No Preliminary Injunction For You! The Latest On The Battle Between eDiscovery Providers
Wednesday, July 12, 2017
Posted by: ACEDS Marketing Team
Extract from Kelly Twigger's article "No Preliminary Injunction For You! The Latest On The Battle Between eDiscovery Providers" posted on abovethelaw.com
Back in May, I wrote about the litigation between two of the largest ediscovery service providers — DTI and LDiscovery — pending in federal court before Judge Jed Rakoff of the Southern District of New York. My article highlighted some fairly egregious facts alleged in the complaint, in which DTI accused LDiscovery and four salespeople from Epiq (the company that DTI acquired in fall 2016) of conspiring to steal trade secrets and solicit their customers in violation of various provisions of their employment agreements. The complaint painted a picture of calculated deception and conspiracy on the part of LDiscovery’s CEO and the salesmen.
The latest evidence in the case suggests those alleged facts are not close to the truth.
DTI moved for a preliminary injunction restricting the individual defendants from engaging in behavior in violation of those “numerous restrictive covenants” from their employment agreements with Epiq (the precursor to DTI), including the following: a one-year non-competition agreement, a one-year prohibition on soliciting the company’s clients, a one-year prohibition on soliciting the company’s employees, a broad non-disclosure provision, and a covenant to return the company’s confidential information upon termination. Judge Rakoff held a three-day hearing on the motion, and summarily denied DTI’s motion on June 16, 2017- with a written decision to follow.
While we were all taking the Independence Day week off, Judge Rakoff issued his written decision last Friday. It took me reading roughly three pages of the 30-page decision to see that the evidence that came to light in the hearing was vastly different than the facts alleged in the complaint. You can read the decision in its entirety here, but suffice it to say that Judge Rakoff shot DTI down on the two key elements necessary for a preliminary injunction: the reasonable likelihood of success on the merits and irreparable harm.
Judge Rakoff dismissed DTI’s claims of misappropriation as “conjecture.” He ruled the contractual provisions they sought to enforce were unenforceable under New York law:
In sum, DTI’s motion for a preliminary injunction fails as to the facts and the law. On the facts, DTI mistakenly portrays what are in actuality innocuous or otherwise legitimate acts by LDiscovery and the Individual Defendants as part of a conjectural (but unsupported) scheme to misappropriate DTI’s trade secrets and improperly compete for its clients and employees. On the law, DTI’s expansive view of its trade secrets and the restrictive covenants in its employment agreements is at odds with New York law and the testimony elicited during Court’s three-day evidentiary hearing, and DTI has failed to show a likelihood of success on the merits or imminent and irreparable harm.
Read the full article here