Opinion ID: 2225574
Heading Depth: 1
Heading Rank: 27

Heading: analysis

Text: R.K. contends that the court ignored Whaley's testimony at the preliminary injunction and in his 2002 deposition. It further argues that the court erred when it failed to find that exhibit 43, which was Whaley's diagram, correctly depicted SFAC's trade secret protected by the court's permanent injunction. When a party to an action fails to comply with a court order made for the benefit of the opposing party, such act is ordinarily a civil contempt, which requires willful disobedience as an essential element. [106] Willful means the violation was committed intentionally, with knowledge that the act violated the court order. [107] Under current Nebraska law, a party seeking to hold another in contempt of an order has the heavy burden of establishing that contempt beyond a reasonable doubt. [108] The question at the contempt proceeding was not whether R.K. pirated SFAC's trade secrets. The question was whether R.K.'s alleged use of SFAC's trade secrets violated the parties' agreed-upon injunction order. Before proceeding to our analysis, we set forth some general principles that are helpful to the resolution of this appeal. Since an injunctive order prohibits conduct under threat of judicial punishment, basic fairness requires that those enjoined receive explicit notice of precisely what conduct is outlawed. [109] The judicial contempt power is a potent weapon. When it is founded upon a decree too vague to be understood, it can be a deadly one.... [T]hose who must obey them will know what the court intends to require and what it means to forbid. [110] Understood in light of these principles, the `four corners' rule for interpreting consent decrees is intended to narrowly cabin the circumstances in which contempt may be found. [111] It is because `[t]he consequences that attend the violation of a court order are potentially dire,' ... `that courts must read court decrees to mean rather precisely what they say.' [112] So a court cannot hold a person or party in contempt unless the order or consent decree gave clear warning that the conduct in question was required or proscribed. [113] But injunctions protecting trade secrets may justify less specificity than other orders or decrees to avoid disclosing the plaintiff's trade secret. [114] For this reason, injunctions protecting trade secrets that raise ambiguities involving technical or scientific knowledge may require courts to review the context in which the injunction was entered. This allows the court to determine what conduct the defendant reasonably should have known was prohibited. Even in that circumstance, however, ambiguities that persist even when considered in the light of the record or after applying other aids of interpretation must be construed in favor of the person or party charged with contempt. [115] We interpret the court's contempt order on remand to mean that the court concluded that it was not required to consider anew whether R.K.'s grinding of its valve spools violated the injunction. The court did not make any specific findings of fact. And although it judicially noticed the preliminary injunction and Whaley's deposition, it did not define the ambiguous terms of the injunction. Its earlier finding that R.K.'s proposed grinding would not result in a commercially available valve spool did not clarify matters. The injunction was prohibitory, not mandatory. That is, the injunction specifically excluded from its prohibition R.K.'s use of any commercially available valve spool. That exclusion obviously did not mandate that R.K. use only commercially available valve spools. Instead, the injunction enjoined R.K. from using a surge free control valve created by grinding or milling the valve spool so as to create an unbalanced control spool which converts the tank side of a hydraulic cylinder to a fluid damper which dissipates pressure surges.  (Emphasis supplied.) It did not enjoin R.K. from modifying commercial valve spools in any manner. But the court in its 2008 order did not find that R.K.'s proposed grinding of a valve spool would result in an unbalanced control spool which converted the tank side of a hydraulic cylinder to a fluid damper to dissipate pressure surges. Instead, the court seems to have deferred to the earlier 2002 contempt order. But the 2002 contempt order is similarly flawed because the court refused to review the record of the preliminary injunction hearing to clarify ambiguities in the injunction. Despite SFAC's claim that the injunction prohibited R.K. from modifying the pressure side of the valve spool, the injunction's language referred to converting the  tank side of a hydraulic cylinder to a fluid damper. (Emphasis supplied.) In the face of R.K.'s claim that the injunction was not intended to apply to the modification to the pressure side of the valve spool, the inconsistency between SFAC's interpretation and the injunction was sufficient to create an ambiguity. So, during the first contempt proceeding, the court erred in concluding that the record from the preliminary injunction hearing was irrelevant. Had the court consulted that record, the ambiguity would have been resolved in R.K.'s favor. The permanent injunction represented the parties' settlement agreement. And the record shows that they clearly agreed to prohibit R.K. from using SFAC's trade secret as described by Whaley. Whaley's description of using a valve spool to convert the tank side of a hydraulic cylinder into a fluid damper was unequivocally explained as making cuts on the tank side of the valve spool, with no modification to the pressure side of the valve spool. He specifically stated that SFAC's grinding permitted the tank side to open before the pressure side to dissipate pressure surges. What SFAC has tried to do is to make R.K.'s grinding on the pressure side of its valve spool fit the language of the injunction. It doesn't fit. We recognize that the record shows that Smeal considered SFAC's trade secret to be more than Whaley's description, and he later denied that Whaley's diagram of SFAC's trade secret had depicted any part of SFAC's trade secret. But the issue in a contempt proceeding is what conduct is clearly prohibited by the injunction. Nothing in the injunction clearly prohibited R.K. from modifying the pressure side of the valve spool. And SFAC was obviously aware of the conduct to which Whaley's language from the preliminary injunction referred. SFAC's change of position at the contempt proceeding about the meaning of Whaley's language is precisely what a court may not permit. Even if SFAC's interpretation were plausible, the court was not free to consider its arguments in a vacuum. Unless a court construes an injunction's terms closely to its intended purpose, complainants could create endless arguments for a party's violation of an injunction. Contempt sanctions cannot be premised upon a moving target. We conclude that the district court erred in finding that SFAC had proved beyond a reasonable doubt that R.K.'s grinding on the pressure side of its hydraulic valve spools was prohibited by the injunction.