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Osborne Associates, Inc. v. Cangemi

United States District Court, M.D. Florida, Jacksonville Division

November 14, 2017

OSBORNE ASSOCIATES, INC., d/b/a Generations Salon Services, Plaintiff,


          MARCIA MORALES HOWARD United States District Judge

         THIS CAUSE is before the Court on Plaintiff's Verified Complaint and Demand for Jury Trial (Doc. 1; Complaint), filed on October 10, 2017, and Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction and Incorporated Memorandum of Law (Doc. 3; Motion) filed on October 11, 2017. Defendants filed a response in opposition to the Motion on October 26, 2017, see Defendants' Response in Opposition to Plaintiff's Motion for Preliminary Injunction (Doc. 21; Response), and in accordance with the Court's Order (Doc. 16; Briefing Order), Plaintiff filed a reply on October 31, 2017, see Plaintiff's Reply to Defendants' Response in Opposition to Plaintiff's Motion for Preliminary Injunction (Doc. 24; Reply). The Court held a hearing on November 2, 2017, during which the Court heard testimony from two witnesses and oral argument from counsel.[1]

         I. Procedural History

         After filing the Complaint, Plaintiff Osborne Associates, Inc., d/b/a Generations Salon Services (Generations Salon or Plaintiff) filed a Motion to Expedite Discovery (Doc. 4; Motion to Expedite) on October 11, 2017. Prior to receiving leave of court to expedite discovery, Generations Salon proceeded to serve a subpoena on a current client of Defendant Silver Salons & Spas, LLC (Silver Salons). See Sheryl Cangemi, Julie Calianno and Silver Salons & Spas, LLC's Response in Opposition to Plaintiff's Motion for Expedited Discovery and Request for Sanctions, ¶¶ 11-13 (Doc. 22; Defendants' Response and Request for Sanctions), filed October 26, 2017. Generations Salon's service of that subpoena prompted Defendants to file a motion for sanctions. On October 30, 2017, the assigned magistrate judge denied Plaintiff's Motion to Expedite and took Defendants' request for sanctions under advisement. See Order Denying Motion to Expedite and Taking Under Advisement Motion for Sanctions (Doc. 23; Order Denying Motion to Expedite).[2] The following day, Generations Salon filed its Reply. With the Reply, Generations Salon included as exhibits some of the documents and information it obtained as a result of the subpoena. See Reply, Attach. 1, Exs. B - D. In response, on November 1, 2017, Defendants filed a Motion to Treat Documents as Non-Trade Secrets and a Second Request for Sanctions Against Plaintiff (Doc. 25; Motion to Treat Documents as Non-Trade Secrets). There, Defendants contended that many of the documents Generations Salon included in its Reply contained un-redacted information Generations Salon was otherwise claiming as trade secrets in this action. Id. at ¶¶ 6-7.

         Additionally, Defendants reasserted their request that sanctions be imposed on Generations Salon for the premature issuance of the subpoenas. Id. at ¶ 8.[3]

         At the Preliminary Injunction Hearing, without determining the ultimate propriety of the issuance of the subpoenas, the Court ruled that the documents obtained by Generations Salon by virtue of the subpoena would not be considered by the Court for the purposes of resolving the Motion. Specifically, those documents included exhibits B - D, which were part of Attachment 1 of Plaintiff's Reply. Reply, Attach. 1, Exs. B - D. However, the Court declined to treat all the information contained in Generations Salon's Reply as non-trade secrets, or to impose sanctions on Generations Salon, noting that the question of sanctions was already before the assigned magistrate judge.[4] In light of the fact that the Court will not consider the information contained in the Plaintiff's Reply, Attachment 1, Exhibits B - D, the Court will also not consider any arguments of the parties that stem from those documents.

         II. Background[5]

         Over the last 25 years, Generations Salon has provided professional salon and spa services to residents in senior living facilities, personal care and assisted living communities, as well as health care and nursing centers. Complaint at ¶ 1, ¶¶ 21-22. Generations Salon has over 300 on-site salons nationwide and services over 30, 000 residents each month. Id. at ¶ 2. It operates salons in Florida, Pennsylvania, New York, New Jersey, Delaware, Maryland, Virginia and Texas. Id. at ¶ 4.

         Generations Salon hired Defendant Sheryl Cangemi (“Cangemi”) on March 2, 2016, id., Exhibit A at 5, to be its Director of Business Development. Id. at ¶ 3. In her position, Cangemi “was responsible for high level contacts with decision makers, seeking out, maintaining, and developing business relationships with senior living communities, stylists, and cosmetologists” in at least the state of Florida. Id. at ¶ 4.[6] Generations Salon hired Defendant Julie Calianno (“Calianno”) in March of 2016 as a Regional Operations Manager. Id. at ¶ 5; id. at Exhibit B at 1.[7] Calianno oversaw operations in the Pennsylvania region. Id. at ¶ 5, 31-32. By virtue of their respective positions, both women had access to information relating to Generations Salon's “customers, stylists, key personnel, the terms of its contracts with senior living communities, pricing, suppliers, marketing strategies and prospective customer pipeline, among other types of information.” Id. at ¶ 3.[8]

         Before working for Generations Salon, Cangemi had at least 14 years' experience in the senior salon services industry. Response, Attach. 1, Cangemi Decl. ¶ 3 (Cangemi Decl.). Immediately prior to her employment with Generations Salon, she was an independent contractor performing salon services at Bay View Healthcare (Bay View). Redacted Transcript of Preliminary Injunction Hearing held on November 2, 2017 at 4-5, 9-10 (Doc. 30; Tr.), filed on November 6, 2017. At Bay View, Cangemi was the sole stylist and was working as an individual, not as an owner of a company. Id. at 4, 9-10. Indeed, she had not set up a company. Id. at 9. Prior to that, Cangemi had worked for at least one other senior salon service provider in the industry, Salon PS. Cangemi Decl. ¶ 8, 10. Calianno had also worked for Salon PS, and prior to joining Generations Salon, she had worked for Salon PS for approximately three years. Calianno Decl. ¶¶ 3, 9.[9] Neither Cangemi nor Calianno presented evidence that either had experience in marketing or negotiating contracts for the operation of on-site salons within senior or assisted living communities, or management of such salons before joining Generations Salon.

         As a condition of employment with Generations Salon, both women signed Non-Compete agreements which restricted each from:

working in a competitive capacity for a period of one year following termination of employment; soliciting any client, customer, officer, staff, or employee of Generations Salon for her own benefit or for the benefit of a third-party that is engaged in a similar business to Generations Salon; and using or disclosing Generations Salon's confidential and proprietary information.

Complaint at ¶ 6; id. at Exhibit A & B.[10] However, given the relationship Cangemi already had with Bay View, Generations Salon and Bay View altered the standard language in the contract between Bay View and Generations Salon which stated:

[d]uring the term of this agreement [Bay View] agrees to use the exclusive services of [Generations Salon] for all of its hair grooming requirements. [Bay View] agrees not to approach [Generations Salon's] agents for the purpose of engaging their services directly or indirectly during the term of this agreement and for a twelve-month period after the termination of this agreement.

Reply, Attach. 2, Ex. B at ¶ F. Next to this language, both the party negotiating on behalf of Bay View, and Marvin Weinstein, President of Generations Salon, initialed a notation that stated “This would not apply to Sheryl Cangemi.” Id. Thus, the agreement between Bay View and Generations Salon provided that Cangemi “could go work for Bayview, notwithstanding the fact that language in [Generations Salon's] contract with [Bayview]” would prevent Bay View from hiring any Generations Salon employees. Id., Attach. 2 at ¶ 8. Cangemi construes the Bay View agreement to suggest that should Cangemi leave Generations Salon, the contract between Bay View and Generations Salon would end, and “Bayview would come with [her.]” Cangemi Decl. at ¶ 10. However, the record before the Court does not support Cangemi's interpretation of the Bay View and Generations Salon agreement. Nor does the copy of Cangemi's fully executed covenant-not-to-compete support such an interpretation. Complaint, Attach 1.[11]

         Cangemi left her employment with Generations Salon on January 26, 2017, and Calianno followed shortly after that. Tr. at 11; Calianno Dec. at ¶ 4. Prior to leaving Generations Salon, and unbeknownst to their employer, the women formed Silver Salons in November 2016. Neither informed Generations Salon of where she actually intended to work following her resignation, or that the two had formed Silver Salons. Complaint at ¶ 46.[12] However, at the time they formed Silver Salons in November 2016, both Cangemi and Calianno had the intention of entering into the senior salon services industry. Tr. at 11.

         By February 1, 2017, Silver Salons had already signed contracts with two communities, Bay View and Anthem Lakes. Tr. at 12-13. Silver Salons solicited and is now serving at least one other former client of Generations Salon - that is Rose Tree Place in Pennsylvania - and is in direct competition with Generations Salon in the senior salon services industry. Complaint at ¶ 52; Reply, Attach. 3 at ¶¶ 13-14 (Allyson DeNardo Decl.). As of the date of the Cangemi and Calianno declarations, Silver Salons was providing senior salon services to ten customer communities, nine in Florida and one (Rose Tree Place) in Pennsylvania. Cangemi Decl. at ¶ 11.[13] In their declarations, Cangemi and Calianno assert that all of their customers are well established and have been in business for several years. Cangemi Decl. at ¶ 11; Calianno Decl. At ¶ 11. However, at the hearing, Cangemi testified that Anthem Lakes was a “brand new building.” Tr. at 13.

         On October 10, 2017, Generations Salon filed suit against Cangemi, Calianno, and Silver Salons. Complaint at 1. Generations Salon accuses Cangemi and Calianno of breaching the terms of their non-compete agreements, breaching their fiduciary duties, violating the Federal Defend Trade Secrets Act, 18 U.S.C. § 1836, as well as violating Florida's Uniform Trade Secrets Act, Fla. Stat. § 688.001. In particular, Generations Salon asserts that what differentiates it from its competitors is

the information Generations Salon has developed about its customers and prospective customers, the stylists who contract with Generations Salon to perform services at the communities where Generations Salon provides services, customer pricing and discounting strategies, marketing strategies, supplier information, specific considerations relating to the resident populations at Generations Salon's customers and their respective buying habits, and a host of additional information that is unknown and not readily ascertainable by Generations Salon's competitors, all of whom could benefit from the disclosure or use of this information.

Id. at ¶ 24. Generations Salon considers this information to constitute its trade secrets, much of which is kept and maintained in its proprietary database (the “Stanglware” database - named after its creator, Fred Stangl). Id. at ¶ 25. One means by which Generations Salon protects its information is by requiring employees who have access to it, like Cangemi and Calianno, to sign non-compete agreements. Id. at 26.

         Cangemi and Calianno deny knowledge of or access to the Stanglware database, or any other proprietary database maintained by Generations Salon. See Cangemi Decl. at ¶ 16; Calianno Decl. at ¶ 16. However, Generations Salon has presented evidence that Calianno received regular reports generated from the Stanglware database which included sales amounts for each community served and commissions stylists were claiming from each community served. DeNardo Decl. at ¶¶ 20-23. Calianno did not seek to contest this statement. Additionally, Cangemi, as Generations Salon's Director of Business Development, had access to similar information, Complaint at ¶ 27, an assertion she has not disputed.

         Generations Salon further alleges that Silver Salons has “solicited and diverted several of Generations Salon's clients and former clients, ” and is now in direct competition with Generations Salon. Complaint at ¶ 52. Generations Salon also avers that

Defendants have disclosed and used and will inevitably disclose and use . . . the following types of trade secret information which they learned by virtue of their respective employment with Generations Salon: (i) high level contacts with decision makers; (ii) potential customers Generations Salon has targeted and plans to target; (iii) market growth opportunities; (iv) Generations Salon's strengths and weaknesses with its customers; (v) specific products, vendors, and arrangements with third parties that may increase profitability; (vi) other information which, collectively, will result in Silver Salons being able to shortcut what it has taken Generations Salon years of labor and expense to build.

Id. at ¶ 57.

         Neither Cangemi nor Calianno has a list of Generations Salon's clients or stylists. Cangemi Decl. at ¶¶ 9, 11; Calianno Decl. at ¶¶ 10, 12. Each asserts that “I did not learn anything from Generations that I didn't already know from working in the industry. I acquired this knowledge from my personal experience and from my previous employers, including Salon P.S. . . .” Cangemi Delc. at ¶ 8; see also Calianno Decl. at ¶ 9. Both women also assert that they garnered some of their knowledge regarding the senior salon service industry by attending the “national and local ‘Leading Age' industry conference(s) where speakers and industry insiders discuss and educate professions in senior specific industries, including senior salon services.” Cangemi Decl. at ¶ 8; Calianno Decl. at ¶ 9.

Finally, Cangemi notes that
I am a single mother of three and . . . support my 83-year old father who resides with me. I have no income other than Silver Salons & Spas, LLC. I have worked in the senior salon services industry for the last 15 years - this is all I know. I spent my entire savings to start Silver Salons & Spas, LLC, and if I am prevented from working in the industry, I will lose everything.

Cangemi Decl. at ¶ 17. Similarly, Calianno asserts that

I am a single mother with a 4-year old son and I receive no child support. I have no income other than Silver Salons & Spas, LLC. I've put everything I have into Silver Salons & Spas, LLC and if I am prevented from working in the industry, I will lose everything.

Calianno Decl. at ¶ 17.

         III. Summary of Arguments

         As a result of Cangemi and Calianno's alleged activities, and in support of its Motion for a Preliminary Injunction, Generations Salon asserts that it is necessary to enforce the non-compete agreements both women signed in order to protect Generations Salon's legitimate business interests. Motion at 13. Specifically, Generations Salon seeks to protect its

customers and prospective customers, the stylists who contract with Generations Salon to perform services at the communities where Generations Salon provides services, customer pricing and discounting strategies, marketing strategies, supplier information, specific considerations relating to the resident populations at Generations Salon's customers and their respective buying habits.

Motion at 6. Likewise, Generations Salon asserts that it will suffer irreparable injury if the Defendants are not enjoined. Id. at 12. In particular, the company claims that

[t]he injury here is not speculative, it is already occurring. . . . [Cangemi and Calianno] are competing in Generations Salon's markets, in a direct capacity, in a specialized industry, and are armed with Generations Salon's confidential and trade secret information. Upon information and belief, Cangemi and Calianno have already diverted customers and independent contractors from Generations Salon, using their knowledge gained by being entrusted employees at Generations Salon.

Id. at 13.[14]

         In response, Defendants claim that their actions have not caused irreparable harm to Generations Salon. They argue that “[p]laintiff has failed to identify a single customer that Defendants have solicited or a single customer that Plaintiff has lost or stands to lose by virtue of Defendants' actions.” Response at ¶ 6. They further assert that they “have not solicited and do not intend to solicit Plaintiff's customers.” Id.

         Defendants also argue that the non-compete agreements they signed are not supported by any legitimate business interests. Id. at ¶¶ 11-20. Specifically, Defendants assert that the alleged trade secrets and confidential information Generations Salon claims they have “disclosed and used and will inevitably disclose and use, ” Complaint at ¶ 57, are not properly characterized as trade secrets or confidential information. Defendants claim that Generations Salon's purported protected “customer lists, ” contain information that is publicly available from state health care regulation websites as well as websites of associations relating to the health care industry. Response ¶ 13. Similarly, Defendants assert that they did not solicit Generations Salon's stylist lists, but rather sought and employed stylists by virtue of placing an advertisement on Craigslist. Id. at ¶ 14.

         As to Generations Salon's claim that it has a protected interest in its customer pricing, discounting strategies, supplier information, marketing strategies, and resident populations and their respective buying habits, id. at ¶¶ 15-20, Defendants assert that most if not all of this information is generally available or common knowledge within the industry. Id. They also assert that because of the commonplace nature of Generations Salon's information, there is nothing unique or proprietary about what they are trying to protect. Id. at ¶ 17. Finally, Defendants challenge any assertion made by Generations Salon that their actions have undermined the “good will” value of Generations Salon. Id. at ¶ 23. Notably however, Defendants do not address Generations Salon's assertions regarding its legitimate business interests in its customer relationships. Finally, Defendants assert that, in determining the proprietary of granting a preliminary injunction to Generations Salon, the Court must evaluate the balance of harms which they argue weighs in favor of Cangemi and Calianno. Response at ¶¶ 21-22. As such, Defendants contend the Motion should be denied.

         In its Reply, Generations Salon first notes that by Defendants' own admissions, Cangemi and Calianno, through Silver Salons, are already in direct competition with it by obtaining clients in the same geographic regions in which Generations Salon serves communities. Reply at 1-2. Second, Generations Salon provides more specificity as to the clients it has already lost to Silver Salons, and to the future clients it may lose.[15]Generations Salon also asserts that the information deemed as “confidential” in the non-compete agreements with Cangemi and Calianno does constitute a legitimate business interest. Id. at 3-5. In this regard, Generations Salon asserts that its client lists are not merely made up of generally publicly available information, but rather exist because of the “industry” and “compiling” efforts of Generations Salon. Id. at 4; id. at Attach 1 at ¶ 14 (noting lists contain key decision makers, and appropriate “pitches” to make).

         In addressing whether Silver Salons was soliciting its stylists, Generations Salon notes that its Business Office Manager, Allyson DeNardo, spoke to a number of its stylists, who had obtained the phone number of Lee Weinstein, Director of Sales and Marketing at Generations Salon. DeNardo Decl. at ¶ 25. The stylists said they obtained the number from a “former manager” of Generations Salon, which DeNardo interpreted to mean Calianno. Id. The stylists allegedly ‚Äúthreatened to go work for this ...

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