Pollard PLLC successfully defeated a preliminary injunction in a non-compete case – this time, in a dispute involving the energy transportation industry. The case comes out of the United States District Court for the Middle District of Florida – Tampa Division.
The plaintiffs, Tampa, Florida-based QC Energy Resources Texas, LLC, QC Energy Resources, LLC, QC Energy Resources, Inc., and Quality Carriers, Inc. (QCER), filed a motion for preliminary injunction against the defendants, Lucky Cousins Trucking, Inc., Givo Younani and Skyline Transport Group, LLC.
On July 28, the court issued an order denying the preliminary injunction.
Founded by Younani in 2011, Lucky Cousins specializes in transporting crude oil. Prior to its relationship with QCER, Lucky Cousins was an established hauling company with employees and trucks of its own.
QCER is a logistics and transportation services company with operations in the chemical, oil and gas industries. The conglomerate began its relationship with Lucky Cousins in 2013.
Lucky successfully transported crude oil, water, acid chemicals and equipment throughout the United States for QCER’s energy hauling business. In 2014, Lucky entered an agreement to provide services to QCER as a “preferred independent contractor.”
Under the written contract between the parties, Lucky agreed that it would not compete with QCER or solicit the company’s customers for two years after their relationship ended.
A few months into the contract, Lucky secured business for QCER with one of its customers, Chesapeake. Due to poor service from another one of QCER’s contractors, Chesapeake agreed to only continue business with QCER if Lucky managed its routes. QCER agreed.
In January 2016, QCER informed Younani that its private equity firm was pressuring it to shut down its energy hauling business. Because Lucky was entirely dependent on QCER for hauling work, Lucky would have faced tremendous losses. Therefore, Younani assisted in the formation of Skyline Transport Group in February 2016. Skyline was established with the purpose of acquiring and leasing equipment to Lucky Cousins and – if necessary – launching its own hauling concern in the event that QCER ended its energy hauling operation.
Eventually, because of certain of QCER’s business practices, Chesapeake banned QCER from bidding on certain work and contracted Skyline to service its Ohio terminal. QCER has since closed its Ohio terminal and its Ohio operations.
When Younani assisted in the formation of Skyline, QCER terminated the contractor agreement. Lucky sued QCER first for fraud, breach of contract and a declaratory judgment invalidating the non-compete agreement among other claims. QCER counter-sued for breach of contract and other claims, then sought a preliminary injunction against Lucky for violating the non-compete, non-solicitation and non-disclosure obligations of the agreement.
In order to secure the preliminary injunction, QCER had to prove one or more legitimate business interests. QCER failed to do so. Legitimate business interests generally take the form of confidential information, substantial customer relationships, or extraordinary or specialized training.
QCER alleged that it provided Lucky Cousins with financial concessions, revenue split, cash assistance, expense reimbursement and equipment rental discounts. As a common practice in the hauling industry, such interests cannot be protected by restrictive covenants. Neither Lucky Cousins nor Younani were ever employees of QCER, and the investment put forth by QCER was no different than the typical investment that a contractor would make with a sub-contractor.
QCER also claimed it provided “pricing and proprietary models and methodologies,” which included client lists, customer relationship management data, and its most aggressive rates. The company argued that Lucky Trucking will continue to use its confidential information. However, it failed to identify any confidential information that Lucky Cousins could use unfairly against QCER. In addition, the information was not unique to QCER and could be found through other sources.
Perhaps QCER’s weakest argument was that competition from Skyline would cause them irreparable harm. Chesapeake had banned QCER from competing for the relevant project at issue and QCER had shut down its Ohio energy hauling operation. In light of this, QCER could not face harm from Skyline performing a job that they could not even bid on. The case is proceeding forward toward a possible trial in September 2017. Jonathan Pollard and Brooke Bach are the primary attorneys on the case.
Pollard PLLC is a litigation boutique based in Fort Lauderdale, Florida and focused on competition law. Its attorneys have extensive experience litigating non-compete, trade secret, trademark and antitrust matters. For more information call 954-332-2380.