Court Opinion

ID: 194631
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:21:36+00
Date Added: 2024-06-11T15:10:08.069263
License: Public Domain

March 29, 1993
                United States Court of Appeals
                    for the First Circuit
                                         

No. 92-1939

                    ALAN SHAWN FEINSTEIN,

                     Plaintiff, Appellee,

                              v.

                    SPACE VENTURES, INC.,

                    Defendant, Appellant.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

               FOR THE DISTRICT OF RHODE ISLAND

         [Hon. Ernest C. Torres, U.S. District Judge]
                                                    

                                         

                            Before

                   Torruella, Circuit Judge,
                                           
                Bownes, Senior Circuit Judge,
                                            
                  and Stahl, Circuit Judge.
                                          

                                         

Elizabeth  Colt with whom Jeffrey S. Michaelson and Michaelson and
                                                                  
Michaelson  and Joel W. Mohrman  and McGlinchey Stafford  Lang were on
                                                          
brief for appellant.
Mark B. Morse for appellee.
             

                                         

                        March 29, 1993
                                         

          STAHL, Circuit Judge.   In this appeal,  defendant-
                              

appellant   Space  Ventures,  Inc.   ("SVI"  or  "defendant")

challenges the  entry of a preliminary  injunction against it

and in  favor  of  plaintiff-appellee  Alan  Shawn  Feinstein

("Feinstein" or  "plaintiff").1    Finding that  the district

court  erred in  determining  that  plaintiff demonstrated  a

likelihood of success on  the merits of his claim,  we vacate

and remand.

                              I.
                                

                          BACKGROUND
                                    

          On  April  8,   1992,  plaintiff,  a   marketer  of

collectibles,  initiated  this  litigation by  filing  a four

count  complaint against  defendant SVI,  a manufacturer  and

distributor  of trading cards.  Counts I and II asserted that

defendant had converted certain  of plaintiff's goods and had

breached a duty of confidentiality owed to plaintiff.  Counts

                    

1.  As an  initial matter, we note  that plaintiff challenges
our jurisdiction to hear this appeal.  In so doing, he relies
upon authority  indicating that an interlocutory  order which
has the  incidental effect  of denying injunctive  relief can
only be appealed under 28 U.S.C.   1292(a)(1) where the order
will have a "`serious, perhaps irreparable, consequence'" and
where  it  "can  be   `effectively  challenged'  only  by  an
immediate appeal."   See Stringfellow v.  Concerned Neighbors
                                                             
in  Action,  480 U.S.  370,  379  (1987) (quoting  Carson  v.
                                                         
American  Brands,  Inc.,  450  U.S.  79,  84 (1981)).    Such
                       
authority  is inapposite  here, however,  where the  order at
issue clearly and  directly granted a preliminary  injunction
after   a   hearing   on   plaintiff's    request   therefor.
Accordingly,  because  28  U.S.C.     1292(a)(1)   grants  us
jurisdiction  over  "interlocutory  orders  of  the  district
courts  . . .  granting . .  . injunctions," we  find that we
have jurisdiction over this appeal.

                             -2-
                              2

III  and  IV stated  that defendant  had breached  a contract

entered into by the parties  on September 4, 1991.   On April

28, 1992, plaintiff amended his  complaint to include a fifth

count for unfair competition.2

          The present appeal concerns only  plaintiff's Count

II,  which  is  entitled  "Breach of  Confidentiality."    In

relevant part, Count II states:

          8.   On  or about  January 23,  1991, and
          divers  times thereafter,  defendant held
          goods consisting  of a series  of trading
          cards known as the Moon-Mars cards.  Said
          cards had been  purchased from  defendant
          by plaintiff and were being held in trust
          for  distribution  by  defendant;   as  a
          bailee.

          9.   Defendant was  obligated to ship the
          Moon-Mars cards  to plaintiff's customers
          in  accordance  with the  instructions of
          plaintiff. . . .

          15.  While acting as  a bailee, defendant
          received  confidential  information  from
          plaintiff      concerning     plaintiff's
          customers.

          16.  Defendant had  a duty not to divulge
          said information or  use the  information
          for its own benefit.

          17.    Defendant  indicated to  plaintiff
          that  it has no  intention of recognizing
          its  duty,  and has  caused  plaintiff to
          have reasonable grounds  to believe  that
          defendant will breach its duty  and shall
          actively solicit plaintiff's customers. .
          . .   Defendant's principal  officer has,
          in subsequent conversations to plaintiff,

                    

2.  Defendant  subsequently  counterclaimed  for   breach  of
contract.

                             -3-
                              3

          orally  evidenced  his intent  to solicit
          plaintiff's customers.

          18.  Plaintiff will be irreparably harmed
          if  defendant  solicits his  customers in
          that the confidentiality of  his customer
          list    will     be    permanently    and
          irretrievably impaired.

          19.  As a further result,  plaintiff will
          sustain  an  irreparable   loss  to   his
          business reputation for which there is no
          adequate remedy at law.

Count  II  concludes  with  a  request  for   damages  and  a

preliminary and permanent  injunction directing defendant (1)

to  refrain from  soliciting  plaintiff's customers,  (2)  to

refrain from using plaintiff's  customer list, (3) to refrain

from selling or distributing  plaintiff's customer list,  (4)

to return plaintiff's  customer list, and  (5) to provide  an

account of plaintiff's customers solicited by defendant.

          On July 2, 1992, the district court held  a hearing

on the  injunctive relief requested in  plaintiff's Count II.

At  this  hearing,  plaintiff  proceeded as  if  the  duty of

confidentiality  referenced in  Count II  was contract-based.

More  specifically,  plaintiff testified  that  defendant was

about  to breach an  oral agreement between  the parties that

defendant would  not use plaintiff's customer  list and would

keep  the list  confidential.3  Although  it is  not entirely

                    

3.  During  the  course  of   the  hearing,  plaintiff   also
introduced  affidavits from  Beverly  S. Vale  and Edward  P.
Walton  tending  to support  plaintiff's  claim  that he  and
defendant had an oral  agreement, and that the duty  at issue
in Count II arose from this agreement.

                             -4-
                              4

clear, it seems that  the district court also  operated under

this  assumption.  In the  portion of its  ruling which comes

closest to addressing (1) whether defendant had a duty not to

use the list  and to keep  the list confidential and  (2) how

any such duty arose, the district court stated:

               [T]he     uncontradicted    evidence
          primarily  in the form  of testimony from
          Mr.  Feinstein  was  that   the[re]  were
          discussions  between  him  and Mr.  White
          [President  of  SVI]   relating  to   the
          confidentiality  of  these  lists and  he
          entered  into  [the contract  under which
          plaintiff had provided defendant with his
          customer    list]   with    the   express
          understanding that these  lists would  be
          held  in  confidence   and  he   received
          assurances  to  that  [e]ffect  from  Mr.
          White.
               So  based on all  those things, it's
          not  difficult at  all for  the Court  to
          determine that . .  . Mr. Feinstein has a
          very good chance of succeeding in proving
          that  the list  is his property,  that it
          was confidential and that the [d]efendant
          has no right to use it.4

The  district court  also found  that plaintiff  would suffer

immediate  and irreparable  harm if  the injunction  were not

granted, that such harm outweighed any harm to defendant, and

that  the public interest would not  be adversely affected by

providing  plaintiff  with the  relief  requested.   See  id.
                                                             

Therefore,  the   district   court  entered   an   injunction

                    

4.  The district court  made these findings in  the course of
considering,   as  it  must   before  issuing  a  preliminary
injunction, whether  plaintiff was  likely to succeed  on the
merits of his claim.  See, e.g., Narragansett Indian Tribe v.
                                                          
Guilbert, 934 F.2d 4, 5 (1st Cir. 1991).
        

                             -5-
                              5

forbidding  defendant from  using plaintiff's  customer list.

This appeal followed. 

                             II.
                                

                          DISCUSSION
                                    

          On appeal, defendant argues,  inter alia, that  the
                                                  

district   court  erred   in   ruling   that  plaintiff   had

demonstrated a  likelihood of  success on  the merits of  his

Count II claim.  After carefully reviewing the record, we are

constrained to agree.

          It  is  settled  that  "`we  scrutinize  a district

court's decision  to grant  or deny a  preliminary injunction

under  a   relatively  deferential  glass.'"    Id.  (quoting
                                                   

Independent  Oil & Chem. Workers of Quincy, Inc. v. Procter &
                                                             

Gamble Mfg. Co.,  864 F.2d 927, 929 (1st Cir.  1988)).  Thus,
               

unless the district court has made a mistake of law or abused

its  discretion, we  will not  disturb its  ruling.   See id.
                                                             

However,  "`[a]pplication of  an  improper legal  standard in

determining  the  likelihood  of  success on  the  merits  or

misapplication  of the law to particular facts is an abuse of

discretion.'"   In re  Rare Coin Galleries  of America, Inc.,
                                                            

862 F.2d 896, 900 (1st Cir. 1988) (quoting Planned Parenthood
                                                             

League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir. 1981)).
                  

          In this  instance,  the district  court applied  an

improper  legal standard  in  determining that  plaintiff had

demonstrated a  likelihood of  success on  the merits of  his

                             -6-
                              6

breach of  confidentiality claim.  The  record indicates that

the district  court assumed  that plaintiff's Count  II claim

was  based  upon  an  oral  contract  between  plaintiff  and

defendant.  The problem  with this, though, is that  Count II

does  not  sound in  contract.5    As we  read  it, Count  II

attempts to set forth a claim for breach of a common law duty

not  to divulge  or use  "confidential" information.6   Thus,

the  district  court's ruling  that  plaintiff  is likely  to

succeed  on  his  Count II  claim,  made  as  it was  without

reference to  common law confidentiality  principles, was  an

abuse of its  discretion.  Accordingly, the court's  entry of

the preliminary  injunction in  favor of plaintiff,  which is

anchored upon this faulty ruling, must be set aside.7

                             III.
                                 

                         CONCLUSION  
                         CONCLUSION
                                   

          For  the  reasons  stated  above,  the  preliminary

injunction  entered in favor  of plaintiff  on his  breach of

                    

5.  Nothing in Count II even remotely suggests that  the duty
of  confidentiality  arises  from  an   explicit  contractual
provision.

6.  In so stating, we do not decide whether Count II, in  its
current incarnation, is sufficient to state such a claim.

7.  Because  we  find  that  the district  court  abused  its
discretion  in  determining  that  plaintiff  was  likely  to
succeed on the merits of his breach of confidentiality claim,
we vacate  and remand without  considering defendants'  other
challenges to the district court's injunction order.

                             -7-
                              7

confidentiality claim  is vacated.8  This  action is remanded

to the district court for further proceedings consistent with

this opinion.

          Vacated and remanded.
                               

                    

8.  Of  course,  defendant  should  in no  way  construe  our
dissolution  of  the  injunction  as an  endorsement  of  its
argument  that it  is  entitled to  use plaintiff's  customer
list.

                             -8-
                              8