Asalesperson quits, goes to a competing firm with your customer list and
begins soliciting your customers. A competitor falsely advertises that your
product causes injury to children. Must
you sit back and wait months for your day
in court while your company suffers
irreparable harm? The answer to that
question is a resounding “no,” according
to Spencer Skeen, litigation partner for
Procopio, Cory, Hargreaves & Savitch
LLP. Skeen says that under these types of
circumstances, executives should contact
their attorneys about the potential for
emergency injunctive relief.
“Injunctive relief is sometimes the only
way to prevent irreparable injury to your
business,” Skeen says. “It’s an effective
option when a claim for monetary damages just won’t be good enough and when
you need to stop someone from infringing
on your rights pending trial.”
Smart Business spoke with Skeen about
when CEOs should seek injunctive relief.
What is preliminary injunctive relief, and
why is it beneficial?
Preliminary injunctive relief is frequently
referred to as extraordinary relief because
it is sudden and powerful. Traditionally, a
preliminary injunction is a court order that
preserves the status quo and requires one
of the parties to refrain from doing certain
acts pending trial. An injunction is
extremely useful when there’s really no
way to calculate or recover the full value
of the damages suffered by your business
at trial. Also, preliminary injunctions often
save companies litigation costs by encouraging settlement talks. To get a preliminary injunction, the moving party must
show it is likely to prevail at trial. As a
result, injunction motions provide the parties with a preview of the court’s thinking.
A party may want to avoid the expense of
a full-blown trial if it knows the court is
leaning in favor of the other party.
When should CEOs seek preliminary injunctive relief?
It’s commonly requested in cases of
unfair competition, trademark, copyright or patent infringement. It is also requested in real estate and certain employment
law cases. For example, if an ex-employee starts a competing firm using your
company’s trade secrets, such as a customer list, it may be impossible to determine the revenue loss your company has
suffered due to misappropriation of the
trade secret. Preliminary injunctive relief
would be appropriate in that case. You
should seek an order from the court to
stop the former employee from using the
customer list. You can also seek an order
requiring the former employee to return
or destroy all copies of the list. You will
have to prove the customer list was confidential and that the list had economic
value due to its secret nature. In other
words, you must show the list is not ordinary, publicly available information, but
rather information that gives you a competitive advantage over others who do
not have it.
Alternatively, let’s say a competitor
falsely advertises that taste tests show its
product is definitely superior to your company’s product. Obviously, this would hurt
your company’s brand and trademark
value, but it would be hard to quantify the amount of harm. Preliminary injunctive
relief would be appropriate here as well.
Is preliminary injunctive relief an option in
real estate disputes?
Absolutely. Suppose your company receives a foreclosure notice, and the
trustee is alleging that your company
defaulted on its mortgage payments. It
may be that the lender’s payment history
is incorrect, or perhaps the underlying
loan agreement is subject to legal challenge. You can seek an immediate injunction to halt the foreclosure process and
preserve your company’s rights in the
property.
Even if your business is in fact behind
on its mortgage payments, injunctive
relief may still be appropriate if the
trustee did not follow all procedures for a
foreclosure sale. Getting the injunction to
prevent the foreclosure sale may allow
your company time to refinance the loan
or negotiate a settlement with the lender.
What steps should CEOs take to seek preliminary injunctive relief?
First, determine the pros and cons of
seeking injunctive relief. If you decide to
move forward with a request for preliminary injunction, an attorney will need to
file a lawsuit on your behalf. Next, the
attorney will file either an application for
a temporary restraining order or a
motion for a preliminary injunction. A
preliminary injunction can only be issued
after notice to the other side and a full
hearing. A temporary restraining order
may be issued more quickly and without
notice to the other side in some instances. However, a temporary restraining order only lasts for a brief time.
Courts will often deny a request for
injunctive relief if there is excessive
delay in bringing the motion. So, if you
think your company may need injunctive
relief, you should act now.
SPENCER SKEEN is a litigation partner for Procopio, Cory, Hargreaves & Savitch LLP. Reach him at [email protected] or
(619) 525-3844.