Background
UEC Holdings and its subsidiary, United Electric Company, sued former United Electric vice president Steven Mark Hatcher, Kent Power, Inc., and Kent Power owner Troy Kent for alleged trade-secret misappropriation under federal and Kentucky law and for related contract claims. The plaintiffs alleged that, before his termination, Hatcher sent Kent confidential pricing information, union hiring rates, and other proprietary materials while Kent Power pursued work with Louisville Gas & Electric.
The district court entered a preliminary injunction that, among other things, required Kent Power to stop working under its transmission contract with LG&E and authorized independent forensic examiners to image and search the defendants’ computers, phones, drives, and cloud accounts. Although the parties later reached an oral agreement in principle about certain forensic safeguards, no written protocol or protective order was entered. The defendants brought an interlocutory appeal.
The Court’s Holding
The Sixth Circuit held that the plaintiffs had not shown the actual and imminent irreparable harm required to stop Kent Power from performing its transmission contract. United Electric could not perform transmission work, no witness identified business that Kent Power had taken from it, and Kent Power’s attempts to obtain LG&E distribution work had been unsuccessful. The possibility that the transmission relationship might eventually help Kent Power compete for distribution work was therefore speculative.
The court also held that the forensic-review provisions were not narrowly tailored. The injunction did not adequately identify the custodians, devices, search limits, or responsive information covered by the examination, and it lacked binding safeguards for the defendants’ trade secrets, privileged material, employee records, and other confidential or private information. An oral agreement in principle did not narrow the court’s order or provide an enforceable substitute for a written protocol and protective order. The Sixth Circuit vacated the preliminary injunction and remanded for further proceedings.
Key Takeaways
- Irreparable harm supporting a preliminary injunction must be actual and imminent, not a generalized fear of future competition.
- A trade-secret plaintiff cannot justify halting work it is unable to perform merely by predicting that the defendant’s customer relationship could later create a competitive disadvantage.
- An order authorizing forensic imaging must narrowly define its scope and protect unrelated confidential, privileged, and private information through enforceable safeguards.
Why It Matters
The decision emphasizes that evidence of likely trade-secret misappropriation does not eliminate the separate requirement to prove irreparable harm tied to the particular relief requested. Courts must connect an injunction’s competitive restrictions to concrete, imminent injury rather than possible downstream consequences.
It also cautions courts and litigants against open-ended forensic access in trade-secret cases. Written search protocols, defined custodians and data sources, responsiveness standards, and protective provisions may be necessary to prevent discovery aimed at one party’s trade secrets from exposing another party’s confidential information.