Standard Brands, Inc. v. Zumpe, Civ. A. No. 66-769.

• Decision Date: 11 January 1967
• Docket Number: Civ. A. No. 66-769.
• Citation: 264 F. Supp. 254
• Parties: STANDARD BRANDS, INC. v. Walter T. ZUMPE et al.
• Court: U.S. District Court — Eastern District of Louisiana

264 F. Supp. 254

STANDARD BRANDS, INC. v. Walter T. ZUMPE et al.

Civ. A. No. 66-769.

United States District Court E. D. Louisiana, New Orleans Division.

January 11, 1967.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Ralph L. Kaskell, Jr., New Orleans, La., for plaintiff.

Thomas B. Lemann, New Orleans, La., for defendants.

OPINION

RUBIN, District Judge.

A nationally known manufacturer of food and related products here seeks to enjoin a former employee from working for a competitor engaged in the coffee and tea business principally in Louisiana and Tennessee and in the areas surrounding each of these states, and from disclosing confidential information and trade secrets learned during his employment.

Through what is known as its Chase and Sanborn Division, the plaintiff develops, processes, and manufactures coffee and tea products. It distributes these under advertised and well known brand names, such as Chase & Sanborn, Tender Leaf, Instant Chase & Sanborn, Instant Siesta Decaffeinated, Instant Tender Leaf Tea, and Instant Tender Leaf Iced Tea. The plaintiff conducts research in coffee and tea processes and products at research laboratories in New Orleans, Louisiana and Stamford, Connecticut. It operates a pilot plant in New Orleans, where it seeks to improve its coffee and tea products. It also operates a manufacturing plant in New Orleans where it makes all of the instant coffee sold by it throughout the nation.

Walter T. Zumpe, who is one of the defendants, began to work for Standard in 1946 as a shipping clerk. Although he has had no technical education,¹ he has a talent for dealing with people. He was promoted successively until in 1954 he was transferred to New Orleans where he became Plant Manager of Standard's Chase & Sanborn Production Division in New Orleans.

Because Zumpe's work afforded him access to information that Standard considered confidential, Zumpe signed two agreements, one in 1959 and the other in 1964. These agreements, similar in terms, provided that, in consideration of his employment by Standard, Zumpe agreed:

* * * * * *

"2. That except as required in the performance of his duties to the Company, he will not disclose or use at any time during his employment any of the Company's manufacturing processes, techniques, types of machinery and equipment used together with improvements and modifications thereof, product formulae and ingredients, including raw materials used, discoveries, inventions, ideas, * * * projects or programs, customer lists or any information disclosed to him in confidence or any information held in secret by the Company, of which he became informed during the term of his employment with the Company; and

"3. That he will not disclose or use at any time after the termination of his employment any of the foregoing information which may be trade secrets or confidential information of the Company unless he shall first request and obtain the written consent of the Company."

As Plant Manager, Zumpe received reports from Standard's Research and Development laboratories covering the work being done by them. He also conferred from time to time with research and technical personnel regarding methods of production and areas of research in which they were engaged. The information that he received included trade secrets and confidential information as well as much that was routine.

The defendant, William B. Reily & Company, Inc., is a family firm engaged in the coffee and tea business and in the distribution of other food products. It operates a plant in New Orleans located only a few hundred yards from the plaintiff's plant. Its New Orleans plant specializes in coffee with chicory, which is marketed under the trade name "Luzianne." It also sells both roasted and instant pure coffee and tea under the trade names Arobrand and Crescent Club. It has a subsidiary in Knoxville, Tennessee, which sells only roasted and instant pure coffee and tea products. Reily manufactures its own instant coffee. It purchases decaffeinated coffee and instant tea from other manufacturers.

Reily needed a Production Manager. It was particularly interested in finding someone who could work well with people. One of its executive officers heard favorable reports about Zumpe, looked him up, and, after a series of conferences, engaged him as Reily's Vice-President and General Manager in charge of production. His duties include coordination of production at both the Knoxville and New Orleans plants. He was hired principally as an executive and to take charge of production processes, not to engage in improvement of coffee or tea products, research, or new product development. But Standard contends that in seeking properly to discharge his duties for Reily Zumpe will inevitably disclose the secret and confidential information that he learned while working for Standard, and that he cannot so "compartmentalize his mind" as to avoid disclosure however good his intentions.

The legal problems created when an employer seeks to protect his trade secrets from disclosure by a former employee were familiar to judges long before they learned the delight of a fragrant cup of coffee. The Romans recognized an action for enticement to communicate business secrets.² But it was not until the end of the Third Century, one legend tells, that monks, fleeing persecution, escaped to the highlands of Abyssinia, across the Red Sea from Arabia, and by accident discovered the virtues of the coffee bean.³

The coffee purchased by the consumer is a blend, compounded usually by a secret formula to achieve that flavor and aroma the coffee maker considers his own. Courts have recognized the need for blending conflicting interests in trade secret cases, too, although they are still struggling with the proper adjustment of the balance between employer and employee.

An employer who discloses valuable information to his employee in confidence is entitled to protection against the use of these secrets in competition with him. But the employee who possesses the employer's most valuable confidences is apt to be highly skilled. The public is interested in the reasonable mobility of such skilled persons from job to job in our fluid society, which is characterized by and requires the mobility of technically expert persons from place to place, from job to job and upward within the industrial structure.⁴ And the employee himself must be afforded a reasonable opportunity to change jobs without abandoning the ability to practice his skills.⁵ The resolution of the issues in this case first requires determining how much Zumpe knows that can be properly considered Standard's "trade secrets or confidential information" as distinguished from those things that he has absorbed as part of his general managerial and professional background.

NATURE OF THE INFORMATION IMPARTED TO ZUMPE

A part of the trial was held in camera because the plaintiff contended that the testimony would necessarily disclose its trade secrets. By agreement of the parties, when the testimony dealt directly with information that the plaintiff considered secret, all persons were excluded from the courtroom except a representative of the plaintiff, the plaintiff's counsel, Zumpe, defendants' counsel, and the reporter. In order to preserve the confidentiality of the record, the documents alleged to be secret were presented in envelopes which were separately sealed. When the testimony required an answer the plaintiff considered secret, the witness wrote it instead of answering orally so that the reply itself would not appear in the transcript. Finally, because the plaintiff contended that even after these efforts a clever competitor might piece together confidential information from other testimony, the transcript itself was ordered not to be disclosed to the public.

The defendant acquiesced in these efforts to maintain secrecy but it contended that relatively little of the information identified by the plaintiff as secret or confidential was truly either one or the other.

Standard offered evidence that Zumpe had received confidential information or trade secrets regarding each of the following:

1. Development of a new dry coffee concentrate.

2. Processes for aroma and flavor recovery.

3. Instant coffee extraction equipment, developmental in nature, to produce best balance between quality and yield.

4. Standard's processes specifically for instant coffee production, including aroma oil, extraction and foam control, and maintenance of flavorability.

5. Decaffeinization.

6. Instant tea processes.

7. New instant dry tea concentrate.

8. Process and equipment development for freeze drying.

9. Research and other reports.

Zumpe testified that he had received information in each of these areas, that he considered relatively little of it to be secret since he thought a good deal of it was known to technical experts in the trade, but that Standard did consider this information confidential. It is clear that Standard had spent a good deal of money to develop this information and made a major effort to prevent its disclosure. Copies of reports relating to these subjects were kept in locked cabinets. The documents were not available to employees generally. Standard thought the information was of value to its competitors—not only because of the information concerning successful experiments or other work underway, but also because even the information about unsuccessful experiments had "negative value": a competitor who knew that a certain experiment had been fruitless could save the time and expense of repeating it.⁶ In addition, the evidence is clear that in regard to development of new products, merely being able to offer the product first—a few weeks or months ahead of competitors—may give a food manufacturer a substantial advantage.

Defendants sought to minimize the value of this information in three ways:

First, they denied that much of it was of any interest to Reily....