RECO Equipment, Inc. v. Wilson

RECO Equipment, Inc. (RECO) (plaintiff) distributed and serviced heavy construction equipment. Jeffrey Wilson and Joseph Russo (defendants) began working for RECO in 2014. In 2019, Wilson signed an employment contract with RECO. The contract provided that if Wilson stopped working at RECO, Wilson could not use any of RECO’s confidential information to Wilson’s advantage and could not compete with RECO’s operations within a 50-mile area for three years. Russo never signed an employment contract with RECO. In 2020, Wilson and Russo left RECO to work at Wilson’s newly created competitor company, Republic Equipment Holding, LLC (Republic) (defendant). Wilson did not return his RECO-issued cell phone when he left, and Wilson also kept confidential and proprietary information about RECO accounts. Before Russo’s departure, Russo downloaded and took hundreds of RECO’s files containing customer information, financial information, and machine-repair manuals. Russo also shared a Google Drive link for RECO’s folders and files to Russo’s new Republic email address. The information taken by Wilson and Russo included insights about machine repair and rebuilding that RECO had developed over years in the industry. The information was password-protected and not widely distributed among RECO employees. RECO sued Wilson, Russo, and Republic in federal district court, alleging misappropriation of trade secrets. RECO also asserted a breach-of-contract claim against Wilson based on Wilson’s alleged failure to honor the employment contract’s noncompete provision. However, RECO presented no evidence indicating that the three-year restriction would not unduly burden Wilson. The district court granted preliminary injunctive relief that (1) ordered Wilson to return his cell phone, (2) directed Wilson to comply with the noncompete provision, (3) enjoined Wilson and Russo from using trade secrets to solicit businesses from RECO’s customers, and (4) ordered Wilson and Russo to return the stolen information. Wilson and Russo appealed, asserting that the district court had improperly found that RECO was likely to succeed on the merits of the claims as required to award injunctive relief. Specifically, Wilson argued that RECO was unlikely to succeed on the breach-of-contract claim because the noncompete agreement was unenforceable. Wilson and Russo also argued that RECO was unlikely to succeed on the misappropriation claim because the information taken from RECO did not constitute trade secrets.