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H.Q. Milton, Inc. v. Webster

United States District Court, N.D. California

November 22, 2017

H.Q. MILTON, INC., Plaintiff,
v.
JESSY WEBSTER, et al., Defendants.

          ORDER GRANTING APPLICATION FOR TEMPORARY RESTRAINING ORDER Re: Dkt. No. 10

          PHYLLIS J. HAMILTON United States District Judge

         Plaintiff's application for a temporary restraining order (“TRO”) and an order to show cause re preliminary injunction came on for hearing before this court on November 22, 2017. Plaintiff appeared by its counsel Nancy E. Harris, and defendants Jessy Webster and Hidekazu Matsuba appeared by their counsel Russell Goodrow and Burke Hansen, respectively. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, for the reasons stated at the hearing and summarized below, the court hereby GRANTS plaintiff's application for a temporary restraining order.

         BACKGROUND[1]

         Plaintiff H.Q. Milton seeks an immediate temporary restraining order to prevent defendants Jessy Webster and Kazu Matsuba from using allegedly misappropriated trade secrets. Amongst other claims, the complaint asserts that defendants violated the Defend Trade Secrets Act, 18 U.S.C. 1836 et seq. (the “DTSA”), intentionally interfered with H.Q. Milton's prospective economic advantage, and converted H.Q. Milton property.[2]Complaint ¶¶ 32-66. The present TRO application is based only on the DTSA cause of action. In support of its TRO application, plaintiff submitted declarations from Scott Kaplan, H.Q. Milton's founder, Jacek Kozubek, a long-time employee and partner at H.Q. Milton, and excerpts of over 1200 pages of text messages between defendants Matsuba and Webster.

         Scott Kaplan founded H.Q. Milton, which is one of the world's leading purveyors of high-value, collectible vintage and modern timepieces, with a particular focus on Rolex sports model watches. Dkt. 10-2, Kaplan Decl. ¶ 1, 4; Compl. ¶ 2. H.Q. Milton's business relies upon its well-earned reputation for honesty, reliability, impeccable merchandise and its vast knowledge of vintage and antique timepieces. Compl. ¶ 2. H.Q. Milton has invested time, energy and resources to build its own proprietary and invaluable set of customer and vendor contacts. Kaplan Decl. ¶¶ 6-7; Compl. ¶ 4.

         H.Q. Milton protects its client source and lead information and does not share it with anyone outside its small company that employed four people in 2017 and currently employs two people. Kaplan Decl. ¶¶ 7, 10, 11; Compl. ¶¶ 2, 19. Because the market for vintage timepieces is volatile, H.Q. Milton protects the information it has acquired about customer interests, pricing, and profit margin. Kaplan Decl. ¶¶ 4-5, 7-8, 9, 11; Compl. ¶¶ 19-20. Access to that pricing and profit margin information is invaluable in a fast-moving market where pricing decisions ultimately determine profitability. Kaplan Decl. ¶ 4, 5, 7-8, 11; Compl. ¶¶ 19-20.

         Up until November 7, 2017, defendant Matsuba was employed by H.Q. Milton as a sales person. Compl. ¶ 23. In that role, Matsuba was given access to H.Q. Milton's customer information, a “customer wish list, ” and final pricing and margin information, so that he could adequately perform his job duties. Compl. ¶ 23; Kaplan Decl. ¶ 17-21.

         Defendant Webster worked for H.Q. Milton as a professional photographer for approximately 3.5 years. Compl. ¶ 24; Kaplan Decl. ¶¶ 13-16. H.Q. Milton fired Webster in December 2016. Kaplan Decl. ¶¶ 13-16; Compl. ¶ 24. At that time, H.Q. Milton was aware that Webster intended to pursue vintage watch dealing on his own. Kaplan Decl. ¶¶ 15-16; Compl. ¶ 24. A couple of months after leaving, Webster launched his own vintage watch dealing website called oysterpalace.com. Compl. ¶ 25.

         Between February and November 2017, Matsuba, still working at H.Q. Milton, provided Webster with key client information, including names and contact information. Dkt. 10-3, Kozubek Decl. ¶¶ 12-31; Compl. ¶¶ 26-29. Matsuba also provided Webster with H.Q. Milton's proprietary pricing information. Compl. ¶¶ 3, 5, 23-29; Kozubek Decl. ¶¶ 26-31. The text messages show that Matsuba affirmatively steered H.Q. Milton customers to Webster and Oyster Palace. Kozubek Decl. ¶¶ 23-25; Compl. ¶¶ 26-29. Some of these customers purchased vintage timepieces from Webster and Matsuba, rather than H.Q. Milton. Kozubek Decl. ¶ 22; Compl. ¶ 27.

         The text messages also show that both defendants were aware that their conduct should be kept hidden from H.Q. Milton. For example, Matsuba, then still working at H.Q. Milton, rebuffed Webster's request that he leave H.Q. Milton, stating “we may be more successful this way, me staying here, and you doing ur thing . . . I'm a splinter cell for [Oyster Palace] . . . and we actually have access to more, I have information at [my] fingertips, and access to all of my clients, with the credibly [sic] of HQ” Milton. Compl. ¶ 5. Webster responded “Yessir I'm in! Obviously hahahaha.” Kozubek Decl. ¶ 14. But Webster then immediately warned Matsuba to “[j]ust be careful with leaving your messages on your comp:-/.” Id. In another instance, after Matsuba confirmed which watch parts Webster wanted from H.Q. Milton, Webster stated “Yes please;) and delete this convo from your comp;).” Id. at ¶ 23.

         DISCUSSION

         A. Legal Standard

         Federal Rule of Civil Procedure 65 provides federal courts with the authority to issue temporary restraining orders and preliminary injunctions. Fed.R.Civ.P. 65(a), (b). Generally, the purpose of a preliminary injunction is to preserve the status quo and the rights of the parties until a final judgment on the merits can be rendered, see U.S. Philips Corp. v. KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir. 2010), while the purpose of a temporary restraining order is to preserve the status quo before a preliminary injunction hearing may be held. See Granny Goose Foods, Inc. v. Bhd. of Teamsters and Auto Truck Drivers, 415 U.S. 423, 439 (1974).

         Requests for temporary restraining orders are governed by the same general legal general standards that govern the issuance of a preliminary injunction. See New Motor Vehicle Bd. v. Orrin W. Fox Co., 434 U.S. 1345, 1347 n.2 (1977); Stuhlbarg Int'l Sales Co., ...


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