Opinion
Civil No. 03-5582 ADM/AJB
November 7, 2003
Lawrence M. Shapiro, Esq., Shapiro Professional Association, Minneapolis, MN for Plaintiff
Robert B. Patterson, Jr., Esq., Murphy Patterson P.A., Minnetonka, MN, for Defendants
MEMORANDUM OPINION AND ORDER
Plaintiff Esquire Search's ("Plaintiff") Motion for a Temporary Restraining Order ("TRO") [Docket No. 4], along with Defendants Elizabeth J. Dietrich's and eJD Search's ("Defendants") Emergency Motion to Stay Proceedings [Docket No. 10], and Defendants' Motion to Dismiss or in the Alternative to Transfer Venue [Docket No. 11], were expedited and heard before the undersigned United States District Court Judge on November 5, 2003. For the reasons explained below, the Court grants Plaintiffs Motion for a Temporary Restraining Order and denies Defendants' Motions.
Because of the expedited nature of the hearing, there has been no formal discovery and the Court is relying only on affidavit testimony in its analysis at this juncture. Defendants argue that dismissal is warranted based on lack of personal jurisdiction, forum non conveniens grounds, improper venue, and insufficient service of process, and move alternatively to transfer venue to Colorado.
Defendants contend first that this Court lacks personal jurisdiction over Defendants. However, as Defendants conceded at oral argument, Defendant Dietrich was hired by a Minnesota corporation and signed an employment contract that stated its terms were controlled by Minnesota law. Comeford Aff. Ex. A. As part of her employment, Dietrich frequently communicated with management in the Minnesota office, and attended work related functions in Minnesota on at least four or five occasions. Second Comeford Aff. ¶ 6. These facts demonstrate that Dietrich had significant business contacts with Minnesota, and that it would be neither unjust nor unfair for her to face litigation in a Minnesota court. See Worldwide Volkswagon Corp. v. Woodson 444 U.S. 286, 291-93, 297 (1980); Ml Shoe Co. v. Washington 326 U.S. 310, 316 (1945). Personal jurisdiction over Defendants is also appropriate based on the Minnesota long-arm statute. See Minn. Stat. § 543.19;Moog World Trade Corp. v. Bancomer. S.A., 90 F.3d 1382, 1384 (8th Cir. 1996) (holding that federal court must determine whether defendant is subject to state's long-arm statute).
Additionally, these facts show, at least in this early stage of litigation, that Minnesota is a proper venue and that dismissal is not justified under forum non conveniens. See 28 U.S.C. § 1391(a) (venue is proper where any defendant is subject to personal jurisdiction at the time the action is commenced); 28 U.S.C. § 1404(a) (court may transfer venue based on convenience of the parties and witnesses and the interests of justice); Piper Aircraft Co. v. Reyno, 454 U.S. 235, 262, 266-68 (1981);Kennecott Holdings Corp. v. Liberty Mut. Ins. Co., 561 N.W.2d 189, 191 (Minn.App. 1992). Finally, dismissal is not required for insufficient service of process, because Defendants waived service.See Waiver of Service served on Defendant Dietrich [Docket No. 2]; Waiver of Service served on Defendant eJD Search, Inc. [Docket No. 3]. Therefore, the Court denies this Motion without prejudice, and Defendants may renew the Motion at a later time if relevant evidence emerges once the parties have more fully developed the record.
While the facts are somewhat unclear at this early phase of litigation, the Court also appears to have personal jurisdiction over eJD Search, Inc., as it is Dietrich's personal business which she apparently runs from her home. Dietrich Aff. ¶ 18. Additionally, Dietrich's activities as owner of eJD Search, Inc. form the basis of Plaintiff s lawsuit. Compl. ¶¶ 19-22.
Plaintiff moves for a temporary restraining order based on the following facts. Plaintiff is a legal recruiting business based in Minneapolis, that has a satellite office in Denver, Colorado. Comeford Aff. ¶ 2. Plaintiff hired Dietrich to run its Denver office in June 1999. Id As a condition of her employment, Dietrich signed a contract ("Agreement") that included a non-competition clause. Dietrich is a lawyer and negotiated with Plaintiff about the non-competition provision in their Agreement. Second Comeford Aff. ¶¶ 2, 5. This clause prohibited Dietrich from operating or working for a legal recruiting business in any geographic area where she had worked for Esquire Search for two years after her employment ended. The Agreement also stated Minnesota law governed its terms. Comeford Aff. Ex. A.
On July 10, 2003, Dietrich left Esquire Search, explaining that she wanted to stop working to spend more time with her family. Id at 14. Dietrich then started her own legal recruiting service, eJD Search, that operates in the Denver area and directly competes with Plaintiff. Id. ¶¶ 15-18. Plaintiff discovered that Dietrich had filed articles of incorporation creating eJD Search on February 24, 2003, and had registered the "ejdsearch.com" domain name in March 2003 while still employed at Esquire Group. Plaintiff also began creating a website for her new company in March 2003. Id. ¶¶ 16-18. Exs. E-H. After Dietrich refused to refrain from operating eJD Search, Plaintiff filed suit and brought this motion for temporary relief. Id. ¶ 20.
Courts must balance the four factors outlined in Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 113-14 (8th Cir. 1981) before granting injunctive relief. These factors include: (1) the threat of irreparable harm to the moving party if an injunction is not granted, (2) the harm suffered by the moving party if injunctive relief is denied as compared to the effect on the non-moving party if the relief is granted, (3) the public interest, and (4) the probability that the moving party will succeed on the merits.
Based on the Dataphase factors, temporary injunctive relief is warranted in this case. First, under Minnesota law, irreparable harm is inferred when a party breaches a noncompetition agreement. See Medtronic. Inc. v. Gibbons. 527 F. Supp. 1085, 1091 (D. Minn. 1981), aff'd, 684 F.2d 565 (8th Cir. 1982); Cheme Indus., Inc. v. Grounds Assocs., Inc., 278 N.W.2d 81, 92 (Minn. 1979);Thermorama. Inc. v. Buckwold. 125 N.W.2d 274, 280 (Minn. 1964). Plaintiff has also shown that Dietrich largely ran Esquire Search's Denver office before leaving to start eJD Search, and that Dietrich now uses skills and business connections acquired at Esquire Search to directly compete with Plaintiff. Comeford Aff. ¶¶ 9, 11-13. Therefore, Plaintiff faces irreparable harm if the TRO is not granted because Defendants are violating the Agreement's non-competition clause.Id. ¶¶ 16-22. Second, in comparing the impact of injunctive relief on the parties, Defendants will not face great harm if the TRO is granted because the Agreement does not preclude Dietrich from generating income from other means. For example, she could return to the practice of law, or could recruit employees for non-legal fields. Comeford Aff. Ex. A. The non-competition clause is of limited duration, two years, and is narrowly tailored to restrict Dietrich from recruiting and placement activities in law-related positions in the geographic area where she conducted business for Plaintiff. Id. Third, ensuring that parties comply with contractual provisions fulfills the public interest Finally, Plaintiff will likely succeed on the merits because the Agreement provides that it is governed by Minnesota law, which generally upholds both choice of law and non-competition provisions, and because the Agreement is limited in duration and scope. See Cheme. 278 N.W.2d at 88 n. 2;Combined Indus. Co. v. Bode. 77 N.W.2d 533, 536 (Minn. 1956);Gelhaus v. Fingerhut Cos., Inc., No. C5-01-1711, ("Agreement") 2002 WL 857835 at * 2 (Minn.App. May, 7, 2002). Given the balance of theDataphase factors, Plaintiffs Motion for a Temporary Restraining Order is granted. Based on all the files, records, and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendants' Emergency Motion to Stay Proceedings Pending Determination of Defendants' Motion to Dismiss or Transfer Venue [Docket No. 10] is denied as moot.
2. Defendants' Motion to Dismiss or in the Alternative to Transfer Venue [Docket No. 11] is denied without prejudice.
3. Plaintiffs Motion for a Temporary Restraining Order is granted. Accordingly, until further order of this Court, Defendants Elizabeth J. Dietrich f/k/a Elizabeth J. Ruffing and eJD Search, Inc., as well as their respective officers, agents, servants, employees, attorneys and representatives, together with those in active concert or participation with them, are hereby enjoined and restrained from conducting the following activities within either the state of Minnesota or the state of Colorado: (A) Retaining or using any of the Confidential Information identified in Plaintiffs Complaint;
(B) soliciting or attempting to solicit business from Plaintiffs past, present and/or potential customers and candidates; (C) accepting any recruiting business from Plaintiffs past, present and/or potential customers and candidates; and (D) otherwise engaging in any of the competitive practices defined in the Agreement in Plaintiffs Complaint.
4. Plaintiff shall, on of before November 14, 2003, post a bond pursuant to Fed.R.Civ.P. 65(c) in the amount of $5000. The funds will be held in an interest bearing account pursuant to Fed.R.Civ.P. 67.
5. The parties have requested time to attempt to resolve this suit themselves. If resolution is not reached, the parties will meet for a status conference with Judge Ann D. Montgomery on December 10, 2003, at 2:00 p.m. in Courtroom 13W in the United States Courthouse in Minneapolis, Minnesota. At that conference the parties will discuss expedited discovery and the briefing schedule for a possible preliminary injunction motion.