Most trade secret lawsuits involve a request for an injunction, frequently in the form of a motion for a temporary restraining order (TRO). TROs are high octane proceedings that move very quickly and can turn on one key fact, argument or legal doctrine. A recent ruling in a high profile case dominating the news, Parler v. Amazon Web Services, reinforces a number of important lessons that can determine a critical ruling on a very limited evidentiary record. While the Parler case doesn’t involve claims typically found in a trade secret injunction, the lessons described below apply with equal force in all cases involving TROs and other emergency injunctions.
Factual Background. By now, most of us are familiar with the facts of this case, so I’ll be brief and focus on the district court’s reasoning. Parler promotes itself as a conservative social media alternative to Twitter, and it has come under criticism and praise, depending on where you are on the political spectrum, for more loosely moderating the content of the discussions on its platform. In June 2018, Parler entered into a Customer Services Agreement (CSA) with Amazon Web Services (AWS) through which AWS provided Parler with cloud computing services that Parler needed for its apps and website to function on the internet.
On January 9, 2021, AWS notified Parler that it was going to suspend its services under its CSA because AWS determined Parler was in material breach of the CSA. AWS asserted that Parler had failed to abide by AWS’s user policy by allowing content to be posted that advocated “activities that are illegal, that violate the rights of others, or that may be harmful to others, our operations or reputation” and that contained “defamatory, obscene, abusive, invasive of privacy, or otherwise objectionable” content. Parler argued that the AWS had failed to give it sufficient time to cure these violations (it argued that the CSA provided a 30-day cure period for Parler to remove this type of content).
Parler filed a lawsuit in the U.S. District Court for Western District of Washington and requested that the court grant a TRO preventing AWS from suspending the cloud computing services that Parler claimed were critical to its operations (the parties agreed to convert that request to one for a preliminary injunction). Yesterday, U.S. District Court Judge Barbara Jacobs Rothstein issued her order denying that request, reasoning that Parler had failed to meet each of the requirements necessary for an injunction. Judge Rothstein found that Parler had failed to show that AWS had breached the CSA by not allowing Parler time to cure and remove the offending content; she also found that Parler had failed to make a sufficient showing that AWS had violated the Sherman Act (an antitrust statute) or tortiously interfered with Parler’s business expectancy (since none of those claims are particularly important in the trade secret context, I’m not going to cover them in any depth here).
Judge Rothstein also found that Parler had failed to show irreparable injury — in other words, that it had failed to show that an injunction was necessary because money damages would not be an adequate remedy. Irreparable injury is an important legal concept in trade secret law because courts have traditionally found that trade secrets are difficult to monetize and therefore, their loss frequently qualifies as irreparable injury justifying an injunction. Parler had argued that AWS’s suspension or termination would render Parler unable to deliver its services online and disrupt its business so substantially that it would be threatened with “extinction.” Judge Rothstein recognized authority from the U.S. Court of Appeals for the Ninth Circuit, hiQ Labs, Inc. v. LinkedIn Corp., 938 F.3d 985, 993 (9th Cir. 2019), holding that the “threat of being driven out of business is sufficient to establish irreparable harm.” However, the court found that Parler’s claims of irreparable injury were “substantially diminished by its admission ‘that much of the harm would be compensable by damages.'”
Lesson No. 1: Concede irreparable injury at your own risk. A local federal judge once told me during a TRO hearing that the two most important factors that a court considers are irreparable injury and the balance of harms (i.e., the impact that the injunction might have on the defendant). This approach makes sense because it enables the court to postpone a catastrophic result and not harm the other side until the court has a fuller opportunity to review the law and hear the facts. This approach also recognizes the primacy of irreparable injury at this stage of a proceeding and the need for a plaintiff to make a compelling showing of that injury to get an injunction.
Parler argued that AWS’s suspension/termination of its CSA posed an existential threat to its business, which is generally one of the most compelling examples of irreparable injury. However, Parler apparently acknowledged that much of that harm would be compensable by money damages in one of its briefs submitted to the court, perhaps to hedge its bet in the event that it wanted to recover money damages against AWS later in the case. That admission substantially undermined Parler’s claim of irreparable injury, as Judge Rothstein found.
It should be noted that Judge Rothstein may still not have been willing to grant an injunction because of her concerns about the merits of the underlying claims. However, the impact of that admission doomed any hope that Parler had of getting an injunction. So trade secret plaintiffs who truly want an injunction have to be prepared to go all in and commit to their claim of irreparable injury to its logical conclusion–i.e., no opportunity for money damages. If they waver on that issue, they may invite doubt and skepticism from the trial court.
Lesson No. 2: The unrefuted affidavit can be devastating. On multiple occasions, Judge Rothstein cited to an affidavit that AWS had provided in support of its opposition to Parler’s request for an injunction and repeatedly noted that Partler could not refute many of the critical factual statements in that affidavit. Because the injunction was being considered on an emergency basis, there was no opportunity for discovery, depositions or even live witnesses testimony subject to cross-examination. So the AWS statements that could not be challenged, or at least undermined circumstantially, proved to be critical to the court’s analysis of the Sherman Act claim.
Affidavits are frequently used in trade secret TROs. The plaintiff will routinely use them to lay the necessary evidentiary foundation describing the trade secrets at issue, the steps that were taken to protect those trade secrets, and the facts demonstrating why the plaintiff believes that the defendant took the trade secrets or is threatening to use them. The defendant will frequently present an affidavit denying he or she took anything. As a result, unrefuted testimony, or testimony that is not challenged, can be outcome-determinative.
To further illustrate, I filed a TRO motion several years ago that accused the defendant of printing and taking reams of proprietary customer information with him when he left his employer. The defendant submitted an affidavit denying he had used anything but was equivocal enough on certain key points that I could challenge the completeness and credibility of that affidavit. Had I not vigorously attacked what I perceived to be the holes in that affidavit, the defendant would have likely prevailed because his testimony would have been unchallenged and therefore dispositive. The court agreed with me and granted the TRO.
In sum, both sides always need to be prepared to attack any noteworthy gaps in their opponent’s affidavits. Otherwise, the undisputed affidavit may rule the day.
Lesson No. 3: In a case so dependent on the equities, messiness favors the defendant. As students of the law know, injunctions are creatures of equity, an ill-defined concept that aspires to look at all the facts of a dispute and reach a just result. And as this blog post hopefully makes clear, TRO proceedings can move very quickly; a substantial amount of factual and legal information is thrust upon a court, demanding a decision almost immediately. As a result, clean and surgical cases are always best and the messier the case is, the greater the opportunity for a defendant to sow doubt, diminish sympathy or create uncertainty, and thus defeat a TRO.
Although the record is not fully described in the court’s opinion, it looks like AWS benefited from that messiness. Judge Rothstein declined to describe the content that triggered AWS’s suspension (a footnote reveals her disdain when she says she will “not dignify or amplify these posts by quoting them here”), but AWS’s opposition lists many of the offensive posts that urge violence and use incendiary and vulgar language. One can’t help but wonder whether they weighed down Parler’s case and subtly eroded the sympathy it needed as the plaintiff to secure an injunction.