Opinion
CV-22-01895-PHX-SPL
11-08-2022
Forefront Dermatology S.C., Plaintiff, v. Shelly Crossman, et al., Defendants.
ORDER
Honorable Steven P. Logan United States District Judge
Before the Court is Plaintiff Forefront Dermatology S.C.'s (“Plaintiff”) Motion for Temporary Restraining Order and Preliminary Injunction (Doc. 6). Plaintiff brings claims against Defendants Shelly Crossman, Burt Faibisoff, and Prescott Medical and Dermatology Group PLLC (“Prescott Dermatology”) for breach of contract, breach of fiduciary duty, and tortious interference with a contract. (Doc. 1 at 22-29). Plaintiff seeks injunctive relief enjoining Defendant Crossman from using Plaintiff's goodwill, confidential patient information, and financial data to unlawfully compete with Plaintiff. (Doc. 6 at 3). For the following reasons, the Court issues this Order granting Plaintiff's Motion to the extent it seeks a temporary restraining order.
I. BACKGROUND
Plaintiff is a national dermatology practice, with clinics in twenty-four states. (Doc. 1 at 3). Defendants Crossman and Faibisoff are former employees of Plaintiff. (Id. at 2). Together, Defendants Crossman and Faibisoff formed, are members of, and are currently operating Prescott Dermatology. (Id.). Plaintiff brings this action against all three-Crossman, Faibisoff, and Prescott Dermatology. (Id.).
In or around June 2018, Defendant Crossman began working as a nurse practitioner for non-party Arizona Dermatology Group (“ADG”). (Id.). ADG owned and operated several dermatology clinics in and around Prescott, Arizona, including a clinic at 830 Ainsworth Drive (the “Forefront Clinic”) at which Defendant Crossman worked. (Id. at 3). In late 2021, Plaintiff acquired ADG and all its assets, including the Forefront Clinic. (Id.). Plaintiff entered into an employment agreement (the “Employment Agreement”) with Defendant Crossman providing that Defendant Crossman would continue at the Forefront Clinic for a three-year term. (Id.). The Employment Agreement included a covenant not to compete. (Id.).
In May 2022, Plaintiff alleges that Defendant Crossman secretly formed a competing business-Prescott Dermatology. (Doc. 6 at 2-3). For the next several months, Defendant Crossman remained employed at the Forefront Clinic, continuing her regular duties and interactions with Forefront patients. (Id. at 3). Defendant Crossman “abruptly quit” the Forefront Clinic effective September 30, 2022, over two years before the end of her term. (Id. at 2). Plaintiff alleges that Defendant Crossman is now operating Prescott Dermatology “within mere yards” of Plaintiff's Forefront Clinic, and that she is offering the same services and procedures that she once did at the Forefront Clinic. (Id.). Plaintiff asserts that Defendant Crossman's conduct violates the parties' contractual agreements, including the non-compete agreement, and breaches fiduciary duties that Defendant Crossman owed to Plaintiff. (Doc. 1 at 22-29).
Plaintiff seeks injunctive relief to prevent Defendant Crossman from engaging in acts that further breach her non-compete agreement with Plaintiff. Specifically, Plaintiff seeks an Order enjoining Defendant Crossman from “performing medical care or cosmetic services of the type she provided for or on behalf of [Plaintiff] and/or [ADG] during the timeframe of September 30, 2021 through September 30, 2022 at: (a) Prescott Medical and Dermatology Group, PLLC, or (b) in any other capacity in any location within a 15-mile radius of [Plaintiff]'s practice locations” at the Forefront Clinic and at 2820 North Glassford Hill Road, Prescott Valley, Arizona. (Doc. 6-4 at 3-4).
II. LEGAL STANDARD AND DISCUSSION
A request for a TRO is analyzed under the same standards as a request for a preliminary injunction. Stuhlbarg Int'l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001). “A preliminary injunction is ‘an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.'” Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam) (emphasis omitted)); see also Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) (citation omitted) (“A preliminary injunction is an extraordinary remedy never awarded as of right”). A party seeking injunctive relief under Rule 65 of the Federal Rules of Civil Procedure must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of injunctive relief; (3) the balance of equities tips in its favor; and (4) an injunction is in the public interest. Winter, 555 U.S. at 20; Stuhlbarg, 240 F.3d at 839, n.7; Pom Wonderful LLC v. Hubbard, 775 F.3d 1118, 1124 (9th Cir. 2014); Pimentel v. Dreyfus, 670 F.3d 1096, 1105-06 (9th Cir. 2012). Where a movant seeks a mandatory-rather than a prohibitory-injunction, the request for injunctive relief is “subject to a heightened scrutiny and should not be issued unless the facts and law clearly favor the moving party.” Dahl v. HEM Pharms. Corp., 7 F.3d 1399, 1403 (9th Cir. 1993).
The Ninth Circuit observes a “sliding scale” approach, in that these elements “are balanced, so that 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). Thus, by example, an injunction can issue where there are “‘serious questions going to the merits' and a balance of hardships that tips sharply towards the plaintiff . . . so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Id. at 1135.
“A mandatory injunction orders a responsible party to take action,” while “a prohibitory injunction prohibits a party from taking action and preserves the status quo pending a determination of the action on the merits.” Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 879 (9th Cir. 2009) (internal quotation marks omitted). “The ‘status quo' refers to the legally relevant relationship between the parties before the controversy arose.” Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053, 1060-61 (9th Cir. 2014).
The Court finds that Plaintiff has made the requisite showing for the issuance of a TRO and that Plaintiff is entitled to a TRO pending a hearing on the merits of a preliminary injunction. Taking Plaintiff's allegations as true, Defendant Crossman signed an enforceable Employment Agreement with Plaintiff under which she agreed to, among other things, a three-year term of employment and a covenant not to compete with Plaintiff. Defendant Crossman allegedly violated the Employment Agreement by resigning from Plaintiff's Forefront Clinic over two years before the end of her employment term and by now openly competing with Plaintiff at Prescott Dermatology. At Prescott Dermatology- which is only one-fifth of a mile from Plaintiff's Forefront Clinic-Defendant Crossman is offering the same services and procedures, using confidential patient data and other business information obtained from Plaintiff, and damaging Plaintiff's goodwill and customer relationships. Such allegations from Plaintiff's verified complaint demonstrate that Plaintiff has a strong likelihood of success on the merits of its claims for breach of contract and breach of fiduciary duties. See J.P. Morgan Securities LLC v. Krich, No. CV-15-00979-PHX-DGC, 2015 WL 3604199, at *2 (D. Ariz. June 8, 2015) (“In order to demonstrate a likelihood of success on the merits, [Plaintiff] must show that the Agreement is enforceable and that [Defendant] has violated it by using [Plaintiff]'s confidential information or by soliciting its clients.”).
Plaintiff's allegations also show that Plaintiff is likely to suffer irreparable and immediate harm in the absence of injunctive relief. Courts widely recognize that the loss of customers, business reputation, and customer goodwill can constitute irreparable harm. See Krueger Invs., LLC v. Cardinal Health 110, Inc., No. CV 12-618-PHX-JAT, 2012 WL 3028349, at *5 (D. Ariz. July 24, 2012) (citations omitted) (“Courts can consider economic hardship, actual or threatened loss of customers, business reputation, and goodwill in determining the presence and sufficiency of irreparable harm.”). Here, Defendant Crossman's alleged conduct-opening a competing business while still employed with Plaintiff, prematurely resigning from her employment with Plaintiff, and leveraging confidential business information to directly compete with Plaintiff-threatens to steal customers from Plaintiff and otherwise erode Plaintiff's goodwill as a business. The immediacy of the alleged harm is shown by the fact that Defendant Crossman's competing business is already operational and that Defendant Crossman has allegedly encouraged Plaintiff's customers to leave the Forefront Clinic and to move “down the street” with her. (Doc. 1 at 22). Moreover, Plaintiff alleges that it is “already aware of patients who have recently requested that all their patient records be sent to Prescott Dermatology.” (Id.). Although the Court is typically inclined to withhold injunctive relief until both sides have an opportunity to fully brief the issues and until the Court has held a hearing on the matter, the immediacy of the threatened harm in this case warrants at least temporary relief.
The balance of equities and the public interest factors also weigh in favor of maintaining the status quo and issuing a TRO. In the absence of a TRO and before this Court can rule on Plaintiff's request for a preliminary injunction, Plaintiff could lose additional customers to Defendants and suffer additional harm to their business reputation and goodwill. Conversely, Defendant Crossman does not face any obvious hardship if a TRO is issued because the injunction is focused on a narrow scope of activities and their enjoinment is only temporary. Defendant Crossman is merely being held to the contractual promises she made. If the relevant contractual provisions-such as the non-compete provision-are found to be unenforceable, a preliminary injunction will not issue, and Defendant Crossman will be permitted to resume the activities that the TRO enjoins her from conducting. See Winter, 555 U.S. at 24 (when analyzing balance of equities, courts “must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief”); see also Int'l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 827 (9th Cir. 1993) (“In evaluating the balance of hardships a court must consider the impact granting or denying a motion for [an] injunction will have on the respective enterprises.”). As to public interest, a TRO would protect the public interest by maintaining the status quo-and thereby protecting Plaintiff's business operations and contractual rights-until a preliminary injunction hearing can be held. See Compass Bank v. Hartley, 430 F.Supp.2d 973, 983 (D. Ariz. 2006) (citation omitted) (“Courts have held that the public interest is served by protecting a company's right to proprietary information, business operations, and contractual rights.”).
The Court finds that Plaintiff has sufficiently met all four prongs required for a TRO to issue. Moreover, Plaintiff's Motion indicates that it was served on Defendant Crossman the same day that it was filed with this Court. (Doc. 6 at 19). Thus, the Court need not conduct the additional level of analysis required for issuing a TRO without notice. See Fed.R.Civ.P. 65(b) (providing that a TRO may issue without notice only where (i) specific facts show that irreparable harm will result to movant before adverse party can be heard in opposition and (ii) the movant's attorney certifies in writing any efforts made to give notice and reasons why it should not be required).
Accordingly, IT IS ORDERED:
1. TRO : That Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction (Doc. 6) is granted to the extent it seeks a temporary restraining order. Defendant Crossman is temporarily enjoined from performing dermatological medical care or cosmetic services of the type she provided for or on behalf of Forefront Dermatology, SC and/or Arizona Dermatology Group during the timeframe of September 30, 2021 through September 30, 2022 at: (a) Prescott Medical and Dermatology Group, PLLC, or (b) in any other capacity in any location within a 15-mile radius of Forefront's practice locations, which are situated at (i) 830 Ainsworth Drive, Prescott, Arizona and (ii) 2820 North Glassford Hill Road, Prescott Valley, Arizona.
2. Preliminary Injunction : The Court withholds ruling on whether Plaintiff's Motion should be granted to the extent it seeks a preliminary injunction.
3. Service : That, no later than close of business on November 9, 2022, Plaintiff must serve a copy on Defendants and file proof of service with the Court of the following: (1) the Complaint; (2) the Motion for TRO and Preliminary Injunction and attachments; and (3) this Order.
4. Hearing : That a Preliminary Injunction Hearing is set for November 18, 2022 at 9:00 a.m., before the Honorable Judge Steven P. Logan, United States District Judge, in the Sandra Day O'Connor United States Courthouse, located at 401 West Washington Street, Phoenix, Arizona 85003, 5th Floor, Courtroom 501.
5. Briefing : That Defendants shall have until the close of business on November 11, 2022 to file any Response to Plaintiff's Motion; Plaintiff shall have until the close of business on November 15, 2022 to file any Reply in support of its Motion.
6. Joint Notice : That the parties shall file a Joint Notice by November 11, 2022, indicating whether the motion may be decided on the briefing and argument of counsel alone.
7. Proposed Injunction : That Plaintiff shall submit a proposed form of preliminary injunction no later than November 11, 2022.
8. Warning : That if Defendants do not respond to the Motion for a TRO/Preliminary Injunction or fail to appear at the above-scheduled hearing, the Court will deem such failure as consent to granting the motion, see LRCiv 7.2(i).