FIRST WESTERN CAPITAL MANAGEMENT COMPANY, a Colorado corporation; FIRST WESTERN FINANCIAL, INC., a Colorado corporation, Plaintiffs - Appellees,
KENNETH D. MALAMED, Defendant-Appellant.
from the United States District Court for the District of
Colorado (D.C. No. 1:16-CV-01961-WJM-MJW)
on the briefs:[*]
B. Goss, Orrick Herrington & Sutcliffe LLP, Los Angeles,
California and Paul H. Schwartz, Shoemaker Ghiselli &
Schwartz, LLC, Boulder, Colorado, for Appellant.
Timothy R. Beyer and Sarah L. Hartley, Bryan Cave LLP,
Denver, Colorado, for Appellee.
McKAY, MATHESON, and McHUGH, Circuit Judges.
MATHESON, Circuit Judge.
Western Capital Management ("FWCM"), an investment
management company, and its parent company First Western
Financial, Inc. (collectively, "First Western"),
sought a preliminary injunction against former employee
Kenneth Malamed for misappropriating trade secrets. The
district court excused First Western from demonstrating
irreparable harm-one of the four elements a party seeking
injunctive relief is typically required to prove-and granted
the injunction. Mr. Malamed appeals. Exercising jurisdiction
under 28 U.S.C. § 1292(a)(1), we reverse.
Western is headquartered in Denver, Colorado. In 2008, it
acquired Financial Management Advisors, LLC
("FMA"), an investment firm Mr. Malamed founded in
1985 primarily to serve high net worth individuals and
entities such as trusts and foundations. After selling FMA,
Mr. Malamed worked for FWCM from 2008 until FWCM terminated
him on September 1, 2016.
early 2016, a committee of FWCM directors began discussing
the possibility of selling FWCM to another company. Although
Mr. Malamed was not involved in these discussions, he learned
about the potential sale and, in a meeting with other FWCM
officers, expressed his displeasure with the buyer under
consideration. Following the meeting, Mr. Malamed emailed his
assistant asking her to print three copies of his client
book, which contained the names and contact information for
approximately 5, 000 FWCM contacts. Of these contacts, 331
were current FWCM clients and roughly half of those had been
clients of FMA before First Western acquired it. The printout
also contained spreadsheets that included, among other
information, client names, the total market value of their
holdings under management, and the fees being charged by
September 1, 2016, shortly after Mr. Malamed's employment
contract expired, First Western fired him.
September 1, 2016, the same day Mr. Malamed was fired, First
Western served him with a complaint it had filed in federal
court a month earlier. The complaint alleged misappropriation
of trade secrets under the federal Defend Trade Secrets Act
of 2016, 18 U.S.C. § 1836 ("DTSA"), and the
Colorado Uniform Trade Secrets Act, Colo. Rev. Stat.
§§ 7-74-101 et seq. ("CUTSA"), breach of
employment contract, and breach of fiduciary duty. First
Western moved for a temporary restraining order and a
preliminary injunction to prevent Mr. Malamed from soliciting
conducting an evidentiary hearing, the district court issued
a preliminary injunction preventing Mr. Malamed from
"soliciting business from, or otherwise competing for
the business of, any FWCM Client; and . . . from accepting
business offered from any FWCM Client, " with some
exceptions. App., Vol. I at 200. In making this decision, the
court excused First Western from demonstrating one of the
standard requirements to obtain injunctive relief-a showing
of irreparable harm in the absence of an
injunction. Citing our decision in Star Fuel
Marts, LLC v. Sam's East, Inc., 362 F.3d 639 (10th
Cir. 2004), the court said, "[T]he irreparable harm
requirement is excused when the evidence shows that a
defendant is or will soon be engaged in acts or practices
prohibited by statute, and that statute provides for
injunctive relief to prevent such violations." App.,
Vol. I at 196. "Because both the DTSA, 18 U.S.C. §
1836(b)(3)(A), and CUTSA, Colo. Rev. Stat. § 7-74-103,
provide for injunctive relief to prevent misuse of trade
secrets, " and because "Mr. Malamed [was] misusing
or threatening to misuse trade secrets regarding FWCM
clients, " the court determined that "irreparable
harm presumptively exists and need not be separately
established." Id. at 196-97.
First Western not been excused from showing irreparable harm
under Star Fuel, however, the court would have
denied injunctive relief because it determined that money
damages could be "reasonably quantified" and
"would have adequately made [First Western] whole."
Id. at 197 n.5. The court questioned whether
Star Fuel remained good law in light of subsequent
Supreme Court cases "strongly suggest[ing] that no
element of the injunction test should be presumed."
Id. But it concluded that because this court had not
yet addressed that question, it was "bound to follow
[Star Fuel]." Id.
court addressed precisely that question in Fish v.
Kobach, 840 F.3d 710 (10th Cir. 2016), issued just three
weeks after the district court granted First Western the
preliminary injunction. In Fish, we explained that
Supreme Court cases following Star Fuel
"clarif[ied] the narrow circumstances when a presumption
of irreparable injury could apply." Id. at 751
n.24. 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. Id. When Congress passes
such a statute, it effectively withdraws the courts'
traditional discretion to determine whether such relief is
warranted. Id. When, by contrast, a statute merely
authorizes injunctive relief, courts may not presume
irreparable harm, as doing so would be "contrary to
traditional equitable principles." Id.
October 28, 2016, Mr. Malamed appealed, seeking our review of
the preliminary injunction. This is appeal 16-1434. He later
filed two additional appeals-16-1465 and 16-1502-challenging
separate district court orders pertaining to the scope of the
preliminary injunction. This court consolidated the appeals,
and Mr. Malamed filed a single, consolidated opening brief
for all three appeals. Our reversal of the preliminary
injunction in appeal 16-1434 renders the other appeals moot.
discuss: (A) our standard of review, (B) the requirements for
obtaining injunctive relief, and (C) whether First Western is
excused from demonstrating one of those
requirements-irreparable harm. We conclude that First Western
must show irreparable harm to obtain an injunction. Because
the district court had already determined First Western
cannot establish irreparable harm, injunctive relief was not
warranted. We reverse.