Opinion
No. 01-74279.
November 30, 2001.
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION
Before the Court is Plaintiff's motion for a preliminary injunction (Docket Entry # 2). The Court heard testimony and oral argument on this motion on November 26-27, 2001. Plaintiff requests relief in the form of a preliminary injunction preventing Defendant, in the course of his employment with J L, from calling upon these companies: Ford and Visteon for a period of six (6) months; Tenneco and Arvin-Meritor for a period of twelve (12) months. Upon consideration of the motion, the submissions of the parties, and the applicable law, the Court will GRANT IN PART and DENY IN PART the motion for preliminary injunction.
I. FINDINGS OF FACT
1. Defendant Robert Colton was employed by Plaintiff AK Steel Corp. from late July of 1999, until November 5, 2001.
2. Defendant signed an "Employee Invention and Confidential Information Agreement" (hereinafter "confidentiality agreement") with Plaintiff, in consideration of his continued employment, on August 4, 1999. Defendant did not sign a covenant not to compete with AK (hereinafter "a non-compete agreement").
3. That confidentiality agreement provides, in relevant part:
I recognize that during my employment I will receive, develop, or otherwise acquire various kinds of information which are of a secret or confidential nature. During and after my employment, except as authorized by the company, I will not disclose or use, directly or indirectly, any information I obtain during the course of my employment relating to inventions, products, product specifications, processes, procedures, machinery, apparatus, prices, discounts, manufacturing cost, business affairs, future plans, customers, ideas, technical data or otherwise which is of a secret or confidential nature (whether or not acquired or developed by me) and which belongs to the Company or to those with whom the company has contracted regarding such information.
4. Defendant's calendar diary from his Palm Pilot shows that he had a number of meetings with Ford representatives regarding future product development uses of AK stainless steel in the automotive industry.
5. In October of 2001, Defendant was contacted by Joe Karl, of Jones Laughlin Speciality Stainless (hereinafter "J L"), about the possibility of employment with J L.
6. Defendant received a written offer of employment from J L on October 27, 2001.
7. The J L offer of employment concerned a substantially similar job description to Defendant's employment with AK, in that Defendant would be calling upon purchasing agents for customers, including automobile manufacturers in the Detroit metropolitan area such as Ford Motor Company (hereinafter "Ford"), regarding potential and existing business relations, and purchases for stainless steel for the automotive exhaust industry.
8. On October 29, 2001, Defendant informed his superiors at AK Steel of his offer from J L.
9. On October 29, 2001, Defendant contacted Tom Long, AK Steel's Product Manager for automotive exhaust products, in the context of his employment with AK, to discuss future pricing strategies for the Ford account.
10. On October 30, 2001, Defendant had a detailed discussion with Tom Long about AK's pricing structure of the Ford account for the year 2002, including, but not limited to, how AK could price its product so that Ford would view the bid favorably during negotiations, and how and why AK could reduce its price on certain components, but not on others, pursuant to Ford's request.
11. Defendant admitted in his testimony that the pricing information he obtained through his discussions with Tom Long constituted AK proprietary information, covered by his confidentiality agreement.
12. On October 31, 2001, Defendant had a meeting with Mr. Gant of AK to discuss AK's counter-offer to keep him employed there. At that meeting, Mr. Gant specifically asked Defendant if he would stay with AK — otherwise, the relationship would end, and Defendant would not further participate in AK meetings. Defendant committed to stay at AK.
13. Immediately after this meeting, and in exchange for his promise to remain with AK, Defendant was permitted to attend a meeting AK had arranged with Mr. Bob Mateer, Ford's worldwide head of steel purchasing, with AK's Mr. Gant and Mr. Garrettson, regarding AK's 2002 bid for Ford's business. Defendant testified that he had never previously been able to secure a meeting with Mr. Mateer.
14. Soon thereafter, on November 5, 2001, Defendant informed his superiors at AK that he was leaving AK to accept the offer of employment from J L. Defendant testified that he offered to stay at AK for two more weeks, but AK ordered him out, immediately.
15. Visteon, a tier one company recently spun off from Ford, continues to be intimately connected with Ford, such that its purchasing (pricing/product information) is substantially controlled by Ford.
16. Defendant did not call upon Tenneco or Arvin-Meritor during his employment with AK. His only knowledge of AK's pricing of its steel to Tenneco or Arvin-Meritor was a reference, in his October 30th conversation with Mr. Long, of how the Ford price necessarily differs from the pricing for Tenneco and Arvin-Meritor. Defendant does not possess any secret or proprietary information with regard to these two companies.
II. CONCLUSIONS OF LAW
A. Preliminary Injunction Standard
In evaluating whether Plaintiff is entitled to a preliminary injunction, the Court must consider the following four factors:
(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would otherwise suffer irreparable injury; (3) whether issuance of a preliminary injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuance of a preliminary injunction.Michigan Bell Telephone Co. v. Engler, 257 F.3d 587, 592 (6th Cir. 2001) (quoting McPherson v. Michigan High Sch. Athletic Ass'n, 119 F.3d 453, 458 (6th Cir. 1995)). The Sixth Circuit Court of Appeals has held that the factors are to be balanced by the Court, and are not to be viewed as prerequisites that must be met. Id. As a result,
No single factor will be determinative as to the appropriateness of equitable relief, . . . and the district court's weighing and balancing of the equities is overruled only in the rarest of cases.Id. (internal quotation marks omitted).
1. Strong Likelihood of Success on the Merits a. Breach of Confidentiality Agreement
Defendant signed a confidentiality agreement, in which he promised, inter alia, not to "use, directly or indirectly, any information obtain[ed] during the course of [his] employment relating to inventions, products, product specifications, processes, procedures, machinery, apparatus, prices, discounts, manufacturing cost, business affairs, future plans, customers, ideas, technical data or otherwise which is of a secret or confidential nature." (Emphasis added.) Defendant admitted during his testimony that the pricing information regarding Ford was proprietary information within the meaning of this agreement.
Although there is no evidence that he has breached the agreement yet, the Court finds not credible, Defendant's promise not to do so. Defendant's pre-Ford/Mateer meeting commitment to AK to accept its counter-offer and remain — a condition of his being permitted to attend that meeting — which was followed a few days later by his departure notification to AK, leads this factfinder to give no credibility to Defendant's testimony that he will honor his AK confidentiality agreement. The Court further finds that AK Steel's pricing structure/new product strategy with regard to Ford/Visteon is protected by the agreement, and is in danger of disclosure or use, even "indirect" use, by Defendant, if he is permitted to participate in pricing/purchasing negotiations with Ford/Visteon for the six month "shelf life" of the information. AK Steel has presented evidence that the shelf life of the information is approximately six (6) months, as the pricing negotiations are handled on an annual basis, such that six months from now will begin the process anew for the year 2003. Thus, the Court will issue a limited injunction, preventing Defendant from participating in such pricing/purchasing negotiations with Ford/Visteon, in any way, in the next six (6) months.
In addition, Defendant's testimony that Ford product development planning with suppliers such as AK and J L also occurs at the plant level, supports Plaintiffs request that its requested injunction prevent Defendant from representing J L at Ford plants for six months. Accordingly, this injunction will also prevent Defendant from representing J L at Ford plants during the six month period.
b. Uniform Trade Secrets
AK Steel has set forth an evidentiary basis that supports its proposition that the material it claims is subject to trade secret protection, is, in fact, included in categories of protected information under the Ohio Uniform Trade Secrets Act, OHIO REV. CODE ANN. §§ 1333.61-69. See State ex rel. The Plain Dealer v. Ohio Dep't. of Ins., 80 Ohio St.3d 513, 687 N.E.2d 661, 672 (1997). The factors employed in analyzing a trade secret claim under Ohio law are:
(1) The extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e., by the employees; (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information.687 N.E.2d at 672 (citations omitted). Further, AK Steel made a showing that it has sought to protect its proprietary information from disclosure. See Valco Cincinnati, Inc. v. ND Machining Serv., Inc., 24 Ohio St.3d 41, 492 N.E.2d 814, 819 (1986).
The Court emphasizes that it is not ruling that Ohio, rather than Michigan law applies on this claim. The Court saves this inquiry for a later day, with the benefit of full briefing on the issue.
The Court finds that the pricing strategy for Ford, and new product development (i.e., the development of non-traditional uses of stainless steel in the automotive industry) are protectable trade secrets under the Uniform Trade Secrets Act. Specifically, there was testimony that competitors do not know pricing strategies of other competitors; only certain employees at AK are privy to pricing strategy for certain customers; AK Steel asks Ford to keep the initial pricing confidential; having a competitor's pricing structure/information would benefit a competitor in its negotiations; although the pricing information may be learned/acquired by others through disclosure from Ford, it is not easily obtained, nor readily capable of duplication. As to the development of non-traditional uses of stainless steel, although there was testimony that new uses for steel are being researched throughout the automotive industry, a particular steel company's unique or innovative ideas are protectable trade secrets, at least until they are presented to/accepted by automobile manufacturers.
The Court finds that Defendant undertook a course of action, after reviewing the J L offer of employment, which appears to have led to his obtaining of detailed information from Mr. Long regarding the strategy of AK pricing to Ford. Mr. Long testified that had he known of Defendant's intent to join J L, he would not have had the conversation with Defendant regarding the structure and strategy of steel pricing for Ford. Nor would AK have permitted Defendant to attend the afore noted Ford meeting had he stated either that he was leaving, or was unsure about staying, at AK. The Court finds that that Defendant's promise not to disclose trade secrets "rings hollow" and would not protect AK Steel's interests.
Thus, this Court will issue a limited preliminary injunction pursuant to the contract he signed. Defendant will be enjoined from disclosing or using AK Steel's trade secrets in any way. Indeed, J L's general counsel wrote Defendant a letter mandating that he honor his confidentiality agreement with AK:
During your employment with J L, you are not to use or disclose any AK Steel confidential information. Included in this confidential information would be any information concerning AK Steel's pricing, customers and commercial strategies, which is not publicly known or available from a non-confidential source. Under no circumstances are you to use or disclose any AK Steel confidential information or trade secrets during your employment with J L.
(Def.'s Exh. 1, Nov. 8, 2001 Letter from Daniel Amidon, General Counsel to J L, to Robert Colton, at ¶ 2.)
In its original motion, AK Steel requested this Court enjoin Defendant from working for J L in any capacity. Because AK Steel has abandoned that position, the Court need not deal with this issue. The Court notes that Defendant did not sign a non-compete agreement with AK Steel. c. Promissory Estoppel
The Court notes, by analogy, that Ohio precedent regarding non-compete agreements adopts a flexible standard of "reasonableness," requiring courts to consider all factors relevant to the contract and to "fashion a contract" that is reasonable based on the facts of the case. Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 325 N.E.2d 544, 547 (1975). The Court in the instant case, although not faced with a non-compete contract, finds those factors useful in fashioning the instant remedy:
[w]hether the covenant imposes temporal and spatial limitations, whether the employee had contact with customers, whether the employee possesses confidential information or trade secrets, whether the covenant bars only unfair competition, whether the covenant stifles the employee's inherent skill and experience, whether the benefit to the employer is disproportionate to the employee's detriment, whether the covenant destroys the employee's sole means of support, whether the employee's talent was developed during the employment, and whether the forbidden employment is merely incidental to the main employment.Basicomputer Corp. v. Scott, 973 F.2d 507, 512 (6th Cir. 1992) (citing Raimonde, 325 N.E.2d at 547).
Plaintiff AK Steel did not address this claim in oral argument, and the Court will not base its issuance of the preliminary injunction on this claim.
2. Irreparable Harm
AK Steel contends that it will suffer irreparable injury, incapable of being remedied by monetary relief. In the event that economic loss can be calculated and compensated by monetary damages, there is generally no claim for irreparable injury. See Basicomputer Corp. v. Scott, 973 F.2d 507, 511 (6th Cir. 1992). Conversely, "an injury is not fully compensable by money damages if the nature of the plaintiffs loss would make damages difficult to calculate." Id. at 511 (citation omitted).
In Basicomputer, the defendants, five former employees of the plaintiff, had signed non-competition agreements with the plaintiff:
Basic's standard employment contract contains a covenant not to compete.
* * *
Each contract also contains a covenant not to disclose proprietary information, confidential information, or trade secrets, including the identity of customers and the prices at which Basic sells its goods and services. The contract bars an employee from removing any confidential information from the office except in the normal conduct of business.Id. at 509. The Sixth Circuit held that the district court did not abuse its discretion in concluding that the plaintiff would suffer irreparable injury in the absence of a preliminary injunction and in issuing the injunction:
The record contains ample evidence to support the court's findings that [inter alia] . . . the defendants had access to Basic's pricing information and could use that information to underbid Basic. These facts are sufficient to support a finding that Basic would suffer competitive injury and loss of customer goodwill from the defendants' alleged breach of their covenants. Since competitive injuries and loss of goodwill are difficult to quantify, the court did not err in finding that Basic would suffer irreparable harm in the absence of an injunction.Id.
In this case, although Defendant did not sign a non-compete agreement, because he did sign a confidentiality agreement, the threat of harm to AK Steel is likely irreparable. AK Steel would suffer competitive injury and loss of goodwill if Defendant breaches his confidentiality agreement. These competitive injuries are difficult to quantify, and justify this Court's issuance of a preliminary injunction.
3. Balance of Harms
Evidence was presented that Defendant's dealing with Ford in new position with J L would be approximately 5% to 10% of his customer responsibilities. The Court finds that given this small percentage in relationship to Defendant's entire job with J L, and also, given the limited temporal scope of the prohibition (six months), Defendant's harm to be suffered, if any, is minimal in relation to the threat of harm to AK Steel. Thus, this factor weighs in favor of issuance of the injunction.
4. Public Interest
The public has an interest in the integrity of confidentiality agreements. The public also has an interest in competitive markets, which could be threatened by even an "indirect use" of AK Steel's confidential pricing information/new product development. Thus, this element weighs in favor of issuance of the injunction.
III. ORDER
For the reasons stated above, the Court finds that Plaintiff has a strong likelihood of success on the merits of its breach of contract claim, that a limited injunction preventing Defendant from participating in any pricing negotiations or product development/presentations on behalf of J L as to Ford/Visteon offices and plants would not substantially harm Defendant, that Plaintiff is likely to suffer irreparable harm if the injunction does not issue, and that the public interest will be served by this limited injunction.
Therefore, it is hereby ORDERED:
(1) Defendant shall abide by the terms of his Confidentiality Agreement with AK Steel in all respects, and shall not use or disclose any AK Steel trade secrets, confidential or proprietary information in any way.
(2) Defendant shall refrain from participating, in any way, in pricing negotiations or product development/presentations on behalf of J L, with Ford or Visteon offices and plants, for a period of six (6) months from the date of his hire at J L.
(3) This Injunction is not contingent upon Plaintiff presenting security, pursuant to FED. R. Civ. P. 65(c). The Court finds that given the limited injunctive relief granted, no bond is required.
SO ORDERED.