Procter & Gamble Co. v. Stoneham

• Decision Date: 29 September 2000
• Docket Number: No. C-990859.,C-990859.
• Citation: 747 NE 2d 268,140 Ohio App.3d 260
• Parties: PROCTER & GAMBLE COMPANY, Appellant, v. STONEHAM, Appellee.
• Court: Ohio Court of Appeals

140 Ohio App.3d 260

747 NE 2d 268

PROCTER & GAMBLE COMPANY, Appellant, v. STONEHAM, Appellee.^*

No. C-990859.

Court of Appeals of Ohio, First District, Hamilton County.

Decided September 29, 2000.

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Dinsmore & Shohl, Nancy A. Lawson, Mark A. Vander Loan and Lawrence R. Elleman; Howrey, Simon, Arnold & White, Mark D. Wegener, Kenneth W. Brothers and Gary Thompson, for appellant.

Lindhorst & Dreidane, Leo J. Breslin and James C. Frooman; Kirkland & Ellis, Brian D. Sieve and Anne J. McClain, for appellee.

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HILDEBRANDT, Presiding Judge.

Plaintiff-appellant, the Procter & Gamble Company ("P&G"), appeals from the judgment of the trial court dismissing its claims against defendant-appellee, Paul Stoneham, for breach of contract and misappropriation of trade secrets. P&G sought damages and injunctive relief against Stoneham, claiming that he had violated a non-compete agreement that he had signed while employed at P&G and that he had misappropriated trade secrets when he began working for a company called Alberto-Culver. The case was tried to a judge.

Upon Stoneham's motion, the trial court dismissed P&G's claims pursuant to Civ.R. 41(B), which states in part, "After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant * * * may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief." Because we hold that the court's decision was erroneous as a matter of law and contrary to the manifest weight of the evidence, we reverse the judgment and remand the cause for further proceedings.

SUMMARY OF FACTS

The massive amount of testimony and evidence presented to the trial court must be, for practical purposes, substantially condensed in this opinion. Moreover, because the record in the proceeding below has been sealed from public disclosure, this court has taken steps to refrain from identifying any specific trade secret asserted by P&G, causing us to refer instead to categories of evidence submitted in support of this claim. We believe that disposition of this case can be accomplished without disclosure of information that P&G considers confidential.

Paul Stoneham worked for P&G for thirteen years. He had a master's degree in marketing. During the latter part of his employment, he worked in the haircare division, focusing primarily on hair-conditioning products. As a seniorlevel manager, he had responsibility for international marketing. As a member of several teams of managers formulating P&G's global business goals and strategies related to haircare, Stoneham was required to know and use information such as market research results, financial data related to the costs and profits of the products, and the technological developments in existing and new products.

As part of its drive to substantially expand its global haircare business, P&G obtained raw market research data from a market research firm. The marketing division compiled the information for use in developing consumer models, determining the product areas in which P&G would expand or reduce its business, assessing the types of advertising that were most successful for different products, and creating a line of products that would optimize P&G's profits. Stoneham's expertise was the foreign markets, that is, the markets other than the United States, and the needs of the foreign consumers, the products that sold best in the foreign markets, the areas in which P&G should concentrate its resources to increase sales in haircare products, and the types of claims and advertising that would be most successful in foreign markets.

As part of his job, Stoneham was also privy to the development of new haircare products by P&G. He knew, among other things, which products were closest to market, when and where they would be launched, the target consumers, the type of advertising to be used, the strengths and weaknesses of the products, the strengths and weaknesses of the company's scientific backup for its claims about the products, the price for the new products, and the targeted profits. He was also involved in the "relaunch" or revitalization of existing products, and knew, among other things, which products were going to be relaunched, the perceived weaknesses of the products, the changes made or to be made in the products, the changes in the advertising and marketing focus, and the anticipated costs of the relaunch.

As a member of worldwide multi-functional teams at P&G, Stoneham developed a confidential ten-year marketing plan for one of P&G's hair-conditioning products, participated in the development of new products, and helped develop a ten-year plan for P&G's best-selling brand, Pantene. No one was more knowledgeable about the foreign marketing of P&G's haircare products, and no one was more knowledgeable about P&G's hair-conditioning products, both existing and potential, than Stoneham.

When he reached a certain management level at P&G, Stoneham, like other employees at that level, was given the opportunity to obtain P&G stock options. Only about ten percent of P&G's employees, the highest levels of management, were eligible for these options. To receive the stock options, Stoneham was required to sign an agreement not to compete with P&G for three years after the termination of his employment. Agreeing to the covenant not to compete was entirely voluntary, but failure to agree would have required Stoneham to forgo the stock options. Stoneham signed the non-compete agreement. Like all other employees at P&G, Stoneham had signed a confidentiality agreement when he was hired, in which he had agreed not to disclose any of P&G's confidential information or trade secrets.

In 1998, Stoneham decided to take a job with Alberto-Culver, a company whose haircare products, including its conditioners, competed with P&G products to some extent. Alberto-Culver's V05 brand of hair conditioner was the best-selling leave-in conditioner on the market at the time. Stoneham's position was to be President of Alberto-Culver International, the complement to the company's President of Alberto-Culver U.S.

Shortly after he accepted the position, P&G filed suit, alleging that Stoneham had breached the covenant not to compete and that his employment with Alberto-Culver posed an immediate threat that P&G's trade secrets would be disclosed. Following a hearing on P&G's requests for a preliminary and a permanent injunction, the trial court held that P&G had not established an entitlement to relief.

P&G'S SIXTH ASSIGNMENT OF ERROR

We first address P&G's sixth assignment of error, in which P&G contends that the trial court erred in applying the clear-and-convincing standard of proof in deciding P&G's claim for misappropriation of trade secrets. Determination of the appropriate standard of proof (and standard of review for this court) is complicated by the nature of the action and P&G's request for permanent injunctive relief.

P&G's complaint alleged that Stoneham had breached the non-compete agreement when he began working for Alberto-Culver. The complaint also alleged that Stoneham had misappropriated trade secrets in violation of R.C. 1333.62. P&G requested monetary damages, as well as a preliminary injunction and a permanent injunction.

The purpose of a preliminary injunction is to preserve a status between the parties pending a trial on the merits.¹ Ordinarily, a party requesting a preliminary injunction must show that (1) there is a substantial likelihood that the plaintiff will prevail on the merits, (2) the plaintiff will suffer irreparable injury if the injunction is not granted, (3) no third parties will be unjustifiably harmed if the injunction is granted, and (4) the public interest will be served by the injunction.²

A permanent injunction is not considered an interim remedy. It is issued after a hearing on the merits in which a party has demonstrated a right to relief under the applicable substantive law.³ A party seeking a permanent injunction must show that the injunction is necessary to prevent irreparable harm and that the party does not have an adequate remedy at law.⁴ A party seeking either type of injunction must ordinarily prove the required elements by clear and convincing evidence.⁵

The Supreme Court of Ohio has held that when an injunction is authorized by statute, normal equity considerations do not apply, and a party is entitled to an injunction without proving the ordinary equitable requirements, upon a showing that the party has met the requirements of the statute for issuance of the injunction.⁶ In this case, R.C. 1333.62 authorizes the issuance of an injunction upon a showing that one party has misappropriated another's trade secrets. Under Ackerman, P&G's request for an injunction to remedy a violation of Ohio's Uniform Trade Secrets Act would have required P&G to prove, by a preponderance of the evidence, that a violation of the statute had occurred.⁷ P&G would still have been required to prove by clear and convincing evidence that it was entitled to an injunction on its breach-of-contract claim.

However, in State ex rel. Jones v. Hamilton Cty. Bd. of Commrs.,⁸ this court held that the rule in Ackerman is limited to those statutes that contain specific criteria that the court must use in determining entitlement to an injunction. When a statute merely provides that a party is entitled to injunctive relief as well as other types of relief, there is no "statutory injunction" within the meaning of Ackerman, and the party requesting the injunction must use the general equitable principles governing the issuance of injunctive relief.

In this case, the applicable statute provides for injunctive relief but does not contain the statutory guidelines that Jones held necessary for the application of th...