United States District Court, D. Colorado
DIGITALGLOBE, INC., a Delaware corporation, and DIGITALGLOBE INTELLIGENCE SOLUTIONS, INC., a Delaware corporation, Plaintiffs,
LOUIS PALADINO, an individual, Defendant.
ORDER DENYING PLAINTIFFS' MOTION FOR PRELIMINARY
William J. Martinez, United States District Judge
DigitalGlobe, Inc. (“DigitalGlobe”) and
DigitalGlobe Intelligence Solutions, Inc.
(“DGIS”) (together, “Plaintiffs”) sue
a former employee, Defendant Louis Paladino
(“Paladino”), for breach of contractual covenants
of noncompetition, nonsolicitation of Plaintiffs'
employees, and nondisclosure of Plaintiffs' trade
secrets. Currently before the court is Plaintiffs'
Renewed Motion for Preliminary Injunction. (ECF No. 25.) The
Court has received and reviewed Paladino's response (ECF
No. 26) and Plaintiffs' reply (ECF No. 29). The Court
held an evidentiary hearing (“Preliminary Injunction
Hearing”) on August 30, 2017. (ECF No. 39.) The Court
then called for simultaneous further briefing on certain
lingering questions. (ECF No. 41.) The Court has received and
reviewed the parties' supplemental briefs. (ECF Nos. 45,
46.) Having considered the record as a whole as it currently
stands, the Court denies Plaintiffs' motion for a
preliminary injunction for the reasons explained below.
FINDINGS OF FACT
preliminary injunction record supports the following findings
are in the business of satellite mapping and a host of
related services. DGIS in particular focuses heavily on
providing services to the Department of Defense. DGIS's
main business emphasis is geospatial predictive analysis,
which involves gathering various data sets (mostly, satellite
imagery and photos in social media posts) to more-or-less
surveil the world, “extract[ing] information of
military interest, to inform predictions of where and when
events will occur.” (ECF No. 46 at 3.)
began working in this field in 2006, when he joined a company
that later merged with another company named GeoEye
Analytics, Inc. (“GeoEye Inc.”). In 2013, GeoEye
Inc. went through a complicated series of transactions and
emerged as a subsidiary of Plaintiff DigitalGlobe named
GeoEye Analytics, LLC (“GeoEye LLC”). GeoEye LLC
eventually changed its name to DigitalGlobe Intelligence
Solutions- Plaintiff DGIS in this lawsuit. Despite the
acquisitions, name changes, and so forth, Paladino's
employers have always been based in Washington, D.C., or its
suburbs, and that is where Paladino has lived and worked. The
current parent entity, DigitalGlobe, is headquartered in
(before GeoEye Inc. became a DigitalGlobe subsidiary),
Paladino began leading a GeoEye Inc. team of 4-5 employees on
a classified geospatial predictive analysis project for the
Defense Intelligence Agency (“DIA”) that went by
the designation “DRI-7.” Paladino's title at
the time was “Senior Manager - Geospatial.” His
duties toward his subordinates were relatively limited. He
delegated responsibilities to them and he contributed to
their annual reviews, but they did not report directly to him
and he had no hiring or firing authority (although he
participated in hiring interviews). Paladino had three layers
of DGIS management above him.
number of subcontractor employees from other companies also
worked on DRI-7, including competitor firms named MDA,
BigBear, and STR. All three of these firms will play a role
in the events that led to Paladino's falling-out with
DGIS, described below. But, at the time Paladino began work
on DRI-7 in 2009, DGIS had yet to come into existence.
December 2010, GeoEye Inc. required Paladino to sign an
Employee NonDisclosure Agreement (“GeoEye NDA”).
(Plaintiff's Preliminary Injunction Hearing Exhibit
(“PX”) 3.) The GeoEye NDA prohibits solicitation of
employees, and of “any customer or client of the
Company with whom the Employee had dealings or about whom the
Employee acquired proprietary information, ” for one
year after the end of the employee's employment with
GeoEye. (Id. §§ D, E.) It also prohibits
disclosure of “Proprietary Information” for three
years after the end of the employee's employment.
(Id. § B.) “‘Proprietary
Information' means information or material proprietary to
the Company and not generally known by people not affiliated
with the Company.” (Id. § A.)
and Paladino's role in it continued after GeoEye
Inc.'s 2013 acquisition and eventual name change to DGIS.
Also in 2013, GeoEye LLC (soon to be DGIS) required Paladino
to assent to the “Employee Invention, Confidential
Information, Noncompetition and Non-Solicitation
Agreement” (“2013 Agreement”). (PX
It contains a 1-year noncompetition clause with respect to
“direct business lines, including, but not limited to,
satellite and aerial imagery operations, product
distribution, mapping and other value added services”
(id. § 6); a 1-year
nonsolicitation-of-employees clause (id. § 8);
and an indefinite nondisclosure agreement regarding
“Business Confidential Information” (id.
§ 2), defined as “certain information, including,
but not limited to, business plans, customer lists, marketing
programs, price lists, salary and human resource information,
technology development information, drawings, reports,
inventions, and other material[s] that contain, embody or
disclose trade secrets, confidential business and technical
information and proprietary business information of the
Company” (id. § 1).
between 2014 and 2016 (the evidence points in various
directions), DGIS promoted Paladino to “Director of
Geospatial, ” making him the “site lead [for
DGIS] at DIA” (Preliminary Injunction Hearing
Transcript (“Tr.”) at 239) and responsible for
about thirty DGIS employees. In this position, there was only
one layer of management between him and DGIS's CEO.
2015, DGIS filed a patent application for certain technology
that arose from the DRI-7 work. This upset Terry Busch, the
DIA employee in charge of DRI-7. Busch believed that the
technology in question had been developed with government
dollars and therefore should not be proprietary to DGIS.
in 2016, DigitalGlobe required Paladino to sign an Employee
Stock Option Plan (“Stock Option Plan”). (PX
Despite primarily governing stock options, the Stock Option
Plan also contains a 1-year noncompete provision
(id. § 24(d)(i)), a 2-year nonsolicitation
provision (id. § 24(d)(ii)), and an indefinite
nondisclosure provision (id. § 24(b)).
2016, DIA awarded DGIS a “sole-source”
(i.e., no-bid) contract to continue developing a
geospatial predictive analysis tool known as “Signature
Analyst.” This contract could last up to five years.
Year one was guaranteed and years two through five are known
as “option years.” Whether to exercise those
options is within DIA's discretion. Paladino was in
charge of DGIS's performance under this contract.
DIA's urging, part of what DGIS explored in the first
year of this contract was “I&W, ” short for
“indicators and warnings.” I&W is a
particular approach to geospatial predictive analysis. The
parties have not explained how I&W differs from other
approaches, because those details are classified. In any
event, Paladino's team at DGIS diligently developed
is some dispute-not relevant to the present
proceedings-whether I&W was properly within the scope of
DGIS's sole-source contract. Regardless, all parties
agree that DIA frequently uses existing “contract
vehicles” to explore potentially out-of-scope ideas,
with an eye toward proving their feasibility and then
establishing a new “contract vehicle”
specifically focused on a proven-feasible idea. Whether or
not I&W was out of the scope of DGIS's sole-source
contract, the parties expected that DIA would eventually
place I&W work under its own contract.
January 2017, DIA exercised the first option year under
DGIS's contract, but chose to fund only about $5.6
million of the $9.6 million available for that year. In
February 2017, news leaked that MDA was planning to acquire
DigitalGlobe. This further upset the DIA's Busch, due to
an incident a few years previous in which a contract dispute
allegedly prompted MDA to cut off a data stream that was
highly important to an in-progress, boots-on-the-ground
military operation. DIA had since excluded MDA from DRI-7.
merger announcement caused concern for many DGIS employees,
who feared that DIA would terminate DGIS's participation
in DRI-7. Paladino was all the more worried given his
knowledge of Busch's lingering resentment over DGIS's
patent application. Paladino's specific worries deepened
in March 2017 when DGIS's patent application was granted,
and then, later in the month, DGIS began touting another
allegedly proprietary technology as if it had been developed
in-house, although Busch believed that it too had been
developed with government dollars.
this time, Paladino began to consider leaving DGIS. At first
he explored starting his own company. He specifically
discussed this idea with Frank Porcelli, CEO of BigBear, who
had co-founded BigBear and therefore had advice to offer on
that process. He also organized meetings with certain DGIS
employees to discuss forming a new business. Nonetheless,
Paladino continued his attempts to solidify DGIS as DIA's
first choice for I&W work.
2017, a DIA employee named Joe Hartenstine began assuming
Busch's role as DIA supervisor of DRI-7. Paladino learned
that Hartenstine planned to shift the I&W exploratory
work to a different “contract vehicle, ” namely,
a sole-source contract previously awarded to STR, with
BigBear as the relevant subcontractor. With an interesting
mix of metaphors, Paladino describes this revelation as the
event that finally prompted him to leave DGIS:
And that was really, so to speak, the straw that broke the
camel's back. That, you know, after seeing that writing
on the wall, which to me that writing on the wall appeared
like a big neon sign on DRI-7's leadership's, you
know, future direction, I decided to leave DGIS.
(Tr. at 263.) Paladino gave notice to his DGIS superiors on
June 1, 2017, and his last day at DGIS was June 16, 2017. In
between those dates, he applied for a posted position at
BigBear. The record does not reveal precisely when BigBear
extended an offer or when Paladino accepted it, but he
started with BigBear in “late June” of 2017. (Tr.
29, 2017, Hartenstine (or someone of similar authority at
DIA) directed DGIS to stop work on I&W, because that work
was going to BigBear. Paladino thus continues to work for
BigBear on the I&W development he had been doing for
DGIS. Five other DGIS employees have since joined Paladino at
BigBear to work on I&W. Three of those employees were
persons whom he had met with a few months earlier to explore
the idea of starting a new company.
filed this lawsuit on July 5, 2017. (ECF No. 1.) Paladino
learned of the lawsuit around that same time and reacted by
sending an emotional group text message to a number of his
colleagues back at DGIS:
DG is sueing [sic] me for violating my
non-compete[.] They are saying that I am in direct
competition with them. I have to return all my stock grants,
including what I have sold, and [they] are threatening to
continue to sue for lost future work amounts. Even [DGIS CEO]
Tony [Frazier] himself told me that [DGIS's sole-source
contract with DIA] was [at] high risk for [dis]continuation
after the MDA merger, and now he is coming after me and my
family. I wanted to stay close to [DRI-7], and now this. By
doing this DG is going to put fear in others leaving, but I
think they are sending the message that their employees are
being held hostage.
ask that Paladino be enjoined from
(i) owning, managing, operating, joining, controlling,
providing services to, or serving as an employee, agent,
consultant, officer or director of BigBear, Inc. or any
entity engaging in geospatial predictive analysis, including
the use of machine learning to perform I&W analysis and
automate object detection from satellite imagery and ground
photos; (ii) directly recruiting, soliciting, or attempting
to persuade any DGIS employee to leave employment with DGIS
for the purpose of employing him or her at any such entity;
[and] (iii) using or disclosing DGIS Business Confidential
Information as defined in Paragraph 1 of the [2013
(ECF No. 46 at 11-12.)
PRELIMINARY INJUNCTION STANDARD
preliminary injunction is an extraordinary remedy;
accordingly, the right to relief must be clear and
unequivocal. See, e.g., Flood v. ClearOne
Commc'ns, Inc., 618 F.3d 1110, 1117 (10th Cir.
2010). A movant must show: (1) a likelihood of success on the
merits, (2) a threat of irreparable harm, which (3) outweighs
any harm to the non-moving party, and that (4) the injunction
would not adversely affect the public interest. See,
e.g., Awad v. Ziriax, 670 F.3d 1111, 1125 (10th
recently, the Tenth Circuit endorsed an alternate standard
that relaxed the likelihood of success requirement when the
other three factors tipped strongly in the movant's
favor. See, e.g., Oklahoma ex rel. Okla. Tax
Comm'n v. Int'l Registration Plan, Inc., 455
F.3d 1107, 1113 (10th Cir. 2006). The Tenth Circuit abrogated
this standard last year, announcing that “any modified
test which relaxes one of the prongs for preliminary relief
and thus deviates from the standard test is
impermissible.” Diné Citizens Against
Ruining Our Environment v. Jewell, 839 F.3d 1276, 1282
(10th Cir. 2016).
Federal Rules of Evidence do not apply to preliminary
injunction hearings.” Heideman v. S. Salt Lake
City, 348 F.3d 1182, 1188 (10th Cir. 2003). The fact
that evidence might be excludable goes to the weight of that
evidence, not necessarily its admissibility. See,
e.g., Pharmanex, Inc. v. HPF, 221 F.3d 1352
(table), 2000 WL 703164, at *3 (10th Cir. 2000).
Likelihood of Success
sue Paladino for breach of contractual covenants of
noncompetition, nonsolicitation of Plaintiffs' employees,
and nondisclosure of Plaintiffs' trade secrets.
Plaintiffs also sue for breach of the duty of loyalty, but
that claim is not at issue in these preliminary injunction
Which of the Three Contracts Applies?
the Court can evaluate Plaintiffs' likelihood of success
on any of their contract theories, the Court must first
determine which contract applies. As noted above, Paladino
has signed three similar agreements: the GeoEye NDA, the 2013
Agreement, and the Stock Option Plan.
2013 Agreement specifically states that it supersedes any
prior agreement between the employee and what was then GeoEye
LLC (which later changed its name to DGIS). (PX 1 §
9(b).) Thus, there appears to be no circumstance under which
the GeoEye NDA is still enforceable.
the Stock Option Plan, its covenants of noncompetition,
nonsolicitation, and nondisclosure are stated as conditions
for obtaining and keeping stock option awards, and violation
of any of them allows DigitalGlobe to rescind and/or
recapture those awards. (PX 2 § 24(a).) It is not clear
that these provisions are enforceable apart from that
purpose. (Cf. Tr. at 18 (Plaintiffs'
counsel's acknowledgment that “the relief on the
stock option agreement is that DigitalGlobe gets back the
stock if he breaches”).) The Court therefore finds the
Stock Option Plan irrelevant for present purposes.
leaves only the 2013 Agreement, and that is the focus of the
Court's analysis below.
Is the Noncompete ...