Doebler's Pennsylvania Hybrids, Inc. v. Doebler Seeds, LLC

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
2-12-2004
Doeblers PA Hybrids v. Doebler Seeds
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-4108
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NOT PRECEDENTIAL
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 03-4108
___________
DOEBLER'S PENNSYLVANIA HYBRIDS, INC.
v.
DOEBLER SEEDS, LLC, d/b/a T.A. Doebler Seeds;
TAYLOR DOEBLER, III, an individual,
Appellants
___________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 03-cv-01079)
District Judge: The Honorable James F. McClure, Jr.
___________
Submitted Under Third Circuit LAR 34.1(a)
January 30, 2004
BEFORE: NYGAARD and FUENTES, Circuit Judges.
and O’NEILL,* District Judge.
(Filed February 12, 2004)
* Honorable Thomas N. O’Neill, Jr., Senior District Judge for the United States
District Court for the Eastern District of Pennsylvania, sitting by designation.
___________
OPINION OF THE COURT
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NYGAARD, Circuit Judge.
This case is an expedited interlocutory appeal by Appellants T.A. Seeds
(formerly known as Doebler Seeds, LLC) and Taylor Doebler, III (“Doebler III”) of a
preliminary injunction entered by the District Court. The District Court entered the
injunction to protect Appellee Doeblers’ Pennsylvania Hybrids, Inc. (“DPH”) from the
harmful acts of T.A. Seeds and Doebler III that allegedly included unfair competition,
trademark dilution, and misappropriation of trade secrets. We will affirm.
I.
Because the facts are known to the parties, and we write only for them, our
factual summary is brief. This case stems from a dispute over the control of family-
owned businesses, all of which have similar names. T.A. Doebler & Son, later renamed
Doebler Seeds, LLC and then T.A. Seeds, is a seed growing business. DPH is a business
that markets seeds grown by T.A. Doebler & Son and other growers, under the trade
name Doebler’s. The Doebler’s trade name has been in use for 30 years and is considered
by the public to be synonymous with DPH. DPH also does substantial research and
testing of new hybrid seeds.
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In late 2002, because of disagreements with the senior management of
DPH, Doebler III resigned both his employment and position on the board of the
company. Doebler III maintained, however, exclusive control over T.A. Doebler & Son.
He renamed the company Doeblers’ Seeds, LLC and developed a plan to grow and
market seed corn in competition with DPH. He hired many of the employees who
formerly worked for DPH.
After Doebler III failed to respond to a cease-and-desist letter, DPH sued
alleging, inter alia, unfair competition, trademark dilution, and misappropriation of trade
secrets. The District Court granted a preliminary injunction enjoining Appellants from:
(1) using the Doebler’s mark or any confusingly similar variation; (2) engaging in unfair
competition; (3) offering for sale any of a list of twenty-one seed corn hybrids sold by
DPH; and (4) comparing any of its hybrids to those sold by DPH. On reconsideration, the
District Court refused to amend the injunction, but required DPH to post a bond for
security. In response to the Court’s concern about name confusion, Doebler III agreed to
rename his company T.A. Seeds (“TAS”).
II.
A preliminary injunction is an appealable interlocutory order under 28
U.S.C. § 1292(a)(1). We review a District Court’s grant of a preliminary injunction for
abuse of discretion, error of law, or clear mistake of fact. Vuitton v. White, 945 F.2d 569,
574 (3d Cir. 1991).
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Appellants TAS and Doebler III argue on appeal that the preliminary
injunction was in error because it: (1) imposed restrictions on competition despite the lack
of a non-compete agreement; (2) was overbroad; (3) overestimated the harm to DPH and
underestimated the harm to TAS; and (4) mistakenly concluded DPH’s trade secrets were
misappropriated. Appellants’ claims are meritless and require little discussion.
The preliminary injunction was not an abuse of discretion nor an error of
law. DPH showed: (1) a reasonable probability of success on the merits; (2) irreparable
injury; (3) harm outweighing possible harm to other parties; and (4) that the injunction
would be in the public interest. See Novartis Consumer Health, Inc. v. Johnson &
Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 586 (3d Cir. 2002). Appellants
are incorrect that the District Court erred in its assessment of harms to the parties.
Customer confusion to the detriment of DPH is inevitable, since the TAS employees are
substantially derived from DPH, the two companies sell the same products in the same
market, and the companies are located in the same town. Additionally, TAS employs
many of DPH’s former employees in positions that will result in inevitable disclosures of
trade secrets. See Pepsico, Inc. v. Redmond, 54 F.3d 1262, 1269-70 (7th Cir. 1995)
(concluding that a company made out a case of trade secret misappropriation where an
employee “possessed extensive and intimate knowledge” about strategic goals and
without an “uncanny ability to compartmentalize information” would end up relying on
that knowledge, and likening the situation to one where the company “finds itself in the
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position of a coach, one of whose players has left, playbook in hand, to join the opposing
team before the big game”). 1
Appellants’ argument that no non-compete agreements were signed is
irrelevant. Appellants’ liability is not premised on the fact that they competed with DPH,
but rather on the fact that they used DPH’s own confidential information to compete
against them. The new TAS employees have made use of their contact lists developed at
DPH and TAS marketing staff have made direct comparisons between their products and
those of DPH, including telling customers that “basically the same people that produced
[DPH] hybrids . . . will now be producing [TAS] hybrids.”
The preliminary injunction was narrowly tailored, as it precluded only
unfair competition. The injunction prevented TAS from selling only 21 of its 50 hybrid
seed corn varieties—those that were similar or identical to DPH products. Also, on
reconsideration the Court amended the injunction to allow TAS to sell even the 21
1. Pen nsylvania courts have not explicitly adopted the inevitable disclosure
doctrine from Pepsico, Inc., but we predict that, under the circumstances, the
Pennsylvania Supreme Court would apply it or some variation thereof. In Air Products
& Chemicals, Inc. v. Johnson, the Superior Court of Pennsylvania affirmed a
preliminary injunction preventing a former employee from disclosing confidential
information to a new employer or participating in certain aspects of his new
em ployment w here disclosure would be a risk. 442 A .2d 1114, 1124-25 (Pa. Super.
Ct. 1982). The Court reasoned that the trial court’s “expression of its determination of
the likelihood of disclosure was proper,” but stopped short of saying disclosure was
“inevitable.” Id. at 1124. Using Air Products as a signpost for when Pennsy lvania
courts are willing to grant an injunction against m isappropriation of trade secrets, w e
conclude that the injunction entered here w as proper.
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allegedly infringing hybrids as feed corn, provided that it did not disclose the pedigree
and variety to buyers. Similarly, we conclude that the District Court was within its
discretion in refusing to confine the injunction to “the Northeast.”
Appellants incorrectly characterize the preliminary injunction as a
permanent injunction. The evidence does not support anything more than a speculative
conclusion that the injunction will put TAS out of business. Furthermore, the bond
posted by DPH will reimburse TAS for any hardship suffered because of the injunction, if
it wins the lawsuit on the merits.
Finally, appellants claim that the District Court erred by excluding an
affidavit from evidence. Appellants gloss over the fact that they first attempted to present
the affidavit at the reconsideration hearing. The District Court was under no obligation to
consider such evidence at that time.
III.
For the foregoing reasons, we will affirm.
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_________________________
TO THE CLERK:
Please file the foregoing opinion.
/s/ Richard L. Nygaard
Circuit Judge
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