Opinion
Civ. File No. 02-1864 (PAM/RLE)
July 31, 2002
MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff's Motion for a Temporary Restraining Order ("TRO"). For the reasons that follow, the Motion is denied.
BACKGROUND
Plaintiff Inter-Tel, Inc. is a manufacturer, distributor, and servicer of telephone equipment. In January 2002, Inter-Tel bought a part of the business of McLeodUSA, Inc., called IBS, that consisted mainly of service maintenance contracts for Toshiba telephone equipment. It appears that as a result of the sale many McLeodUSA employees became or were intended to become Inter-Tel employees in the sale.
The individual Defendants are all former employees of McLeodUSA. According to Inter-Tel, all of these employees were subject to covenants not to compete and confidentiality agreements that were assigned to Inter-Tel in the sale. Inter-Tel does not make clear whether any of the individual Defendants ever actually worked for Inter-Tel in any capacity, or whether they all left McLeodUSA at or before the time of the sale.
Inter-Tel now alleges that these former employees have formed Defendant CA Communications, Inc. and that they are violating the terms of the non-competition and confidentiality agreements they signed with McLeodUSA and are committing violations of Minnesota and federal law and various torts such as unfair competition, business disparagement, and tortious interference with contracts. Among Inter-Tel's allegations are that employees of CA Communications have represented to former McLeodUSA customers that CA Communications, not Inter-Tel, bought their service maintenance contracts, and that one of the individual Defendants, Marc Agar, solicited McLeodUSA employees to break their employment contracts. Inter-Tel also alleges that CA Communications is violating the proscription against false advertising found in both the Lanham Act, 15 U.S.C. § 1125(a), and the Minnesota Deceptive Trade Practices Act, Minn. Stat. § 325D.44, by disseminating materials claiming, among other things, that Inter-Tel does not employ any certified Toshiba technicians.
Defendants' affidavits tell a different story. According to these affidavits, all of the individual Defendants were terminated from their employment with McLeodUSA prior to Inter-Tel's purchase of the IBS business. The employees who were subject to confidentiality and non-competition agreements each signed a "Letter of Confirmation" from McLeodUSA that claimed to release the employee from any previous non-compete agreement. This Letter of Confirmation required the former employee not to solicit customers or employees of McLeodUSA for one year and not to disparage McLeodUSA, but provided that the terms of any confidentiality agreement remained in effect. The affidavits categorically deny that CA Communications has made any misrepresentations about Inter-Tel or about CA Communications' relationship with former McLeodUSA service contracts.
DISCUSSION
A. Injunctive Relief
A TRO may be granted only if the moving party can demonstrate: (1) a likelihood of success on the merits; (2) that the balance of harms favors the movant; (3) that the public interest favors the movant; and (4) that the movant will suffer irreparable harm absent the restraining order. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981). Injunctive relief is considered to be a "drastic and extraordinary remedy that is not to be routinely granted." Intel Corp. v. ULSI Sys. Tech., Inc., 995 F.2d 1566, 1568 (Fed. Cir. 1993).
In this case, most of Inter-Tel's claims are based on alleged violations of non-compete and confidentiality agreements between the individual Defendants and McLeodUSA. However, Inter-Tel has offered no evidence that these agreements are enforceable in the first instance, that the agreements are assignable, or that the agreements were in fact assigned to Inter-Tel as part of the IBS purchase. Covenants not to compete are disfavored under Minnesota law. Nat'l Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740 (Minn. 1982). These covenants will not be enforced absent evidence that the underlying agreement is valid in the first instance, that is, that the agreement is reasonable in scope and was supported by sufficient consideration. See, e.g., Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d 698, 703-04 (Minn.Ct.App. 1989) (discussing what constitutes reasonableness in restrictive covenants). Inter-Tel has failed to offer such evidence here. Thus, to the extent that Inter-Tel's claims rest on alleged violations of restrictive covenants, Inter-Tel has failed to show that it is likely to succeed on the merits of its claims. Some of Inter-Tel's claims do not depend on the existence of a valid employment agreement. However, as to these claims, there are significant factual disputes between the parties. Although Inter-Tel urges the Court to simply adopt the facts as stated in its Verified Complaint, given the extraordinary nature of the relief requested, the Court is unwilling to do so. Absent a more fully developed record on issues such as whether employees of CA Communications did indeed represent to former McLeodUSA customers that CA Communications, not Inter-Tel, purchased the customer's service contract, the Court cannot determine that Inter-Tel is likely to succeed on the merits of its claims. Absent a showing of likelihood of success on the merits, Inter-Tel is not entitled to a temporary restraining order. The Motion is denied.
B. Motion for Expedited Discovery
Both parties agree that expedited discovery is appropriate so that this matter may be resolved as quickly as possible. At the hearing, the Court directed the parties to agree on a schedule for expedited discovery. If the parties are unable to agree, they are to contact Magistrate Judge Erickson for assistance in this matter. In the interim, the Motion for Expedited Discovery is denied without prejudice.
CONCLUSION
For the foregoing reasons, and upon all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Plaintiff's Motion for a Temporary Restraining Order (Clerk Doc. No. 2) is DENIED; and
2. Plaintiff's Motion for Expedited Discovery (Clerk Doc. No. 6) is DENIED WITHOUT PREJUDICE.