Stop There: Eighth Circuit Decides Whether an Injunction Should Prevent a Company from Hiring a Competitor’s Employees
When a plaintiff starts a lawsuit, they may want the defendant to stop doing something during the trial. In some cases, a court may grant the plaintiff’s wish in the form of a preliminary injunction. In the case of Management Registry, Inc. v. AW Companies, Inc., et al., the plaintiff sought to prevent the defendant from actively hiring the plaintiff’s employees.
The Facts
In an effort to expand its business, a company called Management Registry negotiated the acquisition of various businesses owned by a company called AllStaff. Ultimately, Management Registry agreed to buy all of the companies owned by AllStaff. AllStaff President Allan Brown further agreed to continue running the AllStaff business. Allan’s wife, Wendy, separately agreed to buy one of the AllStaff companies from the Management Registry.
Negotiations between Management Registry and Wendy eventually soured, causing Allan to leave Management Registry and form a rival company with Wendy. The business formed by Allan and Wendy, AW Companies (“AW”), began hiring Management Registry employees. In addition, it was alleged that AW asked newly hired employees to bring computers, client files, and other proprietary information from Management Registry. Preliminary Injunction: A Powerful Tool For Your Lawsuit
The Lawsuit
Management Registry sued AW in federal court, seeking, among other things, a preliminary injunction barring AW from hiring Management Registry employees. The federal district court denied the injunction, holding that Management Registry had failed to show that it would be “irretrievably impaired” without the injunction. Management Registry then appealed to the United States Court of Appeals for the Eighth Circuit, claiming both that it was likely to prevail in its lawsuit against AW and that it would suffer irreparable harm if a preliminary injunction was not granted.
The Appeal
On appeal, the Eighth Circuit recited the four factors that courts must consider in determining whether to grant a preliminary injunction: “(1) the threat of irreparable harm to the plaintiff; (2) the balance between this damage and the damage that granting the injunction will inflict on the [non-claimant]; (3) the likelihood that [the] claimant will succeed on the merits; and (4) the public interest.” Focusing on the first factor, the Eighth Circuit held that to receive a preliminary injunction, Management Registry had to show “irreparable harm,” that is, “that it had ‘no adequate recourse at law’ because ‘
Confirming the district court, the Eighth Circuit held that the evidence presented by Management Registry did not actually prove irreparable damage because monetary damages would fully compensate you for any loss caused by AW because such damages were quantifiable. Further, as to the third factor of the injunction, the Eighth Circuit stated that rather than provide evidence to show that it would prevail on the merits, Management Registry “devoted most of its memorandum accompanying its petition for an injunction to recount the alleged misdeeds of the Browns[.]”.
The Lesson
A preliminary injunction can be a powerful tool for maintaining the status quo in the early stages of a case. The party requesting the preliminary injunction bears the burden of satisfying the four factors of the Eighth Circuit. As it was more important in the case Management Registry, Inc. v. AW Companies, Inc., et al., for a preliminary injunction to be granted, the first factor requires the plaintiff to show that the award of money at the end of the case will not adequately compensate for the losses caused by the defendant. This is not always an easy task because, as this case shows, if the losses are quantifiable, a court could consider that the money will sufficiently compensate them and, consequently, deny the request for injunctive relief.