10th Circuit Affirms That Employer Failed To Show How Past Harm Signified Future Irreparable Harm In Support Of Preliminary Injunction Request In Trade Secret Battle

On December 28, 2018, a three-judge panel of the Tenth Circuit Court of Appeals affirmed the holding by the U.S. District Court for the District of Colorado denying the plaintiff's, DTC Energy Group, Inc. ("DTC Energy"), request for a preliminary injunction against a collective of defendants: former DTC Energy employees Adam Hirschfeld ("Hirschfeld") and Joseph Galban ("Galban") and Ally Consulting, LLC ("Ally Consulting"), Hirschfeld's new employer and a DTC Energy competitor. DTC Energy Grp., Inc. v. Hirschfeld, No. 18-1113, 2018 WL 6816903, at *1 (10th Cir. Dec. 28, 2018). In a majority opinion written by the Honorable Mary Beck Briscoe, the Court held that the trial court did not abuse its discretion in determining that DTC Energy failed to present evidence in support of a preliminary injunction. Id., at *5. In particular, while DTC Energy proffered prior harm as a consequence of Hirschfeld's past breaches of his employment contract and the individual defendants' failure to uphold their duty of loyalty, it could show that neither the prior harm established a significant risk of future irreparable harm saddled by DTC Energy nor Hirschfeld currently breached his employment agreement. Id.

Facts

Employed in 2013 by DTC Energy—a staffing agency for oil and gas companies—Hirschfeld subsequently became its business development manager. Id., at *1. At that point, he executed an employment agreement that required him to devote substantially all of his professional time to DTC Energy and to act in its best interests. Id. The agreement further prohibited him from (i) using confidential information for his and others' benefit, (ii) diverting DTC Energy customers to a competitor, and (iii) encouraging DTC Energy employees to work for a competitor. Id. The latter two restrictions survived their relationship for one year unless the impetus for Hirschfeld's departure was "a change in the current equity ownership of" DTC Energy. Id. No one else, including Galban (DTC Enery's former accountant), executed an employment agreement. Id.

Thereafter, in January 2016, DTC Energy and Ally entered into an agreement whereby Ally (another staffing agency but a much smaller competitor given its work exclusively for directional drillers) paid a fee to DTC Energy for its administrative services. Id., at *2. Ally, however, soon became partially owned by Hirschfeld's father, which Hirschfeld failed to disclose to DTC Energy. Id. Despite this apparent conflict...