Stop Right There: The Eighth Circuit Decides Whether a Preliminary Injunction Should Prevent a Business from Hiring a Competitor’s Employees

When a plaintiff starts a lawsuit, he or she may wish to stop the defendant from performing some action during the lawsuit. In some instances, a court can grant the plaintiff’s wish in the form of a preliminary injunction. In the case of Management Registry, Inc. v. A.W. Companies, Inc., et al., the plaintiff sought to stop the defendant from actively recruiting plaintiff’s employees.

The Facts
Intending to expand its business, a company called Management Registry negotiated to acquire separate businesses owned by a company called AllStaff. Eventually, Management Registry agreed to purchase all businesses owned by AllStaff. AllStaff’s president, Allan Brown, further agreed to continue running the AllStaff businesses. Allan’s wife, Wendy, separately agreed to purchase one of AllStaff’s companies back from Management Registry.
Negotiations between Management Registry and Wendy eventually deteriorated, causing Allan to leave his position with Management Registry and form a rival company with Wendy. The company formed by Allan and Wendy, A.W. Companies (“A.W.”), began to recruit Management Registry employees. Further, it was alleged that A.W. asked the newly-recruited employees to bring computers, client files, and other proprietary information from Management Registry.

The Lawsuit
Management Registry sued A.W in federal court, seeking, among other things, a preliminary injunction preventing A.W. from recruiting Management Registry’s employees. The federal district court denied the preliminary injunction, holding that Management Registry had failed to demonstrate that it would be “irreparably harmed” without the preliminary injunction. Management Registry then appealed to the United States Court of Appeals for the Eighth Circuit, claiming both that it was likely to prevail in its lawsuit against A.W. and that it will be irreparably harmed if a preliminary injunction were not granted.

The Appeal
On appeal, the Eighth Circuit recited the four factors that courts are to consider when determining whether to grant a preliminary injunction: “(1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on [the nonmovant]; (3) the probability that [the] movant will succeed on the merits; and (4) the public interest.” Focusing on the first factor, the Eighth Circuit held that to receive a preliminary injunction, Management Registry had to establish “irreparable harm,” that is, “that it had ‘no adequate remedy at law’ because ‘its injuries [could not] be fully compensated through an award of [money] damages.’”

Affirming the district court, the Eighth Circuit held that the evidence presented by Management Registry actually proved no irreparable harm because money damages would fully compensate it for any losses caused by A.W. because such damages were quantifiable. Additionally, as to the third preliminary injunction factor, the Eighth Circuit stated that, rather than providing evidence demonstrating that it would prevail on the merits, Management Registry instead “devoted most of its memorandum accompanying its preliminary-injunction motion to chronicling the Browns’ alleged misdeeds[.]”

The Lesson
A preliminary injunction can be a powerful tool meant to maintain the status quo early in a case. The party seeking the preliminary injunction bears the burden of satisfying the Eighth Circuit’s four factors. As was most important in Management Registry, Inc. v. A.W. Companies, Inc., et al., to be awarded a preliminary injunction, the first factor requires a plaintiff to show that being awarded money at the end of the case will not adequately compensate for losses caused by the defendant. That is not always an easy task because, as this case demonstrates, if the losses are quantifiable, a court could hold that money will sufficiently compensate for them, and consequently, deny the motion for injunctive relief.

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