Miloedu, Inc. v. James

Background

Miloedu, Inc. ("MILO") and Lybroan Dennis James co-founded MILO. MILO alleged that James started competing company Stemulate Solutions, Inc., diverted business opportunities from MILO beginning in September 2021, resigned on November 3, 2021, and copied MILO’s intellectual property and business information. The copied material allegedly included video content, contact information, and notes about current and potential clients and investors. MILO also presented evidence that James forwarded MILO materials to third parties and that Stemulate’s website listed former MILO clients or entities with which MILO was pursuing contracts.

James had signed an agreement defining MILO’s proprietary information broadly. The agreement required him to keep that information confidential, prohibited using it to solicit MILO’s customers and business contacts or interfere with their relationships, and required him to return company property and retain no materials containing proprietary information after his employment ended.

MILO sought a temporary restraining order and expedited discovery. The court applied the same standard used for a preliminary injunction: whether MILO showed a likelihood of success on the merits, likely irreparable harm without relief, a favorable balance of hardships, and that an injunction would serve the public interest.

Court’s analysis

The court found that MILO made a strong showing that James misappropriated its proprietary information and breached the agreement. The court relied on documentary and computer-forensics evidence showing downloads of MILO materials by James, including approximately 1.1 terabytes of video, project, and graphic files. The court found James’s contrary declaration not credible in light of that evidence. The court also stated that MILO’s claims did not depend on registered copyrights or trademarks and noted that defendants did not explain why the proprietary-information agreement did not apply or argue that the material failed to qualify as trade secrets under state or federal law.

The court found irreparable harm because MILO faced threatened loss of prospective customers or goodwill and because California courts presume irreparable harm when proprietary information is misappropriated. The court also relied on James’s agreement that a breach would cause irreparable injury for which money damages would not provide adequate relief. The balance of hardships favored MILO because the information belonged to MILO, while defendants had little legitimate interest in using or disclosing it. The court further found that the public interest favored protecting trade secrets and enforcing contractual obligations. The court rejected defendants’ argument based on California Business and Professions Code section 16600 because MILO sought to prohibit conduct already barred by the proprietary-information agreement, not to prevent James from working in his chosen field.

Order

The court granted MILO’s motion for a temporary restraining order. It immediately enjoined James and Stemulate from copying, using, displaying, or disclosing documents, data, files, or other electronically stored information taken or obtained from MILO by James. The covered material included specified video and electronic files, files downloaded through MILO’s Google Workspace, and files associated with MILO’s Kajabi-based website, including program-enrollee contact information.

The order also prohibited defendants from creating or using derivative works based on MILO’s property; barred them from moving, transferring, hiding, or modifying storage devices containing the property; and required them to preserve communications, notes, documents, and electronic information concerning acquisition, copying, use, distribution, derivative works, or solicitation using MILO property.

The court granted expedited discovery for good cause. MILO was permitted to subpoena Shaun Hillman for communications about MILO, MILO property, or Stemulate and to conduct a preliminary two-hour remote deposition of Hillman about materials he received and what happened to them. MILO was also permitted to conduct a preliminary two-hour remote deposition of James about what MILO property he copied, what he did with it, and where it was located. The court found the limited discovery necessary to minimize potential harm and found no showing that it would unfairly prejudice defendants.

The court declined to require MILO to post security, relying in part on James’s agreement allowing injunctive relief without a bond or other security. The temporary restraining order was set to expire on January 6, 2022, at 5:00 p.m. Pacific time, unless extended by further court order. The opinion addressed temporary relief and expedited discovery; it did not enter a final determination of liability on MILO’s claims.