Campbell Soup v. Giles

• Court: Court of Appeals for the First Circuit
• Decided: February 17, 1995
• Docket: 95-1072
• Status: Published

Opinion

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-