Vacation Hotdeal Cos., Inc. v. Easy Timeshare Resales

• Court: Superior Court of Maine
• Decided: March 10, 2011
• Docket: CUMcv-11-054
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CU1t'IBERLAND, ss CIVIL ACTION DOCKET NO. ~ 11-054J!e! n .r: ,.., \ 11, 1111 ...- r , , i\/I - 3 /V.' f ~.~ ! c· ,..J I: I v/v I i../V' C J "i ' VACATION HOTDEAL I COMPANIES, INC., et al.,

Plaintiffs ORDER ON PLAINTIFFS' v. MOTION FOR PRELIMINARY INJUNCTION EASY TIMESHARE RESALES, LLC, et al.,

Defendants

Before the court is a motion for preliminary injunction pursuant to M.R. Civ. P.

65. Plaintiffs Vacation Hotdeal Companies, Inc. and SellMyTimeShareNow, LLC

(SMTN) request the court enjoin defendant Easy Timeshare Resales, LLC1 (ETR) from:

(1) employing or having any other relationship with defendant Laing; (2) soliciting any

business from any SMTN customer based on information obtained directly or indirectly

from defendant Laing; (3) soliciting or hiring any current or former employees of

plaintiff SMTN based on information or contacts provided by defendant Laing; and (4)

using or disclosing plaintiff SMTN's Confidential Information, including, but not

limited to lead information obtained or derived from plaintiff SMTN. (Ver. Compl. at

17.) Plaintiff SMTN further requests that the court order defendant ETR to destroy any

and all SMTN documents after providing plaintiff SMTN with forensic images of such

documents. 2 (Id.)

1 Consideration of the plaintiffs' motion for a preliminary injunction against defendant Dennis Laing was deferred by plaintiffs. 2 Attached to a letter dated February 24, 2011 from Attorney Shepherd, plaintiff SMTN provided defendant ETR with a proposed "agreed-to" order on its motion for preliminary injunction. (PIs.' Rep. Mot. for Prelim. Inj., Ex. B.) The relief in the proposed order is similar to the relevant relief requested in the plaintiffs' verified complaint. (See id.) Defendant ETR objects to any preliminary injunction, but if one were to issue,

requests that the injunction be limited as follows:

1. Defendant ETR will not engage in any employment activity or any other ownership arrangement with defendant Laing for the duration of defendant Laing's non-compete agreement. 2. Defendant ETR will not knowingly solicit any business from any customer based on lead information allegedly obtained by defendant Laing from the plaintiffs and transferred to defendant ETR. 3. Defendant ETR will not be prevented in any way from soliciting business from any customer whose information it has obtained from independent sources regardless of whether these customers' data were at any time in the possession of the plaintiffs. 4. To the extent defendant ETR finds in its office documents belonging to the plaintiffs, defendant ETR shall return those documents to the plaintiffs. 3

(De£. ETR's Resp. to PIs.' Reply Mot. for Prelim. Inj. at 6.)

BACKGROUND

According to the verified complaint, plaintiff SMTN, a wholly-owned subsidiary

of plaintiff Vacation Hotdeal Companies, Inc., is a real estate time-share listings, sales

and rentals company, which operates a timeshare website. (Ver. Compi. errerr 4, 8.) In or

about 2009, defendant Laing created defendant ETR as a direct competitor to plaintiff

SMTN, where defendant Laing had worked from March to October 2007. (Ver. Compi.

errerr 12, 14-15.) In June 2010, defendant Laing sought reemployment with plaintiff

SMTN, asserting that defendant ETR was no longer an active company and that he was

no longer involved with defendant ETR. (Ver. Compi. errerr 16-17.) Based on his

representations, plaintiff SMTN rehired defendant Laing and made his employment

3 Defendant ETR does not admit that it knowingly employed Mr. Laing in violation of an alleged agreement between defendant Laing and the plaintiffs. (Def. ETR's Resp. to PIs.' Reply Mot. for Prelim. Inj. at 6.) Defendant ETR does not admit that it has ever used lead information allegedly obtained by defendant Laing from the plaintiffs or that defendant Laing ever furnished defendant ETR such lead information. (IQ.) Defendant ETR has maintained that, to its knowledge, it has no documents in their possession, custody, or control that belong to the plaintiffs. (IQ.)

2 contingent upon his entering a non-disclosure, non-competition and non-solicitation

agreement (the "Agreement"). (Ver. CompI. errerr 18, 21-25; Ver. CompI., Ex. A.)

Defendant ETR never signed or was a party to the Agreement. (Ver. CompI., Ex. A.)

Plaintiff SMTN alleges that defendant Laing remained involved with defendant

ETR after he was rehired at plaintiff SMTN. (Ver. CompI. err 26.) Plaintiff SMTN

believes that defendant Laing provided leads he took from plaintiff SMTN to defendant

ETR. (Ver. CompI. err 28.) Moreover, within days of his rehire at plaintiff SMTN,

plaintiff SMTN alleges that defendant Laing began removing confidential customer

leads from plaintiff SMTN's computer system and provided those leads to defendant

ETR. (Ver. CompI. errerr 27-28.) In addition, plaintiff SMTN alleges that defendant ETR

had a number of SMTN leads in its database, at least one of which had been assigned to

defendant Laing. (Ver. CompI. err 29.) Plaintiff SMTN alleges that at least one SMTN

lead had been contacted by defendant ETR; one customer signed with defendant ETR

but had been led to believe he was dealing with plaintiff SMTN. ag.)

In September 2010, plaintiff SMTN confronted defendant Laing about his

connections with defendant ETR and later terminated his employment. (Ver. CompI. err

30.) Since September 2010, plaintiff SMTN alleges that defendant ETR has continued to

rely upon the confidential customer lead information that defendant Laing allegedly

took from plaintiff SMTN. (Ver. CompI. err 32.) Plaintiff SMTN further alleges that

defendants ETR and Laing are suggesting incorrectly to plaintiff SMTN's customers that

defendant ETR is affiliated with plaintiff SMTN and the customers continued to believe

they were dealing with plaintiff SMTN. (Ver. CompI. err 33.)

In its verified complaint, plaintiff SMTN alleges causes of action for: (1) violation

of the Maine Uniform Deceptive Trade Practices Act against defendants ETR and Laing;

(2) violation of the Maine Uniform Trade Secrets Act against defendants ETR and Laing; 3 (3) tortious interference with prospective economic advantage against defendants ETR

and Laing; (4) tortious interference with plaintiff SMTN's contract with SMTN

employees against defendant ETR; (5) breach of contract against defendant Laing; (6)

breach of fiduciary duty against defendant Laing; (7) fraudulent misrepresentation

against defendant Laing; and (8) unjust enrichment against defendants ETR and Laing.

Plaintiff SMTN requests a preliminary and permanent injunction against defendants

ETR and Laing along with other relief.

Defendant ETR asserts that it was not aware of the Agreement between plaintiff

SMTN and defendant Laing. (Def. ETR's Opp. Mem. at 2-3.) Now that defendant ETR

is aware of the Agreement, defendant ETR states that it no longer employs defendant

Laing as a sales representative and he has voluntarily agreed to withdraw as a

shareholder of defendant ETR for as long as the Agreement remains in effect. (Def.

ETR's Opp. Mem. at 3; Dan Aff. at 11 24-25.) Further, ETR asserts that it has never

knowingly used any leads that belong to plaintiff SMTN. (Def. ETR's Op. Mem. at 3;

Dan Aff.127.)

If an order issues, the parties appear to agree that defendant ETR will be

enjoined from continuing its employment relationship with defendant Laing and that

he will no longer have ownership interest in ETR while the Agreement remains in

effect. (PIs.' Rep. Mot. for Prelim. Inj., Ex. B; Dan Aft. 11 24-25.) The parties also appear

to agree that defendant ETR will not knowingly solicit any business from any customer

based on lead information allegedly obtained by defendant Laing from plaintiff SMTN

and transferred to defendant ETR. (PIs.' Rep. Mot. for Prelim. Inj., Ex. B; Dan Aff. 127.)

Defendant ETR argues that an order enjoining defendant ETR from soliciting or hiring

any SMTN employee is overly broad. (See, g,g., Def. ETR's Resp. to PIs.' Rep. Mot. for

Prelim. Inj. at 7.) 4 DISCUSSION

I. Standard of Review

In order to succeed on a motion for a preliminary injunction, a moving party has

the burden of demonstrating

1) that plaintiff will suffer irreparable injury if the injunction is not granted, 2) that such injury outweighs any harm which granting the injunctive relief would inflict on the defendant, 3) that plaintiff has established a likelihood of success on the merits (at most, a probability; at least, a substantial possibility), 4) that the public interest will not be adversely affected by granting the injunction.

Ingraham v. Univ. of Maine, 441 A.2d 691, 693 (Me. 1982). These four criteria, however,

"are not to be applied woodenly or in isolation from each other; rather, the court of

equity should weigh all of these factors together in determining whether injunctive

relief is proper in the specific circumstances of each case." Dep't of Envtl. Prot. v.

Emerson, 563 A.2d 762, 768 (Me. 1989). For example, if the evidence of success on the

merits is clear, the showing of irreparable injury may be subject to less stringent

requirements. Id. (citation omitted).

II. Irreparable Injury

"An injury for which there is no adequate remedy at law is an irreparable

injury." Bar Harbor Banking & Trust Co. v. Alexander, 411 A.2d 74, 79 (Me. 1980).

Plaintiff SMTN alleges that further unauthorized use or disclosure of valuable

confidential or trade secret information constitutes irreparable harm to its goodwill and

usurps its corporate opportunities. (PIs.' Mem. Prelim. Inj. at 4.) The loss of a

business's goodwill and relationships may constitute irreparable injury if the damage is

not too speculative. Compare XWave New Eng. Corp. v. Ziegenfus, 2007 Me. Super.

LEXIS 102, *9-10 (Me. Super. Ct., May 18, 2007) with Coast to Coast Engineering Svcs. v.

5 Stein, 2006 Me. Super. LEXIS 264, *6-8 (Me. Super. Ct., Dec. 12, 2006). The injury to

plaintiff SMTN's business opportunities and goodwill is not too speculative and

plaintiff SMTN has established irreparable injury if this injunction is not granted and

defendant ETR were allowed to continue to employ defendant Laing. (See Ver. CompI.

errerr 12-13, 21, 23, 31-33; Brasier Af£. errerr 4-11; Cresta Af£. errerr 10-15.)

Any irreparable injury that could result if defendant ETR is not prohibited from

soliciting or hiring SMTN employees for the duration of defendant Laing's agreement is

speculative. "Hypothetical injury, even if significant, cannot be a basis for awarding

preliminary injunctive relief." Coast to Coast Engineering Svcs., 2006 Me. Super. LEXIS

264 at *8. Finally, plaintiff SMTN will not suffer irreparable injury if defendant ETR

simply returns plaintiff SMTN's customer leads that are allegedly in defendant ETR's

possession instead of taking a forensic image of such leads and destroying them.

III. Balancing of Harms

The harm to defendant ETR if this injunction issues does not outweigh the harm

to plaintiff SMTN if defendant ETR continues to employ defendant Laing, to allow him

to have an ownership interest in defendant ETR in violation of the Agreement, and to

use plaintiff SMTN's information. Any harm to plaintiff SMTN if defendant ETR

solicits or hires SMTN employees is speculative. Because plaintiff SMTN's leads can be

accessed only in SMTN computers in SMTN offices, this argument assumes that SMTN

employees will download SMTN information and remove it from the SMTN office,

conduct plaintiff SMTN alleges defendant Laing engaged in. • IV. Likelihood of Success on the Merits

A "likelihood of success on the merits" is flat most, a probability; at least, a

substantial possibility." Bangor Historic Track, Inc. v. Dep't of Agric., 2003 ME 140, err 9,

837 A.2d 129, 132. Plaintiff SMTN has established that there is at least a substantial 6 possibility that it will succeed on the merits of its claims against defendant ETR. There

is at least a substantial possibility that defendant ETR acted in violation of the Maine

Uniform Deceptive Trade Practices Act when it led plaintiff SMTN customers to believe

that defendant ETR is affiliated with plaintiff SMTN. 10 M.R.S. §§ 1212(1)(A), (C), & (L)

(2011).4 Plaintiff SMTN alleges that at least one customer was led to believe that

defendant ETR was affiliated with plaintiff SMTN. (Ver. CompI.

Prelim. Inj., Ex. A.)

Plaintiff SMTN has established that there is at least a substantial possibility that

defendant ETR misappropriated trade secrets. Native Maine Produce & Specialty

Foods, LLC v. Berrill, 2008 Me. Super. LEXIS 46, *4 (Me. Super. Ct. Feb. 11, 2008)

(customer lists may be trade secrets in certain limited circumstances); see 10 M.R.S. §

1542(4)(A) & (B) (2011); 10 M.R.S. § 1542(2)(B)(2)(iii) (2011) ("Misappropriation" is

defined as "[d]isclosure or use of a trade secret of another without express or implied

consent by a person who ... [a]t the time of disclosure or use, knew or had reason to

know that his knowledge of the trade secret was" derived from a person who owed a

duty to maintain the secrecy). Defendant Laing had a duty to keep plaintiff SMTN's

customer leads a secret pursuant to the Agreement. Plaintiff SMTN sent a cease and

desist letter to representatives of defendant ETR and to defendant Laing. (Ver. CompI.

4 Title 10 M.R.5. sections 1212(1)(A), (C), and (L) state: A person engages in a deceptive trade practice when, in the course of his business, vocation or occupation, he ... [plasses off goods or services as those of another; ... [clauses likelihood of confusion or of misunderstanding as to affiliation, connection or association with, or certification by, another; [or] [e]ngages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding. 10 M.R.S. §§ 1212(1)(A), (C), & (L) (2011).

7 S

which are identified as SMTN on the paper leads. (Ver. Compi.

9.)

V. Public Interest

Finally, any injunction will not adversely affect the public interest. Enforcement

of valid non-compete contracts is in the public's interest. XWave, 2007 Me. Super. LEXIS

102, at * 11 (Me. Super. Ct. May 18, 2007).

The entry is

The Plaintiffs' Motion for Preliminary Injunction is GRANTED. Defendant ETR is enjoined from (1) engaging in any employment activity or any other ownership arrangement with Defendant Laing for the duration of Defendant Laing's non-compete agreement; (2) knowingly soliciting any business from any customer based on lead information obtained by Defendant Laing from Plaintiff SMTN and transferred to Defendant ETR; and (3) using or disclosing Plaintiff SMTN's confidential information, including but not limited to Plaintiff SMTN lead information removed from Plaintiff SMTN worksite by Defendant Laing and any information in Defendant ETR's databases derived from Plaintiff SMTN's customer lead information.

Defendant ETR will return any document or information to Plaintiff SMTN that Defendant ETR has in its possession or custody or under its control, including but not limited to , ..,">_ "f \v\f\\i·~E., ..; Plaintiff SM~N's lead informati~n removed .from PI~n~ff_S~.~~r~~s,(,ior\"S 0,\1(:1:> SMTN workslte by Defendant Lamg and any mformation'.H:{\\\D.... ~ '1, Defendant ETR's databases derivesr from Plaintiff SMTN's ~.; ~; ~ \

customer lead information. ," ~"" ("" r"", " 'E'1·"1 ;i ..( 1(<> " '?"" ~ \1 .\r.'.~Y,1\ ~. ~< _r. .~~~ ~-r'"" ' .' .­

Date: March 10, 2011 Nancy Mills Justice, Superior Court

S The letter was addressed to defendant Laing and copies to Robert Dahl and Jason Tremblay. (Ver. Comp!., Ex. D.) Mr. Dall denies receiving the letter. (Dall Aff.

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