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Foodcomm Int'l v. Barry - 328 F.3d 300 (7th Cir. 2003)

Rule:

To prevail on a motion for a preliminary injunction, a plaintiff must show that (1) its case has a likelihood of success on the merits; (2) no adequate remedy at law exists; and (3) it will suffer irreparable harm if the injunction is not granted. If these three conditions are met, the court must balance the harm to the plaintiff if the injunction is not issued against the harm to the defendant if it is issued. This balancing involves a sliding scale analysis: the greater the plaintiff's chances of success on the merits, the less strong a showing it must make that the balance of harm is in its favor. Absent a clear error of fact or law, an appellate court defers to the district court's weighing of the relevant factors.

Facts:

Plaintiff Foodcomm International (Foodcomm) was an importer of chilled Australian beef. Defendants Patrick Barry and Christopher Leacy were senior sales representatives at Foodcomm and oversaw its dealings with Empire Beef (Empire), one of Foodcomm's largest customers. In 2001, Empire approached Foodcomm with a business proposal to redistribute market fluctuation risk between the companies. Negotiations eventually broke down between the parties. Leacy stated that he would smooth things over with Empire. However, Leacy learned how badly damaged the Foodcomm-Empire relationship had become when Brubaker informed Leacy that Empire would not conduct further business with Foodcomm. Meanwhile, Barry and Leacy's relationship with Foodcomm also took a downward turn; the two then decided to seek alternative employment together. Barry and Leacy then formed a new company (Outback Imports) that would import Australian chilled beef for Empire. Upon learning about Outback and its ownership by Empire and operation by Barry and Leacy, Foodcomm filed a complaint in district court seeking a preliminary injunction enjoining Barry and Leacy's continued employment with Empire and Outback. Following a four-day hearing, the district court made a preliminary finding that Barry and Leacy had usurped Foodcomm's corporate opportunity with respect to the redistribution agreement and had breached fiduciary duties to Foodcomm when they approached Empire with a business plan and formed a company to compete against Foodcomm. The district court enjoined them from directly or indirectly providing services of any kind to or for Empire or Outback or any of their affiliates and agencies. Defendants Barry and Leacy sought an expedited appeal.

Issue:

Was the grant of injunction proper? 

Answer:

Yes.

Conclusion:

The court of appeals found that the efforts of Barry and Leacy to actively exploit their positions within the company for their own personal benefits, and to hinder the company's ability to conduct its business with Empire if proved at trial, constituted a breach of fiduciary duty. Because the company's irreparable harm was caused by and was maintained by the former employee's actions, an injunction was appropriate.

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