the worlds of film, television, and other performing arts. A recent example may be found in the coverage of the movie celebrities Brad Pitt and Jennifer Aniston.
By written contract dated as of March 26, 2004, Ex. A to Affidavit of Pamela Fox ("Fox Affidavit"), Wenner and McCarthy agreed that Wenner would employ McCarthy as the executive editor of the magazine Us Weekly for a two-year term beginning on April 25, 2004 and expiring on April 25, 2006. Para. 3. The contract referred to McCarthy as "the Employee." Para. 6 provides that
in the event that the Employee resigns or otherwise terminates her own employment other than for Good Reason prior to the expiration of the [two-year] Term, for an additional period equal to (i) the remainder of the Term or (ii) one (1) year, whichever is later, the Employee shall not, anywhere in the United States, directly or indirectly, provide any services to, own, manage or participate in, any business, entity or individual that publishes or distributes any competing publication of the [ Us Weekly] Magazine. For purposes hereof, a "competing publication" shall be defined as any publication (whether in print, electronic or online format) whose primary purpose is covering celebrities.
Para 7(a) contains broad definitions of "Confidential Information," "Trade Secrets," and "Company Documents." Para. 7(b) provides that "[at] all times, both during employment by the Company [Wenner] and after its termination, the Employee agrees to keep in confidence and trust all information referenced" in para. 7(a), and "shall not use or disclose any such information to any party without the written consent of the Company," except as may be necessary in performing the Company's business. These quoted provisions in para. 7 of the employment contract reflect the fact that McCarthy's position as executive editor was, as the job title would suggest, from Wenner's point of view one of trust and confidence.
On January 26, 2005, well before the end of the first year of her two-year term of employment by Wenner, McCarthy sent an e-mail to the staff of Us Weekly magazine. The first paragraph read:
You will know by now (especially the pod!) that I have today resigned my position as Executive Editor of Us Weekly. I have been appointed Ed-in-Chief of the US version of OK! Magazine, which will launch late this year.
Ex. C to Fox Affidavit. McCarthy concluded her e-mail with expressions of gratitude and affection, which one may safely infer her former colleagues at Us Weekly did not reciprocate.
OK! magazine, to which McCarthy's e-mail referred, will be published in the United States by defendant NS America. While at the hearing counsel for defendants initially contested the issue, it is readily apparent that OK! magazine will be a "competing publication" to Us Weekly, as that phrase is defined in para. 6. That is because the record shows that OK!'s "primary focus" will be "covering celebrities," para. 6's definition of a "competing publication." That finding is based in part upon an exchange of e-mails in December 2004 between McCarthy and Paul Ashford, an officer of the corporate defendants, resident in London. David S. Ha, the information technology manager at Wenner, had succeeded in retrieving these e-mails from the Wenner system despite McCarthy's apparent efforts to delete them before leaving the Wenner offices. An e-mail sent on December 21, 2004 by Ashford to McCarthy attached a draft employment contract between NS America and McCarthy, pursuant to which McCarthy would serve "as the Editor of OK! Magazine in the United States of America." An appendix to the contract describing the "services of the executive" (McCarthy) concluded by stating:
Defendants' counsel stated in the notice of removal of the action from the state court that all three corporate defendants are organized under the laws of the United Kingdom.
The parties acknowledge that they are working together to develop the North American edition of OK! Magazine into the best selling celebrity magazine in North America.
Ex. A to affidavit of David S. Ha (emphasis added).
The reader will recall that in text supra, I referred to stories about Brad Pitt and Jennifer Aniston as examples of what "celebrity magazines" publish. As it happens, the website for OK magazine's U.K. publisher, under the caption "OK! First for Celebrity News," summarizes the last six issues of the magazine. Two of them, the issues dated January 18, 2005 and February 1, 2005, headline stories about Pitt and Aniston. See www.ok-magazine.com, visited February 7, 2005.
The evidence submitted at the hearing on plaintiff's motion for a TRO compels the preliminary findings of fact, which I make, that (1) McCarthy breached her contract of employment with Wenner as executive editor of Us Weekly magazine by leaving the company before the agreed-upon two-year term; (2) she breached the agreement in para. 6 of the employment that prior to April 25, 2006 she would not accept employment with the publisher of a "competing publication"; and (3) during her employment with Wenner she became privy to and cognizant of the confidential information and material referred to in para. 7(a) of her contract with Wenner.
The evidence also supports the preliminary finding of fact, which I also make, that McCarthy acted in bad faith vis-a-vis Wenner when, while still working at Wenner's offices, she exchanged e-mails with Ashford looking toward an employment contract with NS America as editor of a competing publication, and then attempted to delete those e-mails so that Wenner would never learn of them.
III. CONCLUSIONS OF LAW
"To obtain a preliminary injunction the moving party must show, first, irreparable injury, and, second, either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits and a balance of hardships decidedly tipped in the movant's favor." Green Party of New York State v. New York State Bd. of Elections, 389 F.3d 411, 418 (2d Cir. 2004) (citation omitted). "The standard for granting a temporary restraining order and a preliminary injunction pursuant to Rule 65 of the Federal Rules of Procedure are identical." Spencer Trask Software and Info. Servs., LLC v. RPost Int'l Ltd., 190 F.Supp.2d 577, 580 (S.D.N.Y. 2002).
To satisfy the threshold requirement of irreparable harm or injury, a movant need not demonstrate its certainty. See, e.g., Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990) ("a showing of probable irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction.") (citation and internal quotation marks omitted) (emphasis added). "Irreparable harm must be shown by the moving party to be imminent, not remote or speculative, and the alleged injury must be one incapable of being fully remedied by monetary damages." Reuters, 903 F.2d at 907. The movant is required to establish not a mere possibility of irreparable harm, but that it is " likely to suffer irreparable harm if equitable relief is denied." JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79 (2d Cir. 1990) (emphasis in original). "Likelihood sets, of course, a higher standard than `possibility.'" Id.
Applying these familiar standards to the proof adduced at the hearing on plaintiff's motion for preliminary equitable relief, I conclude that plaintiff established its entitlement to the order the Court issued on February 3, 2005.
As for irreparable harm, there is no question that during her employment at Wenner, McCarthy became privy to information and celebrity magazine publishing methodologies which were characterized as confidential trade secrets in para. 7 of the employment contract to which McCarthy agreed. When one views that fact together with the defendants' stated intention of hiring McCarthy to "launch" and edit a directly competing publication in the United States, I conclude that Wenner has made out a prima facie case of wrongful misappropriation and imminent exploitation of confidential information by McCarthy. That circumstance is pertinent to an analysis of irreparable harm, since "[i]t is clear that irreparable harm is presumed where a trade secret has been misappropriated." Lumex, Inc. v. Highsmith, 919 F.Supp. 624, 628 (E.D.N.Y. 1996). In Lumex the district court cited and quoted the Second Circuit's decision in FMC Crp. v. Taiwan Tainan Giant Industrial Co., Ltd., 730 F.2d 61, 63 (2d Cir. 1984) ("[I]t is clear that the loss of trade secrets cannot be measured in money damages. . . . A trade secret once lost is, of course, lost forever.") (citations omitted).
A conscious awareness of wrongdoing on McCarthy's part may reasonably be inferred from her failed effort to delete from the Wenner communications systems her e-mailed exchanges with Paul Ashford about her employment by the Northern and Shell companies.
The presumption of irreparable harm is just in the circumstances of this case, at least as revealed by the present record, because, as the district court recognized in Lumex, when an individual in possession of a former employer's confidential information accepts employment with a competitor
there is a high risk that in the course of working on Life Circuit, or on other Life Fitness business, he will, perhaps inadvertently, disclose Cybex trade secrets, or Lumex pricing and profit structure or even the Cybex future prototypes. Highsmith [the employee] was privy to the top secret Cybex product, business and financial information. He cannot eradicate these trade secrets and this confidential information from his mind.919 F.Supp. at 631. See also Pepsico, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) ("a plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant's new employment will inevitably lead him to rely on the plaintiff's trade secrets.") (citing Illinois cases). So I conclude that the plaintiff at bar has, on the present record, made a sufficient showing of likely irreparable harm if preliminary equitable relief was not granted.
The case for Wenner is that the Northern Shell companies deliberately inserted McCarthy as a Trojan horse within Wenner's commercial walls, with the purpose of installing her as editor of the competing American version of OK magazine after McCarthy had acquired confidential information about the publication and marketing of Us Weekly. If that were to be proved, then McCarthy's disclosures of Wenner's trade secrets and confidential information to NS America could not be charitably characterized as "inadvertent" or unconsciously "inevitable." Rather, such disclosures would represent the culmination of a successful act of commercial piracy. However, I need not assess Wenner's prospects of proving that theory of the case in determining whether it is entitled to preliminary relief.
As for the merits, I am not prepared at present to conclude that plaintiff has satisfied the first prong: a showing of likelihood of success, at least in respect of its effort to enjoin McCarthy from accepting employment with NS America. That is so, notwithstanding the observations I have just made with respect to irreparable harm. "It is well established that restrictive covenants contained in employment contracts that tend to prevent an employee from pursuing a similar vocation after termination of employment are disfavored in the law." Lumex, 919 F.Supp. at 628 (citing and quoting New York cases). However, certain circumstances may exist which overcome that disfavored status and justify enforcement of the covenant. At the February 3 hearing counsel for the parties debated at length whether or not such circumstances exist in the case at bar. A resolution of the issue must await a more complete evidentiary record and the briefs of counsel.
But I do conclude without difficulty that by the end of the February 3 hearing, plaintiff had demonstrated sufficiently serious questions going to the merits and a balance of hardships decidedly tipped in plaintiff's favor, thereby satisfying the second prong. On that last point, counsel for defendants expressed the view that the corporate defendants were likely to continue McCarthy on salary while the motion for a preliminary injunction goes forward, thereby avoiding any economic hardship to her. As for the corporate parties, plaintiff on the one hand and the three Northern Shell companies on the other, on the present record the likelihood of hardship to plaintiff if McCarthy becomes employed by NS America is of a greater degree of severity than any hardship discernible to the corporate defendants if McCarthy's employment by NS America is delayed pending trial on the merits.
IV. CONCLUSION
For the foregoing reasons, the Court signed its injunctive order on February 3, 2005.Lest any party be unduly lifted up or cast down by this opinion, I reiterate that the findings in Part II which provide the factual predicate for this opinion and the Court's earlier order are preliminary in nature, and subject to change if an enlarged evidentiary hearing demonstrates that the justice of the cause requires that they be changed.
It is SO ORDERED.