Only $2.99/month
Key Concepts:

Terms in this set (70)

Principle being challenged: inevitable disclosure
On July 27, the United States Court of Appeals for the Third Circuit affirmed a district court's order enjoining a senior executive from Bimbo Bakeries USA, Inc., from working for one of Bimbo's competitors, Hostess, until after the district court resolved the merits of Bimbo's misappropriation of trade secrets claim against the executive. Among other trade secrets at issue in the lawsuit is the recipe for Thomas' English Muffins, which were estimated to account for approximately $500 million in Bimbo's annual sales income. Defendant Chris Botticella is alleged to be one of only seven people who possess all of the knowledge necessary to replicate independently the muffins.

The Circuit Court affirmed the district court's finding that Bimbo was likely to prevail on the merits of its misappropriation of trade secrets claim under Pennsylvania's Uniform Trade Secrets Act ("PUTSA"). Specifically, the Circuit Court left undisturbed the district court's determination that Bimbo likely would be able to prove at trial that Botticella would misappropriate Bimbo's trade secrets if allowed to work at Hostess.

The Circuit Court focused on PUTSA section 5303 and related case law, which allows courts to enjoin actual or threatened misappropriation of trade secrets. The district court's finding that there was "[a] substantial likelihood, if not an inevitability, that [Botticella] will disclose or use Bimbo's trade secrets in the course of his employment with Hostess," was proper, held the Circuit Court. In so holding, the Circuit Court rejected Botticella's argument that the district court could only issue an injunction where it is shown that it would be "virtually impossible" for Botticella to perform his new job at Hostess without disclosing trade secrets.

In reaching this holding, however, the Circuit Court took exception with the district court's analysis of Pennsylvania's law concerning the "inevitable disclosure" doctrine. Specifically, the Circuit Court noted that "[w]hile we agree...that Pennsylvania law empowers a court to enjoin the threatened disclosure of trade secrets without requiring a plaintiff to show that disclosure is inevitable, we do not consider that an injunction granted absent such a showing was issued pursuant to the 'inevitable disclosure doctrine'." Rather, said the Court, an injunction enjoining one from assuming particular employment may issue where the facts of the case demonstrate a substantial threat of trade secret misappropriation.

Citing the district court's findings of fact, the Circuit Court held that the district court had, and properly exercised, discretion to enjoin Botticella from working at Hostess to the extent his proposed employment there threatened to lead to the misappropriation of Bimbo's trade secrets. The Circuit Court noted that, among other things, the district court found that (1) Botticella had accessed via his laptop computer in his final days at Bimbo highly sensitive information belonging to Bimbo which information would have been damaging to Bimbo if obtained by a competitor; (2) Botticella's explanation at deposition regarding his suspicious use of the laptop was "confusing at best" and "not credible"; and (3) Botticella's conduct following his acceptance of the Hostess job offer demonstrated his intention to use Bimbo's trade secrets during his employment with Hostess. As to this latter point, the district court found that Botticella (a) did not disclose to Bimbo his acceptance of a job offer from a direct competitor and remained in his position to receive Bimbo's confidential information, (b) received Bimbo's confidential information after his acceptance of the Hostess job offer, and (c) copied trade secret information from his work laptop onto external storage devices.

The Third Circuit's decision provides guidance to employers as to the showing required to enjoin former employees from assuming new employment where the facts show that there is a substantial threat of trade secret misappropriation.
Plaintiff Patricia Holmes, who was a party to a partnership agreement with defendants Sandra Kruger Lerner and David Soward, brought an action in California state court against defendants, alleging that defendants breached an oral partnership agreement with plaintiff concerning the creation of a cosmetics company and that a third individual interfered with the contract, resulting in plaintiff's ouster from the business. The trial court entered judgment finding defendants liable to plaintiff for compensatory and punitive damages and granted a non-suit on various causes of action against the second defendant. Defendants appealed arguing that there was no partnership.

issue- was there a partnership? (formation by intent)

answer: The appellate court held that the trial court properly determined that a partnership had been formed, notwithstanding the absence of an express agreement to share profits. The court noted that an agreement to divide profits was not a prerequisite to prove the existence of a partnership. Instead, profit sharing was prima facie evidence of being a partner, rather than a required element of the definition of a partnership. The court further held that the oral partnership agreement was sufficiently definite for enforcement. The court, however, reversed the judgment of a co-defendant for contract interference because the finding that he interfered with the contract was precluded by the jury's finding that defendant never intended to perform and reversed an order granting a non-suit on claims against the co-defendant for aiding, abetting and conspiracy related to fraud, and fiduciary duty breach.
RULE:
Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm's length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive is then the standard of behavior.

FACTS:
A joint venture existed in which two partners pooled their money in order to lease a building for shops and offices. Salmon (defendant) was more business savvy and, in an effort to increase his wealth, he entered into an agreement with another businessperson to purchase surrounding property as a leasehold estate. The specifics of this transaction were not disclosed to Meinhard (plaintiff), and he subsequently sued for breach of the joint venture agreement when he discovered the transaction. Litigation ensued and Meinhard received a substantial judgment for breach of contract. The case was appealed.

ISSUE:
Duties of general partners to one another-- Was Meinhard entitled to proceeds resulting from Salmon's purchase of a leasehold estate where Salmon's lucrative position arose from the creation of a joint venture?

ANSWER:
Yes

CONCLUSION:
The Court held that Meinhard was entitled to proceeds resulting from Salmon's purchase of a leasehold estate where Salmon's lucrative position arose from the creation of a joint venture. Salmon would not have been in the rewarding leasehold position if it were not for the joint venture. Accordingly, after lessening stock distribution, the Court reaffirmed the lower tribunal's finding on behalf of the Meinhard.
RULE:
When minority stockholders in a close corporation bring suit against the majority alleging a breach of the strict good faith duty owed to them by the majority, the court must carefully analyze the action taken by the controlling stockholders in the individual case. It must be asked whether the controlling group can demonstrate a legitimate business purpose for its action. In asking this question, the controlling group in a close corporation must have some room to maneuver in establishing the business policy of the corporation. It must have a large measure of discretion, for example, in declaring or withholding dividends, deciding whether to merge or consolidate, establishing the salaries of corporate officers, dismissing directors with or without cause, and hiring and firing corporate employees. When an asserted business purpose for stockholder action is advanced by the majority, it is open to minority stockholders to demonstrate that the same legitimate objective could have been achieved through an alternative course of action less harmful to the minority's interest. If called on to settle a dispute, the court must weigh the legitimate business purpose asserted by majority stockholders, if any, against the practicability of a less harmful alternative.

FACTS:
On August 5, 1971, the plaintiff (Wilkes) filed a bill in equity for declaratory judgment in the Probate Court for Berkshire County, naming as defendants T. Edward Quinn (Quinn), Leon L. Riche (Riche), the First Agricultural National Bank of Berkshire County and Frank Sutherland MacShane as executors under the will of Lawrence R. Connor (Connor), and the Springside Nursing Home, Inc. (Springside or the corporation). Wilkes alleged that he, Quinn, Riche and Dr. Hubert A. Pipkin (Pipkin) entered into a partnership agreement in 1951, prior to the incorporation of Springside, which agreement was breached in 1967 when Wilkes's salary was terminated and he was voted out as an officer and director of the corporation. Wilkes sought, among other forms of relief, damages in the amount of the salary he would have received had he continued as a director and officer of Springside subsequent to March, 1967. A judge of the Probate Court referred the suit to a master, who, after a lengthy hearing, issued his final report in late 1973. Wilkes's objections to the master's report were overruled after a hearing, and the master's report was confirmed in late 1974. A judgment was entered dismissing Wilkes's action on the merits. The Court granted direct appellate review. On appeal, Wilkes argued in the alternative that (1) he should recover damages for breach of the alleged partnership agreement; and (2) he should recover damages because the defendants, as majority stockholders in Springside, breached their fiduciary duty to him as a minority stockholder by their action in February and March, 1967.

ISSUE:
Did the lower court err in dismissing Wilkes' complaint against the majority stockholders in Springside regarding the latter's breach of fiduciary duty?

ANSWER:
Yes.

CONCLUSION:
The Court concluded that the master's findings were warranted by the record and the final report was properly confirmed. However, the Court reversed that portion of the judgment that dismissed plaintiff's complaint and then remanded the case to the probate court for entry of judgment against defendants for breach of fiduciary duty with respect to the freeze-out of plaintiff.