Hulsenbusch v. Davidson Rubber Company

• Citation: 344 F.2d 730
• Decision Date: 23 June 1965
• Docket Number: No. 17785.,17785.
• Parties: Dieter HULSENBUSCH, Appellant, v. The DAVIDSON RUBBER COMPANY, Inc., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

344 F.2d 730 (1965)

Dieter HULSENBUSCH, Appellant, v. The DAVIDSON RUBBER COMPANY, Inc., Appellee.

No. 17785.

United States Court of Appeals Eighth Circuit.

April 21, 1965.

Rehearing Denied June 23, 1965.

John L. Vanker, Jr., of Butzel, Eaman, Long, Gust & Kennedy, Detroit, Mich., and R. Richard Bittner, of Betty, Neuman, Heninger & McMahon, Davenport, Iowa, for appellant. Richard M. McMahon, Davenport, Iowa, and John L. Vanker, Jr., Detroit, Mich., on the brief.

Robert B. Russell, of Russell, Chittick & Pfund, Boston, Mass., for appellee. Russell, Chittick & Pfund, Boston, Mass., and Lane & Waterman, Davenport, Iowa, on the brief.

Before VAN OOSTERHOUT, BLACKMUN and MEHAFFY, Circuit Judges.

MEHAFFY, Circuit Judge.

Defendant, Dieter Hulsenbusch, a citizen of West Germany, has appealed a decision of the District Court enjoining him from further breach of the employment contract he executed with his former employer and plaintiff below, The Davidson Rubber Company, Inc. of Dover, New Hampshire.

The Davidson Company is presently engaged in the manufacture primarily of interior automotive parts such as padded dashboards (crash pads), arm rests and sunvisors. Hulsenbusch's business relationship with Davidson had its beginning in 1958 while he was employed as a technical consultant with the Happich Company of West Germany which also manufactures interior automotive parts for several German-made automobiles.

During a visit in that year to several crash pad producers in the United States, Hulsenbusch and his employer, Dr. Otto Happich, made contact with officials of Davidson in order to learn their process for manufacture of a certain type of "foamed-in-place" arm rest with which they were impressed and wished to duplicate for their own customers.

As a result of this meeting, Davidson divulged its techniques for the production of arm rests to Hulsenbusch. Thereafter, Davidson issued a license for consideration to the Happich Company covering the following subject matter:

"Molded articles employing molded urethane foam alone or such foam and vinyl combinations, including developments in the articles themselves, apparatus for producing them, formulations, materials handling techniques, and the like. * * *"

During the interim Hulsenbusch had agreed to keep this information confidential. He ultimately signed an employment agreement with Happich in which he agreed for the duration of his employment and two years after separation (1) not to disclose information entrusted to him regarding formulas, production procedures, and special machinery used in the mold making and plastics processing of his employer and (2) not to work for himself or a competitor of Happich (other than a firm under Davidson's control) which produces automotive items of the same type as covered by the Davidson-Happich license.¹

On one occasion during this period of his employment with Happich, Hulsenbusch informed a representative of Davidson by letter that he had declined permission to a competitor of Davidson to see or discuss Happich's work with respect to the production of arm rests or crash pads. Hulsenbusch indicated that his basis for refusal was belief that their license with Davidson covered patents and confidential "know-how" of Davidson on which these two areas of Happich's production depended.

Subsequently, Davidson decided to enter the crash pad market in the United States. After learning of Hulsenbusch's intention to leave Happich to take a job with a similar manufacturer in Italy, Davidson's president, E. Paul Casey, hired Hulsenbusch in November of 1962 as a short-term technical consultant and project leader of their planned expansion into the crash pad field. Defendant was to be paid $1,000.00 per month, a bonus, and certain fringe benefits while residing in the United States. Casey confirmed this oral employment agreement by written instrument dated November 5, 1962. In this communique, which Hulsenbusch later signed in New Hampshire before assuming his duties, Casey specified:

"3. It is my understanding that you currently have a contractual obligation to Happich which extends for approximately 2 years in which you agree not to work for competitors of his in Europe and that your proposed employment contract with Gallino will contain a similar provision for Italy. We expect you to observe the same kind of restrictions for the U. S.

"4. It is also agreed, in line with the customary ethical practices of consultants, that any new developments or inventions resulting from your work with us will become the property of Davidson Rubber Company." (Emphasis supplied.)

Thereafter, Hulsenbusch, working in close association with Davidson's research director, chief engineer and their technical staffs, helped in the successful six-month development of a marketable crash pad.

In one year of production, Davidson, by 1964, had acquired crash pad business with General Motors, Chrysler and Ford amounting to over $5,000,000.00 worth of sales. Included in this figure were substantial orders awarded Davidson after its leading competitor, the Sheller Manufacturing Company of Keokuk, Iowa, was unable to fulfill some of its contractual commitments to the automotive industry.

When Davidson became established as a leading crash pad producer, Hulsenbusch's job was complete. He left Davidson's employ on July 31, 1963 and took a consultancy position with a French company which at that time manufactured certain interior automotive parts other than crash pads.

Hoping to recapture market advantage, officials of Sheller contacted Hulsenbusch, whose expertise they had heard put Davidson in the crash pad business. On March 31, 1964, Hulsenbusch was offered and accepted employment with Sheller as a consultant on crash pads at a salary of $34,000.00 for six months' work.

When President Casey of Davidson finally learned on May 14, 1964 of Hulsenbusch's employment with Sheller, he immediately telephoned the president of Sheller, as well as Hulsenbusch. He informed both that Hulsenbusch's employment contract with Davidson precluded his consulting for a competitor such as Sheller in the making of crash pads for two years following separation with Davidson. Sheller and Hulsenbusch disagreed. Whereupon Davidson filed the instant bill in equity in federal district court based on diversity jurisdiction seeking immediate injunctive relief which was awarded below.

After a trial on the merits, the District Court made permanant its temporary injunction restraining the defendant from continuing in the employ of, or disclosing any technical information to Sheller, its representatives, or any other company in the United States in direct competition with plaintiff in the automotive industry until August 1, 1965. A motion for an order staying the injunction pending appeal was denied.

Defendant first attacks the jurisdiction of the District Court on the ground that the amount in controversy does not exceed $10,000.00, exclusive of interest and costs, as required under 28 U.S.C.A. § 1332(a). Defendant maintains that plaintiff's president admitted that as of the time of trial plaintiff had suffered no actual monetary damage, and although crash pad contracts for 1965 had already been awarded, plaintiff failed to show that it was incapable of carrying on its business as in the past or that freedom from defendant's employment with Sheller is worth $10,000.00. On the other hand, plaintiff's president Casey testified that at least $2,000,000.00 worth of their gross business had been acquired as a result of trade secrets developed during defendant's tenure. He was of the opinion that if defendant divulged this proprietary information, to which he had access, to Sheller, plaintiff stood to lose anticipated profits ranging from $600,000.00 to $800,000.00.

Ordinarily, the presence of jurisdictional amount rests upon the plaintiff's good faith allegation in its complaint or bill in equity. But where appropriately controverted by the defendant, the plaintiff has the burden to support its averment by competent and preponderant proof. KVOS, Inc. v. Associated Press, 299 U.S. 269, 57 S.Ct. 197, 81 L.Ed. 183 (1936); Ringsby Truck Lines, Inc. v. Beardsley, 331 F.2d 14 (8th Cir. 1964); Industrial Electronics Corp. v. Cline, 330 F.2d 480 (3rd Cir. 1964).

In an equitable action for an injunction against irreparable injury, the amount in controversy is determined by the value of the property right sought to be protected against the alleged interference. Federated Mutual Implement & Hardware Ins. Co. v. Steinheider, 268 F.2d 734 (8th Cir. 1959); Beneficial Industrial Loan Corp. v. Kline, 132 F.2d 520 (8th Cir. 1942); Burndy Corp. v. Cahill, 196 F.Supp. 619 (D.Minn.1961). Translated into the facts of the instant case, that right is definable as plaintiff's alleged entitlement under the employment contract to be free from the defendant's disclosure of its specified proprietary trade secrets to a competitor in the United States for two years following severance of the employment relationship. While such a right is not susceptible of exact evaluation, the weight of authority in trademark-tradename and unfair competition suits generally permits evidence of potential, as well as past, damages in arriving at the dollar value of the subject matter of the lawsuit. Hanson v. Triangle Publications, 163 F.2d 74 (8th Cir. 1947); Ury v. Mazer Cigar Mfg. Co., 253 F. 551 (8th Cir. 1918); Moline Plow Co. v. Omaha Iron Store Co., 235 F. 519 (8th Cir. 1916); Beneficial Industrial Loan Corp. v. Kline, supra 132 F.2d at 525; Burndy Corp. v. Cahill, supra; 54 Am.Jur., United States Courts, §§ 123-124 (1945). See also 1 Moore's Federal Practice, ¶ 0.96 2 (2nd ed. 1964) approving consideration of prospective damages in computing jurisdictional amount in an action for an injunction, generally. We see no reason to apply a more stringent criterion in determining the jurisdictional amount in an unfair competition...