Stormwater Systems, Inc. v. Reitmeyer, No. 2:2014cv02472 - Document 19 (E.D. Cal. 2014)
Court Description: MEMORANDUM, OPINION and ORDER; denying 9 Motion for TRO. Signed by Chief Judge Morrison C. England, Jr. on 12/1/2014. (Deutsch, S)
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Stormwater Systems, Inc. v. Reitmeyer Doc. 19 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 12 STORMWATER SYSTEMS, INC., dba SAFE DRAIN, INC., a California corporation, et al. 13 14 15 16 17 Plaintiffs, No. 2:14-cv-0472-MCE-CKD MEMORANDUM AND ORDER v. DOUGLAS REITMEYER, an individual, et al., Defendants. 18 This case presents a complex dispute among former business associates. On 19 October 21, 2014, Stormwater Systerms, Inc. (“Stormwater”) filed a complaint against 20 Douglas Reitmeyer (“Reitmeyer”). ECF No. 1. Thereafter, on November 12, 2014, 21 Plaintiffs Stormwater dba Safe Drain, Inc. (“Safe Drain”), John Deming (“Deming”), and 22 Safe Drain International, Inc. (“International”) (collectively “Plaintiffs”) filed the operative 23 First Amended Complaint (“FAC”) against Reitmeyer, Michael Brasberger, Sr. 24 (“Brasberger, Sr.”), Michael Brasberger, Jr. (“Brasberger, Jr.”) and the Brasbergers’ 25 company ASHMB, LLC (collectively “Defendants”). ECF No. 5. On November 20, 2014, 26 thirty days after the filing of the initial complaint and eight days after they filed the FAC, 27 Plaintiffs filed the instant Application for a Temporary Restraining Order (“Application”). 28 ECF No. 9. Reitmeyer filed an opposition to the Application on November 24, 2014. 1 Dockets.Justia.com 1 ECF No. 13. On November 25, 2014, the Court held a hearing at which counsel for 2 Plaintiffs and Reitmeyer appeared. 1 At the conclusion of the hearing, the Court orally 3 denied Plaintiffs’ Application. ECF No. 17. This Memorandum and Order serves as the 4 Court’s formal ruling on the matter. Any conflict between this Memorandum and Order 5 and the Court’s oral decision shall be resolved according to this Memorandum and 6 Order. 7 8 BACKGROUND 9 10 Thus far, the Court has heard from Plaintiffs and only one Defendant. Although 11 there is little agreement among the parties about the events that have transpired over 12 the past year, the Court’s very basic understanding of the facts follows. 13 Deming has conducted business through Safe Drain 2 since approximately 2000, 14 selling storm drain catch basins that capture pollutants and contaminants before they 15 can enter the sewer system. FAC, ECF No. 5 ¶¶ 14, 16. Deming used the domain 16 <safedrain.com>. Id. ¶ 37. In late 2013, Deming and Reitmeyer formed International, a 17 Nevada corporation, to sell the drains through ten regional offices that correspond to the 18 regional divisions established by the Environmental Protection Agency (“EPA”). Id. ¶ 22. 19 Each regional office would be run by a regional sales director, who would earn 60% of 20 the profits generated by drain sales Id. ¶ 24. Safe Drain would receive the remaining 21 profits. Id. Brasberger, Sr. and Brasberger, Jr. are regional sales directors of two 22 regional offices. Id. ¶ 25. 23 By mid-2014, business relations between Deming and Reitmeyer had started to 24 deteriorate. Plaintiffs allege that at an early July 2014 meeting, Deming and others, 25 including Brasberger, Sr., confronted Reitmeyer about his alleged misuse of corporate 26 27 1 It appears that neither the Brasbergers nor ASHMB, LLC, had been served with a summons and FAC at the time of the hearing. ECF No. 12. 2 28 Deming changed the name of the business to Stormwater Systems, Inc. due to other pending litigation. 2 1 funds. Id. ¶ 43. On July 7, 2014, Deming and another regional sales manager, 2 Benjamin “Buzz” Holmes, incorporated a new company called Safe Drain International 3 Delaware with the purpose of selling drains without Reitmeyer’s interference. Id. ¶ 47. 4 The Brasbergers and ASHMB were involved in this new company. Id. ¶ 48. 5 Also during this time, Plaintiffs learned that Reitmeyer transferred the 6 <safedrain.com> domain into his own name in January 2014. Id. ¶ 43. Moreover, 7 Reitmeyer threatened to keep the domain until he “got what he wanted.” Id. ¶ 44. On 8 July 20, 2014, Deming took steps to rectify this alleged malfeasance by writing to the 9 domain agent, GoDaddy, and explaining that the domain name at issue had been taken 10 illegally. Id. ¶ 45. GoDaddy was nonetheless unable to assist Deming due to the 11 passage of time since the domain was transferred. Id. ¶ 46. Consequently, on July 24, 12 2014, attorney Lawrence Townsend, who had represented International and eventually 13 filed the initial complaint in this action, wrote to Reitmeyer about his allegedly unlawful 14 acts in connection with the domain name. Opp’n, ECF No. 14-1, Ex. 20. Townsend’s 15 missive noted that Reitmeyer’s “liability for such a clear case of cybersquatting under 16 federal law is not only an injunction and transfer of the domain name, but also statutory 17 damages up to $100,000 and an award of Safe Drain’s attorneys’ fees.” Id. (emphasis 18 added). 19 Shortly after the formation of Safe Drain International Delaware, Deming’s 20 relationship with the Brasbergers also began to sour. Indeed, by October 2, 2014, and 21 in some instances much earlier, Plaintiffs allege Deming learned that Brasberger, Jr. 22 (1) terminated Deming’s administrative rights to the Customer Relationship Management 23 System (“CRM”), which cut off Deming’s ability to control marketing, customer service, 24 and sales of the company’s extensive customer base, ECF No. 5 ¶ 49; (2) had been 25 preventing Deming from accessing contacts and leads in the CRM systems for months 26 prior, id. ¶ 50; (3) took control of the website and substituted his personal contact 27 information for all but two of the ten EPA regions, including Deming’s region, id. ¶ 53; 28 and (4) altered the site so all leads would be sent to Brasberger, Jr. alone, id. ¶ 54. 3 1 According to Plaintiffs, on October 4, 2014, Deming met with Brasberger, Sr. and 2 Holmes in an attempt to resolve their issues related to the control of the business. Id. ¶ 3 59. Deming asserts that at the meeting the parties agreed that Defendants “would 4 release all control of accounting, the CRM system,…the domain and website, and all 5 other facets of…corporate operations” on October 6, 2014. Id. ¶ 64. Plaintiffs also claim 6 that this meeting resulted in Defendants strong arming Deming into signing an 7 agreement, a copy of which has not been provided to the Court, without giving him 8 adequate time to read it or consult with a lawyer. Id. ¶¶ 61-65. 9 According to Plaintiffs, October 6th came and went and Defendants did not 10 perform their end of the bargain. Rather, they refused to return control of the website, 11 domain, CRM system, and accounting, and also terminated Plaintiffs’ control over the 12 business’ Facebook page and changed all contact information thereon. Id. ¶¶ 66-67. In 13 addition, according to Plaintiffs, beginning in mid-October Defendants began telling third 14 parties that Deming was unable to pay his bills, had not filed corporate tax returns and 15 that Safe Drain, Inc. was a defunct corporation. Id. ¶¶ 73, 82-83. 16 On October 19, 2014, Reitmeyer allegedly contacted Palm Tree, the 17 <safedrain.com> website manager, and indicated he owned and controlled the domain 18 for the protection of himself and other investors. Id. ¶ 73. Additionally, Deming alleges 19 that on this date Defendants took control of all <safedrain.com> emails, including 20 Deming’s personal account, and began sending emails to customers while posing as 21 Deming. ECF No. 9 at 8. 22 23 STANDARD 24 25 Issuance of a temporary restraining order, as a form of preliminary injunctive 26 relief, is an extraordinary remedy, and Plaintiffs have the burden of proving the propriety 27 of such a remedy. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). In general, 28 the showing required for a temporary restraining order and a preliminary injunction are 4 1 the same. Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 2 n.7 (9th Cir. 2001). 3 The party requesting preliminary injunctive relief must show that “he is likely to 4 succeed on the merits, that he is likely to suffer irreparable harm in the absence of 5 preliminary relief, that the balance of equities tips in his favor, and that an injunction is in 6 the public interest.” Winter v. Natural Resources Def. Council, 555 U.S. 7, 20 (2008); 7 Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (quoting Winter). The 8 propriety of a TRO hinges on a significant threat of irreparable injury that must be 9 imminent in nature. Caribbean Marine Serv. Co. v. Baldridge, 844 F.2d 668, 674 10 (9th Cir. 1988). 11 Alternatively, under the so-called sliding scale approach, as long as the Plaintiffs 12 demonstrate the requisite likelihood of irreparable harm and show that an injunction is in 13 the public interest, a preliminary injunction can still issue so long as serious questions 14 going to the merits are raised and the balance of hardships tips sharply in Plaintiffs’ 15 favor. Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-36 (9th Cir. 2011) 16 (concluding that the “serious questions” version of the sliding scale test for preliminary 17 injunctions remains viable after Winter). 18 Mandatory injunctions are subject to heightened scrutiny even beyond that 19 normally applied to preliminary injunctive relief generally. Dahl v. HEM Pharms. Corp., 20 7 F.3d 1399, 1403 (9th Cir. 1993). They are particularly disfavored and will not be 21 granted unless extreme or very serious harm will result. Marlyn Pharms., Inc. v. Mucos, 22 571 F.3d 873, 879 (9th Cir. 2009). The court must accordingly be “extremely cautious” 23 about granting such relief. Martin v. Int’l Olympic Comm., 740 F.2d 670, 675 (9th Cir. 24 1984). 25 ANALYSIS 26 27 In their Application, Plaintiffs ask that the Court order Defendants to: 28 1. Refrain from holding funds properly belonging to Plaintiffs; 5 1 2 3 2. Refrain from withdrawing or transferring any funds from any account of Plaintiffs; 3. Refrain from holding property properly belonging to Plaintiffs, including, but 4 not limited to, demo units, valves, and other items of equipment; sales 5 literature (brochures and cut sheets) and/or trade show displays; 6 4. Refrain from holding proprietary software and rights properly belonging to 7 Plaintiffs, including, but not limited to, email accounts, Customer 8 Relationship Management (“CRM”) software, and Facebook account(s); 9 5. Refrain from any and all use of the “Safe Drain” mark, including, but not 10 limited to, advertising, websites, social media, production, sales, and/or 11 solicitations; 12 6. Refrain from contacting any vendors of Plaintiffs; 13 7. Provide Plaintiffs with the names of all customers or potential customers 14 who have made inquiry as to any Safe Drain product from and after 15 January 1, 2014; 16 8. Refrain from harassing Deming or any other staff member of Plaintiffs; 17 9. Refrain from providing access to any person, other than Plaintiffs, of any 18 19 20 21 Safe Drain proprietary information, funds, and accounts; and 10. Refrain from contacting any customer of Plaintiffs and/or from using Plaintiffs’ customer lists. ECF No. 9-1 at 21-22. Plaintiffs are not simply seeking to maintain the status quo until a preliminary 22 injunction can be issued. Instead, the relief requested seeks to alter business 23 relationships and would involve a substantial alteration of the parties’ respective 24 positions. Therefore, this Application is for a mandatory injunction, which the Court must 25 view with heightened scrutiny. Dahl, 7 F.3d at 1403. 26 A careful analysis of the sequence of events shows that Plaintiffs have been less 27 than expeditious about bringing this dispute to the Court’s attention. While many of the 28 facts are in dispute, Plaintiffs’ counsel repeatedly represented at the hearing that 6 1 Deming was aware by October 19, 2014, that Defendants had wrested full control of the 2 business from him and had no interest in compromising. On October 21, 2014, Plaintiffs 3 finally filed a two count complaint naming Reitmeyer as the sole defendant. ECF No. 1. 4 The initial complaint was not accompanied by an application for a TRO or preliminary 5 injunction. Neither did Plaintiffs immediately seek a TRO when they filed the operative 6 First Amended Complaint twenty-two days later, ECF No. 5; rather, they waited an 7 additional eight days to file their TRO application, ECF No. 9. Plaintiffs’ delay militates 8 against the showing of imminent and irreparable harm required for preliminary injunctive 9 relief. Because Plaintiffs have not treated this situation as an emergency over the 10 11 preceding months, the Court will not grant relief on an emergency basis. Additionally, given the convoluted nature of this case, the widely divergent factual 12 position taken by the parties, and the fact that a number of the Defendants have not 13 even yet been served, adjudicating this matter on an emergency basis, without full and 14 complete briefing, is unwarranted and unwise. See Martin, 740 F.2d at 675. 15 16 CONCLUSION 17 18 Given the considerations outlined above and for the reasons stated on the record 19 during the November 25, 2014 hearing, Plaintiffs’ Application for a Temporary 20 Restraining Order, ECF No. 9, is DENIED. 3 21 IT IS SO ORDERED. 22 DATED: December 1, 2014 23 __________ __________ ___________ __________ ____ MORRISON C. ENGL N LAND, JR, C CHIEF JUDG GE UNITED ST TATES DIS STRICT COU URT 24 25 26 27 28 3 As the Court noted on the record during the TRO hearing, the parties’ actions between now and the hearing on Plaintiffs’ Application for a Preliminary Injunction, which is currently set for January 22, 2015, will be heavily scrutinized. 7
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