Paws With A Cause, Inc. v. Crumpler

• Decision Date: 03 January 1996
• Docket Number: No. 94-1968,94-1968
• Citation: 73 F.3d 358
• Parties: 1996-1 Trade Cases P 71,262 NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. PAWS WITH A CAUSE, INC., Plaintiff-Appellee, v. Donna J. CRUMPLER, Defendant-Appellant, and ROBO DOGS, INC.; William R. Jackson; Virginia Canines for Independence; William I. Sydnor, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 358

73 F.3d 358

1996-1 Trade Cases P 71,262

NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

PAWS WITH A CAUSE, INC., Plaintiff-Appellee, v. Donna J. CRUMPLER, Defendant-Appellant and ROBO DOGS, INC.; William R. Jackson; Virginia Canines for Independence; William I. Sydnor, Defendants.

No. 94-1968.

United States Court of Appeals, Fourth Circuit.

Argued Nov. 2, 1995.

Decided Jan. 3, 1996.

ARGUED: Anthony Francis Troy, MAYS & VALENTINE, Richmond, Virginia, for Appellant. H. Lane Kneedler, HAZEL & THOMAS, Richmond, Virginia, for Appellee. ON BRIEF: Andrew G. Mauck, MAYS & VALENTINE, Richmond, Virginia, for Appellant. S. Miles Dumville, John A. Burlingame, HAZEL & THOMAS, Richmond, Virginia, for Appellee.

Before WILKINS, LUTTIG, and WILLIAMS, Circuit Judges.

OPINION

PER CURIAM:

Appellee Paws With A Cause (Paws), a non-profit Michigan corporation, instituted this diversity suit, see 28 U.S.C.A. Sec. 1332(a)(1) (West 1993), against Appellant Donna Crumpler, alleging three claims: (1) breach of a non-competition agreement (NCA); (2) intentional disregard of Paws's rights under the NCA; and (3) conspiracy to injure Paws's business pursuant to Va.Code Ann. Sec. 18.2-499 (Michie 1988). Paws prayed for damages and an injunction to restrain Crumpler from disclosing or utilizing information that Paws asserted was protected by the NCA. The case was tried to the district court, which issued findings of fact and conclusions of law. See Fed.R.Civ.P. 52(a). The district court concluded that Crumpler breached the NCA, enjoined Crumpler from disclosing or utilizing the information and knowledge protected by the NCA for a term of three years beginning December 20, 1993, and awarded compensatory damages of $18,808. Crumpler appeals. We affirm with respect to liability and granting the injunction, but we vacate and remand with respect to the award of compensatory damages.

I.

This appeal comes to us subsequent to a bench trial. In such a procedural posture, "our scope of review is particularly circumscribed, being limited to determining whether the facts as found by the district court are clearly erroneous." Jiminez v. Mary Washington College, 57 F.3d 369, 378 (4th Cir.), cert. denied, 64 U.S.L.W. 3316 (U.S. Oct. 30, 1995) (No. 95-396). We reverse a factual finding as clearly erroneous if, "although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). The facts as found by the district court, therefore, "are conclusive on appeal ... unless they are plainly wrong." Jiminez, 57 F.3d at 378-79. The facts recited herein and found by the district court are not clearly erroneous.

Paws trains dogs to aid persons who are hearing impaired or mobility limited or both. Crumpler was an obedience trainer at Robo Dogs, Incorporated (Robo), in Virginia with no formal experience in training, marketing, or placing dogs that helped the handicapped. Desiring to obtain these skills, Crumpler enrolled in a week-long course at Paws's Michigan headquarters in August 1991. At the conclusion of her training, Crumpler returned to Virginia as Regional Director of Paws Virginia.

In connection with her training, Crumpler executed the NCA, which was styled a "Sub-contracting Trainers Agreement" and provided in pertinent part:

Since [Paws] is a non-profit organization funded largely by United Way of Michigan and by charitable contributions and desires to maintain the availability of the training sessions on a basis satisfactory to its contributors, the terms and conditions under which [Crumpler] receives instruction, knowledge and/or know-how are as follows:

1. [Paws] agrees to instruct, give knowledge to, and/or know-how to [Crumpler] in the conducting of training sessions directed at dogs and their owners to cause the HEARING DOGS to respond to certain sounds by alerting the owner in various ways to the occurrence of such sounds and SERVICE DOGS to responds [sic] to the needs of the mobility[-]limited community.

2. In consideration of the above instruction, knowledge and/or know-how, [Crumpler] agrees that he/she will not communicate such instruction, knowledge and/or know-how to others or make use of it for his/her benefit, for the period of three (3) years from the date of termination of this organization.

(J.A. at 265.) Crumpler knew that she was required to execute the NCA prior to enrolling in Paws's training course.

Eventually, at an unspecified date in early or mid-1992, relations between Paws headquarters and Crumpler soured. As the district court found, Crumpler embarked upon a smear campaign against Paws, stating that she wanted to sever ties with Paws and form her own corporation to train dogs for the handicapped. Consequently, Candye Sapp, Vice President of Paws, wrote Crumpler on November 5, 1992, advising that "[u]ntil all matters can be agreed upon by all parties and all files are up to date and direction taken by this office only, we need you to cease and desist. Once every item is agreed upon and in writing we will go from there." (J.A. at 258.) Based on Sapp's letter, Crumpler considered herself discharged.

The district court found that during Crumpler's tenure as Regional Director of Paws Virginia, Crumpler utilized Robo to train dogs, and if a dog was certified, then Paws would pay Robo for the expenses of training it. Based on this scheme, the district court found "that Crumpler used [Robo] as a tool for enhancing her ability to form and run an organization that could compete with Paws." (J.A. at 178.) The district court also found that Crumpler competed with Paws by forming Virginia Canines for Independence (VCI), an organization virtually identical to Paws, by serving as a director and trainer for VCI. Crumpler and other directors of VCI attempted to conceal VCI's existence because Crumpler and her co-directors were " 'pirating' Paws's business." (J.A. at 178.) By competing with Paws, the district court found that:

Crumpler has violated the [NCA] ... by utilizing and communicating to others training techniques she learned from PAWS. Crumpler acknowledged ... that she learned "new" techniques while in Michigan. Also, ... Crumpler stated that she was "using techniques used by Paws." Crumpler, who admitted that she had never had any formal hearing[-]dog training prior to attending the PAWS training session, has been training hearing dogs. In fact, ... a dog named Rico was donated to Paws prior to Crumpler's separation from Paws. Subsequently, Crumpler trained Rico as a hearing dog and placed him with a client. Crumpler apparently did so either in her own name or on behalf of VCI, but not as an agent of Paws.

(J.A. at 178-79.) While the district court found that Crumpler violated the NCA, the district court also found that the money-raising and dogtraining skills Crumpler learned from Paws were common in the trade.

Applying Michigan law, the district court ruled in favor of Paws with respect to the breach-of-the-NCA claim, held the intentional disregard claim was duplicative of the breach claim, and concluded that Paws failed to establish a conspiracy claim. Accordingly, the district court awarded relief solely on the breach claim. With respect to equitable relief, the district court enjoined Crumpler, VCI, and VCI directors "from using or further communicating 'information, knowledge and/or know-how' [Crumpler] gained exclusively through her affiliation with Paws with respect to the training of service and hearing dogs and their owners" for a three-year period commencing December 20, 1993, the date the preliminary injunction issued. (J.A. at 182.) Additionally, Crumpler and directors of VCI were enjoined "from forming any other organization comparable to VCI which would provide hearing or service dogs to persons with disabilities." (J.A. at 183.) Regarding legal relief, the district court awarded $18,808 in compensatory damages based on the comparability of Paws Virginia with Paws operations in New Hampshire and Massachusetts.

In its memorandum opinion on the damages issue, the district court addressed Paws's contention that Crumpler was violating the injunction by operating VCI in direct competition with Paws and by concealing the district court's ruling from VCI directors. The district court rejected Paws's contention, explaining that Crumpler and her directors were enjoined merely from using or further communicating the information and knowledge Crumpler learned from Paws and that Crumpler was enjoined from forming another organization similar to Paws, but that Crumpler was not enjoined from operating VCI. The district court found, however, that Crumpler and some directors of VCI deliberately trivialized to other directors of VCI the nature and extent of the relief granted to Paws. Accordingly, the district court ordered counsel for Crumpler to notify Robo and VCI directors of the existence and nature of the injunction.

II.

A federal court exercising its diversity jurisdiction, as here, must apply the substantive law of the forum state, see Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938), and because application of choice-of-law rules is a substantive matter, see Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 496 (1941), Virginia's choice-of-law rule applies. Under Virginia law, because the NCA was entered into in Michigan and does not provide a choice-of-law provision, Michigan substantive law controls the validity, interpretation, and construction of the NCA. See Woodson v. Celina Mut. Ins. Co., 177 S.E.2d 610, 613 (Va.1970). Although Michigan substantive law applies to liability, under Virginia's choice-of-law rules, Virginia law...