On May 6, 2020, the U.S. District Court for the District of Maine denied plaintiff Alcom’s request for a temporary restraining order (“TRO”), which sought to enjoin a competitor’s alleged misappropriation of trade secrets. The court denied the request for a TRO, holding that Alcom’s speculation about the potential harm it would suffer absent the TRO was not enough to show a likelihood of irreparable harm, as required to obtain a TRO. The case serves as a reminder that when proving irreparable harm, courts require more than just speculation.
In 2015, Alcom (a trailer manufacturer) hired Mr. Temple (defendant) as a sales representative for its horse and livestock trailers. As the sole salesperson in North America for the Frontier line of trailers, Mr. Temple gained significant responsibilities including developing and maintaining sales leads, as well as growing Alcom’s customer base for those trailers. Mr. Temple signed various agreements as conditions to his employment, including (i) confidentiality agreement, (ii) non-disclosure agreement, (iii) non-compete agreement, and (iv) a non-solicitation agreement. Alcom required Mr. Temple to sign the agreements as a precondition for accessing highly valuable and confidential company information relating to customer incentive program details, sales and marketing information, and unique insights into the needs and operational requirements of the trailer dealers he solicited.
In March 2020, Mr. Temple resigned and immediately joined Alcom’s competitor, Black Mountain. Alcom’s customers, however, began to inform Alcom that Mr. Temple was soliciting their business on behalf of Black Mountain. Alcom quickly sued Mr. Temple and Black Mountain for trade secret misappropriation (among other things) and sought to stop their competing activities via a TRO.
The court analyzed the facts under the TRO standard: (1) likelihood of Alcom’s success on the merits, (2) likelihood of irreparable harm to Alcom, (3) the balance of hardships, and (4) the effect of a TRO on the public interest. The court denied the TRO, rejecting Alcom’s theory as to the second factor, “irreparable harm.” Alcom had argued that it would suffer a high risk of irreparable harm based on the loss of customers, goodwill, referral sources, and customer contacts—all of which Alcom contended is hard to regain when lost. The court explained that, while loss of goodwill and competitive advantage can be difficult to measure and therefore is sometimes deemed irreparable harm for injunction purposes, Alcom’s evidence here was too speculative. Specifically, only one out of five dealers identified by Alcom had actually transferred its business to Black Mountain. The other four dealers merely informed Alcom that Mr. Temple was now soliciting their business on behalf of Black Mountain, suggesting loyalty to Alcom.
The holding is a reminder that speculative damage, including the potential loss of customers and goodwill, may not rise to the level necessary to substantiate a TRO. The TRO inquiry is fact intensive, so during the factual assessment, litigants should be prepared to provide facts showing that losses are imminent. Where customers remain loyal to the moving party, the perception of irreparable harm diminishes.