December 18, 2019
Lexis Practice Advisor® Practice Note
This excerpt from Lexis Practice Advisor®, a comprehensive practical guidance resource providing insight from leading practitioners, is reproduced with the permission of LexisNexis. Reproduction of this material, in any form, is specifically prohibited without written consent from LexisNexis.
This practice note outlines the steps you should take while preparing for and conducting preliminary injunction hearings on behalf of plaintiff employers in breach of restrictive covenant and trade secret misappropriation actions. This practice note addresses federal law but notes key state law distinctions.
In particular, this note addresses the following issues:
For practical guidance on initiating restrictive covenant and trade secret misappropriation litigation, see Restrictive Covenant and Trade Secret Misappropriation Claims: Key Initial Considerations and Tips for Seeking TROs, Preliminary Injunctions, and Other Relief; Defend Trade Secrets Act (DTSA) and Other Legal Claims and Recourse to Protect Employers’ Confidential Information and Trade Secrets; and Restrictive Covenants: Enforcement Tips.
For practical guidance on conducting discovery in breach of restrictive covenant and trade secret misappropriation litigation, see Discovery on behalf of Plaintiffs in Trade Secret Misappropriation and Breach of Restrictive Covenant Actions.
For additional practical guidance and annotated forms on restrictive covenant and trade secret litigation, see the subtask Employment Litigation — Restrictive Covenants and Trade Secrets, Restrictive Covenants Resource Kit — Restrictive Covenant Enforcement and Litigation, and Milgrim on Trade Secrets § 14.01.
For information on state laws on restrictive covenants and trade secrets, see Non-competes and Trade Secret Protection State Practice Notes Chart.
For additional guidance on seeking preliminary injunctions generally in federal court, see Preliminary Injunctions: Seeking a Preliminary Injunction (Federal).
Broadly speaking, an injunction directs or forbids a party to act. A court can enforce an injunction by its contempt power. See Fryzel v. Mortgage Elec. Registration Sys., Inc., 719 F.3d 40, 43 (1st Cir. 2013).
Federal Rule of Civil Procedure 65 distinguishes between three types of injunctions: temporary restraining orders (TRO), preliminary injunctions, and permanent injunctions. See Fed. R. Civ. P. 65.
A preliminary injunction grants a party injunctive relief when there is an immediate threat of irreparable harm, but it also preserves the court’s ability to later decide the merits of the case. See Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 627 (5th Cir. 1985).
A permanent injunction, on the other hand, is a final determination that may only issue after an adjudication on the merits of the case. See Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 546 n.12 (1987).
This practice note focuses on preliminary injunction hearings, with a brief discussion of permanent injunction hearings, which are less common in restrictive covenant and trade secret cases. TROs are outside the scope of this practice note. For information on TROs, see Restrictive Covenant and Trade Secret Misappropriation Claims: Key Initial Considerations and Tips for Seeking TROs, Preliminary
Injunctions, and Other Relief and Temporary Restraining Orders: Seeking a TRO (Federal).
In federal court, the evidentiary hearing for a preliminary injunction is essentially a simplified trial in which the moving party must present evidence demonstrating:
Additionally, because legal remedies (i.e., monetary damages) are often adequate for addressing violations, courts will only enforce an injunction where, absent immediate relief, a party demonstrates irreparable harm. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506–07 (1959).
States may have different standards for obtaining injunctive relief, so be sure to check the law in your jurisdiction. For instance, to obtain in preliminary injunction in California, the trial court weighs two interrelated factors:
Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1450 (2002); Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal. App. 4th 853, 858–59 (1994).
In New York, the moving party must demonstrate by clear and convincing evidence the following:
See, e.g., Arthur J. Gallagher & Co. v. Marchese, 946 N.Y.S.2d 243, 244 (2d Dep’t 2012).
For more information on the standards for obtaining preliminary injunctive relief in federal court, including in the various circuits, see Pretrial Injunctive Relief Standards (Federal).
For more information on state standards for obtaining preliminary injunctive relief, see the state restrictive covenant practice notes in Non-competes and Trade Secret Protection State Practice Notes Chart.
Note that not all motions for preliminary injunctions necessitate a hearing. Generally, courts will entertain evidentiary hearings where resolving the motion turns on disputed material facts or the credibility of witnesses. See, e.g., Cumulus Media, Inc. v. Clear Channel Communications, Inc., 304 F.3d 1167, 1178 (11th Cir. 2002); Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 553 (6th Cir. 2007). When the court can resolve the dispute based solely on the written record or the issues are primarily questions of law, however, some courts may forego a hearing. See Fed. R. Civ. Proc. 78(b) (“[b]y rule or order, the court may provide for submitting and determining motions on briefs, without oral hearings.”).
In the employment context, employers often seek injunctive relief against employees to obtain:
The hearings in these cases give the court an opportunity to preserve the status quo while a determination on the merits is pending.
This practice note provides guidance for employers’ counsel in preparing for and conducting injunction hearings in such cases.
This section outlines the steps you should take in anticipation of a preliminary injunction hearing in a restrictive covenant or trade secret case.
Researching the Law
Being prepared for an injunction hearing means knowing the law. While the purpose of the preliminary injunction hearing is primarily to assess disputed facts, attorneys must have a clear picture of the legal standards that must be met through the presentation of evidence. Additionally, the opening and closing statements offer opportunities to establish the legal parameters that you must meet and how the evidence supports the need for an injunction.
Dig deep into the preliminary injunction standards in your jurisdiction. In most jurisdictions, including in federal courts, you will be required to show a likelihood of success on the merits and irreparable harm in the absence of injunctive relief. But your research should go beyond merely identifying the preliminary injunction standard. For example, find out:
Additionally, because you must demonstrate a likelihood of success on the merits, your legal argument must persuade the court that the defendant likely violated applicable restrictive covenant or trade secret laws, which vary significantly across jurisdictions. For the elements of preliminary injunction claims and information on restrictive covenant and trade secret laws in each state, see the practice notes in Non-competes and Trade Secret Protection State Practice Notes Chart. See also Restrictive Covenant and Trade Secret Misappropriation Claims: Key Initial Considerations and Tips for Seeking TROs, Preliminary Injunctions, and Other Relief, Restrictive Covenant and Trade Secret Misappropriation Claims: Key Initial Considerations and Tips for Seeking TROs, Preliminary Injunctions, and Other Relief — Insights into Whether and How to Seek Injunctive Relief (Including Temporary Restraining Orders (TROs) and Preliminary Injunctions (PIs)).
If you are seeking an injunction for misappropriation of trade secrets in federal courts, be sure you understand injunction standards under the Defend Trade Secrets Act (DTSA). Under the DTSA, a court may grant an injunction to prevent any actual or threatened misappropriation, provided that the injunction does not “prevent a person from entering into an employment relationship” and that any conditions placed on employment are based on “evidence of threatened misappropriation and not merely on the information the person knows.” 18 U.S.C. § 1836(b)(3)(A) (i). Where appropriate, an injunction under the DTSA may require affirmative actions to protect the trade secret. 18 U.S.C. § 1836(b)(3)(A)(ii). For more information on injunction standards under the DTSA and other trade secret laws, see Defend Trade Secrets Act (DTSA) Fundamentals — Other Remedies under the DTSA, Defend Trade Secrets Act (DTSA) and Other Legal Claims and Recourse to Protect Employers’ Confidential Information and Trade Secrets, and Milgrim on Trade Secrets § 15.02 (subsection ).
When conducting your research, focus on cases that have similar fact patterns to yours. If you’re seeking to enjoin a competitor from poaching away a number of employees with noncompete agreements, for example, identify the cases in which the court granted an injunction in similar circumstances that prevented the employee raiding and be ready to discuss them in your opening and closing arguments.
Even better, find cases decided by the judge assigned to your case. By reviewing opinions your judge has issued, you will have a better idea as to what the court relies on in granting or denying an injunction. Being able to point to a favorable opinion written by your judge is always worth the effort.
Personal experiences are especially helpful in this regard. Before the hearing, reach out to a colleague, within the firm or the bar who has been before your judge for a preliminary injunction hearing and knows what he or she looks for when deciding preliminary injunctions. This will help you construct your argument and prepare for questions from the judge.
Don’t forget to check the local rules regarding injunction hearings as well, as they may contain unique procedural requirements for your judge.
At the hearing, you may encounter a number of questions from the judge regarding the harm your client will suffer and why your client requires this relief. Pull all the latest cases that enforced or rejected restrictive covenants or trade secrets in the jurisdiction, as well as all decisions written by the judge on the issue, and keep them on hand at the hearing so that you can reference them if necessary. Highlight relevant portions and make extra copies for the judge, the clerk, and opposing counsel. Of course, make sure your legal authority is up-to-date before citing it at the hearing. While you’ll likely have included much of the foregoing case law in your written papers, be strategic about whether to save certain persuasive legal authority for use at the hearing. The element of surprise will catch your opponent off guard, but be sure to discuss this strategy with your client.
Selecting and Preparing Witnesses
When selecting witnesses for a preliminary injunction hearing, be sure to pick witnesses who have a solid understanding of the facts and parties at play, especially in complicated restrictive covenant and trade secret matters. These witnesses should be able to speak to the wrongful conduct of the opposing party and/or the immediate, irreparable harm the company will suffer absent an injunction. Common witnesses in these matters include the following:
As a preliminary matter to preparing your witnesses, it is important that you obtain documents from the defendant through the discovery process. Bear in mind, however, that the time-sensitive nature of preliminary injunctions often means the amount of discovery obtained prior to the hearing is minimal. Consider moving for expedited discovery prior to the hearing so that you have sufficient evidence to adequately prep your witnesses. A request to speed up the litigation process protects your client from extended harm and demonstrates to the court the urgency of the matter. Requesting expedited discovery illustrates to the court the seriousness of the matter and gives you the opportunity to discover facts that bolster your argument for injunctive relief. For information on discovery in breach of restrictive covenant and trade secret misappropriation litigation, see Discovery on behalf of Plaintiffs in Trade Secret Misappropriation and Breach of Restrictive Covenant Actions.
Set aside at least one or two sessions (time permitting) to meet with each witness and review relevant documentary and/or testimonial evidence. Key evidence to review will likely include:
Prepare an outline of questions you intend to ask each witness on direct examination. You should inquire about the witnesses’ role, responsibilities, and interactions. Next, draft mock questions that you expect opposing counsel to ask the witness.
Finally, conduct mock direct- and cross-examination with each witness. This may be the first time your witness has testified in court, and a courtroom atmosphere intimidates most people more than the office environment of a deposition. Coach the witness on the best ways to communicate effectively and appear credible to the judge. If you have options, pick witnesses with in-court testimony experience
and who communicate confidently.
Expert testimony can be critical in restrictive covenant and trade secret hearings. You may need to provide testimony regarding:
If expert testimony is critical to your success, be sure to raise the issue with the court at the first available opportunity. Federal Rule of Civil Procedure 26 requires that the opposing party receive notice of all experts and their written reports. See Fed. R. Civ. Proc. 26(a)(2).
The accelerated time frame of a preliminary injunction makes it less likely that the expert will be familiar with the full extent of the facts. Should the defendant use an expert for the preliminary injunction, these same time limitations offer an opportunity to examine the expert before he or she is familiar with the facts, potentially providing your client an advantage. Preparing Exhibits Succeeding in a preliminary injunction hearing requires a convincing and well-constructed narrative. It is important that there is factual support that the court can latch onto when deciding in your favor. You should select and organize each piece of evidence included as an exhibit to support your narrative.
Prepare affidavits or declarations from your client’s key employees in the areas impacted by the defendant’s conduct. This means describing the immediate and irreparable harm (i.e., loss of business, clients, and/or confidential information) about which the employee has personal knowledge. For instance, a coworker could affirm that the defendant discussed soliciting the company’s customers or employees, or a supervisor could declare what confidential information the defendant had access to before leaving the company.
Further, submit an affidavit from an individual within your client’s company who has personal knowledge and can show how the defendant’s conduct affects the company as a whole. If the narrative focuses on financial harm, provide an affidavit from the CFO or high-ranking finance employee. Likewise, if trade secrets are an issue, provide an affidavit from an executive with knowledge of the company’s proprietary information and the means used to protect it. If the company is particularly large, you may need to work with in-house counsel to determine which individuals have the most
knowledge within the company to speak to the harm it will suffer.
In addition to affidavits, you should prepare important documentary evidence as exhibits. This should include:
While expedited discovery makes it less likely that you will have had time to complete depositions, if you have had a chance to depose the defendant or other defense witnesses, be sure to prepare to submit as evidence any excerpts that support your case. For example, you could introduce admissions from the defendant that he or she entered into a restrictive covenant, understood its terms, and engaged in actions that breached the contract, such as taking employment with a competitor or soliciting business from the company’s customers while the covenant was in effect.
Keep in mind that it is important to confront damaging facts head-on. Own the fact in your exhibits and demonstrate contrition. If your client did something wrong, offer an explanation and an apology from senior management. By getting out ahead of your client’s errors, you will have more credibility with the trial court.
Deposition testimony and discovery will bring new facts into play that may not have been on your radar when first moving for preliminary injunction. Always be curious about the issue at large and what actually happened between the parties. New information could allow for a change in strategy that increases your likelihood of success. Track this new information by creating (and continually updating) an internal timeline that shows a chronology of the factual evidence. This timeline will help you determine which exhibits are most helpful in telling your story.
Once you have compiled your exhibits for the preliminary injunction hearing, create an indexed exhibit list. This list should track the structure of your narrative, whether chronological or otherwise. The exhibit list should be crossreferenced with your papers and provide a helpful reference for the court. The exercise of creating an indexed exhibit list will also help you prepare for the hearing insofar as it
enhances your understanding of the facts.
Going to Court
Once you’ve prepared your exhibits, drafted your outlines, and prepped your witnesses, it’s on to the hearing. But don’t undermine your hard work by ignoring courtroom protocol and decorum on the day of the hearing. Consider the following pointers to ensure you have a seamless day at court:
Permanent Injunction Hearings
Permanent injunctions are rare in restrictive covenant and trade secret cases since granting a preliminary injunction will often encourage settlement and a swift case resolution before a trial on the merits occurs. Moreover, because restrictive covenants are often limited in time to only a year or two, by the time the litigation has concluded, the case may be moot since the restrictive covenant is no longer
effective. However, if litigation persists and the restrictive covenant remains in effect or trade secrets are still at issue, a permanent injunction may be the ultimate course of action. Preparing for these hearings is akin to preparing for a trial and all the facts discovered throughout litigation should be persuasively laid out to the court.
Generally speaking, courts have the authority to consolidate preliminary and permanent injunctions (see Fed. R. Civ. Proc. 65(a)(2)), but plaintiffs should be cautious about seeking or agreeing to this. By keeping the permanent injunction hearing separate, the plaintiff has a second chance to prove its case after additional discovery has been conducted and it has been able to more fully develop its argument. While it is unusual for a court to change course after denying a preliminary injunction to subsequently grant a permanent one, it is not impossible, as the findings at a preliminary injunction hearing are not binding at the subsequent trial on the merits. See Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981).
This section outlines the key stages and best practices when conducting a preliminary injunction hearing.
Ensuring Confidentiality of the Proceedings
As trade secret hearings involve highly confidential matters, it is important to ensure that protected information is not inadvertently disclosed. To start, always enter into a confidentiality stipulation / protective order in these cases. The protective order should enable you to label certain items “Highly Confidential” or “Attorneys’ Eyes Only” and require that at the end of litigation all documents exchanged during discovery be destroyed or returned within a reasonable time period. It may also be wise to file pleadings and exhibits
under seal with the court to keep them off the public docket. Another option to ensure the secrecy of the proceedings is to enter into arbitration agreements with employees to take advantage of the confidentiality that arbitrations provide.
For detailed guidance on maintaining confidentiality in trade secret cases, see Restrictive Covenant and Trade Secret Misappropriation Claims: Key Initial Considerations and Tips for Seeking TROs, Preliminary Injunctions, and Other Relief — Maintaining Confidentiality of Trade Secrets and Confidential Information.
Making the Opening Arguments
The plaintiff bears the burden to demonstrate to the court that it is entitled to an injunction.
In the opening statement, outline the elements you must demonstrate to prevail methodically, and use facts to articulate your argument. Consider using the complaint as a starting point for constructing your argument to inform the court why your client is entitled to this relief. During the opening and throughout the hearing, distill your story into digestible soundbites for the judge within the time limit allotted. Typically, preliminary injunction hearings are around 45 minutes, so keep your opening clear and concise.
A key issue in preliminary injunction hearings is whether the plaintiff faces irreparable harm in the absence of an injunction. Thus, be prepared to tell the judge the harm your client faces. In trade secret and restrictive covenant cases, that means explaining how the defendant’s access to confidential and proprietary information or breach of a restrictive covenant will adversely impact your client. Be specific about what harm the employer will suffer, such as the loss of customers, goodwill, or competitive advantage, and how it will continue in the absence of an injunction.
Conducting Direct and Cross-Examinations
Conducting direct- and cross-examinations in a preliminary injunction hearing is different from a jury trial in one critical regard: preliminary injunction hearings are not subject to the same rules of evidence required at trial. See Camenisch, 451 U.S. at 395. For instance, most courts permit hearsay evidence due to a preliminary injunction being less formal than a full trial on the merits. Find out well in advance of the hearing what the judge’s approach is to the presentation of evidence so that you can tailor your questions accordingly.
Because preliminary injunction hearings are relatively informal regarding evidence, you can focus your efforts primarily on persuading the court of the merits of your case. Use your direct examinations to elicit testimony from your witnesses that supports your argument that the employer is entitled to a preliminary injunction. The witnesses should testify about the defendant’s unlawful conduct and the harm it will cause the company. In a restrictive covenant or trade secrets case, this means eliciting favorable testimony that
As discussed in the section “Preparing Witnesses,” above, effectively preparing witnesses for direct testimony is key to success. Still, be sure to have documents at the ready to refresh your witness’s recollection. Even the best coached witnesses can forget details when on the stand.
On cross-examination, your objective is to sow doubt and uncertainty into the testimony of the witness. Use
favorable deposition testimony and documentary evidence during cross-examination to call witnesses’ credibility into question and to contradict the statements of witnesses who try to obscure the facts. You can also use your evidence to help refresh the memory a “forgetful” adverse witness who fails to recall basic facts that you need to be establish before proceeding through your cross-examination. In a restrictive covenant or trade secrets case, an effective cross examination could include:
Remember, this is your opportunity to control the witnesses in the areas that you believe can help your case. The other side will always have holes in their case, but it is up to you to find these holes and use them to your advantage.
During the preliminary injunction hearing, it can be useful to present specific exhibits to the judge. Because your exhibits are already compiled in the indexed exhibit list and noted in your papers, you should present exhibits sparingly. Examine your exhibit list and identify evidence that strongly supports one or more elements of your claim without needing much explanation. If the evidence does not stand on its own,
you will need to take time from your argument to provide contextual explanation. Presenting exhibits should provide an illustrative prop for your argument rather than a distraction.
Evidence of communications can be powerful exhibits to present during the hearing because they demonstrate the knowledge of the communicator. Modern communications like email and text, however, are often fragmented and disjointed. Look for communications that answer most of the “5 Ws” of information-gathering: who, what, when, where, and why. Otherwise the judge will be more confused about
the context of your exhibit than impressed by its importance to your argument.
Consider introducing the applicable restrictive covenant or confidentiality policies, any employment agreements with a new employer, job descriptions for a new position, and any smoking gun written communication or deposition testimony that demonstrates the validity of the plaintiff’s claims. Computer forensic evidence can also be a powerful exhibit and tool. Forensic evidence can demonstrate if an employee took confidential information by, for example, emailing sensitive information outside of the company, downloading confidential information to a data storage device, or destroying technological evidence of wrongdoing in an effort to cover his or her tracks. This evidence can be technical and
confusing to the judge, so be sure that you have witnesses that can explain what these documents mean.
Communications can also be very effective tools to impeach an opposing witness. Showing a witness a direct written contradiction to his or her sworn testimony casts doubt upon the defendant’s case and the witness’ credibility.
Finally, be sure to call witnesses who can authenticate and explain the evidence you introduce. Where third-party documents are important to get into evidence, such as evidence in the possession of a new employer, plan ahead to ensure you have a witness who can testify to its accuracy and authenticity.
Making the Closing Arguments
The closing argument is an opportunity to go through each of the elements you must prove to obtain injunctive relief one final time, using evidence from the hearing to support your case. Your closing should be linear, direct, and quick. Pleading for injunctive relief asks a lot of the court, so it is helpful to show self-awareness. Admit to the judge that you seek an extraordinary remedy, but only because your client
faces immediate and irreparable harm. Muster the strongest facts from the hearing to support the extent of that harm, and impress upon the court the equity of the remedy: the employee was compensated to avoid the conduct, knew it was wrong, but did it anyway.
Assistance for this practice note provided by summer associates Marisa Agganis and Jack Foster.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.