Sixth Circuit Does Not Require Clear and Convincing Evidence for Each Preliminary Injunction Element Unless Required by Statute

Yesterday, the Sixth Circuit reversed the denial of a preliminary injunction sought by an employer against a former employee who allegedly absconded with trade secret information for the benefit of his new employer, a competitor. PCC Airfoils LLC v. Daughterty, No. 25-3794 (6h Cir. 5-19-26).    The Court found that the employer need not prove each element of its claim by clear and convincing evidence in order to obtain preliminary injunctive relief.  “Rather than requiring clear and convincing evidence for each preliminary injunction factor, a court should consider all four factors to determine whether, taken together, they clearly weigh in favor of granting injunctive relief.”

According to the Court’s opinion,  a long time employee who had designed turbine airfoils was promoted to director in 2020 and then demoted a year later during a restructuring.  Frustrated, he later resigned to become a director at a competitor.  He did not have a non-compete agreement.  After his resignation, the employer discovered that he had prepared to print four confidential documents two days before leaving and that he had not left those documents in his office upon his departure.    The employer alleged that he “printed several documents containing trade secrets on his way out the door,”  but it could not prove that he actually printed them.   It sued him and his new employer to prevent him from disclosing trade secrets or working on similar products for the competitor.   The trial court denied the requested injunction on the grounds that the employer had failed to prove each element by clear and convincing evidence.

When faced with requests for a preliminary injunction, district courts consider four factors: (1) the plaintiff’s likelihood of success on the merits; (2) the risk of irreparable harm to the plaintiff in the absence of an injunction; (3) the risk that an injunction will harm others; and (4) the broader public interest. . . .

 . . . Courts, generally speaking, should engage with all four factors in a sliding-scale inquiry. A strong showing as to one factor may “outweigh[]” a weaker showing as to another factor. Winter, 555 U.S. at 23–24. After weighing the four factors against one another, a court may grant a preliminary injunction only if a plaintiff has made “a clear showing that [it] is entitled to such relief.” Id. at 22. All of this means that a movant does not need to establish a quantum of proof, whether a preponderance or clear and convincing evidence, with respect to each factor to be eligible for preliminary relief.

Two qualifications exist. If the plaintiff has “no likelihood of success on the merits,” there is nothing left to balance and the plaintiff’s request for a preliminary injunction must fail regardless of its showing on the other factors. Higuchi Int’l Corp. v. Autoliv ASP, Inc., 103 F.4th 400, 409 (6th Cir. 2024) (quotation omitted). Likewise, a court must reject a plaintiff’s request for a preliminary injunction if it fails to show any risk of irreparable injury.

Measured by these requirements, the district court erred in requiring [the employer] to establish “clear and convincing evidence” with respect to each of the four factors in order to be eligible for preliminary relief.  . . .  While a court should “consider” all four factors, it is a sliding-scale inquiry that turns “as much on the equities of a given case as the substance of the legal issues it presents.”  . . .  The necessary showing for any one factor turns on the strength of the plaintiff’s showings for the other factors. Because generalizations are dangerous when it comes to equity, and because the Supreme Court has cautioned that the clear and convincing evidence standard applies in only a few rare circumstances, . . .  a court may not require every plaintiff to meet a heightened standard of proof for every preliminary injunction factor to qualify for injunctive relief. The district court erred in reaching a contrary conclusion.

 . . . .

 . . . Requiring a “clear showing” to obtain a preliminary injunction—because it is an extraordinary form of relief—is not the same thing as requiring “clear and convincing evidence” to establish each of the four factors to establish eligibility for this relief.

Instead of creating a heightened standard of evidentiary proof for each factor individually, the “clear showing” phrase clarifies that, on balance, the four preliminary injunction factors must clearly weigh in the plaintiff’s favor to qualify for injunctive relief.

The Court agreed that an unpublished Sixth Circuit had applied the clear and convincing evidence standard to all four factors, but was not bound by that precedents or later decisions that relief on it.  The Court also agreed that Ohio state court apply the clear and convincing standard to all four elements, but the federal court procedural rules apply to claims brought in federal court, even if the substantive law is governed by Ohio law.  Further, there was no substantive statute requiring use of a higher standard of proof.

Ohio’s rules of equity generally apply the clear and convincing evidence standard to the four preliminary injunction factors.  . . .  Because one of his claims seeks relief under an Ohio statute, [the defendant employee] contends that Ohio’s preliminary injunction rules should apply. But a federal court applies federal procedural rules, even when deciding cases under state law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The preliminary injunction inquiry falls on the procedural side of the line,  . . . requiring us to apply federal, not Ohio, rules. And we treat the preliminary injunction considerations as equitable factors to be weighed, not elements to be proved by clear and convincing evidence.

 . . . .

The clear and convincing evidence standard thus had no role to play in this case. Indeed, as it pertains to the plaintiff’s likelihood of success on the merits, it seems particularly odd to require the plaintiff to prove its case by a higher standard than will be required at trial even before the parties have had the benefit of discovery.  . . .  . . . .

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Upholds Injunction Requiring Firefighter Promotions Based on Disparate Impact from Promotional Examination

Yesterday, the Sixth Circuit Court of Appeals found that a district court did not abuse its discretion in ordering the promotion of 18 white, minority and older plaintiffs to lieutenant and captain positions in the Akron fire department. Howe v. City of Akron, No. 11-3750 (6^th Cir. 7-22-13). The plaintiffs alleged that the 2004 promotional test caused a disparate impact in promotions among minorities and officers over the age of 40 seeking a promotion to lieutenant and among white officers seeking promotion to captain. Among the interesting conclusions in the opinion, the Court relieved the plaintiffs of the burden of establishing which part of the promotional test (i.e., written multiple-choice examination, interview, oral assessment, consideration of seniority level, and written work exercise or group exercise) or element of the promotional process constituted the specific employment practice being challenged as causing the disparate impact without having to show that the elements were incapable of separation. Second, the Court permitted the plaintiffs to prevail by showing there was a disparate impact in the rate of promotions even though there was no statistical disparity in the pass rate on the promotional test because the employees were promoted in rank order of their test scores. Third, the Court found that the trial court had not been required to instruct the jury about the "unusual employer" which engages in reverse discrimination because the employer failed to object during the charge conference and because this was a disparate impact (where motive is not an issue) instead of a disparate treatment case (where motive is an issue). Fourth, because, among other things, the City failed to suggest how to distinguish between worthy and unworthy plaintiffs, there was no abuse of discretion in ordering promotions even though the City had not budgeted for so many promotions and each of the plaintiffs only had a 29% chance of being promoted in the absence of discrimination. Fifth, a delay in promotions necessarily constitutes irreparable injuries to firefighters and back pay is not a sufficient remedy where the lack of experience from a non-promotion will adversely affect the plaintiffs in the next round of promotions. The Court also refused to consider harm to minority non-plaintiff employees who scored higher on the test and would be bypassed by the court-ordered promotions.

 According to the Court's opinion, the liability case was tried in 2008 to a jury, which found the City to have unlawfully discriminated against the 23 plaintiffs – 12 white captain candidates on the basis of race, 8 lieutenant candidates on the basis of age and 3 African-American lieutenant candidates on the basis of age and race. Although the Chief was permitted to interview candidates and select from among a ranked list of the top candidates for each promotion, he always selected the person with the highest test score. There was no statistical disparity in the pass rates on the exam, but there was a statistical disparity in the rate of promotions. Upon the commencement of the litigation, the City stopped making regular promotions off the list and, by July 2011, the Court concluded that there were 25 available vacancies in which to promote the successful plaintiffs and ordered the promotions of 18 plaintiffs. The City appealed the order. The Court also held a new trial on damages in November 2012 and indicated that it might reconsider the injunctive order to promote the plaintiffs. However, no final judgment has been rendered to date.

 In a Title VII case, the plaintiff-employee must make out a prima facie case wherein he identifies "a particular employment practice" that "caused a significant adverse effect on a protected group."

The City argues, citing Grant v. Metro. Gov't of Nashville and Davidson Cnty., 446 F. App'x 737 (6th Cir. 2011), that the district court erred as a matter of law by permitting Plaintiffs to identify the promotional process in its entirety as a specific employment practice without requiring Plaintiffs to first show that the elements of the process were incapable of separation. According to the City, the only employment practices identified by Plaintiffs were the promotional exams, which cannot be said to have had an adverse impact because comparing pass rates did not demonstrate disparate impact based on race or age.

The Court disagreed: "The challenged promotional process in this case is easily distinguishable from that in Grant. Here, the City promoted candidates in rank-order by score results (where the score was the sum of the candidate's exam score plus seniority)."
 
The City next argued that it was an error to allow Plaintiffs to demonstrate an adverse effect from the examination by applying the "four-fifths rule" to the rate of promotions instead of to the exam pass rates. (This rule provides that "[a] selection rate for any race, sex, or ethnic group which is less than four-fifths . . . of the rate for the group with the highest rate" be "generally . . . regarded . . . as evidence of adverse impact." 29 C.F.R. § 1607.4 (D)). "Because we agree with the district court that the promotional process in this case constitutes a specific employment practice, we must also agree that the outcomes of that practice—promotion rates—are the proper metric for determining "adverse effect" or lack thereof." The City did not dispute that application of the rule showed a disparate impact in the promotion rates of minorities and older employees to the lieutenant position. While the City argued that the rule should have been applied to the pass-fail ratios from the examination, the plaintiffs successfully argued that this would be inappropriate where the applicants are promoted based on their test score. The Court refused to follow its prior unpublished decision in United Black Firefighters Ass'n v. City of Akron, 81 F.3d 161, at *2 (6th Cir. 1996) where it noted that the "District Court properly looked to the examination pass rate for black candidates, not the number of actual promotions . . . ."). Moreover, the Court found that the City's use of the "rule of three" (where the top three candidates were considered for each promotion) did not make a difference here where the Chief always promoted the candidate with the top score.
 
The City also disputed that there was any unlawful disparate impact based on race in the captain promotions. It challenged the trial court's refusal to instruct the jury that the plaintiffs must prove that the City was the "unusual employer" that engaged in reverse discrimination. However, the Court found that this objection was waived by not raising it during the charge conference even though it had raised this argument at the summary judgment stage. Moreover, the Court explained that it has had misgivings about the "unusual employer" rule and had never applied it in a disparate impact case where motive – unlike in disparate treatment cases – is irrelevant.
 
While the Court was sympathetic to the City's argument that not all of the plaintiffs would have been promoted in the absence of discrimination, all of them had proven a likelihood to prevail on the merits. 
 

Assuming, for argument's sake, that the City correctly estimates that the average candidate in this case would have only a 29% chance of promotion, there is no way for the district court to give each candidate 29% of a promotion while waiting for a final judgment. Additionally, the City has provided no basis on which to distinguish between worthy and unworthy Plaintiffs.

Given that Plaintiffs have demonstrated a substantial likelihood of success on the merits as to liability and there is no way to provide a partial injunctive remedy, there is a sufficient likelihood of success as to individual promotions to warrant a preliminary injunction.

The Court also rejected the City's argument that the plaintiffs had failed to show irreparable injury because of a possible award of back pay. "Among other things, the district court noted that, without promotions, Plaintiffs will be unable to gain experience and unable to seek the next rank during the following round of testing." Moreover, "this Court has previously found that promotion delays constitute irreparable injury for firefighters."

 The Court also rejected the City's argument that 10 minority non-plaintiff officers would be harmed by promoting 8 older, white plaintiffs officers ahead of them because the City failed to explain whether the 10 non-plaintiffs would be promoted in the absence of the Court's order and because the City failed to prove that the harm would be caused from the Court's order rather than its own inaction in halting all promotions during the pendency of the litigation.

 NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

 

Ohio Appeals Court: Employers Should Sometimes Leave Competing Former Employees Well Enough Alone.

In early July, the Ohio Court of Appeals in Stark County not only affirmed the trial court’s refusal to enforce the plaintiff-employer’s non-competition agreement against a competing, former employee, but the court also affirmed a significant damage award of $180,000 against the employer and in favor of the former employee on the employee’s unfair competition claim. United Studios of America v. Laman, No. 2007CA00277, 2008-Ohio-3497 (7/7/08). The basis for the employee’s successful counter-claim was that the employer only brought the non-competition lawsuit to cause the employee to incur legal fees.

In Laman, the employer operated a mobile photography studio which provided portraits at grocery stores and shopping malls, etc. in several states. Since at least 2000, the employer required all employees to sign an employment agreement which contained the following non-competition clause:

“Employee acknowledges that Company will expend considerable time, effort and expense in the training of employee and the methods used by Company; that Employee will acquire confidential and valuable knowledge and information as to Company's accounts, customers and business patrons, as well as confidential and valuable knowledge and information concerning the methods and forms developed and used by Company; and that Employee will acquire such knowledge and experience that upon leaving Company's employment for any reason, his engaging directly or indirectly, either alone or in association with any other person or firm, in the family portrait photography business will cause unfair disclosure of such valuable knowledge and information, irreparable harm and financial loss to Company."

The defendant employee signed such a clause when he was hired and he was later promoted to Vice President of the Company. Nonetheless, he eventually resigned from the plaintiff employer and formed his own photography business in Colorado. He then obtained a contract to provide portraits to customers of Safeway of Colorado. There is no discussion in the court’s opinion whether the plaintiff employer operated in Colorado or whether the employee competed against the employer in other states.

The court explains that the plaintiff employer filed suit against the former employee for breach of his non-competition agreement. The lawsuit apparently only sought monetary damages and did not seek equitable relief. When the employee failed to respond to the complaint, the employer moved for default judgment. However, on the same date, the employee requested and later obtained permission to not only file an answer to the complaint, but to file counter claims against the plaintiff employer for, among other things, unfair competition. The trial court granted summary judgment to the employee on the non-competition claims and on his counterclaims. Following a damages hearing, the court awarded damages to the employee in the amount of $180,260.39, including $116,468 in punitive damages and $58,234 in attorney fees.

The employer argued on appeal that the trial court erred in dismissing its non-competition claim on the grounds that the employer failed to prove that it suffered any damage from the breach of the non-competition clause. After all, according to the employer, the contract itself acknowledged that the employer would suffer harm from any breach of the non-competition provision. The court was unmoved:

“A contractual provision acknowledging harm will occur in the event of a breach, without more, is insufficient to withstand summary judgment. Where, as here, a party makes a claim for money damages, the party must demonstrate actual damages. [The employer] filed the within action alleging claims for breach of contract, breach of fiduciary duty, breach of Ohio Trade Secrets Act and intentional interference with contractual relationships. [The employee] moved the trial court for summary judgment on all of the above claims alleged in the complaint, and for summary judgment as to its counterclaim for unfair competition. [The employee’s] motion for summary judgment raises the issue that [the employer’s] claims must fail because Appellant has no evidence demonstrating damage or injury resulting from [the employee’s] actions. In response, [the employer] merely cites the contract provision stipulating damage to[the employer]. The contract did not include a provision for liquidated damages. While the contract provision stipulating to damages and irreparable harm may well provide grounds for an equitable injunction, we find [the employer’s] claims require proof of actual damages, and [the employer] failed to meet the burden.”

In contrast, the court affirmed the employee’s damage award because the employee “presented admissible evidence establishing [the employer’s] motives in filing the instant action were to cause [the employee] to incur legal fees and costs. Accordingly, the trial court properly granted summary judgment in favor of” the employee on his counterclaim for unfair competition against the plaintiff employer.

Insomniacs can read the court’s decision in full at http://www.sconet.state.oh.us/rod/docs/pdf/5/2008/2008-ohio-3497.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.