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Accruent, LLC v. Short

United States District Court, W.D. Texas, Austin Division

January 4, 2018

ACCRUENT, LLC, Plaintiff,
v.
JIM SHORT, Defendant.

          ORDER

          ROBERT PITMAN UNITED STATES DISTRICT JUDGE

         Before the Court in the above-entitled matter is Plaintiff's Application for Temporary Restraining Order and Preliminary Injunction, (Dkt. 10). On September 14, 2017, the Court held a hearing at which it heard evidence and considered arguments on Plaintiff's request for a temporary restraining order (“TRO”). (Dkt. 25). The Court denied Plaintiff's request for a TRO and set a second hearing at which it would consider Plaintiff's request for a preliminary injunction. (Id.). The Court held the preliminary injunction hearing on December 19, 2017. (Dkt. 41). Having considered the parties' arguments, the evidence presented, and the relevant law, the Court GRANTS Plaintiff's application for a preliminary injunction to the extent described in this order.

         I. BACKGROUND

         Plaintiff Accruent, LLC (“Accruent”) is a company that provides software and services that help retail companies select and manage their real estate and facilities. (Appl. Prelim. Inj., Dkt. 10, ¶ 1). In early August 2017, Accruent acquired Lucernex, Inc., another software company that provides real estate- and facilities management products and services to retailers. (Id. ¶ 8).

         Defendant Jim Short (“Short”) was a Lucernex employee who became an Accruent employee after the acquisition. (Def.'s Resp. Appl. Prelim. Inj., Dkt. 16, at 6). Short had been working for Lucernex since March 2010, first as the director of client services until July 2012, then as a solution engineer until July 2015, and then as the sole senior solution engineer until he resigned. (Short Decl., Dkt. 16-1, ¶ 7). As director of client services, Short's job was to implement Lucernex products for existing Lucernex customers. (Prelim. Inj. Hr'g, Dkt. 41 (Short testimony)). As a solution engineer, Short's job was to demonstrate Lucernex products for prospective cleints. (Dkt. 16-1, ¶ 7).

         In each position, Short had access to a wide range of confidential proprietary information. Short's jobs required significant interaction with the software development team, the sales team, and the support team. (TRO Hr'g Tr., Dkt. 29, at 17 (Abdul testimony)). Short's experience implementing and demonstrating Lucernex's products gave him access to Lucernex's business development plans, product development plans, market research, sales strategies, software functionality and limitations, and customers' needs and preferences. (Id. at 21-23).

         When he joined Lucernex, Short signed a “Proprietary Information and Inventions Agreement” (“Agreement”), which included nondisclosure, noncompete, and nonsolicititation provisions. (Id. at 18-20; Agreement, Dkt. 1-1, at 5-12). In the merger, Accruent acquired the right to enforce the Agreement against Short. (Dkt. 41 (Robb testimony)).

         The Agreement's nondisclosure provision requires that Short not “disclose, discuss, transmit, use, lecture upon, or publish” any proprietary information as defined in the Agreement.[1] (Dkt. 1-1 § 2.1). The Agreement's employee nonsolicitation provision requires that Short not “solicit, assist, or in any way encourage” any Lucernex employee to stop working at Lucernex for two years after leaving the company. (Id. § 7.3). The Agreement's customer nonsolicitation provision requires that Short not solicit any Lucernex customers or interfere with Lucernex's customer relationships for one year after leaving the company. (Id. § 7.4). And finally, the Agreement's noncompete provision requires that Short not “compete with the Company in Business” for two years after leaving Lucernex, either in Texas or any other state or country where Lucernex “engages or proposes to engage in Business.” (Id. § 8). The Agreement defines “Business” as “those portions of the Company's business in which [Short] actively participated or received Proprietary Information.” (Id.).

         On August 19, 2017, Short accepted a position with Tango Management Consulting, LLC (“Tango”). (Dkt. 16, at 7). Short continued to work for Accruent until August 31 and then began working for Tango on September 1. (Id.). Tango competes directly with Accruent-it is a software company that helps retail companies select and manage real estate and facilities. (Dkt. 29, at 25 (Abdul testimony)). One Accruent executive described Tango as being directly in Accruent's crosshairs as a competitor and added that Tango had recently hired several employees away from Accruent. (Dkt. 41 (Rivera testimony)).

         Tango hired Short as its director of services. (Dkt. 16-1, ¶ 21). In that role, Short helps existing Tango customers implement and use Tango software. (Id.). Short is not involved directly or indirectly with the Tango sales team and he does not interact with prospective Tango customers. (Tyagi Decl., Dkt. 22-1, ¶ 10). According to Tango, the company has barred Short from working for or contacting any Lucernex customers or prospects with whom he interacted for Lucernex. (Id. ¶ 8).

         Four days after Short began working for Tango, Accruent filed this action against Short, alleging that Short breached the Agreement and requesting an injunction enforcing the Agreement. (Compl., Dkt. 1). Accruent then filed its application for a TRO and preliminary injunction on September 7, 2017. (Dkt. 10). The Court denied Accruent's request for a TRO, (Dkt. 25), but scheduled a preliminary injunction hearing, (Dkt. 35), and ordered a period of expedited discovery in advance of the hearing, (Dkt. 36). Accruent presented evidence and arguments in favor of its request for a preliminary injunction at a hearing before the Court on December 19, 2017, (Dkt. 41).

         II. LEGAL STANDARD

         A preliminary injunction is an extraordinary remedy, and the decision to grant such relief is to be treated as the exception rather than the rule. Valley v. Rapides Parish Sch. Bd., 118 F.3d 1047, 1050 (5th Cir. 1997). “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The party seeking injunctive relief carries the burden of persuasion on all four requirements. PCI Transp. Inc. v. W. R.R. Co., 418 F.3d 535, 545 (5th Cir. 2005).

         III. DISCUSSION

         Accruent requests four kinds of injunctive relief. First, Accruent asks the Court to enjoin Short from disclosing or using Accruent's proprietary information. (Dkt. 10, at 10). Second, Accruent asks the Court to enjoin Short from soliciting Accruent employees for two years. (Id.). Third, Accruent asks the Court to enjoin Short from soliciting Accruent customers for one year. (Id.). Finally, Accruent asks the Court to enjoin Short from competing with Accruent for two years. (Id. at 10-11).

         A. Likelihood of Success on the Merits

         Accruent's lone cause of action against Short is a claim for breach of contract. (Dkt. 1, ¶¶ 23-27). To succeed on its motion for a preliminary injunction, then, Accruent must show that there was an enforceable noncompete/nondisclosure agreement and that Short is substantially likely to violate that agreement. Henson Patriot Co., LLC v. Medina, No. SA-14-CV-534-XR, 2014 WL 4546973, at *2 (W.D. Tex. Sept. 11, 2014). Short argues both (1) that the Agreement is unenforceable and (2) that he is not violating the Agreement even if it is enforceable. (Dkt. 16, at 10-16).

         1. Whether the Agreement is enforceable

         In Texas, [2] “[e]very contract . . . in restraint of trade or commerce is unlawful.” Tex. Bus. & Com. Code § 15.05(a). “An agreement not to compete is in restraint of trade and therefore unenforceable . . . unless it is reasonable.” DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 681 (Tex. 1990). By statute, covenants not to compete are reasonable-and therefore enforceable-only to the extent that they contain “limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.” Tex. Bus. & Com. Code § 15.50(a).[3] “The hallmark of enforcement is whether or not the covenant is reasonable, ” Marsh USA Inc. v. Cook, 354 S.W.3d 764, 777 (Tex. 2011), and courts may “dispense[ ] with one or more factors entirely when the totality of circumstances indicate[ ] that the covenant not to compete [is] reasonably narrow to protect a company's business interest or goodwill.” M-I LLC v. Stelly, 733 F.Supp.2d 759, 799 (S.D. Tex. 2010).

         If a court finds that a covenant is unreasonable, it must reform the covenant so as to render it reasonable. Tex. Bus. & Com. Code § 15.51(c). A court may reform an unreasonable covenant for the purpose of entering a preliminary injunction. Tranter, Inc. v. Liss, No. 02-13-00167-CV, 2014 WL 1257278, at *10 (Tex. App.-Fort Worth Mar. 27, 2014, no pet.) (stating that ‚Äúreformation is not ...


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