evidence of threatened loss of prospective customers or goodwill supports 22 irreparable harm finding
How later courts described this case
- evidence of threatened loss of prospective customers or goodwill supports 22 irreparable harm finding
- plaintiff’s “security practices are not perfect,” but sufficiently 15 reasonable to support preliminary injunction
- “[T]he ‘serious questions’ approach survives Winter 26 when applied as part of the four-element Winter test.”
- “A 13 preliminary injunction . . . should not be granted unless the movant, by a clear showing, carries 14 the burden of persuasion.”
Written by the judges who cited it.
The opinion
1
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8 UNITED STATES DISTRICT COURT
9 FOR THE EASTERN DISTRICT OF CALIFORNIA
10
11 EXAMWORKS, a Delaware limited No. 2:20-CV-00920-KJM-DB
liability company,
12
Plaintiff,
13 ORDER
v.
14
TODD BALDINI, et al.,
15
Defendants.
16
17
18 Plaintiff ExamWorks, LLC has sued its former employees, L. Stuart Girard, Todd
19 Baldini, Pamella Tejada and Abygail Bird (collectively “defendants”), alleging misappropriation
20 of its trade secrets. ExamWorks moves for a preliminary injunction barring defendants’
21 continued misappropriation of those trade secrets. The court, having considered the arguments of
22 counsel on May 22, 2020, and June 3, 2020, and the parties’ briefs including supplemental
23 briefing, HAS GRANTED plaintiff’s motion, for the reasons EXPLAINED below.1
24
25
26
1 This order provides the court’s explanation for the summary order entered previously on
27 June 3, 2020. See ECF No. 45. The court notes defendants have filed a motion to stay the
preliminary injunction order, ECF No. 49, which the court will turn to next.
28
1 I. BACKGROUND
2 A. Factual Background and Allegations
3 ExamWorks is an independent firm that operates in what it dubs a “med-legal”
4 space by managing medical examinations, peer reviews, bill reviews, Medicare compliance and
5 related services for clients including insurance carriers, third party claim administrators and
6 government agencies throughout the United States. Nalley Decl. ¶ 3, ECF No. 4-5. Through its
7 network of medical professionals, ExamWorks offers medical evaluation services, including
8 Independent Medical Examinations (“IMEs”), Qualified Medical Evaluations (“QMEs”) and
9 California Subsequent Injury Benefit Trust Fund (“SIBTF”) evaluations for workers’
10 compensation claims, personal injury, and auto and disability claims. Id. ¶¶ 3, 16.
11 1. Former Employees’ Departure from ExamWorks
12 Between February 24 and May 4, 2020, plaintiff’s former employees, Lawrence
13 Stuart Girard, Todd Baldini, Pamella Tejada and Abygail Bird (together the “Former
14 Employees”) either resigned or, once ExamWorks got wind of the Former Employees’ plans,
15 were terminated from ExamWorks. Compl. ¶¶ 41–45, ECF No. 1. Specifically, Tejada resigned
16 on February 24, 2020 and left on March 13, 2020; Girard left on March 13, 2020; ExamWorks
17 terminated Baldini on April 29, 2020 and terminated Bird on May 4, 2020. Id.
18 Girard had served as Vice President of Sales and Marketing and worked for
19 ExamWorks for more than a decade. Id. ¶ 20. Baldini was the Regional Vice President of
20 Operations in California and worked for ExamWorks for over nine years. Id. ¶ 21. Together,
21 Girard and Baldini led ExamWorks’ California operation. Id. ¶ 22. Baldini more broadly
22 supervised ExamWorks’ business in the Western regions, including California and Hawaii. Id.
23 ¶ 33. Due to their management roles, Girard and Baldini had full access to ExamWorks’
24 financials and other trade secret and confidential information. Id. ¶ 22.
25 Tejada was the SIBTF Division Manager in Sacramento, California and had
26 worked at ExamWorks for nearly four years. Id. ¶ 23. Tejada’s duties included meeting with
27 clients and perspective clients, assigning new cases to physicians, educating physicians on
28
1 reporting requirements and management of the internal operational team. Id. Tejada had access
2 to all data associated with ExamWorks’ California operations and SIBTF work. Id.
3 Bird worked for ExamWorks for more than seven years as a marketing director
4 until she was promoted to Regional Account Executive for California. Id. ¶ 24. In her various
5 roles, Bird was responsible for marketing, doctor referrals, raising ExamWorks’ profile and,
6 generally, bringing in business for ExamWorks. Id. Both Bird and Tejada worked closely with
7 Girard and Baldini. Id.
8 2. “Project Palo Alto”
9 Following the Former Employees’ departure, ExamWorks discovered that,
10 beginning in October 2018, the Former Employees had begun development of a comprehensive
11 business plan dubbed “Project Palo Alto,” as reflected in multiple emails and planning
12 documents. TRO Mot., ECF No. 4, at 112 (citing Holley Decl. ¶¶ 8, 10, ECF No. 28-1). In a
13 document dated April 8, 2019, Former Employees identified the need to plan “the best way to
14 depart ExamWorks without raising suspicion. Was it best to go ‘One at a time vs. together’?
15 What would the explanation be for their departures?” Holley Decl., Ex. E (“Meeting Outline”),
16 ECF No. 21-2, at 18–19 (“If separate, who first, when, how and why? . . . if Second who second
17 when, how and why?”).
18 Through expedited discovery after the court issued a temporary restraining order,
19 ExamWorks learned the “Project Palo Alto” business plan outlined creation of a company called
20 “Feinberg Med-Legal Consultants,” which would compete directly with ExamWorks’ emerging
21 SIBTF business and expand initially by “targeting two specific demographics: 1. Physician
22 recruiting and 2. Applicant Attorney3 Firms.” Holley Decl., Ex. O (“Feinberg Med-Legal
23 Consultants Plan Overview”), ECF No. 21-2, at 27. The new company would be co-owned by
24 Girard, ExamWorks vendor James Tuthill and former ExamWorks medical provider Dr. Steven
25
2 The court cites to the page numbers assigned by the court’s ECF system.
26
3 Applicant or applicants’ attorneys represent injured workers filing for workers’
27 compensation. See, e.g., https://wwwcaaa.org/ (website for California Applicants’ Attorneys
Association).
28
1 Feinberg. Id. William George would be an equity partner as well and serve as CFO. Id. at 19.
2 The plan also included a 24-month budget for the new company. Harris Decl. ¶ 18, ECF No. 21
3 (“Among the files Girard attempted to delete while the USB drive was attached were “Project
4 Palo Alto Construction meeting 4-8-19.docx” and “FML Budget Draft-24 month 7-3-19 Run Rate
5 Analysis Final.xlsx”); Holley Decl., Ex. Q (“Draft Budget”), ECF No. 21-2, at 31 (attachment to
6 email showing link to document titled draft budget for Project Palo Alto).
7 3. ExamWorks’ Forensic Investigation
8 Before filing the instant motion, ExamWorks engaged a forensic firm, K2
9 Intelligence and its partner forensics and e-discovery provider KLDiscovery (collectively “K2”),
10 “in order to investigate the defendant’s [sic] actions related to this lawsuit.” Nalley, Decl. ¶ 27
11 (citing Holley Decl. ¶ 8, ECF No. 21-2). K2’s analysis revealed Former Employees took
12 ExamWorks’ documents and information with them when they left the company, including
13 (1) detailed contact information about doctors and clients, and company-wide customer and
14 doctor lists; (2) financial information about plaintiff’s California operations; (3) a California sales
15 and operational presentation; and (4) specific arrangements regarding the compensation plaintiff
16 offers to certain doctors, Nalley Decl. ¶ 27; defendants emailed this information to their personal
17 email accounts or to third parties, Harris Decl. ¶ 13, ECF No. 21. As recently as March 22, 2020,
18 just over a week after Girard and Tejada left ExamWorks and about a month before Baldini was
19 terminated, it appears Baldini sent the file titled “Cases-01-2019 to 03-202.xlsx,” an ExamWorks
20 document containing information on more than 53,000 cases from the last year and a half with
21 detailed contact information for both doctors and customers, from his ExamWorks email to his
22 personal email address. Id. ¶ 29.
23 The K2 forensic analysis also revealed that, as early as March 3, 2019, Girard sent
24 documents titled “Brice B Fee Schedule 022719.PDF,” “Proposal- Brice 022719.PDF,” “Brice B
25 Fee Schedule Disbursement 022719,” and “Professional Fee Agreement_CA EW BBrice WC Fee
26 Schedule 022719.pdf” to his personal email address. Id. ¶ 39 (“Together these documents
27 represent the ‘recipe’ book of how ExamWorks engages doctors into its network.”). On April 5,
28 2019, Baldini emailed to himself documents titled, “EW California_MQY_6Jun19.xlsx,”
1 “Financials by Company-Region-BusUnit – 2018 SIBTF.xlsx,” “Budget Worksheet – CA
2 2019.xlsx,” “Likely Calcs – gina.xlsx” and “California WC Fee Analysis 10_17_19v10.xlsx.” Id.
3 ¶¶ 33–36 (documents are types of financial tools, valuable for business budget projection). Later
4 in the year, on October 17, 2019, Girard sent “Page Count Reports Reveals Sups and QMEs
5 v2.xlsx” to his personal email address. Id. ¶ 36 (citing confidential and proprietary models used
6 to analyze effects of expected changes in California’s rules related to QMEs for Workers’
7 Compensation). Less than two weeks later, on October 29, 2019, Girard sent files titled “SIBTF
8 Cases – 01-2019 to 10-2019.xlsx,” and “SIBTF CA Referral Tracker by Office v2 01-2019 to 10-
9 2019.xlsx” to his personal email. Nalley Decl. ¶ 31. These files contain specific billing details,
10 including doctor goals, average fees per specialty and a breakdown of the SIBTF referrals by
11 month for more than 1,200 of ExamWorks’ cases. Id. K2’s analysis further revealed that on
12 January 8, 2020, Girard sent “Sales and Operations Meeting 010820.pptx” to his personal email;
13 this PowerPoint presentation was used at plaintiff’s quarterly meeting to discuss high-level
14 strategy and “includes lists of specific ExamWorks clients that were identified as strategic
15 targets.” Id. ¶ 37. Moreover, “on page 57 of the presentation, the top five offices for a certain
16 account representative is identified including how many referrals these law firms have provided.”
17 Id. The next day, on January 9, 2020, Girard sent himself “2019 First Case – CA Only.xlsx.” Id.
18 ¶ 32.
19 K2’s analysis of the other two Former Employees materials produced similar
20 results indicating, for example, in December 2019, five months before she was terminated and
21 three months before Girard left ExamWorks, Bird sent documents to Girard’s personal email,
22 including files titled “Clients. Xlsx,” containing 125,756 unique client entries with detailed
23 contact information for plaintiff’s entire United States client base; she also forwarded
24 “Doctors.xlsx,” “Doctors List 073018.xlsx” and “EW WC Emails 2.13.2020.xlsx,” containing
25 detailed contact information for more than 10,000 doctors across plaintiff’s entire doctor network,
26 including names, email addresses and specialties. Id. ¶¶ 28, 30. On January 16, 2020, Tejada
27 sent the list identified as “Brown & Todoroff.xlsx” to her personal email address, noting “[E]xcel
28 sheet represents pending cases including status of cases, for this particular law firm.” Id. ¶ 38.
1 Ms. Tejada takes the position that “[o]n January 16, 2020, as part of my work for ExamWorks, I
2 visited the law firm, Brown & Todoroff. Because his [sic] office was located in a small town,
3 where I could not be sure I would have an internet connection, I emailed myself a spreadsheet of
4 his pending cases for my meeting. I did this to ensure that I would have the spreadsheet on my
5 desktop for my meeting with the law firm client, and that I would not need to access the internet
6 to pull up the spreadsheet.” Tejada Decl. ¶ 8, ECF No. 26-4.
7 Finally, the forensic analysis shows that only six days after he left ExamWorks, on
8 March 19, 2020, Girard emailed Dr. Feinberg from his IPM email account, copying Tejada and
9 telling them: “Lots to do. This is the spreadsheet we used to blast our message yesterday.” Pl.’s
10 Suppl. Br., ECF No. 39, at 2 (referencing attachment titled “Client 2019.xlsx”). Mot. Prelim. Inj.,
11 Ex. 1 (“Girard March 19 Email”), ECF No. 52-1, at 15 (attachment to email showing Excel
12 spreadsheet) (sealed).4 There is a spreadsheet in the record labeled “Client 2019.xlsx” that
13 plaintiff asserts is very similar to the spreadsheet defendants must have used for the March 19
14 “blast out.” Pl.’s Suppl. Br. at 5 (referencing Holley Decl. at 11–18). On the eve of the court’s
15 June 3 hearing, Girard attempted to clean up the record on this point, saying, “When I sent out the
16 March 19, 2020 email, I must have been confused when referencing the ExamWorks client list to
17 describe a prior ‘blast.’ I was certainly referring to an IPM patient letter that . . . had just been
18 sent out only to IPM patients.” Girard Suppl. Decl. ¶ 3, ECF No. 43; id., Ex. 1 (template of letter
19 to IPM customers) at 5.
20 B. Procedural Background
21 On May 4, 2020, plaintiff filed its complaint against defendants asserting the
22 following claims: (1) misappropriation of trade secrets in violation of the federal Defend Trade
23 Secrets Act (“DTSA”), 18 U.S.C. § 1836; (2) misappropriation of trade secrets in violation of the
24 California Uniform Trade Secrets Act (“CUTSA”), Cal. Civ. Code §§ 3426, et seq.; (3) breach of
25 employment agreement; and (4) breach of fiduciary duty and duty of loyalty. See Compl.
26
27 4 The court granted plaintiff’s request to seal documents, ECF No. 51, and directed
plaintiff to file a redacted version by June 16, 2020 to file on the docket. See ECF No. 61.
28
1 A day after filing the complaint, on May 5, 2020, plaintiff moved the court based
2 on both DTSA and CUTSA claims to temporarily restrain defendants from acquiring, accessing,
3 disclosing, or using, or attempting to acquire, access, disclosure, or use any trade secrets or
4 confidential information of ExamWorks, or derivatives thereof, including, but not limited to, any
5 documents that discuss, forward, reference, or incorporate the trade secrets or confidential
6 information of ExamWorks. See generally Mot. TRO, ECF No. 4. Plaintiff also filed its motion
7 for discovery on an expedited basis, Mot. Disc., ECF No. 6, with a certificate of service on
8 defendants, ECF No. 13. The court promptly set the matter for a videoconference hearing on
9 May 8, 2020, ECF No. 15. See also May 8 Hr’g Tr., ECF No. 25; May 22 Hr’g Tr., ECF No. 38.
10 Plaintiff’s counsel attended that hearing, as did Ms. Byrd who at the time was in pro per; no other
11 defendants were represented at hearing. ECF No. 15. The court granted plaintiff’s motion for a
12 temporary restraining order, finding that plaintiff carried its burden at this early stage of the
13 litigation by raising serious questions going to the merits of the dispute and showing the balance
14 of hardship tips in its favor. TRO, ECF No. 17, at 2.
15 On May 15, 2020, defendants appeared through counsel on the court’s docket and
16 formally opposed plaintiff’s motion for preliminary injunction. Opp’n, ECF No. 26. On May 18,
17 2020, plaintiff replied. Reply, ECF No. 27. As allowed by the court, the parties filed
18 supplemental briefs. ECF Nos. 39–40. The court set the matter for a full preliminary injunction
19 hearing on May 22, 2020. Id. After that hearing, held by videoconference, in light of the
20 expedited discovery that was underway, the court found circumstances justified leaving the
21 previously entered TRO in effect for a brief period of time pending supplemental briefing based
22 on the discovery. ECF No. 37.
23 On June 3, 2020, the court heard oral argument again and later that day granted the
24 preliminary injunction in a summary order with explanation to follow. Prelim. Inj. Order, ECF
25 No. 45. This is the order EXPLAINING the court’s grant of the preliminary injunction. At no
26 time, either in their briefing or during hearing, did defendants request the posting of bond; thus
27 the court has not required one. Connecticut Gen. Life Ins. Co. v. New Images of Beverly Hills,
28 321 F.3d 878, 882 (9th Cir. 2003) (citations omitted) (no abuse of discretion in not reaching issue
1 of bond where defendant did not request bond or submit any evidence of damages she would
2 incur as result of injunction).
3 The court also DETERMINES, as explained below, that defendants presumptively
4 bear the costs associated with the forensic analysis plaintiff says is required to complete review of
5 electronic discovery, subject to defendants’ ability to rebut the presumption in discovery motion
6 practice. ECF 39 at 11.
7 II. LEGAL STANDARDS
8 A. Preliminary Injunction
9 “A preliminary injunction is an extraordinary remedy never awarded as of right[,]”
10 Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) (citation omitted), and should not
11 be granted unless the movant carries the burden of proving this extraordinary remedy is warranted
12 by clear and convincing evidence, Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (“A
13 preliminary injunction . . . should not be granted unless the movant, by a clear showing, carries
14 the burden of persuasion.”) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997))). In
15 determining whether to issue a preliminary injunction, federal courts must consider whether the
16 moving party “[1] is likely to succeed on the merits, . . . [2] is likely to suffer irreparable harm in
17 the absence of preliminary relief, . . . [3] the balance of equities tips in [the movant’s] favor, and
18 . . . [4] an injunction is in the public interest.” Winter, 555 U.S. at 20.
19 The Ninth Circuit has “also articulated an alternate formulation of the Winter
20 test[.]” Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir. 2012). That formulation is referred to as
21 the “serious questions” or the “sliding scale” approach: “‘serious questions’ going to the merits
22 and a balance of hardships that tips sharply towards the plaintiff can support issuance of a
23 preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable
24 injury and that the injunction is in the public interest.” Alliance for the Wild Rockies v. Cottrell,
25 632 F.3d 1127, 1131–35 (9th Cir. 2011) (“[T]he ‘serious questions’ approach survives Winter
26 when applied as part of the four-element Winter test.”). Under the “serious questions” approach
27 to a preliminary injunction, “[t]he elements of the preliminary injunction test must be balanced,
28 so that a stronger showing of one element may offset a weaker showing of another.” Lopez, 680
1 F.3d at 1072. In each case and irrespective of the approach to a preliminary injunction, a court
2 must balance the competing alleged harms while considering the effects on the parties of the
3 granting or withholding of the injunctive relief. Winter, 555 U.S. at 24. In exercising that
4 discretion, a court must also consider the public consequences of the extraordinary remedy. Id.
5 B. DTSA and UTSA
6 As noted, plaintiff’s motion for injunctive relief is based on both its federal and
7 state trade secrets claims. “California has adopted the Uniform Trade Secrets Act (“UTSA”),
8 which codifies the basic principles of common law trade secret protection.” MAI Sys. Corp. v.
9 Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993) (citing Cal. Civ. Code §§ 3426–3426.10
10 (“CUTSA”)). To establish a violation of the CUTSA, a plaintiff must show “(1) the existence of
11 a trade secret, and (2) misappropriation of the trade secret.” AccuImage Diagnostics Corp v.
12 Terarecon, Inc., 260 F. Supp. 2d 941, 950 (N.D. Cal. 2003).
13 At the federal level, Congress has relatively recently enacted the Defend Trade
14 Secrets Act (DTSA) to “provide Federal jurisdiction for the theft of trade secrets.” See DTSA of
15 2016, Pub. L. No. 114-153, 130 Stat. 376 (DTSA) (codified in scattered sections of title 18 of the
16 United States Code). Similarly to the CUTSA, the DTSA permits the “owner of a trade secret
17 that is misappropriated” to bring a civil action, 18 U.S.C. § 1836(b), and includes substantially
18 similar definitions of “trade secret” and “misappropriation” as found in California state law. See
19 18 U.S.C. § 1839(3), (5).
20 The parties do not assert any material difference between the CUTSA and the
21 DTSA. Because the elements of a trade secret misappropriation claim under the DTSA and
22 CUTSA are substantially similar, the court analyzes both claims together below. See Vendavo,
23 Inc. v. Price f(x) AG, No. 17-CV-6930-RS, 2018 WL 1456697, at *3 (N.D. Cal. Mar. 23, 2018).
24 C. California Employment Law Balanced Against Trade Secret Protections
25 At the same time that it provides for protection of trade secrets, California law
26 also prohibits contractual provisions “by which anyone is restrained from engaging in a lawful
27 profession, trade, or business of any kind.” Cal. Bus. & Prof. Code § 16600 (“Section 16600”).
28 This California rule is intended to protect an individual’s right to engage in employment and
1 businesses of their choosing. Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 946 (2008)
2 (citations omitted). “[T]here appears to be a trend among California courts of finding that
3 § 16600 represents a fundamental public policy interest in California.” Stryker Sales Corp. v.
4 Zimmer Biomet, Inc., 231 F. Supp. 3d 606, 621 (E.D. Cal. 2017).
5 In fact, California courts have long recognized the delicate balance between
6 promoting unfettered competition by parties such as defendants here and protecting a business
7 like ExamWorks from unfair conduct. As the California Supreme Court observed nearly seventy-
8 five years ago, “[e]quity will to the fullest extent protect the property rights of employers in their
9 trade secrets and otherwise, but public policy and natural justice require that equity should also be
10 solicitous for the right inherent in all people, not fettered by negative covenants upon their part to
11 the contrary to follow any of the common occupations of life.” Cont’l Car-Na-Var Corp. v.
12 Moseley, 24 Cal. 2d 104, 110 (1944). In striking the appropriate balance in a trade secrets
13 misappropriation case, a court is not constrained from fashioning an appropriate remedy as long
14 as the court remains “highly cognizant of the important policies embodied” in Section 16600.
15 Pyro Spectaculars N., Inc. v. Souza, 861 F. Supp. 2d 1079, 1096 (E.D. Cal. 2012) (citing The Ret.
16 Grp. v. Galante, 176 Cal. App. 4th 1226, 1237 (2009) (clarifying the proper focus in saying “it is
17 not the solicitation of the former employer’s customers, but is instead the misuse of trade secret
18 information, that may be enjoined”) (emphasis in original)). In other words, “[w]hile it has been
19 legally recognized that a former employee may use general knowledge, skill, and experience
20 acquired in his or her former employment in competition with a former employer, the former
21 employee may not use confidential information or trade secrets in doing so.” Morlife, Inc. v.
22 Perry, 56 Cal. App. 4th 1514, 1519 (1997). The misuse of trade secrets can take the form of
23 improper solicitation if the solicitation is based on another’s trade secrets. Id. at 1521; see also
24 Klamath-Orleans Lumber, Inc. v. Miller, 87 Cal. App. 3d 458, 465 (Ct. App. 1978) (“There can
25 be no doubt that a list of preferred customers, ascertained originally by continuous solicitation
26 and investigation, and the specially arranged list of charges and bonuses developed by long
27 experience, constitutes a trade secret of value.” (citation omitted)).
28
1 The court explains below its balancing of the law of trade secret protection with
2 the defendants’ essential right to fairly engage in their chosen professions, if they do so lawfully.
3 III. DISCUSSION
4 The court has found plaintiff satisfies its burden under the Winter test so as to
5 warrant preliminary relief.
6 A. Likelihood of Success on the Merits
7 The court first focuses on the likelihood of success of ExamWorks’ claims under
8 California and federal trade secrets law. Engility Corp. v. Daniels, 16-CV-2473-WJM-MEH,
9 2016 WL 7034976, at *8 (D. Colo. Dec. 2, 2016) (analyzing only certain claims from complaint
10 in preliminary injunction analysis based on content of plaintiff’s preliminary injunction request).
11 1. Existence of Trade Secrets
12 A “trade secret” is “information, including a formula, pattern, compilation, . . . or
13 process, that: (1) Derives independent economic value, actual or potential, from not being
14 generally known to the public . . . , and (2) Is the subject of efforts that are reasonable under the
15 circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1(d). In other words, the
16 information “is valuable because it is unknown to others” and “the owner has attempted to keep
17 [it] secret.” DVD Copy Control Assn. v. Bunner, 116 Cal. App. 4th 241, 251 (2004) (citation
18 omitted).
19 a) Derives Independent Economic Value
20 ExamWorks identifies the following information as trade secrets contained in the
21 files it alleges the Former Employees copied and retained. The court refers to these items here as
22 the “ExamWorks Trade Secret Information.”
23 - ExamWorks’ “playbook” of confidential details about its
California Subsequent Injury Benefit Trust Fund (“SIBTF”)
24
business, including case specific, doctor and revenue
25 information. For example, doctor billing totals, average fees per
specialty, and other marketing information such as referral
26 details for cases (“Client and Doctor Lists”);
27 - ExamWorks’ confidential financial documents which is not
shared with clients or otherwise, setting forth how ExamWorks
28
1 engages doctors in its provider network, including information
on fee splits and financials for the California region, which
2
would allow a competitor to easily recruit doctors by offering
3 more lucrative terms (“Recipe Book”);
4 - ExamWorks’ confidential database of 124,756 unique client
entries with detailed information for its entire U.S. client base
5 and more than 10,000 doctors active in ExamWorks’ network,
including detailed information on more than 53,000 cases from
6 IMEC5 (“IMEC Database”); and
7
- ExamWorks’ confidential breakdown of sales and operations
8 strategies for California, including high-level sales stratagem,
top clients in various categories, top doctors, referrals by client
9 office as well as detailed revenue information, goals and targets,
which also includes referral information from new clients.
10 (“Marketing & Business Strategy Documents”).
11 Nalley Decl. ¶¶ 28–29, 31–34, 37–39; Compl. ¶¶ 61, 89 (recipe book pled, as well as summary of
12 trade secrets); Nalley Decl. ¶¶ 10–19 (detailed descriptions of trade secrets).
13 For the purposes of this motion, on the present record, the court finds the
14 information ExamWorks claims as trade secret qualifies as such, given that its compilations of
15 information “derive[] independent economic value, actual or potential, from not being generally
16 known to the public.” Cal. Civ. Code § 3426.1(d)(1); see Pyro Spectaculars N., Inc., 861 F.
17 Supp. 2d at 1089 (finding, though publicly available customer identity and contact information by
18 itself may not be trade secret, plaintiff’s “comprehensive, if not encyclopedic, compilation of
19 customer, operator, and vendor information” was likely protectable trade secret).
20 ExamWorks’ “Client and Doctor Lists,” for example, are likely protectable trade
21 secrets if nonpublic, as addressed below. “Under the California [CUTSA], Cal. Civ. Code
22 §§ 3426, et seq., a customer list may constitute a protected trade secret if it includes nonpublic
23 information that provides a ‘substantial business advantage’ to competitors.” Pollara v. Radiant
24 Logistics, Inc., 650 F. App’x 372, 373 (9th Cir. 2016) (quoting Morlife, Inc., 56 Cal. App. 4th at
25
26 5 ExamWorks’ information is housed in its proprietary IMECentric and InfoCentric
databases. Because IMECentric and InfoCentric programs are used in conjunction with each
27 other, Nalley Decl. ¶ 7, for purposes of simplification, this order refers to these databases as
“IMEC”.
28
1 1514). “As a general principle, the more difficult information is to obtain, and the more time and
2 resources expended by an employer in gathering it, the more likely a court will find such
3 information constitutes a trade secret.” Morlife, 56 Cal. App. 4th at 1522 (citation omitted). For
4 the purposes of obtaining a preliminary injunction, ExamWorks has offered sufficient evidence to
5 show it has expended substantial time and effort identifying customers with particular needs and
6 characteristics in compilations that contain more than mere identities and addresses easily
7 identified through publicly available sources; the compilations would give a competitor a
8 substantial business advantage in seeking to offer services to compete with ExamWorks’ fully
9 integrated proprietary private network, Compl. ¶ 11; Nalley Decl. ¶¶ 13, 28–29 (referencing
10 millions of dollars spent annually and innumerable person-hours to develop IMEC, which
11 contains the list identified as “Clients.xlsx” with 124,756 unique client entries and detailed
12 information for ExamWorks’ entire United States client base, as well as the list identified as
13 “Doctors.xlsx” containing detailed contact information for more than 10,000 doctors across
14 ExamWorks’ entire United States doctor network); Morlife, 56 Cal. App. 4th at 1521 (“[W]here
15 the employer has expended time and effort identifying customers with particular needs or
16 characteristics, courts will prohibit former employees from using this information to capture a
17 share of the market.”).
18 ExamWorks’ Recipe Book, IMEC Database and Marketing & Business Strategy
19 Documents are also likely protectable trade secrets. These documents comprise various marketing
20 and outreach strategies, explaining how ExamWorks engages doctors into its network. Compl.
21 ¶ 61; Nalley Decl. ¶ 43. Specifically, ExamWorks spends significant funds on internal recruiters
22 to persuade doctors to join ExamWorks’ network. Nalley Decl. ¶ 13. To be competitive, it also
23 nurtures relationships with the applicant attorneys making up the workers’ compensation bar, who
24 serve as a source of doctor referrals. See, e.g., Pl.’s Suppl. Br. at 4; Mot. TRO, Ex. J
25 (Clients.xlsx), ECF No. 28-1 (part 2), at 11–18 (NATIVE-Clients) (sealed); id., ECF No. 28-3
26 (part 4), at 1–912 (NATIVE-Doctors) (sealed). ExamWorks captures key strategic information in
27 a variety of ways, including revenue per doctor, margin or profitability per doctor and negotiated
28 fee per exam for that particular doctor. Nalley Decl. ¶ 15. At this point, IMEC contains
1 information on more than 2,000 doctors who practice in California alone. Id. ¶ 13; see Argo Grp.
2 US, Inc. v. Prof’l Governmental Underwriters, Inc., No. SACV 13-1787 AG (DFMx), 2013 WL
3 11327772, at *2 (C.D. Cal. Dec. 6, 2013) (“[I]nformation regarding profit margins, costs, and
4 market research can be protected trade secrets.” (citing Whyte v. Schlage Lock Co., 101 Cal. App.
5 4th 1443, 1456 (2002))).
6 For these reasons, ExamWorks has met its burden to show its compilations of
7 information, specifically the Client and Doctors List, IMEC database, and the Marketing &
8 Business Strategy Documents, have value and are not publicly available, and therefore likely
9 qualify as trade secrets.
10 b) Subject of Reasonable Efforts to Maintain Secrecy
11 The court also finds ExamWorks has met its burden to show at this stage the
12 ExamWorks Trade Secret Information has been “the subject of efforts that are reasonable under
13 the circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1(d)(2); Pyro Spectaculars,
14 861 F. Supp. 2d at 1092 (plaintiff’s “security practices are not perfect,” but sufficiently
15 reasonable to support preliminary injunction). Specifically, ExamWorks requires all employees
16 to sign confidentiality agreements recognizing the proprietary nature of its “[c]ustomer names,
17 contact information, account numbers or financial information and proprietary business
18 information not otherwise available to the public related to how ExamWorks does business.”
19 Bartsch Decl., ¶¶ 6–7, ECF No. 4-3. “Employees must recertify their understanding of the
20 Employee Handbook and Code of Business Conduct and Ethics at regular intervals.” Id. The
21 Employee Handbook requires employees to maintain the confidentiality of, inter alia,
22 ExamWorks’ “property . . . including any documents or files in [the employee’s] possession and
23 any company property in electronic form” and “ensure that all ExamWorks’ property is returned
24 to ExamWorks.” Id. ¶ 11. Here, all the Former Employees named as defendants signed
25 confidentiality agreements confirming their understanding of, and agreement to, ExamWorks’
26 confidentiality policies; in so doing they also agreed to return ExamWorks’ information upon
27 their departure or termination. See Compl. ¶¶ 31, 34, 39; id., Ex. A (Girard), at 39; id., Ex. C
28
1 (Baldini), at 49; id. Ex. E (Tejada), at 56; id., Ex. F (Bird), at 60.6 The confidentiality agreements
2 were in consideration of employment with ExamWorks, and by signing them at the start of their
3 employment defendants had notice of the agreements’ terms as conditions of their employment
4 and agreed to be bound by them. Cf. AUA Private Equity Partners, LLC v. Soto, No. 1:17-CV-
5 8035-GHW, 2018 WL 1684339, at *5 (S.D.N.Y. Apr. 5, 2018) (acquisition by improper means
6 properly pleaded where plaintiff alleged defendant violated confidentiality agreements she signed
7 upon being hired, which created “contractual duty to abide by their terms”).
8 Additionally, ExamWorks’ network is password protected, see Compl. ¶ 27;
9 Bartsch Decl., Ex. A (“ExamWorks’ Employee Handbook”), ECF No. 4-3 (“All Systems
10 passwords and encryption keys must be available and known to the Company[.]”), and access is
11 limited to employees who need particular data sets for the purposes of carrying out their
12 employment. Bartsch Decl., Ex. A. ExamWorks issues mobile devices to employees, who were
13 then able to determine the passwords they would use to protect ExamWorks’ information. See
14 Compl., Ex. E, ECF No. 1, at 46 (ExamWorks Mobile Device Policy, providing in pertinent part
15 that “ExamWorks’ Mobile Device Policy applies to all uses of your device for ExamWorks’
16 business or on behalf of ExamWorks. In addition, you must: Consent to ExamWorks’ efforts to
17 manage the device and secure its data, including providing ExamWorks with any necessary
18 passwords.”). Employees are required to take security awareness training annually and, when an
19 employee leaves the company, ExamWorks automatically cuts off all access to databases and the
20 network by that employee. Id.
21 ExamWorks also requires departing employees to certify that all company assets,
22 including trade secrets, have been returned, instructing these employees to “check personal
23 computers, email accounts, and thumb drives” and “asks each employee to return all
24 ExamWorks’ property” before departure. Bartsch Decl. ¶ 11. Here, for example, after
25 ExamWorks terminated defendant Baldini on April 29, 2020, ExamWorks asked him to complete
26
27 6 Defendants have not objected to the court’s consideration of the documents attached to
the complaint.
28
1 its standard offboarding checklist and certification form; Baldini did, certifying he had “returned
2 all equipment, documents, software, hardware, and any other company property (whether
3 physical, intellectual, or other) in [his] possession.” Id. ¶ 44; Bartsch Decl., Ex. H, ECF No. 4-2
4 (offboarding checklist and certification form), at 228–229.
5 The efforts reviewed above, supported by the record before the court, are sufficient
6 at this stage to show ExamWorks has made reasonable efforts, at least, to maintain the secrecy of
7 the information it claims as trade secret.
8 c) Conclusion
9 In sum, ExamWorks has met its burden to show the ExamWorks Trade Secret
10 Information “derives independent economic value” and is subject to “reasonable efforts” to
11 protect secrecy as required by statute. See Cal. Civ. Code § 3426.1(d).
12 2. Misappropriation of Trade Secrets
13 The CUTSA defines misappropriation as including either the “[a]cquisition of a
14 trade secret of another by a person who knows or has reason to know that the trade secret was
15 acquired by improper means” or the “use of a trade secret of another without express or implied
16 consent by a person who [] [u]sed improper means to acquire knowledge of the trade secret.”
17 Cal. Civ. Code § 3426.1(b); see 18 U.S.C § 1839(5) (identical DTSA provision).
18 While “[m]ere possession of trade secrets by a departing employee” is not
19 sufficient to establish misappropriation, Norsat Int’l, Inc. v. B.I.P. Corp., No. 12CV674-WQH-
20 NLS, 2014 WL 2453034, at *6 (S.D. Cal. May 30, 2014) (quoting FLIR Sys., Inc. v. Parrish, 174
21 Cal. App. 4th 1270, 1279 (2009)), plaintiff here has met its burden to show the Former
22 Employees obtained the ExamWorks Trade Secret Information for their own uses purposefully,
23 without the consent of ExamWorks, and by “improper means.” The record supports the
24 conclusion the Former Employees took large quantities of ExamWorks Trade Secret Information
25 over time, including critical strategic information near the time of their resignations or
26 terminations, with significant blocks of sensitive data sent to their private email addresses, Harris
27 Decl. ¶¶ 6–19 -- all in violation of company policy and their employment contracts. See Mot.
28 TRO, Ex. B (“ExamWorks Confidentiality and Proprietary Rights”), ECF No. 21-1, at 60
1 (agreement signed by Girard, dated May 15, 2015, providing “All e-mail associated with an
2 ExamWorks email account on the device, both outgoing and incoming, including associated e-
3 mail attachments, created on, transmitted to, received or printed from, or stored or recorded on the
4 device (‘corporate e-mail content’) is the property of ExamWorks.”).7
5 While defendants protest that much of the information they took can be obtained
6 publicly, see, e.g., Defs.’ Suppl. Br., ECF No. 41, at 6, they do not even attempt to argue that they
7 in fact obtained the information from public sources. Moreover, the contents of many of
8 ExamWorks’ files defy defendants’ characterization, including those entitled “Clients.xlsx,”
9 “Financials by Company-Region-BusUnit – 2018 SIBTF.xlsx,” “Budget Worksheet – CA
10 2019.xlsx,” “Likely Calcs – gina.xlsx” and “California WC Fee Analysis 10_17_19v10.xlsx.”
11 See Nalley Decl. ¶¶ 34–39; see also id. ¶ 6 (documents represent ExamWorks’ investment of “a
12 significant amount of money and sweat equity” over more than a decade, to “set it apart from
13 others in the industry”). Moreover, plaintiff has shown it is likely defendants’ transmissions of
14 ExamWorks’ data were not only deliberate, but the culmination of a lengthy planning effort
15 conducted surreptitiously in an effort to cloak their acquisition by improper means. As plaintiff
16 argues, email correspondence between and among Former Employees suggests that, as early as
17 October 2018, they were making plans to launch “Project Palo Alto,” to form a new company to
18 compete in the same market space ExamWorks occupies; they documented the launch plan with
19 multiple emails and planning documents, in fact, preparing to use plaintiff’s business data.
20 Holley Decl. ¶¶ 8, 10. They began sending themselves ExamWorks’ proprietary information
21 shortly after their covert planning began. Nalley Decl. ¶ 34. Their transfer of ExamWorks’
22
23 7 As relevant here, ExamWorks’ Code of Business Conduct and Ethics for its employees
provides: “All data residing on or transmitted through the Company’s computing and
24 communications facilities, including email and word processing documents, is the property of the
Company and subject to inspection, retention and review by the Company, with or without a
25
Community Member’s or third party’s knowledge, consent or approval, in accordance with
26 applicable law. Personal emails, voicemails, calls or other data residing on or transmitted through
the Company’s systems are subject to monitoring. Any misuse or suspected misuse of the
27 Company’s assets must be immediately reported to your supervisor or a Compliance Officer.”
Bartsch Decl., Ex. B (“ExamWorks’ Code of Bus. Conduct & Ethics”), ECF No. 4-3, at 199.
28
1 information continued until the first departures of Girard and Tejada, and even after they had
2 departed while Baldini and Byrd remained at ExamWorks. Tejada’s awareness of the line she
3 was walking and the importance of officially not crossing the line until the predetermined time is
4 telegraphed by her making a point of clarifying, before executing her new agreement for
5 employment immediately after leaving ExamWorks, that she was to perform “no newco business”
6 at first. Mot. Prelim. Inj. Ex. 30 (Tejada Employment Agreement), ECF No. 52-1, at 133 (Tejada
7 note asking “no newco work during this time?”). One email in particular reflects an awareness of
8 the potential problems defendants’ actions posed, and their ongoing efforts to obscure them: On
9 April 23, 2020, while Baldini remained employed by ExamWorks, in response to a message titled
10 “Ground Work” he sent to George, Girard and Tejada, as well as Feinberg and Tuthill, George
11 responded “Todd. . . you should NOT be on these emails [sic] threads. . . and certainly not be
12 calling meetings or making to do lists. . . not while you are employed elsewhere. Please . . . go
13 dark . . . or limit to telephone only comm. Get me?” Mot. Prelim. Inj., Ex. 24 (“April 23 Baldini
14 Email”), ECF No. 52-1, at 112. Baldini acknowledged the warning later that day, “Gone Dark!!!”
15 Id.
16 Not long after, upon learning that plaintiff had filed this lawsuit, George wrote
17 tellingly to Girard, “you have been leaving a trail for a long time . . . and that is not good. The
18 good news is there is no company . . . no nuco.” Mot. Prelim. Inj., Ex. 25 (“May 5 George
19 Email”), ECF No. 52-1, at 115. But while there was no “nuco” yet, plaintiff’s complaint was
20 filed during the interim period contemplated by defendants, before the unveiling of their new
21 enterprise.
22 The record further discloses that the Former Employees not only improperly
23 acquired ExamWorks’ Trade Secret Information for their personal use in working to develop the
24 “Project Palo Alto” plan, but they maintained ExamWorks’ information without returning it upon
25 their departure. It was only after plaintiff filed the complaint and moved for a restraining order
26 and preliminary injunction that defendants started to take some steps to return ExamWorks’ trade
27 secrets. Baldini now admits that when he completed the offboarding checklist and certification
28 form upon leaving ExamWorks, despite his answers then, he in fact had not “returned all
1 equipment, documents, software, hardware, and any other company property (whether physical,
2 intellectual, or other) in [his] possession.” Baldini Decl. ¶ 2, ECF No. 26-5; Bartsch Decl., Ex. H,
3 (offboarding checklist and certification form), at 228–229. He also admits “he used personal
4 electronic resources against ExamWorks policies.” Baldini Decl. ¶ 2 (admitting before leaving
5 ExamWorks in April 29, 2020, he sent various ExamWorks’ documents to his personal email).
6 Girard and Bird have made similar admissions following ExamWorks’ filing of its complaint.
7 Girard Decl. ¶ 2, ECF No. 26-2 (admitting before leaving in March 13, 2020, sending various
8 ExamWorks’ documents to his personal email address); Bird Decl. ¶ 2, ECF No. 26-3 (admitting
9 on December 2, 2019, she emailed Girard two ExamWorks’ spreadsheets to his personal email
10 address). While Ms. Bird takes the position that she only worked for Girard, doing whatever he
11 asked her to, Bird Dec. ¶ 2, she did not promptly produce her personal email account to plaintiff
12 as ordered by the court, see Pl.’s Suppl. Brief at 9, although her counsel reported at hearing that
13 she had finally produced it shortly before.
14 The record also supports the conclusion the Former Employees not only acquired
15 but also have used ExamWorks Trade Secret Information without consent. Three defendants
16 aver, using identical, carefully crafted language, that each has not “used any ExamWorks
17 documents since I left to compete with it or to take any opportunities from it,” Girard Decl. ¶ 2;
18 Baldini Decl. ¶ 2 (same); Tejada Decl. ¶ 5. This wording does not acknowledge that acquisition
19 is sufficient for misappropriation; moreover, at least two items in the record strongly support the
20 conclusion defendant have in fact made unauthorized use of at least certain information, and that
21 also is sufficient. See 3 Callmann on Unfair Comp., Tr. & Mono. § 14:32 (4th ed. 2019) (“It is
22 not necessary to show that the defendant used the trade secret in competition with the plaintiff;
23 either improper acquisition or use of the trade secret is enough to make out a case
24 of misappropriation.”) (citing, inter alia, San Jose Constr., Inc. v. S.B.C.C., Inc., 155 Cal. App.
25 4th 1528, 1544 (2007) (“[U]nder the UTSA ‘misappropriation’ can occur through
26 improper acquisition of a trade secret, not only through use.” (emphasis in original))). One is
27 Girard’s March 19 email specifically referencing “the spreadsheet we used to blast our message
28 yesterday,” attaching a document bearing the title of an ExamWorks’ proprietary list. Pl.’s Suppl.
1 Br. at 2. Girard’s saying now he was confused, and providing a copy of a template for the letter
2 he says was sent, does not explain away his attaching a link to the proprietary spreadsheet to his
3 message. The second is another email Girard sent on April 28 to Tejada, saying “I am looking for
4 the short list of SIBTF doctors to recruit.” Mot. Prelim. Inj., Ex. 26, ECF No. 52-1 (“April 28
5 Girard Email”), at 118, to which Tejada responded by sending him ExamWorks’ SIBTF
6 spreadsheet. If there is some truth to defendants’ saying they have not competed directly with
7 ExamWorks or taken opportunities from it, their careful parsing may simply omit the word “yet.”
8 Taking into account all of this information of record, the court concludes that, at
9 this early stage, ExamWorks has shown a likelihood of success on the misappropriation element
10 of its trade secrets claims.
11 B. Irreparable Harm
12 The court turns to whether ExamWorks has met its burden to demonstrate it will
13 suffer irreparable harm in the absence of a preliminary injunction. Winter, 555 U.S. at 20. “An
14 irreparable harm is one that cannot be redressed by a legal or equitable remedy following trial.”
15 Optinrealbig.com, LLC v. Ironport Sys., Inc., 323 F. Supp. 2d 1037, 1050 (N.D. Cal. 2004) (citing
16 Public Util. Comm’n v. FERC, 814 F.2d 560, 562 (9th Cir. 1987)). Ordinarily, economic injury is
17 not irreparable because monetary damages are an adequate remedy. Rent–A–Center, Inc. v.
18 Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991). However,
19 “intangible injuries, such as damage to ongoing recruitment efforts and goodwill, qualify as
20 irreparable harm.” Id.; see also Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832,
21 841 (9th Cir. 2001) (evidence of threatened loss of prospective customers or goodwill supports
22 irreparable harm finding). Although “loss of control over business reputation and damage to
23 goodwill could constitute irreparable harm,” a court’s finding of such harm cannot be “grounded
24 in platitudes rather than evidence.” Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d
25 1239, 1250 (9th Cir. 2013). A plaintiff must “demonstrate a likelihood of irreparable injury—not
26 just a possibility—in order to obtain preliminary relief,” Winter, 555 U.S. at 21.8
27
8 Although establishing a likelihood of success in one type of intellectual property case,
28 namely a trademark infringement action, may once have created a presumption of irreparable
1 The court finds ExamWorks has met its burden of showing a likelihood of
2 irreparable harm by pointing to the threatened loss of prospective customers posed by defendants’
3 actions, as well as the threat to ExamWorks’ ongoing business recruitment efforts.
4 Defendants’ deep familiarity with ExamWorks’ proprietary information and their
5 detailed advance planning to enter the same “med-legal” market to compete with ExamWorks—
6 after a brief, orchestrated cooling-off period for the sake of optics—supports the conclusion they
7 cannot solicit the persons and companies on ExamWorks’ proprietary lists without
8 misappropriating ExamWorks’ trade secrets. As noted above, those lists are not merely copies of
9 publicly available lists, but lists developed through ExamWorks’ significant efforts over time.
10 Morlife, 56 Cal. App. 4th at 1521 (“[W]here the employer has expended time and effort
11 identifying customers with particular needs or characteristics, courts will prohibit former
12 employees from using this information to capture a share of the market.”); id. at 1528–29; see
13 also MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 515, 520 (9th Cir. 1993) (district
14 court enjoined defendants “from soliciting any [plaintiff] computer maintenance customer and
15 from maintaining any contract with any former [plaintiff] computer maintenance customer where
16 knowledge of any such customers was obtained by [defendant] during his employment with
17 [plaintiff]”; injunction upheld to extent it properly enjoined customer solicitation). This
18
19 harm, see Herb Reed Enterprises, LLC, 736 F.3d at 1250–51, recent Ninth Circuit cases have
called into question whether this presumption is consistent with the Supreme Court’s decision in
20 eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 394 (2006). See 7-Eleven, Inc. v. Dhaliwal, No.
12-CV-02276-KJM-GGH, 2012 WL 5880462, at *6–7 (E.D. Cal. Nov. 21, 2012) (citing eBay
21
Inc., LLC, 547 U.S. at 394; Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d
22 873, 877 (9th Cir. 2009); Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 998 (9th
Cir. 2011)). While the Ninth Circuit has yet to directly address the impact of eBay on courts’
23 power to presume irreparable harm in trade secrets cases in particular, this court has joined those
district courts who decline to rely on a presumption in determining irreparable harm. See Cutera,
24 Inc. v. Lutronic Aesthetics, Inc., No. 2:20-CV-00235-KJM-DB, 2020 WL 1234551, at *7 (E.D.
Cal. Mar. 13, 2020); see also V’Guara Inc. v. Dec, 925 F. Supp. 2d 1120, 1126 (D. Nev. 2013)
25
(citing Flexible Lifeline Systems in declining to presume irreparable harm in trade secrets case);
26 but see Comet Techs. United States of Am. Inc. v. Beuerman, No. 18-CV-01441-LHK, 2018 WL
1990226, at *5 (N.D. Cal. Mar. 15, 2018) (citing pre-Flexible Lifeline Systems district court
27 decisions for proposition that courts in that district presume plaintiff will suffer irreparable harm
if proprietary information is misappropriated).
28
1 conclusion extends to all of ExamWorks’ curated lists, including the client list attached to
2 Girard’s March 19 email and the SIBTF list Tejada emailed to Girard on April 28, 2020.
3 Defendants’ actions also have unfairly threatened ExamWorks’ ability to recruit
4 new business through the use of its proprietary information. Here again, Girard’s April 28 email
5 to Tejada provides support for this conclusion, in that Girard expressly said he was “looking for
6 the short list of SIBTF doctors to recruit.” April 28 Girard Email at 118. Also, although Tejada
7 says she sent the “Brown & Todoroff.xlsx” list to her personal email address on January 16 to
8 make sure she had a copy in the event of a bad internet connection, plaintiffs point to the
9 highlighting of unassigned cases on that list that allows for easy identification and poaching by a
10 competitor. Nalley Decl. ¶¶ 28–29, 31–34, 37–39.
11 Defendants would have the court accept that any threat they pose to ExamWorks is
12 now a thing of the past. They take the position that since their resignations and terminations, the
13 only ExamWorks document they have accessed is a list identified as “Clients.xlsx,” and insist it
14 contains only publicly available information. Defs.’ Suppl. Br. at 3. But again, the list compiled
15 by ExamWorks identifies applicant attorneys comprising 124,756 unique entries with detailed
16 contact information. Compl. ¶ 67; Mot. TRO, Ex. J (Clients.xlsx), ECF No. 28-1 (part 2), at 11–
17 18 (NATIVE-Clients) (sealed); id., ECF No. 28-3 (part 4), at 1–912 (NATIVE-Doctors) (sealed).
18 Defendants further argue that even if this list is a trade secret, it does not support an injunction in
19 this case, as there is no evidence that any applicant attorneys the Former Employees may have
20 solicited have actually done business with them. Defs.’ Suppl. Br. at 3.
21 Defendants’ argument does not grapple with the fact Former Employees were in
22 the process of forming their new company although not yet launched; it also does not hold up in
23 light of the totality of the record before the court reviewed above. The “Clients.xlsx” list is not
24 the only list defendants misappropriated and used without consent. While defendants have
25 conceded the error of certain of their ways, they have not provided full disavowals of their plan to
26 implement Project Palo Alto by launching a business to unfairly compete with ExamWorks.
27 Defendants have dawdled in turning over all of the discovery ordered by the court. May 22 Hr’g
28 Tr., ECF No. 38, at 4:1–4 (plaintiff’s counsel’s unrebutted representation that after signing
1 declaration saying she turned everything over, Tejada still had hard copy documents at home); id.
2 at 4:4–7 (counsel also saying Tejada “has not been able to provide” plaintiff with password for
3 Dropbox account Girard instructed her to place documents in). As noted, Ms. Bird produced her
4 email account only a few days before the court’s June 3 hearing, such that plaintiff had not had an
5 opportunity to review it. This behavior raises a red flag and at this point allows the drawing of
6 adverse inferences. Nationwide Life Ins. Co. v. Richards, 541 F.3d 903, 911 (9th Cir. 2008)
7 (district court has discretion to draw adverse inference when deprived of source of information).
8 Defendants also appear to have been slow to otherwise comply with the court’s orders. Id. at 6:1–
9 3 (counsel representing Tejada testified at deposition she was still contacting persons she worked
10 with at ExamWorks after entry of TRO).
11 The court finds ExamWorks has met its burden to show it is likely to suffer irreparable
12 harm without a preliminary injunction.
13 C. Balance of Equities
14 The balance of equities also tips in ExamWorks’ favor. See Winter, 555 U.S. at 20. An
15 injunction will make clear to the Former Employees, as appears necessary, that they cannot
16 further use any of ExamWorks Trade Secret Information and minimize the competitive harm
17 ExamWorks might otherwise suffer as a result. An injunction tailored to the circumstances of
18 this case will merely prevent Former Employees from engaging in unlawful acts. Here in
19 particular, the circumstances support an injunction restraining defendants from conducting
20 business with any individual or entity that did business with ExamWorks before defendants
21 stopped working there, to the extent those individuals or entities are identified in the bundle of
22 trade secret materials defendants misappropriated. As in Morlife, defendants remain free to
23 engage in their professions and solicit customers whose identities, with all of the associated
24 strategic information, are not ExamWorks’ trade secrets. 56 Cal. App. 4th 1514 at 1528–29.
25 While defendants complain that such an injunction is overbroad and poses great harm to them,
26 their declarations supporting this position are generalized without providing meaningful detail
27 addressing the analysis called for here. Girard Decl. ¶ 7; Bird Decl. ¶ 5; Tejada Decl. ¶ 7; Baldini
28
1 Decl. ¶ 5. Moreover, that they have not sought a bond as a condition of an injunction’s issuing
2 suggests their harm is overstated.
3 At this stage and on this record, the well-supported likely risk of competitive harm
4 to ExamWorks from the Former Employee’s misappropriation of the ExamWorks Trade Secrets
5 Information outweighs the speculative risk to the Former Employees. The balance of equities tips
6 in ExamWorks’ favor.
7 D. Public Interest
8 “In exercising their sound discretion, courts of equity should pay particular regard to the
9 public consequences in employing the extraordinary remedy of injunction.” Winter, 555 U.S. at
10 24 (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982)). As noted above, trade
11 secret cases involving former employees traditionally often invoke the two competing public
12 interests of trade secret protection and employee mobility. Pyro Spectaculars, 861 F. Supp. 2d at
13 1092–93; see also Morlife, 56 Cal. App. 4th at 1520.
14 Here, the court has found ExamWorks has shown a likelihood of success on the
15 merits of its trade secrets claims, a likelihood of irreparable harm if an injunction is not granted
16 and that the balance of equities tips in ExamWorks’ favor. Where the requested injunction will
17 restrain only the Former Employees’ unlawful use of ExamWorks’ trade secrets, the public’s
18 interest in these circumstances favors issuance of the injunction. See Pyro Spectaculars, 861 F.
19 Supp. 2d at 1093 (public interest supported injunction “specifically focused on preventing misuse
20 of PSI’s trade secrets to solicit PSI’s customers” where plaintiff satisfied three other preliminary
21 injunction requirements); Fid. Brokerage Servs. LLC v. McNamara, No. 11 CV 1092 MMA
22 RBB, 2011 WL 2117546, at *8 (S.D. Cal. May 27, 2011) (“[An] injunction does not prohibit
23 defendants from engaging in lawful conduct to service their new and existing clients. Rather, it
24 narrowly restricts the unlawful solicitation of plaintiff’s clientele through use of plaintiff’s trade
25 secret information.”).
26 IV. DISCOVERY COSTS
27 Defendants argue they cannot finance use of an expert by ExamWorks with an
28 hourly rate of $550, Opp’n at 7, and say costs of the forensic expert’s review of the expedited
1 discovery should be borne entirely by ExamWorks; alternately, they say the individual defendants
2 should pay only for the collection and imaging of their devices and the removal of any
3 ExamWorks’ information from the devices. Opp’n at 24. Under federal discovery rules, “the
4 presumption is that the responding party must bear the expense of complying with discovery
5 requests, but [] may invoke the district court’s discretion under Rule 26(c) to grant orders
6 protecting him from ‘undue burden or expense.’” Oppenheimer Fund, Inc. v. Sanders, 437 U.S.
7 340, 358 (1978). In exercising this discretion, the court must decide “whether to leave the cost of
8 complying with its order where it falls, on the defendant, or place it on the party that benefits, the
9 representative plaintiff.” Id. “[T]he test in this respect normally should be whether the cost is
10 substantial . . . in relation to ability to pay.” Id. at 361–62.
11 Defendants argue the “Individual Defendants are being financially crushed by this
12 litigation, and cannot finance use of an expert by ExamWorks.” Opp’n at 7. Defendants’
13 declarations note their personal financial obligations. Girard Decl. ¶ 7 (financial responsibilities
14 for assisted living costs for mother, health insurance gap, daughter’s student loans, and low equity
15 in home due to COVID-19); Bird Decl. ¶ 5 (unemployed and not paying for attorney in this
16 litigation); Tejada Decl. ¶ 7 (stating she is “not paying for, nor do I have the resources to pay for,
17 attorney’s fees or the cost of this litigation,” without further explanation); Baldini Decl. ¶ 5 (“My
18 personal/financial wealth is basically month to month. I support a full family with two out of
19 state college students and extensive student loans.”). The court is not unsympathetic to such
20 obligations, but defendants do not squarely address their overall ability to pay. Recognizing early
21 on in their planning of “Project Palo Alto” the likelihood of an “EW reaction” to their plans at
22 some point, it appears Girard and Baldini each contemplated investing significant amounts
23 monthly in their new business. Holley Decl., Ex. E, ECF 21-2, at 19-20 (identifying “Expected
24 EW reaction in each scenario” on Project Palo Alto topic outline; estimating “all in average of
25 $28K per person per mo.”). And Bird and Tejada signal now that someone else is covering any
26 litigation costs incurred on their behalf, because they are not.
27 Given that defendants have conceded improperly taking ExamWorks’ trade secrets
28 and the court has found they did so intentionally, they have not overcome the presumption that as
1 the responding party they must bear the expense of discovery, including the costs of the forensic
2 expert. This determination, however, does not preclude defendants’ seeking to overcome the
3 presumption through discovery motion practice before the assigned magistrate judge.
4 V. CONCLUSION
5 For the reasons EXPLAINED above, the court CONFIRMS its grant of
6 ExamWorks’ motion for a preliminary injunction order against defendants on the terms the court
7 provided in its June 3, 2020 order, ECF No. 45:
8 1. Defendants are ordered to continue taking all steps to preserve evidence relevant to
9 the allegations of the complaint and/or their employment with ExamWorks, including, but not
10 limited to, any email or cloud storage accounts, computers, servers, USB thumb drives, and any
11 other electronic devices that contain relevant electronic evidence.
12 2. Defendants are further ordered, at their own expense, to continue making any
13 electronic device or account that contains relevant electronic evidence available immediately to a
14 neutral and mutually agreed-upon third-party forensic expert (the “Forensic Expert”) in order to
15 create a forensically sound image of said device, or, in the alternative, turn over the actual
16 electronic device to the Forensic Expert.
17 3. Defendants and all persons in active concert or participation with them are hereby
18 enjoined from acquiring, accessing, disclosing, or using, or attempting to acquire, access,
19 disclosure, or use any trade secrets or confidential information of ExamWorks, or derivatives
20 thereof, as described in the complaint in this action, including, but not limited to, any documents
21 that discuss, forward, reference, or incorporate the trade secrets or confidential information of
22 ExamWorks. For purposes of this order, the legal definition of “trade secret” is all nonpublic
23 “forms and types of financial, business, scientific, technical, economic, or engineering
24 information, including patterns, plans, compilations, program devices, formulas, designs,
25 prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or
26 intangible, and whether or how stored, compiled, or memorialized physically, electronically,
27 graphically, photographically, or in writing.” See 18 U.S.C. § 1839(3). For purposes of this
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1 order, “confidential information” means all other information belonging to or otherwise relating
2 to the business of ExamWorks or its affiliates which is not generally known.
3 4. Defendants and all persons in active concert or participation with them are ordered
4 to continue returning, without delay, all ExamWorks trade secrets and confidential information in
5 their possession, custody, or control to the office of counsel for ExamWorks (Catherine Lui,
6 Orrick, Herrington & Sutcliffe LLP, 400 Capitol Mall # 3000, Sacramento, CA 95814) to the
7 extent there are not materials already turned over to the Forensic Expert.
8 5. Defendants are ordered, at their own expense, to work with the Forensic Expert to
9 permanently and forensically remove from all of their computers, servers, and other electronic
10 devices any trade secrets or confidential information of ExamWorks, or derivatives thereof,
11 including, but not limited to, any documents that discuss, forward, reference, or incorporate the
12 trade secrets or confidential information of ExamWorks, as defined in paragraph 3 above.
13 6. Defendants are hereby enjoined from conducting business with any individual or
14 entity that did business with ExamWorks before defendants stopped working there, to the extent
15 those individuals or entities are identified in the bundle of trade secret materials misappropriated
16 by defendants, including, without limitation, curated lists identifying ExamWorks’ clients,
17 medical providers, and doctors; provided, however, that defendants are not precluded from
18 lawfully announcing their new employment as long as any announcement does not make use of
19 plaintiff’s trade secrets.
20 IT IS SO ORDERED.
21 DATED: June 11, 2020.
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