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Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Callahan - 265 F. Supp. 2d 440 (D. Vt. 2003)

Rule:

To obtain preliminary injunctive relief, a plaintiff must show: (a) that it will suffer irreparable harm in the absence of an injunction and (b) either (i) a likelihood of success on the merits or (ii) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor.

Facts:

A financial analyst resigned from the Burlington office of Merrill Lynch, Pierce, Fenner & Smith Inc. Merrill Lynch sought a temporary restraining order and preliminary injunctive relief prohibiting him from soliciting their former clients or using or disclosing the list of client names and information. Merrill Lynch alleged that after resigning, the defendant retained a list of client names and information and used that list to solicit their former clients in violation of certain contracts between the parties and the Vermont Uniform Trade Secrets Act. Merrill Lynch focused on two potential sources of irreparable harm: the loss of clients on the list due to solicitation by the employees and the loss of the trust and confidence of clients whose financial and other information it had pledged to keep confidential. 

Issue:

Should the court grant temporary restraining order and preliminary injunctive relief?

Answer:

No

Conclusion:

The court found that the employer had not met its burden of demonstrating that it would have suffered future irreparable harm on these bases. First, it was undisputed that the employees had already taken the client list and contacted virtually all of their clients twice. In essence, the damage was already done. Second, the court was not convinced that the financial losses resulting from any client account transfers would have been immeasurable. To the extent that the employer argued more broadly that it faced irreparable damage to its reputation and good will due to lost customer trust, it provided little support for the claim. Even if the employer had demonstrated irreparable harm, given the employer's policy of encouraging newly hired financial analysts to solicit their former clients, denial of the motion was appropriate under the doctrine of unclean hands.

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