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CPI Card Group-Colorado, Inc. v. Lehouck

United States District Court, D. Massachusetts

October 8, 2014



NATHANIEL M. GORTON, District Judge.

This case arises out of an alleged a breach of an employment confidentiality agreement. Plaintiff CPI Card Group - Colorado, Inc. ("CPI") is a plastic payment card (e.g. credit card) production company that also provides related services to its customers. Defendant Michelle Lehouck ("Lehouck") is a former Senior Manager at CPI who was employed at the company from November, 2007 until May, 2014.

Pending before the Court is the plaintiff's motion for a preliminary injunction to preclude Lehouck from continuing to use CPI's confidential and proprietary business information in violation of her Confidentiality Agreement ("Agreement") with CPI. For the reasons that follow, plaintiff's motion will be granted, though the requested scope of the preliminary injunction has been modified.

III. Background

Plaintiff CPI is a global leader in the plastic payment card (e.g. credit card) production industry. Among other things, it manufactures EMV-enabled payment cards, which are cards with embedded computer chips that provide a higher level of security than magnetic-stripe payment cards and are customizable to specific client needs.[1] The major credit card brands have announced that they will shift liability for counterfeit fraud onto credit card issuers and merchants who do not adopt EMV-enabled systems starting on October 1, 2015. The EMV-enabled card migration has thus been a lucrative business opportunity for CPI. CPI has been required by its current and prospective customers to execute non-disclosure agreements with respect to migration proposals and other work performed for them.

From July, 2013 until her resignation from the company, Lehouck worked as a Senior Manager for EMV Technologies in CPI's Global Strategic Marketing Team. Throughout her employment at CPI, Lehouck provided expert support to the EMV sales teams and was the primary customer contact. She had access to confidential information related to customers' EMV migration plans, including 1) the identities and contact information of key decision-makers, 2) business, marketing and information technology plans and 3) project and proposal specifications. At CPI, she also had access to the company's 1) marketing and pricing of products and services, 2) business plans, 3) customers and prospective customers, 4) proposals to customers and prospective customers and 5) the terms of agreements with customers.

Following her resignation from CPI, Lehouck became the U.S. EMV Product Director for Bell Identification B.V. ("Bell ID"). Bell ID is a software company providing mobile payment solutions. It supports many financial institutions with respect to their migration from magnetic strips to EMV chip technology. Lehouck's primary role at Bell ID is to develop business for the company's EMV data preparation/lifecycle management software.

A. Lehouck's Confidentiality Agreement with CPI

At the outset of her employment at CPI, Lehouck signed the Agreement at issue in this case. Section 1, titled "Confidentiality - Trade Secrets, " provided that she shall not at any time disclose or use CPI's confidential information and trade secrets, including the identities and contact information of CPI's customers and potential customers, confidential information on CPI's products and services and confidential CPI marketing and pricing information.

Section 3 of the Agreement, titled "Unfair Competition, " provided that for a period of one year following the termination of employment, Lehouck will not directly or indirectly divert, attempt to divert, solicit, or attempt to solicit any of CPI's customers, "including but not limited to those [with] whom [s]he became acquainted while engaged as an Employee...." In the event of a breach, the Agreement provides for injunctive relief in addition to any other remedy.

B. Alleged breach of Agreement

CPI alleges that Lehouck violated the Agreement after she began working for Bell ID. Plaintiff contends that Lehouck used confidential CPI information, including customer contact information, to divert corporate opportunities from CPI and to sell Bell ID's EMV-related products and services to CPI's customers and prospective customers. Specifically, CPI alleges that Lehouck 1) reached out to a CPI employee to obtain contact information for one of its customers, 2) contacted three of CPI's customers and drew on her knowledge of CPI's confidential information in an attempt to sell Bell ID's products to them and 3) continuously solicited one of CPI's prospective customers and used her knowledge of CPI's confidential information to sell Bell ID's products, which directly caused CPI to lose that potential business.

When CPI's outside counsel sent Lehouck a cease-and-desist letter asking her to confirm her intention to abide by the confidentiality and non-solicitation provisions of the Agreement, Bell ID's outside counsel responded by stating that the Agreement was void and unenforceable under Colorado law. Furthermore, counsel asserted that the contact information of the three CPI customers was not protected by trade secret because the identity of each had been publicly disclosed.

C. Choice of law

Both parties agree that the Agreement should be interpreted under Colorado law, in accordance with the choice of law provision in the Agreement. There are no public policy reasons counseling against the application of Colorado law to the Agreement.

D. Procedural History

Plaintiff CPI filed the instant lawsuit on August 22, 2014. It moved for a preliminary injunction on the same day. The Court heard argument on the plaintiff's motion on September 11, 2014. After hearing argument by each party, the Court indicated that it was inclined to enter a preliminary injunction to prevent defendant from disclosing CPI's trades secrets and confidential information. It urged the parties to agree upon a limited injunction and to submit a joint proposed order by September 19, 2014. The parties have been unable to do so.

IV. Plaintiff's Motion for a Preliminary Injunction

A. Legal Standard

In order to obtain a preliminary injunction, the moving party must establish

(1) a substantial likelihood of success on the merits,
(2) a significant risk of irreparable harm if the injunction is withheld, (3) a favorable balance of hardships and (4) a fit (or lack of friction) between ...

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