Pacific Aerospace & Electronics, Inc. v. Taylor

• Decision Date: 20 June 2003
• Docket Number: No. CS-02-0412-AAM.,CS-02-0412-AAM.
• Citation: 295 F.Supp.2d 1188
• Court: U.S. District Court — District of Washington
• Parties: PACIFIC AEROSPACE & ELECTRONICS, INC., a Washington corporation, Plaintiff, v. Edward TAYLOR, an individual; Kristen Taylor, an individual; James Petri, an individual; Raad Technologies, Inc., a Washington corporation; Defendants.

Page 1188

295 F.Supp.2d 1188

PACIFIC AEROSPACE & ELECTRONICS, INC., a Washington corporation, Plaintiff, v. Edward TAYLOR, an individual; Kristen Taylor, an individual; James Petri, an individual; Raad Technologies, Inc., a Washington corporation; Defendants.

No. CS-02-0412-AAM.

United States District Court, E.D. Washington.

June 20, 2003.

COPYRIGHT MATERIAL OMITTED

Harry J.F. Korrell and Douglas J. Morrill of Davis Wright Tremaine LLP, Seattle, WA, for plaintiff.

John W. Beuhler, Jr., Wenatchee, WA, Janyce L. Fink, Esq., Seattle, WA, for defendants.

ORDER GRANTING PLAINTIFF'S PRELIMINARY INJUNCTION

MCDONALD, Senior District Judge.

I. INTRODUCTION

In 1994, Congress amended the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 ("CFAA"), the application of which this case will confer jurisdiction on the district court for one of plaintiff's claims. Plaintiff, an engineering and manufacturing corporation, seeks to assert the revised provisions of the CFAA as private rights of action against the defendants. Resolving any perceived ambiguities in the legislation in plaintiff's favor, the court by this Order concludes that plaintiff has stated a claim under federal question jurisdiction and has pled a claim under the revised CFAA.

The jurisdictional issue is examined first, followed by a discussion of plaintiff's motion for preliminary injunction and defendants' opposition to such motion.

II. PROCEDURAL HISTORY AND BACKGROUND

Plaintiff Pacific Aerospace & Electronic, Inc. ("PAE") filed this complaint for injunctive relief on November 27, 2002 alleging federal question jurisdiction on the basis of the Computer Fraud and Abuse Act¹. On February 18, 2003, after court-ordered expedited discovery was conducted, plaintiff filed a motion for preliminary injunction (Ct.Rec.30), which was originally set for hearing without oral argument on March 17, 2003. On March 4, 2003, defendants filed their response to the motion and oral argument was set for May 12, 2003 before Chief Judge Van Sickle, the judicial officer to whom this matter was originally assigned.

On March 10, 2003, plaintiff filed a reply in support of its preliminary injunction motion along with a separate "Opposition and Objection" to what plaintiff labeled a "Motion to Dismiss or Transfer" found in defendants' response brief². On April 15, 2003, Chief Judge Van Sickle recused himself from this matter and reassigned the case to the undersigned. On May 1, 2003, defendants filed a motion for "leave to submit supplemental opposition pleadings re: motion for preliminary injunction." This supplemental opposition³, consisting of a 114-page "Supplemental Statement of Material Facts, Evidence and Key Admissions Re: In Opposition To Plaintiff's Motion For Preliminary Injunction", was based on recently taken depositions. In reaction to defendants' supplemental filing, the court, through its "Order Re Motion For Preliminary Injunction" of May 6, 2003: granted defendants' motion for leave to file supplemental opposition pleadings; set defendants' response date for May 23, 2003; vacated the oral hearing of May 12, 2003; and scheduled an oral hearing for June 10, 2003.

III. FACTS

PAE designs and manufactures hermetically-sealed connectors and housings for its customers' highly sensitive electronic circuitry in the commercial and military aerospace, space exploration, defense electronics and weapons systems, medical implants, communications, and geotechnology industries. (Complaint, ¶¶ 9, 10, 11). PAE, with its principal place of business in Wenatchee, Washington, is comprised of three divisions: Aerospace Components (U.S.), Aerospace Components (Europe), and Electronic Components (U.S.). (Complaint, ¶¶ 1,9).

PAE's chief executive officer Don Wright testified that the specialized and customized nature of PAE's business made the identity of the relatively small numbers of engineers who required its products especially crucial to its business success. (Wright Decl., ¶ 17). As a result, he concluded, knowing the identity and needs of these engineers was an extremely valuable aspect of PAE's business and prospective business and one that would have been very difficult for any company to derive on its own. (Wright Decl., ¶¶ 18, 19, 21).

Defendant Edward Taylor ("Taylor") was employed at PAE as Vice President for Engineering and Technology in its Wenatchee, Washington office from July 1, 1991 to August 22, 2002⁴. (Complaint, ¶ 17). Taylor was responsible for inventing and selling, and typically wrote several patents per year on behalf of PAE. Id. By virtue of his position, Taylor was given access to proprietary information concerning PAE's processes, technologies, confidential business information, client and prospective customer lists and information. (Complaint, ¶¶ 17-19). The client information contained in the database which Taylor had access to included company names, contact names, phone and fax numbers, and more particularized information relating to the specific client's needs, projects, and purchases. (Complaint, ¶ 19).

In 1994, Taylor signed an Invention and Confidential Information Agreement in which he agreed to maintain the confidentiality of PAE's information and to assign to PAE any rights to inventions made or conceived during his employment at PAE. (Complaint, ¶ 20). This agreement specifically lists the information PAE prohibited their employees from disclosing:

... concepts, processes, techniques, specifications, drawings, instructions, research, ...customer lists, supplier identity, marketing and sales plans, forecasts, computer data, financial information, costs, data, pricing information and all other information, concepts or ideas involving or reasonably related to the business or prospective business of the Company.

In 1997, Taylor signed an Employment Agreement providing him employment for a specific term of three years. (Complaint, ¶ 21; Taylor Dep., Exh. 37). Through Article 5.1 of this agreement, Taylor committed to maintain the secrecy of and not to use or disclose PAE's confidential and proprietary information, including customer information, except as authorized by the company and for its benefit. Taylor also agreed to assign the rights of any inventions conceived during his employment which relate to the company's business. Id. Article 5.2 of the Employment Agreement prohibited Taylor's solicitation of any PAE employee or interference with any employment relationship between PAE and its employees for a period of two years after the expiration of the contract term. (Complaint, ¶ 22). Article 5.2 reads, in pertinent part:

The Employee agrees that during the Contract Term and for a period of two years after the expiration of the Contract Term ..., he will not (i) directly or indirectly solicit, induce, or encourage any employee of the Company to leave his or her employment with the Company or interfere with any employment relationship between the Company and any of its employees, (ii) hire or encourage or assist any other person to hire any person who has been an employee of the Company within the previous three months, or (iii) have any contact, directly or indirectly, with any customers of the company.

Taylor's Employment Agreement was renewed on May 31, 2000 for an additional two year term. (Complaint, ¶ 21, Taylor Dep., Exh. 37). Taylor specifically acknowledged in this agreement that a breach would cause PAE irreparable harm, and Taylor agreed that an injunction would be a permissible remedy⁵.

Defendant James Petri ("Petri") was employed by PAE as the Engineering Manager in its Wenatchee offices from June 13, 1994 to August 22, 2002, when he resigned. (Complaint, ¶ 23). In this position, Petri was responsible for development of technology, process development, and mechanical design. Id. Like Taylor, Petri had access to PAE's proprietary information about the company's business and intellectual property. (Complaint, ¶ 24). And like Taylor, Petri signed an Invention and Confidential Information Agreement. (Complaint, ¶ 24).

Defendant Kristen Taylor⁶ ("Mrs. Taylor"), Defendant Taylor's wife, was employed as a Document Control Clerk with PAE in its document control department from April 1990 until she resigned on September 6, 2002. (Complaint, ¶ 26). As a requirement of her position, Mrs. Taylor, then using her maiden name Kristen Cotton, also signed an Invention and Confidential Information Agreement. Id.

Defendant RAAD Technologies, Inc. ("RAAD") is an engineering and manufacturing company formed to allegedly compete with PAE in approximately the same time frame that Defendants Taylor and Petri left PAE in August 2002. (Ct. Rec. 34, at page 3). RAAD is engaged in a business targeted towards the same particular niche market as PAE. RAAD designs, manufactures and sells hermetically-sealed connectors and housings for use with highly sensitive electronic circuitry in the aerospace and high tech industries. (Arena Dep. at page 9).

PAE presents evidence that Taylor, in contemplation of leaving PAE, met with potential investors, Edward Worrall and Jack Jones, in late May or early June 2002, approximately two months before Taylor and Petri left PAE, to discuss and evaluate a proposed manufacturing corporation that would make products similar to Taylor's employer at the time, PAE. (Worrall Decl., ¶¶ 2,4). Mr. Worrall had several concerns (possible violation of Taylor's employment agreement, overly optimistic business forecast, Taylor's new ideas may belong to PAE, and the need for a license from PAE) and told Mr. Jones that he would not invest and didn't think Mr. Jones should either. (Worrall Decl. ¶¶ 5-8).

On August 22, 2002, according to PAE's version of the facts, Taylor, Petri, PAE's president Lew Wear and PAE's CEO Don Wright met to discuss Taylor's decision⁷ to leave PAE and restrictions on his post-employment conduct imposed by his employment agreement. (Wear Decl., ¶ 24). At that meeting, according to Wear, Taylor told Wear...