American Equipment Systems LLC v. Chester

CourtDistrict Court, D. Utah
DecidedNovember 29, 2023
Docket2:23-cv-00680
StatusUnknown

This text of American Equipment Systems LLC v. Chester (American Equipment Systems LLC v. Chester) is published on Counsel Stack Legal Research, covering District Court, D. Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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American Equipment Systems LLC v. Chester, (D. Utah 2023).

Opinion

THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH

AMERICAN EQUIPMENT SYSTEMS, LLC, MEMORANDUM DECISION AND ORDER GRANTING IN PART AND Plaintiff, DENYING IN PART [4] PLAINTIFF’S MOTION FOR v. EXPEDITED DISCOVERY

TREVOR CHESTER, an individual; ROGER Case No. 2:23-cv-00680-DBB-DBP RAY, an individual; and CRANETECH, INC., a California corporation, District Judge David Barlow

Defendants.

Before the court is Plaintiff American Equipment Systems, LLC’s (“AES”) Motion for Expedited Discovery.1 AES seeks to conduct expedited discovery against Defendants CraneTech, Inc. (“CraneTech”), Trevor Chester (“Mr. Chester”), and Roger Ray (“Mr. Ray”) (collectively “Defendants”) to support its motion for a preliminary injunction.2 For the reasons below, the court grants AES’s motion in part.3 BACKGROUND AES is a Utah company that conducts “overhead crane installation, inspection, repair, and maintenance services” on customized crane and hoist equipment.4 In early 2015, AES hired Mr. Chester as a service technician.5 CraneTech, a company that also provides overhead crane

1 Mot. for Expedited Discovery, ECF No. 4, filed Sept. 29, 2023. 2 Pl.’s Mot. for Prelim. Inj. (“Prelim Inj. Mot.”), ECF No. 3, filed Sept. 29, 2023. 3 Having considered the briefing and relevant law, the court decides the motion without oral argument. See DUCivR 7-1(g). 4 Decl. of Troy Vellinga (“Vellinga Decl.”) ¶ 5, ECF No. 3-1, filed Sept. 29, 2023. 5 Id. at ¶ 18. and hoist solutions,6 recruited Mr. Chester in April 2023.7 Two months later, Mr. Chester

resigned from AES and started working for CraneTech.8 AES hired Mr. Ray as a service technician in 2006.9 Mr. Ray resigned from AES on September 15, 2023, and became a CraneTech employee three days later.10 Since June 2023, six AES customers have transferred their business to CraneTech and eleven AES employees have left AES for CraneTech.11 On September 29, 2023, AES sued Defendants for trade secret misappropriation, interference with economic and contractual relationships, and breach of contract.12 AES alleges Mr. Chester and Mr. Ray agreed to abide by non-competition and non-solicitation restrictive covenants designed to “prohibit unfair competition and interference with AES’s relationships with its customers and employees.”13 Specifically, AES asserts Mr. Chester and Mr. Ray signed

these agreements with AES’s predecessors and AES “subsequently assigned or purchased” those agreements.14 AES further alleges CraneTech conspired with Mr. Chester and Mr. Ray to recruit AES employees and solicit AES customers,15 that Mr. Chester misappropriated AES trade secrets for CraneTech’s benefit,16 that Mr. Chester and Mr. Ray relied on trade secrets to recruit

6 Id. at ¶ 48. 7 Decl. of Trevor Chester (“Chester Decl.”) ¶ 9, ECF No. 34-2. 8 Vellinga Decl. ¶¶ 46–48. 9 Id. at ¶ 30. 10 Id. at ¶¶ 68, 71; Decl. of Roger Ray (“Ray Decl.”) ¶ 10, ECF No. 34-3. 11 Vellinga Decl. ¶¶ 51–52. 12 Compl. ¶¶ 83–114. 13 Id. at ¶¶ 19–20, 27–28, 37–38; see Vellinga Decl. ¶¶ 23–28, 34–38. 14 Compl. ¶¶ 28, 38; Ex. B & C to Vellinga Decl. AES acquired substantially all of assets of American Equipment, Inc. and American Crane Group LLC, and acquired the equity of 4 Olio Crane Group, LLC. Compl. ¶ 16. 15 Compl. ¶¶ 53–54, 73–74. 16 Id. at ¶ 69. AES employees and solicit AES customers,17 and that the two former AES employees will

continue to do so.18 AES sought a preliminary injunction on September 29, 2023, to “enforce[] the contractual promises made by Chester and Ray in their respective restrictive covenant agreements and prohibit[] Defendants from misappropriating . . . trade secrets” for CraneTech’s benefit.19 AES filed its motion for expedited discovery the same day.20 It moves for leave to serve Defendants interrogatories and requests for document production and to require answers and responses within ten days.21 The matter is fully briefed.22 DISCUSSION Generally, “[a] party may not seek discovery from any source before the parties have conferred as required by Rule 26(f)[.]”23 But a court may exercise its broad discretion to “alter

the timing, sequence, and volume of discovery[,]” including granting expedited discovery.24 The party seeking expedited discovery has the burden to show “good cause for the requested departure from usual discovery procedures.”25 “Good cause may be found where the plaintiff’s need for expedited discovery outweighs the possible prejudice or hardship to the defendant.”26 For example, good cause may exist “where a party seeks a preliminary injunction” or “where

17 Id. at ¶¶ 55, 65, 75. 18 Id. at ¶¶ 65, 75. 19 Prelim Inj. Mot. 3. 20 See Mot. for Expedited Discovery. 21 See Ex. A to Mot. for Expedited Discovery, ECF No. 4-1. 22 See ECF Nos. 33, 38. 23 Fed. R. Civ. P. 26(d)(1). 24 Qwest Commc’ns Int’l, Inc. v. WorldQuest Networks, Inc., 213 F.R.D. 418, 419 (D. Colo. 2003); see Washington v. Correia, 546 F. App’x 786, 787 (10th Cir. 2013) (unpublished) (finding that “[i]t was well within the court’s discretion to decline to authorize expedited discovery”). 25 Sunstate Equip. Co., LLC. v. Equip. Share, No. 2:19-cv-00784, 2020 WL 429479, at *2 (D. Utah Jan. 28, 2020) (citation omitted). 26 Hawley v. Bowser, CIV No. 06-004, 2006 WL 8444279, at *4 (D.N.M. Apr. 7, 2006). physical evidence may be consumed or destroyed with the passage of time.”27 A pending

injunction motion alone may not be enough to merit expedited discovery.28 Courts typically apply several factors in determining whether to grant the request: “(1) whether a preliminary injunction is pending; (2) the breadth of the discovery requests; (3) the purpose for requesting the expedited discovery; (4) the burden on the defendants to comply with the requests; and (5) how far in advance of the typical discovery process the request was made.”29 “These factors are not binding, and the [c]ourt has discretion on whether to authorize expedited discovery.”30 The court discusses each factor in turn.

27 Doe 1 v. Miles, No. 1:18-cv-00121, 2019 WL 201567, at *1 (D. Utah Jan. 15, 2019) (citations omitted); see Pod- Ners, LLC v. N. Feed & Bean of Lucerne Ltd. Liab., 204 F.R.D. 675, 676 (D. Colo. 2002) (“[E]xpedited discovery may be appropriate in cases where the plaintiff seeks a preliminary injunction.” (citing Revlon Consumer Prods. Corp. v. Jennifer Leather Broadway, Inc., 858 F. Supp. 1268, 1269 (S.D.N.Y.1994), aff’d, 57 F.3d 1062 (2d Cir. 1995))). 28 See Colo. Mont. Wyo. State Area Conf. of the NAACP v. U.S. Election Integrity Plan, No. 22-cv-00581, 2022 WL 1443057, at *1 (D. Colo. May 6, 2022) (citing Qwest Commc’ns, 213 F.R.D. at 419–20). 29 Grayeyes v. Cox, No. 4:18-cv-00041, 2018 WL 3421340, at *1 (D. Utah July 13, 2018). Defendants appear to contend the court should apply the so-called Notaro factors. See Opp’n 1 (citing Notaro v. Koch, 95 F.R.D. 403, 405 (S.D.N.Y. 1982)). “Notaro’s factors are (1) irreparable injury; (2) a probability of success on the merits; (3) a connection between the expedited discovery and avoidance of irreparable harm; and (4) evidence that injury that will result without the expedited discovery looms greater than the injury that the defendant will suffer if the expedited relief is granted.” Falcon Indus., Inc. v. Combat Optical, Inc., No. CIV-12-679, 2012 WL 13076232, at *1 (D.N.M. Sept. 26, 2012) (citing Notaro, 95 F.R.D. at 405). By considering the Notaro factors, the court would effectively apply a heightened preliminary injunction standard. But courts in this circuit overwhelmingly apply the less restrictive “good cause standard[.]” See, e.g., Ainstein AI, Inc. v. ADAC Plastics, Inc., No. 23-2166, 2023 WL 3568661, at *3 (D. Kan. May 19, 2023); U.S. Election Integrity Plan, 2022 WL 1443057, at *2; Knight v. Oklahoma ex rel. Okla. Dep’t of Pub. Safety, No.

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