Lodging Solutions, LLC v. Miller

Background

Lodging Solutions, LLC, doing business as Accommodations Plus International (API), is a travel management company that helps airline, cruise-line, and rail-industry crews and employees find lodging through its technology platform. Robert Miller worked for API for nearly a decade as a Vice President of Business Development and salesperson. On October 18, 2019, he resigned and sought to begin working for Corporate Lodging Consultants (CLC), a subsidiary of Fleetcor Technologies, Inc. CLC primarily operates in corporate lodging but also provides lodging for rail crews.

API first sued in New York state court, alleging breach of a restrictive covenant in Miller’s employment agreement, misappropriation of trade secrets, unfair competition, breach of a duty of loyalty, and tortious interference. API later added a claim against Fleetcor for allegedly breaching a non-solicitation clause in a nondisclosure agreement. The state court granted some temporary relief, including restrictions on Miller’s use of API confidential information, but did not prevent him from beginning work at CLC.

API discontinued the state case and filed this federal action, adding a federal trade-secret claim. It sought temporary and preliminary relief concerning Miller’s email, API data, confidential information, electronic devices, and employment at CLC. The defendants agreed to several measures, including restrictions on copying, sharing, and using API information, returning API data, and providing access to electronic devices used with API data. The court had already denied API’s request for a temporary order preventing Miller from starting at CLC because API had not shown likely irreparable harm. The defendants later voluntarily postponed Miller’s start date and agreed to keep the restrictions on confidential information in place while the case continued.

Issue and legal standard

The preliminary-injunction motion principally asked whether Miller could begin working at CLC while the litigation was pending. A preliminary injunction is an order providing temporary relief before a final trial decision. To obtain one, API had to show likely irreparable harm—harm that is actual and imminent, not speculative, and not adequately repairable through money damages—and either a likelihood of success on its claims or serious questions deserving litigation combined with a strongly favorable balance of hardships. The court stated that a showing of likely irreparable harm was required before considering the other requirements.

Court’s analysis

Alleged trade secrets. API argued that Miller possessed trade secrets, including customer contract details and information about how API customized its technology platform for particular customers. API argued that Miller might retain this information in his memory even if he no longer possessed physical or electronic copies. The defendants disputed both that the information was trade-secret information and that Miller was likely to use or disclose it.

The court concluded that, even assuming the information qualified as trade secrets, Miller was unlikely to misappropriate, use, or disclose it at CLC. Miller repeatedly testified under oath that he would not use or disclose information API considered confidential, including contact information, for at least his first year at CLC. The court credited that testimony. CLC’s president also stated that Miller’s new position would not require disclosure of trade-secret information. API did not produce evidence that Miller still possessed physical or electronic copies, and API’s forensic expert had not found evidence that Miller copied API information.

The court recognized that Miller’s testimony about accessing and deleting certain files on the morning of his resignation was contradictory. The court nevertheless concluded that the inconsistency did not justify rejecting all of Miller’s testimony or his sworn promise not to disclose API information. The court also found that Miller’s earlier plan to delete files did not clearly show that he intended to copy or misuse them.

The court separately considered whether Miller might accidentally disclose API information through his new work. Although CLC competed directly with API in the rail industry, Miller’s responsibilities for at least his first year would be limited to workforce lodging and would exclude the airline, cruise, and rail sectors. The court found that this limitation reduced the risk of accidental disclosure because the alleged information was specific to API’s customers and business sectors. Miller’s new position was not nearly identical to his former one, and the court found him unlikely to need API’s alleged trade secrets to perform it.

Other claimed harms. API argued that Miller’s employment at CLC would cause the loss of customer relationships and goodwill. The court rejected that theory because Miller would not directly compete with API or solicit API customers or prospective customers during his first year. API also argued that Miller’s move would harm its reputation by showing that it could not enforce its agreements. The court found that API had not explained why its clients would be concerned about enforcement of restrictive covenants and noted that accepting this theory broadly could allow nearly any breach-of-contract claimant to establish irreparable harm.

The court also found API’s claim that Miller’s departure would damage its reputation too speculative, relying on limited and conclusory testimony. Any reputational harm was more likely to result from Miller’s departure from API—which had already occurred—than from his move specifically to Fleetcor or CLC. Finally, the court held that contractual provisions stating that a breach would cause irreparable harm did not themselves establish a right to an injunction.

Disposition

The court denied API’s motion for a preliminary injunction. To the extent API still sought an order blocking Miller’s access to his Microsoft Outlook cloud account, the court denied that request because it credited Miller’s promise not to use API confidential information for at least his first year and because API conceded that the account’s contacts were not trade secrets. The request concerning Miller’s use of nonpublic API information was mooted by the defendants’ agreement to continue the temporary restrictions and by the court’s finding that Miller was unlikely to misappropriate API’s alleged trade secrets. The opinion stated that the court’s findings at this preliminary stage would not bind a later trial on the merits.