Preliminary injunction in a misappropriation of trade secrets case; The Defend Trade Secrets Act (DTSA); Requirement that a party cease work under a contract; Irreparable harm; Downstream effects; Forensic exam of electronic devices; Whether the order was narrowly tailored; Protection of confidential information

The court held that the district court abused its discretion in this misappropriation of trade secrets case by entering a preliminary injunction requiring that defendant-Kent Power cease working under a contract (¶ 4(e) of the order) and ordering an independent forensic exam of defendants’ electronic devices (¶¶ 4(b)-(d)). The court concluded that, as to ¶ 4(e), plaintiffs failed to establish irreparable harm, and that ¶¶ 4(b)-(d) were not narrowly tailored. Thus, it vacated the preliminary injunction order and remanded. Plaintiff-UEC is the parent and sole owner of United Electric, which previously employed defendant-Hatcher. After UEC terminated Hatcher, it conducted a forensic review of his company-owned devices and allegedly found communications between him and defendant-Kent (the owner of Kent Power), “in which Hatcher allegedly transmitted confidential pricing and rate materials.” UEC then filed this action, which included a federal misappropriation of trade secrets claim under the DTSA. Paragraph 4(e) of the preliminary injunction order required that defendants cease working under the contract with a nonparty client (LG&E) of United Electric, and ¶¶ 4(b)-(d) directed “independent forensic examiners to obtain ‘responsive items’ from” defendants’ electronic devices. On appeal, the court concluded as to ¶ 4(e) that nothing in the record showed “with any certainty that Kent Power poses a competitive threat to United Electric’s relationship with LG&E.” In addition, the record lacked “sufficient evidence suggesting that Kent Power poses a threat to United Electric’s distribution services or other services in Louisville.” To succeed on the irreparable harm prong, “some imminent, non-speculative harm” had to be shown. The court held that UEC did not show “any harm.” While the court has “permitted injunctive relief when misappropriation of trade secrets led to loss of goodwill and competitive disadvantage[,]” the court found the cases on which UEC relied were distinguishable. As to ¶¶ 4(b)-(d), the court held that “the district court failed to provide protections for the Defendants’ confidential, privileged, and private information, making its order overbroad.”