THOMAS B. McCOUN, III, Magistrate Judge.
THIS MATTER is before the court on
Plaintiffs, Leedom Management Group, Inc. ("LMG") and Paymaxx Pro LLC ("Paymaxx"), initiated this action against Defendants, Susan Perlmutter ("Perlmutter" or Defendant) and Sigma Payment Processing, Inc. ("Sigma"), on September 16, 2011, by the filing of an eight-count Complaint for damages and injunctive relief (Doc. 1).
LMG and Paymaxx (collectively "Leedom" or "Plaintiffs") are Florida corporations with their principal place of business in Sarasota, Florida. Paymaxx is in the business of providing ACH and credit card processing services to the automotive industry. LMG is the common paymaster for Paymaxx. Defendant, Susan Perlmutter, a former employee of Leedom, is residing in or about Murfreesboro, Tennessee. Sigma is a Texas corporation that is alleged to have been formed by a competitor of Leedom's that works with Perlmutter to solicit Leedom's clients.
By their motion for preliminary injunction and as argued at the hearing, Plaintiffs urge the court grant injunctive relief to preclude Defendant from improperly using and/or disclosing their confidential proprietary trade secret information and from soliciting their clients. Perlmutter commenced employment with Leedom in February 2011 under the terms of an Offer Letter. Plaintiffs maintain that during the course of Perlmutter's employment with them, she was privy to confidential, proprietary and trade secret business information including business analyses and conditions, customer lists (active and potential), proprietary computer applications, financial health, forecasts, internal operations, strategic planning, sales trends, pricing structure, cost algorithms and other systems designed for Paymaxx's operations. Plaintiffs contend that during her employment and after her termination, Perlmutter violated the non-disclosure, non-solicitation, and non-compete provisions of her February 14, 2011, Offer Letter. They urge her violative conduct is causing irreparable harm to their reputation and goodwill in the industry and that such harm cannot be otherwise remedied by an award of damages. Because Perlmutter's actions threaten to injure or completely destroy the competitive advantage Leedom has worked so hard to develop over time and at great expense, Plaintiffs argue that injunctive relief will not be adverse to the public interest and therefore should be granted.
In response to Plaintiffs' arguments, Perlmutter urges that Plaintiffs' request for injunctive relief must be denied as their proof is wholly lacking, and by their litigious conduct, she is the one being harmed because Plaintiffs' tactics are substantially impairing her from servicing her own clients. As a consequence, Defendant suggests that the $10,000 bond required to be posted by Plaintiffs is woefully inadequate as the TRO is costing her nearly $100,000 per month in business. (Doc. 40). Perlmutter's argument is supported by her affidavit. See (Doc 38-1). Therein she claims ownership of a sizable "book of business," namely, the customer list attached to the Offer Letter, which is at the heart of this dispute. According to Perlmutter, the book of business was developed by her in over fifteen years of industry experience and while she was a principal with MBK, with whom she previously worked. The consideration paid to MBK to release this book of business to her when she left to join Leedom was paid by Perlmutter and not Leedom. Thus, she claims she liquidated a 26% interest in stock plus release of a $65,000 loan.
Certain facts are wholly undisputed. Perlmutter was previously employed as a principal with MBK, a Tennessee company also engaged in the payment processing industry. She terminated her employment with MBK to come work for Leedom as Vice President of Paymaxx. In conjunction with her employment with Leedom, Perlmutter executed an Offer Letter (Doc. 17-1) that provided in pertinent part as follows:
(Doc. 17-1 at 2-3).
By the terms of the Offer Letter, Defendant was eligible for certain incentives, as set forth in the Schedule of Incentives (Doc. 17-1 at 4), based on her representation that she would "bring to Leedom the customers identified in Exhibit A" to the letter (Doc. 17-1 at 5-12). The parties wholly dispute who may service this book of business at present. Plaintiffs urge that these customers became Leedom's upon Defendant's employment with Leedom. Perlmutter contends that this "book of business" is hers, as evidenced by the fact that she developed it while she was employed with MBK and she was the one, not Leedom, who paid MBK to release the book of business to her upon termination of her employment with MBK.
As for the alleged violations, Plaintiffs maintain that shortly after commencing her employment, Perlmutter began engaging in conduct violative of the restrictive covenants of the Offer Letter. Specifically, Plaintiffs claim the following violations:
(1) Perlmutter downloaded, printed and/or copied potential and active customer lists developed by Leedom;
(2) Perlmutter formed two corporations that were actively competing against Leedom in the payment processing industry and she used Leedom's confidential client list to solicit customers on behalf of these companies;
(3) Perlmutter copied and confiscated Leedom documents containing private and confidential information for use at her competing businesses;
(4) Perlmutter used Leedom resources to process "her" clients payments;
(5) Perlmutter solicited and used current Leedom employees to aid her in her business ventures.
Leedom terminated Perlmutter June 17, 2011. (Doc. 17-3). Plaintiffs allege that after her termination, Perlmutter continued to violate the restrictive covenants of the Offer Letter in the following ways:
(6) using Leedom's confidential information, Perlmutter commenced a telephone and email campaign to solicit Leedom clients to leave Leedom and instead do business with her, one of her competing companies, and/or Sigma;
(7) Perlmutter began soliciting Leedom clients on September 12, 2011, on behalf of Sigma, requesting that they terminate their relationship with Leedom and move to Sigma;
(8) Perlmutter provided competitors, AutoStar and Sigma, with Leedom's proprietary and confidential business information;
(9) Perlmutter made false representations to AutoStar which resulted in AutoStar terminating its agreement with Leedom;
(10) Perlmutter formed another competing company Perlpay Systems;
(11) Perlmutter continues to use Leedom's confidential information including business analyses and conditions, customer lists (active and potential), proprietary computer applications, financial health, forecasts, internal operations, strategic planning, sales trends, pricing structure, cost algorithms and other systems designed for Paymaxx's operations;
(12) Perlmutter improperly implied in emails that Paymaxx is non-compliant with PCI and NACHA compliance standards.
In further support of the alleged on-going violations, Plaintiff proffers certain emails from clients indicating contact by Perlmutter. See (Docs. 42-1, 42-2).
In general, by her submissions and argument, Defendant responds that Plaintiffs' contentions are wholly inaccurate or wholly unsupported. By her declaration (Doc. 38), she denies that she accessed or even had access to Paymaxx's confidential client spreadsheets and she urges that Plaintiffs have no evidence to support these allegations, thus their allegations are pure speculation. By her averments, her clients were maintained by her in a separate "Act" database that never before existed for Paymaxx clients. The Paymaxx client list was kept in a separate system to which she denies having access. Defendant denies that Plaintiffs had any prior contracts with any of the clients she brought with her to Paymaxx.
Defendant argues that Plaintiffs fail to offer any evidence of improper solicitation of Paymaxx clients by her and she denies the same. While she admits to doing business currently in Tennessee, she argues there is no showing that this violates any of the restrictive covenants. Plaintiffs are not conducting business in Tennessee. While she does not acknowledge that she is doing business with clients on her book of business, it appears her position is that even if she is, she is free to do so because they are her clients, not Plaintiffs' clients.
As for the particular allegations related to AutoStar, while admitting she had post-termination contact with it, she denies the allegations of tortious misconduct and urges that AutoStar terminated its relationship with Leedom for several business reasons, including dissatisfaction with Leedom's performance, the relationship not producing anticipated revenue, and a dispute over audits and monies owed to AutoStar. In support, she proffers the affidavit of Allen Dobbins, president of AutoStar Solutions. (Doc. 38-2). According to Perlmutter, in December 2011, Plaintiffs raised their prices globally, sought onerous three-year contracts with substantial liquidated damage clauses from their clients, and advised many of their clients of this litigation and their own litigious nature. It is for these reasons, and not anything she has done, that Leedom has experienced disruption in their business.
As for the allegations concerning Sigma, she admits post-termination work with Sigma as an independent contractor for a brief period of time but denies that she did so within fifty miles of a Paymaxx location or by using any information from Paymaxx separate from her book of business. She submits records from Texas showing that Sigma was formed as a Texas corporation in July 11, 2011. (Doc. 39-3).
Perlmutter does not deny that while with Leedom, she formed Perlwood Holdings, LLC, dba "PerlPayments." She claims this was only done when Plaintiffs declined to do business with certain of her customers, those not in the auto sales business, who followed her from MBK. By her account, she was forced to create a company to service those customers rejected by Leedom. As soon as Jim Garvin, Leedom's COO, agreed to reverse course and offer service to these customers, she dissolve Perlwood Holdings. She urges that Paymaxx never did service these customers as promised, and thus the only clients at issue would be ones that Paymaxx expressly declined in any event. Defendant files copies of the incorporation documents reflecting Perlwood Holdings, LLC, was formed as a Florida limited liability company on March 25, 2011, and voluntarily dissolved two months later on May 26, 2011. (Doc. 39-2).
Defendant does deny that she "solicited" Leedom employees as urged by Plaintiffs. Rather, Woods and Duncan both came with her from MBK as part of what she brought to Paymaxx. They became principals in Perlwood Holdings because of their familiarity with the customers and helped service those customers that Leedom was refusing to serve.
Finally, Defendant files the incorporation documents for Perlpay Systems, LLC, which was registered with the State of Tennessee as a limited liability company on October 20, 2011, subsequent to her employment with Paymaxx. (Doc. 39-1). By her declaration (Doc. 38-1) and her affidavit (Doc. 44-2), she acknowledges residing in Tennessee and conducting business currently in Tennessee as an employee of Perlpay Systems, LLC, but claims to be outside the 50-mile radius of anywhere Plaintiffs are conducting business. She further attests she has complied with the TRO, has not solicited Plaintiffs' clients, and has not disclosed any trade secret or confidential information at any time. By her affidavit, she has not destroyed, erased, or otherwise disposed of any records or documents, including electronically stored materials that relate in any way to her business or personal finances. (Doc. 44-2).
Rule 65 of the Federal Rules of Civil Procedure governs the entry of a preliminary injunction. The purpose of a preliminary injunction is to maintain the status quo until the court can enter a final decision on the merits of the case. United States v. DBB, Inc., 180 F.3d 1277 (11th Cir. 1999); see also Canal Auth. of Fla. v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974). A party seeking entry of a preliminary injunction must establish (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction is not granted; (3) the threatened injury to the moving party outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr, S.A., 320 F.3d 1205 (11th Cir. 2003); McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998); Haitian Refugee Ctr., Inc. v. Baker, 949 F.2d 1109, 1110 (11th Cir. 1991).
"[A] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the `burden of persuasion' as to each of the four prerequisites." Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000) (quoting All Care Nursing Serv., Inc. v. Bethesda Mem'l Hosp., Inc., 887 F.2d 1535, 1537 (11th Cir. 1989)). The entry of a preliminary injunction is "the exception rather than the rule, and plaintiff must clearly carry the burden of persuasion." Siegel, 234 F.3d at 1179 (citations omitted). A plaintiff may support its motion for a preliminary injunction by setting forth allegations of specific facts in affidavits. M.D. Fla. R. 4.06(b)(2), 4.06(b)(3). In considering a motion for preliminary injunctive relief, a district court may rely on affidavits and hearsay materials that would not be admissible as evidence for entry of a permanent injunction. Levi Strauss & Co. v. Sunrise Int'l Trading Inc., 51 F.3d 982, 985 (11th Cir. 1995).
As to the first element, Plaintiffs must establish that they have a substantial likelihood of succeeding on the merits. Florida law recognizes that courts may enforce "contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business. . . ." Fla. Stat. § 542.335(1). There is no real argument that these limitations are unreasonable as to time and area. By my consideration, Plaintiffs adequately demonstrate the violations alleged above at (2), (6), (7) and (12) in relation to three of the restrictive covenants. Thus, as indicated above, by the Offer Letter, Perlmutter is restricted from directly or indirectly, individually or for any other entity or person, doing any of the following:
(Doc. 17-1 at 3).
On the other hand, Defendant's formation and operation of Perlpay Systems in Tennessee does not violate this restrictive provision as Plaintiffs admittedly do not operate in the State of Tennessee, and thus her activity there falls outside the geographic scope of the restrictive covenant. That said, to the extent that Defendant, through Perlpay, is soliciting or attempts to solicit Leedom clients or otherwise discloses information not in the best interests of Leedom, the restrictive covenants are invoked.
There is also some limited evidence demonstrating that Defendant breached that provision of the Offer Letter that precluded her from disclosing any information relating to Leedom that does not reflect the best interests of Leedom. Plaintiffs have proffered an email communication from Defendant to undisclosed recipients dated December 2, 2011, (Doc. 17-6 at 2-4), wherein Defendant represents that cancelling Paymaxx Pro will allow the email recipients to eliminate "arbitrary" compliance fees which suggests that Paymaxx Pro is charging arbitrary compliance fees and was clearly not offered by Defendant in the best interests of Plaintiffs. The further advice that the recipient should always request proof of compliance with NACHA authorization standards arguably suggests Paymaxx Pro may not be compliant. These statements, made via email, were disseminated within a year of her termination and accordingly violate provision (b) of the restrictive covenants.
As for provision (c) of the Offer Letter which prohibits solicitation by Defendant of "any entity which Leedom has established a substantive business relationship for a period of 1 year following the termination of [her] employment with Leedom," there is ample evidence to support the conclusion that Defendant has solicited and attempted to do business with clients from the book of business she brought to and serviced while she was employed by Plaintiffs. Such is demonstrated by Defendant's email solicitations to South Jersey Auto (Doc. 17-4 at 2), and Defendant's email to Barrett Motors (Doc. 17-6 at 4).
For these reasons, there is sufficient proffer of evidence to support the conclusion that Defendant has violated one or more of these restrictive covenants and Plaintiffs are likely to succeed on the merits of such claims.
Otherwise, I find Plaintiffs' proof lacking at this point to establish a violation of the two remaining covenants prohibiting Defendant from divulging any confidential or trade secret information of Leedom's and further prohibiting her from inducing or attempting to induce any employee from terminating his or her employment with Leedom. And, concerning the numerous other alleged violations urged by the Plaintiffs, at present, I conclude either that such do not warrant injunctive relief or that they fail for want of sufficient proof. As noted above, several of the Defendant's alleged violations are asserted "upon information and belief" or otherwise lack any evidentiary proof other than an unsupported statement in Chris Leedom's affidavit. With only speculation and supposition on these points, Plaintiffs fail to meet their heavy burden in order to justify an award of injunctive relief. See Touchston v. McDermott, 120 F.Supp.2d 1055 (M.D. Fla. 2000) (quoting 11A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2949 (2d ed.1995) ("[W]hen the primary evidence introduced is an affidavit made on information and belief rather than on personal knowledge, it generally is considered insufficient to support a motion for preliminary injunction.")). Thus, the alleged violations set forth above and identified as (1), (3), and (8)-(11) are not sufficiently supported on this motion to allow for the conclusion that Plaintiffs are substantially likely to succeed on the merits of those claims.
On the issues of whether (4) Perlmutter used Leedom resources to process "her" clients' payments and (5) Perlmutter solicited and used current Leedom employees to aid her in her business ventures, if all that occurred is what is proffered, such does not warrant injunctive relief. This limited proffered evidence relates to Defendant servicing certain of her former clients after she joined Plaintiffs when she was purportedly told that Leedom would not service them and her formation of Perlwood Holdings, LLC, to address these clients. Even assuming Plaintiffs can prove these violations and more, if this is the full extent of the matter, these are past and discrete events and would not merit injunctive relief. As for such violations, an award of damages offers the appropriate remedy.
On the issue of irreparable harm, Plaintiffs claim that Defendant's conduct has caused and continues to cause damage to the goodwill they enjoy in the payment processing industry as well as to destroy the competitive advantage they have obtained through considerable efforts and expenditures of money. It is true that, "[g]rounds for irreparable injury include loss of control of reputation, loss of trade, and loss of goodwill." Ferrellgas Partners, L.P. v. Barrow, No. 04-12548, 2005 WL 1736276, at *7 (11th Cir. July 26, 2005) (quoting Pappan Enters., Inc. v. Hardee's Food Sys., Inc., 143 F.3d 800, 805 (3d Cir. 1998)). To qualify as irreparable harm, the asserted injury "must be neither remote nor speculative, but actual and imminent." Siegel, 234 F.3d at 1176-77 (quoting Ne. Fla. Chapter of the Ass'n of Gen. Contractors v. City of Jacksonville, Fla., 896 F.2d 1283, 1285 (11th Cir. 1990)). "An injury is `irreparable' only if it cannot be undone through monetary remedies." City of Jacksonville, 896 F.2d at 1285. The possibility that adequate compensatory relief will be available at a later date, in the ordinary course of litigation, weighs heavily against injunctive relief. Id. A plaintiff may, however, establish irreparable injury where there is a loss of customer goodwill because the damages flowing from such losses are difficult to calculate. See Ferrero v. Associated Materials, Inc., 923 F.2d 1441, 1449 (11th Cir. 1991).
I find this a fairly close issue. As discussed, much of what Plaintiffs complain about is adequately remedied by damages should Plaintiffs prevail. On this motion, Plaintiffs do not demonstrate harm to their corporate reputation. However, their proffered evidence does suggest some damage to the goodwill they have apparently developed in the payment processing industry as well as confusion within that industry by reason of this dust-up and Defendant's efforts, post-termination, in securing business away from Plaintiffs. Defendant has demonstrated that she is not above using information she no doubt learned while under Plaintiffs' employ against them and such would likely continue absent an injunction. Such harms are better addressed by injunctive relief and thus I conclude that this factor weighs in favor of the Plaintiffs.
A balancing of the equities here is fairly a wash. Absent any showing of wrongful conduct on their parts, Plaintiffs should be allowed the benefits of their agreement with Defendant which included servicing her book of business as their customers. On the other hand, entry of an injunction deprives Defendant of clients which she developed over time and brought with her to Plaintiffs at some considerable cost. However, Defendant is not left without the means to continue to work in this trade as her current operation in Tennessee in and of itself does not violate the restrictive covenants and need not be wholly enjoined.
Finally, the entry of a preliminary injunction would not disserve the public interest in enforcing contracts. The award of an injunction serves to provide both parties the benefit of the bargain they made. Enforcement of the same on this record does no harm to the public interests.
For the foregoing reasons, it is recommended that Plaintiffs' Motion for Preliminary Injunction against Defendant Perlmutter (Doc. 17) be
1) Perlmutter, and all other persons or entities in active concert or participation with her are enjoined from engaging in or assisting others in engaging in a business or endeavor of the same nature and kind as that of Plaintiffs for a period not to exceed one year from the date of entry of the TRO
2) Perlmutter, and all other persons or entities in active concert or participation with her, are enjoined from soliciting any entity or person with which or whom Plaintiffs have established a substantive business relationship as well as any current employee of Plaintiffs for a period not to exceed one year from the date of entry of the TRO;
3) Perlmutter, and all other persons or entities in active concert or participation with her, are enjoined from divulging Plaintiffs' confidential, proprietary or trade secret information and from otherwise disclosing any information relating to Plaintiffs to any entity for any reason, unless such disclosure is on Plaintiffs' behalf and reflects the best interests of Plaintiffs for a period not to exceed one year from the date of entry of the TRO;
4) Perlmutter, and all other persons or entities in active concert or participation with her, are enjoined from destroying, altering, concealing or disposing of any records and communications, in whatever format, related to her employment with Plaintiffs, her self-employment during and after her employment with Plaintiffs, her business relationships and practices and her personal and business finances for a period not to exceed one year from the date of entry of the TRO.
5) By my consideration, the bond posted under the TRO should be increased to at least $50,000.00.
Respectfully submitted on this
Failure to file written objections to the proposed findings and recommendations contained in this report within fourteen (14) days from the date of its service shall bar an aggrieved party from attacking the factual findings on appeal and a de novo determination by a district judge. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72; M.D. Fla. R. 6.02; see also Fed. R. Civ. P. 6; M.D. Fla. R. 4.20.
