they will no longer be confidential and their value to IDS will be decreased.
The threatened injury to IDS outweighs the threatened harm an injunction may inflict on Smithson. Although Smithson's business may be reduced considerably by an injunction preventing him from servicing his former clients, Smithson is not precluded from engaging in the business of financial planning itself. The injunction does not prevent Smithson from dealing with new clients he acquires independently. Furthermore, the conduct prohibited by the injunction is only conduct that is unfair to begin with. Smithson agreed to abide by the terms of the restrictive covenant when he began working with IDS and cannot now complain that he is thereby harmed unfairly by it.
IDS has demonstrated that the granting of a preliminary injunction will not disserve the public interest. IDS's clients, innocent third parties, will be protected by the maintenance of the status quo, that is by preventing Smithson from diverting their business from IDS or from misleading IDS clients into believing that he can still personally serve their financial needs. The injunction will make it clear that the clients are still being served by IDS, albeit absent Smithson's services. Without the injunction Smithson could use his relationship with his former clients to unfairly persuade them to change their accounts over to IDS's competitor. Smithson cannot now blatantly mislead the clients he has been serving into believing that they are still somehow being served by IDS notwithstanding Smithson's new affiliation with SunAmerica.
Smithson has not persuaded the court that IDS cannot likely succeed on its claims. Smithson contends that the restrictive covenant at issue is overbroad and unenforceable as to an independent contractor. But Smithson cannot complain that IDS's contract forced him to do what he agreed to do in the contract. The terms of the agreement are clear. That many of Smithson's clients are friends and were acquired through hard work and long hours is of no significance. The hard work and long hours were engaged in for the benefit of IDS and were an essential part of his agreements with IDS. Smithson was aware from his agreements that no matter how he found his clients, he was limited to using IDS's products or services and that the clients would thus be serviced only by IDS. If Smithson did not like the arrangement offered by IDS, then he should not have accepted it.
Smithson further asserts that an injunction would be contrary to the public interest and contrary to IDS's fiduciary duties to its own clients. Smithson contends that his clients "are entitled to know his whereabouts and the truth of the situation surrounding his resignation . . . ." Def.'s Memo. in Opposition to Pltf.'s Mot. Prelim. Inj. at 14. This assertion is spurious. Smithson's December 14, 1993 letter is hardly an honest attempt at keeping in touch with his clients. Smithson was attempting to maintain client contact and to withhold the truth behind his affiliation with SunAmerica, in order to violate his agreements with IDS. As the court noted above, it is Smithson's conduct -- not IDS's -- that may potentially harm the clients if allowed to continue.
Smithson is accordingly enjoined from selling products or services to the 250 to 340 admitted IDS customers that Smithson had been serving as an IDS representative. All of the clients were acquired while Smithson was affiliated with IDS. The injunction will also limit Smithson's access to these IDS clients in order to prevent him from overreaching and violating the terms of his agreements by persuading the clients to stop using the products or services of IDS or to start using the products or services of SunAmerica.
The court is not granting the full relief requested. The order is limited specifically to the 250 to 340 people who were customers of Smithson. IDS has not produced enough evidence that there are individuals "learned about" or "whose name became known to" Smithson while Smithson was in a relationship with IDS and has not produced evidence to demonstrate the circumstances surrounding how Smithson would have "learned about" these people. The injunction would not cover those situations where names became known to Smithson informally and indirectly while he was with IDS, that is those not disclosed to him in confidence for the purpose of being served by Smithson or not acquired through contacts with other customers. Although the issue is not ready for adjudication on this motion for preliminary injunction, the issue remains contestable at trial.
For the above stated reasons, the motion for a preliminary injunction is granted.
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court
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