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Sterling Computers Corp. v. Fling

United States District Court, D. South Dakota, Southern Division

October 11, 2019

STERLING COMPUTERS CORPORATION, Plaintiff,
v.
BILLIE JO FLING and KELYN TECHNOLOGIES, LLC, Defendants.

          ORDER GRANTING MOTION FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION AS TO BILLIE JO FLING

          KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

         Plaintiff, Sterling Computers Corporation, moves for a temporary restraining order or preliminary injunction enjoining defendants, Billie Jo Fling and Kelyn Technologies, LLC, from engaging in a number of activities that allow Kelyn to benefit from confidential customer information Fling gained during her employment with Sterling. Docket 7 at 2-3. Kelyn filed a motion to dismiss based on lack of personal jurisdiction. Docket 18. The parties are doing limited jurisdictional discovery on this issue and the court reserves ruling on the motion for temporary restraining order and preliminary injunction with regard to Kelyn until the motion to dismiss is resolved. Fling filed an answer to Sterling's complaint and a response in opposition to the temporary restraining order and preliminary injunction. Dockets 26, 27. For the following reasons, the motion for a temporary restraining order and preliminary injunction is granted as to Fling.

         BACKGROUND

         Sterling is an information technology solutions company based in North Sioux City, South Dakota. Docket 8 at 1. Its clients include the federal government, state and local governments, private corporations, and education entities. Id. at 1-2. It holds several federal contracts across defense, civilian, and intelligence sectors, and has obtained awards, certifications, and security clearances to service these contracts. Id. at 2. Because of Sterling's relationship with numerous agencies, it can provide efficient services and is “uniquely position[ed] . . . to provide its clients with comprehensive solutions at an industry-best value.” Id. Sterling uses its long-standing relationships as a competitive advantage in its field. Id.

         Sterling holds confidential information about its clients, their contracts, and its sales solutions. Id. at 3. Its sales representatives access this confidential information via Sterling's Salesforce account, an online database that holds customer data. Id. Sterling's Salesforce database is accessible online from anywhere its salespeople work. Id. The database holds “crucial information regarding Sterling's trade secrets.” Id. Sterling takes pains to keep this confidential information secret. Id. The database is only accessible to designated current employees who must have a unique username and password to access it. Id. at 4. When a Sterling employee is terminated, his or her access to Salesforce is immediately terminated as well. Id.

         Fling began working as an account manager at Sterling on April 25, 2011. Docket 1 ¶ 36. As a member of Sterling's sale team, Fling had access to its Salesforce database. Id. ¶ 37. She worked closely with key Sterling customers, including the Missile Defense Agency, Red Hat, Inc., Jacobs Technology, and other defense agencies during her employment. Id. ¶ 47. She had access to confidential and proprietary information about these clients' profiles, preferences, and specifications via the Salesforce database. Id. According to Sterling, Fling admitted that information contained in the Salesforce database “absolutely belongs to Sterling.” Id. ¶ 49.

         In 2012, Fling signed and acknowledged receipt of Sterling's employee handbook. Id. ¶ 38; Docket 1-1 at 3. The handbook contained a non-disclosure policy stating that Sterling “must protect confidential business information and trade secrets.” Docket 1 ¶ 40; Docket 1-1 at 4. It also contained a confidential information policy stating that Sterling employees must handle confidential information with great care, and that termination of employment does not change this obligation. Docket 1 ¶ 41. It named several examples of confidential business information and trade secrets, including customer lists, customer preferences, marketing strategies, and pending projects and proposals. Docket 1-1 at 4.

         Fling also signed an employment agreement containing a covenant not to compete. Docket 1 ¶ 45. The covenant placed certain restrictions on Fling for one year following the end of her employment. Docket 1-2 at 6. The restrictions included prohibitions on Fling soliciting business from or performing services for any customers of Sterling with whom Fling had contact as a Sterling employee. Id. The agreement, which Fling signed for a second time on June 16, 2015, also contained a confidentiality provision requiring Fling to return any confidential Sterling information when her employment was terminated. Docket 1 ¶ 44.

         On July 18, 2018, Fling sent an email from her Sterling email to “bjkover@yahoo.com, ” an email on record at Sterling as Fling's personal account. Hearing Exhibit 6. The email contained reports generated from Sterling's Salesforce database listing contacts, sales numbers, and pipeline information. Id. On September 10, 2018, Fling sent an email to the same Yahoo account containing a Salesforce report listing activity by sales representative and customer. Id. On November 15, 2018, Fling requested a copy of the signed handbook and covenant not to compete from Sterling's director of human resources. Hearing Exhibit 3. She stated that she had accidentally shredded her own copy. Id.

         On or around November 20, 2018, Fling terminated her employment with Sterling. Docket 1 ¶ 50. At the time of termination, Fling “expressly or impliedly agreed not to use any Sterling confidential information for her own benefit or for any improper purpose, including . . . to benefit a subsequent employer.” Id. ¶ 51. Fling acknowledged the existence and enforceability of the non-compete provision in her employment contract at the time of termination. Id. ¶ 52. She attempted to negotiate a release of her obligations under the provision, but Sterling did not agree to the release. Id. Rather, Sterling reminded Fling of her obligation under the contract via a letter dated December 3, 2018. Id. ¶ 53. Sterling's president and CEO, Brad Moore, told Fling via email on December 26, 2018, that he expected her to honor the agreements. Hearing Exhibit 4.

         In or around January 2019, before the expiration of the noncompete agreement, Fling began working at Kelyn. Docket 1 ¶ 54. Kelyn is a competitor of Sterling. Id. On May 22, 2019, Sterling received an email inadvertently sent to Fling's former Sterling email account. Id. ¶ 55. Through the email, Sterling learned that Fling was working with Sterling customers while employed by Kelyn. Id. These customers included Red Hat, Jacobs Technology, and the Missile Defense Agency. Id. Sterling alleges that Fling is using its confidential information to improperly solicit these and other Sterling customers. Id. The information Fling is allegedly using is not “publicly available or readily ascertainable.” Id. ¶ 57.

         On or around May 30, 2019, Sterling reminded Fling of her obligations under the employee handbook and non-compete agreement. Id. ¶ 60. Fling did not respond. Id. ¶ 63. Sterling states that its “trade secrets, confidential information, and goodwill are at risk” because Fling is using Sterling's confidential information to Kelyn's and her own benefit. Id. ¶ 65. It further states that it is at risk of irreparable harm because of Fling's continued use of Sterling's confidential information and violation of the non-compete agreement. Docket 8 at 14-17.

         Sterling filed its complaint on August 6, 2019, and its motion for temporary restraining order and preliminary and permanent injunction on August 22, 2019. Dockets 1, 7. The complaint alleged breach of contract with regards to both the confidential information provision and non-compete provision, misappropriation of trade secrets in violation of South Dakota state law, unfair competition, and tortious interference with a business expectancy against Fling. Docket 1 ¶¶ 72-127. The temporary restraining order and preliminary injunction motion sought to (1) enjoin Fling from her continued employment with Kelyn, or in the alternative, enjoin Fling from, directly or indirectly, working with Sterling clients or customers with whom she had actual contact while employed with Sterling for a period of one year from November 20, 2018; (2) enjoin Fling from directly or indirectly engaging in, assisting, or working for any person, activity, business, concern, interest, or venture in competition with Sterling other than Kelyn for one year from November 20, 2018; (3) enjoin Fling from accepting employment or acting as a consultant for any Sterling client or customer with whom Fling had actual contact while employed with Sterling for a period of one year from November 20, 2018; (4) compel Fling and Kelyn to return all Sterling confidential or proprietary information, property, or trade secrets in their custody, possession, or control; (5) enjoin Fling from disclosing any Sterling confidential trade secrets to which she became privy during her employment; (6) order Fling and Kelyn to cease use of any and all Sterling confidential or proprietary information or trade secrets in their possession; (7) enjoin Fling and Kelyn from soliciting or rendering marketing or sales to any Sterling customers with whom Fling had actual contact while employed with Sterling; (8) enjoin Fling from encouraging, recommending, or suggesting to any employee, contractor, vendor, or customer to end or reduce its relationship with Sterling. Docket 7 at 2-3.

         On September 17, 2019, Fling's counsel sent an email to Sterling's counsel offering to stipulate to all but the final two of the eight requested forms of relief. Docket 27-1. For the seventh and eighth requests, Fling's counsel offered to stipulate to the terms if Sterling was willing to make the requests contingent on the same date restriction used in the other requests, one year from November 20, 2018. Id. at 4. Sterling rejected the proposed stipulation. Id. at 1. Sterling then filed a reply to Fling's opposition and a motion to strike evidence of the email offer to stipulate to the requested preliminary relief. Dockets 37, 38.

         LEGAL ...


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