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Transtar Industries, LLC v. Lester

United States District Court, N.D. Ohio, Western Division

July 31, 2019

Transtar Industries, LLC, Plaintiff,
v.
Chadd Lester, et al., Defendants.

          MEMORANDUM OF OPINION AND ORDER

          PAMELA A. BARKER, U.S. DISTRICT JUDGE

         Currently pending is Plaintiff Transtar Industries, LLC.'s Motion for Temporary Restraining Order and Scheduling of a Preliminary Injunction Hearing. (Doc. No. 30.) Defendants Chadd Lester, Cary Young, Alven Rivera, Seal Aftermarket Products, LLC (“SAP”), and TranzDepot, LLC filed a Brief in Opposition on June 14, 2019, to which Plaintiff replied on June 19, 2019. (Doc. Nos. 11, 18.) A hearing on Plaintiff's Motion was conducted before the undersigned on June 23, 2019. (Doc. No. 32.) For the foregoing reasons, Plaintiff's Motion for TRO and Preliminary Injunction (Doc. No. 30) is DENIED.

         I. Procedural History

         On May 23, 2019, Plaintiff filed a Complaint in the Cuyahoga County Court of Common Pleas against Defendants asserting state law claims for misappropriation of trade secrets, tortious interference with economic and/or business relations, breach of contract, and injunctive relief. (Doc. No. 1-6.) Several days later, on May 28, 2019, Plaintiff filed Motions for Temporary Restraining Order (Doc. No. 30) and Expedited Discovery (Doc. No. 31.)

         Defendants removed the case to this Court on May 29, 2019 on the basis of diversity jurisdiction. (Doc. No. 1.) Plaintiff promptly filed a Motion to Remand, which was denied on June 7, 2019. (Doc. Nos. 3, 7.) Shortly thereafter, Plaintiff filed a second Motion for Expedited Discovery. (Doc No. 9.)

         Defendants filed an Answer and Counterclaims on June 14, 2019.[1] (Doc. No. 17.) Plaintiff filed an Answer to Defendants' Counterclaims on June 17, 2019. (Doc. No. 28.)

         Meanwhile, the parties submitted briefing regarding Plaintiff's Motions for TRO and Expedited Discovery. Defendants filed a Brief in Opposition to Plaintiff's Motion for TRO on June 14, 2019, to which Plaintiff replied on June 19, 2019. (Doc. Nos. 11, 18.) Both parties submitted numerous declarations in support of their briefing, including the Declarations of Defendants Chadd Lester, Cary Young, and Alven Rivera, and Plaintiff's Vice-President of Sales and Marketing Tom DeMille. (Doc. Nos. 8-1, 12, 13, 14, 15, 16, 18-1.)

         On June 19 and 20, 2019, Defendants filed Motions to Strike the Declarations of Mr. DeMille. (Doc. Nos. 20, 22.) The Court ordered Defendants to file a Sur-Reply addressing Mr. DeMille's Declarations and denied Defendants' Motions to Strike as moot. See Non-Document Order dated June 24, 2019. Defendants thereafter filed a Sur-Reply on June 26, 2019, as well as additional Declarations of Defendants Lester, Rivera, and Young. (Doc. Nos. 24, 25, 26, 27.)

         On June 28, 2019, this matter was reassigned to the undersigned pursuant to General Order 2019-13. The Court subsequently held a status conference with counsel, during which it scheduled a Preliminary Injunction Hearing and denied Plaintiff's Motion for Expedited Discovery (Doc. No. 9) on the grounds Plaintiff had failed to demonstrate good cause. (Doc. No. 29.)

         A Preliminary Injunction Hearing was held on July 23, 2019, at which the following witnesses testified: (1) Plaintiff's Vice President of Sales and Marketing, Tom DeMille; (2) Defendant Lester; (3) Defendant Rivera; (4) Defendant Young; and (5) Plaintiff's Vice-President, North Region, Jason Ganim. (Doc. No. 32.) Numerous exhibits were offered into evidence. (Id.) The only objection raised was to the admission of Plaintiff's Exhibit 3, which consisted of a NonCompetition, Non-Disclosure, Non-Solicitation, and Confidentiality Agreement signed by Defendant Lester and dated March 31, 2012 (hereinafter “March 2012 Lester Agreement.”). Defendants objected to this exhibit on the basis that the March 2012 Lester Agreement was allegedly superseded by a subsequent Non-Competition, Non-Disclosure, Non-Solicitation, and Confidentiality Agreement between Plaintiff and Defendant Lester. Mr. Lester testified at the hearing that he remembered signing this alleged subsequent Agreement but did not have a signed copy in his possession. Plaintiff indicated it was not aware of any signed employment agreement between itself and Lester other than the March 2012 Lester Agreement.

         At the conclusion of the hearing, the Court ordered Plaintiff to conduct a diligent search of its records for any and all Non-Compete Agreements between Lester and Transtar dated subsequent to the March 2012 Lester Agreement. (Doc. No. 33.) The Court also ordered Defendant Lester to consult with his former and current counsel to determine whether a signed copy of the alleged Non-Compete referenced in his hearing testimony could be located. (Id.) The parties were ordered to submit status reports regarding these issues by no later than July 30, 2019. (Id.)

         The parties timely filed their Status Reports. (Doc. Nos. 34, 35.) Neither Plaintiff nor Defendant Lester were able to produce a signed copy of any Non-Compete Agreement between the two dated subsequent to the March 2012 Lester Agreement. (Id.) Defendant Lester, however, provided correspondence that he argues demonstrates that he did, in fact, sign a non-competition agreement with Plaintiff in May 2012. (Doc. No. 34-1.)

         II. Summary of Facts

          Plaintiff Transtar is a distributor and kit packager of transmission parts and components, selling primarily to transmission repair and specialty shops. In 2012, Plaintiff purchased the assets and lease for a new Detroit area branch located at 654 E. 10 Mile Road, Hazel Park, Michigan (hereinafter “the Hazel Park location”). As part of this asset purchase, Defendant Chadd Lester was hired by Plaintiff as a Regional Manager.

         On March 31, 2012, Lester entered into a Non-Competition, Non-Disclosure, Non-Solicitation and Confidentiality Agreement with Plaintiff. Among other things, the March 2012 Agreement required Lester to keep certain information confidential “during and after [his] employment by the Employer until such time as such Confidential Information has become public knowledge, other than as a result of [his] breach of this Agreement or breach by those acting in concert with [him] or on [his] behalf.” (Doc. No. 1-7 at PageID# 156-157.) In addition, this Agreement contained the following non-competition and non-solicitation provision:

Employee agrees that during the term of Employee's employment with Transtar and for a period of twelve (12) months to run consecutively, beginning on the last day of Employee's employment with Transtar, for any reason or no reason and whether employment is terminated at the option of Employee of Transtar (the “Noncompete Period”), Employee shall not directly or indirectly, participate or engage in any activity in which the Employee contributes Employee's knowledge, directly or indirectly, in whole or in part . . . to an entity engaged in any business or enterprise identical to or substantially the same as the Business, and which is located within 100 miles of the Transtar Location from which Employee's employment was based or within Employee's assigned territory or geographic region, whichever is greater (“Prohibited Activity”). Prohibited Activity also includes activity that may require or inevitably require Employee's disclosure of trade secrets, proprietary information or Confidential Information.

(Id. at PageID# 157)[2]

         While the parties dispute the circumstances surrounding the end of Lester's employment with Transtar, [3] it is undisputed that he ceased working for Transtar in August 2015. In January 2016, Lester was hired by Defendant SAP. He subsequently acquired another transmission parts company, A&Reds, with a business partner, Troy Eakins.

         In late 2018, Transtar made the business decision to move its Detroit Branch out of the Hazel Park location to a different facility several miles away. According to the landlord of the Hazel Park location, Howard Tenebaum, he was notified by Transtar on October 22, 2018 that it was planning to relocate its branch and would not be exercising its option to renew its lease on the Hazel Park location. Mr. Tenebaum wanted to find a replacement tenant as soon as possible and reached out to Defendant Lester to inquire if his employer was interested in leasing the property.

         In January 2019, Lester and Mr. Eakins decided to expand A&Reds into the Michigan and Ohio markets and began lease negotiations with Mr. Tenebaum. On March 27, 2019, Lester and Eakins formed Defendant TranzDepot as a subsidiary of A&Reds. Shortly thereafter, TranzDepot entered into an agreement to lease the Hazel Park location.

         Around that same time period, several Transtar employees were offered employment with TranzDepot, including Defendants Rivera and Young.[4] Defendants Rivera and Young had worked as salesmen for Transtar from 1994 and 1995 (respectively) until leaving to join TranzDepot in May 2019. Both had been based out of Transtar's Chicago branch.

         It is undisputed that neither Rivera or Young entered into non-competition agreements with Transtar. They did, however, enter into Confidentiality and Trade Secret Agreements with ...


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