Midwest Sign & Screen Printing Supply Co. v. Dalpe

Background

Midwest Sign & Screen Printing Supply Co. sought preliminary injunctive relief against its former employee, Robert Dalpe, and Dalpe’s new employer, Laird Plastics, Inc. Midwest alleged claims including breach of contract, violations of federal and state trade-secret laws, breach of the duty of loyalty, tortious interference with contract, unfair competition, and aiding and abetting. The opinion addresses only Midwest’s request for preliminary relief and expedited discovery.

Dalpe had worked for Midwest since June 2011 and became its Northwest Sales Manager in April 2015. As part of that promotion, he signed an agreement containing confidentiality, non-retention, non-compete, and customer-related restrictions. The non-compete provisions barred him, for 12 months after his employment ended, from working for or assisting an entity offering products or services competing with Midwest’s products or services. The agreement did not include a geographic limit and did not define what products or services competed with Midwest’s offerings.

Dalpe left Midwest on March 8, 2019, and began working for Laird on March 19, 2019, as the Profit Center Manager for Laird’s Portland location. Before leaving Midwest, he emailed documents from his Midwest work account to his personal account, including financial reports, customer lists, contact information, and employment documents. Dalpe did not dispute that the information was confidential. He testified that he sent it to calculate his commission and to help comply with his non-compete obligations, not to share it with or use it for Laird.

After Midwest filed suit, Laird and Dalpe represented that Dalpe had not used or disclosed Midwest’s information and had deleted it from his devices. Laird also imposed restrictions on Dalpe’s work during the restricted period, including barring him from personally contacting known Midwest customers or participating in certain sales or strategy discussions involving shared products and customers.

Preliminary-injunction analysis

The court treated Midwest’s motion for a temporary restraining order as a motion for a preliminary injunction because the motion did not meet the requirements for an order issued without notice under Federal Rule of Civil Procedure 65(b). A preliminary injunction is an extraordinary remedy. The court considered four factors: Midwest’s likelihood of success on the merits, the likelihood of irreparable harm without an injunction, the balance of harms, and the public interest.

Contract claim. The court concluded that Midwest was not likely to succeed on its claim that Dalpe breached the non-compete provisions. Under Minnesota law, a restrictive covenant must be no broader than necessary to protect the employer’s legitimate interests. The court found that the provisions’ 12-month duration was reasonable, but their lack of geographic limits made them overbroad. The court also found that the provisions appeared overbroad in describing prohibited work because they could bar Dalpe from working for a wide range of businesses offering any product or service competing with anything Midwest offered, even in roles unrelated to his former position.

The court considered whether it could narrow the agreement under Minnesota’s “blue-pencil” doctrine, which permits a court in some circumstances to enforce only the reasonable portion of an overly broad restriction. Although the court indicated that a geographic limit corresponding to Dalpe’s Pacific Northwest territory might be reasonable, it declined to rewrite the agreement to solve the broader problem created by the undefined term “compete.” Midwest had not identified a clear interpretation or offered evidence showing how the term should be limited.

The court found that Dalpe had likely violated the non-retention provision by retaining copies of Midwest’s confidential information after leaving. But the evidence showed that he eventually deleted the information, and there was no evidence that he used it to compete with Midwest. The court stated that this possible breach might support an order requiring the information to be returned or destroyed, but the evidence showed that Dalpe had already done so. The court therefore found that this issue did not justify the broader injunction Midwest requested.

The court also found insufficient evidence that Dalpe had disclosed or used Midwest’s confidential information for his own benefit or for Laird’s benefit. The court acknowledged uncertainty about Dalpe’s stated reasons for sending some of the information to himself, but concluded that the evidence at the preliminary stage did not show actual or likely use or disclosure. The court also rejected Midwest’s theory that disclosure was inevitable merely because Dalpe might remember confidential information.

Trade-secret claims. Midwest asserted claims under the federal Defend Trade Secrets Act and the Minnesota, Oregon, and Washington trade-secret statutes. The court analyzed these claims together because the statutes use functionally equivalent definitions of trade secret, misappropriation, and improper means. The court concluded that Midwest had not shown a likelihood of proving actual or threatened misappropriation. Sending information to himself did not, without evidence of use, disclosure, or acquisition by improper means, establish misappropriation at this stage. The court stated that discovery might reveal otherwise, but the trade-secret claims did not justify a preliminary injunction.

Tortious-interference claim. Midwest’s claim against Laird required proof that Laird knew of the contract, intentionally procured a breach without justification, and caused damages, among other elements. The court found no evidence that Laird knew about the specific non-retention provision before Dalpe announced his departure, and no evidence that Laird intentionally procured Dalpe’s breach. The court therefore concluded that Midwest was not likely to succeed on this claim.

Irreparable harm and remaining factors

The court separately found that Midwest had not shown a likelihood of irreparable harm. Midwest identified potential loss of customer goodwill and confidential information but presented those risks in general and conclusory terms. The record did not show that Dalpe had such a personal hold on customer goodwill that his move to Laird was likely to cause irreparable injury. The court also found that Dalpe’s and Laird’s sworn assurances, deletion of the information, and restrictions on Dalpe’s Laird duties reduced the risk of harm.

The balance of harms did not clearly favor either side. An injunction could harm Dalpe’s ability to earn a living and Laird’s ability to operate its Portland branch, including in areas not shown to compete with Midwest. The public-interest factor was neutral because the dispute primarily involved private business interests.

Expedited discovery

Midwest separately sought expedited discovery. The court found that expedited discovery would not help prepare for another preliminary-injunction hearing because the parties had already created a relatively robust record and no additional hearing was planned. It also found no demonstrated risk of evidence destruction. The parties had litigation holds, Midwest already knew what information Dalpe had emailed to himself, and Dalpe’s devices were in the custody of a third-party computer-forensics firm.

Disposition

Judge Eric C. Tostrud ordered that Plaintiff’s Motion for Temporary Restraining Order was DENIED and Plaintiff’s Motion to Expedite Discovery was DENIED. The order did not resolve the ultimate merits of Midwest’s claims.