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Iron Mountain Information Management, Inc. v. Taddeo

June 30, 2006

IRON MOUNTAIN INFORMATION MANAGEMENT, INC., PLAINTIFF,
v.
BEN TADDEO, MEDIA RECOVERY, INC., DEFENDANTS.



The opinion of the court was delivered by: Joseph F. Bianco, District Judge

MEMORANDUM AND ORDER

This is a diversity action arising out of an alleged breach of an employment agreement. The plaintiff, Iron Mountain Information Management, Inc. ("Iron Mountain"), seeks a preliminary injunction that would enjoin (1) defendant Ben Taddeo ("Taddeo") from soliciting business from any actual or prospective customer or client of Iron Mountain with which Taddeo had contact during his Iron Mountain employment, and (2) defendants Taddeo and Media Recovery, Inc. ("Media Recovery") from soliciting business from any actual or prospective clients of Iron Mountain or its predecessor, who are known to defendants as a result of information or data known or obtained by Taddeo during his employment with Iron Mountain.

The parties stipulated to a temporary restraining order pending a preliminary injunction hearing. A hearing was held on June 13, 2006, on the motion for a preliminary injunction, and the parties had the opportunity to examine witnesses and submit relevant documentary evidence. Closing statements were heard on June 22, 2006.*fn1 Having reviewed the submissions and assessed the credibility of the witnesses, the Court makes the following Findings of Fact and Conclusions of Law, pursuant to Fed. R. Civ. P. 52(a) and 65, and denies the motion for a preliminary injunction.

I. FINDINGS OF FACT

A. THE PARTIES

Plaintiff Iron Mountain, formerly known as Iron Mountain Records Management, Inc., is a Delaware corporation with its principal place of business in Boston, Massachusetts. Iron Mountain provides Data Protection Services, Data Storage, Electronic Vaulting, and Data Products to its clients. (Preliminary Injunction Hearing Transcript, dated June 13, 2006, at 24 (hereinafter "Tr.")). Defendant Taddeo is an individual who resides in North Babylon, New York. Taddeo became an employee of Iron Mountain in 1998 when it acquired his former employer, Arcus Data Security, Inc. (Tr. at 160.) In 1999, Taddeo became a salesperson with Iron Mountain. (Tr. at 161.) In that capacity, Taddeo sold Data Protection Services, Data Storage, Electronic Vaulting and Data Products. (Tr. at 24.) Defendant Media Recovery is a Texas corporation with its principal place of business in Dallas, Texas. Media Recovery is a competitor of Iron Mountain in the sale of Data Products; it does not offer storage services of any kind and, thus, does not compete with Iron Mountain other than in connection with Data Products. (Tr. at 244, 262.)

B. THE PRODUCTS AND SERVICES

Data Storage and Electronic Vaulting (collectively, "Storage") are both services Iron Mountain offers where it stores its customers' computer backup information in Iron Mountain's own facilities. (Tr. at 24.) With Electronic Vaulting, the customer's backup information is transmitted to Iron Mountain's storage facility over secure phone lines. (Tr. at 25.) For Data Storage, the information is saved onto computer backup tapes at the customer's facility, and Iron Mountain then physically retrieves those tapes and stores them in a secure environment, providing twenty-four hour access. (Tr. at 24.) "Data Products" include a wide array of office supply products, similar to those that are available at a "Staples" or "Office Max." (Tr. at 81.) Virtually every business using computers and possessing a need to backup the information on those computers is a potential Data Products customer. (Tr. at 80-81, 242-43, 245.)

Iron Mountain's customers for Storage services sign contracts that can last for one to three years and the service provided by Iron Mountain recurs on a weekly, monthly or annual basis. (Tr. at 25, 243-44.) As a part of those contracts, Iron Mountain's Storage services customers face a monetary penalty if they choose to terminate the contract before the expiration of its term. (Tr. at 244.) In contrast, sales for Data Products are one-time, low-margin sales, and each new sale requires a new order from the customer. (Tr. at 25.) Data Products customers do not sign contracts with Iron Mountain and typically would call Iron Mountain to request a quote and would compare those prices by shopping around with other vendors. (Tr. at 245-46, 255-56.) Data Products are similar to commodities in that the price fluctuates. (Tr. at 78, 132-33.) The pricing information on Iron Mountain's cost sheets, which are available on its intranet, change about every two weeks. (Tr. at 251.) As a sales representative for Iron Mountain, Taddeo used a number of methods to locate and contact prospective customers for Data Products, including local trade publications that publish lists of top accounting firms, law firms, and other public and private companies on Long Island, Hoover's online, Crain's, and other commercially available publications. (Tr. at 164-65, 242-45.) Other customers contacted Iron Mountain's telemarketing department directly, some were existing customers and Taddeo simply "cold-called" others. (Tr. at 164, 166-67.) In addition to these outlets for information, Taddeo implemented his own marketing methods in which he sent out reminder e-mails to customers and ran occasional price specials. (Tr. at 129.) According to one of Taddeo's supervisors, John Connors (Executive Vice-President for North American Sales and Marketing for Iron Mountain), Taddeo was "almost running his own business" with respect to marketing and selling Data Products to prospective customers. (Id.)

To sell Data Products to a prospective customer, Taddeo would call the customer's general telephone number and ask to speak with an employee in the information technology department or someone ultimately responsible for purchasing Data Products. (Tr. at 252-53.) It generally took Taddeo one or two phone calls to find the right person. (Tr. at 254.) Taddeo would then inquire about the customer's Data Products needs and solicit orders accordingly. (Id.) To the extent the customer had any specific preferences for Data Products, Taddeo would obtain that information by asking a direct question or as a result of the customer volunteering such information. (Tr. at 254.) This prospecting conversation could take place in one to two minutes. (Tr. at 253-54.)

At the time of the relevant events in early 2006, Iron Mountain's goal was to change the focus of the sales representatives from Data Products to the higher margin, core services. (Tr. at 43, 70.)

C. THE EMPLOYEE HANDBOOK

On November 16, 2003, Taddeo signed an Employee Acknowledgment Form, acknowledging acceptance of Iron Mountain's Employee Handbook revised January 1, 2003. (Stipulated Facts For Preliminary Injunction Hearing dated June 12, 2006 (hereinafter "Stip.") ¶ 3.) The Employee Handbook prohibited employees from disclosing "to any person the identity of any Iron Mountain customer except to carry out Iron Mountain's obligation with respect to such customer." (Pl. Ex. 2.) The Employee Handbook also provided that "[a]ll customer and employee information shall be treated as confidential and proprietary" and it restricted employees from "simultaneous employment with a . . . competitor." (Id.)

D. THE CONFIDENTIALITY AND NONCOMPETE AGREEMENT

During his employment, Taddeo was required to execute Employee Confidentiality and Non-Competition Agreements with Iron Mountain, in conjunction with changes to his compensation plan. (Tr. at 31-33.) The most recent agreement was executed by Taddeo in December 2004 in conjunction with the 2005 Compensation Plan (the "2004 Agreement"). (Tr. at 32-33; see also Stip. ¶ 5.) The 2004 Agreement had a confidentiality provision, a non-competition provision, and a nonsolicitation provision. (Pl. Ex. 3) The 2004 Agreement's non-competition provision prevented Taddeo from accepting employment with any competitor within a 50-mile radius of any Iron Mountain facility for one year following his termination from Iron Mountain.*fn2 (Id.) The non-solicitation provision prevented Taddeo from soliciting business from any actual or prospective customers of Iron Mountain with whom he had contact during his employment at Iron Mountain for one year following his termination from Iron Mountain. (Id.)

On January 6, 2006, Taddeo's supervisor presented Taddeo with Iron Mountain's 2006 Sales Compensation Plan and another Employee Confidentiality and Non-Competition Agreement in connection with the introduction of the 2006 Compensation Plan (the "2006 Agreement"). (Tr. at 31-32, Stip. ¶ 6.) Execution of the 2006 Agreement was a requirement before Taddeo could receive compensation under the 2006 Compensation Plan. (Tr. at 179-80.) The 2006 Compensation Plan differed from the 2005 Compensation Plan. (Tr. at 58.) First, the 2006 Compensation Plan contained a monthly limit on the commission Taddeo could earn on the sale of Storage services. (Tr. at 59.) In addition, whereas Taddeo had previously received commissions on any sale of Data Products, the new plan cut off those commissions 90 days after the customer placed its first order for Data Products. (Tr. at 58-59.) The 2005 Compensation Plan did not contain these restrictions. (Tr. at 58.)

Taddeo refused to sign the 2006 Agreement, citing the concerns he had regarding the impact of the 2006 Compensation Plan on his income. (Tr. at 32, 64-65, 180.) On January 13, 2006, Taddeo executed an affirmation that he "received, read and understand [sic] the 2006 Sales Plan Memorandum and the 2006 Sales Compensation Plan." (Stip. ¶ 8.) However, Taddeo did not sign the Employee Confidentiality and Non-Compete Agreement that Iron Mountain had presented to him in connection with the 2006 Plan. (Stip. ¶ 9.) Taddeo's supervisor made several inquiries with Taddeo regarding his failure to sign the Non-Compete Agreement. (Tr. 180, Pl. Ex. 16.) On January 17, 2006, Taddeo responded by e-mail to one of these inquiries, to his supervisor, that he sent the 2006 Agreement to his attorneys for review and that he would have a response in "a week or so." (Tr. 182, 189, Pl. Ex. 16.) His supervisor followed-up approximately one week later, on January 30, 2006, and Taddeo assured him that he would have something "today to review." (Pl. Ex. 23.) Taddeo never provided any attorney comments to the 2006 Agreement and he never signed the new agreement. (Tr. at 185.) Instead, Taddeo began to seek other employment. (Tr. at 32, 180, 191-92.) On February 13, 2006, Taddeo signed an Employment Agreement with defendant Media Recovery. (Stip. ¶ 10, Pl. Ex. 30.)

On March 1, 2006, John Conners called Taddeo to "gauge his status and attitude" to decide whether to pay Taddeo his January 2006 commissions, despite Taddeo's failure to sign the 2006 Agreement. (Tr. at 119.) Iron Mountain decided to pay Taddeo. (Tr. at 120.) However, on March 2, 2006, Iron Mountain's director of human resources sent Taddeo a letter stating that Taddeo had an obligation to execute the most recent Confidentiality and Non-Competition Agreement.*fn3 (Tr. at 120, Pl. Ex. 51.) On March 13, 2006, Iron Mountain flew Taddeo to Boston to meet with John Conners and discuss his concerns about the 2006 Compensation Plan. (Stip. ¶ 13.) On March 17, 2006, Conners authorized the payment of Taddeo's February commissions to avoid being "heavy handed" in negotiations. (Def. Ex. J.)

On April 21, 2006, Taddeo provided twoweeks' written notice of his resignation, making May 5, 2006, his last day of employment with Iron Mountain. (Tr. at 88, Pl. Ex. 93, Stip. ¶ 15.) On May 3, 2006, Taddeo blind copied his supervisor on an email, announcing his resignation and new employment relationship with Media Recovery. (Stip. ¶ 17.)

E. TADDEO'S ACTIONS WHILE STILL EMPLOYED AT IRON MOUNTAIN

Subsequent to April 21, 2006, when Taddeo tendered his resignation and informed Iron Mountain he was leaving, Taddeo engaged in conduct inconsistent with his obligations as an Iron Mountain employee by, inter alia, diverting Iron Mountain Data Product orders to Media recovery. (Tr. at 209-35.) A summary of Taddeo's actions, during that two-week period prior to his termination, are described below.

On April 25, 2006, while still employed with Iron Mountain, Taddeo sent an e-mail to a customer service representative for Media Recovery asking her to quote a specific price for a brand and type of computer backup tapes for American Home Mortgage, one of Taddeo's customers. (Tr. at 210-12, Pl. Ex. 99.) Taddeo also stated that the price he wanted to bid was several dollars less than the price he had recently charged the same customer on a sale made on Iron Mountain's behalf. (Tr. at 209-12.) Taddeo ultimately placed that order through Media Recovery. (Tr. at 216.)

On May 2, 2006, again, while still employed with Iron Mountain, Taddeo sent another e-mail to the same customer service representative for Media Recovery to obtain a price quote on computer "motherboards" and hard drives. (Tr. at 218-20.) The request for this order originally came to Taddeo's Iron Mountain address on April 17, 2006, from a customer at Hughes, Hubbard & Reed. (Tr. at 217.) Taddeo ultimately quoted this customer a price from his Media Recovery email, that was less than the price he had quoted for the same products through Iron Mountain roughly two weeks earlier, when the request came in. (Tr. at 218-21.) In a subsequent e-mail, Taddeo quoted a price to the same customer to purchase a laptop through Media Recovery and told the customer that it was about $300 cheaper than the ...


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