Hoechst Diafoil Co. v. Nan Ya Plastics Corp.

• Decision Date: 06 April 1999
• Docket Number: No. 98-1030,98-1030
• Citation: 174 F.3d 411
• Parties: HOECHST DIAFOIL COMPANY, Plaintiff-Appellee, v. NAN YA PLASTICS CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 411

174 F.3d 411

50 U.S.P.Q.2d 1332

HOECHST DIAFOIL COMPANY, Plaintiff-Appellee, v. NAN YA PLASTICS CORPORATION, Defendant-Appellant.

No. 98-1030.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 28, 1999.

Decided April 6, 1999.

ARGUED: Thornwell Forrest Sowell, III, Sowell, Todd, Laffitte, Beard & Watson, L.L.C., Columbia, South Carolina, for Appellant. Jesse C. Belcher, Haynsworth, Marion, McKay & Guerard, L.L.P., Greenville, South Carolina, for Appellee. ON BRIEF: J. Calhoun Watson, William R. Harbison, Sowell, Todd, Laffitte, Beard & Watson, L.L.C., Columbia, South Carolina; Michael A. Pollard, Baker & McKenzie, Chicago, Illinois, for Appellant. Keith Wixler, Haynsworth, Marion, McKay & Guerrard, L.L.P., Greenville, South Carolina; Herbert F. Schwartz, Kenneth B. Herman, Glenn A. Ousterhout, Lianna C. Calmar, Fish & Neave, New York, New York, for Appellee.

Before WILKINS, MOTZ, and KING, Circuit Judges.

Remanded by published opinion. Judge KING wrote the opinion, in which Judge WILKINS and Judge DIANA GRIBBON MOTZ joined.

OPINION

KING, Circuit Judge:

Hoechst Diafoil Company sued Nan Ya Plastics Corporation in the District of South Carolina, alleging that Nan Ya had misappropriated certain of Hoechst's trade secrets. When Nan Ya found a description of these trade secrets in an unsealed court file, it moved for summary judgment, arguing that public disclosure had destroyed the information's trade secret status. Nan Ya now appeals the district court's orders denying Nan Ya's summary judgment motion and granting Hoechst an injunction that, inter alia, required Nan Ya to return to Hoechst all copies of the relevant document. Although we refuse to exercise pendent jurisdiction over Nan Ya's summary judgment appeal, and although we reject certain of Nan Ya's challenges to the injunction order, we must remand for further proceedings because the district court (1) failed to fix an appropriate bond as required by Federal Rule of Civil Procedure 65(a) and (2) failed to properly explain its injunction order pursuant to Rule 52(a).

I.

Hoechst manufactures polyester film. Part of its manufacturing process requires it to apply certain coatings to these films. Over the years, Hoechst has developed a technique known as "in-line coating," which it regards as a valuable innovation in this process.

Hoechst has sought to preserve this "In-Line Technology" as a trade secret. For example, it has required its employees to execute confidentiality agreements prohibiting disclosure of the technology. One such employee was John Rogers, who worked at Hoechst's plant in Greer, South Carolina from 1978 to 1988. Rogers has conceded that he gained his expertise in the polyester film business from his years at Hoechst.

After Rogers left Hoechst in 1988, he established his own consulting firm to advise other polyester film manufacturers. In 1992, he entered into consulting relationships with two such manufacturers: Cheil, a Korean company, and Nan Ya, a Taiwanese corporation. He advised both companies regarding business and technical matters. At the time, though, only Cheil was producing in-line coated films; Nan Ya was not.

In 1994, Rogers allegedly entered into an agreement with Nan Ya under which he agreed to provide, among other things, consulting with respect to in-line coating. For its part, Nan Ya purportedly agreed to pay Rogers $250,000 for his services.

In 1992, Hoechst sued Rogers in South Carolina state court for breaching his confidentiality agreement by selling the In-Line Technology to Cheil. Hoechst eventually won its suit against Rogers, securing an injunction preventing Rogers from further disseminating the In-Line Technology. In 1994, Hoechst sued Cheil in the District of South Carolina, at Greenville, alleging that Cheil itself had misappropriated Hoechst's trade secrets by acquiring them from Rogers. That suit settled in 1996, with Cheil agreeing to change its film-coating process.

To prevent disclosure of the In-Line Technology during the course of the Cheil litigation, Hoechst secured a protective order that required all documents relating to the In-Line Technology to be filed under seal. At the end of that case, the district court ordered the attorneys for Cheil and Hoechst to remove from its files all documents that had been filed under seal. The remainder of the record then was to become public, according to the district court's order. The parties did remove from the files all documents that had been filed under seal, and the court then opened the remaining files to the public.

However, one document containing a twenty-eight page description of the In-Line Technology (the Cheil Document), had been inadvertently filed, unsealed, as an attachment to one of Cheil's motions. Each page of the Cheil Document bore the following heading: "CONFIDENTIAL INFORMATION, HOECHST DIAFOIL V. SAMSUNG & CHEIL." But because this document had not been filed under seal, it was not identified and removed by either party when the case file was reviewed. As a result, it inadvertently remained in the court's public files.

Based on information that had surfaced in the Rogers and Cheil suits, Hoechst sued Nan Ya on September 16, 1996. The complaint alleged that, by hiring Rogers as a consultant in September of 1994, Nan Ya had misappropriated the In-Line Technology in violation of the South Carolina Uniform Trade Secrets Act, S.C.Code Ann. §§ 39-8-1 to 11 (Law.Coop.1996) (repealed 1997). In October 1996, one of Nan Ya's attorneys went to the district court in Greenville to review the court's file from the Cheil case. The attorney found the Cheil Document and sent a copy of it to Nan Ya. Another attorney from the same firm returned to the clerk's office in April 1997 and again retrieved a copy of the Cheil Document.

Having found this information in a public file, Nan Ya moved in August 1997 for summary judgment, arguing that public disclosure had destroyed the In-Line Technology's trade-secret status. When it received Nan Ya's motion, Hoechst immediately requested an emergency telephonic hearing with the district court. During this hearing on August 27, 1997, in which Nan Ya's attorneys participated, Hoechst requested an injunction directing Nan Ya to name all parties to whom it had distributed the Cheil Document.

The district court granted Hoechst's motion, awarding it an "injunction," and directed the parties to submit proposed orders. They did, and over Nan Ya's objection, Hoechst's draft order not only required Nan Ya to name those who had received the Cheil document, but further directed that Nan Ya return to Hoechst all copies of the Cheil Document. The district court adopted Hoechst's proposed order which it entered on August 29, 1997. Nan Ya then moved the district court to reconsider its injunction, arguing that the remedy granted was overbroad because it exceeded the remedy Hoechst had requested during the hearing. The district court denied this motion.

The district court then heard the parties' arguments on Nan Ya's motion for summary judgment, and the district court ruled from the bench in favor of Hoechst. The district court refused to certify for immediate appeal, pursuant to 28 U.S.C. § 1292(b), its denial of Nan Ya's summary judgment motion.

Nan Ya now appeals the district court's injunction order and the denial of its summary judgment motion.

II.

As a preliminary matter, we must determine whether, and to what extent, we have jurisdiction over Nan Ya's appeal. Nan Ya appeals two of the district court's orders. First, it appeals the order granting Hoechst's motion for an injunction. We have jurisdiction over Nan Ya's appeal of this order under 28 U.S.C. § 1292(a)(1): "[T]he courts of appeals shall have jurisdiction of appeals from ... [i]nterlocutory orders of the district courts ... granting ... injunctions...."

Second, Nan Ya seeks to appeal the district court's denial of its summary judgment motion. Nan Ya correctly acknowledges that this order is neither a final order (and thus appealable under 28 U.S.C. § 1291) nor a "collateral order" (and thus appealable under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949)). The district court also refused to certify this interlocutory order for immediate appeal under 28 U.S.C. § 1292(b). Nan Ya instead asks that we review the order denying summary judgment under the doctrine of pendent jurisdiction. We have held that when we have jurisdiction over one issue in an appeal, we may also, if we choose, review separate, otherwise non-appealable issues in that case "which are reasonably related [to the appealable order] when that review will advance the litigation or avoid further appeals." O'Bar v. Pinion, 953 F.2d 74, 80 (4th Cir.1991). The decision to exercise pendent jurisdiction over such issues is purely discretionary. DiMeglio v. Haines, 45 F.3d 790, 808 (4th Cir.1995).

More recently, our ability to exercise pendent jurisdiction has come into question. See Garraghty v. Commonwealth, 52 F.3d 1274, 1279 n.5 (4th Cir.1995) (noting that Swint v. Chambers County Commission, 514 U.S. 35, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995), makes it "unclear whether an appellate court has any 'pendent appellate jurisdiction' over claims like [those presented in Garraghty ]."). We need not resolve this question today; given our disposition of the appealed injunction order, additional review of the summary judgment order would neither "advance the litigation" nor "avoid further appeals." O'Bar, 953 F.2d at 80. Accordingly, even if we may exercise pendent jurisdiction over Nan Ya's appeal of the summary judgment order, we decline to do so.

III.

Nan Ya argues that the district court erred in granting the injunction because Hoechst has no chance of succeeding on its underlying misappropriation claim. More specifically, Nan Ya contends that Hoechst's misappropriation claim must fail because: (1) the In-Line...