DTC ENERGY GROUP, INC., a Colorado corporation, Plaintiff - Appellant,
ADAM HIRSCHFELD; JOSEPH GALBAN; ALLY CONSULTING, LLC, f/k/a Wyodak Staffing, LLC, a Wyoming limited liability company, Defendants - Appellees.
on the briefs:[*]
from the United States District Court for the District of
Colorado (D.C. No. 1:17-CV-01718-PAB-KLM)
Charles W. Weese, John H. Bernetich, and Devin C. Daines,
Lewis, Bess, Williams & Weese P.C., Denver, Colorado, on
the briefs for Appellant.
Forrest Morgan, III, Morgan & Associates, LLC, Denver,
Colorado, on the brief for Appellee Ally Consulting, LLC.
Brian Seserman, Sesserman Law LLC, Denver, Colorado, on the
brief for Appellees Adam Hirschfeld and Joseph Galban.
BRISCOE, MURPHY, and McHUGH, Circuit Judges.
BRISCOE, CIRCUIT JUDGE.
an appeal from the denial of a preliminary injunction in a
business tort case. Plaintiff-Appellant DTC Energy Group,
Inc., has sued two of its former employees-Adam Hirschfeld
and Joseph Galban-as well as one of its industry
competitors-Ally Consulting, LLC-for using DTC's trade
secrets to divert business from DTC to Ally. DTC moved for a
preliminary injunction based on its claims for breach of
contract, breach of the duty of loyalty, misappropriation of
trade secrets, and unfair competition. The district court
denied the motion. It found that DTC had shown a probability
of irreparable harm from Hirschfeld's ongoing
solicitation of DTC clients, but that DTC could not show the
ongoing solicitation violated Hirschfeld's employment
agreement. Exercising jurisdiction pursuant to 28 U.S.C.
§ 1292(a)(1), we AFFIRM.
a staffing company. App. Vol. I at 178. It serves as the
middleman between oil and gas companies who are looking for
workers and workers who are looking for jobs. Id.
When DTC places a worker (referred to as a consultant) in a
job at an oil and gas company (referred to as a customer),
the customer pays DTC a fee and DTC gives a portion of that
fee to the consultant as compensation for his labor.
Id. at 179. For the majority of time relevant to
this appeal, DTC was owned by Bob Sylar and Luke Clausen.
Id. at 178.
primary tool for matching consultants and customers is a
collection of consultant resumes that DTC assembled and
regularly updates. Id. at 182, 184. While the
resumes themselves are supplied by consultants, DTC edits the
resumes before sending them to customers and maintains the
collection of resumes in a password-protected, searchable
Dropbox folder, so it is easy to find qualified candidates
when a customer needs a consultant. Id. at 184.
2013, DTC hired Hirschfeld as a sales associate. Id.
at 179. Hirschfeld's job was to develop relationships
with consultants and customers to win business for DTC.
Id. His role at DTC grew over time and he was
eventually named the business development manager.
Id. Aside from Hirschfeld, DTC only employed a
handful of people. Galban, the other individual defendant in
this case, was DTC's accountant. Id. at 181.
signed an employment agreement with DTC when he became its
business development manager. App. Vol. I at 179; see
also App. Vol. III at 510-20. He was the only employee
who signed an employment agreement with restrictive
covenants. App. Vol. II at 246-47. The agreement required him
to "devote substantially all of his" professional
time to DTC and act in DTC's "best interests."
App. Vol. III at 510. The agreement also included
confidentiality, non-solicitation, and non-interference
provisions. Id. at 513-15. The confidentiality
provision prohibits Hirschfeld from using DTC's
confidential information-including trade secrets, customer
lists, price lists, and resumes-for his own benefit or the
benefit of another company. Id. at 513. The
non-solicitation and non-interference provisions prohibited
Hirschfeld from encouraging DTC's current customers to
take their business to a competitor and from recruiting
DTC's employees to work for a competitor. Id. at
514. The non-solicitation and noninterference provisions
applied while Hirschfeld was employed by DTC and for one year
after the end of his employment. Id. The only
exception was that neither provision applied if he resigned
because of "a change in the current equity ownership
of" DTC (the "change in ownership" clause).
January 2016, DTC and Ally (another oil and gas staffing company)
began to negotiate an agreement. At that time, both companies
provided similar staffing services, but Ally's business
was smaller and limited to directional drillers. App. Vol. II
at 223, 273, 391, 433. In comparison, DTC placed consultants
at many kinds of oil and gas companies. App. Vol. I at
178-79. Ultimately, the agreement established that DTC would
provide "administrative services, such as payroll and
benefits," to Ally for a fee. App. Vol. I at 181-82.
Despite the limited scope of the agreement between Ally and
DTC, Hirschfeld began using DTC's resources (its
employees and its collection of consultant resumes) to win
business for Ally. Id. at 182. At the same time that
DTC and Ally executed the service agreement,
"Hirschfeld's father, Craig Hirschfeld, became a 35%
owner of Ally." Id. Hirschfeld hid his work for
Ally, and his father's ownership interest in Ally, from
DTC's owners. See, e.g., App. Vol. II at 288.
terminated the service agreement with DTC in July 2016, but
Hirschfeld continued to work with other DTC employees on
Ally's behalf. App. Vol. I at 183. That same month,
DTC's owners learned about some of the connections
between their employees and Ally. Id. at 182-83;
App. Vol. III at 541-45. When asked about his work for Ally,
Hirschfeld offered a technically true, but misleading,
answer-that he had "no ownership of any sort in"
Ally, that he "receive[s] no direct compensation
from" Ally, and that he is "compensated by DTC
only." App. Vol. III at 544. Hirschfeld did not disclose
that his father was an owner of Ally. App. Vol. II at 316-17.
DTC's owners were upset about the relationship between
DTC's employees and Ally, but took no action against any
DTC employee. App. Vol. I at 182-83. Hirschfeld's work
for Ally continued.
April 2017, Clausen purchased Sylar's interest in DTC and
became the sole owner of the business. App. Vol. II at 237,
436-37. Then, on May 3, 2017, Hirschfeld resigned from DTC,
effective at the end of the month. App. Vol. I at 184. In his
resignation letter, Hirschfeld cited "the recent change
in the equity ownership of DTC" as his reason for
leaving. App. Vol. III at 558. When Hirschfeld left DTC, he
took a flash drive containing "thousands of . . .
resumes" and a laptop containing "all of the files
stored in DTC's Dropbox" folders. App. Vol. I at
184. Hirschfeld's laptop remained signed-in to DTC's
Dropbox account, so Hirschfeld could access DTC's online
folders after leaving DTC. Id. at 185. Hirschfeld
lost access to his DTC email when he resigned. Id.
after leaving DTC, Hirschfeld began working at Ally as its
director of business development. App. Vol. II at 327.
Hirschfeld "has continued to solicit DTC's customers
since joining Ally." App. Vol. I at 185. In July or
August 2017, Defendants gave Hirschfeld's laptop and the
DTC flash drive to a third-party forensics company as part of
a litigation hold for this case. Id. Hirschfeld no
longer has access to DTC's Dropbox account. Id.
September 2017, DTC filed its first amended complaint. DTC
alleges that Hirschfeld and Galban began to improperly divert
business from DTC to Ally beginning in early 2016, and that
Defendants continue to profit at DTC's expense.
See App. Vol. I at 9-42. DTC then moved for a
preliminary injunction based on four of its claims:
Hirschfeld's breach of his employment agreement;
Hirschfeld's and Galban's breaches of their duties of
loyalty to DTC; all Defendants' misappropriation of trade
secrets in violation of the federal Defend Trade Secrets Act
(DTSA), 18 U.S.C. § 1836, and the Colorado Uniform Trade
Secrets Act (CUTSA), Colo. Rev. Stat. § 7-74-103; and
Ally's unfair competition with DTC. App. Vol. I at
sought a broad injunction that, in DTC's attorney's
own words, would "enjoin [Ally] from any business
operations until a trial." App. Vol. II at 480. The
injunction would have imposed the following restrictions
through the conclusion of this case: Hirschfeld and Galban
would be prohibited from working at Ally; Ally would only be
allowed to work with directional drillers; no Defendant could
work with any customer or consultant with whom Hirschfeld or
Galban worked while at DTC; and all Defendants would be
required to stop using confidential information from DTC.
App. Vol. I at 73-74.
district court held an evidentiary hearing in January 2018,
see App. Vol. II at 203, and denied the motion in
March 2018, App. Vol. I at 200. DTC timely filed an
interlocutory appeal. Id. at 201-02.
end of March 2018, DTC moved to expedite its appeal. We
denied the motion "without prejudice to renewal upon
completion of briefing." DTC has not renewed its motion
for expedited consideration, but ...