Amer. Red Cross v. Palm Beach Blood , 143 F.3d 1407 ( 1998 )

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.
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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
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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.
17