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Richmond Technologies, Inc., A Georgia Corporation, D/B/A Epayware v. Aumtech Business Solutions

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


May 25, 2011

RICHMOND TECHNOLOGIES, INC., A GEORGIA CORPORATION, D/B/A EPAYWARE, PLAINTIFF,
v.
AUMTECH BUSINESS SOLUTIONS, AN UNINCORPORATED ASSOCIATION; AUMTECH ISOLUTIONS PVT. LTD, AN INDIAN CORPORATION,
DAMIAN JOSEPH POLITO, JENNIFER POLITO, SHANKAR BOSE AND ILA BOSE,
DEFENDANTS.

The opinion of the court was delivered by: Lucy H. Koh United States District Judge

For the Northern District of California United States District Court

ORDER DENYING EX PARTE MOTION FOR TRO WITHOUT PREJUDICE

On May 20, 2011, Plaintiff Richmond Technologies, Inc., doing business as ePayware,*fn1 filed the instant action against Defendants Aumtech Business Solutions ("Aumtech America"), Aumtech i-Solutions Pvt. Ltd. ("Aumtech India"), Damien Joseph Polito, Jennifer Polito, Shankar Bose, and Ila Bose. Shortly thereafter, on May 23, 2011, Plaintiff filed an ex parte motion for a 23 temporary restraining order ("TRO"). There is no indication that Defendants have been served 24 with the summons and complaint or given notice of Plaintiff's motion for a TRO. Having 25 considered the arguments and declarations provided by Plaintiff, the Court finds that Plaintiff has not satisfied the requirements of Federal Rule 65(b) for issuance of a TRO without notice to the 2 adverse party. Accordingly, the Court DENIES Plaintiff's ex parte motion for a TRO without 3 prejudice. After Plaintiff serves Defendants with the summons, complaint, and all other filings in 4 this action, and files proof of service with the Court, Plaintiff may renew its motion for a TRO or 5 seek an expedited hearing on a motion for preliminary injunction Plaintiff ePayware is a company that provides enterprise resource planning ("ERP") software for financial service companies who provide credit card terminals to merchants. Compl. ¶

I.Background 7

1. In 2007, ePayware hired Defendant Aumtech India to develop software and conduct 10 maintenance of its ERP modules. Compl. ¶ 23; Decl. of Sandeep Menon in Supp. of Pl's Mot. for 12 entered into a Confidentiality and Non-Disclosure Agreement that included a non-compete clause, 13 as well as restrictions on interference with ePayware's customers and solicitation of its employees.

In its Complaint, Plaintiff ePayware alleges that, in 2010, Defendant Aumtech India "hatched a plan" with former ePayware employee Jennifer Polito and her husband Joseph Damien Plaintiff claims, among other things, that this venture violates the Confidentiality and Non- Disclosure Agreement because it offers the same services provided by ePayware and directly 20 competes with ePayware. Compl. ¶ 4, 7, 40. Plaintiff claims, further, that Aumtech America has 21 been actively soliciting ePayware's clients and marketing its competing services at industry trade 22 shows, in violation of the Confidentiality and Non-Disclosure Agreement. Compl. ¶¶ 7-8, 32-33. 23

After learning of these alleged breaches, ePayware terminated its software development and 24 maintenance agreement with Aumtech India. Menon Decl. ¶ 7. ePayware then demanded that Aumtech India release the software source code to ePayware so that ePayware could transition its 26 software support and development to another vendor. Compl. ¶ 36. ePayware claims that it has 27 paid for the software development and maintenance provided by Aumtech India and that it needs 28 the source code in order to fulfill its obligations to its customers. Compl. ¶ 37; Menon Decl. ¶ 11. TRO ("Menon Decl.") ¶¶ 4-5 & Ex. A. On Sept ember 15, 2009, ePayware and Aumtech India also Menon Decl. Ex. B. ¶¶ 4-6. 15 Polito to create a venture called Aumtech Business Solutions ("Aumtech America"). Compl. ¶ 4.

According to ePayware, Aumtech India has refused to release the source code unless ePayware 2 first provides a payment of $20,000. Compl. ¶ 36; Menon Decl. ¶ 9. ePayware now seeks a 3 temporary restraining order that would (1) compel Defendant Aumtech India and its principals to 4 release the source code to ePayware, and (2) enjoin Defendants from competing with ePayware in 5 violation of the Confidentiality and Non-Disclosure Agreement.

Because Plaintiff seeks issuance of a TRO without notice to the adverse parties, Plaintiff must satisfy both the general standard for temporary restraining orders and the requirements for ex 9 parte orders set forth in Federal Rule of Civil Procedure 65(b). The standard for issuing a TRO is 10 identical to the standard for issuing a preliminary injunction. Brown Jordan Int'l, Inc. v. Mind's Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. Haw. 2002); Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995). A plaintiff seeking a 13 preliminary injunction must make a four-fold showing: (1) that he is likely to succeed on the 14 merits; (2) that he is likely to suffer irreparable harm in the absence of preliminary relief; (3) that 15 the balance of equities tips in his favor; and (4) that an injunction is in the public interest. Winter v. 16

Natural Resources Defense Council, Inc., 129 S.Ct. 365, 374 (2008); Amer. Trucking Assocs., Inc. In addition, a plaintiff seeking issuance of a TRO without notice to the defendant must satisfy two further requirements: (1) "specific facts in an affidavit or a verified complaint [must] 20 clearly show that immediate and irreparable injury, loss, or damage will result to the movant before 21 the adverse party can be heard in opposition," and (2) the applicant's attorney must certify in 22 writing the reasons why notice should not be required. Fed. R. Civ. Pro. 65(b)(1) (emphasis 23 added). The Ninth Circuit has cautioned that there are very few circumstances justifying the 24 issuance of an ex parte TRO. Reno Air Racing Assoc., Inc. v. McCord, 452 F.3d 1126, 1131 (9th 25 Cir. 2006). Such circumstances include "a very narrow band of cases in which ex parte orders are 26 proper because notice to the defendant would render fruitless the further prosecution of the action." 27

Id. (quoting Amer. Can Co. v. Mansukhani, 742 F.2d 314, 322 (7th Cir. 1984)).

II.Legal Standard 7

v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009).

irreparable injury if Aumtech India withholds the source code and continues to violate the non-4 compete agreement until this action is resolved. Plaintiff states that without the source code, it will 5 be unable to fulfill its obligations to its customers and thus could permanently lose both its 6 customers and the goodwill it has accumulated. Similarly, Plaintiff argues that if Aumtech 7

III. Analysis

In this case, Plaintiff argues that an ex parte TRO should issue because Plaintiff will suffer America is allowed to continue competing with Plaintiff and soliciting its customers during the 8 pendency of this action, Plaintiff will suffer irreparable harm in the form of lost business goodwill 9 and reputation.

The Court agrees that loss of customers, goodwill, and business reputation may constitute irreparable harm in some circumstances. See Rent-A-Center, Inc. v. Canyon Television and Appliance Rental, Inc.,944 F.2d 597, 603 (9th Cir. 1991) (upholding issuance of preliminary 13 injunction to enforce non-compete agreement and finding that "intangible injuries" to advertising 14 efforts and goodwill can constitute irreparable harm). In this instance, however, Plaintiff has failed 15 to "clearly show that immediate and irreparable injury, loss, or damage will result to the movant 16 before the adverse party can be heard in opposition," as required for issuance of an ex parte TRO. Fed. R. Civ. Pro. 65(b)(1) (emphasis added). In its brief and declarations, Plaintiff states that it 18 will suffer irreparable injury "if Aumtech India withholds the source code until resolution of this 19 action" or if it receives a damages award for breach of the non-compete agreement "a year or two 20 from now." TRO Mot. at 4, 7; see also Menon Decl. ¶ 12 ("Waiting until the resolution of this 21 action to receive the source code would cause irreparable harm to ePayware's business"). 22

However, Plaintiff fails to set forth any facts suggesting that it is likely to face immediate 23 irreparable harm before Defendants could be heard in opposition to Plaintiff's motion. Plaintiff has 24 not alleged that Defendants cannot be located in time for a hearing, that Defendants are likely to 25 destroy the source code if given notice, or otherwise suggested that it is likely to suffer irreparable 26 injury if consideration of preliminary relief is postponed slightly in order to provide Defendants an 27 opportunity to be heard. See Reno Air Racing Assoc., 452 F.3d at 1131 (suggesting that issuance of 28 an ex parte TRO may be appropriate where the adverse party cannot be located in time for a hearing or where an infringer is likely to dispose of infringing goods before a hearing). Plaintiff's 2 attorney also has not "certif[ied] in writing the reasons why notice should not be required," as 3 mandated by Rule 65(b). Indeed Plaintiff has not addressed why a TRO should issue without 4 notice to Defendants. 5

Preliminary injunctive relief is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter, 129 S.Ct. at 376. Where a 7 plaintiff seeks such relief without notice to the adverse party, he should be able to show that notice 8 would result in immediate, irreparable harm such that notice would "render fruitless the further 9 prosecution of the action." Reno Air Racing Assoc., Inc., 452 F.3d at 1131. In this case, Plaintiff 10 has not complied with the requirements of Rule 65(b) and has not argued that it will face immediate, irreparable injury if Defendant is advised of Plaintiff's application for a TRO and provided an opportunity to be heard. Accordingly, Plaintiff has not demonstrated that issuance of 13 an ex parte TRO is warranted, and the Court DENIES Plaintiff's ex parte motion for a temporary 14 restraining order.

IV. Conclusion

For the foregoing reasons, the Court hereby DENIES Plaintiff's motion for an ex parte TRO without prejudice. Accordingly, after Plaintiff serves Defendants with the summons, 18 complaint, and all other filings in this action, and files proof of service with the Court, Plaintiff 19 may renew its motion for a TRO. However, if Plaintiff chooses instead to file a motion for a 20 preliminary injunction, the Court finds that Plaintiff has made a sufficiently strong showing to 21 warrant an expedited hearing on such a motion. 22

IT IS SO ORDERED.


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