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Pyro Spectaculars North, Inc. et al v. Steven Souza

March 21, 2012

PYRO SPECTACULARS NORTH, INC. ET AL., PLAINTIFFS,
v.
STEVEN SOUZA, DEFENDANT.



The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge

ORDER

Presently pending before the court is plaintiffs Pyro Spectaculars, Inc.; Pyro Spectaculars North, Inc.; and Pyro Events, Inc.'s ("PSI") motion for a preliminary injunction, which came on for hearing before the undersigned on March 15, 2012. (Dkt. Nos. 34, 35.)*fn1

Defendant Steven Souza filed an opposition (dkt. no. 47) and PSI filed a reply brief (dkt. no. 72). Both PSI and defendant also submitted copious declarations, exhibits, and supplemental briefing for the court's review. At the hearing, Kurt Kappes and Jennifer Holly appeared on behalf of PSI and Susan Sheridan and Heather Messenger appeared on behalf of defendant Steven Souza. After considering the papers in support of and in opposition to the motion, the parties' oral argument, and the applicable law, the court now issues the following order preliminarily enjoining defendant Souza and those acting in active concert or participating with him in the misdeeds detailed herein.

BACKGROUND FACTS*fn2

PSI is a business originally started by the Souza family in the early 1900s and is currently one of the largest fireworks production companies in the United States. (Dkt. No. 36 at 2.) Notwithstanding its size, PSI remains a tight-knit, family-operated and managed business. (Id.) PSI states that its success in the commercial market is highly dependent on its established relationships with customers, vendors, and pyrotechnic operators. (Id.) PSI employs commissioned sales executives to market and sell pyrotechnic displays and services to its customers, which are often ongoing customers that purchase fireworks displays regularly from PSI. (Id.)

According to Ian Gilfillan, PSI's Executive Vice President and husband of Nancy Souza, PSI has compiled its list of customers over the decades of its business from advertising, website contacts, publicity, customer referrals, and other sources of leads that have been gathered and forwarded to its account executives to make a sale for PSI. (Dkt. No. 36 at 3.) Customer lists include "the name, address, and phone number of the customer; the 'contact person'; the amount of money previously spent; line item budgets and breakdown of costs of the displays the client purchased; and a breakdown of the specific products used in the individual displays, and a listing of every pyrotechnic operator PSI used for different accounts." (Id.) It also includes "customer feedback, complaints and customer preferences, site surveys concerning the size of the fireworks that can be shot in the customer's area, notes about how to improve the customer's shows in the future, as well as special requirements, preferences and procedures of the authorities that have jurisdiction over the displays." (Id.) Furthermore, "PSI has compiled lists of pyrotechnic operators, their experience, training, qualifications and requirements, as well as a list of Hazardous Materials Drivers and their experience, training, qualifications and requirements, among other lists that it keeps confidential." (Id.) These lists and information were stored in a program on PSI's company database known as the "Booking Form" program. (Dkt. No. 37 at 2; see also Dkt. No. 45-6 at 37-38.)

On or about November 1, 1995, PSI hired defendant Steven Souza as an account executive. (Dkt. No. 3-2 at 2.) Defendant was hired both to serve PSI's existing customers and accounts as well as to seek additional accounts. (Id.) His responsibilities included the marketing and sales of pyrotechnic displays and show production for Northern California and Hawaii. (Id.) Mr. Gilfillan passed this territory on to defendant when he moved up in position with PSI. (Dkt. No. 36 at 2.) PSI expended resources for defendant to visit and develop new and existing PSI clients, and throughout his career at PSI, defendant enjoyed access to PSI's business information, data, and documents. (Id.) Indeed, defendant admitted that he learned all of his pyrotechnics customer contact information through his employment at PSI. (Deposition of Steven Souza ["Steven Souza Depo"] 30:5-19, 32:17-20, Dkt. No. 45-1 at 14-15.) Defendant's access to the company database was limited to the "Booking Form" program. (Dkt. No. 37 at 2.)

Shortly after being hired, on November 8, 1995, defendant signed a document titled "Pyro Spectaculars, Inc. Account Executives Duties and Responsibilities - 1994" which provided in part:

Account executives agree that all account or customer lists, trade secrets, unique display designs or knowledge gained are the exclusive property of Pyro Spectaculars, Inc. and the Account Executive hereby waives any rights therein. Account Executives further agree that they will not divulge any knowledge, trade secrets, formulas, patents or unique display designs to anyone outside Pyro Spectaculars, Inc. (Dkt. No. 46 at 26-30, ¶ 12.) During his employment, defendant also signed and acknowledged multiple versions of PSI's employee handbook, including the PSI Employee Handbook issued November 2008, which plaintiff received on November 30, 2008 and signed on December 5, 2008. (See e.g. dkt. nos. 45-2 at 9, 45-3 at 36.) Section One of the PSI Employee Handbook issued November 2008 provides, in part:

The protection of confidential business information and trade secrets is vital to the interests and the success of Company. Such confidential information includes, but is not limited to, the following examples:

* Computer processes

* Computer programs and codes

* Customer lists

* Customer preferences

* Financial information

* Marketing strategies

* New materials research

* Pending projects and proposals

* Proprietary production processes

* Scientific data

* Scientific formulae

* Technological data

All employees may be required to sign a non-disclosure agreement as a condition of employment. Employees who improperly use or disclose Company trade secrets or confidential operational business information will be subject to disciplinary action, up to and including termination of employment and legal action, even if they do not actually benefit from the disclosed information.

(Dkt. No. 45-4 at 2-3.) Section 7 of that handbook also states, in pertinent part, that:

Employees are responsible for all Company property, materials, or written information issued to them or in their possession or control. Employees must return all Company property immediately upon request or upon termination of employment. Company may take all action deemed appropriate under the law to recover or protect its property issued to employees.

(Dkt. No. 45-4 at 36.) By signing the acknowledgment of receipt of handbook form, defendant acknowledged that he read and understood all of its provisions. (Dkt. No. 45-3 at 36.)

Around the first week of December 2011, defendant decided in his own mind to resign from PSI. (Steven Souza Depo 77:2-9, Dkt. No. 45-1 at 38.) However, he must have been seriously considering such a move as somewhat before that, in November 2011, defendant downloaded and printed 52 individual customer Booking Forms from the Booking Form program. (Dkt. Nos. 37 at 4 & 37-1.) In discussions with his then-prospective new employer and PSI competitor, J&M Displays/Hi-Tech FX, LLC, defendant projected that he could bring approximately $500,000 - $600,000 in client revenue to the table, 70-80% of which would be attributable to existing PSI customers. (Steven Souza Depo 139:5-10, 140:15-25, 145:10-20, 147:22-148:5, Dkt. No. 46 at 9-10, 13-15.) Defendant later acknowledged that J&M Displays/Hi-Tech FX, LLC had only a few customers in Northern California prior to his resignation from PSI. (Steven Souza Depo 137:25-138:2, 138:22-24, 143:19-144:15, Dkt. No. 46 at 7-8, 11-12.) He also stated that he had not heard of J&M Displays prior to J&M Displays recruiting him, was not aware of any advertising by J&M Displays in California, and that J&M Displays were not hiring any other sales people in California apart from defendant. (Steven Souza Depo 154:6-19, Dkt. No. 45-2 at 1.)

Defendant actually tendered his resignation on January 14, 2012, to be effective on January 16, 2012. (Dkt. No. 3-2 at 2.) On January 16, 2012, he allegedly informed PSI Assistant Office Manager, Cindy Allie, that he had no other employment lined up. (Dkt. No. 3-5 at 2.) However, by that time defendant had already signed an employment contract with J&M Displays/Hi-Tech FX, LLC*fn3 on January 14, 2012, which actually overlapped his employment with PSI by two days. (Steven Souza Depo 173:14-175:4, Ex. 30, Dkt. Nos. 45-2 at 3-5 & 46 at 31-34.) Defendant purportedly told Ms. Allie that she may not want to keep in touch with him after he takes business away from PSI. (Dkt. No. 3-5 at 2.) Defendant's wife, Sherry Souza, also informed a PSI employee that she hated defendant's family and that defendant and her would "take as many shows as we can." (Sherry Souza Depo 35:20-37:7, Ex. 36, Dkt. No. 45-6 at 11-13, 28.)

Furthermore, shortly after defendant's resignation, PSI started receiving reports from some of its customers that defendant had been contacting them and soliciting their business on behalf of his new employers. (Dkt. Nos. 3-1 at 2; 3-3 at 2-3; 3-7 at 2-3; 3-8 at 6-7; 36 at 3-4; 36-1.) Mark Silveira, PSI's Madeira Facilities Manager, also reported that, around mid-December 2011, defendant had asked him who built PSI's fireworks racks, adding that he was starting his own company and looking for a supplier. (Dkt. No. 3-3 at 2.)

In light of this information, PSI retained a computer forensics expert to analyze defendant's former PSI-assigned laptop. The forensics report indicated that, on January 14, 2012 (the date of his resignation), defendant transferred over 60 PSI files from his PSI-assigned laptop to a Western Digital external hard drive and to additional USB drives. (Dkt. Nos. 3-6 at 3-4; 24 at 2-3.) Thereafter, a wiping software called "Disk Redactor" was used to delete and write over several computer files on the PSI-assigned laptop. (Dkt. No. 3-6 at 4-5.) It was later established that defendant retained the services of a computer expert to help him delete various files and folders from his PSI-assigned laptop. (Dkt. No. 45-6 at 44-55.) Despite the deletion, the computer forensics expert was able to recover the names of some of the files transferred, which were mostly concerning specific PSI clients and projects. (Dkt. No. 3-6 at 4-5.)

Additionally, it is undisputed that defendant retained an older version of PSI's Booking Form program and accessed it after his resignation. (Steven Souza Depo 108:1-109:8, Dkt. No. 45-1 at 46-47.) He kept a separate Excel database of PSI customer and show information that was derived from PSI documents and databases. (Steven Souza Depo 38:4-40:15, Dkt. No. 45-1 at 17-19.) Defendant also admitted that he accessed and funneled information from PSI Booking Forms to Mark Johnson at J&M Displays to prepare proposals to customers on behalf of J&M Displays, even though defendant was no longer a PSI employee and knew that it was something he was not permitted to do. (Steven Souza Depo 110:15-112:14, Dkt. No. 46 at 4-6.) Defendant further testified as follows:

Q. And how many proposals did you make in January after you left?

A. Probably 20.

Q. And how were you able to make so many proposals so quickly?

A. Get my information and -- I didn't make the proposal. J&M

-- Mark at J&M made the proposal. I fed him the information. He could probably put out four or five, ...


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