The Ninth Circuit's decision in Perrin Bernard Supowitz, LLC v. Morales continues to highlight the high bar necessary for a motion for preliminary injunction, the evidence required to establish irreparable harm, and the limited "abuse of discretion" standard that may be applied during any appeal. Case No. 23-55189, 2023 WL 1415572 (9th Cir. Feb. 5, 2024).
In Perrin, the Ninth Circuit found no abuse of discretion in the Central District of California's decision to deny a preliminary injunction that Individual FoodService ("IFS"), a supplier of food service products, sought against two former employees who formed a competing business while still employed at IFS, for misappropriation of a trade secret – IFS's customer list.
Although the Court noted that "there was no dispute that IFS's customer order history qualified as a trade secret," the Court found that any trade secrets the former employees may have misappropriated from IFS were "old and stale," and therefore IFS was at no risk of suffering irreparable harm by being "wronged again" by their continued use. The Court explained that this finding of staleness sufficed to deny the preliminary injunction because such a remedy should only last as long as it is necessary to preserve the rights of the parties and eliminate the commercial advantage gained through misappropriation.
The Court further reasoned that barring the two former employees from doing business with any customer they serviced while still employed at IFS was a punitive measure, "whereas the purpose of a preliminary injunction is to preserve the status quo." The Court explained that by refusing to enjoin activity that potentially extended beyond the two former employees' trade secret misappropriations, the lower court properly balanced the competing public interests of protecting trade secrets and allowing open competition and employee mobility.
This case highlights the need to critically assess the bases for a request for preliminary relief when claims of misappropriation of trade secrets are being asserted. One should be particularly careful about the scope and strength of the trade secrets at issue and be able to articulate the various harms that may be encountered if those secrets are allowed to be misused on an ongoing basis.
Originally published on February 20, 2024
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