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UNITEDSTATESDISTRICTCOURT
DISTRICTOFMINNESOTA
FirstFinancialSecurity,Inc.,
aDelaware
Corporation,
Plaintiff,
v. MEMORANDUM
OPINION
ANDORDER
CivilNo.141843(MJD/SER)
GillesMoua,anindividual,
andMaiLee,anindividual,
andDOES1100,
Defendants.
__________________________________________________________________
DavidD.VanSpeybroeckandCliffordS.Davison,SussmanShankLLPand
LouseneM.Hoppe,Fredrikson&Byron,P.A.,CounselforPlaintiff.
JonE.Drucker,LawOfficesofJonE.DruckerandCarolynG.Anderson,
ZimmermanReed,PLLP,CounselforDefendants.
___________________________________________________________________
I. Introduction
TheaboveentitledmattercomesbeforetheCourtonPlaintiffFirst
FinancialSecurity,Inc.s(FFS)motionforapreliminaryinjunction. ByOrder
dated
July
29,
2014,
this
Court
granted
FFSs
motion
for
a
temporary
restraining
order. AtthetimethatOrderwasentered,Defendantshadnotappearedinthis
action,andtheClerkofCourthadentereddefaultagainstthem.
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Defendantsarenowrepresentedbycounselandaremovingtosetaside
thedefaultandtotransfervenuetoCalifornia. Defendantsalsoobjecttothe
entryof
apreliminary
injunction.
TheCourtheldanevidentiaryhearingonthemotionforpreliminary
injunctiononSeptember3,2014.
II. Background
FFSisalifeinsurancebrokerageagency. DefendantGillesMouawasan
independentsalescontractorforFFSanditspredecessorGlobalGroupFinancial
(GGF)from2003untilhisresignationonMay10,2014. In2005,Mouawas
promotedtoExecutiveFieldChairman(EFC)andasofMay2013,hewasFFSs
highestpaidEFC1. Priortohisresignation,therewereapproximately14,700sales
contractorson
his
team,
of
which
1,404
were
licensed.
Defendant
Mai
Lee
lives
withMoua,andwasalsoalicensedsalescontractorforFFSuntilherresignation
onMay10,2014.
AllFFScontractorsmustsignaSalesContractAgreement(Agreement),
which
prohibits
the
sales
contractor
frominteralia
,
inducing
an
FFS
customer
to
1FFSassertsthatMouassalesteamrepresented42%ofFFSs2013commissionincome
of$25,500,000,andsince2007,FFShaspaidMouaover$6millionincommissions.
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terminateorreducetheircoverage,inducinganotherFFScontracttoterminate
theiraffiliationwithFFS,usingconfidentialinformationortradesecretsofFFS
andsoliciting
other
contractor
to
purchase
produces
other
than
those
offered
by
FFS.
OneofMouasdownlineagentswasSouksakhoneKhammanivong. She
testifiedthatshewasamemberofthechampionclub,asshehadearnedover
$100,000incommissionsinthecourseofoneyear. Khammanivongisaresident
ofTexasandhasvisitedMinnesotaforleadershipmeetingswithMoua,Leeand
othersinthechampionclub. Shetestifiedthatsheattendedonesuchmeetingin
March2014inSt.Paul,Minnesota,andatthismeeting,Mouabeganpromoting
thethemethatadividedLaoswilldieandaunitedLaoswilllive. Thissame
themewas
also
brought
up
during
an
FFS
dream
destination
cruise
that
MouasteamwasawardedinApril2014.
OnMay10,2014,keymembersofMouasFFSsalesteamwerescheduled
tomeetat1:00p.m.attheofficeofAndreMoua,GillesMouasson,in
Woodbury,
Minnesota.
(Testimony
of
Souksakhone
Khammanivong
and
Saveng
Vongkhamsene.) ThemorningofMay10,2014,however,Khammanivong
receivedaphonecallfromMouaslieutenant,NoneiVorasane,tellinghertogo
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informedtheteammemberstoallowpoliciesatFFStolapse,andthenresign
thematFEG. MaiLeealsoexplainedtothemembersthatwithregardtoresidual
income
still
owed
to
them
by
FFS,
team
members
should
ask
FFS
nicely
for
such
payments.
Afterthepresentation,teammemberswereprovidedassistancetoresign
fromFFS. Threelaptopsweresetupinthebasement,andCharlesMoua,Nonei
VorasaneandothersprovidedassistancetothosewhowantedtoresignfromFFS
andenlistwithFEG.
Khammanivongtestifiedthatthroughouttheday,moreteammembers
arrivedatMouashome,andthatitappearedthemoredownlineanagentwas,
thelatertheyshowedup. SavengVonkhamsenewasaregionalmarketing
directorand
downline
agent
from
Khammanivong,
and
he
testified
that
he
arrivedatMouashomelaterintheafternoonafterhereceivedatextmessage
fromNoneiVorasane. (PlaintiffsEx.3.) UponarrivalatMouashome,
Vonkhamsenetestifiedthathewasgiventhenonsolicitationformtosign,and
toldthathehadtosigntheformorleaveMouashome. Noneiclarifiedthatin
orderforVonkhamsenetohearwhatwasgoingtohappen,hehadtosignthe
form. Becausehebelievedthathecouldonlygettrainingifhesignedtheform,
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Vonkhamsenedidso. Hewasthendirectedtogotothebasementwhereother
teammemberstoldhimhewouldhavetoresignfromFFStohearaboutthebig
move.
Vonkhamsene
testified
that
he
did
not
want
to
resign
from
FFS,
but
eventuallyhedidsobygivinghisiPadtoScottNhativongsothathecouldsend
aresignationemailtoFFS. AfterresigningfromFFS,Vonkhamsenetestifiedthat
hejoinedFEG.
BothMouaandLeetestifiedthattheyresignedfromFFSatapproximately
6:00a.m.onMay10,2014. LeetestifiedthatMouadidnottellherthathewas
resigninguntilthatmorning. Althoughtheybothtestifiedthatmanyoftheir
teammemberscametotheirhomelaterthatday,andthattheyweregiventhe
nonsolicitationformstosign,theydidnotinvitethem. Instead,theteam
memberscame
to
Mouas
home
on
their
own
after
they
discovered
that
their
accesstotheFFSwebsite fromwhichtheydidbusiness hadbeenblocked.
MichaelHardin,FFSVicePresidentofSalesManagement,testifiedthatasa
matterofordinarybusinesspractice,whenanagentresignedfromFFS,his/her
accesstotheFFSwebsitewouldbeblocked. Withrespecttothiscase,Hardin
testifiedthatheonlyblockedanagentsaccessafterthatagenthadresigned.
FollowingtheresignationsofMouaandLee,FFSreceivedmass
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resignationsfromagentsdownlinefromthem. (TestimonyofMargaretJones.)
JonesbelievedthattheorderinwhichMouasteamresignedwasimportant,
because
it
allowed
the
Moua
hierarchy
to
remain
intact
when
it
moved
to
FEG.
ByMay22,2014,FFSreceivedover1,300resignations. ByJune4,2014,FFS
alsoreceived74NoticesofCancellationsofapplicationsassociatedwiththe
resigningsalesteam. FFSalsoreceivednoticesofchargebacks2frominsurance
companies;someofwhicharebasedontheaforementionedapplication
cancellationsandothersarebasedonacustomersfailuretopay.
FFSbroughtthisactionassertingclaimsofbreachofcontractand
misappropriationoftradesecrets. FFSmovesforpreliminaryinjunctivereliefto
preventDefendantsfromusingordisclosingconfidentialinformationofFFSand
fromsoliciting,
recruiting,
inducing
or
otherwise
engaging
any
FFS
sales
contractorstoterminatetheirrelationshipwithFFStobecomeassociatedwith
FEGoranyotherFFScompetitor. FFSalsoseekstoenjoinDefendantsfrom
workingwithFFScustomers.
III. Motion
to
Set
Aside
Default
2AchargebackbasedonfailuretopayrequiresFFStorepaycommissionstothecarrier.
FFSthenpassesthechargebacktothesalescontractor,whoisthenrequiredtorepayFFS.
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Here,theDefendantsareHmongimmigrantswithlimitedEnglishskills
andtheydidnotrealizetheimportanceofthedocumentstheyreceivedwhen
personally
served.
At
the
time
of
service,
both
were
in
the
process
of
moving
backtoCaliforniaandlosttrackofthepackageandfailedtoforwardittoa
lawyer. Theyarguethattheyfailedtotimelyanswerthisactionduetoalackof
comprehensionandinadvertentcarelessness,nottointentionallydelaythese
proceedings.
FFSdisputesDefendantsrepresentationsthattheylackedcomprehension
oftheimportanceofthesummonsandcomplaintanddefensecounsels
representationsthatwhenhedidcommunicatewithPlaintiffscounsel,he
believedhewastalkingaboutaseparatecasethatinvolvedthesameparties. At
thistime,
however,
the
Court
finds
that
Defendants
did
not
engage
in
conduct
thatweighsagainstsettingasidethedefaultenteredagainstthem.
B. Meritorious
Defense
Thisfactorfocusesonwhetherthedefaultingpartyhaspresentedevidence
thatwouldpermitafindingforthedefaultingparty,notthattheevidenceis
undisputed.Johnson,140F.3dat785. Atthistime,Defendantsdenythe
allegationsandhaveprovidedtestimonythattheydidnotinduceagentstoleave
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asMouaandLeehaverecentlymovedtoLongBeach,California.
Fortheconvenienceofpartiesandwitnesses,intheinterestofjustice,a
district
court
may
transfer
any
civil
action
to
any
other
district
or
division
where
itmighthavebeenbrought. 28U.S.C.1404(a). Thedeterminationofwhether
totransfervenueofaparticularcaserequire[s]acasebycaseevaluationofthe
particularcircumstancesathandandaconsiderationofallrelevantfactors.
TerraIntl,Inc.v.Miss.Chem.Corp.,119F.3d688,691(8thCir.1997). To
prevailonamotiontotransfer,themovantmustshowthathisinconvenience
substantiallyoutweighstheinconveniencethatplaintiffwouldsufferifvenue
weretransferred. Nelsonv.SooLineR.Co.,58F.Supp.2d1023,1026(D.Minn.
1999).
A. Convenience
of
the
Parties
DefendantsassertthattheyliveinLongBeach,Californiaanditwouldbe
ahardshiptoforcethemandtheircounseltoflytoMinnesotaandtoforcethem
toinducewitnessestoattendtrialinMinnesota. Defendantsfurtherassertthat
alloftheirbooksandrecordsareinCaliforniaandthatmanyoftheagentsthat
FFSallegeswereinducedtoleaveFFSbyDefendantsalsoliveinCalifornia.
TheyfurtherassertaCaliforniavenuewillnotimposeahardshiptoFFS,whichis
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alargeinsurancecompanywithvastresources.
TheCourtfindsthatDefendantshavenotdemonstratedthatthe
convenience
of
the
parties
substantially
weighs
in
favor
of
transfer.
There
is
no
disputethatwhenservedcopiesofthesummonsandcomplaintinthismatter,
DefendantswerelivingintheirhomeinWayzata,Minnesota. Despitehaving
movedtoCalifornia,DefendantstillowntheirhomeinMinnesota. FFShasalso
submittedevidencetoshowthatsincethisactionwasfiled,Defendantshave
returnedtoMinnesotaontwooccasionsforthepurposeofmeetingwith,and
rallying,theirsalesteam. (DavidsonDecl.Exs.EandF.) Further,Defendants
havenotdemonstratedthatthelocationofrelevantrecordsanddocuments
substantiallyweighsinfavoroftransfertoCalifornia.
B. Convenience
of
the
Witnesses
DefendantsassertthatitwillbeeasiertotrythiscaseinCaliforniaas
DefendantswillneedtocalldozensofCaliforniaresidentsaswitnessestomount
aneffectivedefense.
AlthoughDefendantshaveprovidedalistofthenamesofsuchwitnesses,
theyhavefailedtodemonstratethatsuchpotentialwitnessesarematerialtotheir
defense. SeeReidWalenv.Hansen,933F.2d1390,1396(8thCir.1991)(finding
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thatthecourtmustexaminethematerialityandimportanceofanticipated
witnesstestimony,thendeterminetheiraccessibilityandconveniencetoforum).
It
is
Defendants
burden
to
make
such
a
showing.
Wells
Fargo
Fin.
Leasing,
Inc.
v.NCHHealthcareSys.,756F.Supp.2d1086,110102(S.D.Iowa2012).
Inaddition,FFShaspresentedevidencewhichdemonstratesthatofthe
approximate1,400FFSagentsthatresignedandfollowedDefendantstoFEG,
only30haveCaliforniaaddresses,while335haveaddressesinMinnesota.
(ManzerDecl.Ex.A.)
C. InterestsofJustice
Whenaddressingthisfactor,courtshaveconsideredthefollowing:judicial
economy;plaintiffschoiceofforum;comparativecoststotheparties;each
partysability
to
enforce
ajudgment;
obstacles
to
afair
trial;
conflict
of
law
issues
andtheadvantagesofhavingalocalcourtdeterminequestionsoflocallaw.
TerraIntl,Inc.,119F.3dat696.
TheCourtfindsthattheinterestsofjusticeweighinfavorofdenyingthe
motiontotransfer.JudicialeconomyfavorsMinnesota,asthisCourtisalready
familiarwiththefactsandcontentionsofthiscase. Theplaintiffschoiceof
foruminthiscasefavorsMinnesota,andFFSfiledthiscaseinMinnesotaas
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DefendantswereresidentsofMinnesotaatthetimeoffiling. Minnesotaisalso
closertoFFSsheadquartersinNorcross,GA. Finally,theconductatissueinthis
case
took
place
in
Minnesota.
BecauseDefendantshavefailedtomeettheirburdenofdemonstratingthat
transfertoCaliforniaiswarranted,themotiontotransfervenuewillbedenied.
V. StandardforPreliminaryInjunctiveRelief
Thelawiswellsettledthatinordertoobtainpreliminaryinjunctiverelief,
aplaintiffmustshowalikelihoodofirreparableharmintheabsenceofthe
injunction. Winterv.NaturalRes.Def.Council,Inc.,555U.S.7,22(2008). The
Courtalsoconsidersthebalancebetweensuchharmandtheinjurythatgranting
theinjunctionwillinflictonotherparties,Plaintiffslikelihoodofsuccessonthe
merits,and
the
public
interest.
Dataphase
Sys.,
Inc.
v.
C
L
Sys.,
Inc.,
640
F.2d
109,
114(8thCir.1981)(enbanc).
A. Likelihood
of
Success
on
the
Merits
DefendantsassertthattheyhaveneversolicitedagentsorclientsofFFS,do
nothaveanyFFScustomerlistsorotherproprietaryinformation. (MouaDecl;
LeeDecl.) Inhisdeclaration,forexample,MouaexplainsthatheisaHmong
immigrantwhoseEnglishisnotverygood. (MouaDecl.2.) Hefurtherstates
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thatmanyoftheagentsunderhimwhileheworkedforFFSwerealsoHmong,
andafterheresigned,manyoftheseagentstoldhimthathehadgiventhemthe
good
life
and
that
they
left
FFS
on
their
own,
and
that
Moua
never
instructed
orevenencouragedthemtoleaveFFS. (Id.5.) MouafurtherstatesthatFFS
wrongfullytoldpeoplethatithadfiredMouaandthatFFSautomatically
assumedhisdownlineagentswereleavingwithhimandproceededtoblockthe
accessofMouasdownlineagentsfromtheFFSwebsite. (Id.) Theseagents
neededaccesstotheFFSwebsiteinordertodobusiness. (Id.)
Mouafurtherstatesthathedoesnotknowbutahandfulofthealleged
1,400agentsthatleftFFSandonlycommunicatedwithafewofthem. (Id.7.)
MouastatesthattherealreasonforthemassexodusfromFFSisfoundinthe
Hmongculture.
(Id.
10.)
When
he
came
to
the
United
States,
he
was
apoor
immigrant,andhisfirstjobwasonafarm.(Id.) WhenhesignedupforFFS,FFS
hadfewagents,andMouaworkedveryhardtoenlistotherHmongimmigrants
intohisFFSsalesnetwork. (Id.) MouafurtherstateshedoesnothaveanyFFS
customerlists,assuchlistsarelocatedontheFFSwebsite,towhichMouano
longerhasaccess. (Id.11.)
Inherdeclaration,MaiLeestatesthatsheisaHmongimmigrant. (Lee
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Decl.2.) ShefurtherstatesthatshehasneversolicitedanyagentstoleaveFFS,
hasnottriedtomoveclientsawayfromFFSandhasnocustomerlists. (Id.3
7.)
Both
Moua
and
Lee
also
testified
at
the
evidentiary
hearing
consistent
with
theirdeclarations.
DefendantsarguethatFFShasnotdemonstratedthatitislikelytosucceed
onthemeritsoftheirclaimsofbreachofcontractandmisappropriationoftrade
secrets. DefendantsfurtherarguethatevenifFFScoulddemonstratesuccesson
theirclaims,FFSwillnotsufferirreparableharmifthepreliminaryinjunctive
reliefisnotgranted. Further,theyarguethepublicinterestweighsinfavorof
allowingpeopletoearnalivelihood.
Basedontherecordcurrentlybeforeit,theCourtfindsthatFFShas
demonstratedalikelihood
of
success
on
the
merits
of
its
claims
that
Defendants
havebreachedtheAgreementbyinducingfellowFFScontractorstoterminate
theiraffiliationwithFFSandbyrefusingtoreturnconfidentialinformationin
violationofthesalescontractoragreementintheformofcontractorlists,
customerlistsandcustomerinformationinviolationofSectionC(4)ofthe
Agreement.
ThetestimonyofSouksakhoneKhammanivongandSaveng
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VongkhamsenedemonstratedthatpriortoMay10,2014,Defendantssetin
motionaplantomovetheirsalesteamfromFFStoFEG. First,Defendants
presented
a
theme
at
recent
leadership
meetings
that
a
divided
Laos
will
die
whileaunitedLaoswilllive. Defendantsalsoarrangedfortheirtopleadersto
beinMinnesotaonMay10,2014byschedulingaleadershipmeetingatthe
officesofAndreMouainSt.Paul,Minnesota. Atthelastminute,Mouas
lieutenantcalledorsenttextmessagestothesalesteam,inorderoftheir
placementintheteamhierarchy,tellingthemtogotoMouashomeinsteadof
theoffice. OnceatMouashome,allteammembersweretoldtheyhadtosigna
nonsolicitationforminordertostayandhearwhatwouldhappennext. Both
KhammanivongandVongkhamsenetestifiedthattheywereconfused,butfelt
theyhad
no
choice
but
to
sign
the
non
solicitation
form,
resign
from
FFS
and
join
FEG,inordertomaintaintheirlivelihood. Khammanivong,whowasamember
ofthechampionclub,waspresentwhenMouagaveapowerpointpresentation
highlightingthebenefitofmovingtoFEG.
FFSalsopresentedevidencetoshowthatfollowingDefendants
resignations,itrequestedDefendantstoreturnanyconfidentialFFSinformation
theyhadintheirpossession,suchasFFScontractorandcustomerlists,andthat
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boththeDefendantseitherfailedtorespondorrefusedtoreturnsuch
information.
B. Irreparable
Harm
Thisfactorrequiresapartyseekingpreliminaryinjunctiverelieftoshow
thattheharmiscertainandgreatandofsuchimminencethatthereisaclearand
presentneedforequitablerelief. IowaUtil.Bd.v.F.C.C.,109F.3d418,425(8th
Cir.1996). Itisalsowellsettledthateconomiclossdoesnot,inandofitself,
constituteirreparableharm....Recoverablemonetarylossmayconstitute
irreparableharmonlywherethelossthreatenstheveryexistenceofthe
[petitioner]sbusiness. PackardElevatorv.I.C.C.,782F.2d112,115(8thCir.
1986).
Courtsmay
infer
irreparable
harm
when
aformer
employee
breaches
an
enforceablerestrictivecovenant. Medtronicv.Gibbons,527F.Supp.1085,1090
91(D.Minn.1981);Thermorama,Inc.v.Buckwold,125N.W.2d844,845(Minn.
1964). Inaddition,Minnesotacourtshavefoundthatinjunctivereliefis
appropriatetopreventirreparableinjuryfromwrongfuluseofconfidential
information. Salitermanv.Finney,361N.W.2d175,179(Minn.Ct.App.1985).
TheCourtfindsthatFFShassufficientlydemonstratedthatitwillsuffer
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irreparableharmiftherequestedinjunctivereliefisnotgranted. FFShas
sufficientlydemonstratedinjunctivereliefisnecessarytopreventDefendants
from
continuing
to
solicit
sales
contractors
on
Defendant
Mouas
former
sales
teamtoleaveFFSandjoinhimatFEG.
Inadditiontotheevidencethatover1,400membersofDefendantsFFS
salesteamresignedshortlyafterDefendantssubmittedtheirresignations,the
recorddemonstratesthatover13,000ofMouasformersalesteamremainatFFS.
FFShasthusdemonstratedthatinjunctivereliefisrequiredtoprevent
Defendantsfromfurtherinducingtheirformersalesteamfromjoiningthemat
FEG.
TherecordalsosufficientlydemonstratesthatDefendantshaverefusedto
returnconfidential
information
in
violation
of
the
Agreement
in
the
form
of
contractorlists,customerlistsandcustomerinformationinviolationofSection
C(4)oftheAgreement. FFSisthusentitledtoaninferenceofirreparableharm.
SeeModernControls,Inc.v.Andreadakis,578F.2d1264,1270(8thCir.1978)
(recognizingthatdisclosureofconfidentialinformationmaybedisclosedinways
moresubtlethanoutrightdisclosuretoathirdparty,suchastheinabilityofa
formeremployeetopreventhisknowledgeofhisformeremployersconfidential
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covenantsincontracts. SeeEmersonElec.Co.v.Rogers,418F.3d841,847(8th
Cir.2005);Kremersv.Dahl,No.A130367,2014WL273966at*10(Minn.Ct.
App.,
Jan.
21,
2014)
(finding
that
Minnesota
law
favors
the
enforcement
of
valid
contracts). Accordingly,thisfactorweighsinfavorofgrantingthepreliminary
injunctivereliefrequested.
ITISHEREBYORDERED:
1. DefendantsMotiontoSetAsideDefault[Doc.No.54]isGRANTED;
2. DefendantsMotiontoTransferVenue[Doc.No.60]isDENIED;
3. FFSMotionforPreliminaryInjunctiveRelief[Doc.No.7]is
GRANTED;
4. EachDefendantmustceasealluseofFFSconfidentialtradesecrets,
includingFFS
sales
contractor
lists
and
customer
lists;
5. ForaperiodofoneyearcommencingMay10,2014,eachDefendant
mustceasesoliciting,recruiting,inducingorotherwiseengagingany
FFScontractorstoleaveFFStoworkinconnectionwith,orinany
waybeassociatedwithFEGoranyotherFFScompetitor;
findsthatatwoyearperiodisoverbroad,andwilllimitinjunctiverelieftoaoneyearperiod
commencingthedateDefendantsresignedfromFFS.
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6. ForaperiodofoneyearcommencingMay10,2014,eachDefendant
isenjoinedfrominducingFFSsalescontractorsfrombreachingthe
Agreement;
7. ForaperiodofoneyearcommencingMay10,2014,eachDefendant
isenjoinedfromworkingwithFFScustomers;and
8. FFSshallpostabondintheamountof$100,000.
Date: September4,2014 s/MichaelJ.Davis
MichaelJ.Davis
ChiefJudge
UnitedStatesDistrictCourt
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