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TDBBS LLC v. Ethical Products Inc.

United States District Court, D. Arizona

February 28, 2019

TDBBS LLC, Plaintiff,
Ethical Products Incorporated, Defendant.


          Dominic W. Lanza United Slates District Judge

         Pending before the Court is the motion for a temporary restraining order (“TRO”) of Plaintiff TDBBS, LLC (“Plaintiff”). (Doc. 1, 3.) The motion was filed on February 25, 2019, and the Court held a hearing earlier today. As explained below, the TRO request will be denied, without prejudice to Plaintiff's separate request for a preliminary injunction.


         Plaintiff is a manufacturer of pet chews and treats. (Doc. 1 ¶ 17.) In March 2017, Plaintiff hired Timothy Fabits (“Fabits”) to serve as its vice president of sales. (Id. ¶ 30.) Fabits's employment with Plaintiff ended on May 31, 2018. (Id. ¶ 64.) Afterward, in or around August 2018, Fabits began working for Ethical Products, Inc. (“Ethical”). (Id. ¶ 103.) Plaintiff contends that Fabits stole confidential and/or trade secret information during his last few months of employment and provided that information to Ethical so it could enter the pet chews and treats market. (Id. ¶¶ 56-104.) The information included (1) “lost revenue” reports, which “contained detailed information showing, by product and consumer, any quantity differences between amounts ordered and amounts shipped, ” and (2) Plaintiff's “confidential master product information spreadsheet . . ., which contains extensive data on every [relevant] product, including detailed information on pricing tiers.” (Id. ¶¶ 67, 71.)

         Notably, this is not the first lawsuit Plaintiff has filed concerning these allegations. In September 2018, Plaintiff sued Fabits in Arizona state court. (Id. ¶ 3.) Plaintiff's complaint in that case (“the Fabits litigation”) asserted federal and state-law claims for theft of trade secrets and also sought injunctive relief against Fabits. (No. 18-cv-3566-DJH, Doc. 1-3.) The Fabits litigation was later removed to federal court and is currently pending before Judge Humetewa. (No. 18-cv-3566-DJH, Doc. 1.)

         Although Ethical is not a party to the Fabits litigation, it is not a stranger to the proceedings. For example, on January 2, 2019, Plaintiff served a Rule 45 subpoena on Ethical that sought various documents. (Doc. 3-1 at 5-16; No. 18-cv-3566-DJH, Docs. 15, 15-1.) Additionally, in the parties' Rule 26(f) report, which was filed more than a month ago, Plaintiff noted that it “may seek leave to add Ethical Pet as a defendant if the facts warrant.” (No. 18-cv-3566-DJH, Doc. 22 at 4.) The Court also notes that Plaintiff requested a relaxed case management schedule in the Fabits litigation, with a discovery deadline in January 2020. (Id. at 6.)

         Here, Plaintiff alleges that on February 4, 2019, it learned for the first time-based in part on Ethical's response to the Rule 45 subpoena in the Fabits litigation-that Ethical had successfully developed a competing product line by using the information stolen by Fabits. (Doc. 1 ¶ 107.) Plaintiff contends that Ethical necessarily must have utilized the stolen information because it should have taken Ethical 18 months to develop a competing product. (Id. ¶¶ 117-18.) The complaint further alleges that Ethical is about to display its new product line at a trade show[1] and has plans to display its new product line at a larger trade show in Florida in mid-March 2019. (Id. ¶¶ 122-36.) Thus, Plaintiff seeks a TRO that would (1) require Ethical to immediately stop using, and return, all of Plaintiff's trade secrets and confidential information, (2) prohibit Ethical from promoting its new product line or any other animal body parts product line at the two trade shows, and (3) prohibit Ethical from participating in the pet treats and chews business for the next 18 months with Fabits's assistance or using any of Plaintiff's trade secrets or confidential information. (Doc. 3 at 2.)

         During today's hearing, Ethical denied that it utilized Plaintiff's protected information when developing its new product line. Among other things, Ethical's counsel argued that (1) although Fabits shouldn't have emailed the master spreadsheet to himself on his last day of work, he quickly realized this was wrong and deleted the spreadsheet without providing it to Ethical, [2] (2) the document that Ethical produced in response to the Rule 45 subpoena on February 4, 2019, is different from the two documents that Fabits emailed to himself while working for Plaintiff (and thus doesn't prove that Fabits transmitted any protected information to Ethical), (3) Fabits swore under oath, in response to an interrogatory from Plaintiff in the Fabits litigation, that he has never provided any of Plaintiff's trade secret or confidential information to Ethical, and (4) Fabits was a veteran of the pet treats and chews industry long before he joined Plaintiff, so it would be illogical to assume that any information he possessed when joining Ethical was a trade secret derived from Plaintiff. Additionally, Ethical's in-house counsel stated during today's hearing that he reviewed a large quantity of documents during the Fabits litigation and has derived a good-faith belief, based on that document review, that Ethical isn't in possession of any of Plaintiff's confidential or trade secret information. (Counsel was unwilling, however, to provide a formal certification on this point.)


         A. Legal Standard

         Under Rule 65 of the Federal Rules of Civil Procedure, a party may seek injunctive relief if it believes it will suffer irreparable harm during the pendency of an action. There are two types of injunctions available under Rule 65: TROs and preliminary injunctions. TROs may be issued without notice to the adverse party and are of limited duration. See Fed. R. Civ. P. 65(b). Preliminary injunctions, in contrast, may only be issued after adequate notice is provided to the adverse party. See Fed. R. Civ. P. 65(a). See generally Ciena Corp. v. Jarrard, 203 F.3d 312, 319 (4th Cir. 2000) (“The interplay between Rule 65(a) (governing preliminary injunctions) and Rule 65(b) (governing TROs) is fluid, requiring greater procedural formality and notice for preliminary injunctions that remain operative for an unlimited time period. . . . Because a preliminary injunction is unlimited in duration, its entry always requires notice to the opposing party sufficient to give that party an opportunity to prepare an opposition to entry of an injunction.”).

         Here, Plaintiff seeks both types of injunctions. (Doc. 3.) However, during today's hearing, both parties agreed that the Court should only consider the TRO request for the time being and should defer resolution of the preliminary-injunction request. Accordingly, the Court will do so.[3]

         A request for a TRO is analyzed under the same standards as a request for a preliminary injunction. Stuhlbarg Int'l Sales Co., Inc. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001). “A preliminary injunction is ‘an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.'” Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam) (emphasis omitted); see also Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) (citation omitted) (“A preliminary injunction is an extraordinary remedy never awarded as of right”). A plaintiff seeking a preliminary injunction must show that (1) he is likely to succeed on the merits, (2) he is likely to suffer irreparable harm without an injunction, (3) the balance of equities tips in his favor, and (4) an injunction is in the public interest. Winter, 555 U.S. at 20. “But if a plaintiff can only show that there are ‘serious questions going to the merits'-a lesser showing than likelihood of success on the merits-then a preliminary injunction may still issue if the ‘balance of hardships tips sharply in the plaintiff's favor,' and the other two Winter factors are satisfied.” Shell Offshore, Inc. v. Greenpeace, Inc., 709 ...

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