United States District Court, D. Arizona
J.P. Morgan Securities LLC, Plaintiff,
Henry J. Krich, Defendant.
TEMPORARY RESTRAINING ORDER
DAVID G. CAMPBELL, District Judge.
On June 4, 2015, the Court held a hearing on Plaintiff's motion for a temporary restraining order ("TRO"). Doc. 1. After considering the evidence submitted by the parties and their written and oral arguments, the Court will grant the motion.
On May 1, 2015, Defendant Henry Krich resigned from his position as a Private Client Advisor for Plaintiff JPMorgan Chase Bank, N.A. and JPMorgan Securities, LCC (collectively "JPMS") in order to begin working for Wells Fargo Advisors, LCC. Doc. 1, ¶ 2. Krich worked for JPMS as a Financial Advisor from 2002-2007, as an Independent Financial Advisor from 2007-2012, and most recently as a Private Client Advisor. Id., ¶ 36. His position required him to work closely with clients to create a customized, comprehensive investment program. Id., ¶ 37. At the time he resigned, Krich was managing approximately $96 million in assets spread across 470 accounts. Id., ¶ 38. JPMS maintains that Krich did not independently develop most of this business, but was instead referred to existing customers for investment advice. Id., ¶¶ 39-40. When Krich was hired, he had 20 preexisting clients. Id., ¶ 42.
In 2002, as a condition of his employment, Krich signed a Confidentiality and Non-Solicitation Agreement (the "Agreement") in which he agreed not to use confidential information obtained during his employment and to refrain from soliciting JPMS's clients for 12 months after termination of his employment. Id., ¶¶ 3, 22. The Agreement requires Krich to protect the confidentiality of JPMS's trade secrets and confidential information, which includes names, addresses, and telephone numbers of customers and prospective customers; account information; specific customer needs; information regarding established business relationships; software; and any other information JPMS deemed confidential. Id., ¶ 23. Krich also agreed to comply with JPMS's Code of Conduct, which prohibits employees from soliciting JPMS customers after termination of their employment. Id., ¶ 20.
On May 29, 2015, JPMS filed this action alleging that Krich "improperly utilized confidential client information to solicit both clients he developed while at [JPMS] as well as other JPMS clients." Id., ¶ 48. The complaint asserts that "multiple JPMS clients have advised JPMS that they have been solicited by Krich and wish to remain clients of JPMS, " and that Wells Fargo has been assisting Krich's solicitation. Id., ¶¶ 48, 49. The complaint asserts eight causes of action: (1) Breach of Contract - the Confidentiality and Non-Solicitation Agreement, (2) Misappropriation of Trade Secrets, (3) Breach of Fiduciary Duty, (4) Tortious Interference with Business Relationships, (5) Unjust Enrichment, (6) Unfair Competition, (7) Replevin, and (8) Conversion. JPMS seeks a TRO to preserve the status quo pending arbitration of its claims before the Financial Industry Regulatory Authority ("FINRA").
II. Legal Standard.
A TRO is "an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original). A TRO may be granted if the movant "establishes that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Defense Council, Inc., 555 U.S. 7, 20 (2008). Where, as here, the party requests a TRO pending arbitration, a district court may "issue interim injunctive relief on arbitrable claims if interim relief is necessary to preserve the status quo and the meaningfulness of the arbitration process - provided, of course, that the requirements for granting injunction relief are otherwise satisfied." Toyo Tire Holdings of Am. v. Continental Tire N.A., Inc., 609 F.3d 975, 981 (9th Cir. 2010).
JPMS asks the Court to prohibit Krich from using confidential customer information gained during his employment to solicit customers "whom he became aware of or with whom he had direct contact while an employee of [JPMS]." Doc. 3 at 8.
A. Likelihood of Success on the Merits.
In order to demonstrate a likelihood of success on the merits, JPMS must show that the Agreement is enforceable and that Krich has violated it by using JPMS's confidential information or by soliciting its clients.
1. Enforceability of the Agreement.
"The validity of a restrictive covenant is determined by its reasonableness." Phoenix Orthopedic Surgeons, Ltd. v. Peairs, 790 P.2d 752, 758 (Ariz.Ct.App. 1989). A restrictive covenant is reasonable and therefore enforceable by injunction where (1) the restraint does not exceed that necessary to protect the employer's legitimate interest, (2) the restraint would not cause undue hardship to the employee, and (3) the restraint would not cause harm to ...