Order granting preliminary injunction.pdf

8/11/2019 Order granting preliminary injunction.pdf

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UNITEDSTATESDISTRICTCOURT

DISTRICTOFMINNESOTA

FirstFinancialSecurity,Inc.,

aDelaware

Corporation,

Plaintiff,

v. MEMORANDUM

OPINION

ANDORDER

CivilNo.141843(MJD/SER)

GillesMoua,anindividual,

andMaiLee,anindividual,

andDOES1100,

Defendants.

__________________________________________________________________

DavidD.VanSpeybroeckandCliffordS.Davison,SussmanShankLLPand

LouseneM.Hoppe,Fredrikson&Byron,P.A.,CounselforPlaintiff.

JonE.Drucker,LawOfficesofJonE.DruckerandCarolynG.Anderson,

ZimmermanReed,PLLP,CounselforDefendants.

___________________________________________________________________

I. Introduction

TheaboveentitledmattercomesbeforetheCourtonPlaintiffFirst

FinancialSecurity,Inc.s(FFS)motionforapreliminaryinjunction. ByOrder

dated

July

29,

2014,

this

Court

granted

FFSs

motion

for

a

temporary

restraining

order. AtthetimethatOrderwasentered,Defendantshadnotappearedinthis

action,andtheClerkofCourthadentereddefaultagainstthem.

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CASE 0:14-cv-01843-MJD-SER Document 80 Filed 09/04/14 Page 1 of 22


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Defendantsarenowrepresentedbycounselandaremovingtosetaside

thedefaultandtotransfervenuetoCalifornia. Defendantsalsoobjecttothe

entryof

apreliminary

injunction.

TheCourtheldanevidentiaryhearingonthemotionforpreliminary

injunctiononSeptember3,2014.

II. Background

FFSisalifeinsurancebrokerageagency. DefendantGillesMouawasan

independentsalescontractorforFFSanditspredecessorGlobalGroupFinancial

(GGF)from2003untilhisresignationonMay10,2014. In2005,Mouawas

promotedtoExecutiveFieldChairman(EFC)andasofMay2013,hewasFFSs

highestpaidEFC1. Priortohisresignation,therewereapproximately14,700sales

contractorson

his

team,

of

which

1,404

were

licensed.

Defendant

Mai

Lee

lives

withMoua,andwasalsoalicensedsalescontractorforFFSuntilherresignation

onMay10,2014.

AllFFScontractorsmustsignaSalesContractAgreement(Agreement),

which

prohibits

the

sales

contractor

frominteralia

,

inducing

an

FFS

customer

to

1FFSassertsthatMouassalesteamrepresented42%ofFFSs2013commissionincome

of$25,500,000,andsince2007,FFShaspaidMouaover$6millionincommissions.

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terminateorreducetheircoverage,inducinganotherFFScontracttoterminate

theiraffiliationwithFFS,usingconfidentialinformationortradesecretsofFFS

andsoliciting

other

contractor

to

purchase

produces

other

than

those

offered

by

FFS.

OneofMouasdownlineagentswasSouksakhoneKhammanivong. She

testifiedthatshewasamemberofthechampionclub,asshehadearnedover

$100,000incommissionsinthecourseofoneyear. Khammanivongisaresident

ofTexasandhasvisitedMinnesotaforleadershipmeetingswithMoua,Leeand

othersinthechampionclub. Shetestifiedthatsheattendedonesuchmeetingin

March2014inSt.Paul,Minnesota,andatthismeeting,Mouabeganpromoting

thethemethatadividedLaoswilldieandaunitedLaoswilllive. Thissame

themewas

also

brought

up

during

an

FFS

dream

destination

cruise

that

MouasteamwasawardedinApril2014.

OnMay10,2014,keymembersofMouasFFSsalesteamwerescheduled

tomeetat1:00p.m.attheofficeofAndreMoua,GillesMouasson,in

Woodbury,

Minnesota.

(Testimony

of

Souksakhone

Khammanivong

and

Saveng

Vongkhamsene.) ThemorningofMay10,2014,however,Khammanivong

receivedaphonecallfromMouaslieutenant,NoneiVorasane,tellinghertogo

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informedtheteammemberstoallowpoliciesatFFStolapse,andthenresign

thematFEG. MaiLeealsoexplainedtothemembersthatwithregardtoresidual

income

still

owed

to

them

by

FFS,

team

members

should

ask

FFS

nicely

for

such

payments.

Afterthepresentation,teammemberswereprovidedassistancetoresign

fromFFS. Threelaptopsweresetupinthebasement,andCharlesMoua,Nonei

VorasaneandothersprovidedassistancetothosewhowantedtoresignfromFFS

andenlistwithFEG.

Khammanivongtestifiedthatthroughouttheday,moreteammembers

arrivedatMouashome,andthatitappearedthemoredownlineanagentwas,

thelatertheyshowedup. SavengVonkhamsenewasaregionalmarketing

directorand

downline

agent

from

Khammanivong,

and

he

testified

that

he

arrivedatMouashomelaterintheafternoonafterhereceivedatextmessage

fromNoneiVorasane. (PlaintiffsEx.3.) UponarrivalatMouashome,

Vonkhamsenetestifiedthathewasgiventhenonsolicitationformtosign,and

toldthathehadtosigntheformorleaveMouashome. Noneiclarifiedthatin

orderforVonkhamsenetohearwhatwasgoingtohappen,hehadtosignthe

form. Becausehebelievedthathecouldonlygettrainingifhesignedtheform,

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Vonkhamsenedidso. Hewasthendirectedtogotothebasementwhereother

teammemberstoldhimhewouldhavetoresignfromFFStohearaboutthebig

move.

Vonkhamsene

testified

that

he

did

not

want

to

resign

from

FFS,

but

eventuallyhedidsobygivinghisiPadtoScottNhativongsothathecouldsend

aresignationemailtoFFS. AfterresigningfromFFS,Vonkhamsenetestifiedthat

hejoinedFEG.

BothMouaandLeetestifiedthattheyresignedfromFFSatapproximately

6:00a.m.onMay10,2014. LeetestifiedthatMouadidnottellherthathewas

resigninguntilthatmorning. Althoughtheybothtestifiedthatmanyoftheir

teammemberscametotheirhomelaterthatday,andthattheyweregiventhe

nonsolicitationformstosign,theydidnotinvitethem. Instead,theteam

memberscame

to

Mouas

home

on

their

own

after

they

discovered

that

their

accesstotheFFSwebsite fromwhichtheydidbusiness hadbeenblocked.

MichaelHardin,FFSVicePresidentofSalesManagement,testifiedthatasa

matterofordinarybusinesspractice,whenanagentresignedfromFFS,his/her

accesstotheFFSwebsitewouldbeblocked. Withrespecttothiscase,Hardin

testifiedthatheonlyblockedanagentsaccessafterthatagenthadresigned.

FollowingtheresignationsofMouaandLee,FFSreceivedmass

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resignationsfromagentsdownlinefromthem. (TestimonyofMargaretJones.)

JonesbelievedthattheorderinwhichMouasteamresignedwasimportant,

because

it

allowed

the

Moua

hierarchy

to

remain

intact

when

it

moved

to

FEG.

ByMay22,2014,FFSreceivedover1,300resignations. ByJune4,2014,FFS

alsoreceived74NoticesofCancellationsofapplicationsassociatedwiththe

resigningsalesteam. FFSalsoreceivednoticesofchargebacks2frominsurance

companies;someofwhicharebasedontheaforementionedapplication

cancellationsandothersarebasedonacustomersfailuretopay.

FFSbroughtthisactionassertingclaimsofbreachofcontractand

misappropriationoftradesecrets. FFSmovesforpreliminaryinjunctivereliefto

preventDefendantsfromusingordisclosingconfidentialinformationofFFSand

fromsoliciting,

recruiting,

inducing

or

otherwise

engaging

any

FFS

sales

contractorstoterminatetheirrelationshipwithFFStobecomeassociatedwith

FEGoranyotherFFScompetitor. FFSalsoseekstoenjoinDefendantsfrom

workingwithFFScustomers.

III. Motion

to

Set

Aside

Default

2AchargebackbasedonfailuretopayrequiresFFStorepaycommissionstothecarrier.

FFSthenpassesthechargebacktothesalescontractor,whoisthenrequiredtorepayFFS.

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Here,theDefendantsareHmongimmigrantswithlimitedEnglishskills

andtheydidnotrealizetheimportanceofthedocumentstheyreceivedwhen

personally

served.

At

the

time

of

service,

both

were

in

the

process

of

moving

backtoCaliforniaandlosttrackofthepackageandfailedtoforwardittoa

lawyer. Theyarguethattheyfailedtotimelyanswerthisactionduetoalackof

comprehensionandinadvertentcarelessness,nottointentionallydelaythese

proceedings.

FFSdisputesDefendantsrepresentationsthattheylackedcomprehension

oftheimportanceofthesummonsandcomplaintanddefensecounsels

representationsthatwhenhedidcommunicatewithPlaintiffscounsel,he

believedhewastalkingaboutaseparatecasethatinvolvedthesameparties. At

thistime,

however,

the

Court

finds

that

Defendants

did

not

engage

in

conduct

thatweighsagainstsettingasidethedefaultenteredagainstthem.

B. Meritorious

Defense

Thisfactorfocusesonwhetherthedefaultingpartyhaspresentedevidence

thatwouldpermitafindingforthedefaultingparty,notthattheevidenceis

undisputed.Johnson,140F.3dat785. Atthistime,Defendantsdenythe

allegationsandhaveprovidedtestimonythattheydidnotinduceagentstoleave

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asMouaandLeehaverecentlymovedtoLongBeach,California.

Fortheconvenienceofpartiesandwitnesses,intheinterestofjustice,a

district

court

may

transfer

any

civil

action

to

any

other

district

or

division

where

itmighthavebeenbrought. 28U.S.C.1404(a). Thedeterminationofwhether

totransfervenueofaparticularcaserequire[s]acasebycaseevaluationofthe

particularcircumstancesathandandaconsiderationofallrelevantfactors.

TerraIntl,Inc.v.Miss.Chem.Corp.,119F.3d688,691(8thCir.1997). To

prevailonamotiontotransfer,themovantmustshowthathisinconvenience

substantiallyoutweighstheinconveniencethatplaintiffwouldsufferifvenue

weretransferred. Nelsonv.SooLineR.Co.,58F.Supp.2d1023,1026(D.Minn.

1999).

A. Convenience

of

the

Parties

DefendantsassertthattheyliveinLongBeach,Californiaanditwouldbe

ahardshiptoforcethemandtheircounseltoflytoMinnesotaandtoforcethem

toinducewitnessestoattendtrialinMinnesota. Defendantsfurtherassertthat

alloftheirbooksandrecordsareinCaliforniaandthatmanyoftheagentsthat

FFSallegeswereinducedtoleaveFFSbyDefendantsalsoliveinCalifornia.

TheyfurtherassertaCaliforniavenuewillnotimposeahardshiptoFFS,whichis

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alargeinsurancecompanywithvastresources.

TheCourtfindsthatDefendantshavenotdemonstratedthatthe

convenience

of

the

parties

substantially

weighs

in

favor

of

transfer.

There

is

no

disputethatwhenservedcopiesofthesummonsandcomplaintinthismatter,

DefendantswerelivingintheirhomeinWayzata,Minnesota. Despitehaving

movedtoCalifornia,DefendantstillowntheirhomeinMinnesota. FFShasalso

submittedevidencetoshowthatsincethisactionwasfiled,Defendantshave

returnedtoMinnesotaontwooccasionsforthepurposeofmeetingwith,and

rallying,theirsalesteam. (DavidsonDecl.Exs.EandF.) Further,Defendants

havenotdemonstratedthatthelocationofrelevantrecordsanddocuments

substantiallyweighsinfavoroftransfertoCalifornia.

B. Convenience

of

the

Witnesses

DefendantsassertthatitwillbeeasiertotrythiscaseinCaliforniaas

DefendantswillneedtocalldozensofCaliforniaresidentsaswitnessestomount

aneffectivedefense.

AlthoughDefendantshaveprovidedalistofthenamesofsuchwitnesses,

theyhavefailedtodemonstratethatsuchpotentialwitnessesarematerialtotheir

defense. SeeReidWalenv.Hansen,933F.2d1390,1396(8thCir.1991)(finding

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thatthecourtmustexaminethematerialityandimportanceofanticipated

witnesstestimony,thendeterminetheiraccessibilityandconveniencetoforum).

It

is

Defendants

burden

to

make

such

a

showing.

Wells

Fargo

Fin.

Leasing,

Inc.

v.NCHHealthcareSys.,756F.Supp.2d1086,110102(S.D.Iowa2012).

Inaddition,FFShaspresentedevidencewhichdemonstratesthatofthe

approximate1,400FFSagentsthatresignedandfollowedDefendantstoFEG,

only30haveCaliforniaaddresses,while335haveaddressesinMinnesota.

(ManzerDecl.Ex.A.)

C. InterestsofJustice

Whenaddressingthisfactor,courtshaveconsideredthefollowing:judicial

economy;plaintiffschoiceofforum;comparativecoststotheparties;each

partysability

to

enforce

ajudgment;

obstacles

to

afair

trial;

conflict

of

law

issues

andtheadvantagesofhavingalocalcourtdeterminequestionsoflocallaw.

TerraIntl,Inc.,119F.3dat696.

TheCourtfindsthattheinterestsofjusticeweighinfavorofdenyingthe

motiontotransfer.JudicialeconomyfavorsMinnesota,asthisCourtisalready

familiarwiththefactsandcontentionsofthiscase. Theplaintiffschoiceof

foruminthiscasefavorsMinnesota,andFFSfiledthiscaseinMinnesotaas

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DefendantswereresidentsofMinnesotaatthetimeoffiling. Minnesotaisalso

closertoFFSsheadquartersinNorcross,GA. Finally,theconductatissueinthis

case

took

place

in

Minnesota.

BecauseDefendantshavefailedtomeettheirburdenofdemonstratingthat

transfertoCaliforniaiswarranted,themotiontotransfervenuewillbedenied.

V. StandardforPreliminaryInjunctiveRelief

Thelawiswellsettledthatinordertoobtainpreliminaryinjunctiverelief,

aplaintiffmustshowalikelihoodofirreparableharmintheabsenceofthe

injunction. Winterv.NaturalRes.Def.Council,Inc.,555U.S.7,22(2008). The

Courtalsoconsidersthebalancebetweensuchharmandtheinjurythatgranting

theinjunctionwillinflictonotherparties,Plaintiffslikelihoodofsuccessonthe

merits,and

the

public

interest.

Dataphase

Sys.,

Inc.

v.

C

L

Sys.,

Inc.,

640

F.2d

109,

114(8thCir.1981)(enbanc).

A. Likelihood

of

Success

on

the

Merits

DefendantsassertthattheyhaveneversolicitedagentsorclientsofFFS,do

nothaveanyFFScustomerlistsorotherproprietaryinformation. (MouaDecl;

LeeDecl.) Inhisdeclaration,forexample,MouaexplainsthatheisaHmong

immigrantwhoseEnglishisnotverygood. (MouaDecl.2.) Hefurtherstates

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thatmanyoftheagentsunderhimwhileheworkedforFFSwerealsoHmong,

andafterheresigned,manyoftheseagentstoldhimthathehadgiventhemthe

good

life

and

that

they

left

FFS

on

their

own,

and

that

Moua

never

instructed

orevenencouragedthemtoleaveFFS. (Id.5.) MouafurtherstatesthatFFS

wrongfullytoldpeoplethatithadfiredMouaandthatFFSautomatically

assumedhisdownlineagentswereleavingwithhimandproceededtoblockthe

accessofMouasdownlineagentsfromtheFFSwebsite. (Id.) Theseagents

neededaccesstotheFFSwebsiteinordertodobusiness. (Id.)

Mouafurtherstatesthathedoesnotknowbutahandfulofthealleged

1,400agentsthatleftFFSandonlycommunicatedwithafewofthem. (Id.7.)

MouastatesthattherealreasonforthemassexodusfromFFSisfoundinthe

Hmongculture.

(Id.

10.)

When

he

came

to

the

United

States,

he

was

apoor

immigrant,andhisfirstjobwasonafarm.(Id.) WhenhesignedupforFFS,FFS

hadfewagents,andMouaworkedveryhardtoenlistotherHmongimmigrants

intohisFFSsalesnetwork. (Id.) MouafurtherstateshedoesnothaveanyFFS

customerlists,assuchlistsarelocatedontheFFSwebsite,towhichMouano

longerhasaccess. (Id.11.)

Inherdeclaration,MaiLeestatesthatsheisaHmongimmigrant. (Lee

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Decl.2.) ShefurtherstatesthatshehasneversolicitedanyagentstoleaveFFS,

hasnottriedtomoveclientsawayfromFFSandhasnocustomerlists. (Id.3

7.)

Both

Moua

and

Lee

also

testified

at

the

evidentiary

hearing

consistent

with

theirdeclarations.

DefendantsarguethatFFShasnotdemonstratedthatitislikelytosucceed

onthemeritsoftheirclaimsofbreachofcontractandmisappropriationoftrade

secrets. DefendantsfurtherarguethatevenifFFScoulddemonstratesuccesson

theirclaims,FFSwillnotsufferirreparableharmifthepreliminaryinjunctive

reliefisnotgranted. Further,theyarguethepublicinterestweighsinfavorof

allowingpeopletoearnalivelihood.

Basedontherecordcurrentlybeforeit,theCourtfindsthatFFShas

demonstratedalikelihood

of

success

on

the

merits

of

its

claims

that

Defendants

havebreachedtheAgreementbyinducingfellowFFScontractorstoterminate

theiraffiliationwithFFSandbyrefusingtoreturnconfidentialinformationin

violationofthesalescontractoragreementintheformofcontractorlists,

customerlistsandcustomerinformationinviolationofSectionC(4)ofthe

Agreement.

ThetestimonyofSouksakhoneKhammanivongandSaveng

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VongkhamsenedemonstratedthatpriortoMay10,2014,Defendantssetin

motionaplantomovetheirsalesteamfromFFStoFEG. First,Defendants

presented

a

theme

at

recent

leadership

meetings

that

a

divided

Laos

will

die

whileaunitedLaoswilllive. Defendantsalsoarrangedfortheirtopleadersto

beinMinnesotaonMay10,2014byschedulingaleadershipmeetingatthe

officesofAndreMouainSt.Paul,Minnesota. Atthelastminute,Mouas

lieutenantcalledorsenttextmessagestothesalesteam,inorderoftheir

placementintheteamhierarchy,tellingthemtogotoMouashomeinsteadof

theoffice. OnceatMouashome,allteammembersweretoldtheyhadtosigna

nonsolicitationforminordertostayandhearwhatwouldhappennext. Both

KhammanivongandVongkhamsenetestifiedthattheywereconfused,butfelt

theyhad

no

choice

but

to

sign

the

non

solicitation

form,

resign

from

FFS

and

join

FEG,inordertomaintaintheirlivelihood. Khammanivong,whowasamember

ofthechampionclub,waspresentwhenMouagaveapowerpointpresentation

highlightingthebenefitofmovingtoFEG.

FFSalsopresentedevidencetoshowthatfollowingDefendants

resignations,itrequestedDefendantstoreturnanyconfidentialFFSinformation

theyhadintheirpossession,suchasFFScontractorandcustomerlists,andthat

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boththeDefendantseitherfailedtorespondorrefusedtoreturnsuch

information.

B. Irreparable

Harm

Thisfactorrequiresapartyseekingpreliminaryinjunctiverelieftoshow

thattheharmiscertainandgreatandofsuchimminencethatthereisaclearand

presentneedforequitablerelief. IowaUtil.Bd.v.F.C.C.,109F.3d418,425(8th

Cir.1996). Itisalsowellsettledthateconomiclossdoesnot,inandofitself,

constituteirreparableharm....Recoverablemonetarylossmayconstitute

irreparableharmonlywherethelossthreatenstheveryexistenceofthe

[petitioner]sbusiness. PackardElevatorv.I.C.C.,782F.2d112,115(8thCir.

1986).

Courtsmay

infer

irreparable

harm

when

aformer

employee

breaches

an

enforceablerestrictivecovenant. Medtronicv.Gibbons,527F.Supp.1085,1090

91(D.Minn.1981);Thermorama,Inc.v.Buckwold,125N.W.2d844,845(Minn.

1964). Inaddition,Minnesotacourtshavefoundthatinjunctivereliefis

appropriatetopreventirreparableinjuryfromwrongfuluseofconfidential

information. Salitermanv.Finney,361N.W.2d175,179(Minn.Ct.App.1985).

TheCourtfindsthatFFShassufficientlydemonstratedthatitwillsuffer

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irreparableharmiftherequestedinjunctivereliefisnotgranted. FFShas

sufficientlydemonstratedinjunctivereliefisnecessarytopreventDefendants

from

continuing

to

solicit

sales

contractors

on

Defendant

Mouas

former

sales

teamtoleaveFFSandjoinhimatFEG.

Inadditiontotheevidencethatover1,400membersofDefendantsFFS

salesteamresignedshortlyafterDefendantssubmittedtheirresignations,the

recorddemonstratesthatover13,000ofMouasformersalesteamremainatFFS.

FFShasthusdemonstratedthatinjunctivereliefisrequiredtoprevent

Defendantsfromfurtherinducingtheirformersalesteamfromjoiningthemat

FEG.

TherecordalsosufficientlydemonstratesthatDefendantshaverefusedto

returnconfidential

information

in

violation

of

the

Agreement

in

the

form

of

contractorlists,customerlistsandcustomerinformationinviolationofSection

C(4)oftheAgreement. FFSisthusentitledtoaninferenceofirreparableharm.

SeeModernControls,Inc.v.Andreadakis,578F.2d1264,1270(8thCir.1978)

(recognizingthatdisclosureofconfidentialinformationmaybedisclosedinways

moresubtlethanoutrightdisclosuretoathirdparty,suchastheinabilityofa

formeremployeetopreventhisknowledgeofhisformeremployersconfidential

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covenantsincontracts. SeeEmersonElec.Co.v.Rogers,418F.3d841,847(8th

Cir.2005);Kremersv.Dahl,No.A130367,2014WL273966at*10(Minn.Ct.

App.,

Jan.

21,

2014)

(finding

that

Minnesota

law

favors

the

enforcement

of

valid

contracts). Accordingly,thisfactorweighsinfavorofgrantingthepreliminary

injunctivereliefrequested.

ITISHEREBYORDERED:

1. DefendantsMotiontoSetAsideDefault[Doc.No.54]isGRANTED;

2. DefendantsMotiontoTransferVenue[Doc.No.60]isDENIED;

3. FFSMotionforPreliminaryInjunctiveRelief[Doc.No.7]is

GRANTED;

4. EachDefendantmustceasealluseofFFSconfidentialtradesecrets,

includingFFS

sales

contractor

lists

and

customer

lists;

5. ForaperiodofoneyearcommencingMay10,2014,eachDefendant

mustceasesoliciting,recruiting,inducingorotherwiseengagingany

FFScontractorstoleaveFFStoworkinconnectionwith,orinany

waybeassociatedwithFEGoranyotherFFScompetitor;

findsthatatwoyearperiodisoverbroad,andwilllimitinjunctiverelieftoaoneyearperiod

commencingthedateDefendantsresignedfromFFS.

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isenjoinedfrominducingFFSsalescontractorsfrombreachingthe

Agreement;


isenjoinedfromworkingwithFFScustomers;and

8. FFSshallpostabondintheamountof$100,000.

Date: September4,2014 s/MichaelJ.Davis

MichaelJ.Davis

ChiefJudge

UnitedStatesDistrictCourt

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Order granting preliminary injunction.pdf

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