Amer. Red Cross v. Palm Beach Blood

143 F.3d 1407

• Court: Court of Appeals for the Eleventh Circuit
• Decided: June 16, 1998
• Docket: 96-5092
• Status: Published

Opinion

PUBLISH

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

_______________

No. 96-5092 _______________

D. C. Docket No. 96-1584-CIV-KING

AMERICAN RED CROSS,

Plaintiff-Appellee,

versus

PALM BEACH BLOOD BANK, INC,

Defendant-Appellant.

______________________________

Appeal from the United States District Court for the Southern District of Florida ______________________________ (June 16, 1998)

Before TJOFLAT and BIRCH, Circuit Judges, and RONEY, Senior Circuit Judge.

BIRCH, Circuit Judge: In this diversity case, we review the propriety of a preliminary

injunction entered against one blood bank to prohibit it from using

“trade secret” donor lists compiled by another, competing blood

bank. On appeal from the district court’s injunction, defendant-

appellant argues both that plaintiff-appellee’s lists are not

protectable trade secrets and that the injunction is impermissibly

vague. We vacate the injunction and remand the case to the district

court for further proceedings.

I. BACKGROUND

Defendant-appellant, Palm Beach Blood Bank, Inc. (“Palm

Beach”), is a non-profit Florida corporation engaged in the business

of collecting, processing, and distributing blood components.

Similarly, plaintiff-appellee, American Red Cross (“Red Cross”), is

also a non-profit corporation engaged in collecting, processing, and

distributing blood components, though its activities are more national

in scope. Despite a history of at least limited cooperation, Palm

2 Beach and Red Cross compete with each other for sponsors and

donors. Competition between the two companies is especially keen

regarding recruitment of apheresis donors, a small subset of blood

donors willing to undergo a longer and less-comfortable donation

procedure.

In October 1995, Palm Beach opened a Miami branch and over

the next several months hired a number of Red Cross’s Miami

personnel. At least one of these former Red Cross employees took

a list of Red Cross donors with her to Palm Beach, where she used

the list to contact and recruit blood donors for her new employer.

Soon after opening its Miami office, Palm Beach succeeded in

recruiting several former Red Cross donors, including apheresis

donors, to participate in Palm Beach’s blood collection program.

In April 1996, Red Cross discovered that Palm Beach was

using at least one of Red Cross’s donor lists for Palm Beach’s own

solicitations, leading Red Cross to demand that Palm Beach cease

all efforts to contact Red Cross’s donors. Unsatisfied with Palm

3 Beach’s response, Red Cross sought emergency relief on June 11,

1996, from the district court. Persuaded by Red Cross to take

immediate action, the district court entered a broad temporary

restraining order (“TRO”) against Palm Beach.1 Substantively, the

TRO prohibited Palm Beach from, inter alia, “soliciting donations

from any Red Cross donor” or engaging “in any way adversely

affecting Red Cross’s reputation or goodwill.” R1-25-5. In addition,

the TRO authorized Red Cross to enter Palm Beach’s premises,

access Palm Beach’s computer files, and to recover any documents

that “resemble[d]” Red Cross’s “trade secrets.” Id. at 8-12. Red

Cross, accompanied by United States Marshals, entered Palm

Beach’s office and seized various pieces of evidence, including one

of Red Cross’s donor lists, on June 14, 1996.

On several days in late June and early July, 1996, the district

court held evidentiary hearings on Red Cross’s motion to convert the

1 Unfortunately, neither the district court nor its court reporter has been able to locate any record of the ex parte proceeding conducted by the district court.

4 TRO into a preliminary injunction. On July 5, Palm Beach moved to

modify the TRO to allow Palm Beach to accept donations from

persons whom it had not solicited from any Red Cross list. Although

the district court expressed its hope that Palm Beach’s “reasonable

request” might form the basis of a compromise between the parties,

Red Cross objected on the ground that “basically, they are going to

be exacerbating what they have already done by using our donors.”

R6-64-87, 91. Following Red Cross’s objection, the district court

chose not to modify the TRO, without further explanation.

On August 6, 1996, the district court entered the following

preliminary injunction that restrained Palm Beach from:

(a) possessing, copying, or making unauthorized use of Plaintiff’s lists or any other documents that contain trade secrets that are the proprietary property of Plaintiff; (b) contacting and/or soliciting donations from any donor whose name is contained on Plaintiff’s lists; © engaging in any other activity constituting a misappropriation of Plaintiff’s lists, or in any way adversely affecting Plaintiff’s reputation or good will; (d) using any false designation of origin or false description which can or is likely to lead the trade or

5 public or individual members thereof to erroneously believe that Defendant is affiliated with Plaintiff; (e) disposing of or destroying any documents that are relevant to the Complaint in this action, including but not limited to Plaintiff’s lists, or Defendant’s donor lists, or donor information, whether in hard copy form or on a computer, or any simulation or copy thereof, or any document or computer data which has its genesis from any of Plaintiff’s lists; (f) disposing of or destroying any documents or related materials that evidence, relate, or pertain to Defendant’s misappropriation of Plaintiff’s lists, as well as the records of donations solicited and obtained from Plaintiff’s donors.

R2-49-2-3. Soon thereafter, Palm Beach filed an emergency motion

for clarification, expressing concern that the injunction appeared to

allow Red Cross to determine which of Palm Beach’s competitive

practices were illegitimate (and which might therefore might lead to

sanctions for contempt). Rejecting Palm Beach’s motion, the court

accepted Red Cross’s representation “that it [Red Cross] is not

concerned by legitimate recruiting efforts and unsolicited donations”

and ruled that any further clarification or explanation of its order

would amount to an “advisory opinion.” R2-48-1-2.

6 II. DISCUSSION

Palm Beach argues that the district court should not have

issued the preliminary injunction because Red Cross’s lists are not

trade secrets. Additionally, Palm Beach contends that the

preliminary injunction is impermissibly vague. We review the district

court’s grant of a preliminary injunction for abuse of discretion, but

we examine its legal determinations de novo. See Lucero v. Trosch,

121 F.3d 591, 599 (11th Cir. 1997). We will not disturb the district

court’s factual determinations unless they are clearly erroneous.

See id. at 599.

A. RED CROSS’S DONOR LISTS AS TRADE SECRETS

In order to secure a preliminary injunction, a plaintiff must show

(1) a substantial likelihood of success on the merits, (2) a substantial

threat of irreparable injury if the injunction were not granted, (3) that

the threatened injury to the plaintiff outweighs the harm an injunction

may cause the defendant, and (4) that granting the injunction would

7 not disserve the public interest. See Church v. City of Huntsville, 30

F.3d 1332, 1342 (11th Cir. 1994). Accepting arguendo that Red

Cross has satisfied the latter three of these requirements, Palm

Beach argues that Red Cross cannot show a substantial likelihood

of success on the merits because Red Cross has not kept its donor

lists sufficiently confidential for them to qualify as trade secrets.2

Under Florida law, a trade secret consists of information that (1)

derives economic value from not being readily ascertainable by

others and (2) is the subject of reasonable efforts to maintain its

secrecy. See Fla. Stat. § 688.002(4). Information that is generally

known or readily accessible to third parties cannot qualify for trade

secret protection. See Bestechnologies, Inc. v. Trident Envtl. Sys.,

Inc., 681 So. 2d 1175, 1176 (Fla. Dist. Ct. App. 1996). Moreover, an

employer may not preclude its former employee from “utilizing

contacts and expertise gained during his former employment.”

2 Although Palm Beach has not raised any issue regarding the “public interest” prong of the preliminary injunction test on appeal, the district court may wish to consider, on remand, whether trade secret injunctions between non-profit organizations serve the public interest.

8 Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288, 290

(Fla. Dist. Ct. App. 1989). In a trade secret action, the plaintiff bears

the burden of demonstrating both that the specific information it

seeks to protect is secret and that it has taken reasonable steps to

protect this secrecy. See Lee v. Cercoa, Inc., 433 So. 2d 1, 2 (Fla.

Dist. Ct. App. 1983).

After reviewing the incomplete record in this case, we are

unable to determine that Red Cross is substantially likely to establish

that its donor lists are trade secrets. Palm Beach has offered us a

variety of evidence tending to show that Red Cross has not been

particularly careful to protect the secrecy of its lists of names.3

Some of Red Cross’s lists appear to have been posted on a

computer bulletin board freely accessible to Red Cross’s

competitors, while many of Red Cross’s donor groups have publicly

revealed their sponsorship of Red Cross’s blood drives. It may also

3 We note, however, that there is no evidence in the record that Red Cross has failed to keep its donors’ personal medical information confidential.

9 be the case, as Palm Beach claims, that some former Red Cross

employees have professional relationships with individual Red Cross

donors, relationships which these workers may now rely upon

without infringing any of Red Cross’s rights. See Templeton, 552

So. 2d at 290.

To rebut this evidence, Red Cross presents us with a number

of confidentiality agreements that it requires its employees to sign.

From the incomplete record now before us, though, it appears that

many, if not all, of these confidentiality agreements protect donors’

personal medical information, not their identities. Further, even if we

were to assume that these agreements proved that Red Cross had

taken reasonable steps to protect the secrecy of its lists, Red Cross

has pointed us to no evidence to rebut Palm Beach’s contention that

the lists at issue are not in fact secret but have instead entered the

public domain.

Because the record at this preliminary stage is incomplete, and

because we have decided to remand for reconsideration of the

10 wording of the injunction, we do not think it prudent to reach any

conclusion now regarding the protectability of Red Cross’s lists.

Instead, we remand the case to the district court for further

development of the record and entry of more particularized findings

of fact.

B. THE SCOPE OF THE PRELIMINARY INJUNCTION

Palm Beach argues that several provisions of the preliminary

injunction are so vague as to violate Rule 65(d) of the Federal Rules

of Civil Procedure (“Rule 65(d)”). As we have previously held, a

court must craft its orders so that those who seek to obey may know

precisely what the court intends to forbid. See Hughey v. JMS

Dev., 78 F.3d 1523, 1531 (11th Cir. 1996). Thus, Rule 65(d) of the

Federal Rules of Civil Procedure provides that “[e]very order

granting an injunction . . . shall be specific in terms; [and] shall

describe in reasonable detail . . . the act or acts sought to be

restrained . . . .” Fed. R. Civ. P. 65(d). Under this rule, “an ordinary

11 person reading the court’s order should be able to ascertain from the

document itself exactly what conduct is proscribed.” Hughey, 78

F.3d at 1531 (quoting 11A Wright et al., Federal Practice and

Procedure § 2955 at 308-09 (1995)).4

Applying Rule 65(d), we believe that two significant portions of

the injunction do not give Palm Beach sufficient notice as to what

actions the district court means to prohibit. First, the injunction

prohibits “contacting and/or soliciting donations from any donor

whose name is contained on Plaintiff’s lists.” R2-49-2. Although at

first glance this directive from the district court may seem simple

enough, Palm Beach has no way to determine whether a given

member of the public might happen to appear on a Red Cross list

not in Palm Beach’s possession. As the district court itself

acknowledged during its preliminary injunction hearing:

Well, almost everybody that has ever donated before as a Red Cross donor, therein lies one of the problems. The

4 Rule 65(d) not only serves the interest of fairness but also helps to ensure informed and intelligent appellate review. See Hughey, 78 F.3d at 1531.

12 American Red Cross has been in existence for 50-odd years according to the testimony, or maybe longer, so it is very difficult, I presume, to go out and compete in the recruiting of donors without touching upon someone in this five percent of the donating population that is or has been at some point in time a Red Cross donor. I mean, if the two entities are going to compete at all, if they are entitled to compete, it is obvious they are going to be competing for each others’ donors.

R6-88. Since an ordinary person in Palm Beach’s position could not

ascertain which members of the public might be off-limits for its

recruitment efforts, this provision contravenes Rule 65(d).5

Second, the injunction bars Palm Beach from “possessing,

copying, or making unauthorized use of Plaintiff’s lists or any other

documents that contain trade secrets that are the proprietary

property of Plaintiff.” R2-46-2 (emphasis added). As Red Cross

argues, a nonspecific injunction may sometimes be justified “when

5 We are also concerned that this portion of the injunction, along with the section banning Palm Beach from “in any way adversely affecting Plaintiff’s reputation or goodwill,” R2-46-2, may constitute an impermissible prior restraint on Palm Beach’s legitimate competitive speech. See In re Nat’l Serv. Corp. v. Turner Adver. Co., 742 F.2d 859, 862 (5th Cir. 1984) (holding that injunction prohibiting advertising of company’s bankruptcy was unconstitutional prior restraint). Because we conclude that the injunction is improper under Rule 65(d), however, we do not reach this constitutional issue.

13 the information needed to make the order specific in form is known

only to the party to be enjoined.” Wright, § 2955 at 323. In this

case, though, Red Cross has not suggested even a genre of trade

secret beyond its donor lists that Palm Beach might misappropriate,

nor has Red Cross explained why only Palm Beach should be

thought to have knowledge of those Red Cross trade secrets that

the injunction might protect. Indeed, the lack of any apparent factual

basis for this open-ended portion of the injunction has left Palm

Beach understandably uncertain as to what the district court means

to prohibit. While we would not expect an injunction in a case such

as the one at bar to describe with particularity each of the

documents that Palm Beach might misappropriate, we do think that

the district court’s injunction should put Palm Beach on notice as to

the types of information, “other” than “lists,” to which it applies. See

E.W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1114 (8th Cir.

1969); Hughey, 78 F.3d at 1531. The district court may not simply

order Palm Beach to “obey the law.” See Hughey, 78 F.3d at 1531.

14 Finally, we note that, assuming Red Cross’s lists are

protectable trade secrets, the district court could readily have drafted

a more narrow injunction. Such an injunction would presumably

have prohibited Palm Beach from (1) possessing, using, or copying

Red Cross’s lists or any other specific types of valuable confidential

documents identified by the district court, (2) using false

designations or descriptions to mislead individuals or businesses

into believing that Palm Beach is affiliated with Red Cross,6 and (3)

disposing of or destroying material evidence. Such an injunction

would have given Palm Beach much fairer notice of what the district

court intended to prohibit, without compromising whatever legitimate

need Red Cross may have for protection of its trade secrets.

In sum, the district court has crafted an injunction that leaves

Palm Beach without reasonable notice of what the court means to

6 Though such a provision would not have any basis in trade secret law, it would address the trademark or fraud related issues that apparently motivated the district court to include it in the current injunction. Because neither party has questioned the propriety of the current provision, we assume, without deciding, that it is appropriate.

15 prohibit. Regardless of whatever assurances Red Cross may have

given the district court or Palm Beach regarding its intended manner

of enforcing the injunction, Palm Beach should not have to risk

citation for contempt in order to determine the true scope of activity

barred by the district court’s order. See Hughey, 78 F.3d at 1531.

Therefore, we hold that the preliminary injunction is impermissibly

vague under Rule 65(d), and we vacate the district court’s order.

III. CONCLUSION

In its attempt to protect Red Cross from misappropriation of its

trade secrets, the district court has fashioned an injunction that is

impermissibly vague under Rule 65(d). Further, the district court has

based its injunction on an incomplete record that may not establish

a substantial likelihood that Red Cross’s lists are in fact trade

secrets. Therefore, we VACATE the preliminary injunction and

REMAND this case to the district court for further development of the

record and entry of more particularized findings of fact. If, upon

16 reconsideration, the district court concludes that Red Cross can

show a substantial likelihood of success on the merits of its claims,

the district court may craft a more narrow injunction to protect Red

Cross’s rights from abuse by Palm Beach.