Tenth Circuit reaffirms need for irreparable harm to obtain injunction in trade secrets case

Both federal and state law (respectively, the Defend Trade Secrets Act (DTSA) and Colorado’s Uniform Trade Secrets Act (CUTSA)) authorize a company to obtain a preliminary injunction against a former employee who is using or threatening to use its trade secrets. The Tenth Circuit recently reaffirmed that, among the requirements for such an injunction, is proof of irreparable harm. (The other requirements are (1) substantial likelihood of success once the merits of the case are decided, (2) the threatened injury outweighs the harm of the injunction, and (3) the injunction will not be adverse to the public interest.)

To be “irreparable” the harm that will be suffered but for the preliminary injunction must be the kind that cannot be reversed, repaired or even compensated for in damages.

In this case, the trial court found that the harm the former employer would suffer if no injunction was issued could be compensated for in damages. In other words, quoting the trial court, it could be “reasonably quantified” in terms of dollars, and such an award of damages “would have adequately made (the company) whole.” Typically that is enough to show such harm is not “irreparable” and therefore a preliminary injunction should be denied.

However, the trial court decided that no showing of actual harm was necessary to prove the irreparable harm element; it decided that the element of irreparable harm could instead be presumed. The court so decided “because both the DTSA … and the CUTSA … provide for injunctive relief.”

The Tenth Circuit reversed. The Tenth Circuit held that legislatures can create presumptions of irreparable harm but to do so they need to say so. Both DTSA and CUTSA lack such language. They merely allow for injunctive relief:

DTSA and CUTSA … merely authorize and do not mandate injunctive relief and thus do not allow a presumption of irreparable harm.

Without a presumption of irreparable harm and lacking proof of irreparable harm, the Tenth Circuit reversed.

The case illustrates the need to prove irreparable harm, in order to obtain a preliminary injunction in cases involving trade secrets. The case is also a reminder that irreparable harm cannot exist where monetary damages will make the plaintiff whole.

Source: FIRST WESTERN CAPITAL MANAGEMENT COMPANY v. MALAMED, Court of Appeals, 10th Circuit 2017 – Google Scholar

Interested in my thoughts on the Gothamist shutdown?

Honored to be featured in Doug Chartier’s article about the recent Gothamist shutdown.

Source: Gothamist Shutdown Raises Questions – Law Week Colorado

The advice of legal counsel does not immunize an employer against later employment lawsuit

An Oregon trial court recently held that the advice of legal counsel does not immunize an employer against a later employment lawsuit. The employee lodged complaints involving sexual harassment and workplace safety concerns. The employer consulted with legal counsel, who advised, on the basis of her being an at-will employee, that the employee could be terminated. Further, the employer testified his attorney told him the company not only could but should terminate her. “According to (an owner of the employer), the attorney referred to Plaintiff as ‘a troublemaker’ and advised Morse to terminate her.” That owner testified the company would not have terminated her if the attorney hadn’t given his blessing.

The court recognized Tenth Circuit precedent in favor of an employer in a similar situation, but in that situation, the attorney recommended the plaintiff’s request for a shift assignment be denied because a similar request was already at-issue in a different pending lawsuit. In other words, the attorney recommended the employer treat the employee uniformly with its prior practice. Because, in following the attorney’s advice, the company’s “motive” was to treat its employees uniformly, the Tenth Circuit held its motive did not include a retaliatory/unlawful intent. The Tenth Circuit simply held the company had acted for a lawful reason — one that its attorney had articulated — and not even in part an unlawful reason. In so ruling the Tenth Circuit clarified that the advice of counsel was not itself a defense; it was simply evidence that supported the presence of a lawful motive.

To be sure, an employer cannot immunize itself from Title VII liability by following the advice of its lawyers. Still, given the facts of this case, the City was not required to compromise its defense of Lollis’s claims simply to accommodate McGowan’s subjective desire for a change in shifts. In sum, this record does not support a conclusion that the City’s reason for denying McGowan a shift change was pretextual. The City’s temporary refusal to grant McGowan’s request for a shift change was perhaps reactive, but cannot be said on this record to have been retaliatory.

Here, there was no similar reasoning available to the employer. If the company’s attorney had really advised that at-will employment somehow permitted an otherwise illegal discharge, that would have been incorrect. If the attorney really had somehow come to a legal conclusion the plaintiff was a “troublemaker” who should be fired, that again would only have confirmed a retaliatory motive. The fact that the company (allegedly) consulted with an attorney did not — unlike the Tenth Circuit case — suggest it had anything but an unlawful intent: The intent to retaliate against a troublemaker.

The case is a reminder that employers should consult with experienced legal counsel but not anticipate doing so can somehow immunize an employer against the consequences of unlawful actions. But, as in the Tenth Circuit case, the consultation with a lawyer can be used as evidence, when appropriate, of a lawful motive.

Source: Bloomberg Law – Document – Aichele v. Blue Elephant Holdings, LLC,, No. 3:16-cv-02204-BR, 2017 BL 405999 (D. Or. Nov. 13, 2017), Court Opinion

Supreme Court holds deadline for appealing a federal lawsuit is not jurisdictional

Prior case law had suggested and many litigators had assumed that the deadline for filing an appeal in a federal lawsuit is jurisdictional, meaning it cannot be waived or extended and must be met at the risk of losing an otherwise meritorious appeal. In a recent case, the appellant requested and received, before her deadline to appeal, a 2-month extension of the deadline to appeal. That extension was one month more than the federal rules allow. Those federal rules are adopted by the courts, specifically the Supreme Court, they are not laws made by Congress.

The appellate court held that the deadline for her to appeal was jurisdictional and therefore the lower court had lacked authority to extend it so long. Accordingly the appellate court dismissed her appeal.

A unanimous Supreme Court disagreed. While the rule is in fact a rule, and failure to file a timely appeal still generally will warrant a dismissal, the Supreme Court held that  the deadline is not jurisdictional. It is merely a rule of court. It may be extended. To be jurisdictional, the Supreme Court held, it would have had to have been the product of Congressional legislation; the Supreme Court held it does not itself have the authority to create jurisdictional deadlines in its own rules. Accordingly, the dismissal of the appeal was vacated.

Source: Hamer v. Neighborhood Housing Services of Chicago, No. 16-658 (U.S. Nov. 08, 2017), Court Opinion

Sexual Harassment Prevention In The American Workplace

In the wake of the many recent sexual harassment scandals, both the Wall Street Journal and New York Times ran major pieces on sexual harassment in the American workplace and its prevention.

It’s a particularly difficult challenge in light of the EEOC’s recent study, which produced what EEOC Commissioner Lipnic called a “jaw-dropping moment,” when concluded by finding that 30 years of training has had no impact on the incidence of sexual harassment in the workplace. According to the EEOC, training just simply hasn’t been effective. As NPR has reported, it’s not just the EEOC that thinks training is ineffective; that is unfortunately the opinion of a good many trainers as well. Now, the EEOC recommends a different kind of training that is less focused on the legal issues and more customized to each workforce. To be sure, though, some training is still a best practice.

Other best practices recommended by the EEOC and in the Wall Street Journal and New York Times articles include the following:

  • Clear and updated EEO, sexual harassment, complaint and anti-retaliation policies (again, with related training).
  • Frequent communication of those policies to workers from hire throughout their employment.
  • Enforcement of those policies, in particular the anti-retaliation policy for people who complain and/or participate in the investigation of sexual harassment.
  • Prompt investigations of complaints or concerns.
  • Effective remedial measures, including discipline up to discharge, where investigations establish a violation.

To that list, this author would add consideration of whether an anonymous complaint reporting system is practical in a company’s workplace.

Sources: The Workplace After Harvey Weinstein: Harassment Scandals Prompt Rapid Changes – WSJWill Harvey Weinstein’s Fall Finally Reform Men? – The New York Times

House passes Joint Employer bill

In previous posts, this blog has reported on legislative efforts to limit the NLRB’s joint employer approach. The House has voted to pass its bill, HB 3441, which now proceeds to the Senate, where supporters will need to find at least 8 Democrats to overcome anticipated filibuster.

Source: E:\BILLS\H3441.RH