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Kforce Inc. v. Beacon Hill Staffing Group LLC

United States District Court, E.D. Missouri, Eastern Division

January 8, 2015

KFORCE INC., Plaintiff,
v.
BEACON HILL STAFFING GROUP LLC., et al., Defendants.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

Kforce and Beacon Hill are competitors in the staffing agency business. Gary Hahn was an account manager at Kforce until he went to work for Beacon Hill. When he joined Kforce, Hahn signed an employment agreement which contained non-disclosure and non-solicitation provisions. Kforce complains that Hahn has violated these provisions by stealing its confidential client information and soliciting Kforce clients while at Beacon Hill, and it seeks preliminary injunctive relief against both Hahn and Beacon Hill. After a hearing on November 13, 2014, I denied Kforce's request for a temporary restraining order and ordered limited and expedited discovery on Kforce's motion for preliminary injunction. I held a hearing on the motion on December 18, 2014, during which both sides presented evidence by live testimony[1] and exhibits, argued the motion, and submitted written briefs as instructed by the Court. After due consideration of all the evidence, I must deny preliminary injunctive relief for the reasons that follow.

Background Facts[2]

Kforce and Beacon Hill are staffing agencies engaged in the business of placing personnel ("candidates") with companies seeking to fill job openings ("clients"). Kforce is a large, publicly traded staffing firm with 62 offices across the United States and 40 to 50 full time employees in its St. Louis office. Beacon Hill is a smaller firm with a recently opened office in St. Louis. It currently employs five people in St. Louis, including Hahn. This case involves placement for information technology positions. Staffing agencies identify prospective customers, access available job openings, and find candidates for the job openings. Their revenue is derived from successfully placing candidates at clients. Most staffing agencies operate similarly, with a recruiting side to recruit candidates and a sales side to deal with clients and find job openings. Account managers like Hahn work the sales side of the business.

The staffing industry is highly competitive, and there is substantial customer and client overlap within the industry. Companies often request multiple staffing agencies to assist in filling the same job opening.[3] Stated otherwise, this means that the same company could be a client of both Kforce and Beacon Hill. For example, Beacon Hill's division manager Pat Burgess testified that about 50 staffing firms place candidates at Express Scripts, and about 20 staffing firms place candidates at Charter, one of the top employers of contract employees in the area.[4] To do business with Charter a staffing agency apparently must first be vetted by a third-party vendor called Zero Chaos. Once a staffing agency gets approved by Zero Chaos and an agreement is put in place, it may then compete with other approved staffing agencies to place candidates at Charter. Based on the testimony it appears that this type of arrangement is common with many companies using staffing agencies, such as Magellan Health Services, Inc.[5]

Account managers find job vacancies in various ways. Sometimes, companies post their job openings on their websites and on public job-posting websites such as Careerbuilder, LinkedIn, Monster.com, Dice.com, or Craigslist. Account managers use this publicly available information as a common tool for locating potential clients. Account managers also call companies requesting hiring information and make cold sales calls on the hiring managers. They may also rely on candidates that they have successfully placed on a job to notify them of new job openings. Account managers may also receive emails or phone calls from companies about job openings. Sometimes these emails are sent to numerous staffing agencies, and sometimes they are sent to a particular account manager. Occasionally, a company may send notice of a job opening to an account manager and claim that it is an "exclusive" posting, but there is no way to verify the accuracy of that statement.[6] Usually, however, the job postings are public and posted online.

At the hearing, the parties differed on their positions as to the relative importance of an account manager's personal relationships with the client's hiring managers. According to Kforce, it has invested considerable time and expense in developing and maintaining relationships on the client side of the business. Kforce claims that its account managers have extensive and repeated contacts with its clients, and that they are "responsible for facilitating activities associated with matching candidates to client job openings." Kforce contends that it compiles "confidential" client information to assist its account managers, and this information "includes such things as confidential communications among management personnel, valuable compilations and information regarding clients and prospective clients (including client contact information, client preferences and needs, and client rates), compilations of employment candidates and prospective employment candidates, Kforce's financial and budgetary information, and information related to marketing strategy." In support of a preliminary injunction, Kforce argues that "an extremely valuable segment of [its] confidential information is the information... regarding the identity of Kforce's clients and candidates, the purchase activity of Kforce's clients, pricing information, compensation information, key contact information and personnel, and other proprietary, customer-specific information regarding Kforce's clients and candidates." To protect this information, Kforce restricts access to only certain employees with authorized log-ins and passwords.

According to Hahn and Beacon Hill, an account manager's personal relationships are secondary to the primary goal of placing candidates with clients. Defendants maintain that the information used by account managers to do this is not confidential, but is publicly available and can easily be found on the internet.

Before joining Kforce, Hahn worked at another staffing firm called Signature Consultants with Bonita Daughaday. Daughaday is the current managing director of Kforce's technical division. She testified at the hearing. When Daughaday left Signature for Kforce, she solicited Hahn to work for Kforce. According to Hahn, Daughaday told him "not to worry" about the non-compete and non-solicitation agreement he had signed with Signature because it was "not enforceable." Daughaday denied this. She also hired two other Signature employees, Ryan Harris and Adam Riggs, to work for Kforce. They had the same restrictive covenants as Hahn. Both Harris and Riggs testified at the hearing. Riggs claimed that Daughaday also told him not to worry about his restrictive covenants with Signature.

On September 17, 2012, Hahn began working for Kforce. His employment agreement is signed and dated the same day. The agreement contains the following non-disclosure provisions:

6. Confidential Information. The EMPLOYEE recognizes and acknowledges that the FIRM has, through the expenditure of substantial time, effort and money, developed, compiled, and/or acquired certain confidential information and trade secrets which are of great value to the FIRM in its operations. The EMPLOYEE further acknowledges and understands that in the course of performing his/her duties for the FIRM, he/she will receive and/or have access to the trade secrets and other confidential information of the FIRM.
The EMPLOYEE agrees that he/she will not make any use of, take, download, publish or disclose, or authorize anyone to use, take, publish or disclose, any of the FIRM's trade secrets or other confidential information, for any reason, except to the extent authorized and required in the course of performing his/her duties on behalf of the FIRM. Upon request of the FIRM, the EMPLOYEE will promptly return or destroy all expressions of trade secrets and confidential information in his/her possession and control. EMPLOYEE shall cooperate with the FIRM's efforts to verify such return or destruction.
As used herein, the term "trade secrets and other confidential information" shall include, without limitation: (a) client or prospective client lists and client or prospective client contact information (including but not limited to business cards, contact persons, and hiring managers); (b) client job openings and job orders and client pricing information; (c) actual or prospective applicant, employment candidate, employee or consultant lists; (d) actual or prospective applicant, employment candidate, employee or consultant qualifications, contact information, and resumes; (e) actual or prospective applicant, employment ...

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