Two-Prong Test for Temporary Injunction for Breach of Non-Solicitation Agreement

Case Background

Integrated Corporate Relations, Inc. was a Westport-based parties relations and public consulting firm that contracted with Bidz, Inc., a California corporation, to perform various investor relations services.  The agreement between the companies contained a non-solicitation clause that prohibited Bidz from soliciting, hiring, or otherwise engaging any of Integrated’s personnel during the agreement and for one year following its termination.  Integrated stated that this was their standard practice with clients in order to protect its legitimate business interests and the resources it had spent to develop its business model.  It also claimed that it incurs a hardship when an employee leaves because it must find a suitable replacement.

Integrated hired Mr. Andrew Greenebaum in 2003 as an at-will employee at the company’s Los Angeles office to work as a Senior Managing Director where he was the primary manager of Bidz’s account.  Mr. Greenebaum worked in this capacity until his resignation on February 27, 2009 at which point he founded his own company, Addo Communications, Inc. with another former Integrated employee.  Bidz terminated its business relationship with Integrated on March 30, 2009 and shortly thereafter contracted with Mr. Greenebaum and Addo for investor relations services.

Granting Temporary Injunction

Integrated sued Bidz when it learned of this new business relationship and claimed that Bidz had violated the non-solicitation agreement in their contract.  The company requested equitable relief and called for the enforcement of the restrictive covenant.  Integrated requested a temporary injunction while the case was being decided in order to prevent further violations of the agreement.  The court’s holding in this case pertains to the issue of whether to grant a temporary injunction.

The court outlined that the primary purpose of a temporary injunction is to “preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits”.  Connecticut courts will generally grant temporary injunctions when the moving party: 1) demonstrates “it is likely to succeed on the merits of its case” and 2) that it will “suffer immediate and irreparable harm if the injunction is not granted”.  The court concluded that Integrated failed to meet either of these requirements and denied the company’s request for a temporary injunction.

The Court’s Decision

The court concluded that Integrated lacked a meritorious claim regarding a breach of the employment contract by Bidz contracting with one of its former employees.  The non-solicitation agreement in question is one between a consulting company and a client, not between a company and its employee(s).  Integrated failed to present any case from any jurisdiction in the United States where a court recognized this business arrangement as an interest that warranted legal protection.

This, according to this court, meant that Integrated lacked a legitimate business interest that a temporary injunction would be necessary to protect.  Additionally, Integrated failed to present evidence that Bidz had actually “solicited” Mr. Greenebaum and purposefully induced him to terminate his employment with Integrated.  The court used these two factors to hold that that Integrated would most likely not succeed on the merits of its case.

Conclusions

The facts of the case also led the court to conclude that Integrated would not experience imminent and irreparable harm if it failed to issue an injunction.  The court held that this was requisite for granting a temporary injunction and commented “Connecticut law supports a distinctly moderated level of proof required to establish the elements of irreparable harm”.  Even though Connecticut courts require only a “moderated level of proof”, the moving party must demonstrate some degree of imminent, irreparable harm.  The only loss that Integrated could demonstrate was that two employees terminated their employment and started their own company.  They were both at-will employees however and could have done so at any point in time, regardless of Bidz’s action.

In conclusion, the court held that Integrated failed to meet the requirements that would warrant a temporary injunction against Bidz to prevent it from transacting with Mr. Greenebaum and his company Addo.

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