Prime Group Inc v. Dixon

CourtDistrict Court, W.D. Washington
DecidedApril 28, 2021
Docket2:21-cv-00016
StatusUnknown

This text of Prime Group Inc v. Dixon (Prime Group Inc v. Dixon) is published on Counsel Stack Legal Research, covering District Court, W.D. Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Prime Group Inc v. Dixon, (W.D. Wash. 2021).

Opinion

1 HONORABLE RICHARD A. JONES

8 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 9 AT SEATTLE

11 PRIME GROUP, INC., a Washington 12 corporation, Case No. 2:21-cv-00016-RAJ

13 Plaintiff,

14 v.

ORDER DENYING MOTION FOR 15 DONALD DIXON, an individual, PRELIMINARY INJUNCTION 16 Defendant.

17 .

18 19 I. INTRODUCTION 20 This matter comes before the Court on Plaintiff Prime Group, Inc.’s (“Plaintiff” or 21 “Prime”) motion for preliminary injunction. Dkt. # 6. Having considered the briefing, 22 relevant law, and the record, the Court finds that oral argument is unnecessary. For the 23 reasons below, the Court DENIES the motion. 24 II. BACKGROUND 25 Prime is an electrical contractor based in Bellevue, Washington. Dkt. # 6 at 2. It 26 has historically done most of its work in six counties—three in Washington (King 27 County, Pierce County, and Snohomish County) and three in California (Alameda 1 County, Santa Clara County, and San Mateo County) (collectively the “Six Counties”)— 2 and it is expanding into other areas. Id. On February 24, 2016, Prime acquired a 3 company called AMS and issued shares of its company to certain AMS employees as part 4 of the transaction. Id. at 4. Defendant was among these employees who signed the 5 Joinder and First Amendment to Shareholders Agreement, under which he agreed to be 6 bound by the Shareholders Agreement (“Agreement”). Id. The Agreement contained 7 several restrictive covenants, including a noncompete, a non-solicitation of customers or 8 suppliers, and a no-hiring covenant. Id. The noncompete states the following:

9 15.1. Covenant Not to Compete. Each Shareholder agrees that during such time 10 as such Shareholder holds any Shares and for a period of three (3) years after such date, or if longer, one (1) year following an Employment Termination with respect 11 to such Shareholder (the “Restricted Period”), the Shareholder will not, directly or indirectly, enter into the employment of, render services to, or acquire any interest 12 whatsoever… in any business, trade or occupation similar to or in competition 13 with the business of the Company or its Affiliates within the State of Washington or any other states where the Company or its Affiliates conduct business 14 operations, except where such activities are for or on behalf of the Company or its 15 Affiliates.

16 Dkt. # 1-1 at 12. The non-solicitation covenant states the following:

17 15.2. Nonsolicitation of Customers or Suppliers. Each Shareholder agrees that 18 during the Restricted Period, such Shareholder shall not call upon or solicit, either for the Shareholder or any other person or firm other than the Company or its 19 Affiliates any of the customers or suppliers of the Company or its Affiliates for the 20 purpose of the sale, service or distribution of any of the products or services offered by the Company or its Affiliates. 21 Id. The no-hiring covenant contained in the agreement proscribes the following: 22

23 15.3 No Hiring Covenant. During the Restricted Period, each Shareholder shall not, directly or indirectly, take any action to hire or assist in hiring any employee 24 of the Company or its Affiliates, for the Shareholder’s benefit or the benefit of any 25 other Person, including without limitation: (1) identifying to any subsequent employer of Shareholder or such employer’s agents or any other Person or Persons 26 who have special knowledge concerning inventions, processes, methods or confidential affairs of the Company or its Affiliates, (2) commenting to any 27 subsequent employer of Shareholder or such employer’s agents, or any such other 1 Person, about the quantity or quality of work, special knowledge or personal 2 characteristics of any Person who is still employed by the Company or its Affiliates, and (3) providing such information to a prospective employer during 3 interviews preceding possible employment.

4 Id. at 12-13. The agreement also contained a confidentiality provision: 5 16.1 In General. Each Shareholder agrees that such Shareholder will not, either 6 for profit or otherwise, both during and after the term of this Agreement, disclose 7 any Confidential Information of the Company or its Affiliates to any person, firm, corporation or other entity, or make use of such Confidential Information, directly 8 or indirectly, for the benefit of such Shareholder or for the benefit of any firm, corporation or entity other than the Company or its Affiliates. 9

10 Id. at 13. The Agreement is governed under the laws of Washington. Id. at 18. 11 At the time of the acquisition, Defendant was promoted to the role of Group 12 Executive and was invited to join the Ownership Group, which provided “unrestricted 13 access to Prime’s trade secrets, proprietary knowledge, and customer information.” Id. at 14 5. As an executive-level manager in Prime’s San Jose, California office, Defendant “had 15 full control and oversight of all personnel, field operations, estimating, bidding, contract 16 negotiation, personnel hiring and management, and field operations.” Dkt. # 10 ¶ 5. As a 17 shareholder, Defendant would attend Prime’s annual shareholders meetings. Id. ¶ 8. The 18 last shareholder meeting that Defendant attended was on October 9, 2020, which was six 19 weeks prior to his termination date. Id. 20 During his employment with Prime, Defendant managed the company’s data 21 center. Id. at 7. Prime created the data center in 2018 and hired Ms. Aimee Bowers to 22 lead it. Id. The data center group was staffed over the course of 12 to 18 months. Id. 23 The group’s work involved “researching markets and opportunities, contacting and 24 soliciting potential customers, and devising cost models.” Id. Prime allocated 25 $1,050,000 for Defendant’s data center subgroup in 2019. Id. Prime claims that the data 26 27 1 center group was on track to generate $8.8 million in revenue and $625,000 in profit in 2 2020. Id. 3 Between October 15, 2020 and November 4, 2020—a period of twenty days—five 4 Prime employees who worked directly for Defendant in the data center subgroup 5 terminated their employment and began to work for Sprig, a direct competitor, shortly 6 thereafter. Id. at 10. Sprig is a company based in the Bay Area of California whose 7 “industry segments are nearly identical to Prime’s within the region.” Id. According to 8 Defendant, four of the employees who left to work for Sprig comprised Defendant’s 9 entire data center group and their departure “devastated Prime’s start-up data center 10 group.” Id. Prime alleges that it learned that Defendant had been in talks with Sprig to 11 leave his position with Prime and begin a new role at Sprig as part of its new data center 12 group. Id. at 10. On October 29, 2020, Defendant told Prime that he did not intend to 13 adhere to the restrictive covenants in his agreement. Id. 14 On November 20, 2020, Prime terminated Defendant for cause and informed him 15 that accepting employment with Sprig would violate the noncompete covenant of the 16 shareholder agreement. Id. at 10-11. On December 1, 2020, Defendant informed Prime, 17 through counsel, of his belief that the noncompete was unenforceable. Id. at 11. 18 Defendant’s counsel also denied the Defendant was responsible for Sprig hiring the entire 19 data center team at Prime. Dkt. # 9 ¶ 3. He represented that Defendant would not work 20 for a company with an office based in the Six Counties. Id. 21 On December 9, 2020, Prime’s counsel responded to Defendant’s counsel, stating 22 that Prime intended to enforce the noncompete covenant with respect to employers with 23 offices based in the Six Counties or employers that bid on work in the Six Counties. Id. ¶ 24 4. Prime’s counsel provided a list of employers for whom Defendant could not work, 25 including Sprig, as well as a list of employers for whom Defendant could work without 26 objection from Prime.

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Prime Group Inc v. Dixon, Counsel Stack Legal Research, https://law.counselstack.com/opinion/prime-group-inc-v-dixon-wawd-2021.