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U.S. Electrical Services v. Schmidt (Inevitable Disclosure, D. Mass. 2012)

U.S. Electrical Services v. Schmidt (Inevitable Disclosure, D. Mass. 2012)

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Published by: gesmer on Jul 09, 2012
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11/29/2012

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UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTS__________________________________________)U.S. ELECTRICAL SERVICES, INC.,))Plaintiff,))v.)Civil Action No. 12-10845-DJC)JAMES SCHMIDT, PETER COLON, and)MUNRO DISTRIBUTING CO., INC., ))Defendants.)__________________________________________)STATEMENT OF REASONSCASPER, J.
June 19, 2012
I. Introduction
Plaintiff U.S. Electrical Services, Inc. (“USESI”) has sued its former employees, JamesSchmidt (“Schmidt”) and Peter Colon (“Colon”), and their current employer, Munro DistributingCompany, Inc. (“Munro”) (collectively, “Defendants”), alleging breach of contract, breach of theduty of loyalty, misappropriation of trade secrets, conversion, tortious interference with bothcontractual relations and advantageous relations, unfair competition, and civil conspiracy. USESImoved for a preliminary injunction restricting the scope of Schmidt and Colon’s work for Munroand precluding Munro from competing with USESI for a particular piece of business (the “DollarTree account” or “Dollar Tree”) on which Schmidt and Colon had worked during their employmentat USESI. After a hearing on May 14, 2012, the Court DENIED USESI’s motion for a preliminaryinjunction and informed counsel that a statement of reasons would follow.
Case 1:12-cv-10845-DJC Document 22 Filed 06/19/12 Page 1 of 23
 
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References to docketed material are abbreviated as “D. __.”2
II. Burden of Proof and Standard of Review
The burden of providing a factual basis sufficient to justify a preliminary injunction restswith the party seeking the injunction. Nieves-Marquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir.2003). Unless the parties’ competing versions of events are “in sharp dispute such that the‘propriety of injunctive relief hinges on determinations of credibility,’” Rohm & Haas Elec.Materials, LLC v. Elec. Circuits Supplies, Inc., 759 F. Supp. 2d 110, 117 (D. Mass. 2010) (quotingCampbell Soup Co. v. Giles, 47 F.3d 467, 470 (1st Cir. 1995)), the Court is free to accept as true“well-pleaded allegations [in the] complaint and uncontroverted affidavits.” Id. at 114 n.2 (quotingElrod v. Burns, 427 U.S. 347, 350 n.1 (1976)). The Court must ensure that “given the nature andcircumstances of the case . . . the parties have a fair opportunity to present relevant facts andarguments to the court, and to counter the[ir] opponent’s submissions.” Aoude v. Mobil Oil Corp.,862 F.2d 890, 894 (1st Cir. 1988).
III. Factual BackgroundA. USESI
USESI is a Connecticut corporation with its principal place of business in Connecticut. D.1 at ¶ 1.
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USESI is a national distributor of electrical products and services. D. 1 at ¶ 7. USESIoperates through a number of business units, subsidiaries and brand identities. For example,Standard Electric Supply Company (“SESCO”), a distributor of electrical products and services, wasmerged into USESI on December 31, 2008, at which point USESI assumed all of SESCO’s assets,liabilities, obligations and agreements but continued to do business under SESCO’s brand namebased out of SESCO’s office in Wilmington, Massachusetts. D. 1 at ¶¶ 7-8; Affidavit of SESCO
Case 1:12-cv-10845-DJC Document 22 Filed 06/19/12 Page 2 of 23
 
3President Thaddeus Dlugolecki, D. 3-1 at ¶¶ 5-6. Electrical distributors distribute products andservices such as lighting, fixtures, wiring, fuses and breakers, and switchgear; a typical “nationalaccount” for such a distributor is a large nationwide retail chain (such as Legal Sea Foods orAbercrombie & Fitch) that agrees to buy a set of electrical products exclusively from one distributorfor a specific period of time, often two years or longer. Dlugolecki Aff., D. 3-1 at ¶¶ 10, 12. Oneof USESI’s national accounts is the Dollar Tree account, which USESI successfully bid for in 2008.D. 1 at ¶ 79; Dlugolecki Aff., D. 3-1 at ¶ 38.
B. Munro
Munro is a Massachusetts corporation with a principal place of business in Fall River,Massachusetts. D. 1 at ¶ 4. Until recently, Munro was a regional distributor of electrical products,but by April 2012 it had opened a national accounts division in Wilmington, Massachusetts, lessthan one mile from SESCO’s Wilmington office. Affidavit of Mary-Ellen Stahl (“Stahl”), SESCO’sHuman Resources Manager, D. 3-2 at ¶ 24; D. 1 at ¶ 19. Munro’s national accounts divisioncompetes directly with USESI and USESI asserts that Munro intends to compete with USESI forthe Dollar Tree account, which was scheduled to go out for bid for the first time in four years on oraround May 16, 2012. D. 1 at ¶¶ 20, 80.
C. Schmidt
Schmidt is a New Hampshire resident who resides in Nashua, New Hampshire. D. 1 at ¶ 2.On August 1, 2007, Schmidt began working for SESCO as its Director of National Accounts. D.1 at ¶ 23; Schmidt Aff., D. 11 at ¶ 3. In consideration for his position, he signed a ProprietaryInformation and Non-competition Agreement, which included the following clause:I agree at all times during the term of my employment and thereafter to hold instrictest confidence, and not to use, except for the benefit of the Company, or to
Case 1:12-cv-10845-DJC Document 22 Filed 06/19/12 Page 3 of 23

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