Brooklyn Music Distribution, Inc. v. Vydia, Inc.

Background

Vaeso and High Peak Software, Inc. had a business relationship beginning in August 2018. Their Master Services Agreement included a confidentiality provision. Vaeso alleged breach of contract and breach of the duty of good faith and fair dealing, claiming that High Peak threatened to use, disseminate, or monetize computer code that High Peak developed for Vaeso.

Vaeso sought a preliminary injunction and a temporary restraining order. Vaeso relied principally on its CEO’s secondhand account of a conversation involving a current High Peak employee and a former High Peak employee. Vaeso argued that the conversation showed High Peak was beginning to consider how to monetize the code and that sharing the code would cause irreparable harm.

High Peak opposed emergency relief. Through counsel, it represented that it would not use, disseminate, or monetize Vaeso’s confidential information before the court determined whether Vaeso or High Peak owned the code. High Peak also offered a different explanation for the conversation and argued that ownership was disputed because the agreement made Vaeso’s ownership subject to payment of amounts owed to High Peak. High Peak claimed that Vaeso owed more than $2 million.

Legal standard

To obtain a preliminary injunction or temporary restraining order, a party must show irreparable harm without the order; either a likelihood of success on the merits or a serious question suitable for trial combined with a balance of hardships strongly favoring the party; and that the public interest favors the order. The court described irreparable harm as an actual and imminent injury that cannot be adequately remedied after trial, including through monetary damages.

Court’s analysis

The court held that Vaeso did not persuasively show a genuine risk of irreparable harm. Its theory rested on a secondhand account, and High Peak offered a benign explanation for the conversation. Vaeso provided no corroborating evidence that High Peak intended to distribute or sell the code. High Peak also denied such an intention and represented that it would not make outside use of the code before ownership was determined.

The court assumed, for purposes of its analysis, that disseminating the software could cause irreparable harm. Even so, it found that Vaeso had not shown why monetary damages would be inadequate. The court also noted that merely exposing an employee to confidential information does not, without more, establish a threat of irreparable harm; the relevant question is whether the information is likely to be used or disclosed in a harmful way. Vaeso had not made that showing.

Independently, the court found that Vaeso had not shown a likelihood of success. The parties’ submissions left the question of ownership unresolved at this early stage, so Vaeso would have needed to show that the balance of hardships strongly favored it. The court found that Vaeso had not done so.

The court also rejected Vaeso’s claim that High Peak had consented to the requested relief. It interpreted the agreement’s equitable-relief provision as allowing Vaeso to seek relief, not guaranteeing that relief would be granted. It likewise found that High Peak’s statement that it had not threatened or planned to misuse the information was not consent to a temporary restraining order. High Peak expressly opposed the requested order.

Disposition

The court denied Vaeso’s application for emergency relief and directed the Clerk of Court to close the motion at docket 2. The court stated that High Peak, having been served on February 14, 2022, had to answer or otherwise respond to the complaint by March 7, 2022.