Omnitech Intern., Inc. v. Clorox Co.
| Decision Date | 26 January 1994 |
| Docket Number | Nos. 92-3381,92-3911,s. 92-3381 |
| Citation | 11 F.3d 1316 |
| Parties | OMNITECH INTERNATIONAL, INC., Plaintiff-Counter Defendant-Appellant, v. The CLOROX COMPANY, Defendant-Counter Claimant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
D. Michael Dendy, Jacob J. Amato, Jr., Amato & Creely, David T. Pick, Greenberg & Dallam, Gretna, LA, Walter C. Thompson, Jr., Mark P. Seyler, Barkley & Thompson, New Orleans, LA, for plaintiff-counter defendant-appellant.
Roy J. Rodney, Jr., Colvin G. Norwood, Jr., Stephen W. Rider, Kim M. Boyle, McGlinchey, Stafford, Lang, New Orleans, LA, for defendant-counter claimant-appellee.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before KING and JOLLY, Circuit Judges, and PARKER *, District Judge.
Plaintiff-Appellant Omnitech International, Inc. ("Omnitech") appeals from the district court's grant of judgment as a matter of law in favor of the Defendant-Appellee The Clorox Company ("Clorox") on Omnitech's misappropriation of trade secrets, breach of contract, detrimental reliance, and breach of fiduciary duty claims. Omnitech also challenges the trial court's exclusion of expert testimony as to one of its theories of damages and seeks review of the jury's actual award of damages. Omnitech additionally requests this court to recalculate the district court's award of attorneys' fees. Clorox cross-appeals from the district court's denial of its motion for judgment as a matter of law on Omnitech's claim under the Louisiana Unfair Trade Practices Act and from the final judgment. Since we agree with Clorox that the district court improperly denied its motion for judgment as a matter of law on the unfair trade practices claim, we reverse that part of the judgment (and the associated attorneys' fees award) and render for Clorox. Finding no error with the trial court's other findings, we affirm the remainder of the judgment.
Omnitech was in the business of manufacturing, packaging, and distributing insecticides in the southern United States during the late 1980s. Until 1988, Omnitech manufactured and packaged a roach spray which it sold through a marketing agent under the label "Bengal Roach Spray." At that time, Omnitech and Bengal mutually agreed to terminate the distribution contract. During the course of the Bengal contract, Omnitech had developed other, related insecticidal products, including an indoor fogger. Until after the Bengal contract expired, however, Omnitech had never manufactured, distributed, or marketed its own roach spray.
Omnitech was able to duplicate successfully the Bengal formula to market as its own "Dr. X" brand after the Bengal contract was terminated. 1 Because the Dr. X product was proving to be moderately successful in the local markets, Omnitech decided to recruit an investor or marketing partner to expand the distribution of Dr. X and retained a business broker, Chaffe & Associates ("Chaffe"), to assist with this endeavor.
Chaffe first contacted Clorox in January of 1989 about a potential venture with Omnitech. At that time, Clorox did not manufacture, sell, or distribute any insecticides, but had been researching and evaluating the insecticide industry since around 1987. According to Clorox, however, it had first become enamored with the insecticide industry in view of the enormous success of the Combat roach bait stations, first introduced by American Cyanamid in the early 1980s. Clorox' evaluation of the opportunities in this industry included investigation of, and negotiations with, Consep Membrane, Inc. ("Consep") and the Seabright Company ("Seabright"). In 1987, Clorox retained Consep to conduct technical "biorational" 2 research on cockroaches, ants, and flies for the purpose of developing a non-toxic consumer insecticide product that would be as effective as the Combat bait traps. Clorox also began evaluating a bait trap manufactured by Seabright in late 1988. In addition, Clorox investigated a bait technology developed by Dr. Phil Koehler ("Koehler") at the University of Florida. Finally, Clorox conducted its own in-house research on the insecticide category. These relationships and investigations apparently gave Clorox a variety of informational materials relating to the pest-management industry or category.
In March 1989, Clorox sent several representatives to visit Omnitech's plant in Thibodaux, Louisiana. After the visit, Clorox decided to conduct a blind test comparison between Omnitech's Dr. X product and Raid Max, an industry leader. To facilitate the blind test, the parties executed a letter of understanding dated June 16, 1989 (the "letter of understanding") in which Omnitech agreed that, for a period of thirty days after the results of the blind tests were received, Omnitech would not enter into any contracts which could interfere with Omnitech's ability to grant Clorox a fifteen-year license for the distribution of Dr. X. Pursuant to the letter of understanding, Clorox conducted the blind tests, and the Dr. X product measured favorably against Raid Max.
Clorox and Omnitech continued negotiations with respect to Omnitech's business and assets, including its rights in Dr. X. However, on July 31, 1989, unbeknownst to Clorox, Omnitech sold to Ogden Laboratories, Inc. ("Ogden") "all the rights and actions of warranty ... [to] [t]he entire Dr. X product line, including, but not limited to, all roach sprays and other insecticides, whether such product line is presently existing or is developed in the future," in consideration of the sum of $539,000. The agreement further provided that Omnitech would "retain the exclusive rights to be the sole manufacturer and distributor of the entire Dr. X product line, including, but not limited to, all roach sprays and other insecticides, whether such product line is presently existing or is developed in the future...."
Clorox and Omnitech continued to negotiate a potential purchase of Omnitech's assets, which led to the execution of a non-disclosure agreement between the parties, the final version of which was dated November 30, 1989 (the "non-disclosure agreement"). The non-disclosure agreement was originally intended to be executed by Omnitech, Clorox, Peachtree Creek Business Group ("Peachtree"), an insecticide consultant, PSL Marketing Resources, Inc. ("PSL"), a marketing firm, 3 and Seabright. 4
The non-disclosure agreement stated its purpose as being "to share non-public information defined below as 'Confidential Information' relating to the evaluation of the 'Doctor X' insecticide product and other products in the insecticide product category for the purposes of development and marketing of such products." Clorox representatives testified that they wanted the agreement to protect the confidentiality of Clorox' interest in the insecticide category. Omnitech also wanted the agreement to protect its proprietary information regarding Dr. X. The non-disclosure agreement thus provided, in pertinent part, that:
Each [non-disclosing party] agrees to treat all Confidential Information provided by a [disclosing party] as trade secrets which shall not be disclosed to any one other than a non-disclosing party's employees or agents who have a need to know in order to complete assigned responsibilities. Each non-disclosing party also agrees to take all reasonable measures to guard against the unwarranted use or disclosure of any information ("Confidential Information") received by a non-disclosing party during all discussions and negotiations relating to the evaluation of the "Doctor X" insecticide product and other products in the insecticide product category for the purposes of development and marketing of such products.
The non-disclosure agreement also provided Clorox with an opportunity to terminate its relationship with Omnitech as follows:
In the event that Clorox, based upon the evaluation by the parties hereto of the "Doctor X" insecticide product and other products in the insecticide product category, decides in writing not to continue to participate in the development and marketing of such products, then each party to this Agreement agrees to maintain the confidentiality of any Confidential Information disclosed by a party pursuant to this Agreement....
At the same time, Clorox and Omnitech executed a letter of intent (the "letter of intent"), which, among other things, gave Clorox a right of first refusal to purchase the assets of Omnitech. Pursuant to the letter of intent, from the November 30, 1989, date of execution through August 31, 1990, Clorox was to license all trademarks relating to Dr. X on a non-exclusive basis "in order to conduct laboratory and/or mini-market test marketing of the Doctor X product in certain stores and geographic areas selected by Clorox." During this same period, Omnitech was restricted from expanding its marketing areas in grocery stores and its marketing accounts in mass merchandise stores. However, Omnitech was allowed to continue marketing Dr. X to grocery stores in the same geographic areas in which the product was already being marketed and could continue to service the mass merchandise store accounts to which it had previously marketed its wares. Omnitech could also expand its marketing efforts in hardware stores "in any geographic area of the United States and its territories."
The letter of intent further granted Clorox "an exclusive option and the right of first refusal to purchase all trademarks relating to the Doctor X product and/or to purchase the business and all of the assets of Omnitech on terms mutually agreed to by the parties...." This option was to expire on December 31, 1990.
Clorox paid Omnitech $100,000 in cash for the non-exclusive license and test marketing. As further consideration for the letter of intent agreement, Clorox was to ...
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