Garcia et al v. Office Keepers LLC et al, No. 2:2017cv03032 - Document 54 (D. Ariz. 2018)
Court Description: ORDER denying 31 Motion for Preliminary Injunction. The temporary restraining order previously entered by the Court 42 is dissolved. Signed by Judge David G Campbell on 2/26/2018.(DGC, nvo)
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Garcia et al v. Office Keepers LLC et al 1 Doc. 54 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Alberto Garcia and Rosa Marin, No. CV-17-03032-PHX-DGC Plaintiffs, 10 ORDER 11 v. 12 Office Keepers LLC, et al., 13 Defendants. 14 15 16 On February 22, 2018, the Court held an evidentiary hearing on the motion for a 17 preliminary injunction filed by Defendant/Counterclaimant Office Keepers LLC. 18 Doc. 31. After considering the evidence submitted by the parties and the arguments 19 made in writing and at the hearing, the Court will deny the motion. 20 I. Legal Standard. 21 A “preliminary injunction is an extraordinary and drastic remedy, one that should 22 not be granted unless the movant, by a clear showing, carries the burden of persuasion.” 23 Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original). 24 injunction may be granted if the movant “establish[es] that he is likely to succeed on the 25 merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that 26 the balance of equities tips in his favor, and that an injunction is in the public interest.” 27 Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). 28 /// Such an Dockets.Justia.com 1 II. Analysis. 2 Office Keepers asks the Court to prohibit Plaintiffs Alberto Garcia and Rosa 3 Marin from soliciting customers for whom Officer Keepers performed work during the 4 12 months preceding Plaintiffs’ separation from the company in July 2017, from 5 soliciting Office Keepers’ independent contractors to work for Plaintiffs’ new company, 6 and from using confidential information gained during their employment. Office Keepers 7 asserts that it is likely to succeed on the merits of four claims: (1) misappropriation of 8 trade secrets, (2) tortious interference with contract and with prospective business 9 relations, (3) unfair competition, and (4) breach of contract. Doc. 31 at 8-15. Office 10 Keepers has failed to show that it is likely to succeed on any of these claims. 11 A. 12 Office Keepers alleges that Plaintiffs violated the Arizona Uniform Trade Secrets Misappropriation of Trade Secrets. 13 Act, A.R.S. § 44-401, et seq. (“AUTSA”). 14 information that “[d]erives independent economic value, actual or potential, from not 15 being generally known to, and not being readily ascertainable by proper means by, other 16 persons who can obtain economic value from its disclosure or use.” § 44-401(4)(a) 17 (emphasis added). During the hearing, Office Keepers presented evidence that Plaintiffs 18 have used the identities of Office Keepers’ customers, and contact information related to 19 those customers, to contact the customers and solicit business for Plaintiffs’ new 20 company. Office Keepers did not present evidence that Plaintiffs have used any other 21 confidential information. That statute defines a trade secret as 22 Office Keepers is not likely to prevail on its claim that the identities and contact 23 information of its customers constitute trade secrets. Office Keepers’ customers are 24 companies that contract to provide janitorial services to various businesses or entities. 25 The customers then subcontract the actual janitorial work to companies like Office 26 Keepers. Plaintiffs’ counsel aptly characterized these customers as brokers of janitorial 27 cleaning work. 28 -2- 1 Two of the five customers identified in Office Keepers’ motion testified during the 2 hearing. Mark Adriansen, the owner of System4, testified that his company is publicly 3 known as an entity that subcontracts for janitorial services. He testified that he uses 4 approximately 80 subcontractors like Office Keepers. He advertises his business on the 5 Internet, has a website, and readily provides contact information. The fact that he is in 6 the business of subcontracting janitorial work, and his contact information, cannot be said 7 to be trade secrets within the definition of the AUTSA. That information is generally 8 known to persons who can obtain economic value from it, and is “readily ascertainable 9 by proper means.” Id. An Internet search would identify System4 as a company that 10 subcontracts out janitorial work. 11 Mike O’Donnell is the owner of City Wide of Phoenix, another of Office Keepers’ 12 customers. O’Donnell testified that he uses approximately 30 subcontractors like Office 13 Keepers. His company advertises on the Internet, and he invites janitorial companies like 14 Office Keepers to apply for work. Again, it appears that the position of his company as a 15 possible supplier of janitorial work is not secret, and that his identity and contact 16 information are readily ascertainable by proper means. 17 Office Keepers presented evidence regarding other allegedly sensitive information 18 contained in documents that Plaintiffs did not return when they left Office Keepers’ 19 employment. This included information regarding specific janitorial jobs, the times when 20 the work was performed, billing information, and building access codes. But Office 21 Keepers presented no evidence that this information has been used by Plaintiffs. Office 22 Keepers has not shown that Plaintiffs are misappropriating information properly 23 categorized as trade secrets under the AUTSA. 24 Office Keepers’ motion also cites the Defend Trade Secrets Act, 18 U.S.C. § 1833, 25 et seq. Doc. 31 at 11. But Office Keepers does not identify the requirements of this 26 statute, and does not explain how the readily ascertainable information discussed above 27 could be viewed as a trade secret under it. 28 /// -3- 1 B. 2 Office Keepers alleges that Plaintiffs have tortiously interfered with contracts and 3 prospective business with its customers. To demonstrate such interference, a party must 4 show: “(1) the existence of a valid contractual relationship or business expectancy; 5 (2) knowledge of the relationship or expectancy on the part of the interferor; 6 (3) intentional interference inducing or causing a breach or termination of the relationship 7 or expectancy; and (4) [] damage to the party whose relationship or expectancy has been 8 disrupted.” Antwerp Diamond Exch. of Am., Inc. v. Better Bus. Bureau, 637 P.2d 733, 9 739-40 (Ariz. 1981); Doc. 31 at 11. Tortious Interference. 10 Office Keepers has not shown that it is likely to prevail on the third element of this 11 claim. Evidence presented at the hearing showed that Plaintiffs have indeed contacted 12 companies that provide work to Office Keepers – Mr. Garcia made contact with a number 13 of Office Keepers’ customers after he terminated his employment and started his own 14 business. But Office Keepers presented no evidence that these contacts induced or 15 caused a breach of a contractual relationship between Office Keepers and its customers, 16 or loss of a valid business expectancy. The evidence demonstrated that Office Keepers’ 17 customers use many different companies to perform their janitorial work, and that 18 Plaintiffs have obtained some of that work. The evidence did not show that Plaintiffs 19 received work that was taken from Office Keepers – that Plaintiffs caused a customer to 20 breach a contract or a business expectancy with Office Keepers. 21 To be sure, Office Keepers believes that Plaintiffs caused LandCorp Management 22 Services to withdraw work from Office Keepers. Marci Hernandez, an owner of Office 23 Keepers, testified that an employee of LandCorp informed Office Keepers that LandCorp 24 was taking away all of Office Keepers’ accounts because someone from Office Keepers’ 25 office suggested to LandCorp that Office Keepers was paying its independent contractors 26 incorrectly. Mrs. Hernandez suspects that this individual was Mr. Garcia, but provided 27 no direct evidence of that fact. And she acknowledged that LandCorp’s stated reason for 28 terminating the accounts was that LandCorp’s contract prohibits Office Keepers from -4- 1 using independent contractors – the very kinds of janitorial workers that Office Keepers 2 uses. Although Mrs. Hernandez testified that she genuinely believes Mr. Garcia was 3 behind LandCorp’s termination of Office Keepers’ work, she was unable to present direct 4 evidence of that fact. And she acknowledged on cross-examination that she knows of no 5 LandCorp account previously serviced by Office Keepers that is now serviced by 6 Plaintiffs. 7 Office Keepers also presented evidence that Plaintiffs are currently providing 8 janitorial services at Benchmark School, an account that Office Keepers previously 9 serviced through a subcontract with City Wide of Phoenix. But City Wide’s facility 10 services manager, Rafael Moreno, testified that he decided to give the Benchmark work 11 to Plaintiffs – they did not solicit it from him. 12 Given this evidence, Office Keepers has not shown that it is likely to succeed in 13 proving that Plaintiffs induced or caused a breach of contract or termination of a 14 legitimate business expectancy. 15 C. 16 In support of this claim, Plaintiffs rely on Fairway Constructor’s Inc. v. Ahern, 17 970 P.2d 954, 956 (Ariz. Ct. App. 1998). Doc. 31 at 13. That case held that the general 18 purpose of the doctrine of unfair competition “is to prevent business conduct that is 19 ‘contrary to honest practice in industrial or commercial matters.’” Fairway, 970 P.2d 20 at 956 (citation omitted). Office Keepers argues that Plaintiffs are “attempting to take a 21 shortcut [in] growing [their] janitorial services business by stealing the contracted labor 22 and customers that Office Keepers has invested substantial time and effort to develop.” 23 Doc. 31 at 14. “Stealing” is the key word in the sentence, and it was not borne out by the 24 evidence. Unfair Competition. 25 The evidence demonstrated that Office Keepers does not have an exclusive 26 contract with any of its customers. The customers can, and do, give work to many 27 providers of janitorial services. Given this evidence, the Court cannot conclude that 28 Plaintiffs engaged in dishonest practices when they solicited work from these customers. -5- 1 Obtaining work from these customers would not require a dishonest act or that any of the 2 customers stop using Office Keepers.1 3 Similarly, evidence at the hearing demonstrated that Office Keepers does not use 4 employees to perform janitorial services; it uses independent contractors. One of these 5 contractors, Erica Hernandez, testified that she cleans a number of offices for Office 6 Keepers, but that she also cleans offices for Plaintiffs’ new company. She testified that 7 Carlos Hernandez, one of Office Keepers’ owners, told her that he has no objection to her 8 working for others. And Office Keepers acknowledged during the hearing that it uses 9 many of its independent contractors only on a part-time basis. Thus, Plaintiffs’ soliciting 10 of independent contractors to perform work for Plaintiffs’ company would not 11 necessarily mean that the independent contractors must stop working for Office Keepers 12 or even reduce the hours they devote to Office Keepers. The Court cannot conclude that 13 such solicitation necessarily requires dishonest business practices. 14 Office Keepers did present evidence that Mr. Garcia told Ms. Hernandez that he 15 would make checks payable to her boyfriend so that Office Keepers would not know she 16 was working for him. This appears to be a dishonest business practice, but the Court 17 cannot conclude that such dishonesty is necessary in order for Plaintiffs to procure work 18 from independent contractors who happen to also be working for Office Keepers. Thus, 19 the Court cannot conclude that Office Keepers is likely to prevail on its claim that the 20 solicitation of its independent contractors constitutes an unfair business practice. 21 D. 22 Plaintiffs’ contracts with Office Keepers provided that Plaintiffs would not, for a 23 period of 12 months after the termination of their employment, “solicit, or attempt to 24 solicit, business or patronage from any Customer for whom Office Keepers has 25 performed Services during the twelve (12) months prior to the termination of this 26 agreement[.]” Doc. 31 at 3. The contracts also prohibited Plaintiffs, during the same 12- Breach of Contract. 27 28 1 Office Keepers does allege that Plaintiffs breached restrictive covenants in their contracts with Office Keepers. That claim is addressed next. -6- 1 month period, from soliciting “any employees or other independent contractors or agents 2 of Office Keepers to work for any person or entity which performs the Services.” Id. 3 Office Keepers argues that Plaintiffs are breaching these restrictive covenants by 4 soliciting its customers and independent contractors. 5 “The validity of a restrictive covenant is determined by its reasonableness.” Phx. 6 Orthopaedic Surgeons, Ltd. v. Peairs, 790 P.2d 752, 758 (Ariz. Ct. App. 1989), 7 disapproved of on other grounds by Valley Med. Specialists v. Farber, 982 P.2d 1277 8 (Ariz. 1999). A restrictive covenant is reasonable and therefore enforceable by injunction 9 where (1) the restraint does not exceed that necessary to protect the employer’s legitimate 10 interest, (2) the restraint would not cause undue hardship to the employee, and (3) the 11 restraint would not cause harm to the public interest. See id. at 757. “In the commercial 12 context, it is clear that employers have a legitimate interest in retaining their customer 13 base.” Valley Med. Specialists, 982 P.2d at 1284. 14 Office Keepers has not shown that it is likely to succeed on its claim that the 15 restrictive covenants are necessary to protect its legitimate interest in retaining its 16 customer base. As noted above, Plaintiffs are soliciting future business from entities that 17 subcontract janitorial services to a wide number of companies like Office Keepers. 18 Soliciting such business does not necessarily interfere with Office Keepers’ relationship 19 with these customers, and the Court therefore cannot conclude that the restrictive 20 covenants are necessary to protect Office Keepers’ legitimate interest. Phx. Orthopaedic 21 Surgeons, 790 P.2d at 757. As noted above, Office Keepers does assert that Plaintiffs 22 persuaded LandCorp to terminate its relationship with Office Keepers, but Office 23 Keepers was unable to present any clear evidence of this fact. 24 The same is true of the covenant that prohibits solicitation of Office Keepers’ 25 independent contractors. Because they are independent contractors who can work for 26 more than one company, soliciting them does not necessarily mean that they will abandon 27 or even reduce their work for Office Keepers, and Office Keepers therefore has not 28 shown that it has a legitimate interest in prohibiting their solicitation. -7- 1 For these reasons, Office Keepers has not shown that it is likely to prevail on its 2 claim that the restrictive covenants protect legitimate interests and are enforceable. 3 III. Conclusion. 4 Because Office Keepers has not shown that it is likely to prevail on any of the four 5 claims addressed in its motion, the Court concludes that Office Keepers has not shown 6 that it is entitled to the extraordinary remedy of a preliminary injunction. The Court need 7 not address the other requirements for such an injunction.2 8 IT IS ORDERED that Office Keepers’ motion for a preliminary injunction 9 (Doc. 31) is denied. The temporary restraining order previously entered by the Court 10 11 (Doc. 42) is dissolved. Dated this 26th day of February, 2018. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Under Ninth Circuit law, a party can also obtain a preliminary injunction by raising serious questions and showing that the balance of hardships tips sharply in its favor. Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d 1281, 1291 (9th Cir. 2013). Office Keepers has not argued that it is entitled to relief under this standard, but even if it did, the Court would deny relief. Given the facts set forth above, the Court cannot conclude that the balance of hardships tips sharply in Office Keepers’ favor. -8-
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