G.W. HENSSLER & ASSOCIATES, LTD. and Henssler Asset Management, LLC, Plaintiffs, v. MARIETTA WEALTH MANAGEMENT, LLC; Scott Keller; Wes Hackney; and Charlie Holloway, Defendants CIVIL ACTION FILE NUMBER 1:17-cv-2188-TCB United States District Court, N.D. Georgia, Atlanta Division Signed October 23, 2017 Counsel Bradley T. Adler, Matthew Nolan Foree, Freeman Mathis & Gary, LLP, Atlanta, GA, for Plaintiffs. Thomas Edward Austin, Jr., Thomas E. Austin, Jr., LLC, William James Piercy, Berman Fink Van Horn, P.C., Atlanta, GA, for Defendants. Batten, Sr., Timothy C., United States District Judge ORDER *1 This case comes before the Court on Plaintiffs' motion for a preliminary injunction [7]. I. Background Plaintiffs G.W. Henssler & Associates, Ltd. and Henssler Asset Management, LLC (collectively, “Henssler”) operate a financial planning, management, and advisement company. Defendants Scott Keller, Wes Hackney, and Charlie Holloway were employed by Henssler until October 16, 2015, when they resigned to start a competing business, Defendant Marietta Wealth Management, LLC (“MWM”). Prior to their resignation, the individual Defendants had access to Henssler's confidential and proprietary information and trade secrets, including the Tamarac system, a computer database in which Henssler maintains its client information such as clients' names, addresses, phone numbers, monetary amount of any accounts managed by Henssler, and client-specific notes about a client's particular needs or preferences. During their employment at Henssler, the individual Defendants were subject to restrictive covenants regarding, among other things, confidential information and the solicitation of Henssler's clients. In May 2010, each individual Defendant signed a confidentiality agreement in which he (1) acknowledged that he had access to confidential and proprietary information of Henssler (including clients' names and contact information) and (2) agreed that he would not, during his employment and for a period of two years after his termination, use or divulge any of Henssler's information except in the course of performing his job duties for Henssler. The May 2010 agreements also provided that during the individual Defendants' employment with Henssler and for a period of two years thereafter, the individual Defendants would not solicit any clients with whom they had material contact while at Henssler for the purpose of performing any services that Henssler offers. Finally, the May 2010 agreements required the individual Defendants to return all Henssler property—including confidential information and trade secrets—to the company upon the termination of their employment with Henssler. In December 2015, following the individual Defendants' resignations, Henssler entered into a new agreement with each individual Defendant containing identical restrictive covenants. The individual Defendants acknowledged that they had access to Henssler's confidential and proprietary information—defined to include the names and contact information of Henssler's actual and potential clients—and agreed not to use or disclose that information for a period of two years from October 16, 2015. The December 2015 agreements also provided that the individual Defendants would not solicit Henssler's clients for that same two-year period. The individual Defendants also represented in the December 2015 agreements that they had (1) returned all of Henssler's property, including records, client lists, and customer contact information; (2) not solicited or attempted to solicit any of Henssler's clients prior to November 3, 2015; and (3) not used or disseminated Henssler's confidential information or trade secrets prior to the effective date of the agreements. *2 In October 2016, approximately one year after MWM was formed, Defendants hired Karen Rinehart, a former managing associate at Henssler, as a senior financial advisor for MWM. Between January and May 2017, Rinehart's employment at MWM led her to believe that Defendants had taken client information when they resigned from Henssler. In February, unbeknownst to the individual Defendants, Rinehart found in Holloway's MWM office a list of Henssler clients, including their names, contact information, and the amount of their investable assets. She photocopied that list and kept it in her office in a file with her personal tax returns. In May 2017, Defendants terminated Rinehart's employment and returned all of her personal items—except the file containing her personal tax returns and the copy of the client list. Plaintiffs' counsel subsequently notified Defendants that Henssler believed they had breached their legal obligations. Defendants' counsel responded that the only lists of actual or prospective Henssler clients in Defendants' possession “are those that [the individual Defendants] created without reference to anything belonging to Henssler.” [1] ¶ 67; [1-5] at 2. This lawsuit ensued. When Henssler filed suit in June 2017, it asserted federal claims against the individual Defendants for violations of the Defendant Trade Secrets Act (“DTSA”) and the Computer Fraud and Abuse Act (“CFAA”). Henssler also brought state-law claims for misappropriation of trade secrets, breach of contract, conversion, breach of fiduciary duty, tortious interference with contractual relations, civil conspiracy, and violation of the Georgia Computer Systems Protection Act (“GCSPA”). Henssler also moved for a preliminary injunction, seeking to (1) enjoin Defendants from using its trade secrets or proprietary information; (2) order Defendants to return its confidential information and trade secrets and turn over their hard drives and computers and provide access to cloud-based computer storage services and email accounts for a forensic examination; and (3) prohibit Defendants from conducting business with clients acquired through use of Henssler's confidential or trade secret information. On August 18, 2017, the Court dismissed Henssler's CFAA claim for failure to state a claim but retained jurisdiction over the DTSA claim and the state-law claims. In that Order, the Court deferred ruling on Henssler's motion for a preliminary injunction until Henssler filed an amended verification of its complaint that is based on the affiant's personal knowledge. Henssler subsequently amended its verification, and the motion for a preliminary injunction is now ripe for review. II. Discussion A moving party may obtain a preliminary injunction only by showing (1) a substantial likelihood that it will ultimately prevail on the merits of the case; (2) that the movant will suffer irreparable injury unless the injunction issues; (3) that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) that if issued, the injunction would not be adverse to the public interest. Osmose, Inc. v. Viance, LLC, 612 F.3d 1298, 1307 (11th Cir. 2010). A preliminary injunction “is a drastic remedy not to be granted unless the movant clearly establishes the burden of persuasion as to all four elements.” Davidoff & CIE, S.A. v. PLD Int'l Corp., 263 F.3d 1297, 1300 (11th Cir. 2001). A. Likelihood of Success on the Merits Henssler contends that it is likely to succeed on the merits of each of its remaining claims. Specifically, Henssler focuses on its claims under the DTSA, the Georgia Trade Secrets Act (“GTSA”), the GCSPA, and its claim for breach of contract.[1] In support of its motion, Henssler relies on its verified complaint and Rinehart's affidavit [1-2]. *3 The Court may rely on an affidavit in determining that a preliminary injunction is appropriate. See Levi Strauss & Co. v. Sunrise Int'l Trading, Inc., 51 F.3d 982, 985 (11th Cir. 1995). In large part, Defendants' response to Henssler's motion for a preliminary injunction consists of attacking Rinehart's affidavit, contending that it is not sufficient evidence upon which to grant a preliminary injunction. For instance, Defendants assert that Rinehart only saw the alleged client list from afar. However, Rinehart has testified that she made a copy of the list and that it contained names, phone numbers, addresses, and dollar amounts for the clients listed. She also testified that she kept a copy of the document until she was terminated, at which point she noticed the list was missing. Defendants provide affidavits intended to contradict Rinehart's testimony regarding the alleged client list. However, these affidavits state, “I do not have access to or possess a customer relations database format list as referenced in paragraphs 14-18 of Ms. Rinehart's Affidavit that belongs to Henssler, nor am I aware of any such list being in the possession of anyone associated with Marietta Wealth.” (emphasis added). The qualifying statement does not foreclose the possibility that Defendants possess such a list, but only that it does not belong to Hennsler. Defendants' affidavits therefore fail to provide a full contradiction of Rinehart's affidavit. Based on this, the Court will rely on her affidavit as evidence in ruling on Henssler's motion. 1. Trade Secrets Claims As noted, Henssler has asserted claims under both the DTSA and the GTSA. Because the analysis substantially overlaps, the Court will address these claims simultaneously. The DTSA creates a private cause of action for an “owner of a trade secret that is misappropriated ... if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1).[2] Under the DTSA, the Court may grant an injunction to prevent actual or threatened misappropriation of trade secrets. 18 U.S.C. § 1836(b)(3)(A)(i). Similarly, “[a] claim for misappropriation of trade secrets under the Georgia Trade Secrets Act requires a plaintiff to prove that (1) it had a trade secret and (2) the opposing party misappropriated the trade secret.” Capital Asset Research Corp. v. Finnegan, 160 F.3d 683, 685 (11th Cir. 1998) (internal punctuation omitted). Therefore, to prevail, Henssler must demonstrate a likelihood of success on the merits that the alleged client list constitutes a trade secret and that Defendants misappropriated the list. a. Qualification as a Trade Secret *4 The DTSA defines “trade secret” to include all forms and types of business information if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.] 18 U.S.C. § 1839(3). The GTSA defines “trade secret” as information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information: (A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. O.C.G.A. § 10-1-761(4). Henssler has demonstrated a likelihood of success that the alleged list constitutes a trade secret under both the GTSA and the DTSA. Subject to the requirements regarding economic value and reasonable efforts to maintain secrecy, customer lists explicitly qualify as trade secrets under the GTSA. O.C.G.A. § 10-1-761(4). Subject to similar requirements, business information qualifies as a trade secret under the DTSA. 18 U.S.C. § 1939(3). Here, Henssler has demonstrated that the list contains sensitive client information such as names, addresses, telephone numbers, monetary amounts, and notes including needs or preferences, and is highly valuable, providing Henssler with a competitive advantage. [1] ¶¶ 26-27. Henssler also took efforts to maintain the secrecy of its client list by maintaining the information in a password-protected and access-restricted computer database and requiring key employees (such as the individual Defendants) to sign agreements with confidentiality requirements. The Court finds that Henssler has demonstrated a likelihood of success that these efforts are reasonable to maintain the confidentiality of the alleged client list and, thus, that the alleged list constitutes a trade secret. SeeAmedisys Holding, LLC v. Interim Healthcare of Atlanta, Inc., 793 F. Supp. 2d 1302, 1311 (N.D. Ga. 2011) (holding that restricting access to confidential documents and allowing transmittal only through protected computer and email system demonstrated reasonable efforts to maintain confidentiality). b. Misappropriation Under the DTSA, to misappropriate is to disclos[e] or use ... a trade secret of another without express or implied consent by a person who ... [a]t the time of disclosure or use, knew or had reason to know that her or his knowledge of the trade secret was ... [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use. *5 18 U.S.C. § 1839(5)(B)(ii)(II). Similarly, under the GTSA, “misappropriation” is defined to include the “[d]isclosure or use of a trade secret of another without express or implied consent by a person who” either (1) “[u]sed improper means to acquire knowledge of a trade secret” or (2) “[a]t the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was ... [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.” O.C.G.A. § 10-1-761(2)(B). “ ‘Improper means’ includes theft, bribery, misrepresentation, [or] breach ... of a confidential relationship or other duty to maintain secrecy or limit use.” O.C.G.A. § 10-1-761(1). Henssler has shown a likelihood of success on the merits that Defendants misappropriated the list by retaining the list and using it for MWM's benefit. Defendants had access to the client database while at Henssler, and acknowledged that they had access to Henssler and its affiliates' confidential and proprietary information in the December 2015 agreements they signed. Henssler has demonstrated that the individual Defendants misappropriated the list by secretly copying or downloading the contacts from Henssler's computer network to Holloway's personal computer, and intend to use the information on the list to contact and solicit clients to move from Henssler to MWM. At this stage, the evidence indicates that Defendants knew or had reason to know that these secrets were divulged through improper means, and thus that Defendants misappropriated Henssler's trade secrets. See O.C.G.A. § 10-1-761(2)(b)(ii)(I).[3] 2. Georgia Computer Systems Protection Act The GCSPA allows a person whose property or person is injured by a violation of the statute to sue and recover damages for the violation. Under the GCSPA, Any person who uses a computer or computer network with knowledge that such use is without authority and with the intention of: (1) Taking or appropriating any property of another, whether or not with the intention of depriving the owner of possession; (2) Obtaining property by any deceitful means or artful practice; or (3) Converting property to such person's use in violation of an agreement or other known legal obligation to make a specified application or disposition of such property shall be guilty of the crime of computer theft. O.C.G.A. § 16-9-93. Notably, the GCSPA provides that “without authority” includes “the use of a computer or computer network in a manner that exceeds any right or permission granted by the owner of the computer or computer network.” O.C.G.A. § 16-9-92(18).[4] Here, Henssler has demonstrated that the individual Defendants used its computer network for their or MWM's benefit, against Henssler's interests, knowing that the use violated Henssler's policies and Holloway's contractual obligations and thus exceeding any right or permission they had to access the network, with the intent of (1) taking or appropriating Henssler's files and information; (2) obtaining Henssler's computer files and protected information by deceitful means or artful practice; or (3) converting Henssler's files and information for Holloway's or MWM's use in violation of Holloway's contractual obligations. [1] ¶¶ 59–64. Henssler has demonstrated that the individual Defendants are not authorized to continue to access or possess its files. Id. ¶ 131. Therefore, Henssler is substantially likely to succeed on the merits of its GCSPA claim. See, e.g., DuCom v. State, 654 S.E.2d 670, 675–76 (Ga. Ct. App. 2007) (holding that “there was sufficient evidence to allow a rational trier of fact to conclude beyond a reasonable doubt that DuCom used a computer, owned by her employer, with knowledge that such use was without authority and with the intention of removing programs or data from that computer and appropriating them for her own use, in violation of OCGA § 16-9-93(a)(1).”). 3. Breach of Contract *6 Because the two-year non-disclosure and non-solicitation provisions of the May 2010 agreements expired on October 16, 2017, arguments for injunctive relief made pursuant to these provisions are moot. However, Henssler also has pleaded that Defendants have breached a provision of the May 2010 confidentiality agreements requiring the return of all Henssler property, including records, files, or business-related documents (specifically including all confidential information or trade secrets), to Henssler at the end of their employment with Henssler. [1] ¶ 33. It further avers that Defendants have not returned any documents or computer files to Henssler. Id. ¶ 67. Return-of-property provisions are valid. See, e.g.,Equifax Servs., Inc. v. Examination Mgmt. Servs., Inc., 453 S.E.2d 488, 491–92 (Ga. Ct. App. 1994). Although Defendants contend that they already sent all relevant materials to Henssler, as discussed above, Henssler has provided evidence that they retained a list of its clients, which is Henssler's property, in violation of the agreements. Therefore, the Court concludes that Henssler is likely to succeed on the merits of this claim. B. Irreparable Harm “An injury is ‘irreparable’ only if it cannot be undone through monetary remedies.” Ferrero v. Associated Materials, Inc., 923 F.2d 1441, 1449 (11th Cir. 1991). “Although economic losses alone do not justify a preliminary injunction, ‘the loss of customers and goodwill is an irreparable injury.’ ” BellSouth Telecomms., Inc. v. MCIMetro Access Transmission Servs., LLC, 425 F.3d 964, 970 (11th Cir. 2005) (quoting Ferrero, 923 F.2d at 1449); see also Mohr v. Bank of N.Y. Mellon Corp., 393 Fed.Appx. 639, 646 (11th Cir. 2010). Loss of confidential and proprietary information is per se irreparable harm. O.C.G.A. § 10-1-762(a); see also Amedisys, 793 F. Supp. 2d at 1313–14(holding that plaintiff would suffer irreparable harm if defendant was “allowed to solicit patients from the same doctors and facilities that were referenced in the misappropriated Referral Logs” because it would give defendant an “unearned advantage in the marketplace and will likely cause [plaintiff] to lose patients and referral sources.”). Henssler has alleged that it spent a great deal of time and expense in developing and maintaining its protected information. [1] ¶ 24. The Court finds that this factor favors Henssler. C. Balancing of the Equities and Public Interest Henssler contends that the only effect of a preliminary injunction on Defendants would be to force them to comply with their legal obligations, but not granting such an injunction would allow Defendants an unfair and unearned advantage that would not be compensable in monetary damages. Although Defendants contend that a preliminary injunction would harm the growth of MWM, the Court finds that these factors weigh in favor of Henssler. It is both equitable and in the public interest to require Defendants to abide by the law. Therefore, the Court concludes that a preliminary injunction is appropriate in this case. D. Bond Defendants request that any injunction should require Henssler to post a security bond pursuant to Federal Rule of Civil Procedure 65(c), according to which the Court may issue a preliminary injunction “only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Henssler contends that no bond is necessary but that, if the Court does require a bond, $50,000 is sufficient. The Court agrees that $50,000 is an appropriate amount of bond. Therefore, this preliminary injunction is conditioned on Henssler posting a bond in the amount of $50,000 pursuant to the provisions of Rule 65. Pursuant to Local Rule 67.1B(2), NDGa, the Clerk is directed to post any cash bond in the Clerk's CRIS interest-bearing account. III. Conclusion *7 For the foregoing reasons, Henssler's motion for a preliminary injunction [7] is granted. It is hereby ordered that, until the final disposition of this case or other intervening order of this Court, Defendants and anyone acting in concert with any of them are restrained and enjoined from (1) accessing, using, or distributing any of Henssler's confidential information and trade secrets, including computer files or other electronic data; and (2) conducting business with any client acquired through the use of Henssler's confidential information and trade secrets. It is further ordered that within seven days Defendants (1) return all confidential information and trade secrets, including computer files and other electronic data, to Henssler; and (2) turn over business and personal external hard drive(s) and computer(s) and to provide access to their cloud-based computer storage services (such as Dropsend.com and/or Dropbox.com), and their email accounts for a forensic examination. IT IS SO ORDERED this 23rd day of October, 2017. Footnotes [1] Henssler also contends that it is likely to succeed on its CFAA claim; however, as noted, the Court has granted the motion to dismiss this claim. [2] Contrary to Defendants' argument, Henssler does allege post-DTSA enactment use of the alleged trade secrets. As discussed in the Court's Order denying Defendants' motion to dismiss Henssler's DTSA claim, Henssler avers, based on allegations about Karen Rinehart's employment with MWM between December 2016 and May 2017, that Defendants have disclosed and/or used this information. See, e.g., [1] ¶¶ 57–61. For example, in mid-February 2017 Defendants allegedly used the misappropriated information to provide Rinehart with contact information for Charlie and Carol Lassen, two Henssler clients who were living in Colorado and whom Defendants wanted Rinehart to contact. Id. ¶ 58. [3] Defendants' reliance on HCC Insurance Holdings, Inc. v. Flowers, No. 1:15-cv-3262-WSD, 2017 WL 698676 (N.D. Ga. Feb. 22, 2017), is unavailing. In that case, there was direct evidence that the defendant did not use or disclose trade secrets. Further, even if that were the case here, Henssler has presented contrary evidence. [4] This distinguishes Henssler's claim under the GCSPA from that under the CFAA, which the Court dismissed.