SC Court of Appeals Upholds Preliminary Injunction Prohibiting Former Employee from Using Personnel Information

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It is rare to see an employment-law related case decided by South Carolina appellate courts; it is even more rare for the appellate courts to issue an opinion addressing a trial court’s issuance of a preliminary injunction in the employment context.  Last week, however, the South Carolina Court of Appeals published an opinion, Jennings-Dill, Inc. v. Israel, Op. No. 6046 (S.C. Ct. App filed Jan. 24, 2024), affirming a Greenville, South Carolina trial court’s issuance of a preliminary injunction enjoining an individual from using personnel documents to which he had access during his employment with his former employer.

The Facts 

The lawsuit was filed by Jennings-Dill, Inc. (“JDI”), a commercial plumbing and gas piping company, against a former employee, Eric Israel, who last worked for JDI in a supervisory position as a plumbing superintendent.  Shortly after a phone call discussing Mr. Israel’s resignation from employment with JDI, Mr. Israel used a company-issued iPad to access and download several files containing JDI personnel information, including employee lists and pay rates for all JDI employees (the “Personnel Documents”).  Following Mr. Israel’s resignation from JDI, its plumbing division lost twelve employees and, according to JDI, it had to withdraw from projects due to its decreased manpower, resulting in lost revenue.  At least some of the employees who left JDI subsequently became employed with Mr. Israel’s new employer.

Notably, Mr. Israel never executed any restrictive covenants, e.g., a non-solicitation provision, in connection with his employment with JDI.  Nevertheless, JDI filed suit against Mr. Israel, including by seeking injunctive relief against Mr. Israel based on its claims for misappropriation of trade secrets, unfair trade practices, conversion, and unjust enrichment. The trial court granted JDI’s request for a temporary injunction, ordering that—at least until trial of the case—Mr. Israel was enjoined and restricted from using JDI’s Personnel Documents.  More specifically, the injunction prohibited Mr. Israel from using information contained in the Personnel Documents to bid on projects on behalf of his new employer or to solicit JDI employees, among other things.

Key Issue on Appeal and the Court’s Decision 

To obtain a preliminary injunction, a party must demonstrate three elements: (1) irreparable harm; (2) a likelihood of success on the merits; and (3) the absence of an adequate remedy at law.^[1]  

Mr. Israel appealed the trial court’s temporary injunction order, focusing on the trial court’s decision on the second prong and arguing that the trial court erred in finding that JDI had demonstrated a likelihood of success on the merits of the underlying claims.  Specifically, the Court of Appeals addressed Mr. Israel’s argument that JDI had failed to present evidence that Mr. Israel possessed or misappropriated trade secrets or confidential information because JDI failed to show that Mr. Israel copied, downloaded, or otherwise removed the Personnel Documents from the company-issued iPad.  On this point, the Court of Appeals considered JDI’s evidence that the Personnel Documents were JDI’s property and contained confidential and trade secrets, Mr. Israel downloaded the Personnel Documents following the call during which JDI considered his resignation to be effective, and JDI maintained a policy regarding its sensitive and confidential information.  While the court acknowledged the lack of direct evidence that Mr. Israel used the Personnel Documents to solicit employees, it took into account evidence that Mr. Israel had contacted JDI employees following his departure, as well as the facts surrounding JDI’s loss of plumbing employees. 

Ultimately, the Court of Appeals held that the circumstantial evidence and facts were sufficient to demonstrate that Mr. Israel could have used the Personnel Documents in an unauthorized manner, which is all that was needed in order for the trial court to enter the preliminary injunction.  In other words, because a party seeking a preliminary injunction need only prove “a fair question to raise as to the existence of a legal right,” not an “absolute legal right,” the court properly issued the preliminary injunction.  Jennings-Dill, Op. No. 6046, at p. 32 (citations omitted). 

Takeaways for Employers

The Jennings-Dill opinion provides guidance for employers considering seeking a preliminary injunction against a former employee who may have taken or is using confidential information and trade secrets, or who may be violating restrictive covenants such as non-competition, non-solicitation, or non-disclosure provisions.  The opinion serves as a reminder that: (a) employees need not have signed a restrictive covenant in order for an employer to successfully obtain an injunction; and (b) courts may be willing to enter preliminary, temporary injunctions early in the litigation process even in the absence of direct evidence of wrongdoing.  However, with respect to confidential information and trade secrets, the employer must have taken appropriate steps to protect its information and must show that the injunction is reasonably necessary to protect its rights. 

_{[1] Richland County. v. S.C. Dep't of Revenue, 422 S.C. 292, 310, 811 S.E.2d 758, 767 (2018).}