Court Opinion

ID: 9676948
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:39:25.49724+00
Date Added: 2024-06-11T18:16:52.564494
License: Public Domain

Robert L. Brown, Justice. Appellant Tyson Foods, Inc., appeals the granting of a motion for judgment notwithstanding the verdict in favor of appellees ConAgra, Inc., and ConAgra Poultry Co. (both companies referred to collectively in this opinion as ConAgra). Tyson essentially mounts two arguments in its appeal: (1) that Arkansas law does not invariably require employers to enter into postemployment confidentiality agreements with departing employees for company information to qualify as a trade secret, and (2) Tyson’s nutrient profile qualifies as a trade secret. We affirm the trial court’s order granting the motion for judgment notwithstanding the verdict, but we do so for reasons other than those stated by the trial court in its order. In 1984, David Purtle began his employment with Tyson.1 At the time of his resignation from Tyson in 1999, Purtle held the position of Senior Vice-President in charge of Retail Poultry. In 1997, he directed Dr. Roy Brister, Vice-President of Nutrition Research at Tyson, to develop two nutrient profiles (described as “normal” and “reduced”) for use in formulating Tyson’s poultry feed to avoid having different nutrient profiles at each Tyson complex. Dr. Brister did so. The two profiles were compiled into a single document, the “nutrient profile,” which Tyson used to formulate feed for its chickens, based on varying combinations and levels of amino acids. In June 1999, Purtle left Tyson and began his employment with ConAgra, because he had become unhappy with a reorganization of management at Tyson. Soon after he began work with ConAgra, Purtle gave ConAgra the Tyson nutrient profile, which ConAgra then implemented. That same year, Tyson initiated trade-secret litigation against ConAgra in which it contended that ConAgra had “raided” Tyson and hired away four top management executives, including Purtle, and that those executives would inevitably divulge or had divulged trade secrets to ConAgra. Tyson’s prayer for relief included an injunction against disclosure of Tyson’s trade secrets and damages for misappropriation of the same. Allegations against Purtle were severed, because it was alleged that he had actually given trade secrets to ConAgra. The trial of the remaining three executives proceeded. The trial court in that trial found that certain pricing information and marketing strategies were trade secrets, and it enjoined the three former Tyson executives from revealing those trade secrets for a period of one year. This court reversed and held that the trial court erred in granting the injunction, because Tyson had made no efforts to restrain disclosure of information postemployment. See ConAgra, Inc. v. Tyson Foods, Inc., 342 Ark. 672, 30 S.W.3d 725 (2000) (Tyson I). The case involving Purtle was tried in October 2000, and a jury was impaneled, though the matter was in chancery court. Evidence was presented on (1) whether the nutrient profile was a trade secret; (2) whether it was misappropriated; and (3) what damages may have resulted from a misappropriation. Following a trial on liability, the trial court found that the “nutrient profile” was a trade secret under Arkansas law and was misappropriated. The trial court so instructed the jury, and the matter of damages was submitted to a jury. The jury returned a verdict in favor of Tyson for trade secret misappropriation in the amount of $20,094,531. On October 26, 2000, the trial court entered a judgment in the amount of $20,094,531 against ConAgra. On November 8, 2000, ConAgra filed a Motion for Judgment Notwithstanding the Verdict, or Alternatively, Motion for Remittitur or New Trial. On December 7, 2000, the trial court entered its Order Regarding Trade Secret Misappropriation, which included the following findings: 1. That Tyson’s nutrient profile (the “Profile”) is a formula, and 2. The Profile has independent economic value from not being generally known; and 3. The Profile is not readily ascertainable because it is not readily available on the open market and it is not capable of being reverse engineered; and 4. Tyson took reasonable efforts to protect the secrecy of the Profile by instituting Tyson’s Code of Conduct and Compliance Policy that contains a confidentiality provision, by having verbal understandings with its employees and by taking other measures that are equivalent to those standards in the industry. Also on December 7, 2000, and because of this court’s decision in Tyson I, which was handed down on November 16, 2000, the trial court granted the motion for judgment notwithstanding the verdict and concluded that Tyson I “appears to require a written contract prohibiting postemployment disclosure of information and upon no other grounds.” On December 29, 2000, the trial court entered an Order of Modification nunc pro tunc, adding two additional findings to the December 7, 2000 Order Regarding Trade Secret Misappropriation: 5. The Profile constitutes a trade secret under the ATSA. 6. Because David Purtle supplied the Profile to ConAgra which immediately implemented it without the knowledge or permission of Tyson, the Profile was misappropriated pursuant to the ATSA. It is from the order of December 7, 2000, granting the motion for judgment notwithstanding the verdict and the modification order of December 29, 2000, that Tyson appeals. However, we note that the December 7, 2000 Order Regarding Trade Secret Misappropriation, as modified, was favorable to Tyson. The second December 7, 2000 order was the grant of the motion for a judgment notwithstanding the verdict. Tyson urges that this court reverse the trial court’s order granting the motion for judgment notwithstanding the verdict and reinstate the jury’s original damage award. ConAgra filed a notice of cross-appeal and in its brief argued before this court that Tyson’s proof could not support the verdict and judgment. We first admit to some confusion over the postjudgment relief requested by ConAgra in the form of a judgment notwithstanding the verdict or, alternatively, motion for remittitur or new trial. Part of our confusion may relate to impaneling a jury in chancery court. It appears clear to us that it was the trial court that first concluded that the nutrient profile was a trade secret that was misappropriated by Purtle and so instructed the jury. The trial court then submitted the issue of damages to the jury. The jury found that Tyson had been damaged and in what amount. This all seems akin to a judge directing a verdict in favor of a plaintiff with the jury fixing damages. In effect, ConAgra’s post-trial motion was a motion for the trial court to reconsider its December 7, 2000 Order Regarding Trade Secret Misappropriation in light of this court’s decision in Tyson I. Thus, we will treat the motion for judgment notwithstanding the verdict as one for reconsideration of the trial court’s original order based on our decision in Tyson I. The question then becomes: what is this court’s standard of review for the trial court’s order granting ConAgra’s motion for judgment notwithstanding the verdict? The trial court read our decision in Tyson I as requiring a reversal of its initial ruling as a matter of law. The trial court reversed itself solely for the reason that it believed it was mandated to do so by Tyson I, due to the absence of a postemployment confidentiality agreement.  Our standard of review in chancery cases is de novo. See Tyson I; Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979). As we said in Tyson I: All of the issues raised in the court below are before the appellate court for decision and trial de novo on appeal in equity cases involves determination of fact questions as well as legal issues. The appellate court reviews both law and fact and, acting as judges of both law and fact as if no decision had been made in the trial court, sifts the evidence to determine what the finding of the chancellor should have been and renders a decree upon the record made in the trial court. The appellate court may always enter such judgment as the chancery court should have entered upon the undisputed facts in the record. 342 Ark. at 677, 30 S.W.3d at 728-29 (quoting Ferguson, supra, 266 Ark. at 564, 587 S.W.2d at 23 (1979) (citations omitted)). We have further stated that we do not reverse a chancery court’s findings of fact unless we conclude the chancery court has clearly erred. See Tyson I; Bendinger v. Marshalltown Trowell Co., 338 Ark. 410, 994 S.W.2d 468 (1999). Accordingly, our standard of review in this case is de novo, but we will apply the clearly-erroneous standard to any findings of fact made by the trial court. a. Postemployment confidentiality agreement. Turning to the merits, we first consider whether the trial court erred in concluding that this court held in Tyson I that a postemployment confidentiality agreement be signed in all instances as an absolute prerequisite for trade-secret status and protection. We hold that the trial court did err in this regard. Our decision in Tyson I was not limited to the failure to have a postemployment contract. Rather, we concluded: As best we can tell, there were no efforts on Tyson’s part to restrain disclosure of information postemployment. And that distinguishes the facts in this case from the facts in Cardinal Freight. Obviously, the failure of a business to protect against the disclosure of information it considers to be secret following employment is critical to our analysis and ultimate decision regarding whether the information is in fact a trade secret. Accordingly, we conclude that the trial court was clearly erroneous in finding that the information at issue qualified as a trade secret. We reverse the decree of the trial court ordering the one-year injunctions and remand for an order to be entered forthwith voiding the injunctions. Tyson I, 342 Ark. at 680, 30 S.W.3d at 730-31 (emphasis added). In holding as we did, we relied on our opinion in Cardinal Freight Carriers, Inc. v. J.B. Hunt Transp. Serv., Inc., 336 Ark. 143, 987 S.W.2d 642 (1999). In Cardinal Freight, we alluded to a post-employment confidentiality agreement for one year as being one way a company could protect trade secrets. We also emphasized measures taken by the company during the employee’s employment to protect the secrecy of its information. J.B. Hunt, in that case, had passwords and passcodes in place to protect trade-secret information and had adopted a “loose-lips” policy to restrict public disclosure of confidential information.  In short, we did not specifically require in Cardinal Freight or in Tyson I that a postemployment confidentiality contract be entered into in all instances to identify trade secrets and to protect them. That was simply one measure to which we referred that could be taken by the company to assure trade-secret protection postemployment. However, as we made clear in Tyson I, no efforts had been taken by the company to restrain the disclosure of information postemployment. And that was determinative. b. Trade-Secret Protection. Having concluded that a postemployment confidentiality agreement is not an absolute requirement in all instances for trade-secret protection, we now consider whether the trial court was right to rule in favor of ConAgra on its motion for judgment notwithstanding the verdict, albeit for the wrong reason. See Norman v. Norman, 347 Ark. 682, 66 S.W.3d 635 (2002); Ouachita Trek & Dev. Co. v. Rowe, 341 Ark. 456, 17 S.W.3d 491 (2000); Malone v. Malone, 338 Ark. 20, 991 S.W.2d 546 (1999). In this regard, we examine what steps Tyson took both during Purtle’s employment and postemployment to identify the nutrient profile as a trade secret and to protect it. Tyson urges that it did take pains to protect its confidential information and points to its Corporate Code of Conduct and Compliance Policy (Corporate Code) as evidence of that fact. As we noted in Tyson I, Tyson adopted the Corporate Code in the mid-to-late 1990s as an outgrowth of the special prosecutor’s investigation into the affairs of Michael Espy and Tyson. The Corporate Code includes various legal and ethical principles, and its purpose, according to its foreword written by Tyson’s then chairman and CEO, is “to help us at Tyson Foods make ethical business decisions.” The Corporate Code deals with Conflicts of Interest, Confidential Information, Corporate Records, Relationships with Government Personnel, Political Contributions, International Transactions, Antitrust Compliance, Environmental Compliance, and Reporting of Violations. Employees were asked to read the code and then sign a statement to the effect that they had done so. They further attend a class every year in which the Code is discussed. No contractual agreement was required between the company and its employees mandating that the employees would keep certain information confidential.  The pertinent provision of the Corporate Code for our purposes is the section entitled “Confidential Information”: 1. Proprietary Information All Tyson Foods’ employees are required to safeguard the Company’s confidential business and technical information and use such information only for Company purposes. Failure to observe this duty of confidentiality may additionally result in a conflict of interest or a violation of securities, antitrust, or employment laws. Confidential information, whether Tyson Foods’ information or the information of others, may further be subject to agreements Tyson Foods has with other companies, trade secret statutes, or other laws for the protection of such information. In addition to protecting its own trade secrets, it is the policy of Tyson Foods to respect the trade secrets of others. Tyson Foods will not tolerate the violation of confidentiality or secrecy agreements or the improper acquisition of protected information. If a Tyson Foods’ employee is furnished with information or becomes aware of information which may have been misappropriated from another party, the employee must immediately contact the Legal Department. It is clear from a reading of this language that Tyson did not necessarily equate confidential information to a trade secret. More was required under our trade-secret statutes. We turn then to an examination of our trade-secret law. Section 4-75-601(4) of Arkansas’s Unfair Practices Code defines a “trade secret” as: (4) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Ark. Code Ann. § 4-75-601(4) (Repl. 2001).  In addition to the statute, this court has endorsed a six-factor analysis in determining whether information qualifies as a trade secret: (1) the extent to which the information is known outside the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and to its competitors; (5) the amount of effort or money expended by the appellee in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. See Tyson I. See also Weigh Sys. S., Inc. v. Mark’s Scales & Equip., Inc., 347 Ark. 868, 68 S.W.3d 299 (2002); Wal-Mart Stores, Inc. v. P.O. Market, Inc., 347 Ark. 651, 66 S.W.3d 620 (2002); Saforo & Assocs., Inc. v. Porocel Corp., 337 Ark. 553, 991 S.W.2d 117 (1999); Restatement of Torts § 757, cmt. b. As to the third factor, which is the extent of measures taken by the company to guard the secrecy of the information, this court held in Tyson I that “the failure of a business to protect against the disclosure of information it considers to be secret following employment is critical to our analysis and ultimate decision regarding whether the information is in fact a trade secret.” Tyson I, 342 Ark. at 680, 30 S.W.3d at 731. Here, Tyson maintains that it took reasonable efforts to guard the secrecy of its nutrient profile. We disagree. Tyson specifically argues that Purtle admitted that he considered the nutrient profile to be confidential and that he instructed others that it was. Further, Tyson claims that Purtle knew of his obligation to keep such information secret because of the Corporate Code. Tyson also asserts that the nutrient profile was an internal document and was not part of any third-party customer contract. Moreover, it contends that, according to Dr. Brister, only five people at Tyson retained a hard copy of the nutrient profile. ConAgra counters this by urging that while Purtle thought the nutrient profile was confidential, he testified that he never considered it to be a trade secret. ConAgra also points to Purtle’s testimony that hundreds of Tyson managers in the field were given a hard copy of the nutrient profile, without an admonition of confidentiality, which undercuts any notion that the profile was a trade secret. We turn then to an examination of the efforts taken by Tyson to keep the nutrient profile secret, both during Purtle’s employment and after he left to join ConAgra. Certainly, covenants not-to-compete and confidentiality agreements would have been active efforts on the part of Tyson to protect proprietary information it considered to be a trade secret. See Weigh Sys. S., Inc. v. Mark’s Scales & Equip., Inc., supra; Tyson I, supra. However, those steps are not the only options available to a company. Melvin F. Jager, in his treatise, Trade Secrets Law, sets out other options, in addition to publishing corporate ethical principles, which would be acceptable measures for a company to institute to protect secret information. Those measures include detailed record-keeping procedures, physical security, confidentiality agreements, vendor and supplier confidentiality agreements, use of confidential stamps and legends, computer security measures like passwords, and the use of entrance and exit interviews. See 1 Melvin F. Jager, Trade Secrets Law § 5.05[2][c] (2001). The treatise, Milgrim on Trade Secrets, details a variety of precautionary steps that have been implemented by trade-secret owners to protect secret information: use of techniques to put employees on notice of the trade-secret status of the matter on which they are working; posting of warning or cautionary signs or use of document legends; restricting visitors; maintaining internal secrecy by dividing the process into steps and separating the various departments working on the several steps; using unnamed or coded ingredients; keeping secret documents under lock; and limiting access to computer materials by use of passwords to prevent unauthorized access and keeping magnetic tapes, flow charts, symbolics and source codes under lock and key when not in use. See 1 Roger M. Milgrim, Milgrim on Trade Secrets § 1.04 (2001). The South Dakota Supreme Court has also discussed reasonable precautions for maintaining secrecy when a feed supplement was at issue: In addition, there was no substantial evidence showing Weins took reasonable efforts to maintain his product’s secrecy. SDCL 37-29-1 (4)(ii). Secrecy is fundamental to the existence of a trade secret. Pioneer Hi-Bred Int’l, 35 F.3d at 1235. Although the secrecy is not required to be absolute, reasonable precautions must be taken. Id. Regarding such precautions, the Appellate Court of Illinois held: [N]o evidence exists to show that plaintiff took any affirmative measures to keep its [product] secret. No evidence was presented regarding internal or external physical security; that confidentiality agreements or understanding existed among those having access to plaintiffs [product]; that plaintiff’s [product] contained confidentiality stamps or [was] kept under lock and key; or that employees received entrance and exit interviews imparting the importance of confidentiality. Consequently, we conclude that plaintiff failed to produce sufficient evidence to prove that under [the relevant section] of the [Trade Secrets] Act, its [product] was the subject of reasonable efforts designed to protect its secrecy. Gillis Associated Indus. v. Cari-All, 206 Ill. App.3d 184, 151 Ill. Dec. 426, 431, 564 N.E.2d 881, 886 (1990) (applying the same subsection as SDCL 37-29-1 (4)(ii)). Weins v. Sporleder, 569 N.W.2d 16, 27 (S.D. 1997).  Tyson failed to take any precautionary measures to protect its nutrient profile. The Corporate Code at Tyson, for example, hardly qualifies as an agreement between Tyson and Purtle not to disclose the nutrient profile. Nor were any other measures, such as those listed above, implemented. Donald “Buddy” Wray, the former President of Tyson, and a current member of its Board of Directors, summarized Tyson’s efforts: Counsel: I had forgotten to ask. you a question. Oh, I want to go back to the issue of Tyson’s code of conduct — Corporate Code of Conduct. Do you remember the question about the Corporate Code of Conduct? Wray: Yes, sir. Counsel: Did Tyson d° anything else or rely upon anything else, other than the Corporate Code of Conduct, with respect to keeping the confidentiality of its proprietary information or alleged trade secrets? Wray: I "don’t think Tyson would be any different than anyone else. You can have a signed document, but you have to trust your people and believe in their honesty and in their integrity. Counsel: Have you heard Mr. Manuel comment one way or another as to what he believes the standard in the industry is with respect to maintaining confidentiality of proprietary information and alleged trade secrets? Wray: I think his words were that they had to depend on the honesty or the character and integrity of their people. Wray also testified that Tyson’s Corporate Code did not list items like the nutrient profile it considered to be confidential in the Corporate Code. Finally, Wray admitted that there was no time for an exit interview with Purtle. Of course, an exit interview could have been used to discuss matters Tyson believed were proprietary. Dr. Roy Brister, Vice President of Tyson’s Nutrition Research, testified that only five employees had a hard copy of the nutrient profile, but he admitted that many other Tyson employees had seen it on an overhead projector because the nutrient profile was used as a tool to educate the upper management of Tyson’s complexes. Apparently, one reason for showing the nutrient profile was so the managers could choose between the normal or the reduced profile. Dr. Brister could not say whether those managers were told about the confidential nature of the profile. Purtle added that these meetings with Tyson managers out in the field probably involved a total of four hundred to four hundred and fifty people. He contradicted Dr. Brister’s testimony and stated that most of the field managers were given a hard copy of the nutrient profile.  Tyson bears down hard on the fact that Purtle admitted that he knew the nutrient profile was confidential. The fact that Purtle himself believed the nutrient profile to be confidential, however, as well as the fact that Dr. Brister testified that Purtle told him he thought the profile possessed economic value do not decide the issue for us. Purtle also testified that he did not believe the nutrient profile was a trade secret. We believe that it was incumbent on Tyson to clearly identify what information it considered to be a trade secret, as that is a legal status fixed by statute. Moreover, we draw a clear distinction between actions taken by Tyson to protect trade secrets on the one hand and understandings of individual officers like Purtle in determining whether information was confidential and had value on the other. As discussed above, the six Saforo factors contemplate that it is the efforts taken by the company to safeguard the information that is critical, not the perception of individual officers. Absent clear corporate action to protect the nutrient profile as a trade secret, a subjective belief of an individual employee that the information is confidential or even had value seems largely irrelevant in our analysis. We note once more that even the Corporate Code distinguished confidential information from a trade secret.  In sum, the efforts taken by Tyson to safeguard the information comes down to (1) the Corporate Code and Tyson's directive to its employees that the Code be read, and (2) the company's faith in the integrity of its employees. Yet, hundreds of Tyson managers were educated about the nutrient profile and there was no proof that Tyson took any steps to swear them to secrecy, or warn them of the confidential nature of the profile. Relying on an ethical guide like the Corporate Code, which fails to identif~r what is a trade secret or to mention the nutrient profile, is simply not enough for Tyson to invoke trade-secret protection.  We hold that the trial court clearly erred in finding that the nutrient profile was a Tyson trade secret and that the trial court was correct to reverse itself by granting the motion for judgment notwithstanding the verdict, albeit the court's reason for doing so was erroneous. Because we affirm the order granting the motion for judgment notwithstanding the verdict, ConAgra's cross-appeal on damages is moot. Affirmed. THORNTON, j., dissents.   Purtle had been employed by Tasty Bird, which was acquired by Tyson in 1984.