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Garon Foods, Inc. v. Montieth

United States District Court, Seventh Circuit

July 2, 2013

GARON FOODS, INC., Plaintiff,
v.
SARAH MONTIETH, Defendant.

MEMORANDUM AND ORDER

J. PHIL GILBERT, District Judge.

This matter comes before the Court on the motion for a preliminary injunction filed by plaintiff Garon Foods, Inc. ("Garon") (Doc. 13). Defendant Sarah Monteith[1] ("Sarah") has responded to the motion (Doc. 14). The Court held a hearing on the motion on June 20, 2013, at which Sarah, Sharon Griesbach ("Sharon"), Shalisha Wood ("Shalisha") and Gary Griesbach ("Gary") testified. Sharon and Gary own Garon, and Shalisha, their daughter, is a Garon employee.

I. Preliminary Injunction Standard

Preliminary injunctive relief is designed "to minimize the hardship to the parties pending the ultimate resolution of the lawsuit." Platinum Home Mortg. Corp. v. Platinum Fin. Group Inc., 149 F.3d 722, 726 (7th Cir. 1998). A party seeking a preliminary injunction must make a threshold showing that (1) it has some likelihood of success on the merits, (2) no adequate remedy at law exists, and (3) it will suffer irreparable harm if the injunction is not granted. Lambert v. Buss, 498 F.3d 446, 451 (7th Cir. 2007); Ferrell v. United States Dep't of Housing & Urban Dev., 186 F.3d 805, 811 (7th Cir. 1999). If the moving party is able to establish these three factors, the Court must then balance the harms to both parties using a "sliding scale" analysis, also taking into consideration the effect that granting or denying the injunction will have on the public. Ferrell, 186 F.3d at 811. "[T]he greater the moving party's likelihood of prevailing on the merits, the less strongly it must show that the balance of harms weighs in its favor." Id.

"A preliminary injunction is an extraordinary remedy that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Chicago Dist. Council of Carpenters Pension Fund v. K & I Constr., Inc., 270 F.3d 1060, 1064 (7th Cir. 2001) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)); accord Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). "[T]he district [court] has to arrive at a decision based on a subjective evaluation of the import of the various factors and a personal, intuitive sense about the nature of the case." Faheem-El v. Klincar, 841 F.2d 712, 717 (7th Cir. 1988).

II. Facts

The evidence elicited at the hearing establishes the following facts for the purposes of the pending motion for a preliminary injunction.

Sarah was an employee of Garon from November 2011, until she voluntarily resigned in February 2013. Garon is in the business of selling peppers to cheese manufacturers for use in making pepper jack cheese. It essentially acts as a distributor for peppers it obtains from a supplier ("Supplier") that Garon relabels and distributes to its pepper jack cheese manufacturing customers under Garon's name. Sarah held various positions at Garon, including in logistics, sales and purchasing. During her time at Garon, she had access to a computer program listing the names of Garon's customers, and she was specifically assigned to manage the accounts of a small number of customers (around five at any one time).

Prior to starting her employment, Sarah signed a document entitled "Garon Trade Secrets Confidentiality Agreement" ("Agreement") in which she agreed to hold Garon's trade secrets confidential and to refrain from using them for anything other than Garon's benefit. Under the Agreement, the following information was designated as trade secrets: customer lists, customer products, customer pricing, data, designs, financial records, formula, packaging, procedures, processes, suppliers, vendors, and other confidential information. Garon required anyone with access to this confidential information to sign the Agreement. Garon further protected some of this information on a computer system with individual passwords and by hiding it on its computer server. At the time of her resignation, Sarah signed another document in which she acknowledged the Agreement's non-disclosure provisions. Garon never asked Sarah to sign a covenant not to compete with Garon.

During Sarah's employment with Garon, she sent an e-mail with some of the foregoing confidential information to her personal e-mail account. She did this with the permission of Sharon and Shalisha and for the purpose of preparing for a meeting to address a customer complaint that had arisen while Gary, Sharon and Shalisha were on vacation. She has since deleted this e-mail from her personal e-mail account. On one occasion, Sarah also sent a purchase order containing confidential information to a trucking company to facilitate an urgent transportation request. During her employment, Sarah also regularly deleted e-mails from her Garon e-mail account as a housekeeping measure. When Sarah resigned, she was escorted from Garon's property and took no documents with her. She did retain in her memory the names of purchasing agents of certain Garon customers and general knowledge of the industry, such as "ballpark" pricing arrangements. Any specific pricing details Sarah retained in her memory are likely to be obsolete within a year or less due to the fluctuation of product prices.

After Sarah's resignation, she began working as an independent contractor for the Supplier of peppers to Garon. This was the Supplier's first attempt to market its product directly to cheese manufacturers.

No credible evidence shows Sarah gave the Supplier any of Garon's confidential information or trade secrets. However, Garon alleges Sarah breached the Agreement on February 19, 2013, when she began marketing the Supplier's products directly to pepper jack cheese manufacturers, which included Garon's customers. Specifically, Sarah sent mass e-mails to the purchasing agents of the companies on a list of pepper jack cheese manufacturers. She had not obtained the manufacturer list from Garon but derived it on her own through internet searches. She had remembered some of the purchasing agents' names from her work at Garon but had obtained others, along with contact information, through telephone calls to the manufacturers. She did not specifically target any of Garon's customers with her e-mail solicitations, but she did not avoid them either. However, some of the mass e-mails contained references from which the manufacturer could easily draw the conclusion that the Supplier was Garon's source of the products Garon sold under its own name. For example, one mass e-mail referred to specific weights of specific products in specific types of packaging (pails, drums or totes) sold by Garon and identified that product as originating from the Supplier. See Pl. Ex. 8. It also provided quality audit documentation from the Supplier in hopes that manufacturer would correctly conclude that the product it was currently receiving had originated with the Supplier. Id. The e-mail also touted the Supplier as approved by a major cheese manufacturer. Id.

Another mass e-mail offered to sell the Supplier's product to manufacturers using standard packaging methods (pails, drums and totes) "at a significant cost savings and with shorter lead times" than the manufacturer could get through a distributor. See Pl. Ex. 4. The e-mail further contained a specification sheet for a product that this customer had purchased from Garon. Id. Based on this e-mail, one Garon customer drew the conclusion that since he knew Sarah from Garon and since she was now offering to avoid the distributor middle-man, she had begun working directly for Garon's supplier. See Pl. Ex. 4.

Despite receiving a cease and desist letter from Garon's counsel, Sarah continues to solicit business for the Supplier. Sarah has not brought any new customers to the Supplier since her marketing efforts began, but Garon has lost one long-time customer who generated more than $200, 000 of business a year. The evidence does not support the inference that this loss was attributable to Sarah. If the Supplier is able to draw customers away from Garon, Garon's reputation in the industry would suffer and it would be nearly impossible to get its customers back. Garon is unable to say, however, how many of the roughly 2000 cheese manufacturers in the country or of the roughly 500 cheese manufacturers in Wisconsin are its customers. Also, Garon may lose customers if they find out a former Garon employee is not keeping confidential information about which manufacturers actually make cheese for ...


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