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Revzip, LLC v. McDonnell

United States District Court, W.D. Pennsylvania

December 9, 2019




         I. Introduction

         This case arises from Defendant Michael McDonnell's ("Mike")[1] ownership and sale of his sub sandwich shop and fundraising business, Power House Subs, [2] to Revzip.

         Pending before the Court is Plaintiffs Rezvip, LLC, and Power House Subs Corporate (collectively, "Revzip" or "Power House"), LLC's Motion for Preliminary Injunction and Temporary Restraining Order[3] (ECF No. 3) against defendants Mike ("Mike"), Chris McDonnell ("Chris"), Jacob Bearer ("Jake"), Dana Bearer ("Dana"), and Supreme Fundraising and Catering, LLC ("Supreme Fundraising") (collectively, "Defendants"). Plaintiffs, having received a temporary restraining order, seek a preliminary injunction to protect various trade secrets and enforce non-compete agreements related to the operation of their sandwich shop and catering business. For the reasons that follow, the Court DENIES Revzip's Motion for Preliminary Injunction.

         II. Jurisdiction and Venue

         This Court has jurisdiction over the action because Count Five arises under federal law, and the remaining state law claims in the action form part of the same case or controversy. 28 U.S.C. §§ 1331, 1367. Venue is proper in this district because Power House Subs' place of business is Blair County, which is part of the Western District of Pennsylvania and a substantial portion of the events giving rise to the action occurred in the Western District of Pennsylvania. 28 U.S.C. § 1391.

         III. Factual Background[4]

         Mike originally owned and operated the business known as Flower House Subs, which operates two sub sandwich stores in the area of Altoona, Pennsylvania, and also operates a catering and fundraising business in the same area. (ECF No. 1 ¶ 18.) pike's brother, Chris, and his nephew, Jake, worked at various times for Power House Subs. (Id. ¶¶ 43, 90-91.) Dana, Jake's mother and Mike's sister, had some minor involvement in Power House's, or a previous iteration's, operations. (Tr. 1 at 9:3-10:13.) Mike sold Power House Subs and all of its intellectual property ("IP") to Power House Corporate, LLC on November 12, 2018, [5] while retaining a fifteen percent share for himself. (Id. ¶¶ 26-30.) The IP included in the agreement includes any "trade dress, trade secrets, domain names, and other intellectual property" associated with Power House Subs. (ECF No. 1-1 at 1.) Revzip believed that, in buying Power House Subs from Mike, they were acquiring the recipes to Power House Subs' two secret dressing recipes (the "Secret Recipes"), one light and one dark, used on sandwiches, as well as Power House Subs' fundraising customer list (the "Customer List"). (Tr. 2 at 135:10-136:12.) As part of this sales agreement, Mike signed a non-compete agreement preventing him from working in the sandwich shop industry in any form for two years within twenty-five miles of Power House Subs' locations, as well as a non-disclosure agreement agreeing to not disclose any confidential information or use that information in competing with Power House. (ECF No. 1 ¶¶ 31-37, 50-54.)

         After the sale, Mike continued to work for Power House as an at-will employee. (Id. ¶ 42.) Several months after the sale, Mike became dissatisfied with his role at Power House and ultimately quit. (Id. ¶¶ 57-61.) After quitting, Mike stated that he was planning on opening a competing sandwich shop and registered the fictitious business name Subpreme Fundraising and Catering. (Id. ¶¶ 63, 82.) After being told that the non-compete barred his ability to open a new sandwich shop, Mike dropped the idea and filed a declaratory judgment action[6] in the Court of Common Pleas of Blair County. (Tr. 1 at 57:9-59:18.) During the post-sale period that Mike continued to work at Power House, Revzip allegedly made several improvements to Power House's operations, including developing a special process for taking fundraising orders and making sandwiches for fundraisers (the "Assembly Process"). (Tr. 2 at 73:3-12.)

         Shortly after Mike quit Power House Subs, Jake indicated his desire to open his own sandwich shop and created Supreme Fundraising and Catering, LLC. (Tr. 1 at 143:13-17; 173:2-174:16.) Jake initially scheduled his shop to open on November 15, 2019, in Altoona. (Id. ¶ 126.)

         IV. Procedural Background

         Revzip filed this lawsuit on November 6, 2019 and moved for both a temporary restraining order and preliminary injunction on November 7, 2019. (ECF Nos. 1, 3.) The Court held a hearing on Revzip's Motion for a Temporary Restraining Order on November 14, 2019, and granted the Motion, solely for a temporary restraining order, that same day. (ECF Nos. 12, 13.) In its Order granting the temporary restraining order, the Court found that Revzip was entitled to injunctive relief. (ECF No. 12.) The Court found that Revzip was likely to prevail on the merits, that Revzip would be irreparably harmed in the absence of the temporary restraining order, that the balance of the equities favored granting the temporary restraining order, and finally that the public interest favored granting the temporary restraining order. (Id. at 4-5.)

         Defendants filed a response on November 25, 2019. (ECF No. 2p.) On November 26 and 27, 2019, the Court held a hearing on Revzip's Motion for a Preliminary Injunction, and on November 27, 2019, extended the temporary restraining order until December 6, 2019, pending resolution of the Motion for Preliminary Injunction. (ECF No. 21.) Following the hearing, the Court requested that the parties file post-hearing briefs no later than December 4, 2019. The parties timely filed the appropriate briefs. (ECF Nos. 25, 26, 27, 28.)

         Revzip's Complaint includes thirteen counts: Counts One through Three are for breach of contract, relating to various contracts Mike signed while selling Power House Subs (ECF No. 1 ¶¶ 129-47.); Counts Four, Nine, and Ten are claims of tortious interference (Id. ¶¶ 148-54, 181-197); Counts Five through Seven are claims of misappropriation of trade secrets and confidential information (Id. ¶¶ 155- 76); Count Eight is a claim for conversion (Id. ¶¶ 177-80); Count Eleven claims business defamation (Id. ¶¶ 198-204); Count Twelve is for breach of fiduciary duty (Id. ¶¶ 205-14); and Count Thirteen seeks relief for a civil conspiracy (Id. ¶¶ 215-18).

         Revzip's Complaint seeks injunctive relief only on Counts One through Eight and Thirteen. (Id. ¶¶ 136, 143, 147, 154, 163, 171, 176, 180, 218.) However, their Motion for Preliminary Injunction and Brief in Support, as well as their post-hearing brief, only address Counts One through Seven. (ECF Nos. 3, 5, 26.) Accordingly, the Court will only address Counts One through Seven in determining whether to grant the preliminary injunction.

         V. Legal Standard

         The Federal Rules of Civil Procedure permit courts to issue preliminary injunctions on notice to the adverse party. Fed.R.Civ.P. 65(a). "A preliminary injunction is an extraordinary remedy never awarded as of right." Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) (citing Munaf v. Geren, 553 U.S. 674, 689-90 (2008)). A preliminary injunction is appropriate only "upon a clear showing that the [movant] is entitled to such relief." Id. at 22 (citation omitted). In determining whether a party is entitled to a preliminary injunction, courts consider four factors: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably harmed without the preliminary injunction; (3) the balance of equities favors granting a preliminary injunction, including any harm to the nonmoving party; and (4) whether granting the preliminary injunction will be in the public interest. Id. at 20; Columbia Gas Transmission, LLC v. Temporary Easements for Abandonment of a Nat. Gas Pipeline Across Somerset & Fayette Ctys., Pa., No. 3:16-cv-268, 2017 WL 1284943, at *3 (W.D. Pa. Apr. 5, 2017) (Gibson, J.).

         "While these factors structure the inquiry, no one aspect will necessarily determine its outcome. Rather, proper judgment entails a 'delicate balancing' of all elements." Constructors Ass'n of Western Pa. v. Kreps, 573 F.2d 811, 815 (3d Cir. 1978).

         VI. Discussion

         A. Findings of Fact

         The Court makes the following findings of fact:

1. Mike knows the Secret Recipe for the light dressing. (ECF No. 20-1 ¶ 47.)
2. Mike is the only party that Power House has ever subjected to a nondisclosure agreement regarding any of the alleged trade secrets; no other Power House employee, including those who know how to make the Secret Recipes, have agreed to keep the Secret Recipes confidential. (See, e.g., Tr.2 at 28:14-29:11, 90:12-91:19, 95:1-9, 97:21-23, 177:3-6.)
3. Jake and Chris worked at Power House both before and after Mike sold Power House Subs to Revzip and were familiar with its processes and fundraising activities. (Tr. 1 at 171:16-18, 167:15-20; Tr. 2 at 37:9-15, 40:22-41-1.)
4. At some point after Mike quit Power House in August of 2019, a recipe for one of the Secret Recipes were posted on the wall of a room in the restaurant for a period of somewhere between six weeks and three months. (Tr. 2 at 40:23-41:6, 176:17-23, 29:23-30:7.)
5. The posted recipe was visible to any of Power House's employees or vendors who had access to the room. (Tr. 2 at 30:8-23.)
6. The Customer List consists of contact information for various parties who have used Power House's sandwiches for fundraising purposes in the past; these groups include youth sports teams, church groups, and other similar ...

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