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Branch Banking and Trust Co. v. Jones

United States District Court, E.D. Kentucky, Central Division, Lexington

December 4, 2018

BRANCH BANKING AND TRUST CO., Plaintiff,
v.
LAURA MASSEY JONES, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Joseph M. Hood Senior U.S. District Judge

         This matter is before the Court upon Plaintiff's renewed Motion for a Temporary Restraining Order [DE 15], renewed Motion for Expedited Discovery [DE 16], and Motion for a Preliminary Injunction [DE 17]. BB&T's Motion for a Temporary Restraining Order [DE 15] will be GRANTED because BB&T has met the substantive requirements for issuance of a temporary restraining order. BB&T's Motion for Expedited Discovery [DE 16] will be GRANTED IN PART and DENIED IN PART. BB&T has shown good cause for limited expedited discovery but the Court will significantly narrow the scope of the expedited discovery. Finally, a hearing will be scheduled to consider the Motion for a Preliminary Injunction [DE 17].

         I. Procedural and Factual Background

         Plaintiff Branch Banking and Trust Company (“BB&T”) filed this breach of contract action on November 9, 2018. [DE 1]. BB&T brought this action against four former employees, and Individual Defendants, Laura Massey Jones, Ralph S. “Bud” Watson, II, John Cadwell, and Lee Lamonica Walker (“Individual Defendants”), and The Farmers National Bank of Danville, d/b/a WealthSouth (“WealthSouth”). BB&T alleges the defendants misappropriated BB&T trade secrets in violation of the Kentucky Uniform Trade Secrets Act and engaged in a civil conspiracy. [Id. at 14-15, 20-21]. BB&T also alleges that the Individual Defendants violated contractual non-disclosure agreements and interfered with contractual relations. [Id. at 15-18]. Furthermore, BB&T alleges that Defendants Jones, Watson, and Cadwell breached contractual non-solicitation agreements and that Defendant WealthSouth interfered with the contractual relationship between BB&T and the Individual Defendants. [Id. at 12-13, 18-19]. BB&T seeks punitive damages, injunctive relief, compensatory damages, costs, and attorneys' fees. [Id. at 19-20, 21-24].

         According to BB&T, Defendants Jones, Watson, and Cadwell are former employees who entered into contractual employment agreements that provided that during their employment, and for certain periods[1] following their termination of employment with BB&T, that the defendants would not “call upon, solicit, divert, or take away any of BB&T's clients, current or potential.” [Id. at 3]. BB&T alleges that these defendants acknowledged “that for any violation or threatened violation of any [contractual] covenants, BB&T will . . . be entitled to specific performance and an injunction (without bond) to be issued . . . .” [Id. at 4, DE 1-1 at 2; DE 1-3 at 2, DE 1-4 at 2]. Finally, BB&T claims that Defendant Walker signed a non-disclosure agreement. [DE 1 at 8; DE 1-2].

         BB&T asserts that the Individual Defendants “abruptly resigned” on September 4, 2018. [DE 1 at 10]. BB&T further contends that the Individual Defendants “immediately went to work for WealthSouth, ” a direct competitor of BB&T, and “began calling on and soliciting BB&T clients and business opportunities.” [Id.].

         Apparently, the parties attempted to resolve the dispute before the commencement of this action. BB&T has attached exhibits containing correspondence between the parties' attorneys. [See DE 1-6; DE 1-7; DE 5-1]. In fact, counsel for the Defendants assured BB&T that Individual Defendants Jones, Watson, and Cadwell would honor their continuing contractual obligations with respect to the BB&T contracts. [See DE 1-6 at 1, Page ID # 38; DE 1-7 at 2, Page ID # 56].

         Even so, the relationship soured. BB&T claims that the Individual Defendants are actively soliciting their customers and exposing their trade secrets, in violation of the contractual provisions in the employee contracts. [See DE 1; DE 5]. BB&T further claims that the actions of the Defendants are causing continuing and irreparable harm. [DE 1; DE 15].

         As a result, on November 12, 2018, BB&T moved for a temporary restraining order against the Defendants. [DE 5]. Initially, the Court granted an ex parte temporary restraining order [DE 6] but it was subsequently vacated without prejudice due to a procedural deficiency. [DE 14]. The Court, having vacated the temporary restraining order, also denied BB&T's previous Motion for Expedited Discovery. [Id.].

         On November 21, 2018, BB&T filed a renewed Motion for a Temporary Restraining Order [DE 15], a renewed Motion for Expedited Discovery [DE 16], and a Motion for a Preliminary Injunction [DE 18]. Since the Defendants have appeared in this action and opposed the initial temporary restraining order, the Court allowed a response from the Defendants [DE 20] and reply from the Plaintiff [DE 26] on an expedited briefing schedule. The Defendants responded [DE 23; DE 24] and BB&T replied [DE 32, DE 33], making this matter ripe for review. Consideration of all three motions will be consolidated into this memorandum opinion and order.

         II. Analysis

         BB&T asserts that they will be irreparably harmed without injunctive relief from the Court due to the Defendants' past and continuing violations of the BB&T employment contracts. [See DE 15]. Furthermore, BB&T asserts that expedited discovery is necessary to determine whether a preliminary injunction is warranted in this matter. [See DE 16; see also DE 17].

         The Defendants oppose BB&T's request for injunctive relief by claiming that BB&T's motion fails to meet the subsequent requirements for the issuance of a temporary restraining order. [See DE 24]. Additionally, the Defendants oppose BB&T's request for expedited discovery, asserting that the discovery requests are too broad and that it will difficult to complete the expedited discovery within twenty-eight days considering the upcoming holiday season. [See DE 23].

         Both parties make compelling arguments. Still, at this stage, the Court finds that the issuance of a temporary restraining order is warranted to preserve the status quo until the Court may consider whether a preliminary injunction is warranted for the pendency of the litigation. Furthermore, the Court will grant BB&T the opportunity to conduct limited expedited discovery to determine if a preliminary injunction is warranted in this matter. Still, the Court will substantially limit the scope of the proposed expedited discovery.

         A. Temporary Restraining Order

         “The factors to be weighed before issuing a TRO are the same as those considered for issuing a preliminary injunction.” Contrech Casting, LLC v. ZF Steering Sys., LLC, 931 F.Supp.2d 809, 814 (E.D. Mich. 2013) (quoting Monaghan v. Sebelius, 916 F.Supp.2d 802, 807 (E.D. Mich. 2012)). Thus, when a party seeks a temporary restraining order, the Court must consider: (1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury without the injunction; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by the issuance of the injunction. See Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535, 542 (6th Cir. 2007); see also Stein v. Thomas, 672 Fed.Appx. 565, 569 (6th Cir. 2016). These are “factors to be balanced, not prerequisites that must be met.” Tenke Corp., 511 F.3d at 542. For example, where a party makes “an extremely strong showing of irreparable harm” they are “not required to make as strong a showing of a likelihood of success on the merits.” Stein, 672 Fed.Appx. at 569.

         (1) Likelihood of Success on the Merits

          First, the renewed Motion, Complaint, and accompanying affidavits raise serious questions about whether the BB&T contractual provisions were violated and demonstrate a strong likelihood that BB&T will proceed on the merits. As the Court previously discussed, non-solicitation agreements are generally enforceable under Kentucky law. See, e.g., Hammons v. Big Sandy Claims Service, Inc., 567 S.W.2d 313, 315 (Ky. Ct. App. 1978); Crowell v. Woodruff, 245 S.W.2d 447, 449 (Ky. 1951) (upholding validity of contractual non-compete agreement). The parties do not dispute the enforceability of the contracts in question nor do they contest the validity of the relevant contractual provisions.

         BB&T has provided affidavits and letters in support of its Complaint and renewed Motion for a Temporary Restraining Order. In a letter dated September 13, 2018, counsel for the Defendants assured BB&T that “WealthSouth has instructed Mr. Watson, Ms. Jones, and Mr. Cadwell to comply with their non-solicitation obligations [for] the required term[s].” [DE 1-7 at 2, Page ID # 56]. Still, Lori McGuire, Senior Vice President and Portfolio Manager at BB&T, alleges that she contacted clients of BB&T's Lexington office and learned that “by September 6, 2018, most of BB&T's more significant clients had already been contacted by one or more of the former employees.” [DE 15-2 at 2, Page ID # 304]. Importantly, McGuire's affidavit states that over thirty-three BB&T accounts have transferred to WealthSouth since the Individual Defendants resigned on September 4, 2018. [Id. at 2-3, Page ID # 304-05].

         BB&T has also presented an affidavit [DE 15-3] and supplemental affidavit [DE 15-5] from Greg Broadridge, Senior Vice-President for BB&T in Louisville. Similarly, the Broadridge affidavit alleges that calls to BB&T clients revealed that BB&T's more significant clients were being contacted by one or more of the Individual Defendants. [DE 15-3 at 2, Page ID # 307].

         Finally, BB&T has included an affidavit from Veronica Wang. [DE 1-5]. Ms. Wang asserts that she is a long-time customer of BB&T and that she had communicated and worked primarily on her accounts at BB&T with Bud Watson, Laura Jones, and Lee Lamonica [Walker] in the Lexington, Kentucky BB&T wealth management office. [DE 1-5 at 1, Page Id. # 37]. Ms. Wang further alleges that Laura Jones contacted her on September 6, 2018, to inform Wang that she was employed at another bank and to ask Wang to move her BB&T accounts to the new bank where Jones worked. [Id.].

         In response, the Defendants claim that the affidavits do not demonstrate that BB&T is likely to succeed on the merits because the affidavit testimony is replete with hearsay. [See DE 24 at 7, Page ID # 500]. Of course, the Defendants are correct that the testimony in the affidavits concerning contacts to current or former BB&T clients appears to constitute hearsay.

         Still, there is ample evidence in the record to raise grave concerns about past and continuing violations of the BB&T contracts. For instance, Lori McGuire has personal knowledge of the fact that thirty-three BB&T accounts have transferred to WealthSouth since September 4, 2018. [DE 15-2 at 2, Page Id. # 304]. The timeframe of these transfers corresponds with the resignation of the Individual Defendants. Additionally, and most glaringly, BB&T has provided testimony from Veronica Wang, a BB&T wealth management client, who alleges that she was directly solicited by one of the Individual Defendants. The Defendants response discusses the affidavits from Lori McGuire and Greg Broadridge but fails to address or even mention the affidavit provided by Veronica Wang. [See DE 24 at 7, Page ID # 500].

         Furthermore, the Defendants claim that this Court's previous decision in Wells v. Merrill Lynch, Pierce, Fenner & Smith, Inc., is controlling here and that application of Wells to this case demonstrates that BB&T has failed to demonstrate likelihood of success on the merits. See Wells v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 919 F.Supp. 1047 (E.D. Ky. 1994). [See DE 24 at 5-8 Page ID # 498-501]. But while Wells is highly instructive, it is not directly on point in this factual scenario.

         In Wells, the Plaintiff signed an employment agreement that stated, in part, “In the event of termination of my services with Merrill Lynch for any reason, I will not solicit any of the clients of Merrill Lynch whom I served or whose names became known to me while in the employ of Merrill Lynch . . . .” Wells, 919 F.Supp. at 1049 (emphasis in original). The Court analyzed the meaning of the term “solicit” in the Merrill Lynch non-solicitation agreement. The Defendants correctly point out that the Wells Court found that “mere informational contact” with a former client did not constitute “solicitation” under the employment agreements. Id. at 1053. Additionally, the Defendants are correct that the burden of proving wrongful solicitation is on the Defendant. Id. at 1054.

         But here, the BB&T employment agreements prohibit a range of conduct that is more broad than the employment agreement that the Court analyzed in Wells. In Wells, the employment agreement only prohibited the employee from soliciting any Merrill Lynch clients for a one-year period. Id. at 1049-50. In this case, the BB&T employment agreements prohibit the Defendants from “call[ing] upon, solicit[ing], divert[ing], or tak[ing] away any of BB&T's clients, current or ...


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