Court Opinion

ID: 2963216
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:07:39.010335+00
Date Added: 2024-06-11T11:42:39.660934
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                         ____________________        No. 95-1072                                 CAMPBELL SOUP COMPANY,                                Plaintiff, Appellant,                                          v.                                    PAUL D. GILES,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________                                 ____________________                                        Before                                Torruella, Chief Judge,
                                           ___________                            Bownes, Senior Circuit Judge,
                                    ____________________                              and Stahl, Circuit Judge.
                                         _____________                                 ____________________            Bernard  J.  Bonn III,  with  whom  Kara  W.  Swanson, Deborah  W.
            _____________________               _________________  ___________        Kirchwey and Dechert Price & Rhoads were on brief, for appellant.
        ________     ______________________            Keith  C. Long,  with  whom Christa  A. Arcos,  Anne T.  Zecha and
            ______________              _________________   ______________        Warner & Stackpole were on brief, for appellee.
        __________________                                 ____________________                                  February 17, 1995                                 ____________________

                 TORRUELLA, Chief  Judge.   After having worked  for some
                 TORRUELLA, Chief  Judge.
                            _____________            thirteen  years in a  series of sales  positions at plaintiff            Campbell Soup Co., defendant Paul Giles resigned to undertake            similar  employment at  one of Campbell's  chief competitors.            Campbell  promptly filed  suit,  alleging  that  Giles  would            inevitably  use  or disclose  various  trade  secrets in  the            performance of his new duties.  Among the relief sought was a            preliminary injunction barring  Giles from  assuming his  new            position (at least  through the  end of the  fiscal year)  or            from otherwise making use  of Campbell's trade secrets.   The            district  court denied the request for preliminary injunctive            relief, finding that Campbell had  satisfied none of the four            criteria governing the award  thereof.  Campbell now appeals,            complaining principally  that the  court erred in  failing to            conduct an  evidentiary  hearing  prior  to so  ruling.    We            affirm.                                          I.                 Giles  has  worked in  Campbell's  New England  division            since  1981 in  a  progressively more  responsible series  of            sales  posts.   In  1989,  he  became  "Director of  Retail,"            charged with managing the regional  sales force.  In February            1991, he was promoted to "Category Sales Manager" for  soups,            in  which  capacity  he   assisted  in  the  development  and            implementation of Campbell's sales  and marketing plans.  And            in  October  1993,  upon  being  named  one  of  three  "Area                                         -2-

            Directors," he  assumed a  greater role in  implementing such            plans (for  both  the soup  and  grocery product  lines)  and            acquired  direct  responsibility  for  several  large  retail            accounts.1                   On  November 1,  1994, Giles  left Campbell's  employ to            undertake analogous duties at  Pet, Inc., the manufacturer of            Progresso soups (among other  products) and one of Campbell's            chief competitors.   His  new position--as Sales  Manager for            Pet's  New  England   Division--involves  the  management  of            several  brokers selling  the  company's products  (soup  and            other  foods) to  regional  customers.   Campbell filed  this            diversity action  against Giles shortly  thereafter, claiming            breach of  contract,2 misappropriation of trade  secrets, and            unfair  and deceptive  trade practices.   Giles  responded by            advancing  a  series  of  counterclaims,  including  one  for            intentional interference with contractual relations.                                 
            ____________________            1.  Each of  the Area Directors  in the New  England division            handle different customer  accounts.  These three  directors,            along with  the two Category  Sales Managers (one  for soups;            one  for  grocery  products),  all  report  to  the  Regional            Manager,  who  in  turn  reports  to  Campbell's  New  Jersey            headquarters.            2.  Upon beginning work for Campbell back in 1981, Giles  had            signed a "Patent-Trade Secret  Agreement" obliging him not to            "use, divulge, or publish" any of the company's trade secrets            without consent, either during such employment or thereafter.            (No  non-competition agreement,  however,  was ever  signed.)            Campbell's  breach-of-contract claim  alleged a  violation of            this trade secret agreement.                                          -3-

                 The  trade secrets  identified by  Campbell as  being in            Giles' possession  fall  into two  categories: (1)  marketing            information for the 1995 fiscal  year (which runs from August            1994  through July 1995); and (2) the existence and nature of            a secret project ("the project") involving a new product line            scheduled to be launched in 1995.  The  marketing information            was said to include such data as proposed sales expenditures,            the timing of promotional  efforts such as advertisements and            coupons, pricing strategies and other efforts to compete with            competitors,  and projected  net  unit costs  (including  the            lowest  price that  could  be charged  customers).   Campbell            asserted that such information was highly confidential, since            its  disclosure  would  enable  a competitor  to  modify  its            marketing plans to counteract those  of Campbell.  It alleged            that Giles was privy to all such information.  And it claimed            that  Giles,  in undertaking  to  market  Progresso soups  in            direct competition with Campbell in the same  region in which            he used to  operate, would be unable (even  in good faith) to            avoid using such information.  In  turn, Campbell stated that            the project involved  a new product line designed  to compete            directly with some of  Pet's products.  Only thirty  to forty            of its employees  (out of a total work force  of 40,000) were            said to even know  of the project's existence; Giles  was one            of the  few who had  been informed of  the details.   And any            premature disclosure of the  project, it argued, would enable                                         -4-

            a  competitor to adapt its marketing plans so as to undermine            the entire venture.                  In response, Giles maintained that most of the marketing            information was no longer confidential--having been disclosed            to  customers  at the  outset of  the  fiscal year  and being            otherwise  available through  published  sales materials  and            syndicated data sources.3   And he insisted that, even  if he            were in possession of confidential  marketing information, he            would  be   in  no  position  to  exploit  it  to  Campbell's            detriment.  As one  of fifty-nine division sales  managers at            Pet, his responsibility was  to implement rather than concoct            market  strategies.    Pet's  annual  marketing  plans  (like            Campbell's)  were  by then  well  into effect  and  could not            easily be altered.   And since the peak of  the "soup season"            ended  in March  or  April, and  since most  customers placed            their  orders up to four months in advance, there was minimal            room left for competitive  positioning this year.  As  to the            project, Giles  flatly denied any knowledge thereof.  He also            affirmed   that   he  intended   to   abide   fully  by   his            confidentiality  obligations to  his former  employer, adding            that Pet had taken pains to ensure that he would do so.                                 
            ____________________            3.  The   surveys  of   such  organizations   as  Information            Resources,  Inc.  and  Nielsen,  he  argued,   recorded  such            information as items and quantities sold, the date and price,            the type of advertising  employed, and the accompanying store            display.                                         -5-

                 The  district  court  declined  to   grant  a  temporary            restraining order  and  thereafter, in  a detailed  decision,            denied Campbell's motion for a preliminary injunction.  Based            on  its  review of  the  documentary  evidence presented,  it            concluded  that:  (1)  Campbell  had failed  to  establish  a            likelihood  of  success on  the  merits;  (2) withholding  an            injunction  would  not  irreparably  harm  Campbell,  whereas            barring  Giles from  assuming his  new position  would likely            damage his  career; and  (3) the  public  interest tilted  in            Giles'  favor,  especially  given   the  absence  of  a  non-            competition agreement.  More particularly, the court found as            follows.   Whereas the  project likely  qualified as  a trade            secret,  most  of the  marketing  information  was no  longer            confidential  in light  of  its public  disclosure.   Whereas            Giles  was  privy to  the  marketing  information, he  likely            lacked any  knowledge of  the project.   Even if some  of the            marketing data remained secret, and even if Giles knew of the            project,  he  was  unlikely  to  use  or  disclose  any  such            information in his  new position.   And even  if he did,  any            harm to  Campbell would  likely be compensable  through money            damages.                                         II.                 On appeal,  Campbell does not dispute  that the district            court  properly enunciated the test governing  the award of a            preliminary injunction--one which  requires consideration  of                                         -6-

            (1) the movant's likelihood of success on the merits, (2) the            potential  for  irreparable  harm,  (3) a  balancing  of  the            relevant equities, and (4) the effect on the public interest.            See, e.g., Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 110 (1st
            ___  ____  ___________________    ____            Cir. 1994);  Gately v. Commonwealth of  Massachusetts, 2 F.3d
                         ______    ______________________________            1221,  1224-25 (1st Cir. 1993), cert. denied, 114 S. Ct. 1832
                                            ____________            (1994).    Nor,  apart  from one  misplaced  objection,  does            Campbell  dispute  that the  district court  properly applied            Massachusetts   trade   secret   law.4     Rather,   Campbell            challenges  the court's ruling on procedural grounds--arguing            that the  court erred  in denying the  preliminary injunction            without  conducting   an  evidentiary  hearing   and  without                                
            ____________________            4.  The  parties are  in  agreement that  the information  at            stake here is  of the  type that, at  least potentially,  can            qualify as trade  secrets.   See, e.g., Kroeger  v. Stop  and
                                         ___  ____  _______     _________            Shop  Cos.,  13  Mass.  App. 310,  316-17  (1982)  (marketing
            __________            information  can  constitute trade  secret).    They likewise            agree that,  were it  established that Giles  possessed trade            secrets and  was likely to use or disclose them in the course            of his new duties, he could properly be barred from doing so.            See, e.g., Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835,
            ___  ____  ______________________    ________            839  (1972)  (even  in   absence  of  applicable  contractual            provision, departing  employee may be enjoined  from using or            disclosing confidential information  entrusted to him  during            employment,   based  on   implied   contract  stemming   from            employer/employee relationship).                 Campbell's  only complaint  in this  regard is  that the            district  court   improperly  focused  on   Giles'  potential            disclosure of trade secrets  while ignoring his potential use
            __________                                                ___            thereof.     Yet,  while  the  court  did   refer  solely  to            "disclosure" on various  occasions, it elsewhere referred  to            improper or  inevitable "use."   It  is evident  that, rather            than  intending any  distinction between  the two  terms, the            court  was simply  employing  a shorthand  formula.   Indeed,            Campbell's  counsel  himself  referred  to   the  "inevitable            disclosure doctrine" in a letter to the court.                                          -7-

            promulgating adequate findings of fact under  Fed. R. Civ. P.            52(a).  We disagree.                 As this  court has previously  observed, "an evidentiary            hearing  is not  an  indispensable requirement  when a  court            allows  or refuses  a preliminary  injunction" under  Fed. R.            Civ. P. 65.  Aoude v. Mobil Oil Corp., 862 F.2d 890, 893 (1st
                         _____    _______________            Cir.  1988).   Unlike  some  other courts  that  have adopted            "categorical rules"  in this  regard, we have  indicated that            "the balancing between speed and practicality versus accuracy            and  fairness" should  be entrusted  to the  district court's            discretion.  Jackson  v. Fair,  846 F.2d 811,  819 (1st  Cir.
                         _______     ____            1988).   As such, the  lower court's determination  as to the            need for an evidentiary hearing will be overturned "only if a            clear abuse of discretion is  shown."  Id.  To be  sure, when
                                                   ___            the  parties'  competing versions  of  the  pertinent factual            events  are  in sharp  dispute,  such that  the  propriety of            injunctive  relief hinges  on determinations  of credibility,            "the  inappropriateness of  proceeding on  affidavits [alone]            attains its maximum."   SEC v. Frank, 388  F.2d 486, 491  (2d
                                    ___    _____            Cir. 1968); accord, e.g., Jackson, 846 F.2d at 819.  Campbell
                        ______  ____  _______            argues that such was  the case here.  We  nonetheless find no            abuse of discretion, for several reasons.                 First, it is apparent that Campbell was afforded "a fair            opportunity to  present relevant  facts and arguments  to the            court, and  to counter  the opponent's submissions."   Aoude,
                                                                   _____                                         -8-

            862  F.2d at 894; accord,  e.g., Schulz v.  Williams, 38 F.3d
                              ______   ____  ______     ________            657,  658 (2d Cir.  1994) (per curiam)  (where material facts            are  contested, the district court need not engage in "a full            evidentiary hearing  conducted in open court"  but must offer            the parties  "a reasonable opportunity  to put forth,  and to            oppose,  the disputed  evidence"); Stanley  v. University  of
                                               _______     ______________            Southern  California,  13 F.3d  1313,  1326  (9th Cir.  1994)
            ____________________            (same).  Over the course of eighteen days, Campbell submitted            an  abundance  of  materials:  a  verified  complaint,  three            initial affidavits, a total of seven reply affidavits (on two            successive  occasions),  a  legal  memorandum,   four  letter            briefs,  excerpts from  a treatise,  and copies  of pertinent            case law.5  The court also twice entertained oral  argument--            first on an  ex parte basis from Campbell, and  then during a
                         ________            nearly hour-long  session attended by  both parties.   Such a            wealth of  submissions, we  think, was sufficient  to provide            the court  with "adequate documentary evidence  upon which to            base an  informed, albeit preliminary conclusion."  SEC v. G.
                                                                ___    __            Weeks Securities, Inc.,  678 F.2d  649, 651  (6th Cir.  1982)
            ______________________            (emphasis deleted) (quoted in Aoude, 862 F.2d at 894).
                                          _____                 Second, the extent to which material factual issues were            genuinely  in  dispute here  diminishes somewhat  upon closer            inspection.    With  regard  to  its  marketing  information,                                
            ____________________            5.  Giles, in turn, filed an answer, four initial affidavits,            two reply affidavits, three letter briefs and a memorandum.                                         -9-

            Campbell does not contest that most such data is disclosed to            customers  at the start of  each fiscal year  or is otherwise            readily  available.   It focuses  instead on  a few  discrete            items--primarily the lowest net cost of its products and  the            timing of  its promotional campaigns.   Yet Campbell  has not            taken issue with Giles' assertions (1) that the height of the            soup season ends  in March  or April and  (2) that  customers            typically  place their orders  up to four  months in advance.            Together, these assertions suggest that there is minimal room            left for competitive  maneuvering in this  fiscal year.6   As            well,  its claim that Pet  can easily and  quickly modify its            marketing  tactics   in  response  to  the   actions  of  its            competitors is at odds with its repeated contention that  its            own  marketing   plans  can  be  adjusted   only  with  great            difficulty.   And  Campbell has  not seriously  disputed that            Giles' new  duties are confined to  implementing, rather than            developing, Pet's marketing plans.7   Given these factors, we                                
            ____________________            6.  Campbell has no objections to Giles working at Pet in any            capacity  after  July  1995--by   which  time  a  new  annual            marketing plan (which has  yet to be created) will  have been            implemented and the project will have been announced.            7.  The middle-level sales position held by Giles at Campbell            (and now at Pet) is  in sharp contrast to that of  the senior            executive in Pepsico, Inc. v. Redmond, No. 94C6838 (N.D. Ill.
                         _____________    _______            Dec. 15, 1994), a case on which Campbell heavily relies.  Nor            has  there been  any suggestion  that Pet  was attempting  to            "raid"  Campbell  personnel  (senior  or  otherwise);  it  is            undisputed that Giles was  recruited through a "headhunter"--            several months after Campbell's 1995 marketing plans had been            developed (and discussed with customers).                                          -10-

            think the district court was warranted in finding that Giles'            knowledge of any confidential marketing information would not            result in irreparable harm to Campbell.                  With regard  to Giles' knowledge of the  project, it can            well be  argued that  the nature  of the  parties' respective            submissions provided a supportable basis for crediting Giles'            averments over  those proffered  by Campbell.8   The district            court appeared to do so (although some  ambiguity attends the            matter).9   Yet we need  not dwell on  this particular issue,            for the court proceeded  to find that (1) Giles  was unlikely            to disclose the project to Pet even  if he knew of it and (2)            Campbell would not be  irreparably harmed even if he  did so.                                
            ____________________            8.  For example,  Campbell initially  averred that  Giles was            the  sole employee in the  New England division  who had been
                 ____            informed of the project.  Following Giles' retort that such a            scenario was implausible in  light of his rank in  the office            hierarchy, Campbell revised its position to state that he had            been  the first (of several)  in the region  to be contacted.
                      _____            In  turn,  three  Campbell  executives based  in  New  Jersey            averred they  had  disclosed the  details of  the project  to            Giles in a telephone  conference call.  Yet they  were unable            to identify the date  thereof, except to say it  had occurred            in "late  September or early  October, 1994."   No supporting            documentary evidence  was provided.   Giles replied  that the            only conference call in which he had participated occurred on            May 3,  1994 (on matters unrelated  to the project).   And he            submitted copies  of his  personal calendar that  appeared to            corroborate this assertion.  Campbell offered no response.            9.  The  court  first stated  that  Campbell  had "failed  to            present sufficient proof ...  that the Project was, in  fact,            disclosed  to  Giles."    With regard  to  this  same  issue,            however,  it noted  on  the  next  page:  "In  light  of  the            substantial  factual dispute  which  is not  resolved by  the            pleadings, the  Court is  compelled to rule  against Campbell            which bears the burden of proof on its motion ...."                                         -11-

            Campbell  has  not  drawn  these   conclusions  into  serious            question.   The record  contains no indication  that Giles is            dishonest or would be  inclined to breach his confidentiality            agreement with  Campbell.  In turn,  as mentioned, Campbell's            assertion  that  Pet  could   readily  alter  its   marketing            strategies, particularly at this point in the soup season, in            order to undermine the project is questionable.  As well, the            launch of the project is supposedly imminent; Campbell argued            below,  in fact, that it was originally slated to be released            in January 1995.   Again,  therefore, we  think the  evidence            before  the court was sufficient to support a conclusion that            Campbell  was unlikely  to  suffer irreparable  harm in  this            regard.                 Finally,  we reiterate  what  was  emphasized in  Aoude:
                                                                   _____            "Even where Rule 65 factfinding is desirable, it  is designed            to be  tentative--'preliminary'--in nature  ....  The  web of            conclusions  upon which  a  preliminary injunction  rests are            'statements  as to  probable outcomes,'  nothing more."   862            F.2d at 894 (quoting  Goyco de Maldonado v. Rivera,  849 F.2d
                                  __________________    ______            683, 686 (1st Cir. 1988)); accord, e.g., Sierra On-Line, Inc.
                                       ______  ____  ____________________            v.  Phoenix Software,  Inc., 739  F.2d 1415,  1423 (9th  Cir.
                _______________________            1984) (in preliminary injunction context, district court need            not make  "binding findings  of fact"  but instead  need only            "find probabilities that the necessary facts can be proved").            For  the reasons  discussed above,  we think  the documentary                                         -12-

            evidence  was  sufficient  to  permit   an  informed,  albeit            preliminary,   conclusion   that   injunctive    relief   was            unwarranted.  While an evidentiary hearing would  undoubtedly            have been helpful in  light of the number of  disputed issues            and the lack  of discovery, we are unprepared to say that the            court abused its discretion in failing to conduct one.10                                         III.                 Also  requiring  resolution  is  Campbell's   motion  to            impound  all appellate  papers, which  has been allowed  on a            provisional  basis  only  and   which  Giles  opposes.    Any            confidential information contained in such papers is properly            withheld from  public disclosure.   Yet the  only information            conceivably falling within that  category are the few details            provided about  the project;  nothing in the  descriptions of            Campbell's  marketing  information  can  possibly  be  deemed            sensitive.   Accordingly,  the motion  to impound  is granted            only until such time as the project is publicly announced, at            which point  all appellate  papers will  be  unsealed.   See,
                                                                     ___            e.g., Pepsico, Inc. v.  Redmond, ___ F.3d ___, 1995  WL 29349
            ____  _____________     _______                                
            ____________________            10.  Campbell's  related  claim--that  the  court  engaged in            inadequate  factfinding--can  be  summarily  rejected.    The            length  of the  court's written  decision belies  any general            complaint  in this  regard.   And to  the extent  Campbell is            challenging   the  court's   isolated   reference   to   "the            substantial  factual dispute  which  is not  resolved by  the            pleadings,"  see note 9 supra,  any error in  this regard (if
                         ___        _____            any there be) was harmless for the reasons just discussed.                                         -13-

            (7th Cir. Jan.  20, 1995).   Campbell is  directed to  notify            this court when such announcement occurs.11                 The order of the district  court dated December 23, 1994
                 ________________________________________________________            is affirmed.  The limited injunction entered by this court on
            _____________________________________________________________            January 12, 1995  is dissolved.   The motion  to impound  all
            _____________________________________________________________            appellate papers is allowed on a temporary basis.
            _________________________________________________                                
            ____________________            11.  Given our resolution of this appeal, we have no occasion            to  address Giles' assertion  that Campbell's complaint fails            to satisfy  the $50,000  threshold requirement  for diversity            jurisdiction.   We leave that matter to the district court in            the first instance.                                          -14-