Hyman Companies v. Brozost

964 F. Supp. 168, 42 U.S.P.Q. 2d (BNA) 1694, 1997 U.S. Dist. LEXIS 3295, 1997 WL 249207
CourtDistrict Court, E.D. Pennsylvania
DecidedMarch 12, 1997
DocketCivil Action No. 97-269
StatusPublished

This text of 964 F. Supp. 168 (Hyman Companies v. Brozost) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hyman Companies v. Brozost, 964 F. Supp. 168, 42 U.S.P.Q. 2d (BNA) 1694, 1997 U.S. Dist. LEXIS 3295, 1997 WL 249207 (E.D. Pa. 1997).

Opinion

MEMORANDUM

GAWTHROP, District Judge.

This is a difficult case. It goes to the very heart of a lawyer’s ethics: the continuing and sacrosanct duty of fidelity to a client, versus the right to be emancipated from that client and to go off to do lawyering elsewhere. The subtle tugs and tensions between that duty and that right raise questions that are particularly knotty.

Before the court is Plaintiffs Motion for a Preliminary Injunction. Plaintiff, The Hyman Companies, Inc., filed this diversity action to prevent its former General Counsel and Vice President, Michael Brozost, from working for its competitor, Erwin Pearl, Inc. Plaintiff argues that such employment would lead to disclosure of trade secrets and material protected by the attorney-client privilege. Defendants counter that Plaintiff cannot establish that Brozost will breach his ethical or fiduciary obligations as an attorney, and that Brozost does not possess trade secrets. After a hearing, argument, and due deliberation, I shall partially grant the Motion.

I. Background

Ten years ago, Nat L. Hyman formed The Hyman Companies, Inc. (“Hyman”), which is incorporated in Delaware and has its principal place of business in Allentown, Pennsylvania. Hyman operates a chain of 42 high-end costume jewelry retail stores, located at affluent sites throughout the United States and Canada. Hyman does not manufacture its own jewelry.

Erwin Pearl, Inc. (“Pearl”), a New York corporation, competes with Hyman in the retail sale of high-end costume jewelry. Pearl’s President, Erwin Pearl, owns several affiliated companies which design, manufacture, and sell fine and high-end costume jewelry. In the past 'year and three-quarters, they have begun to sell their jewelry through their own independent retail stores. Because landlords typically want only one high-end costume jewelry store per location, Hyman competes with Pearl for selling space as well as for customers.

Michael Brozost, Esquire, is an attorney with nearly thirty years of experience in real estate law. A member of the New York and D.C. bars, he was real estate counsel for Southern Railway and J.C. Penney before becoming in-house counsel for The Goodman Company, a real estate developer.

In October, 1993, Mr. Hyman hired Brozost as General Counsel for the Hyman Company. There never was a written employment contract, or a non-compete agreement. Indeed, a lawyer generally may not sign a restrictive covenant. See Pennsylvania Rule of Professional Conduct 5.6. Later promoted to Vice President, and working out of a Florida office, Brozost handled all legal matters relating to Hyman’s operations, including employment, insurance, billing, collections, and copyright issues. He was involved in site inspection, lease negotiation and administration, and in coordinating efforts with real estate consultants. He also developed professional relationships with, landlords, developers and hotel chains. Brozost first met Mr. Pearl while acting as Mr. Hyman’s personal representative.

Mr. Hyman talked with Brozost on a daily basis, using him as a confidant and sounding board. Topics of discussion included: (1) the profitability of individual stores and which regions and- stores were the most profitable, (2) general criteria for choosing store locations, and how these criteria applied to specific locations, (3) innovative retail locations, (4) potential expansion opportunities, including which other retailers might be willing to sell stores, (5) which stores Hyman would be willing to sell and at what price, (6) arguments for why developers should choose Hyman over its competitors as a tenant, (7) specific hiring criteria, and (8) plans for Hyman’s future. One such discussion occurred on December 31, 1996, after Brozost had been offered a position with Pearl. Other discussions are memorialized in Memoranda from September, 1995 to November, 1996. [171]*171Mr. Hyman disclosed this information to Brozost believing it would be protected by the attorney-client privilege.

While Brozost was employed at Hyman, the only information to which he was not privy was the salary of other executives. Mr. Hyman instructed his employees to give Brozost whatever other information he requested. Brozost thus knows the identity of the suppliers of Hyman Inc.’s computer system and insurance. He became well familiar with Hyman’s criteria for effective lighting and case design. He received profit-and-loss statements for stores when needed to negotiate either for rent relief or for lease renewals.

As a major part of his job, Brozost learned where lease negotiations were pending and the salient details of those leases. Negotiations were still pending at several of these locations at the time of the hearing. He knows the other Hyman stores whose leases will soon be up for renewal. Because he was involved in negotiations to terminate leases, Brozost also knows which locations Hyman wishes to abandon. Although Brozost stated under oath that he only remembers the exact lease termination date for one store and cannot recall any other specific details about Hyman leases, I do not believe his pate to have suddenly become so empty. The record is replete with testimony as to his steel-trap memory for minutiae, and, although at Hyman he did have a lease-summary book to fall back on, I do not find that his memory bank self-destructed when he switched jobs.

It is true that some of the information possessed by Brozost is available through other sources. For example, property managers of shopping malls will often provide figures for gross sales per square foot; although these figures tend to be somewhat inflated, there is much that one can glean from these numbers. Real estate consultants may be able to provide more accurate sales figures. Hyman’s gross sales are not secret. Landlords rarely have an obligation to keep lease terms confidential and will often, for practical, business reasons, let out the word as to whether a lease is soon to cease. Another public source is Mr. Hyman, himself, who gave an interview to Women’s Wear Daily in which he disclosed four definite, and two possible, future store sites.

Mr. Pearl professes to have no interest in the comings and goings of Hyman, on the basis that his company is actually more involved in the manufacture of jewelry than its direct sale. It is true that Pearl operates somewhat differently. Mr. Pearl, who first got into this line of work as a diamond cutter, evolved into a highly successful designer and manufacturer of jewelry. This he still does, and it constitutes the bulk of his business. His foray into direct marketing began less than two years ago, and he claims that since he, unlike Hyman, makes his own product (Hyman makes none, buys all), and since he, unlike Hyman, produces only original creations (Hyman tends to make costume facsimiles), his business is different. I can see that it is different, but I find it to be not all that different. Both Pearl and Hyman sell high-end costume jewelry, with prices often running into four figures. Their products may have their dissimilarities, but apples and bananas they are not. I cannot help but think that Mr. Pearl’s curiosity is more than a wee bit piqued as to which high-end costume jewelry marketing philosophies Mr. Hyman discovered to be effective through a hard decade of trial and error, and what precise store sites he has set his sights on. Mr. Pearl himself would keep confidential his own stores’ profitability figures and specific sites to which he plans to expand.

At Mr.

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964 F. Supp. 168, 42 U.S.P.Q. 2d (BNA) 1694, 1997 U.S. Dist. LEXIS 3295, 1997 WL 249207, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hyman-companies-v-brozost-paed-1997.