USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 95-1072
CAMPBELL SOUP COMPANY,
Plaintiff, Appellant,
v.
PAUL D. GILES,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
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Before
Torruella, Chief Judge,
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Bownes, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Bernard J. Bonn III, with whom Kara W. Swanson, Deborah W.
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Kirchwey and Dechert Price & Rhoads were on brief, for appellant.
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Keith C. Long, with whom Christa A. Arcos, Anne T. Zecha and
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Warner & Stackpole were on brief, for appellee.
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February 17, 1995
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TORRUELLA, Chief Judge. After having worked for some
TORRUELLA, Chief Judge.
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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
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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.
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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.
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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
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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.
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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.
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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
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(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
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Cir. 1994); Gately v. Commonwealth of Massachusetts, 2 F.3d
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1221, 1224-25 (1st Cir. 1993), cert. denied, 114 S. Ct. 1832
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(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
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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
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Shop Cos., 13 Mass. App. 310, 316-17 (1982) (marketing
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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,
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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
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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.
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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
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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.
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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
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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
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Cir. 1968); accord, e.g., Jackson, 846 F.2d at 819. Campbell
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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,
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862 F.2d at 894; accord, e.g., Schulz v. Williams, 38 F.3d
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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
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Southern California, 13 F.3d 1313, 1326 (9th Cir. 1994)
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(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
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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.
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Weeks Securities, Inc., 678 F.2d 649, 651 (6th Cir. 1982)
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(emphasis deleted) (quoted in Aoude, 862 F.2d at 894).
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Second, the extent to which material factual issues were
genuinely in dispute here diminishes somewhat upon closer
inspection. With regard to its marketing information,
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5. Giles, in turn, filed an answer, four initial affidavits,
two reply affidavits, three letter briefs and a memorandum.
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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
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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.
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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).
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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.
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8. For example, Campbell initially averred that Giles was
the sole employee in the New England division who had been
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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.
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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 ...."
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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:
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"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
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683, 686 (1st Cir. 1988)); accord, e.g., Sierra On-Line, Inc.
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v. Phoenix Software, Inc., 739 F.2d 1415, 1423 (9th Cir.
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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
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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,
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e.g., Pepsico, Inc. v. Redmond, ___ F.3d ___, 1995 WL 29349
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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
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any there be) was harmless for the reasons just discussed.
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(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
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is affirmed. The limited injunction entered by this court on
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January 12, 1995 is dissolved. The motion to impound all
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appellate papers is allowed on a temporary basis.
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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.
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