IP Law Daily, TRADE SECRETS—E.D. Mo.: Apparel design company denied TRO against competitor, (May 15, 2024)

By Kevin M. Finson

A TRO was denied because there was no showing that the plaintiff’s trade secrets were actually misappropriated, but only that they were possessed by former employees.

An apparel design company failed to establish the elements of a temporary restraining order against its former employees and a competitor, the U.S. District Court in St. Louis has held. Any harm alleged had already occurred, so there was no need for preliminary injunctive relief (Star Design Group, Inc. v. Sun Coast Merchandise Corp. , No. 4:24-cv-00620-HEA (E.D. Mo. May 14, 2024)).

Stars Group, Inc. (Stars) is an apparel design and manufacturing company which developed apparel programs for brands and businesses and provided access for its clients to its relationships with manufacturers in 14 countries. Sun Coast Merchandise Corp. (Sun Coast) is a direct competitor of Stars. Several senior employees of Stars left Stars to begin working for Sun Coast. Around the same time, several large clients of Stars, including Staples, became clients of Sun Coast instead. Stars additionally alleged that one of its former employees had retained a company laptop containing confidential information.

Stars brought suit for misappropriation of trade secrets against Sun Coast and its former employees and sought a temporary restraining order. After receiving briefing and declarations from both parties, the court applied the traditional four factor test.

Likelihood of success on the merits. The court found that the defendants clearly had access to Stars’s confidential information, but there was no showing that they had misappropriated it. The court was faced with competing declarations by Stars asserting that a company laptop had been taken and by the former employee asserting that the laptop had been returned to factory settings and no longer contained any information, confidential or otherwise. The court was unable to say that one declaration was more compelling than the other at this stage.

Irreparable harm. The court determined there was no showing that irreparable harm was likely or imminent. It was undisputed that the hoodies and t-shirts allegedly being made with Stars’ trade secrets were no longer being produced and the loss of the customer relationships had already occurred, it was not ongoing, and so would best be remedied by monetary damages if appropriate.

Balance of harms. The court held that a restraining order would severely prejudice Sun Coast because it would cause it to be in breach of its contractual obligations with third parties, while Stars would suffer no harm from a lack of a restraining order because the alleged harm had already occurred.

Public interest. While noting that the public interest was in favor of protecting trade secrets, the court held that in this case there was not a sufficient showing of misappropriation to support preliminary relief.

The court denied Stars’s motion for a temporary restraining order.

The Case is No. 4:24-cv-00620-HEA.

Judge: Autrey, H.

Attorneys: Amy L. Fehr (Capes Sokol PC) for Stars Design Group, Inc. Alexander James Lindley (McCarthy Leonard LC) for Sun Coast Merchandise Corp. d/b/a Sunscope.

Companies: Stars Design Group, Inc.; Sun Coast Merchandise Corp. d/b/a Sunscope

Cases: TradeSecrets MissouriNews