Four Seasons Hotels and Resorts v. Consorcio Barr

• Decision Date: 05 February 2003
• Docket Number: No. 01-16588.,01-16588.
• Citation: 320 F.3d 1205
• Parties: FOUR SEASONS HOTELS AND RESORTS, B.V., Four Seasons Hotels (Barbados), Four Seasons Hotels Limited, Plaintiffs-Appellees, v. CONSORCIO BARR, S.A., Carlos L. Barrera, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

320 F.3d 1205

FOUR SEASONS HOTELS AND RESORTS, B.V., Four Seasons Hotels (Barbados), Four Seasons Hotels Limited, Plaintiffs-Appellees, v. CONSORCIO BARR, S.A., Carlos L. Barrera, Defendants-Appellants.

No. 01-16588.

United States Court of Appeals, Eleventh Circuit.

February 5, 2003.

COPYRIGHT MATERIAL OMITTED

Eduardo Palmer, Edwin G. Torres, Robert W. Pittman, Steel, Hector & Davis, LLP, Miami, FL, for Defendants-Appellants.

John C. Carey, Kilpatrick Stockton, Miami, FL, for Plaintiffs-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before EDMONDSON, Chief Judge, ANDERSON, Circuit Judge, and POGUE^*, Judge.

POGUE, Judge:

Appellants Consorcio Barr, S.A., and Carlos L. Barrera (collectively, "Appellants" or "Consorcio") appeal the district court's entry of a preliminary injunction in favor of Appellees Four Seasons Hotels and Resorts, B.V., Four Seasons Hotels (Barbados) Ltd., and Four Seasons Hotels Limited (collectively, "Appellees" or "Four Seasons") restraining Appellants' access to a computer network and requiring Appellants to return certain items of computer equipment to the custody of Appellees. This Court exercises jurisdiction over this appeal under 28 U.S.C. § 1292(a)(1).¹ For the reasons expressed below, we reverse and vacate the injunction.

I.

In April 1997, Four Seasons and Consorcio entered into a licensing agreement for the operation of a Four Seasons hotel in Caracas, Venezuela (the "Four Seasons Caracas"). The agreement provided that Consorcio would build a luxury hotel in Caracas, and Four Seasons would license its trademark to the hotel and provide "advisory, operations, and management services." Compl., Rec. Ex. 1 at 5 ¶ 13.

On November 6, 2001, Four Seasons filed a complaint in the District Court for the Southern District of Florida alleging that Consorcio was gaining unauthorized access to the Four Seasons computer network, and thus to e-mail and other proprietary and confidential materials located on the network, in violation of the Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030(a)(4) and 1030(a)(2)(d), the Wire and Electronic Communications Interception Act, 18 U.S.C. §§ 2511(1)(a) and 2511(1)(d), and the Florida Uniform Trade Secrets Act, Fla. Stat. § 688. On the same date, Four Seasons filed an emergency motion for an ex parte temporary restraining order ("TRO"), seeking to prevent Consorcio from accessing its computer network.

On November 12, 2001, Appellants were served with the complaint, motion, and written notice of a preliminary injunction hearing to be held on November 14, 2001 in Miami, Florida. Appellants' counsel at the November 14 hearing stated that he had learned of the action late in the day on November 13 and requested additional time to prepare. The district court proceeded with the hearing and Four Seasons presented witness testimony to support its allegations. Appellants' lawyer cross-examined Four Seasons' witness but did not present any witnesses or affidavits.

The facts surrounding the alleged unauthorized computer use are in dispute. Dr. Jozel Venegas, a Four Seasons employee who investigated the computer problems at the Four Seasons Caracas, testified at the November 14 hearing that by using a protocol called NetBEUI, he was able to ascertain that Consorcio computers were accessing the Four Seasons network and that packets of data, including files from a Four Seasons guest history database, were being sent between Consorcio's computers and the Four Seasons network. Dr. Venegas named specific Consorcio employees whose computers were accessing the network, and stated that at one point, the unauthorized access took place almost daily and was continuing at the time of the preliminary injunction hearing. Dr. Venegas admitted on cross examination that he had no direct evidence that trademark or proprietary information had been accessed; however, he indicated that such information would be freely available to anyone who gained access to the network. Four Seasons also alleged that Eduardo Bencomo, a former Four Seasons employee later hired by Consorcio, appropriated computer equipment owned by Four Seasons and a CD-ROM containing proprietary and confidential information, and that Consorcio had refused to grant Four Seasons employees access to the Four Seasons server and other equipment located at the Caracas hotel.

Following the hearing, the district court issued an injunction restraining Appellants from (1) gaining access to Appellees' computer network; (2) obtaining, disclosing, or using any information or data accessible through Four Seasons' computer network and e-mail system; and (3) denying Four Seasons access to any computer connected to the Four Seasons network systems. The injunction further ordered Appellants to return to Four Seasons' custody and control certain items of computer equipment, including a three-com switch, a server, and a computer used by Eduardo Bencomo, and any information obtained through access to Four Seasons' computer systems.

On November 19, 2001, Consorcio filed an emergency motion to dissolve, stay, or modify the injunction. Attached to the motion were affidavits presenting a serious factual dispute on issues essential to Four Seasons' claim. Specifically, the affidavit of Consorcio's vice president, Lautaro Barrera, indicated that the computer activity data submitted by Four Seasons in support of its allegations of computer hacking demonstrated only that Four Seasons used the shared building computer network. The affidavit indicated that packets of information sent over the network arrive at each computer connected to the network, and computers that are not the intended recipients of a particular information packet simply reject or deny the packet. Therefore, the computer activity reports showing transmission of information packets merely illustrate the network's normal functioning. The affidavits also asserted that the computer equipment ordered returned to Four Seasons was owned by Consorcio and formed part of the building computer network used by Consorcio, Four Seasons, and other building tenants.

The district court scheduled an evidentiary hearing to consider Consorcio's motion on November 28, 2001. The November 28 hearing, however, was not held; instead, the court held a telephone hearing on November 21, 2001. During the telephone hearing, Consorcio asserted that it had not appropriated any proprietary information belonging to Four Seasons or gained unauthorized access to the Four Seasons network, and that Consorcio owned the computer equipment at issue. Consorcio disputed that the evidence offered by Four Seasons indicated computer hacking, arguing that it indicated only that Consorcio, Four Seasons, and other building tenants shared the building computer network. Consorcio also requested that the district court hold the November 28 evidentiary hearing so that Consorcio could present evidence, including witness testimony, to disprove the allegations of hacking and unauthorized access.

At the conclusion of the November 21 telephone hearing, the district court, without issuing any further findings on the disputed issues of fact, denied Consorcio's motion to dissolve, stay, or modify the preliminary injunction. No evidentiary hearing was held. This appeal ensued.

II.

This Court reviews a district court's order granting or denying a preliminary injunction for abuse of discretion. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir.1998) (citing Baker v. Buckeye Cellulose Corp., 856 F.2d 167, 169 (11th Cir.1988)).²

A district court may issue a preliminary injunction where the moving party demonstrates (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir.2000); McDonald's Corp., 147 F.3d at 1306; All Care Nursing Serv., Inc. v. Bethesda Mem'l Hosp., Inc., 887 F.2d 1535, 1537 (11th Cir.1989). "[A] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the `burden of persuasion'" as to each of the four prerequisites. McDonald's Corp., 147 F.3d at 1306 (internal citations and quotations omitted); see also Texas v. Seatrain Int'l, S.A., 518 F.2d 175, 179 (5th Cir.1975) (grant of preliminary injunction "is the exception rather than the rule," and movant must clearly carry the burden of persuasion).

In order for a preliminary injunction to issue, the nonmoving party must have notice and an opportunity to present its opposition to the injunction.³ Fed.R.Civ.P. 65(a)(1) ("No preliminary injunction shall be issued without notice to the adverse party."); Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 434 n. 7, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974). While Rule 65 does not define "notice," and the sufficiency of notice "is a matter left within the discretion of the trial court," United States v. Alabama, 791 F.2d at 1458, the Supreme Court has stated that the notice requirement "implies a hearing in which the defendant is given a fair opportunity to oppose the application and to prepare for such opposition." Granny Goose Foods, Inc. v. Teamsters, 415 U.S. at 434 n. 7, 94 S.Ct. 1113 (internal citations omitted); see also McDonald's Corp., 147 F.3d at 1311; All Care Nursing, 887 F.2d at 1538. Furthermore, "[a]lthough the timing requirements are applied flexibly in practice, the underlying principle of giving the party opposing the application notice and an adequate opportunity to respond is carefully honored by the courts." 11A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2949 at 215.

This principle is reflected in case law. In All Care...