Lothamer Tax Resolution, Inc. v. (1), No. 1:25-cv-579 (2025)

Case details
Full caption
Lothamer Tax Resolution, Inc. v. Paul Kimmel (1)
Country
United States
Jurisdiction
Federal
Decided
2025
Disposition
Motion Granted
Majority
Jarbou (Justice)
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12025 WL 2490380Only the Westlaw citation is currently available.United States District Court, W.D.Michigan, Southern Division.LOTHAMER TAX RESOLUTION,INC, et al., Plaintiffs,v.PAUL KIMMEL, Defendant.Case No. 1:25-cv-579|08/29/2025HALA Y. JARBOU, CHIEF UNITED STATES DISTRICTJUDGEOPINION*1 Plaintiffs Lothamer Tax Resolution, Inc., LothamerConsulting Services, LLC, and Lothamer FranchiseCorporation (collectively “Lothamer”) bring this lawsuitagainst a former employee, Defendant Paul Kimmel,1alleging (1) violation of the Stored Communications Act(SCA), 18 U.S.C. § 2707(a), (2) violation of the ComputerFraud and Abuse Act (CFAA), 18 U.S.C. § 1030(a), (3)violation of the Defend Trade Secrets Act (DTSA), 18 U.S.C.§ 1839, (4) violation of the Michigan Uniform Trade SecretsAct (MUTSA), Mich. Comp. Laws § 445.1901 et seq., (5)breach of contract, (6) fraud in the inducement of a contract,(7) common-law conversion, and (8) statutory conversionunder Mich. Comp. Laws § 600.2919a. (Compl., ECF No. 1.)Lothamer moved for a preliminary injunction on May 20,2025. (Pls.’ Mot. for Prelim. Inj., ECF No. 2.) On July24, 2025, due to developments since the start of litigation,Lothamer29moved for a temporary restraining order (TRO) and apreliminary injunction. (Pls.’ Mot. for TRO, ECF No. 87.)2Lothamer seeks an order to prevent Kimmel from retaining,using, or sharing its confidential information, and to forcehim to remove a public LinkedIn post about the company.(Pls.’ Br. in Supp. of Prelim. Inj. 2, ECF No. 2-1; Pls.’ Mot.for TRO Ex. A, ECF No. 87, PageID.1271.) On August 6,2025, Magistrate Judge Sally Berens issued a Report andRecommendation (“R&R”) recommending that this Courtgrant Lothamer's motions and issue a preliminary injunction.(R&R, ECF No. 107.)3 Kimmel filed a timely objection tothe R&R. (Def.’s Obj., ECF No. 116.)4*2 For the reasons discussed below, the Court will sustainin part and overrule in part Kimmel's objection, adopt inpart and reject in part the R&R, grant in part and deny inpart Lothamer's motions for a preliminary injunction, andhold in abeyance, pending a hearing, a decision related tothe requested preliminary injunction to enforce the contractprovision requiring the return of Lothamer's software.I. BACKGROUNDThe facts as stated in Lothamer's verified complaint aredescribed comprehensively in the R&R, so the Court willonly provide a brief overview here. Lothamer is a tax servicescompany29that hired Kimmel in June 2024 to improve its software.(Compl. ¶¶ 36, 47, 162, ECF No. 1.) When he washired, Kimmel signed an Employment Agreement with threeprovisions relevant to this case. First, the non-disclosureprovision:At no time during and after theterm of this Agreement will [Kimmel]communicate or disclose, at any time,to any person, either directly orindirectly, under any circumstances,any confidential knowledge orinformation acquired by Employeeduring the period of his[ ] employmentwith [Lothamer]. [Kimmel] agreesto take all necessary precautions toprserve the confidentiality of all suchinformation...(Employment Agreement 3, ECF No. 1-3.) Second, the non-retention provision:
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.2[Kimmel] will also return allconfidential information in his[ ]possession, or in the possession ofothers given permission to havesuch information, upon request ordemand by [Lothamer], or within twoweeks from the termination date ofemployment.(Id.) Finally, the non-disparagement provision:[Kimmel] covenants and agrees notto make negative comments about[Lothamer] or its officers, directors,current and former employees, or otheragents after he...signs this agreement.Such disparagement includes, but isnot limited to, making disparaging ordiscrediting remarks on any internetweb site, including but not limitedto, internet complaint boards orsocial media sites, such as FaceBook,Instagram, X (Twitter), TickTock,UTube, Google Reviews, the BetterBusiness Bureau, any employmentsites, etc.(Id. at 5.)Kimmel also signed a separate Non-Disclosure Agreement(“NDA”), which states:[Kimmel] agrees not to use theConfidential Information disclosed toit by Lothamer for use outside ofthe above stated purpose, or forany unpermitted purpose. [Kimmel]will not disclose such ConfidentialInformation to anyone, and agreesthat [he] will take all reasonablesteps to protect the secrecy of andavoid disclosure or use of ConfidentialInformation of Lothamer in orderto prevent it from falling into thepublic domain or the possession ofunauthorized persons.(NDA 1, ECF No. 1-4.) The NDA defines “ConfidentialInformation” asany information, technical dataor know-how, including, but notlimited to, that which relatesto research, customers, software,programming, inventions, processes,designs, drawings, engineering,marketing, trade secrets, pricing,source code, intellectual property,financial statements, any clientinformation, marketing29strategies, confidential information legally obtained aboutcompetitors, and any other information, disclosed orally or inwritten or electronic form. Confidential Information does notinclude information, technical data or know-how which (i)prior or after the time of disclosure becomes part of the publicknowledge or literature, not as a result of any inaction oraction of Lothamer, (ii) is approved for release by Lothamer,or (iii) is independently developed by Recipient without theuse of any Confidential Information of Lothamer.*3 (Id.)Lothamer was ultimately unsatisfied with Kimmel's workand terminated his employment on March 7, 2025. (Compl. 120.) On April 6, 2025, Kimmel sent a letter to JesseLothamer, the company's majority owner and chief executiveofficer, about his termination. (Id. ¶¶ 11, 126.) Kimmelalso sent the letter to several other Lothamer employees.(Id. 134; see Kimmel Letter, ECF No. 1-8; Compl.Ex. 11, ECF No. 1-11.) In the letter, Kimmel “formallycontest[ed his] wrongful termination” and asked for monetarydamages, including a ten percent equity stake equaling$630,000 that was “[b]ased on your own valuation of thecompany.” (Kimmel Letter 1, 3, 6.) Jesse had previouslyobtained a valuation from an outside company and had notshared the valuation with anyone. (Compl. 127.) Therefore,
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.3Lothamer contends that Kimmel must have learned ofthe valuation by accessing Jesse's email account withoutauthorization. (Id. 128.) Kimmel, on the other hand, statesin a sworn affidavit that he “did not access, attempt to access,or have access to any personal or corporate email accountsbelonging to Jesse Lothamer or [Lothamer].” (Kimmel Aff. 3, ECF No. 70-1.) Lothamer also states that Kimmelmaintains unauthorized possession of two software programsbelonging to the company—the Scheduled Deposits program,which Kimmel was developing to “automatically populateand track important information,” and the company's Portal,which is an online service available to customers. (Compl. ¶¶112, 222; Jesse Lothamer Aff. 7, ECF No. 87-3.)29On June 28, 2025, after the commencement of this lawsuit,Kimmel posted an article about Lothamer on LinkedIn.5(LinkedIn Post, ECF No. 87-1.) In the article, Kimmelcriticized Lothamer for having poor data security andprovided details about Lothamer's system that, according toLothamer, are confidential. (See id.; Pls.’ Br. in Supp. of TRO,ECF No. 87, PageID.1276.) Lothamer argues that Kimmel'spost significantly increased the number of attempts by badactors to breach its Portal, which has forced Lothamer to shutdown the Portal during nights and weekends. (Casey Aff. ¶¶19-25, ECF No. 87-2; Jesse Aff. ¶¶ 15-23.)Lothamer's May 20, 2025, motion requests an injunctionrequiring Kimmel to not use its trade secrets, to returnany trade secrets he possesses and destroy any copies, andto identify anyone he disclosed Lothamer's trade secretsto. (Pls.’ Br. in Supp. of Prelim. Inj. 32.) Lothamer'sJuly 24, 2025, motion additionally requests an injunctionrequiring Kimmel to take down his June 28, 2025, LinkedInpost, to remove any other public disclosures of Lothamer'sconfidential information, and to not disclose any otherconfidential information. (Pls.’ Mot. for TRO, PageID.1271.)II. LEGAL STANDARDSA. R&R Review StandardUnder Rule 72 of the Federal Rules of Civil Procedure,the district judge must determine de novo any part of themagistrate judge's disposition that has been properly objectedto. The district judge may accept, reject, or modify therecommended disposition; receive further evidence; or returnthe matter to the magistrate judge with instructions.Fed. R. Civ. P. 72(b)(3).29B. Preliminary Injunction Standard*4 Whether to issue a preliminary injunction is in thediscretion of the district court. Planet Aid v. City of St. Johns,782 F.3d 318, 323 (6th Cir. 2015). A court considers andbalances four factors: (1) whether the movant has establisheda substantial likelihood or probability of success on themerits; (2) whether the movant would suffer irreparable injurywithout the preliminary injunction; (3) whether the issuanceof the preliminary injunction would cause substantial harmto others; and (4) whether the public interest would beserved by issuance of the preliminary injunction. Kentuckyv. Hagel, 759 F.3d 588, 600 (6th Cir. 2014). Each factorshould “be balanced against one another and should notbe considered prerequisites to the grant of a preliminaryinjunction.” Liberty Coins, LLC v. Goodman, 748 F.3d 682,690 (6th Cir. 2014). However, the existence of irreparableharm “is indispensable,” and district courts abuse theirdiscretion if they grant a preliminary injunction withoutfinding irreparable harm. D.T. v. Sumner Cnty. Sch., 942 F.3d324, 327 (6th Cir. 2019). Furthermore, “[w]hen one factor isdispositive, a district court need not consider the others.” Id.A “preliminary injunction is an extraordinary remedyinvolving the exercise of a very far-reaching power, which isto be applied only in the limited circumstances which clearlydemand it.” Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir.2000) (cleaned up). An injunction at this stage should “onlybe awarded upon a clear showing that the plaintiff is entitledto such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S.7, 22 (2008) (internal citation omitted).“[A] hearing is only required when there are disputed factualissues, and not when the issues are primarily questions oflaw.” Certified Restoration Dry Cleaning Network, LLC v.Tenke Corp., 511 F.3d 535, 552 (6th Cir. 2007). “[W]herematerial facts are not in dispute...district courts generally neednot hold an evidentiary hearing.” Id. (quoting McDonald'sCorp. v. Robertson, 147 F.3d 1301, 1312-13 (11th Cir. 1998)).However, “[w]here facts are bitterly
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.429contested and credibility determinations must be made todecide whether injunctive relief should issue, an evidentiaryhearing must be held” before the court grants injunctive relief.Tenk, 511 F.3d at 553.6III. ANALYSISThe magistrate judge concluded that Lothamer was likely toprevail on its claims under the SCA, the DTSA, and MUTSA,as well as its breach of contract claims. Kimmel objected tothe magistrate judge's recommendation as to each of theseclaims. Therefore, the Court will consider each claim in turn.See Mech. Constr. Managers, LLC v. Paschka, No. 3:21-CV-302, 2022 WL 1591605, at *5 (S.D. Ohio May 19, 2022)(preliminary injunction factors are analyzed separately forseparate claims).As explained below, on the current record Lothamer has notestablished its right to preliminary relief under the SCA, theDTSA, or MUTSA, or based on breach of the EmploymentAgreement's non-disclosure provision or breach of the NDA.However, Lothamer has established a right to relief forbreach of the Employment Agreement's non-disparagementprovision. As to Kimmel's alleged breach of the non-retentionprovision, the Court finds that there are disputed factual issuesthat must be addressed in an evidentiary hearing. Therefore,the Court will issue injunctive relief to prevent irreparableharm from breach of the non-disparagement provision andhold an evidentiary hearing to resolve the outstanding factualdisputes.29A. SCA Claim*5 The SCA provides that whoever “(1) intentionallyaccesses without authorization a facility through whichan electronic communication service is provided; or(2) intentionally exceeds an authorization to access thatfacility; and thereby obtains...access to a wire or electroniccommunication while it is in electronic storage in such systemshall be punished.” 18 U.S.C. § 2701(a). Electronic storageis defined by the SCA as “(A) any temporary, intermediatestorage of a wire or electronic communication incidental tothe electronic transmission thereof; and (B) any storage ofsuch communication by an electronic communication servicefor purposes of backup protection of such communication[.]”Id. § 2510(17). Emails that are stored in a web-based emailservice are covered under the statute. Hately v. Watts, 917F.3d 770, 791-98 (4th Cir. 2019). The SCA provides a privatecause of action to “any...person aggrieved by any violation ofthis chapter in which the conduct constituting the violation isengaged in with a knowing or intentional state of mind.” 18U.S.C. § 2707(a).Lothamer premises its SCA claim on Kimmel's allegedunauthorized access of Jesse's email account. Therefore,Lothamer must show that (1) Kimmel accessed Jesse's emailaccount; (2) the access was either without authorization orin a manner that exceeded Kimmel's authorization; and (3)the access was intentional. The magistrate judge concludedthat Kimmel's knowledge of the $6.5 million valuation, andhis description of it in his letter as “your own valuation,”sufficiently established that Kimmel had gained unauthorizedaccess to Kimmel's email.7 (R&R 9-10; Kimmel Letter 3.)Kimmel objects to this conclusion and points to his affidavit,in which he states he never accessed Jesse's emails. (Pl.’s Obj.13; Kimmel Aff. 3.)29The Court agrees with Kimmel that, based on the evidencein the record, Lothamer has not established a substantiallikelihood of success on its SCA claim. The accusation thatKimmel accessed Jesse's email account is merely an inferencefrom Kimmel's knowledge of the valuation figure. Thiscircumstantial evidence, standing alone, cannot overcomeKimmel's sworn statement to the contrary. Kimmel contendsthat his valuation figure was “inferred from companydiscussions and public industry benchmarks.” (Def.’s Br.in Opp'n to Prelim. Inj., ECF No. 11, PageID.200.)Lothamer provides no evidence to refute the entirely plausiblesuggestion that Kimmel learned about the valuation from hiswork at the company.Lothamer has also failed to show irreparable harm relatedto Kimmel's alleged SCA violation. Indeed, Lothamer'sargument as to irreparable harm focuses on its other claimsand does not even mention the company's valuation. (See Pls.’Br. in Supp. of TRO 27-28.) Lothamer provides no reasonto think Kimmel will gain unauthorized access to anyoneelse's emails, nor does it argue that Kimmel will disclose itsvaluation figure in the future. And although Lothamer notes
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.5that Kimmel disclosed the valuation to some of its employees(Compl. 193), it does not contend that this disclosure causedit any harm, let alone that an injunction is necessary to preventfuture harm related to the valuation. Indeed, such a contentionwould be especially doubtful given that Lothamer includedthe valuation figure in an exhibit attached to its publicly filedcomplaint. (See Kimmel Letter 6.)Because Lothamer has failed to show a likelihood of successon the merits of its SCA claim or a likelihood of irreparableharm, it is unnecessary to consider the other two preliminaryinjunction factors. In sum, Lothamer has not made a clearshowing of an entitlement to injunctive relief on its SCAclaim.8B. DTSA and MUTSA Claims*6 Lothamer also argues that Kimmel has violated theDTSA and MUTSA. A DTSA claim requires: “(1) ‘theexistence of a trade secret, defined generally as informationwith independent economic value that the owner has takenreasonable measures to keep secret[;]’ (2) that ‘is related toa product or service used in, or intended for use in, interstateor foreign commerce[;]’ and (3) ‘the misappropriation ofthat trade secret, defined broadly as the knowing improperacquisition, [ ] use[,] or disclosure of the secret.’ ” In re IslandIndus., Inc., No. 23-5200, 2024 WL 869858, at *2 (6th Cir.Feb. 29, 2024) (alterations in original) (quoting OakwoodLab'ys LLC v. Thanoo, 999 F.3d 892, 905 (3d Cir. 2021)(quoting 18 U.S.C. §§ 1836(b)(1), 1839(3), (5))). A tradesecret can be improperly acquired via, among other methods,“theft, bribery, misrepresentation, breach or inducement of abreach of a duty to maintain secrecy, or espionage throughelectronic or other means[.]” 18 U.S.C. § 1839(6)(A).MUTSA similarly allows a court to enjoin themisappropriation of trade secrets. Mich. Comp. Laws§ 445.1903(1). “Misappropriation” includes improperacquisition of a trade secret or disclosure of a trade secret thatwas “acquired under circumstances giving rise to a duty tomaintain its secrecy.” Id. § 445.1902(b). Improper acquisitionincludes “theft, bribery, misrepresentation, breach, orinducement of a breach of a duty to maintain secrecyor espionage through electronic or any other means.” Id.§ 445.1902(a). Because MUTSA and the DTSA have“almost identical” standards, Prudential Defense Sols., Inc.v. Graham, 498 F. Supp. 3d 928, 938 (E.D. Mich. 2020), theCourt will address the claims together.Lothamer argues that Kimmel improperly acquired three tradesecrets: the valuation, the Scheduled Deposits Program, andthe Portal. The magistrate judge concluded that Lothamercannot raise an improper acquisition claim related to theScheduled Deposits Program or the Portal because Kimmelaccessed them as part of his employment—thus, there wasno improper acquisition. (R&R 14-16.) Lothamer raised noobjections to this portion of the R&R, and the Court will adoptthe magistrate judge's conclusion on that point.As to the valuation, Lothamer's argument fails here for thesame reason its SCA claims failed. As discussed above, therecord does not clearly establish that Kimmel improperlyaccessed Jesse's email account. Therefore, Lothamer is notsubstantially likely to succeed on its DTSA or MUTSAclaims.9Lothamer has also not established a likelihood of irreparableharm related to its DTSA or MUTSA claims. As discussedabove, Lothamer has not shown that Kimmel's access to thevaluation figure has caused, or will cause, any harm. It isunnecessary to consider the other two preliminary injunctionfactors, as Lothamer has not made a clear showing that it isentitled to injunctive relief.C. Breach of Contract ClaimsThe magistrate judge also concluded that Lothamer was likelyto succeed on its breach of contract claims. As Kimmel notes—and as the magistrate judge acknowledged (R&R 16)—Lothamer referenced Kimmel's alleged breaches of contractin its brief, but did not actually argue that they were abasis for injunctive relief. (Def.’s Obj. 18.) Kimmel contends,therefore, that he was not properly on notice of these claims.However, the inclusion of the claims in Lothamer's brief andin the R&R provided Kimmel sufficient notice to addressthem in his objections, which he did at length. As explainedbelow, only one of the contract claims—Kimmel's breach ofthe non-disparagement provision—warrants injunctive relief.1. Disclosure of Valuation*7 Lothamer alleges that Kimmel revealed itscompany's valuation to several of its employees whenhe sent them copies of his letter to Jesse. Thisviolated his employment agreement, which barred himfrom “communicat[ing] or disclos[ing]...any confidentialknowledge or information acquired...during the period ofhis[ ] employment,” (Employment Agreement 3), and theNDA, which barred him from “disclos[ing]...Confidential
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.6Information to anyone.” (NDA 1.) Lothamer has establishedthat it is likely to succeed on the merits of this claim. Jesse'saffidavit indicates that the valuation figure was confidential,and that Kimmel sent his letter containing the valuationfigure to various employees of the company. The non-disclosure provision and the NDA do not make exceptionsfor disclosures of confidential information to other employeesof the company. Further, even if Kimmel came up with thevaluation figure based in part on company discussions, ashe contends, that would still qualify as information obtained“during the period of his[ ] employment,” so revealing thatinformation would be a violation of the contract.However, Lothamer has not shown irreparable harm as tothis claim. Lothamer has made no argument as to whythe letter caused it harm, or why future revelations of itsvaluation would cause it irreparable harm. Indeed, thoughKimmel revealed the valuation to a small number of companyemployees, Lothamer subsequently included it in a publiclyavailable court filing. Because Lothamer has not shown anyirreparable harm related to this particular contractual breach,it is not entitled to injunctive relief. See Sumner, 942 F.3dat 327 (The existence of irreparable harm “is indispensable,”and district courts abuse their discretion if they grant apreliminary injunction without finding irreparable harm.).2. Confidential Information on LinkedInLothamer also contends that Kimmel disclosed confidentialand sensitive information about the company's data securityprotocols on LinkedIn, exposing Lothamer to attemptedsecurity breaches. (Pls.’ Br. in Supp. of TRO, PageID.1276.)Specifically, Kimmel mentioned that Lothamer used “PHP7.3.3” and “SHA-1 Hashing.” (LinkedIn Post 2.) Kimmelargues that this information was already made public byLothamer's court filings. (Pl.’s Obj. 15.) This contentionappears correct—in its complaint, Lothamer notes that ituses PHP (Compl. 196), and one of the documents itattached as an exhibit references its desire to “[r]eplaceDwoo 7.3” (Lothamer Portal Modernization 5, ECF No.1-7). The complaint also includes Kimmel's letter as anattachment, in which he refers to the company's use of“SHA-1 encryption.” (Kimmel Letter 2.)Lothamer does not argue to the contrary; rather, it contendsthat including something in a court filing does not exposeit to the wider audience of a LinkedIn post. (Pls.’ Resp.to Obj. 14, ECF No. 123.) Be that as it may, therelevant question is whether Lothamer's inclusion of theinformation in a public filing excluded it from the categoryof confidential information protected by its contracts withKimmel. The definition of “Confidential Information” inKimmel's NDA excludes information “approved for releaseby Lothamer.” (NDA 1.) A reasonable interpretation of thatphrase includes information that Lothamer put in its publiccourt filings. Kimmel's Employment Agreement does notspecifically define “confidential,” but the plain meaning ofthe term does not encompass information that Lothamer madepublic of its own accord. Therefore, Kimmel did not violatethe NDA or the non-disclosure provision of his EmploymentAgreement.In sum, Lothamer is unlikely to succeed on the merits of itsclaim that revealing its software information was a breach ofcontract, and thus it is not entitled to injunctive relief on thisclaim.3. Retention of Scheduled Deposits Program and PortalIn its verified complaint, Lothamer states that Kimmelmaintains unauthorized possession of two software programsbelonging to the company—the Scheduled Deposits programand the Portal. (Compl. 191.) Lothamer contends thatthis conduct is a violation of the non-retention clauseof Kimmel's Employment Agreement, which states thatKimmel “will return all confidential information in his/her possession...upon request or demand by the Employer,or within two weeks from the termination date ofemployment.” (Employment Agreement 3.) Because morethan two weeks have elapsed since the end of Kimmel'semployment, Lothamer argues, his failure to return theseprograms is a breach of the contract. (See Compl. 191.) TheCourt agrees, and finds that Lothamer is likely to succeed onthe merits of this claim.10*8 However, Lothamer has not established a likelihoodof irreparable harm. Kimmel's LinkedIn post indicatesthat he has started a competing tax preparationcompany. (See LinkedIn Post 4 (“I'm building analternative: CheapTaxSolutions.com.”)). Kimmel doesnot dispute this fact. (See Def.’s Surreply 3, ECFNo. 71 (“Although Defendant has launched a newbusiness, CheapTaxSolutions.com....”)). The magistratejudge concluded that this is sufficient to establish irreparableharm because Kimmel has such an obvious opportunity touse the confidential information he has taken from Lothamer.(R&R 18.) Kimmel objects that this is merely “conjecture.”(Def.’s Obj. 27.) And in a sworn affidavit, Kimmel atteststhat he has not used Lothamer's confidential information and
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.7“[a]ny documents or data in [his] possession were preservedsolely for the purpose of litigation.” (Kimmel Aff. 4.)Lothamer's argument for irreparable harm relies on theassumption that Kimmel will actually use its software forhis competing company, which is contradicted by his swornaffidavit. On the record before it, the Court cannot discountKimmel's affidavit based on Lothamer's speculation. SeeTenke, 511 F.3d at 553 (“Where facts are bitterly contested andcredibility determinations must be made to decide whetherinjunctive relief should issue, an evidentiary hearing must beheld” before the court grants injunctive relief.). Therefore, theCourt will hold an evidentiary hearing to resolve this factualdispute.4. Disparagement on LinkedInLothamer also argues that Kimmel violated the non-disparagement provision of his Employment Agreementby making critical statements about the company onLinkedIn.11 The relevant portion of the contract provides:[Kimmel] covenants and agrees notto make negative comments about[Lothamer] or its officers, directors,current and former employees, or otheragents after he...signs this agreement.Such disparagement includes, but isnot limited to, making disparaging ordiscrediting remarks on any internetweb site, including but not limitedto internet complaint boards or socialmedia sites...any employment sites,etc.(Employment Agreement 5.) The magistrate judge concludedthat Kimmel had made disparaging comments aboutLothamer in his June 28, 2025, LinkedIn post. (R&R 17.)The post contains many negative assertions about Lothamer,including that the company made “false representations”and “unfulfilled oral agreements” (LinkedIn Post 1), that acompany officer characterized its “system as the worst codehe's seen in 40 years” (id. at 2), that Lothamer has hadsecurity breaches, that the company is in violation of a federalregulation, that its system is vulnerable to a breach (id.), andthat the company lied about having attorneys on staff (id.at 3). These statements are clearly disparaging, so Lothameris likely to succeed on the merits of its claim that this postviolates the non-disparagement provision.Lothamer has also sufficiently shown it will suffer irreparableharm from this post. Specifically, Lothamer has establishedthat this post is causing bad actors to attempt to breach itsPortal, which in turn has harmed its customers’ ability to usethe company's services. (Casey Aff. ¶¶ 19-25; Jesse LothamerAff. ¶¶ 15-23.) These attempts are connected to the breachof the non-disparagement provision, in that Kimmel's claimsabout Lothamer's security vulnerabilities tacitly encouragedpeople to try to exploit those vulnerabilities. And theproblems caused by these breach attempts—including theforced shutoffs of the Portal, and the potential reputationalharm of a data breach—are likely to irreparably harmLothamer's business. See Basicomputer Corp. v. Scott, 973F.2d 507, 512 (6th Cir. 1992) (“The loss of customer goodwilloften amounts to irreparable injury because the damagesflowing from such losses are difficult to compute.”).*9 The other preliminary injunction factors also supportissuing injunctive relief here. The Court agrees with themagistrate judge's conclusion that ordering Kimmel to takedown this post will not cause substantial harm to Kimmel orothers. (R&R 19.) Kimmel's right to free speech will onlybe limited to the extent that he agreed in his employmentcontract. And an injunction would be in the public interestbecause the attempted security breaches caused by Kimmel'spost could expose people's information to bad actors. Thepublic interest is also served by the enforcement of validemployment contracts. See Henkel Corp. v. Cox, 386 F. Supp.2d 898, 904 (E.D. Mich. 2005).12Kimmel objects that the magistrate judge's public interestdetermination did not properly consider the importanceof informing the public about Lothamer's alleged securityweaknesses. (Def.’s Obj. 21.) But whatever weaknessesexist in Lothamer's security have been exacerbated by thepost, which (inadvertently or not) encouraged bad actorsto exploit the company's security vulnerabilities. Kimmelhas not presented evidence establishing that his post wasbeneficial to the public overall.In sum, Lothamer has made a clear showing that it is entitledto an injunction requiring Kimmel to remove the June 28,2025, LinkedIn post.5. First Amendment Objection
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.8Kimmel contends that ordering him to remove his LinkedInpost violates his First Amendment rights and constitutes anunlawful prior restraint.13 The magistrate judge concludedthat the First Amendment does not apply here becauseLothamer is a private party rather than a government actor,and because Kimmel waived his First Amendment rightsby signing the Employment Agreement. (R&R 17 (citingRomano v. Blue Cross Blue Shield of Mich., No. 2:21-cv-12966, 2022 WL 19188, at *3 (E.D. Mich. Jan. 3, 2022);Ostergren v. Frick, 856 F. App'x 562, 569–70 (6th Cir.2021)).) Kimmel objects that the First Amendment appliesbecause court orders can constitute state action, and thatOstergren’s discussion of contractual waiver is inapplicableto these facts. (Def.’s Obj. 20.)As an initial matter, the application of the state action doctrineto court enforcement of private contracts is not well-settled.A court's enforcement of tort law, whether through monetarydamages or an injunction, implicates the First Amendmenteven if the parties to the lawsuit are private. See, e.g.,Curtis Pub. Co. v. Butts, 388 U.S. 130, 154-55 (1967)(plurality opinion) (applying First Amendment to libel suitfor damages brought by private party); Karhani v. Meijer, 270F. Supp. 2d 926, 931-32 (E.D. Mich. 2003) (applying FirstAmendment to temporary restraining order sought by privateparty). A lawsuit brought under a promissory estoppel theoryalso implicates the First Amendment, because promissoryestoppel is “a state-law doctrine which, in the absence ofa contract, creates obligations never explicitly assumed bythe parties.” Cohen v. Cowles Media Co., 501 U.S. 663, 668(1991). This principle implies that enforcement of contractualobligations, by contrast, would not implicate the FirstAmendment. However, this inference is not airtight becauseCohen involved monetary rather than injunctive relief, andFirst Amendment concerns are heightened in the context ofinjunctions. See Novak v. City of Parma, 932 F.3d 421, 432(6th Cir. 2019) (“The First Amendment guarantees ‘greaterprotection from prior restraints.’ ” (quoting Alexander v.United States, 509 U.S. 544, 550 (1993))).*10 Even so, some courts have held that enforcing a contractvia injunction does not implicate the First Amendment atall. See United Egg Producers v. Standard Brands, Inc.,44 F.3d 940, 943 (11th Cir. 1995) (“Where two disputingparties in positions of equal bargaining power agree, througha Settlement Stipulation, to restrict, in a limited degree, theirFirst Amendment rights on commercial speech as was donehere, we hold that court enforcement of that agreement isnot governmental action for First Amendment purposes.”);USA Techs., Inc. v. Tirpak, No. CIV.A. 12-2399, 2012 WL1889157, at *8 (E.D. Pa. May 24, 2012) (“[I]n the contextof a contractual limitation of speech, there is no state actionunless the court enjoins speech that is beyond the scope ofthe parties’ agreement.”); Fisher v. Biozone Pharms., Inc.,No. 12-CV-03716-LB, 2017 WL 1097198, at *7 (N.D. Cal.Mar. 23, 2017) (granting injunctive relief and holding that a“settlement's non-denigration term does not implicate FirstAmendment rights”).Other courts have suggested that court enforcement of acontract can constitute state action. See Nat'l Abortion Fed'n,NAF v. Ctr. for Med. Progress, 685 F. App'x 623, 626 (9th Cir.2017) (considering First Amendment challenge to injunctionenforcing non-disclosure agreement); Pizza Hut LLC v.Pandya, No. 4:19-CV-00726-RWS, 2019 WL 8331437, at*4 (E.D. Tex. Nov. 26, 2019) (noting, in analysis of TROrequest to enforce non-disparagement clause, that “priorrestraints against speech are generally unconstitutional”);Head Kandy LLC v. McNeill, No. 23-CV-60345-RAR, 2023WL 7318907, at *4 (S.D. Fla. Nov. 7, 2023) (consideringFirst Amendment challenge to injunction enforcing non-disparagement agreement); see also Shelley v. Kraemer, 334U.S. 1, 19-20 (1948) (court enforcement of private raciallyrestrictive covenants constitutes state action). And at least onefederal court of appeals has explicitly left the question open.See Democratic Nat'l Comm. v. Republican Nat'l Comm.,673 F.3d 192, 204-05 (3d Cir. 2012) (declining to decidewhether enforcement of a consent decree between privateparties constitutes state action).There does not appear to be any authority from the SixthCircuit directly indicating how the state action doctrineapplies to court enforcement of private contracts. In twocases, the Sixth Circuit has conducted a First Amendmentanalysis of the government's ability to enforce a contractagainst a private party by bringing a lawsuit, see Ostergren,856 F. App'x at 568-70; Henley v. Cuyahoga Cnty. Bd. ofMental Retardation & Dev. Disabilities, 141 F. App'x 437,445-46 (6th Cir. 2005), but those opinions indicate littleabout how the state action doctrine applies to contracts notinvolving the government.It is ultimately unnecessary to decide this issue because theCourt is persuaded that issuing an injunction here complieswith the First Amendment even if it constitutes state action.Courts have frequently held that it is constitutional to enjoinparties from violating speech-related contractual obligationsthat they have voluntarily undertaken. See, e.g., NAF, 685
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.9F. App'x at 626 (upholding injunction against violation ofnon-disclosure contract because “the district court did notclearly err in finding that the defendants waived any FirstAmendment rights to disclose that information publicly byknowingly signing the agreements”); Romeo & Juliette LaserHair Removal, Inc. v. Assara I LLC, 679 F. App'x 33,36 (2d Cir. 2017) (holding that injunction complies withFirst Amendment because its “prohibition on speech that isfalse...or disparaging effectively enforces defendants’ owncovenant not to engage in such speech”); Head Kandy, 2023WL 7318907, at *4 (granting injunctive relief to enforce non-disparagement clause because “a party can waive their freespeech rights in the course of an agreement”); MillennialPlastic Surgery PLLC v. James, No. 21 CIV. 9590 (ER), 2021WL 5988322, at *2 n.2, *4 (S.D.N.Y. Dec. 16, 2021) (grantinginjunctive relief to enforce non-disparagement clause becausedefendant waived First Amendment rights); Tirpak, 2012 WL1889157, at *1, 10-12 (holding that injunction enforcing non-disparagement contract does not violate First Amendmentbecause defendants waived their rights); Great CaesarsGhost LLC v. Unachukwu, No. CV 19-5408, 2020 WL2394052, at *4-5 (D.N.J. May 12, 2020) (granting injunctionrequiring defendant to obey non-disparagement clause inprior settlement agreement); Moreno v. Tringali, No. CIV.14-4002 JBS/KMW, 2015 WL 3991161, at *1 (D.N.J. June30, 2015) (discussing prior preliminary injunction requiringdefendant to obey non-disparagement clause).*11 The Supreme Court has also upheld an injunctionenforcing a contract that restricted speech, noting that thedefendant had “voluntarily signed the agreement.” Snepp v.United States, 444 U.S. 507, 508-09 & n.3 (1980). However,the scope of Snepp’s holding is unclear given the nationalsecurity interests implicated by the case. See id. at 509 n.3(noting that because the plaintiff worked for the CIA, a priorrestraint would have been justified even absent a contractualprovision).There is little Sixth Circuit case law on a person's ability tocontractually waive their First Amendment rights. Lothamerpoints to Ostergren, 856 F. App'x at 568-70, a case thatis of limited applicability here. In Ostergren, the plaintiffsought an injunction to prevent state officials from enforcinga non-disclosure agreement against him, arguing that theagreement was an unlawful prior restraint. Id. at 563-65,568. The Court of Appeals held that the non-disclosureagreement did not violate the First Amendment, noting that“[s]everal courts—including the Supreme Court and ourCircuit—have rejected First Amendment challenges to non-disclosure agreements, all emphasizing that the challengingparty voluntarily undertook a duty not to speak.” Id. at 568-69.It also pointed out, as a factor in favor of enforcement, that“it was only by making a contractual promise to maintainconfidentiality that [the defendant] was able to access the[confidential] materials.” Id. at 570.But Ostergren explicitly recognized that the analysis mightbe different when a party sought an injunction enforcing anon-disclosure agreement. Id. at 569 (“Notably, we do notface a prospective injunction seeking to prohibit [the plaintiff]from sharing the course materials in the future.”). Indeed, thecourt explained that “[w]e have not identified—nor have theparties identified—any cases holding that a non-disclosureagreement alone (as opposed to an injunction enforcing one)amounts to a prior restraint.” Id. (emphasis added).14Another potentially relevant case is Henley, where the Courtof Appeals held that a settlement agreement including anon-disclosure and non-disparagement clause did not violatethe First Amendment because the plaintiff had “voluntarilyrelinquished” her free speech rights. 141 F. App'x at 446.However, Henley involved an order to enforce a settlement—i.e., to prevent the plaintiff from reopening the case, seeid. at 441—rather than an injunction requiring compliancewith the speech-related contractual provisions. Therefore, itis unclear whether Henley’s discussion of waiver is applicablein this context, where the concerns about prior restraints areheightened.The Sixth Circuit also made some passing comments onthis issue in State Farm Mutual Automobile Insurance Co.v. Angelo, 95 F.4th 419 (6th Cir. 2024), cert. denied, 145S. Ct. 264 (2024). There, the defendant challenged on FirstAmendment grounds a court order requiring him to dismissa separate lawsuit, which he had brought in violation of asettlement agreement. State Farm, 95 F.4th at 424-25. TheSixth Circuit did not address the merits of the defendant'sargument because it held that he had forfeited the issue. Id. at435-36. But the court noted, in dicta, that the defendant wasnot certain to succeed on his First Amendment claim because“our case law establishes that a party's First Amendmentrights are not violated where that party voluntarily enters intoa bargained-for agreement that happens to implicate someburden on speech.” Id. at 436 (citing Ostergren, 856 F. App'xat 569). Although this principle was not determinative to theoutcome, it suggests that the logic of Ostergren—and therule allowing contractual waiver of First Amendment rights—applies in the context of injunctions.
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.10*12 Ultimately, the Court is persuaded that enforcementof the non-disparagement clause against Kimmel will notviolate his First Amendment rights. The precedent outlinedabove largely supports the principle that a person can waivetheir free speech rights via contract, including their right tonot face prior restraints from a court. Accord Perricone v.Perricone, 972 A.2d 666, 679 (Conn. 2009) (“[O]ur researchhas not revealed[ ] a single case in which a court has heldthat a judicial restraining order that enforces an agreementrestricting speech between private parties constitutes a perse violation of the first amendment's prohibition on priorrestraints on speech.”); Kneebinding, Inc. v. Howell, 201A.3d 326, 348 (Vt. 2018) (“[P]rivate parties may enteragreements that waive their respective free speech rights,and courts may enforce those agreements”). That principleis also in line with the general rule that constitutionalrights, including First Amendment rights, can be waived.See Cohen, 501 U.S. at 665 (allowing damages for breachof promise of confidentiality because “any restrictions thatmay be placed on the publication of truthful informationare self-imposed”); Democratic Nat'l Comm., 673 F.3d at204-05 (upholding validity of contract restricting speechbecause “[t]he Supreme Court has long recognized that aparty may waive constitutional rights” (internal quotationmarks omitted)); Janus v. Am. Fed'n of State, Cnty., &Mun. Emps., Council 31, 585 U.S. 878, 930 (2018) (non-union members who agree to pay union fees “are waivingtheir First Amendment rights” to free association); Powell v.SEC, No. 24-1899, 2025 WL 2233792, at *6 (9th Cir. Aug.6, 2025) (“Judicially enforceable non-disclosure and non-disparagement agreements are commonplace.”); Lake JamesCommunity Volunteer Fire Dept., Inc. v. Burke, 149 F.3d277, 278 (4th Cir. 1998) (finding contractual waiver of FirstAmendment right to petition government), cert. denied, 525U.S. 1106 (1999); Perricone, 972 A.2d at 679 n.18 (collectingcases).Courts that have allowed the waiver of First Amendmentrights via contract have generally required it to be knowing,voluntary, and intelligent. See Leonard v. Clark, 12 F.3d 885,889-90 (9th Cir. 1993), as amended (Mar. 8, 1994); ErieTelecommunications, Inc. v. City of Erie, Pa., 853 F.2d 1084,1094-96 (3d Cir. 1988); Lake James, 149 F.3d at 280; seealso D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 187(1972) (suggesting that waivers of constitutional rights aregenerally valid if voluntary, knowing, and intelligent). Somecourts have also held that a waiver is invalid “if the interestin its enforcement is outweighed in the circumstances bya public policy harmed by enforcement of the agreement.”Leonard, 12 F.3d at 890; see Lake James, 149 F.3d at280 (“The contractual waiver of a constitutional rightmust...not undermine the relevant public interest in order tobe enforceable.”); Town of Newton v. Rumery, 480 U.S. 386,392 (1987) (applying the public interest requirement to awaiver of a right to sue); but see Erie Telecomm., 853 F.2d at1099 (declining to conduct a public interest analysis beforeenforcement of First Amendment waiver).At this stage, it appears Kimmel's waiver of his FirstAmendment rights under his Employment Agreement wasknowing, voluntary, and intelligent. The record makes itclear that Kimmel signed the Employment Agreement, andhe makes no allegations of coercion or duress. See Nat'lAbortion Fed'n v. Ctr. for Med. Progress, No. 15-CV-03522-WHO, 2016 WL 454082, at *18 (N.D. Cal. Feb. 5, 2016),aff'd sub nom. Nat'l Abortion Fed'n, NAF v. Ctr. for Med.Progress, 685 F. App'x 623 (9th Cir. 2017) (waiver ofFirst Amendment rights was valid because contracts were“voluntarily and knowingly signed”); K.M.C. Co. v. IrvingTr. Co., 757 F.2d 752, 758 (6th Cir. 1985) (“[I]n the contextof an express contractual waiver [of constitutional rights,]the objecting party should have the burden of demonstratingthat its consent to the provisions was not knowing andvoluntary.”). Although Kimmel objects that the contract wasthe result of fraud (Def.’s Obj. 12), he has provided noevidence of this. Enforcing the waiver is also not contrary tothe public interest. Though Kimmel's post arguably informsLothamer's customers about potential security vulnerabilitiesaffecting their personal information, by advertising thosevulnerabilities it also encourages the very breaches Kimmel iswarning about. Therefore, the non-disparagement provisionof the Employment Agreement is enforceable.6. Other Objections*13 Kimmel raises several other objections to the issuanceof an injunction. As explained below, they are all meritless.Kimmel challenges the enforceability of the EmploymentAgreement in various ways. He claims that it was“procured by a fraudulent inducement” and “lacks mutualassent” (Def.’s Obj 12), but he does not point to any evidencesupporting these assertions. He also argues that the agreementis “void as a matter of public policy,” but does not explainwhy this is the case.15 (Id.)
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.11Kimmel also argues that Lothamer cannot seek an injunctionbecause it has unclean hands. (Id. at 15.) “The concept ofunclean hands may be employed by a court to deny injunctiverelief where the party applying for such relief is guilty ofconduct involving fraud, deceit, unconscionability, or badfaith related to the matter at issue to the detriment of the otherparty.” Performance Unlimited, Inc. v. Questar Publishers,Inc., 52 F.3d 1373, 1383 (6th Cir. 1995). The misconductalleged “must also have a sufficient connection to the matterin dispute.”FBB IP LLC v. Big Boy Rest. Grp., LLC, 769 F.Supp. 3d 765, 775 (S.D. Ohio 2025) (citing Cyber Sols. Int'l,LLC v. Pro Mktg. Sales, Inc., 634 F. App'x 557, 568 (6th Cir.2016)). Kimmel alleges that Lothamer has violated a federalregulation related to data security (Def.’s Obj 16-17), but thisis not sufficiently connected to Lothamer's causes of action tosupport an unclean hands defense, see Cyber Sols. Int'l, 634 F.App'x at 568 (unclean hands doctrine “does not grant courtsfree-floating authority to deny...relief in all cases in which aparty has engaged in misconduct”).Additionally, Kimmel contends that his LinkedIn postcontained only true information, which, he argues, doesnot qualify as “disparagement as a matter of law.” (Def.’sObj. 19.) However, his Employment Agreement bars himfrom making any “negative comments about [Lothamer],”regardless of their truth. (Employment Agreement 5.)Therefore, negative but true comments clearly violate thecontract.Kimmel also argues that Lothamer is not entitled toinjunctive relief because it “did not seek a TRO untilmonths after termination and only after public criticismon LinkedIn.” (Def.’s Obj. 22.) As the Sixth Circuit hasexplained, “a lengthy delay in seeking injunctive relief mayweigh against a finding of irreparable harm,” but “[a]ll delaysin seeking injunctive relief are not unreasonable.” York RiskServs. Grp., Inc. v. Couture, 787 F. App'x 301, 309 (6th Cir.2019). As to the non-disparagement claims, Lothamer movedfor a preliminary injunction on July 24, 2025, less than amonth after Kimmel's June 28, 2025, LinkedIn post. (See Pls.’Mot. for TRO; LinkedIn Post 1.) This is not an unreasonabledelay. See York, 787 F. App'x at 309 (six-month delay notunreasonable). As to Lothamer's contract claim for retentionof its programs, Lothamer moved for a preliminary injunctionrequiring the return of its confidential materials on May 20,2025 (Pls.’ Mot. for Prelim. Inj. 32), less than three monthsafter Kimmel was terminated (see Compl. 120). Again, thisdelay was not unreasonable, especially because it is unclearwhen Lothamer determined that Kimmel had possession of itsprograms and was starting a competing business.*14 Finally, Kimmel argues that the Court should reject theR&R and deny the request for a preliminary injunction dueto “a recurring pattern of procedural error” that “deprived[Kimmel] of a fair and reliable adjudication.” (Def.’s Obj. 29.)The Court is not persuaded that any such procedural errorshave occurred, let alone that they have deprived Kimmel of afair and reliable adjudication.7. Citation PracticesBefore concluding, it is necessary to address one other issueraised by the briefings. The Court's review of Kimmel'sobjection to the R&R indicates that a substantial amountof the legal authority he purports to rely on is eithermischaracterized or entirely fictitious. Many of the casesKimmel cites cannot be found at the locations he provides.(See Def.’s Obj. 6 n.2 (citation to Hall v. Hall, 584 U.S.147 (2018)), 8 & n.3 (citation to Baker Hughes Inc. v. S&SChem., LLC, No. 2:21-cv-2611, 2022 WL 1591563 (W.D.Tenn. Mar. 30, 2022) and PFK Co. v. Protective Technologies,Inc., 624 F. Supp. 2d 802 (S.D. Ind. 2008)), 13 (citation toDearborn Heights v. Comcast, 269 F. Supp. 3d 904 (E.D.Mich. 2017)), 29 (citations to Brown v. Matthews Mortuary,Inc., 118 F.3d 1008 (4th Cir. 1997) and United States SEC v.Miner, 744 F.3d 1123 (9th Cir. 2014)), 12 (citation to Stinniev Holcomb, 977 F.3d 403 (4th Cir. 2020)).) Other cases donot contain the quoted language he attributes to them. (Seeid. at 14 (citation to FormFactor, Inc. v. Micro-Probe, Inc.,No. 10-3095, 2012 WL 2061520, at *4 (N.D. Cal. June 7,2012)), 16 & n.3 (citation to Shane Grp. v. Blue Cross, 825F.3d 299, 305 (6th Cir. 2016) and Next Payment Sols., Inc.v. CLEAResult Consulting, Inc., No. 2:17-CV-00628-JRG,2020 WL 2836778, at *3 (E.D. Tex. May 29, 2020)), 17(citation to Mertik v. Blalock, 983 F.2d 1353, 1367 (6th Cir.1993)), 18 (citation to Ball v. Famiglio, 396 F. App'x 836,837 (3d Cir. 2010)), 19 (citation to Rondigo, LLC v. Twp. ofRichmond, 641 F.3d 673, 681 (6th Cir. 2011)), 20 (citation toCraig v. Harney, 331 U.S. 367, 374 (1947)), 22 (citation toOverstreet v. Lexington-Fayette Urban Cnty. Gov't, 305 F.3d566, 579 (6th Cir. 2002)), 24 (citation to Gates Rubber Co.v. Banda Chem. Indus., Ltd., 9 F.3d 823, 848 (l0th Cir. 1993)and Packaging Corp. of Am. v. Croner, 419 F. Supp. 3d 1059,1066 (N.D. Ill. 2020)), 26 (citation to Basicomputer, 973 F.2dat 511 (6th Cir. 1992)).)The Court presumes that the fictitious citations in Kimmel'sbrief were the result of using generative artificial intelligence
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12(“AI”). “It is no secret that generative AI programs are knownto ‘hallucinate’ nonexistent cases, and with the advent ofAI, courts have seen a rash of cases in which both counseland pro se litigants have cited such fake, hallucinated casesin their briefs.”Evans v. Robertson, No. 24-13435, 2025WL 1483449, at *2 (E.D. Mich. May 21, 2025). “Withoutquestion, it is improper and unacceptable for litigants—including pro se litigants—to submit ‘non-existent judicialopinions with fake quotes and citations.’ ” Anonymous v.N.Y.C. Dep't of Educ., No. 1:24-cv-04232, 2024 WL 3460049,at *7 (S.D.N.Y. July 18, 2024) (internal quotation marksomitted). Such fake citations waste the time and resourcesof the Court and opposing parties. Morgan v. Cmty. AgainstViolence, No. 23-CV-353-WPJ/JMR, 2023 WL 6976510, at*8 (D.N.M. Oct. 23, 2023). “Sanctions may be imposed forsubmitting false and nonexistent legal authority to the Court.”Anonymous, 2024 WL 3460049, at *7.*15 Because Kimmel may not have recognized the risks ofusing AI, the Court will not impose sanctions at this time. SeeAlkuda v. McDonald Hopkins Co., No. 1:24-CV-1103, 2025WL 843403, at *5 n.5 (N.D. Ohio Mar. 18, 2025). However,Kimmel is now on notice that future use of fictitious citationsmay result in sanctions.IV. CONCLUSIONFor the reasons discussed above, Lothamer has establishedthat it is entitled to injunctive relief in relation to Kimmel'sbreach of the non-disparagement clause of his EmploymentAgreement. Therefore, the court will enter an order requiringhim to take down the June 28, 2025, LinkedIn post. As toKimmel's alleged breach of the non-retention clause, the courtwill hold an evidentiary hearing to resolve disputed issues offact. Lothamer's other requests for injunctive relief are denied.An order consistent with this Opinion will issue.Dated: August 29, 2025 /s/ Hala Y. JarbouHALA Y. JARBOUCHIEF UNITED STATES DISTRICT JUDGEAll CitationsSlip Copy, 2025 WL 2490380Footnotes1Kimmel is proceeding pro se.2Because Kimmel responded, the Court will treat both motions as ones for preliminary injunctions.3Kimmel argues that it was improper for the magistrate judge to consider both motions in one R&R. However,the rule he cites—Rule 42 of the Federal Rules of Civil Procedure—concerns the consolidation of separateactions, not the combination of two motions into one R&R. See Fed. R. Civ. P. 42(a)(2). A magistrate judgecan address multiple motions in a single R&R. See, e.g., Burnett v. Michigan, No. 1:24-CV-57, 2024 WL3342328 (W.D. Mich. July 8, 2024) (adopting R&R addressing four motions to dismiss).4The magistrate judge required objections to the R&R to be filed within five days, rather than the normalfourteen, concluding that the ongoing harm of Kimmel's actions was an exigency justifying a prompterresolution of the motion. (R&R 20.) The Court subsequently lengthened the objection period to eleven days,setting August 15, 2025 as the deadline. Kimmel filed his objection on August 14, 2025. However, he stillobjects to the shortened deadline. (Def.’s Obj. 28.) Contrary to Kimmel's contentions, a shortened deadlinewas reasonable given the nature of the motion, and was within the Court's authority. See, e.g., Harper v.Everson, No. 3:15-CV-00575-JHM, 2016 WL 8201785, at *9 (W.D. Ky. June 27, 2016); Aubrey v. Barlin, No.1:10-CV-076 DAE, 2016 WL 110604, at *3 (W.D. Tex. Jan. 7, 2016). Furthermore, given that Kimmel filedextensive objections, any procedural error in establishing the deadline would be harmless.
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.135Kimmel claims that he removed the post at some point, then republished it on July 24, 2025. (Def.’s Resp.Br. in Opp'n to TRO 2, ECF No. 88.)6Kimmel objected to the magistrate judge's stated preliminary injunction standard (Def.’s Obj 11), and inparticular to the principle that “[w]here the three factors other than the likelihood of success all stronglyfavor issuing the injunction, a district court is within its discretion in issuing a preliminary injunction if themerits present a sufficiently serious question to justify a further investigation.” (R&R 6-7 (quoting Little CaesarEnters., Inc. v. R–J–L Foods, Inc., 796 F. Supp. 1026, 1030 (E.D. Mich. 1992)) (alteration in original).) Kimmelcontends that this standard was rejected by the Supreme Court in Winter, 555 U.S. at 22. Because thisOpinion does not rely on the quoted principle, it is unnecessary to decide whether it still applies in light ofWinter.7Kimmel objects that this letter is privileged under the Noerr-Pennington doctrine, which exempts businessesfrom antitrust liability when they lobby the government. Knology, Inc. v. Insight Commc'ns Co., 393 F.3d656, 658 (6th Cir. 2004). The doctrine is plainly inapplicable to this case. He also contends that the letter is“protected by pre- litigation privilege,” which he does not define. (Def.’s Obj. 13.) Regardless, any privilegethat could have covered the letter was waived when Kimmel sent it to Jesse.8Though Lothamer argued in its motion that it was also entitled to relief under the CFAA, the magistrate judgedid not address this claim in her R&R. Because Lothamer failed to raise any objection to the R&R, the Courtneed not consider this claim. However, it will merely note that several of the issues with the SCA claim applyequally to the CFAA, which similarly bars intentional unauthorized access to a computer. See 18 U.S.C.§ 1030(a)(2). Lothamer also argues that Kimmel violated the CFAA by threatening to reveal confidentialinformation (i.e., the valuation) with intent to extort. (Pls.’ Br. in Supp. of TRO 21; see 18 U.S.C. § 1030(a)(7).)However, Lothamer does not point to any portion of Kimmel's letter that can be read as an extortionate threat.9The magistrate judge noted that Lothamer could have brought a claim for improper disclosure of trade secretsunder the DTSA based on Kimmel's LinkedIn post. (R&R 16.) However, as the magistrate judge explained,Lothamer has not pled or argued that Kimmel violated the DTS or MUTSA in this way. (Id.) Under thosecircumstances, it would be inappropriate for the Court to grant relief solely based on the potential successof these hypothetical claims.10The magistrate judge also concluded that Kimmel had breached the non-retention provision by keeping theLothamer Valuation. (R&R 16.) However, even if Lothamer is correct that Kimmel learned of the valuation viaunauthorized access of Jesse's emails, it is not clear that the valuation is actually an item that can be returned,rather than simply a piece of knowledge. Regardless, as discussed above, Lothamer has not established anyirreparable harm from Kimmel's alleged possession of the valuation.11Lothamer also contends that Kimmel disparaged the company by sending a letter to Jesse and variousLothamer employees when he was terminated. (Pls.’ Mot. for Prelim. Inj. 19.) However, Lothamer does notlink this breach of contract to any future irreparable harm, so it is not entitled to relief on this breach of contractclaim.12The magistrate judge also concluded that Kimmel violated the non-disparagement clause with anotherLinkedIn post from July 30, 2025. (R&R 8.) But Lothamer has not argued that this post will cause themirreparable harm or requested injunctive relief related to the post, so the Court will not grant any.13“Any prior restraint on expression comes...with a ‘heavy presumption’ against its constitutional validity.”Org. for a Better Austin v. Keefe, 402 U.S. 415, 419 (1971). “Temporary restraining orders and permanentinjunctions— i.e., court orders that actually forbid speech activities—are classic examples of prior restraints.”Alexander v. United States, 509 U.S. 544, 550 (1993). Although Kimmel's LinkedIn post is in some sense
LOTHAMER TAX RESOLUTION, INC, et al., Plaintiffs, v. PAUL..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.14past rather than future speech, an injunction requiring him to remove it is still “prior” in that it forces him tostop an ongoing, continuous act of communication. See Am. Univ. of Antigua Coll. of Med. v. Woodward,No. CIV. 10-10978, 2010 WL 5185075, at *3 (E.D. Mich. Dec. 16, 2010) (injunction forcing defendant to takedown online speech would constitute prior restraint).14Lothamer argues that if “[a] non-disclosure agreement itself is not an unlawful prior restraint...a fortiori, anorder that enforces such an agreement is also not an unlawful prior restraint.” (Pls. Resp. to Obj. 18.) Butthis gets it exactly backwards: the prior restraint doctrine is specifically concerned with the unique nature ofinjunctive relief, so an injunction to enforce a non-disclosure agreement implicates the doctrine more than themere existence of such a contract. See Novak, 932 F.3d at 432 (“The First Amendment guarantees ‘greaterprotection from prior restraints’ ” (quoting Alexander, 509 U.S. at 550).).15Kimmel also raises several challenges to the enforcement of the NDA, but the Court is not issuing an injunctionbased on violations of the NDA, so it will not address its enforceability here.End of Document© 2025 Thomson Reuters. No claim to original U.S. Government Works.
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