interpreted, applied, and enforced, they agree that its key
provisions guaranteed the confidentiality of Morgan Stanley's
records. They also concur that the Agreement prohibited Mr.
Rothe from, among other things, communicating to third parties
the contents of any records belonging to Morgan Stanley, and
from soliciting customers he served at Morgan Stanley for a
period of one year following termination of his employment with
Morgan Stanley and within a radius of 100 miles from Morgan
Stanley's Washington office. See Mem. in Support of Pl.'s Mot.
for a T.R.O. and Prelim. Inj. Relief ("Pl.'s Mem.") at 2;
Compl., Ex. A.
Beyond these points, the parties find little to agree on.
The plaintiff seeks a temporary restraining order to prevent
what it calls the "unlawful misappropriation by Defendant John
Rothe . . . of confidential information pertaining to hundreds
of Morgan Stanley accounts, representing in excess of $10
million in assets under Morgan Stanley management and over
$250,000 in Morgan Stanley commissions over the last 12 months,
and Defendant's effort to divert these accounts, assets and
commission revenues" to Oppenheimer. See Pl.'s Mem. at 1.
According to the plaintiff, Mr. Rothe, while still employed by
Morgan Stanley, prepared to engage in, and now continues to
engage in, the following acts that violate the terms of the
Agreement: (1) removing, retaining, and/or copying confidential
information pertaining to Morgan Stanley customers, and/or
customer lists, including the names and/or addresses of hundreds
of Morgan Stanley accounts formerly served by Defendant at
Morgan Stanley; (2) disclosing and producing this confidential
customer information to Oppenheimer; and (3) using this
confidential customer information to solicit Morgan Stanley
customers. See id. at 2; see also Ex. A (Tilahun Aff.).
Morgan Stanley claims that Mr. Rothe has committed the torts
of conversion, unfair competition and breach of the duty of
loyalty. The plaintiff also charges that Mr. Rothe has
misappropriated Morgan Stanley's trade-secret customer lists and
breached the express terms of the Agreement he signed as a
condition of his employment. See Pl.'s Mem. at 2.
Morgan Stanley points out that in addition to containing the
restriction on Mr. Rothe's future employment, the Agreement also
called for the issuance of a temporary restraining order and a
preliminary injunction to preserve the status quo pending the
outcome of arbitration if the defendant breached the terms of
his agreement. See Compl., Ex. A.
In consideration for Mr. Rothe's signing the agreement and
becoming an employee, Morgan Stanley asserts that it agreed to,
and in fact did, register and compensate Mr. Rothe, give him
training and a job as a financial consultant and provide him
with Morgan Stanley operational and sales systems, research and
development, sales assistants and support, as well as the
benefit of its reputation and goodwill. See Pl.'s Mem. at 3.
Moreover, the company alleges that it provided Mr. Rothe with
Morgan Stanley customers through: (1) "walk-ins"; (2)
"call-ins"; (3) reassignments; (4) clients from Morgan
Stanley-sponsored seminars; (5) leads from lists purchased from
mail-order firms; (6) leads from Morgan Stanley national
advertising campaigns; (7) leads from customer responses to
national television campaigns; (8) leads responding to Morgan
Stanley newspaper coupons; (9) leads calling Morgan Stanley's
toll-free telephone number; (10) leads from blanket mailings to
zip codes; and (11) other customer leads and sales advantages
resulting from Morgan Stanley's
goodwill, reputation, and name recognition in the securities
industry. See id.
Furthermore, the plaintiff claims that before the defendant
joined Morgan Stanley, Mr. Rothe "had no experience as a
financial consultant in the securities brokerage industry."
See Pl.'s TRO Mot., Ex. A, Tilahun Aff. at 2. Mr. Tilahun also
alleges that the company gave Mr. Rothe on-the-job training
throughout his employment and, at all times, paid his annual
registration fees with the NASD, the New York Stock Exchange,
and the American Stock Exchange. See id. In addition, Mr.
Tilahun makes the following specific allegations:
7. Despite Defendant's contractual and other
obligations to Morgan Stanley, and despite the fact
that Morgan Stanley is informing its customers
where to reach Defendant, we have learned that
immediately upon his resignation late May 11, 2001,
Defendant began initiating contact with clients he
formerly serviced at Morgan Stanley to solicit them
to transfer their accounts to Oppenheimer.
8. In particular, our investigation has indicated
so far that at least one client received a package
of solicitation materials on Saturday, May 12, 2001
(the day after Defendant resigned), requesting that
the client transfer its accounts to Oppenheimer.
9. In addition, our investigation has revealed that
Defendant removed all of the original files of one
significant Morgan Stanley client. That client
maintained eight Morgan Stanley accounts with
assets in excess of five million dollars. The
original documents missing include account and
taxpayer information, margin papers,
correspondence, and check receipts, among other
vital and confidential information regarding the
Id. at 2-3. The plaintiff asserts that all these alleged
actions constitute violations of Mr. Rothe's agreement.
Accordingly, Morgan Stanley seeks injunctive relief pending an
expedited hearing on the merits before a panel of arbitrators in
accordance with Rule 10335(g) of the NASD Code of Arbitration
Countering that a temporary restraining order is not the
appropriate remedy in this case, Mr. Rothe states that Morgan
Stanley should seek relief from the arbitration process alone.
He asks the court to deny the plaintiffs motion with prejudice
and to direct Morgan Stanley to proceed promptly to arbitration
of this matter on the merits before the NASD. See Opp'n at 4.
Mr. Rothe also argues that even if an injunction were proper
in this case, Morgan Stanley's proposed order would violate the
rules of the NASD. See Opp'n at 3. That is, the company's
proposed order would include a restriction on Mr. Rothe's right
to accept business from the customers at issue. See id. The
NASD's Board of Governors, however, "just last week approved the
publication of a rule interpretation making clear that the NASD
rules prohibit `any member firm [such as Morgan Stanley] from
taking any action that interferes with [a] customer's right to
transfer his or her account.'" See id.; Ex. 2 (NASD news
release dated May 7, 2001).
Next, Mr. Rothe argues that the Agreement that Morgan Stanley
asked him to sign was "overly broad." See Opp'n at 3. In
addition, he attempts to cast doubt on the enforceability of the
Agreement, which, he says, he "was forced to execute without
discussion or negotiation several years after becoming employed
by the firm. . . ." See id. Moreover, Mr. Rothe states that
"he developed the vast majority of his "book of business"
friends and family." See Rothe Decl. at 2-3. Thus, he takes
issue with Morgan Stanley's claim to have a proprietary interest
in these clients.
In sum, the defendant argues that the plaintiff has failed to
make a showing strong enough to justify the issuance of
injunctive relief. The court disagrees. Accordingly, the court
will grant the plaintiff's motion for a temporary restraining
A. Legal Standard for Injunctive Relief
The court considers the same factors in ruling on a motion for
a temporary restraining order and a motion for a preliminary
injunction. See Vencor Nursing Ctrs., L.P v. Shalala,
63 F. Supp.2d 1, 7 n. 5 (D.C. 1999) (Urbina, J.); National Football
League Properties, Inc. v. Coniglio, 554 F. Supp. 1224, 1226
(D.C. 1983). This court may issue a temporary restraining order
or a preliminary injunction only when the movant demonstrates
(1) there is a substantial likelihood plaintiff will
succeed on the merits; (2) plaintiff will be
irreparably injured if an injunction is not granted;
(3) an injunction will not substantially injure the
other party; and (4) the public interest will be
furthered by an injunction.
Davenport v. International Bhd. of Teamsters, 166 F.3d 356,
361 (D.C.Cir. 1999); see also World Duty Free Americas, Inc. v.
Summers, 94 F. Supp.2d 61, 64 (D.C. 2000). These four factors
are not considered in isolation from one another, and no one
factor is necessarily dispositive as to whether preliminary
injunctive relief is warranted. See CityFed Fin. Corp. v.
Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir. 1995).
Rather, the factors "interrelate on a sliding scale and must be
balanced against each other."*fn2 Davenport, 166 F.3d at
361 (citing Serono Labs. v. Shalala, 158 F.3d 1313, 1317-18
(D.C.Cir. 1998), on remand, 35 F. Supp.2d 1 (D.C. 1999)); see
also WMATA v. Holiday Tours, Inc., 559 F.2d 841, 842-43
(D.C.Cir. 1977) (court "examines each requirement in light of
the others to determine whether an injunction would be proper").
Thus, a particularly strong showing on one factor may
compensate for a weak showing on one or more of the other
factors. See Serono Labs., 158 F.3d at 1318. For instance, as
to the first factor, "[t]he court is not required to find that
ultimate success by the movant is a mathematical probability,
and indeed, [the court] may grant [an injunction] even though
its own approach may be contrary to [the movants'] view of the
merits. The necessary `level' or `degree' of possibility of
success will vary according to the court's assessment of the
other factors." New Mexico v. Richardson, 39 F. Supp.2d 48, 50
(D.C. 1999) (quoting Holiday Tours, 559 F.2d at 843).
A strong showing of likely success on the merits may warrant
issuance of preliminary injunctive relief even if the plaintiff
makes a less compelling showing
on the other three factors. See Virginia Petroleum Jobbers
Ass'n v. Federal Power Comm'n, 259 F.2d 921, 925 (D.C.Cir.
1958) ("injury held insufficient to justify a stay in one case
may well be sufficient to justify it in another, where the
applicant has demonstrated a higher probability of success on
the merits."); National Wildlife Fed'n v. Andrus, 440 F. Supp. 1245,
1256 (D.C. 1977) (enjoining further construction on dam
power plant, despite dispute over irreparable injury, because
"the court is convinced by plaintiffs' argument on the merits
and therefore finds it sufficient on the question of irreparable
injury . . .").
If the plaintiff makes a particularly weak showing on one
factor, however, the other factors may not be enough to
"compensate." See Taylor v. RTC, 56 F.3d 1497, 1506
(D.C.Cir.), amended on other grounds on reh'g, 66 F.3d 1226
(D.C.Cir. 1995). It is particularly important for the plaintiff
to demonstrate a substantial likelihood of success on the
merits. Cf. Benten v. Kessler, 505 U.S. 1084, 1085, 112 S.Ct.
2929, 120 L.Ed.2d 926 (1992) (per curiam); University of Texas
v. Camenisch, 451 U.S. 390, 394, 101 S.Ct. 1830, 68 L.Ed.2d 175
(1981); Doran v. Salem Inn, Inc., 422 U.S. 922, 934, 95 S.Ct.
2561, 45 L.Ed.2d 648 (1975). If the plaintiff fails to make this
showing, "it would take a very strong showing with respect to
the other preliminary injunction factors to turn the tide in
plaintiff['s] favor." Davenport, 166 F.3d at 367; see, e.g.,
National Pharm. Alliance v. Henney, 47 F. Supp.2d 37, 41 (D.C.
1999) ("Here, because the likelihood of success is slim,
plaintiffs would have to make a very substantial showing of
severe irreparable injury in order to prevail on their
motion."). Indeed, absent a "substantial indication" of likely
success on the merits, "there would be no justification for the
court's intrusion into the ordinary processes of administration
and judicial review." American Bankers Ass'n v. National Credit
Union Admin., 38 F. Supp.2d 114, 141 (D.C. 1999) (quoting
Holiday Tours, 559 F.2d at 843).
In addition, any injunction that the court issues must be
carefully circumscribed and tailored to remedy the harm shown.
See National Treasury Employees Union v. Yeutter,
918 F.2d 968, 977 (D.C.Cir. 1990) (citation omitted).
Finally, because preliminary injunctions are extraordinary
forms of judicial relief, courts should grant them sparingly.
See Mylan Pharms., Inc. v. Thompson, 139 F. Supp.2d 1, 2001 WL
273073, *13 (D.C, March 13, 2001) (Urbina, J.); Moore v.
Summers, 113 F. Supp.2d 5, 17 (D.C. 2000). Although the trial
court has the discretion to issue or deny a preliminary
injunction, it is not a form of relief granted lightly. See
Ambach v. Bell, 686 F.2d 974, 979 (D.C.Cir. 1982). As the
Supreme Court has said, "It frequently is observed that a
preliminary injunction is an extraordinary and drastic remedy,
one that should not be granted unless the movant, by a clear
showing, carries the burden of persuasion." Mazurek v.
Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162
B. Injunctive-Relief Analysis
In this case, the court concludes that the plaintiff makes a
strong showing on all four factors that the court must consider
in the injunctive-relief analysis. In short, the plaintiff has
shown that it has a good likelihood of success on the merits of
the case, it would suffer irreparable harm if an injunction is
not issued, the balance of the equities favors the plaintiff and
issuance of a temporary restraining order would serve the public
1. The Plaintiff Has a Strong Likelihood of Success on the
The plaintiff makes three main arguments in support of its
contention that it would be likely to succeed on the merits in
this case: (1) the non-solicitation covenant is fully
enforceable against the defendant; (2) Morgan Stanley's customer
list and information is entitled to trade-secret protection
under the District of Columbia Uniform Trade Secrets Act; and
(3) the defendant's agreement to the issuance of injunctive
relief pending a resolution at arbitration must be enforced. The
court will examine each argument in turn.
a. The Defendant's Non-Solicitation Covenant Is Fully
Citing a spate of case law to support its position, the
plaintiff contends that its non-solicitation agreement with the
defendant is fully enforceable. See, e.g., Morgan Stanley v.
Weiss and Sandoe, Dkt. No. 01-0816(RCL) (D.C. April 16, 2001);
Merrill Lynch v. Schultz, Dkt. No. 01-0402(TFH) (D.C. Feb. 26,
2001). For example, the Agreement calls for a one-year covenant
not to compete, unless the defendant works more than 100 miles
away from Washington, D.C. See Compl., Ex. A. Pointing out
that the Agreement contains only modest restrictions, the
plaintiff argues that the agreement is fully enforceable under
District of Columbia law.