Ciena Corp. v. Jarrard

• Decision Date: 25 January 2000
• Docket Number: CA-99-3269,No. 99-2485,99-2485
• Citation: 203 F.3d 312
• Parties: (4th Cir. 2000) CIENA CORPORATION, Plaintiff-Appellee, v. CYNTHIA JARRARD, Defendant-Appellant. (). . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 312

203 F.3d 312 (4th Cir. 2000)

CIENA CORPORATION, Plaintiff-Appellee, v. CYNTHIA JARRARD, Defendant-Appellant.

No. 99-2485(CA-99-3269).

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: January 25, 2000.

Decided: February 11, 2000.

Appeal from the United States District Court for the District of Maryland, at Baltimore.

Frederic N. Smalkin, District Judge.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] COUNSEL ARGUED: Edward W. Warren, KIRKLAND & ELLIS, Washington, D.C., for Appellant. Stanley J. Brown, HOGAN & HARTSON, L.L.P., McLean, Virginia, for Appellee. ON BRIEF: Christian B. Hansen, JACKSON, LEWIS, SCHNITZLER & KRUPMAN, Washington, D.C.; Conrad S. Kee, JACKSON, LEWIS, SCHNITZLER & KRUPMAN, Stamford, Connecticut, for Appellant. Michael J. Lorenger, HOGAN & HARTSON, L.L.P., McLean, Virginia; Catherine E. Stetson, HOGAN & HARTSON, L.L.P., Washington, D.C.; Ruffin B. Cordell, Brian R. Nester, FISH & RICHARDSON, P.C., Washington, D.C., for Appellee.

Before NIEMEYER, Circuit Judge, HAMILTON, Senior Circuit Judge, and J. Frederick MOTZ, Chief United States District Judge for the District of Maryland, sitting by designation.

Affirmed and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Senior Judge Hamilton and Chief Judge Motz joined.

OPINION

NIEMEYER, Circuit Judge:

On two days' notice to the defendant of a hearing on an application for a temporary restraining order, the district court entered a preliminary injunction against the defendant, enforcing a non-competition agreement against her. On appeal, the defendant challenges (1) the district court's jurisdiction and venue, (2) the adequacy of notice for entry of a preliminary injunction, and (3) the appropriateness of the injunction, both on procedural grounds and on the merits. While we affirm the injunction, we remand to give the defendant an opportunity to conduct expedited discovery and to file a motion to dissolve the injunction within 30 days.

I

CIENA Corporation, a Delaware corporation with its principal place of business in Linthicum, Maryland, is a high-tech business engaged in designing, manufacturing, and marketing hardware and software designed to increase the capacity of fiber-optic networks. CIENA's technology increases the capacity of a single fiber-optic cable by adding multiple signals on different wavelengths. Within the period of a few years, it has increased the capacity of cables from 4 wavelengths for a single fiber to 79, with the promise of up to 200 in particular applications. The company markets its products and services nationwide.

In September 1997, CIENA hired Cynthia Jarrard as the Western Regional Director of Sales, with a base of operations in Kansas City,

Missouri. Jarrard supervised CIENA's sales force in the western part of the United States, focusing on St. Louis, Denver, and Kansas City. She also served as account manager for CIENA's largest client, Sprint Communications. Jarrard was paid $300,000 per year plus substantial bonuses. CIENA states that for the last year Jarrard worked, her compensation was in the range of $500,000.

On taking her position with CIENA and as a condition of her employment, Jarrard executed an agreement to protect CIENA's proprietary information. This agreement provides in part:

Non-Solicitation. During the term of my employment by the Company, and for a period of twelve months thereafter, I shall not, directly or indirectly, without the prior written consent of the Company . . . solicit or accept employment or be retained by any party who, at any time during the term of my employment, was a competitor or a client of the Company; or . . . solicit or accept the business of any party who, at any time during the term of my employment, was a client of the Company.

The agreement was, by its terms, effective September 22, 1997, although Jarrard did not sign it until October 2, 1997.

A little over two years after being hired as a sales director with CIENA, Jarrard resigned to accept a high-level sales position with a start-up corporation, Sycamore Networks, Inc., based in Chelmsford, Massachusetts. Jarrard's purported compensation, including stock options, was stated by CIENA on belief to be worth in excess of $5 million, an assertion with which Jarrard has not taken issue except to note that stock options in a start-up company are often difficult to value. Sycamore Networks' stated mission is to improve the optical network infrastructure available to the telecommunications industry, and in its SEC filings, it has disclosed that it competes directly with CIENA.

Upon learning of Jarrard's new employment with Sycamore Networks, CIENA promptly filed this action, alleging in two counts (1) that Jarrard breached her agreement with CIENA to keep confidential CIENA's trade secrets and not to compete with CIENA for 12 months after leaving CIENA's employ, and (2) that Jarrard misappropriated and will continue to misappropriate CIENA's trade secrets in performing her new job with Sycamore Networks. CIENA notified Jarrard of this action on the date that the complaint was filed -Friday, October 29, 1999 -and on Saturday, October 30, provided Jarrard with copies of the suit papers, a motion for a temporary restraining order (TRO), and notice that the TRO motion would be heard in court on Monday, November 1, 1999.

At the commencement of the hearing on November 1, the district court informed the parties, "We are going to handle this as a TRO with notice, which is the equivalent to a preliminary injunction and it will be handled as a preliminary injunction." Neither party presented evidence at the hearing. Rather, the court resolved all the issues based upon the arguments of counsel, the verified complaint, and CIENA's motion papers.

During the course of the hearing, Jarrard (1) challenged the district court's jurisdiction over her, now a California resident, and its venue, (2) complained of a lack of notice, (3) argued that Delaware law, as referenced in the non-competition agreement, did not apply, and (4) argued that the non-competition agreement was unreasonable and therefore unenforceable. Rejecting Jarrard's arguments and balancing the relevant equities, the district court entered a preliminary injunction, enjoining Jarrard from "using, disclosing, or otherwise misappropriating any of CIENA's trade secrets or confidential information," and "[u]ntil further order of court" enjoining her from working for Sycamore Networks, soliciting any of CIENA's existing customers, soliciting or accepting business "from any customer or prospective customer of CIENA who Jarrard solicited during the time that she was employed by CIENA," or having any business contact with any "CIENA customers or potential customers whom she solicited" while working at the company. The court also required Jarrard to return to CIENA all trade secrets she still possessed. Finally, the court instructed CIENA to post a bond of $2.5 million to secure the injunction. During the course of the hearing, the district court explicitly invited Jarrard to file a motion for reconsideration "if [the injunction] needs to be reconsidered."

Jarrard appealed two days later. Her motions to stay, filed both with the district court and with this court, were denied, but we entered an order expediting this appeal. We now address in turn each of Jarrard's arguments.

II

At the outset, Jarrard contends that the district court did not have personal jurisdiction over her and that the District of Maryland is not an appropriate venue for this case. She does not dispute the assertions made by CIENA relating to her contacts with Maryland or the relationship to Maryland of the issues in litigation.

Federal Rule of Civil Procedure 4(k)(1)(A) provides that "[s]ervice of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant . . . who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located." We have previously explained that "[b]ecause Rule 4(k)(1)(A) delimits the scope of effective federal service in terms of the limits on state court jurisdiction," our inquiry into a federal court's jurisdiction pursuant to the Rule looks to the law of the state in which the federal court sits and the limits on the jurisdiction of that state's courts imposed by the Fourteenth Amendment. ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 622-23 (4th Cir. 1997), cert. denied, 523 U.S. 1048 (1998).

The relevant provisions of Maryland's long-arm statute confer personal jurisdiction over a party who

(1) Transacts any business or performs any character of work or service in the State; . . . [or]

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the State.

Md. Code Ann. Cts. & Jud. Proc. § 6-103(b)(1) & (4). The Maryland Court of Appeals has noted that the statute "represents an effort by the Legislature to expand the boundaries of permissible in personam jurisdiction to the limits permitted by the Federal Constitution." Geelhoed v. Jensen, 352 A.2d 818, 821 (Md. 1976). As a consequence, "the statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one." Stover v. O'Connell Assoc., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996). As we explained in ESAB Group, "because Rule 4(k)(1)(A) delimits the scope of effective federal service in terms of the limits on state court jurisdiction, our inquiry into a federal court's jurisdiction pursuant to Rule 4(k)(1)(A) incorporates the Fourteenth Amendment due process standard, even though that Amendment applies of its own force only to states."...