Website Mgt. Systems v. Benjamin Daileda

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 5, 2021
• Docket: 20-15784
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 5 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

WEBSITE MANAGEMENT SYSTEMS, No. 20-15784 LLC, a Nevada Limited Liability Company, D.C. No. 2:20-cv-00213-JCM-BNW Plaintiff-Appellant,

and MEMORANDUM*

KJR MANAGEMENT COMPANY, LLC,

Plaintiff,

v.

BENJAMIN DAILEDA; et al.,

Defendants-Appellees.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued and Submitted November 20, 2020 Submission Vacated November 23, 2020 Resubmitted July 21, 2021 Pasadena, California

Before: PAEZ and OWENS, Circuit Judges, and ENGLAND,** Senior District

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Morrison C. England, Jr., United States Senior District Judge for the Eastern District of California, sitting by designation. Judge.

Website Management Systems, LLC (“Appellant”) appeals from the district

court’s denial of its request for a preliminary injunction. We have jurisdiction

under 28 U.S.C. § 1292(a)(1), and we affirm.

Appellant’s business engages in search-engine optimization (“SEO”) for its

clients. SEO aims to increase visibility of a client’s website in the results of word

searches on Internet search engines. The individually named Defendants, who

formerly were employed by Appellant, left to form a competing SEO business,

Defendant Yes We Will, Inc. (“YWW”). Appellant then instituted the present

action and sought preliminary injunctive relief on grounds that 1) Defendants

misappropriated and are using its confidential and proprietary trade secrets,

including its processes for identifying customer leads and SEO methodologies; and

2) the individual Defendants are subject to non-competition agreements which

prevent them from competing with Appellant through YWW. The district court

denied the injunction, finding both that Appellant had failed to identify any

actionable trade secret and that the non-competition protection sought was likely

overbroad and unenforceable.

A preliminary injunction should ordinarily not issue where the probability of

success on the merits is low. Johnson v. Cal. State Bd. of Acct., 72 F.3d 1427,

1430 (9th Cir. 1995). The district court determined here that Appellant’s trade

2 secret claim was not likely to succeed on the merits, and accordingly did not

warrant injunctive relief, because Appellant failed to identify any actual trade

secret.

We review that determination for an abuse of discretion, All. for the Wild

Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011), and find no such abuse

here. The district court found that none of the “processes” or “techniques”

identified by Appellant differed substantially from those generally employed in the

SEO industry such that they could comprise trade secrets, and that determination

was not an unreasonable one. Appellant was unable to articulate how any viable

trade secret was implicated before the district court or on appeal, despite being

afforded numerous opportunities to do so.

We turn to whether Defendants should have been preliminarily enjoined

from competing with Appellant, as provided in the non-competition agreements.

We conclude that the challenge to denial of preliminary injunctive relief as to that

claim is moot.1 The district court denied the requested injunction, which sought to

1 We vacated submission of this appeal pending the Nevada Supreme Court’s resolution of Duong, M.D. v. Fielden Hanson Isaacs Miyada Robison Yeh, Ltd., 478 P.3d 380 (Nev. 2020). In Duong, the Nevada Supreme Court held that if an otherwise unenforceable noncompetition agreement contains a blue-penciling provision, a court may blue-pencil the agreement. Id. at 381. The court did not address whether NRS 613.195(5)—which requires courts to blue pencil unenforceable noncompetition agreements—applies retroactively. The Nevada Supreme Court filed its opinion in Duong on December 31, 2020, and Appellant notified the court of the opinion on March 18, 2021.

3 enjoin Defendants from “providing SEO services for one year,” because the

likelihood of success on the merits was questionable. At oral argument prior to

ruling on the motion for a preliminary injunction, the district court characterized

any injunction it would consider as being “for one year from the time that

[Defendants] left the company,” and counsel assented to that limitation. In

supplemental briefing to the district court, Appellant reiterated being

“comfortable” requesting a one-year period for the injunction.

Defendants left the employ of Appellant between December 20, 2019 and

January 3, 2020. Any one-year period of non-competition extending from those

dates expired not later than January 3, 2021. Generally, where events occur that

prevent an appellate court from granting any effective relief, an appeal should be

dismissed as moot. See, e.g., Matter of Combined Metals Reduction Co., 557 F.2d

179, 187 (9th Cir. 1977). This is because under Article III of the United States

Constitution, federal courts can “adjudicate only actual, ongoing cases or

controversies.” Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477 (1990). Here,

because the one-year period for which an injunction was sought has expired, the

appeal of the breach of contract claim is now moot and is no longer subject to

adjudication.

AFFIRMED.