Management Registry, Inc. v. A.W. Companies, Inc.

United States Court of Appeals

For the Eighth Circuit

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No. 17-3675

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Management Registry, Inc.

Plaintiff - Appellant

v.

A.W. Companies, Inc.; Allan K. Brown; Wendy Brown

Defendants - Appellees

Eric Berg

Defendant

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No. 18-1154

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Management Registry, Inc.

Plaintiff - Appellant

v.

A.W. Companies, Inc.; Allan K. Brown; Wendy Brown

Defendants - Appellees

Eric Berg

Defendant

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Appeals from United States District Court

for the District of Minnesota - Minneapolis

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Submitted: November 14, 2018

Filed: April 11, 2019

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Before COLLOTON, SHEPHERD, and STRAS, Circuit Judges.

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STRAS, Circuit Judge.

This appeal arises out of a contentious business deal. Management Registry,

Inc., a large Kentucky staffing company, acquired a family of smaller staffing

companies operating under the brand “AllStaff.” When negotiations grew sour

between some of the participants, two—Allan and Wendy Brown—formed a rival

company. Management Registry sought a preliminary injunction and an injunction

pending appeal to prevent this newly formed company from competing against it.

The district court1 declined to grant either, and we affirm.

I.

In an effort to expand its business, Management Registry entered into

discussions to acquire AllStaff companies. Following months of negotiations,

Management Registry agreed to purchase the whole family of businesses, with their

president, Allan, staying on to run them. There was also an understanding that

Allan’s wife, Wendy, would separately negotiate to purchase one of the AllStaff

companies back from Management Registry.

1

The Honorable John R. Tunheim, Chief Judge, United States District Court

for the District of Minnesota.

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At first, the deal proceeded as planned. But the negotiations between

Management Registry and Wendy eventually fell apart, which led to Allan’s

departure and his decision to form a rival company with Wendy. The new company,

A.W. Companies, Inc., recruited Management Registry employees and allegedly

asked that they bring their computers, client files, and other proprietary information

with them.

Management Registry sued A.W., Allan, and Wendy in federal district court,

seeking, among other things, a preliminary injunction. Following briefing and a

hearing, the district court denied the motion due to both the presence of material

factual disputes and the absence of evidence showing how Management Registry

would be irreparably harmed without an injunction. Management Registry appeals

the decision not to grant injunctive relief, arguing that it is likely to prevail on the

merits and that, if it does not receive an injunction, it will continue to suffer

irreparable harm. 2 See 28 U.S.C. § 1292(a)(1) (granting appellate jurisdiction over

the denial of an injunction).

II.

When determining whether to grant a preliminary injunction, district courts

must weigh four factors: “(1) the threat of irreparable harm to the movant; (2) the

state of the balance between this harm and the injury that granting the injunction will

inflict on [the nonmovant]; (3) the probability that [the] movant will succeed on the

merits; and (4) the public interest.” Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d

109, 113 (8th Cir. 1981) (en banc). As we have explained, “[a] preliminary

2

Management Registry filed two notices of appeal, one right after the district

court denied the preliminary injunction and a second after the court refused to grant

an injunction pending appeal. These two appeals have been consolidated.

Management Registry treats the denial of a preliminary injunction and the denial of

an injunction pending appeal as raising the same underlying issues, and so will we.

Cf. Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Walker v. Lockhart, 678 F.2d 68,

70 (8th Cir. 1982) (per curiam).

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injunction is an extraordinary remedy,” and “[t]he party seeking injunctive relief

bears the burden of proving” that these factors weigh in its favor. Watkins Inc. v.

Lewis, 346 F.3d 841, 844 (8th Cir. 2003). We will reverse a decision to deny a

preliminary injunction only if the district court has abused its discretion, which

happens if the decision rests “on clearly erroneous factual findings or erroneous legal

conclusions.” Home Instead, Inc. v. Florance, 721 F.3d 494, 497 (8th Cir. 2013)

(citation omitted).

The district court determined that Management Registry had not met its

burden of showing irreparable harm. Gen. Motors Corp. v. Harry Brown’s, LLC,

563 F.3d 312, 318–19 (8th Cir. 2009) (clarifying that the “burden [is] on [the

movant] to establish the threat of irreparable injury”). To receive a preliminary

injunction, Management Registry had to establish that it had “no adequate remedy

at law” because “its injuries [could not] be fully compensated through an award of

damages.” Id. at 319. It had a potentially viable theory—it was continuing to lose

goodwill with its employees and customers—but not enough evidence or analysis to

support it. See Iowa Utils. Bd. v. FCC, 109 F.3d 418, 426 (8th Cir. 1996) (explaining

that a loss of goodwill can be an irreparable harm).

In fact, Management Registry presented evidence suggesting the opposite:

that an award of money damages would fully compensate it because its losses are

quantifiable. For example, Management Registry claimed that A.W.’s actions led

to the loss of three major accounts, which cut its revenues by $65,000 per week. To

be sure, Management Registry claims to have lost other things too, such as customer

files and other intellectual property. But beyond just asking the district court to trust

its assessment that these harms are unquantifiable, it never persuasively explained

why money damages could not compensate it for these losses as well. With the

burden on Management Registry, it was not “error for the district court to require

[more] evidence” than just a discussion of “general business principles” and a series

of assurances that its business would be irreparably harmed if it did not receive an

injunction. Gen. Motors, 563 F.3d at 319–20.

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Although the failure to show irreparable harm was a sufficient reason to deny

a preliminary injunction, see Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418

(8th Cir. 1987), Management Registry also failed to establish that it was likely to

succeed on the merits, see Dataphase, 640 F.2d at 113 (suggesting that if a movant

cannot make a strong showing of harm, it “faces a heavy burden” of showing it will

ultimately prevail). It alleged ten claims in its complaint, running the gamut from

equitable to contract- and tort-based claims. Yet rather than explaining why it was

likely to prevail on the merits of those claims, it devoted most of its memorandum

accompanying its preliminary-injunction motion to chronicling the Browns’ alleged

misdeeds, regardless of their relevance to the motion. It was not up to the district

court to try to then connect the dots between Management Registry’s allegations and

its legal theories. Cf. Rodgers v. City of Des Moines, 435 F.3d 904, 908 (8th Cir.

2006) (noting that a court need not “mine a summary judgment record searching for

nuggets of factual disputes to gild a party’s arguments”).

III.

Accordingly, we affirm the denial of preliminary injunctive relief to

Management Registry.

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