Southeast X-Ray, Inc. v. Spears

929 F. Supp. 2d 867, 2013 WL 882437, 2013 U.S. Dist. LEXIS 32141
CourtDistrict Court, W.D. Arkansas
DecidedMarch 8, 2013
DocketCase No. 2:13-CV-02026
StatusPublished
Cited by3 cases

This text of 929 F. Supp. 2d 867 (Southeast X-Ray, Inc. v. Spears) is published on Counsel Stack Legal Research, covering District Court, W.D. Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southeast X-Ray, Inc. v. Spears, 929 F. Supp. 2d 867, 2013 WL 882437, 2013 U.S. Dist. LEXIS 32141 (W.D. Ark. 2013).

Opinion

MEMORANDUM OPINION AND ORDER

P.K. HOLMES, III, Chief Judge.

Before the Court are Plaintiffs Southeast X-Ray, Inc. (“SXR”) and Real Radiology, LLC’s (“Real Radiology”) Motion for Preliminary Injunction (Doc. 5) and Brief in Support (Doc. 6). The parties appeared before the Court on February 26, 2013 and on March 1, 2013 for a hearing on the Motion. In advance of the hearing, Plaintiffs submitted a Pre-hearing Memorandum (Doc. 21), and Defendants Michael Spears (“Spears”), Kenneth Dean Vaughan (“Vaughan”), and Rapid Radiology, Inc. (“Rapid Rad”) also submitted a Pre-hearing Memorandum (Doc. 22). During the hearing, both Plaintiffs and Defendants called witnesses and introduced evidence. At the conclusion of the hearing, Plaintiffs renewed their Motion for Leave to Serve Written Discovery (Doc. 7) and to require Defendants to provide expedited responses to such discovery. The Court had previously denied Plaintiffs’ Motion for Leave to Serve Written Discovery on February 15, 2013, but had specifically stated in the text of the order that Plaintiffs could renew their expedited discovery Motion at the time of the preliminary injunction hearing.

After considering the briefs submitted by the parties on Plaintiffs’ Motion for Preliminary Injunction, as well as the evidence and testimony presented at the two-day hearing, the Court is now ready to render its decision. To the extent that this Order conflicts with any oral pronouncement made during the hearing, the findings in this Order are the final and binding findings of the Court in the current matter.

I. Background

Plaintiff SXR is an Arkansas corporation that performs digital radiology and medical testing for clients nationwide. Until the close of 2012, part of SXR’s business comprised teleradiology services. Teleradiology involves the electronic transfer of x-rays and other medical images from hos[870]*870pitáis and clinics to data servicing liaisons, such as SXR, which in turn contract with licensed radiologists who read and interpret the images. According to SXR, its unique software interface and database allow it to manage workflow and provide technical and billing support and assistance to clients and radiologists. SXR also expends time and effort in assisting radiologists in obtaining the proper state credentialing required by clients.

Plaintiff Real Radiology is a Colorado limited liability company that acquired the teleradiology portion of SXR’s business through an asset purchase agreement on December 31, 2012. On January 9, 2013, Real Radiology secured copyright protection for SXR’s integrated computer software program, called PACSRat, and provided SXR with a license to use the software. Real Radiology now performs teleradiology services for SXR’s former clients.

Defendant Spears is a former employee of SXR who, while still employed by SXR, started a new teleradiology business called Rapid Rad, which is also a Defendant in this case. Rapid Rad is an Arkansas corporation that provides teleradiology services in direct competition with Real Radiology. Spears worked for SXR from January of 2009 until he was fired on December 21, 2012. During the four years that Spears worked for SXR, he primarily served as Director of Marketing for the company.

Defendant Vaughn was hired by SXR in January of 2005 and served as Director of Information Technology. During Vaughn’s time at SXR, he was instrumental in developing the PACSRat software that SXR used in conducting its teleradiology business. Vaughn voluntarily quit his job at SXR as of February 1, 2013, in order to work for Spears’s business, Rapid Rad.

During the course of Spears’s and Vaughn’s employment with SXR, both men signed a document called a “Confidentiality, Privacy and Security Agreement.” (Doc. 1-2). This Agreement states in relevant part that “[t]he browser interface, printed worksheets and other written, printed, graphic, or electronically recorded data furnished by SXR ... are the proprietary property of SXR.” Id. The Agreement further states that employees of SXR “will maintain in confidence and will not, directly or indirectly, disclose or use, either during or after the term of this agreement, any proprietary or confidential information or know-how belonging to SXR ... whether or not it is in written format or electronic format ...” Id.

Spears and Vaughn also signed “Non-Disclosures” during the course of their employment with SXR. (Doc. 1-5). The Non-Disclosures defined several items as SXR’s “confidential information” or “trade secrets,” including computer processes, computer programs and codes, client contact information, customer lists, customer preferences, financial information, and radiologist contact information. Id. By the plain terms of the Non-Disclosures, Spears and Vaughn agreed they were prohibited from utilizing the designated confidential information or trade secrets of SXR for personal gain, from sharing such information with former SXR employees, or from improperly using or disclosing SXR’s confidential information or trade secrets, even if no benefit were derived from such use or disclosure. Id.

On January 25, 2013, Plaintiffs filed in this Court a Complaint (Doc. 1) alleging that all Defendants infringed Plaintiffs’ copyright in the PACSRat software; stole Plaintiffs’ trade secrets in violation of the Arkansas Trade Secrets Act, Ark.Code Ann. § 4-75-601, et seq.; engaged in unfair competition and tortious interference [871]*871with Plaintiffs’ contractual relationships; and violated the Arkansas Deceptive Trade Practices Act, Ark.Code Ann. § 4-88-107. The Complaint further alleges that Spears and Vaughn breached their fiduciary duties and employment contracts with SXR.

On the same date Plaintiffs filed their Complaint, they also filed a Motion for Preliminary Injunction (Doc. 5), asking the Court to enjoin Defendants’ use of Plaintiffs’ copyrighted software and trade secrets. Defendants denied all wrongdoing. The Court then held a two-day evidentiary hearing on the Motion for Preliminary Injunction on February 26, 2013 and March I, 2013, receiving evidence and hearing testimony from a number of witnesses. After Plaintiffs concluded their case, the Court announced from the bench that Plaintiffs had failed to establish their entitlement to a preliminary injunction on the basis of Defendants’ alleged copyright infringement, principally because Plaintiffs had failed to put on proof that either SXR or Real Radiology would be irreparably harmed, whether through the loss of current customers, prospective customers, or profits, if the injunction did not issue. The Court reserved its ruling on whether Defendants should be enjoined from using Plaintiffs’ trade secrets.

II. Standard of Review

“The primary function of a preliminary injunction is to preserve the status quo until, upon final hearing, a court may grant full, effective relief.” Ferry-Morse Seed Co. v. Food Corn, Inc., 729 F.2d 589, 593 (8th Cir.1984). “A preliminary injunction is an extraordinary remedy and the burden of establishing the propriety of an injunction is on the movant.” Roudachevski v. All-Am. Care Centers, Inc., 648 F.3d 701, 705 (8th Cir.2011).

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929 F. Supp. 2d 867, 2013 WL 882437, 2013 U.S. Dist. LEXIS 32141, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southeast-x-ray-inc-v-spears-arwd-2013.