Monsanto Co. v. Manning

• Decision Date: 08 March 1988
• Docket Number: No. 87-1790,87-1790
• Citation: 841 F.2d 1126,1988 WL 19169
• Parties: Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. MONSANTO COMPANY, Plaintiff-Appellant, v. Warren J. MANNING, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1126

841 F.2d 1126

Unpublished Disposition

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

MONSANTO COMPANY, Plaintiff-Appellant, v. Warren J. MANNING, Defendant-Appellee.

No. 87-1790.

United States Court of Appeals, Sixth Circuit.

March 8, 1988.

Before RALPH B. GUY, Jr., DAVID A. NELSON, and BOGGS, Circuit Judges.

PER CURIAM.

Monsanto Company appeals the district court's order denying its request to extend until trial a preliminary injunction, which prohibited Warren Manning, a former employee, from promoting, marketing or offering for sale "greenhouse films" to any customer or distributor that he sold to during his last three years of employment with Monsanto. We affirm.

I

Monsanto Company develops and manufactures a variety of chemical and plastic products, including thin sheet polyethylene film through its Film Business Group. These film products are used primarily in the agricultural field to cover greenhouses and in the disposable diaper industry.

In early 1987, Warren Manning, Monsanto's Midwest sales representative for the Film Business Group, left and took a comparable position with Ethyl Corporation. Ethyl is Monsanto's chief competitor in the sale of plastic film products. During his employment with Monsanto, Manning sold horticultural films (also known as "greenhouse films").

Fearing Ethyl would gain an unfair advantage from Manning's assistance, Monsanto sued Manning in district court, alleging trade secret misappropriation, breach of contract and breach of fiduciary duty. In the misappropriation and fiduciary duty counts, Monsanto alleged that Manning was using Monsanto's trade secrets and confidential information for his and Ethyl's benefit.

On the breach of contract count, Monsanto alleged that Manning breached his employment contract, which Manning signed at the beginning of his relationship with Monsanto in 1972. The employment contract prohibited Manning, during his employment with Monsanto and thereafter, from using or disclosing confidential information, except as such disclosure or use may be required in connection with his employment or may be consented to in writing by Monsanto. ¹ This provision was to remain in effect "after termination of [Manning's] employment, whether such termination [was] in accordance with this Agreement, or for any reason whatsoever, with or without cause or voluntary or involuntary."

The employment contract contained a non-competition clause, which read as follows:

Employee shall not, without prior written consent of Monsanto, for his own account or as an officer, member, employe, consultant, representative or advisor of another, during his employment by Monsanto and for a period of three (3) years thereafter, for any reason whatsoever, engage in or contribute his knowledge to engineering, development, manufacture, research (including, without limitation, market as well as technical research), or sales relating to any compound, product, equipment, process or material that is or was involved in any work performed at any time by Employe for Monsanto or any subsidiary. However, the foregoing provision shall not prohibit Employe from engaging in any work at any time after leaving the employ of Monsanto upon Employe furnishing to Monsanto proof that Confidential Information of Monsanto or any subsidiary acquired or learned by Employe will not be involved in such work.

On the basis of the contract, Monsanto sought injunctive relief prohibiting Manning from using or disclosing Monsanto's trade secrets and confidential information, and from "working for or with Ethyl Corporation, or any other organization or any affiliate thereof, in the research, development, manufacture, marketing, sale or use of plastic film products for a three-year period." Monsanto also sought an order compelling Manning to turn over any trade secrets, confidential information and tangible materials in his possession which related to Monsanto's business or his employment with the company.

Pending a hearing, the district court granted a temporary restraining order prohibiting Manning from using or disclosing to any third party any of Monsanto's trade secrets or confidential information, or any "documents, materials or tangible things of any type in his possession" which related to Monsanto's business or Manning's employment with Monsanto. This included "all memoranda, diaries, notes, records, sketches, plans, specifications or other documents or things relating, directly or indirectly," thereto.

A hearing was held several days later, at which time Manning and two other witnesses testified: Dixon Rimer, National Sales Manager for the Film Business Group, and Donald Kaldenberg, a retired Monsanto executive who signed Manning's employment agreement in 1972. On February 26, 1987, the district court granted a preliminary injunction which "continued in force and effect" the terms and provisions of its previous restraining order. In addition, the court enjoined Manning for 180 days from "engaging in any way in the promotion, marketing, offering for sale or sale of horticultural films (also known as greenhouse films) to any and all customers and distributors in the United States and Canada that he ha[d] sold any of such films to in the past three years on behalf of ... Monsanto." ² Manning was also required to return to Monsanto any written or recorded material containing confidential or trade secret information.

Although the court's order with respect to non-competition was to expire on August 25, 1987, Monsanto could not secure a trial on the merits until December 1987. Accordingly, Monsanto moved for extension of the preliminary injunction until trial. In support, Monsanto provided new deposition testimony of Manning and Thomas Gipson, Manning's peer at Monsanto.

The district court denied the motion from the bench. After remarking that Manning was merely a "salesman," the court concluded that 180 days was the limit under the public policy of Michigan and the United States "to enjoin someone from lawfully making a living," and that period was sufficient time for Monsanto to do whatever it needed "to make certain somebody wasn't going to come and take [its] customers."

Thereafter, Monsanto filed a notice of appeal, and sought extension of the injunction and an expedited appeal from this court. On August 25, 1987, a panel of this court granted Monsanto's motion, extending the injunction until such time as a panel of this court decided this issue on the merits.

Since oral argument, we have been informed that the scheduled trial date, originally set for December 1987, has been postponed indefinitely.

II

At the outset, we note the limited nature of this appeal. The sole issue is whether the district court erred in refusing to extend until trial the preliminary injunction, prohibiting Manning from approaching those customers and distributors to whom he had sold greenhouse film in the last three years of his employment with Monsanto. We have no occasion to review the court's order restricting Manning from using or disclosing trade secrets or confidential information, or from taking advantage of tangible materials in his possession which relate to Monsanto's business or Manning's employment with the company. By its terms, the court's February 26, 1987, order with respect to these issues applies until trial. Accordingly, we only discuss Monsanto's breach of contract claim.

III

In reviewing a district court's order denying extension of a preliminary injunction, our task is limited to determining if the lower court abused its discretion. See Gaston Drugs, Inc. v. Metropolitan Life Insurance Co., 823 F.2d 984, 988 (6th Cir.1987). "A district court abuses its discretion when it relies on clearly erroneous findings of fact, or when it improperly applies the law or uses an erroneous legal standard." Christian Schmidt Brewing Co. v. G. Heileman Brewing Co., 753 F.2d 1354, 1356 (6th Cir.) (citations omitted), cert. denied, 469 U.S. 1200 (1985).

The district court must consider four factors when a claim for injunctive relief is presented: 1) the likelihood of success on the merits; 2) the irreparable harm which could result without the requested relief; 3) the impact on the public interest; and 4) the possibility of substantial harm to others. Ibid. The burden is on the moving party to show that these factors weigh in favor of granting injunctive relief. See Gaston Drugs, 823 F.2d at 988.

We must first determine whether there is a strong or substantial likelihood that Monsanto will prevail at trial in enforcing the covenant not to compete in Manning's employment contract. Resolution of this question hinges on the appropriate state law governing the agreement.

Since this diversity action was brought in the United States District Court for the Eastern District of Michigan, Michigan conflict of law rules apply. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487 (1941); Tele-Save Merchandising Co. v. Consumers Distributing Co., 814 F.2d 1120, 1122 (6th Cir.1987). Under Michigan law, the validity and construction of a contract are to be determined by the law of the place where the contract was entered into. Wells v. 10-X Manufacturing Co., 609 F.2d 248, 253 (6th Cir.1979) (relying on Rubin v. Gallagher, 294 Mich. 124, 128, 292 N.W. 584, 586 (1940)). However, if the contract is to be performed in a different state, then the law of the latter state governs. M & A Associates Inc. v. VCX, Inc., 657 F.Supp. 454, 460 (E.D.Mich.1987) (relying on George Realty Co. v. Gulf Refining Co., 275 Mich. 442, 266 N.W. 411 (1936)). "In general, the state of performance refers to the state in which the party who allegedly breached the contract was required to perform." Ibid. (citations omitted).

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