Gamlen Chemical Co. v. Gamlen

• Decision Date: 29 July 1948
• Docket Number: Civ. A. No. 7232.
• Citation: 79 F. Supp. 622
• Parties: GAMLEN CHEMICAL CO. v. GAMLEN et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

79 F. Supp. 622

GAMLEN CHEMICAL CO. v. GAMLEN et al.

Civ. A. No. 7232.

United States District Court W. D. Pennsylvania.

July 29, 1948.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Walter J. Blenko (of Stebbins, Blenko & Webb), of Pittsburgh, Pa., for plaintiff.

Edgar W. McCallister (of Green, McCallister & Miller), and William A. Blair (of Griggs, Moreland, Blair & Douglass), both of Pittsburgh, Pa., for defendant.

GOURLEY, District Judge.

This proceeding comes before the Court on plaintiff's motion for a preliminary injunction. Jurisdiction of the Court is invoked by virtue of Title 28 U.S.C.A. § 41, Subd. (11), Judicial Code, § 24; 28 U.S. C.A. § 112, Judicial Code § 51. Under the allegations of the complaint, jurisdiction also exists by virtue of the Judicial Code, 28 U.S.C.A. § 41, Subd. (7).

It is the contention of the plaintiff that if a preliminary injunction is not granted against the defendant, the plaintiff will suffer an irreparable loss and damage from interference with rights previously enjoyed. The plaintiff further contends that a preliminary injunction should be issued in which the defendant, his agents, servants, employees, and all others acting by or under his authority are restrained until final disposition of the issues which exist:

(a) from using the name "C. Gamlen Company", or any other name or style confusingly similar to plaintiff's corporate name, in connection with the manufacture and sale of cleaning compounds, solvents, rust preventatives, protective coatings and detergents, or any of them;

(b) from selling or in any way disposing of and from advertising or offering for sale cleaning compounds, solvents, rust preventatives, protective coatings or detergents, or any of them, labeled or having printed thereon or connected therewith the word "Gamlen," either alone or in combination with other words or characters;

(c) from using in any manner any of the secret code books or formula books of the plaintiff, or any copies thereof, or any of the subject matter contained therein;

(d) from using in any way any of the books and records of the plaintiff or any other data of the plaintiff pertaining to sales, salesmen, distribution, prices, discounts and manufacturing or other information pertinent to the products of the plaintiff or its operations that were taken from the plaintiff, or any copies thereof, or any of the subject matter contained therein;

(e) from in any manner whatsoever representing himself or the business he is conducting as being associated or connected with the plaintiff, or deriving from it, or situated to serve the public by reason of the defendant's knowledge of or former connection with the plaintiff;

(f) from enticing away the plaintiff's employees, agents, representatives or customers or any of them.

The Gamlen Company, hereinafter referred to as "plaintiff", has its principal place of business in San Francisco, California, and is duly authorized to do business in the Commonwealth of Pennsylvania. Plaintiff maintains offices, a warehouse and manufacturing plant within the Western District of Pennsylvania.

The defendant, Harry Cuthbert Gamlen, doing business under the name and style of "C. Gamlen Company," hereinafter referred to as "defendant," is a citizen and resides within the Western District of Pennsylvania.

The defendant is a son of Harry Gamlen, President of the plaintiff corporation, is the owner of one-third of the stock in said corporation, had acted as Vice President, Secretary and Treasurer until on or about April 15, 1948, and still remains a director of the plaintiff corporation. He has received no notice of a directors' meeting since severing his active association with the plaintiff corporation.

During the year 1932, Harry Gamlen became associated with a brother at San Francisco, California, in the business of manufacturing and selling a chemical compound which was devised and perfected for use in steam boilers to eliminate combustion deposit and slag on tube surfaces and refractories. Although differences arose between Harry Gamlen and his brother, Harry Gamlen became the sole proprietor of the business and operated under the name and style of "Gamlen Chemical Company."

A short time after Harry Gamlen became the owner of said business, he invited his son, who is the defendant, to enter into a partnership with him and gave the defendant a one-third interest in said business. At that time the defendant had no education or training as to the particular type of work in which his father was engaged. Sometime thereafter James E. Gamlen, a younger son of Harry Gamlen and brother of the defendant, was made a member of the partnership without any reduction being made in the defendant's interest of one-third, and said business was continued on without interruption and generally known as "the Gamlen partnership."

In 1939 the defendant was placed in charge of the Eastern Division of said company, and, as a partner and officer of the plaintiff, had complete knowledge of and direct contact with all of the plaintiff's representatives and salesmen in said district, knew all the names of plaintiff's customers, and had custody of the records relating thereto. In addition thereto, defendant had general knowledge and information relating to the operation of the plaintiff corporation in the United States and Canada.

A corporation was formed in the State of California on January 1, 1946, at which time the plaintiff corporation succeeded to the business, goodwill, trade secrets, trademarks and other assets of the Gamlen partnership and has continued said business until the present time. Eighteen hundred (1800) shares of capital stock were issued and the defendant is the owner of six hundred (600) shares thereof, corresponding to his one-third interest of the partnership. The other shares (save for qualifying shares) were and are held by Harry Gamlen and his son, James E. Gamlen. In addition to the stock interest which the defendant held in the plaintiff corporation, he received an agreed salary for his services as an officer and director.

As the business grew, other chemical products, which were useful in industrial and maritime fields, were devised or created by one member or the other of said partnership. The compositions and chemicals constituting the chemical products which were sold were regarded as trade secrets and maintained as such by the plaintiff, and were recorded in formula books which were kept confidential and which were known only to the members of the partnership. The various ingredients were specified by code numbers instead of by their scientific or chemical names, and a great number of the employees, other than the members of the partnership, were bound by written secrecy agreements not to divulge any information or knowledge of a secret or confidential nature relative to the business of the Gamlen Chemical Company obtained or acquired by the employees by reason of their business connection with the company. The defendant, as Vice President of the plaintiff corporation, as part of his duties had occasion to have many of these agreements executed.

Sales offices were opened in the principal cities of the United States, and a subsidiary company was organized in Canada.

Differences arose between Harry Gamlen, President of the plaintiff company, and the defendant as to the operation and management of said company and as to the authority of James E. Gamlen, a younger son of the plaintiff. It was impossible to adjust the differences and, as a result thereof, on April 15, 1948 the defendant severed all connection with the plaintiff company, other than retaining his office of director which has not been resigned to this date.

A short time thereafter the defendant commenced business within the Western District of Pennsylvania under the fictitious name and style of "C. Gamlen Company." The nature of the business set forth in said registration was — the manufacture and sale of cleaning compounds, solvents, rust preventatives, protective coatings, detergents, paints and kindred items.

It is self-evident the business of the defendant is similar to and competitive with that which had been conducted by the plaintiff for over sixteen years.

The plaintiff contends:

(a) The defendant has violated his fiduciary obligations to the plaintiff, has acted fraudulently and in violation of his duties to exercise good faith toward the stockholders of the plaintiff, has sought to derive personal profit and advantage to the detriment of the plaintiff corporation and its stockholders by reason of the advantageous position held by him, has acted in a manner contrary to commercial good faith and to the normal and honorable development of industry and business activities, and has competed unfairly with the plaintiff in the following respects:

(1) While still actively serving as an officer of the plaintiff corporation, he planned and at least partially completed the organization of his competing business.

(2) He has unlawfully taken and utilized the trade secrets and confidential records of the plaintiff.

(3) In building up his competing organization, he has hired employees of the plaintiff who were bound by secrecy agreements, and has utilized their services in a manner violative of those agreements.

(4) He has traded upon the reputation and good will of the plaintiff and diverted business from the plaintiff to himself by utilizing the plaintiff's customer lists and his knowledge of the plaintiff's prices and business practices.

(5) He has adopted the fictitious name and style of "C. Gamlen Company" in close imitation of the plaintiff's corporate name and has used the name "C. Gamlen Company" in printed matter in a way calculated to minimize the prefix "C" and to emphasize the words "Gamlen Company" so as to create confusion in the trade.

(6) On May 19th, 1948, he registered the name "C. Gamlen Company" under the...