The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CHGYM LLC, )
)
Plaintiff, )
)
v. ) 1:21CV911
)
UNIFY ATHLETICS, LLC and VAHID )
KAVOUS MOAVENZADEH, )
)
Defendants. )
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Presently before this court is Plaintiff CHGYM LLC’s
(“Plaintiff” or “CHG”) Motion for Temporary Restraining Order
and Preliminary Injunction with Request for Oral Argument, (Doc.
5), against Defendants Unify Athletics, LLC and Vahid Kavous
Moavenzadeh (separately “Unify” and “Moavenzadeh,” together
“Defendants”). This court held a hearing on the temporary
restraining order (“TRO”) portion of the motion, (Minute Entry
12/16/2021), and subsequently issued a TRO, (Doc. 21). This
court then held a hearing on the preliminary injunction portion
of the motion. (Minute Entry 01/05/2022).
Because Plaintiff has demonstrated a likelihood of success
on the merits as to its North Carolina computer trespass claim
and met the other requirements for a preliminary injunction, a
preliminary injunction will be granted.
I. PROCEDURAL HISTORY
Plaintiff filed its Complaint on November 24, 2021. (Compl.
(Doc. 1).) That same day Plaintiff filed a Motion for Temporary
Restraining Order and Preliminary Injunction with Request for
Oral Argument. (Doc. 5.) Plaintiff also filed a Memorandum in
support of its motion. (Pl. Mem. in Supp. of Mot. for
TRO/Prelim. Inj. (“Pl.’s Br.”) (Doc. 6).) Attached to that
memorandum was a Declaration of Amanda Maness, (Decl. of Amanda
Maness in Supp. of Pl.’s Mot. for TRO/Prelim. Inj. (“Maness
Decl.”) (Doc. 6-1), along with multiple exhibits, (Docs. 6-2 —
6-6). Defendants filed a Brief in Opposition to the TRO portion
of Plaintiff’s motion, (Defs.’ Br. in Opp’n to Mot. for TRO
(“Defs.’ TRO Br.”) (Doc. 15)), accompanied by two exhibits,
(Docs. 16-1, 16-2), and numerous affidavits, (Docs. 16-3 — 16-
37), including one from Defendant Moavenzadeh, (Aff. of Vahid
Moavenzadeh (“Moavenzadeh Aff.”) (Doc. 16-3)). This court held a
hearing as to the TRO portion of Plaintiff’s motion, (Minute
Entry 12/16/2021), and on December 22, 2021, issued a TRO, (TRO
(Doc. 21)). Plaintiff then filed a Reply in Support of Motion
for Preliminary Injunction. (Pl. Reply in Supp. of Mot. for
Prelim. Inj. (“Pl.’s Reply”) (Doc. 25).) Attached to the reply
were two exhibits, (Ex. F (“ICP Log”) (Doc. 25-2); Doc. 25-3),
and a Supplement Declaration of Amanda Maness, (Suppl. Decl. of
Amanda Maness (“Maness Suppl. Decl.”) (Doc. 25-1)). Defendants
subsquently filed a Brief in Opposition to Motion for
Preliminary Injunction, (Defs.’ Br. in Opp’n to Mot. for Prelim.
Inj. (“Defs.’ Prelim. Inj. Br.”) (Doc. 28)), along with a
Supplemental Declaration of Moavenzadeh, (Suppl. Dec. of Vahid
Kavous Moavenzadeh (“Moavenzadeh Suppl. Decl.”) (Doc. 28-1)).
This court then held a hearing as to the preliminary injunction
portion of Plaintiff’s motion. (Minute Entry 01/05/2022.)
At the hearing, this court extended the TRO for seven days
to allow for the preparation of a written memorandum opinion and
order making specific findings of fact and conclusions of law in
support of a preliminary injunction. (Id.) Having reviewed the
motion, the supporting documents, all matters of record, and the
briefing, this court’s findings of fact and conclusions of law
are contained herein. Infra Parts II—III. These findings and
conclusions are supplemental to, and incorporate by reference,
those announced at the close of the hearing. Additionally, these
findings and conclusions are only made for the purpose of
issuing a preliminary injunction.
II. FINDINGS OF FACT
1. Plaintiff is a youth gymnastics facility. (Maness Decl.
(Doc. 6-1) ¶ 2.) It opened in 2011, (id.), and its current
majority owner is Amanda Maness, (Maness Suppl. Decl. (Doc. 25-
1) ¶ 1). Plaintiff’s clients are parents who enroll their
children in gymnastics classes. (Maness Decl. (Doc. 6-1) ¶ 8.)
2. In June 2013, Plaintiff hired Defendant Moavenzadeh as a
coach. (Id. ¶ 11; Moavenzadeh Aff. (Doc. 16-3) ¶ 3.) In 2018, he
was promoted to Team Director. (Maness Decl. (Doc. 6-1) ¶ 13;
Moavenzadeh Aff. (Doc. 16-3) ¶ 5.) In this new role,
Moavenzadeh’s responsibilities included team management
activities, (Maness Decl. (Doc. 6-1) ¶ 14; Moavenzadeh Aff.
(Doc. 16-3) ¶ 5), but he was not authorized to manage
Plaintiff’s business generally, nor was he involved in CHG’s
specific financial affairs, (Maness Decl. (Doc. 6-1) ¶ 14).
3. Plaintiff uses class management software called iClass
Pro (“ICP”) to assist in ownership, management, operations, and
accounting-related tasks. (Maness Decl. (Doc. 6-1) ¶ 22.) ICP
enables Plaintiff to send bulk emails and also contains
databases that store proprietary and confidential information
regarding Plaintiff’s clients, students, coaches, and staff.
(Id. ¶ 23.) This information includes—but is not limited to—
names, contact information, students’ class history, Plaintiff’s
class history, current class enrollments, what classes
Plaintiff’s coaches have taught, client credit card information,
client billing information, and client payment history. (Id.)
The accumulation of information in ICP’s databases for over a
decade is one of Plaintiff’s most valuable assets. (Id. ¶ 25.)
4. Access to ICP is provided to Plaintiff’s staff on a
need-to-use basis. (Id. ¶ 26.) Staff members with access are
provided their own login credentials and are informed that ICP
contains proprietary and confidential information. (Id. ¶¶ 26,
27.) Additionally, their ICP authorization is limited to what is
necessary to perform their respective CHG tasks and duties.
(Id. ¶ 24.) Plaintiff’s staff are also informed that the
proprietary and confidential information contained in ICP should
not be shared with staff and third parties who do not
independently have access to such information. (Id. ¶ 27.)
5. Sometime before 2019, Moavenzadeh was granted ICP
access. (Id. ¶ 29.) His ICP authorization was limited to using
the software for routine class-attendance matters and
communication with clients regarding team-related activities.
(Id.) Moavenzadeh used ICP frequently for these tasks. (See
generally ICP Log (Doc. 25-2).) At some point, Moavenzadeh was
given full access to ICP. (See Moavenzadeh Aff. (Doc. 16-3)
¶¶ 9, 10; cf. ICP Log (Doc. 25-2) at 3 (removing Moavenzadeh’s
full access rights after his resignation).) However, he was
never granted unlimited authorization. (See Maness Decl.
(Doc. 6-1) ¶¶ 24, 29.)
6. In August 2020, Moavenzadeh created Instagram accounts
to promote and chronicle the accomplishments of Plaintiff’s
athletes. (Maness Decl. (Doc. 6-1) ¶ 15; Moavenzadeh Aff.
(Doc. 16-3) ¶ 8.) The Instagram accounts were named CHG.XCEL and
CHG.MENS to represent Plaintiff’s female and male teams,
respectively. (Maness Decl. (Doc. 6-1) ¶ 16.)
7. When CHG reopened for in-person training after
temporarily closing its facilities due to COVID-19, Plaintiff
added the role of Operations Manager to Moavenzadeh’s
responsibilities. (Moavenzadeh Aff. (Doc. 16-3) ¶¶ 7, 9.) As
part of this additional role (Moavenzadeh continued to hold the
position of Team Director), he assumed a broader portfolio of
tasks. (Id. ¶ 9.)
8. On February 27, 2021, unbeknownst to Plaintiff,
Moavenzadeh used ICP to generate a report of Plaintiff’s
recurring billings. (Maness Decl. (Doc. 6-1) ¶ 31; Doc. 6-4; ICP
Log (Doc. 25-2) at 20.1) Less than a minute after creating the
1 All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
report, Moavenzadeh utilized the “Background Task Cancelled”
function,2 but ICP nevertheless automatically generated and
maintained a log that recorded these actions. (Maness Decl.
(Doc. 6-1) ¶ 31; Doc. 6-4; ICP Log (Doc. 25-2) at 20.) That log
lists Moavenzadeh as having an “unknown” IP address when he
generated the report.3 (Doc. 6-4; ICP Log (Doc. 25-2) at 20.) ICP
has no record of him ever generating such a recurring billing
report before. (See ICP Log (Doc. 25-2).) These types of reports
generally contain information such as the name of the student,
contact information, credit card information, and payment
history. (Maness Decl. (Doc. 6-1) ¶ 31.) Because Moavenzadeh
utilized the “Background Task Cancelled” function, Plaintiff
does not know the exact extent or amount of information
contained in the report. (Id. ¶ 32.)
9. In June 2021, Moavenzadeh approached at least one of
Plaintiff’s owners and asked whether the owners were interested
2 Other than the June 11, 2021 reports and July 14, 2021
mass departure email, discussed infra ¶¶ 10—11, the 109-page log
listing all of Moavenzadeh’s ICP activities, which dates to
November 2019, contains only one other entry where he utilized
the “Background Task Cancelled” function. (ICP Log (Doc. 25-2)
at 79.)
3 Other than the June 11, 2021 reports, discussed infra
¶ 10, the log listing all of Moavenzadeh’s ICP activities
features only one other entry with an “unknown” IP address. (ICP
Log (Doc. 25-2) at 61.)
in selling CHGYM to him. (Maness Suppl. Decl. (Doc. 25-1) ¶ 7;
Moavenzadeh Suppl. Decl. (Doc. 28-1) ¶ 17.)
10. On June 11, 2021, unbeknownst to Plaintiff, Moavenzadeh
used ICP to generate reports of Plaintiff’s “Family List,”
“Family Email List,” and “Roll Sheets.” (Maness Decl. (Doc. 6-1)
¶ 33; Doc. 6-5; ICP Log (Doc. 25-2) at 6—7.) The ICP log lists
Moavenzadeh’s IP address as “unknown” for each report generation
request. (Doc. 6-5; ICP Log (Doc. 25-2) at 6—7.) Within minutes
of generating the reports, Moavenzadeh utilized the “Background
Task Cancelled” function as to each, (Maness Decl. (Doc. 6-1)
¶ 33; Doc. 6-5; ICP Log (Doc. 25-2) at 6—7), except for the
final “Roll Sheets” report he had generated—he had created that
report three times, (Doc. 6-5; ICP Log (Doc. 25-2) at 6—7.) ICP
has no record of him ever generating these types of reports
before.4 (See ICP Log (Doc. 25-2).) Because Moavenzadeh utilized
the “Background Task Cancelled” function,” Plaintiff does not
know the exact extent or amount of information contained in the
“Family List,” “Family Email List,” and first two “Roll Sheets”
reports. (Maness Decl. (Doc. 6-1) ¶ 34.)
11. On July 14, 2021, Moavenzadeh resigned. (Maness Decl.
(Doc. 6-1) ¶ 35; Moavenzadeh Aff. (Doc. 16-3) ¶ 23.) That same
4 This court does note that in late June 2020, Moavenzadeh
generated a report titled “Families: Policy Report.” (ICP Log
(Doc. 25-2) at 61.)
day, he used ICP to send an email to seventeen classes of
Plaintiff’s clients notifying them of his departure. (Maness
Decl. (Doc. 6-1) ¶ 35; Moavenzadeh Aff. (Doc. 16-3) ¶ 23;
Doc. 6-6; ICP Log (Doc. 25-2) at 3.) The email expressed
Moavenzadeh’s hope to stay in touch and provided his personal
email address. (Maness Decl. (Doc. 6-1) ¶ 36; Moavenzadeh Aff.
(Doc. 16-3) ¶ 23.) Less than a minute after sending the mass
email, Moavenzadeh utilized the “Background Task Cancelled”
function. (Maness Decl. (Doc. 6-1) ¶ 35; Doc. 6-6; ICP Log
(Doc. 25-2) at 3.)
12. On September 13, 2021, Moavenzadeh created the
competing gymnastics entity named Unify Athletics, LLC. N.C.
Sec’y of State, Annual Report: Unify Athletics, LLC, https://www
.sosnc.gov/online_services/business_registration/flow_annual_rep
ort/18083935 (last visited Jan. 12, 2022)5; (Maness Decl.
(Doc. 6-1) ¶ 37; Moavenzadeh Aff. (Doc. 16-3) ¶ 28.) Numerous
clients have left CHGYM and joined Unify. (Maness Decl. (Doc. 6-
1) ¶ 41; Moavenzadeh Aff. (Doc. 16-3) ¶ 29; see also e.g., Docs.
16-5, 16-7, 16-8, 16-10, 16-11, 16-13, 16-15, 16-16, 16-17, 16-
18, 16-19, 16-22, 16-23, 16-24, 16-25, 16-27, 16-28, 16-29, 16-
33, 16-35, 16-36, 16-37.)
5 This court takes judicial notice of this public record
pursuant to Federal Rule of Evidence 201.
13. Moavenzadeh also changed the names of the Instagram
accounts he had created in August 2020. (Maness Decl. (Doc. 6-1)
¶¶ 39, 40; Moavenzadeh Aff. (Doc. 16-3) ¶ 31; Doc. 6-2; Doc. 6-
3.) He changed the name of “CHG.XCEL” to “UNIFY.GYM” and changed
“CHG.MENS” to “UNIFYGYM.MENS.” (Maness Decl. (Doc. 6-1) ¶ 40;
Moavenzadeh Aff. (Doc. 16-3) ¶ 31; Doc. 6-2; Doc. 6-3.)
III. CONCLUSIONS OF LAW
“A plaintiff seeking a preliminary injunction must
establish” four prongs: “that [1] he is likely to succeed on the
merits, that [2] he is likely to suffer irreparable harm in the
absence of preliminary relief, that [3] the balance of equities
tips in his favor, and that [4] an injunction is in the public
interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,
20 (2008). Such an injunction “is an extraordinary remedy
intended to protect the status quo and prevent irreparable harm
during the pendency of a lawsuit.” Di Biase v. SPX Corp., 872
F.3d 224, 230 (4th Cir. 2017) (citation omitted).
Here, Plaintiff has established all four prongs, and
therefore this court will issue a preliminary injunction in its
favor. This preliminary injunction will preserve the status quo
until this case is adjudicated on a more fulsome and developed
record. Each prong is addressed in turn.
A. Likelihood of Success on the Merits
While Plaintiff has asserted nine claims against
Defendants, (Compl. (Doc. 1) ¶¶ 51—107), its preliminary
injunction motion was only made pursuant to four of those
claims, (Pl.’s Br. (Doc. 6) at 9). Those four claims are
(1) misappropriation of trade secrets under federal law,
(2) misappropriation of trade secrets under North Carolina law,
(3) computer trespass under North Carolina law, and (4) false
association under federal law. (Id.)
Through briefing and oral argument, the North Carolina
computer trespass claim emerged as the sole claim for which
preliminary injunctive relief should issue.6 Indeed, this court’s
TRO found that “Plaintiff has a substantial likelihood of
succeeding on the merits of its North Carolina computer trespass
claim[.]” (TRO (Doc. 21) at 3.) Therefore, at least insofar as
the first preliminary injunction prong, this court will focus on
the North Carolina computer trespass claim. To demonstrate a
6 This court declined to grant preliminary injunctive relief
as to Plaintiff’s misappropriation and false association claims.
Defendants presented evidence through the affidavits of former
CHG clients. (Docs. 16-4 — 16-37.) The allegations in those
affidavits suggest there are a number of reasons why clients may
have left CHG and moved to Unify. (Defs.’ Prelim. Inj. Br.
(Doc. 28) at 8—9.) Consequently, as to its claims for
misappropriation and false association, Plaintiff did not
sufficiently establish a likelihood of success on the merits to
support injunctive relief separate and apart from its computer
trespass claim.
likelihood of success on that claim, “plaintiff need not
establish a ‘certainty of success,’ but must make a clear
showing that [it] is likely to succeed at trial.” Di Biase, 872
F.3d at 230 (citation omitted).
North Carolina’s computer trespass statute makes it
(a) unlawful for any person to use a computer or
computer network without authority and with the
intent to do any of the following:
. . . .
(3) Alter or erase any computer data, computer
programs, or computer software.
. . . .
(5) Make or cause to be made an unauthorized
copy, in any form, including, but not limited to,
any printed or electronic form of computer data,
computer programs, or computer software residing
in, communicated by, or produced by a computer or
computer network.
. . . .
[A] person is “without authority” when . . . the
person has no right or permission of the owner to use
a computer, or the person uses a computer in a manner
exceeding the right or permission[.]7
N.C. Gen. Stat. § 14-458(a) (emphasis added). To synthesize, the
statute has two elements: (1) a person must “use a computer or
7 “The statute provides for a private right of action by
‘[a]ny person whose property or person is injured by reason of a
violation of this section. . . .’” Spirax Sarco, Inc. v. SSI
Eng’g, Inc., 122 F. Supp. 3d 408, 417 (E.D.N.C. 2015)
(alterations in original) (quoting N.C. Gen. Stat. § 14–458(c)).
computer network without authority,” with (2) the intent to
engage in one of the enumerated prohibited actions. Each element
is analyzed as follows.
1. Element 1: Without Authority
Plaintiff maintains Moavenzadeh was without authority when
he generated the February 27 and June 11, 2021 reports because
he did so for “personal use,” as his work “duties and
responsibilities had no relation to needing this information.”
(Pl.’s Br.’s (Doc. 6) at 16.) Defendants disagree and advance
two reasons why Moavenzadeh had authority to generate the
reports. First, “CHG gave [Moavenzadeh] ‘full access’ to iClass
Pro, electing not to place any restrictions on his use of the
software,” (Defs.’ TRO Br. (Doc. 15) at 16), thus “expressly
authoriz[ing] him to access class enrollment information,
contact information, and billing information,” (Defs.’ Prelim.
Inj. Br. (Doc. 28) at 14). Second, Defendants argue that any
reports Moavenzadeh may have generated were within his authority
because he “was required to regularly access CHG’s client lists,
class rolls, and customer contact information as part of his
responsibilities.” (Defs.’ TRO Br. (Doc. 15) at 16.)
The North Carolina computer trespass statute provides that
“a person is ‘without authority’ when . . . the person uses a
computer in a manner exceeding the[ir] right or permission[.]”
N.C. Gen. Stat. § 14-458(a). When the reports were generated,
Moavenzadeh had full access to Plaintiff’s ICP databases. Supra
¶ 5. However, just because Moavenzadeh had unlimited access did
not mean he had unlimited authorization. While he could access
all of ICP, he was only authorized to use that access to the
extent it was necessary to perform his CHGYM tasks and duties.
Supra ¶¶ 4—5. Any greater utilization of that access would
exceed his “right or permission,” thus qualifying as “without
authority” for purposes of the North Carolina computer trespass
statute. N.C. Gen. Stat. § 14-458(a).
Despite Defendants’ arguments to the contrary, there is
sufficient circumstantial evidence to conclude that the reports
Moavenzadeh generated on February 27 and June 11, 2021 were not
necessary to perform his CHG tasks and duties. The best evidence
of this is that the 109-page log containing all of Moavenzadeh’s
ICP activities since November 2019 shows that he never generated
any reports like the ones at issue. Supra ¶¶ 8, 10.
Additionally, Moavenzadeh never offers a credible explanation
for why he cancelled the background task for all but one of
these reports. See supra ¶¶ 8, 10. To the contrary,
Moavenzadeh’s shifting8 and conflicting9 explanations of his
computer activity cause this court, at this stage of the
proceedings, to reject his purportedly innocent explanations for
the activity, (see Moavenzadeh Aff. (Doc. 16-3) ¶ 12;
Moavenzadeh Suppl. Decl. (Doc. 28-1) ¶¶ 6—7), which otherwise
support a finding of unauthorized access. Moreover, the reports’
contents would likely aid Moavenzadeh in establishing his own
8 Compare Moavenzadeh Aff. (Doc. 16-3) ¶ 12 (“I recall that
in February 2021, I was using iClass Pro and inadvertently
downloaded reports from iClass Pro.”) (emphasis added), with
Moavenzadeh Suppl. Decl. (Doc. 28-1) ¶ 6 (“In my December 15,
2021, affidavit, I used the colloquial term ‘downloaded’ to
describe what I did with respect to the report. By ‘downloaded,’
I meant that I had iClass Pro ‘download’ the report to my
‘background tasks’ folder in iClass Pro. To the best of my
knowledge, I did not take the additional step of having iClass
Pro ‘download’ the report to any personal computer or other
device.”).
9 Compare Moavenzadeh Aff. (Doc. 16-3) ¶ 12 (“I recall that
in February 2021, I was using iClass Pro and inadvertently
downloaded reports from iClass Pro. . . I have no recollection
of what . . . information was included in the reports.”)
(emphasis added), with Moavenzadeh Suppl. Decl. (Doc. 28-1) ¶ 6
(“I recall that in February 2021 . . . I inadvertently created a
report in iClass Pro that included billing information for
certain CHG customers.”) (emphasis added).
gymnastics business, which he did in fact later establish.10 See
supra ¶ 12.
Defendants argue that the facts of Moavenzadeh’s departure,
and the recruitment of Moavenzadeh by the parents rather than
vice versa, diminishes the reasonableness of any inference of
wrongful conduct by Moavenzadeh. (See e.g., (Defs.’ Prelim. Inj.
Br. (Doc. 28) at 1.) This court disagrees. The information that
Moavenzadeh accessed without authorization is clearly of
business value to Moavenzadeh, a gymnastics coach. No evidence
has been presented to suggest that at the time he accessed that
information he knew parents would contact him to start a new
gym. Perhaps a trial may establish different or new facts that
weaken any reasonable inference to be drawn from an unauthorized
access of business information followed by the establishment of
a competing business. However, the facts presently before this
court establish a strong inference that Moavenzadeh accessed
computer information without authorization because he did so for
an unauthorized purpose, that is, for the benefit of third
10 This court notes that North Carolina computer trespass
actions often feature employees leaving for competing
businesses. Spirax Sarco, 122 F. Supp. 3d 408; Glover Constr.
Co., Inc. v. Sequoia Servs., LLC, No. 18 CVS 1900, 2020 WL
3393065 (N.C. Super. Bus. Ct. June 18, 2020); Constr. Managers,
Inc. of Goldsboro v. Amory, No. 18 CVS 1359, 2019 WL 2167311
(N.C. Super. Bus. Ct. May 17, 2019).
parties—namely, himself in a personal capacity and a competing
gymnastics business, ultimately established as Unify.
In the aggregate, this circumstantial evidence leads this
court to the conclusion that when Moavenzadeh generated the
reports he was not doing so as part of his CHG responsibilities.
That he was not acting in furtherance of his CHG tasks and
duties when he generated the reports means he was “without
authority” as defined by the North Carolina computer trespass
statute. See N.C. Gen. Stat. § 14-458(a). Therefore, Plaintiff
has shown a likelihood of success in establishing the first
element of a North Carolina computer trespass claim.
2. Element 2: Intent to Engage in Prohibited Action
Implicating subsection (a)(5) of the North Carolina
computer trespass statute, Plaintiff argues that “Moavenzadeh
violated the Computer Trespass law by making an unauthorized
copy of CHG’s confidential and proprietary customer lists,
customer contact information, roll sheets, and billing records
of customers.” (Pl.’s Br. (Doc. 6) at 16 (emphasis added).)
Additionally, Plaintiff implicates subsection (a)(3) of the
statute by alleging that Moavenzadeh “altered or erased computer
data in order to hide” his generation of the reports. (Compl.
(Doc. 1) ¶ 81 (emphasis added).)
Defendants do not directly address Plaintiff’s computer
data alteration and erasure allegation. As to Plaintiff’s
unauthorized copy allegation, Defendants insist that there are
two reasons why any report Moavenzadeh may have—or may have
received—does not constitute an unauthorized copy. First,
Defendants argue that because making “copies of class rolls or
contact information [w]as part of his daily responsibilities,”
those copies cannot be considered unauthorized (Defs.’ TRO Br.
(Doc. 15) at 16.) And second, Defendants contend that the
reports cannot qualify as unauthorized copies because “in the
course of forming and operating Unify, [Moavenzadeh] has never
used any of the information that [he] may have downloaded,
intentionally or accidentally, in the course and scope of his
employment with CHG.” (Id.)
This court is not convinced by either of these arguments.
As to the first, the ICP log refutes Defendants’ claim that
generating these types of reports was a part of Moavenzadeh’s
“daily responsibilities.” As to the second, it is irrelevant for
purposes of a computer trespass claim whether Moavenzadeh ever
actually used the information contained in the reports. All that
matters, insofar as the claim’s second element, is that the
reports constitute “unauthorized cop[ies].” N.C. Gen. Stat.
§ 14-458(a)(5). This court concludes that Plaintiff has shown a
likelihood that they do. Furthermore, this court concludes that
Moavenzadeh’s utilization of the “Background Task Cancelled”
function—which has prevented Plaintiff from uncovering the
extent of information contained in the reports—likely qualifies
as an “alter[ation] or eras[ure]” of computer data. Id. § 14-
458(a)(3).
Therefore, Plaintiff has shown a likelihood of success in
establishing the second element of a North Carolina computer
trespass claim. Because Plaintiff has done so for both elements,
this court concludes that Plaintiff has shown a likelihood of
success on the merits of the claim and has thus made “a clear
showing that [it] is likely to succeed at trial,” Di Biase, 872
F.3d at 230 (citation omitted).
B. Risk of Irreparable Harm
In addition to a likelihood of success on the merits, a
plaintiff seeking a preliminary injunction must also make a
“clear showing that it is likely to be irreparably harmed absent
preliminary relief.” Real Truth About Obama, Inc. v. Fed.
Election Comm’n, 575 F.3d 342, 347 (4th Cir. 2009) (citation
omitted), vacated on other grounds 559 U.S. 1089. “[W]hen the
failure to grant preliminary relief creates the possibility of
permanent loss of customers to a competitor . . . the
irreparable injury prong is satisfied.” Multi–Channel TV Cable
Co. v. Charlottesville Quality Cable Operating Co., 22 F.3d 546,
552 (4th Cir. 1994) (citation omitted), abrogated on other
grounds, Winter, 555 U.S. 7. “Loss of proprietary or
confidential information may also constitute irreparable harm.”
Creative Snacks, Co., LLC v. Hello Delicious Brands LLC, No.
1:17CV50, 2018 WL 1626522, at *7 (M.D.N.C. Mar. 30, 2018)
(citing Zahodnick v. Int’l Bus. Machs. Corp., 135 F.3d 911, 915
(4th Cir. 1997)).
Plaintiff argues that Moavenzadeh’s “computer trespass
. . . [is] causing, and will continue to cause, irreparable
injury[.]” (Pl.’s Br. (Doc. 6) at 20.) Specifically, Plaintiff
maintains that “CHG has lost a substantial number of clients
already due to Moavenzadeh’s” misconduct and absent a
“preliminary injunction, CHG has no ability to prevent the
continued damage to its business.” (Id. at 21.)
Defendants advance two arguments why “the principal purpose
served by entering the requested [preliminary injunction]” would
not be to prevent irreparable harm but rather to “allay[] CHG’s
fears.” (Defs.’ Prelim. Inj. Br. (Doc. 28) at 18.). First,
Defendants argue that Plaintiff would suffer no irreparable harm
because Moavenzadeh “has averred that he has not, and will not,
use any of the . . . information that he appears to have
downloaded from iClass Pro[,] in the course and scope of his
employment with CHG[,] as part of the formation or operations of
Unify.” (Defs.’ TRO Br. (Doc. 15) at 18.)
This court finds this first argument wanting. While
Defendant Moavenzadeh does aver that he will not use any
information downloaded from ICP as part of his work with Unify,
(Moavenzadeh Aff. (Doc. 16-3) ¶ 30), this court has reasonable
doubts about the general credibility of Moavenzadeh’s averments.
In the less than two months since this case was initiated,
Moavenzadeh has already submitted to this court shifting and
contradictory sworn statements. See supra notes 8-9. These
inconsistences are significant; they concern matters within the
heartland of the case—namely, what Moavenzadeh did with the ICP
reports and what information was contained therein. See supra
notes 8—9. Such inconsistencies undermine this court’s
confidence in the credibility of Defendant Moavenzadeh’s
averments, including his averment that he will not use any of
Plaintiff’s proprietary ICP data. Therefore, this court rejects
Defendants’ argument that because Moavenzadeh has sworn he will
not use any of Plaintiff’s proprietary ICP data, an injunction
is unnecessary.
This court is also unconvinced by Defendants’ second
argument. That argument insists that Plaintiff would not suffer
irreparable harm in the absence of a preliminary injunction
because “numerous parents have made clear that they will not
allow their children to attend any gymnastics facility operated
by the Maness family, including CHG[.]” (Defs.’ TRO Br.
(Doc. 15) at 19.) Even assuming that to be true, the evidence
established for purposes of this motion shows that a current
competitor to Plaintiff had (and may still have) Plaintiff’s
confidential business information without Plaintiff’s
authorization. The failure to grant an injunction could very
well permit Defendants to wrongfully retain and use that
information without limitation while Defendants operate a
competing business. That circumstance creates an improper
competitive advantage for Defendants.
Relatedly, that some former clients may not return to
Plaintiff under its current ownership in no way forecloses “the
threat of a permanent loss of [other] customers[.]” Multi–
Channel TV Cable, 22 F.3d at 552 (citation omitted). For
example, current clients who have thus far remained with
Plaintiff could be lured to Unify through the use of information
contained in the ICP reports that Moavenzadeh generated. See
Philips Elecs. N. Am. Corp. v. Hope, 631 F. Supp. 2d 705, 711
(M.D.N.C.2009) (finding irreparable harm where the absence of an
injunction “could result in the further loss of customer
relationships” (emphasis added)). If that were to occur, the
harm suffered by Plaintiff would “be longstanding and near
impossible to remedy retroactively.” (TRO (Doc. 21) at 3). In
other words, the harm would be “irreparable” because neither
party contends that the parents who submitted affidavits,
(Docs. 16-4 — 16-37), constitute all of the individuals whose
information was accessed by Moavenzadeh without authorization.
Therefore, this court concludes that “the failure to grant
preliminary relief” to Plaintiff “creates the possibility of
permanent loss of customers to a competitor,” namely Unify.
Multi–Channel TV Cable, 22 F.3d at 552 (citation omitted). That
possibility constitutes a “clear showing” that Plaintiff “is
likely to be irreparably harmed absent” a preliminary
injunction, Real Truth About Obama, 575 F.3d at 347 (citation
omitted), and accordingly “the irreparable injury prong is
satisfied.” Multi–Channel TV Cable, 22 F.3d at 552 (citation
omitted).
C. Balance of Equities
The third preliminary injunction prong requires that this
court determine whether “the balance of equities tips in
[Plaintiff’s] favor.” Winter, 555 U.S. at 20 (citations
omitted). This requires assessment of “the harm Defendants will
suffer if Plaintiff’s motion is granted.” Int’l Lab. Mgmt. Corp.
v. Perez, No. 1:14CV231, 2014 WL 1668131, at *14 (M.D.N.C. Apr.
25, 2014).
Defendants argue that the “balance of equities tips heavily
in the favor of [Moavenzadeh] and Unify” because “any
discontinuation or interruption in Unify’s operations will
simply serve to undermine the establishment of an entity . . .
created by a coalition of parents who pledged both their time
and money to create a space where their children can engage in
the sport they love in a supporting, healthy, and safe
environment.” (Defs.’ TRO Br. (Doc. 15) at 19.) Defendants
express particular concern about the issuance of “an injunction
that curtails or in any way impacts [Moavenzadeh]’s ability to
contact and communicate with families with which he has a
longstanding personal relationship.” (Defs.’ Prelim. Inj. Br.
(Doc. 28) at 18.)
Plaintiff counters that “[n]othing in the terms of CHG’s
proposed injunction prevents either Movaenzadeh from opening a
gym or parents from joining the gym. It merely prevents
Defendants from misusing confidential information[.]”11 (Pl.’s
11 This court notes that at the preliminary injunction
hearing, Plaintiff’s Counsel began his remarks by emphasizing
that the requested injunction would not prevent Defendant
Moavenzadeh from opening a gym or coaching, nor would it prevent
parents from contacting him and enrolling their children at the
facility of their choosing.
Reply (Doc. 25) at 10—11.) Plaintiff stresses that “[t]o the
extent that [] prohibition interferes with Moavenzadeh’s
operation of a gym, that is a problem he created for himself, it
does not tip the balance of equities in his favor.” (Id. at 11.)
This court agrees with Plaintiff. The preliminary
injunction that Plaintiff has requested, and that this court
will issue, does not require Unify to cease its operations.
Thus, Defendants’ concerns about parents losing “a space where
their children can engage in the sport they love in a
supporting, healthy, and safe environment[,]” (Defs.’ TRO Br.
(Doc. 15) at 19; Defs.’ Prelim. Inj. Br. (Doc. 28) at 18), are
unfounded at this early stage in the case.
As to Defendants’ concern that the preliminary injunction
will impact Moavenzadeh’s “ability to contact and communicate
with families with which he has a longstanding personal
relationship,” (Defs.’ Prelim. Inj. Br. (Doc. 28) at 18), this
court likewise agrees with Plaintiff. The preliminary injunction
that this court will issue will not prevent Moavenzadeh from
having any contact with former CHG clients. It merely bars him
from using Plaintiff’s confidential business data, such as
client email lists, to make such contact. If Moavenzadeh’s sworn
statement is taken at its word, this prohibition will not impact
his communications with former CHG clients with whom he has
longstanding relationships because he avers that he has not and
will not use Plaintiff’s confidential business data.
(Moavenzadeh Aff. (Doc. 16-3) ¶ 30.) “Therefore, in accordance
with Defendant Moavenzadeh’s own sworn statement, the entry of
this [preliminary injunction] will be minimally invasive. It
will prevent Defendants from using information that they aver
they have no intention of using.” (TRO (Doc. 21) at 4.)
Accordingly, this court concludes that the balance of equities
tips decisively in Plaintiff’s favor.
D. Public Interest
The final prong that Plaintiff must establish is that “an
injunction is in the public interest.” Winter, 555 U.S. at 20
(citations omitted). Plaintiff emphasizes that the public
interest is served by “preventing unethical business behavior,”
which it argues “is exactly the circumstance that CHG is facing
here as a result of Moavenzadeh’s . . . computer trespass[.]”
(Pl.’s Br. (Doc. 6) at 22 (internal quotation marks omitted)
(quoting Philips Elecs. N. Am., 631 F. Supp. 2d at 724).)
Defendants disagree that the public interest would be
served by the issuance of a preliminary injunction, arguing that
“[t]here is no public interest served by using this Court’s
equitable power to save a business that has failed in the
marketplace, that has been alleged to place its customers in
danger, and that has been rejected by the clients it seeks to
serve.” (Defs.’ TRO Br. (Doc. 15) at 20.) Defendants also allege
that Plaintiff’s motive for initiating this case, and seeking a
preliminary injunction, is to retaliate against Moavenzadeh for
cooperating in a separate investigation into Plaintiff’s former
owner. (Defs.’ Prelim Inj. Br. (Doc. 28) at 19.) Consequently,
“[t]he public interest is not served by allowing CHG to co-opt
this Court’s equitable powers to advance CHG’s potentially
improper objective of” retaliation. (Id.)
This court rejects Defendants’ arguments. If Plaintiff has
truly been “rejected by the clients it seeks to serve” this
fairly narrow preliminary injunction will in no way “save” its
business. (Defs.’ TRO Br. (Doc. 15) at 20.) And as to
Plaintiff’s “potentially” retaliatory motive, this court finds
such allegations to be only speculation at this juncture. What
is not speculation, but rather firmly grounded in a persuasive
recognition by another court in this district, is that the
requested preliminary injunction will serve the public interest
by ensuring that a company can “develop[] its customer
relationships and . . . share [that] confidential and
proprietary information with its employees without fear it will
end up in the hands of a competitor.” Philips Elecs. N. Am., 631
F. Supp. 2d at 724 (citing Travenol Lab’ys, Inc. v. Turner, 30
N.C. App. 686, 691, 228 S.E.2d 478, 483 (1976)). Therefore, this
court concludes that the issuance of a preliminary injunction is
rooted in the public interest.
Lastly, Defendants maintain that if a preliminary
injunction is issued, then it should expressly state that it
does not apply to Moavenzadeh’s clients developed independently
of any alleged wrongful conduct. (Defs.’ Prelim Inj. Br.
(Doc. 28) at 19—20.) This court declines to include that
limitation in the preliminary injunction. While there are parent
affiants who contend they convinced Moavenzadeh to open a gym,
(see e.g., Doc. 16-16 ¶ 6; Doc. 16-33 ¶ 7), Moavenzadeh has not
persuaded this court that he did not use the information
contained in the ICP reports in some fashion. As a result, this
court declines to make an affirmative finding that suggests some
or all of Unify’s clientele was developed independent of
Plaintiff’s proprietary ICP data.
IV. CONCLUSION
For the foregoing reasons, this court concludes that
Plaintiff has shown a likelihood of success on the merits of its
North Carolina computer trespass claim, that Plaintiff will
suffer irreparable harm in the absence of a preliminary
injunction, and that the balance of equities and public interest
favor a preliminary injunction.
Pursuant to Federal Rule of Civil Procedure 65, IT IS
THEREFORE ORDERED that Plaintiff’s motion for a preliminary
injunction as requested in Plaintiff’s Motion for Temporary
Restraining Order and Preliminary Injunction with Request for
Oral Argument, (Doc. 5), is GRANTED IN PART as follows:
IT IS ORDERED that, Defendants, and all those acting in
concert or participation with them, are hereby PROHIBITED AND
ENJOINED from disclosing, using, or relying upon Plaintiff’s
trade secrets, proprietary or confidential information, including
customer lists, customer contact information, class or program
enrollment information, and billing information, which were
accessed by Defendant Moavenzadeh without authorization as
described herein; and
IT IS FURTHER ORDERED that, Defendants SHALL preserve all
data currently stored on computers over which they have
possession, custody, or control, including personal digital
assistants or mobile telephones, including any information stored
on backup media, which currently stores, or which has stored,
Plaintiff’s confidential information, proprietary information, or
trade secrets; and
IT IS FURTHER ORDERED that Defendants SHALL preserve all
emails on any computer under their control, including internet
mail servers, personal digital assistants, and other hardware,
that was at any time related to the solicitation or contact of
Plaintiff’s current or former clients; and
IT IS FURTHER ORDERED that Defendants are hereby PROHIBITED
AND ENJOINED from using the Instagram accounts previously named
“CHG.XCEL” and “CHG.MENS,” now named “UNIFY.GYM” and
“UNIFYGYM.MENS,” (see supra 7 13); and
IT IS FURTHER ORDERED that security in the amount of
$1,000.00, which has already been posted by Plaintiff, (Doc. 23),
shall serve as the bond contemplated by Federal Rule of Civil
Procedure 65(c); and
IT IS FURTHER ORDERED that Defendants SHALL each file with
this court, within three (3) days of this Memorandum Opinion and
Order, a statement under oath certifying their ongoing compliance
with this Order.
IT IS SO ORDERED.
This the 12th day of January, 2022.
LS Wi rn L. abun. □
“United States District Judge
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