Tenth Circuit Holds That Irreparable Harm Cannot Be Presumed for Trade Secret Injunction
In First Western Capital Management Co. v. Malamed, Case Nos. 16-1434, 16-1465 & 16-1502 (10th Cir. Oct. 30, 2017), the Tenth Circuit Court of Appeals held that a district court erred in issuing a preliminary injunction to a party under federal and state trade secret law where the court presumed that the party would be irreparably harmed absent the injunction.
Ordinarily, in order to obtain a preliminary injunction, a moving party needs to establish, among other things, that it will suffer irreparable harm if the injunction is denied. This requires the party to show that there is a significant risk that it will experience harm that cannot be compensated by money damages. In First Western Capital Management, however, the district court held that the plaintiff (First Western) was not required to establish irreparable harm because both the Defend Trade Secrets Act (“DTSA”) and the Colorado Uniform Trade Secrets Act (“CUTSA”) provide for injunctive relief to prevent misuse of trade secrets, and the evidence showed that the defendant was misusing or threatening to misuse trade secrets regarding First Western’s clients. Thus, the district court held that irreparable harm “presumptively exists and need not be separately established.” Had First Western not been excused from showing irreparable harm, the district court would have denied its request for injunctive relief because evidence was presented that showed that monetary damages could be reasonably quantified and would adequately make First Western whole.
The Tenth Circuit explained that courts may presume irreparable harm only when a party is seeking an injunction under a statute that mandates injunctive relief as a remedy for a violation of the statute. When Congress or a state legislature passes such a statute, it effectively has withdrawn the court’s discretion to determine whether such relief is appropriate. By contrast, when a statute merely authorizes injunctive relief, courts may not presume irreparable harm, as doing so is contrary to equitable principles. Because DTSA and CUTSA only authorize, but do not require, injunctive relief, and because the evidence presented to the district court showed that monetary damages could be quantified in order to compensate First Western, the Tenth Circuit reversed the district court’s grant of the injunction to First Western. Legal practitioners thus should carefully review the applicable statute to determine whether it mandates or merely permits injunctive relief; where such relief is not required, they should make a fulsome showing that their client will suffer irreparable harm without an injunction.