Licata & Co. Inc. v. Goldberg

• Decision Date: 01 February 1993
• Docket Number: No. 92 Civ. 9209 (VLB).,92 Civ. 9209 (VLB).
• Citation: 812 F. Supp. 403
• Parties: LICATA & CO. INC., Plaintiff, v. Seymour GOLDBERG and Total Dollar Management Effort Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

812 F. Supp. 403

LICATA & CO. INC., Plaintiff, v. Seymour GOLDBERG and Total Dollar Management Effort Ltd., Defendants.

No. 92 Civ. 9209 (VLB).

United States District Court, S.D. New York.

February 1, 1993.

COPYRIGHT MATERIAL OMITTED

Alan M. Simon, Suffern, NY, for plaintiff.

Farrell, Fritz, Caemmerer, Cleary, Barnosky & Armentano, Uniondale, NY, for defendants.

MEMORANDUM ORDER

VINCENT L. BRODERICK, District Judge.

I

Plaintiff Licata & Co. Inc. ("Licata") is a firm which entered the insurance agency business utilizing assistance of the defendant Seymour Goldberg ("Goldberg"), who has since left Licata and gone to work with the defendant Total Dollar Management Effort Ltd. ("Total"), which also engages in insurance brokerage. Licata contends that under its arrangement with Goldberg, identities of all customers developed or serviced by Goldberg while at Licata were exclusively the property of Licata and that Goldberg took customer lists from Licata.

The jurisdiction of this court is invoked pursuant to 28 U.S.C. § 1331 based on a claim under 15 U.S.C. § 1125(a), the Lanham Trademark Act's prohibition of false representations and descriptions in commerce, and a claim for unfair competition pursuant to 28 U.S.C. § 1338.

Licata, proceeding by Order to Show Cause, seeks a preliminary injunction barring defendants from "making false and misleading representations and descriptions of the conduct of the plaintiff's business and from using the plaintiff's customer lists and books and conducting any other acts of unfair competition in connection therewith"; and requiring defendants to "deliver up for impoundment during the pendency of this action all customer lists, books or the like belonging or originating with the plaintiff in their possession or under their control ..."

An affidavit of Randi Frascella, an employee of Licata, states that Goldberg had copied what she believed to be confidential customer information from Licata files. There is no contention that Goldberg took original files without returning them.

Aurealius J. Licata, president of the corporate plaintiff, has also filed an affidavit stating that it "was understood" that customers obtained by Goldberg while at Licata "would be and remain" customers of Licata & Co. Inc., but no time, place, or details concerning any conversations had to that effect are furnished and no one else appears to have been present when such understanding was reached.

The identities of the customers and the types of insurance involved are claimed as trade secrets, but no specific means used to protect their secrecy are outlined. It appears to be undisputed that Goldberg was responsible for developing Licata's business with the insurance customers involved, so that while copies of papers Goldberg prepared or worked with while at Licata might be helpful to Goldberg in approaching his former contacts, Goldberg could presumably have retrieved the identities of the customers somewhat more laboriously from other sources, and were his memory impeccable he would have needed no copies of Licata files to get in touch with them. No written agreement concerning post-employment competition or restricting Goldberg's approach to any customers he recruited while at Licata appears to have been prepared or signed.

Mr. Licata also avers that customers have told him that Goldberg had indicated in oral conversations with them that Licata could no longer service insurance needs and was not qualified to handle their business. No indication has been provided that the individual one-to-one conversations described by this hearsay were in or affecting interstate transactions or whether they took place with new prospects or persons Goldberg already knew.

While Licata seeks a preliminary injunction based on its affidavits, no offer of proof concerning what further information could be furnished is included in its papers. No information concerning the transmission of the alleged false statements in commerce has been provided.

For the reasons which follow, I deny the motion for a preliminary injunction.

II

Several factual issues concerning the relationship of the parties are presented by the application as submitted by Licata, including the following:

(a) Whether the alleged representations on the part of Goldberg concerning Licata were in fact made and were in fact false, and if so whether they were in commerce; and

(b) Whether customers recruited by Goldberg are part of his personal business acquaintanceship developed through his own efforts without any commitment not to contact them if Goldberg left Licata, and which Goldberg may hence use at another job, or whether there was an enforceable agreement that Licata would retain exclusive rights to contact such customers.

While the test for granting a preliminary injunction has been often restated, its core has changed little in recent decades. In order to secure a preliminary injunction, a movant must, barring circumstances not involved here, establish (a) irreparable harm and (b) either likelihood of success on the merits, or fair ground for litigation and a balance of hardships tipping decisively in favor of the movant. Jackson Dairy v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir.1979); see Silberman, Injunctions by the Numbers: Less Than the Sum of Its Parts, 63 Chi-Kent L.Rev. 279 (1987).

There are reasons why an injunction may be a preferred method of resolution in specific circumstances, which may affect the application of the Jackson test. Where events with irrevocable effects which are difficult to unscramble are imminent, quick resolution on the merits is crucial to those involved. This may be true, for example, in certain corporate control controversies, as outlined in Piper v. Chris-Craft Industries, 430 U.S. 1, 42, 97 S.Ct. 926, 949-50, 51 L.Ed.2d 124 (1977), quoting Electronic Specialty Co. v. International Controls, 409 F.2d 937, 947 (2d Cir.1969); see Laycock, The Death of the Irreparable Injury Rule, 103 Harv.L.Rev. 687 (Jan.1990).

Similarly, the risk of monetary liability may in certain kinds of situations chill otherwise desirable behavior, leading courts or legislative bodies to opt for injunctive enforcement as the primary or sole method of enforcing applicable requirements. See Gwaltney v. Chesapeake Bay Foundation, 484 U.S. 49, 108 S.Ct. 376, 98 L.Ed.2d 306 (1987). In still other cases, damage awards are problematic because of the potential for multiple claims, whereas injunctive relief meets with no such barrier and is hence preferred where justified. See Mid-West Paper Products Co. v. Continental Group, 596 F.2d 573 (3d Cir.1979). No circumstances of any of these or related types have been claimed or shown here.

Irreparable injury has not been shown. Total appears to be solvent and able to respond in damages if any actionable injury is shown. Nor do damages appear incalculable, see Triebwasser & Katz v. AT & T, 535 F.2d 1356, 1359 (2d Cir.1976). There is no indication that the alleged improper behavior is putting Licata out of business, which might suffice to show irreparable injury. John B. Hull, Inc. v. Waterbury Petroleum Products, 588 F.2d 24, 29 (2d Cir.1978), cert. denied, 440 U.S. 960, 99 S.Ct. 1502, 59 L.Ed.2d 773 (1979).¹

Licata has also failed to show probability of success on the merits. No proof beyond generalities has been offered that Licata's contentions accurately describe the facts. Nor has any request for an evidentiary hearing to establish those facts by testimony been made; there is an absence here of any offer of proof as to what witnesses would be called at such a hearing if requested, and what they would be expected to testify to in order to establish adequate support for the injunction sought.

Licata has also failed to satisfy the alternative second branch of the Jackson test. Even assuming that irreparable injury had been established, and assuming without deciding that fair ground for litigation has been shown, the equities do not tip toward Licata. On the contrary, if a prohibitory injunction had the effect of preventing transactions which would otherwise occur on the merits at the instance of the customer, whichever insurance agency was entitled to the benefit of those transactions the parties as a group would lose. On the other hand, if such transactions occurred at the expense of Licata's rights, it could be compensated for by a money judgment.

Further, as discussed below in connection with Licata's proposed remedy, a preliminary injunction merely barring improper conduct would not give any certainty of protection to Licata, since misconduct on the part of Goldberg and Total is disputed; such an injunction would invite contempt litigation since its application to the behavior of the parties to be enjoined would remain in dispute.

III

Licata has failed to establish the appropriateness of its reliance on the Lanham Act as a basis for injunctive relief or as the prerequisite for sustaining its unfair competition claim under 28 U.S.C. § 1338.

The Lanham Act's antideception provision (15 U.S.C. § 1125a) in its present form, designed among other things to bar misleading commercial advertising, would be trivialized if it were applied to statements in oral conversations by an individual sales representative to an individual customer concerning matters which an ordinary listener would recognize as personal opinion as opposed to representations of hard definable facts, such as product descriptions. See Brignoli v. Balch Hardy and Scheinman, Inc., 645 F.Supp. 1201, 1209 (S.D.N.Y.1986).

Robust debate between competitors on matters of opinion, and claims that one product or service is far superior to that of rivals, are encouraged as part of the hurly-burly inherent in a free market system, and indeed an open society.² The deceptive potentialities of alleged misstatements balanced against the restrictive impact of prior restraint on freedom of commercial speech³ must be evaluated —...