Sybron Corp. v. Wetzel

• Decision Date: 07 December 1978
• Citation: 46 N.Y.2d 197,385 N.E.2d 1055,413 N.Y.S.2d 127
• Parties: , 385 N.E.2d 1055, 205 U.S.P.Q. 673 SYBRON CORPORATION, Appellant, v. Alfred J. WETZEL et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 127

413 N.Y.S.2d 127

46 N.Y.2d 197, 385 N.E.2d 1055, 205

U.S.P.Q. 673

SYBRON CORPORATION, Appellant, v. Alfred J. WETZEL et al., Respondents.

Court of Appeals of New York.

Dec. 7, 1978.

Edward J. Burns and Sherry Kraus, Rochester, for appellant

John W. Clarke and Paul J. Yesawich, III, Rochester, for respondents.

OPINION OF THE COURT

BREITEL, Chief Judge.

Plaintiff Sybron, among other things a manufacturer and reliner of glass-lined vessels used in processing corrosive chemicals, sues its former employee, Wetzel, and a competitor corporation, De Dietrich, to enjoin the employment of Wetzel by De Dietrich and to prevent Wetzel from divulging alleged trade secrets. Special Term after a hearing granted Sybron a preliminary injunction. The Appellate Division, in reversing, held De Dietrich not subject to personal jurisdiction, but reached the merits with respect to Wetzel, and dismissed the action as to both defendants. Plaintiff appeals.

The principal controversy involves application to De Dietrich of CPLR 302 (subd. (a), par. 3), providing long-arm jurisdiction over nondomiciliary defendants who commit tortious acts outside the State causing injury in New York. At issue is whether, for purposes of the statute, a nondomiciliary competitor causes injury in New York when it hires a former employee of a corporation engaged in manufacturer in this State allegedly to obtain protected trade secrets. As to defendant Wetzel, dismissal of the complaint, which had not as yet been served, is challenged as premature.

The order of the Appellate Division insofar as it dismissed the action should be reversed and the action reinstated as to both defendants. With respect to the Appellate Division's reversal of the preliminary injunction this court is without power to review, and, therefore, to that extent the order of the Appellate Division should be affirmed.

Plaintiff, who had employed Wetzel at its New York plant for 34 years, would indeed be injured in New York should De Dietrich, by inducing a tortious breach of Wetzel's obligations to his former employer and through use of trade secrets purloined through Wetzel, make valuable competitive sales to plaintiff's New York customers. Plaintiff is thus entitled to invoke the jurisdictional statute to avert threatened harm. With respect to defendant Wetzel, dismissal of the complaint not yet served was premature, but denial of the preliminary injunction, as noted, is beyond the court's scope of review. An issue not resolvable at this stage of the action, however, remains: the record, even on the limited evidence submitted or allowed upon the hearing for a preliminary injunction, raises the issue of fact whether Wetzel, applying his knowledge for the benefit of De Dietrich, would necessarily be divulging plaintiff's trade secrets.

Wetzel had been employed in New York by the Pfaudler Company, a division of plaintiff Sybron, and one of three competitors in the United States engaged in the design, manufacture, and sale of glass-lined chemical processing vessels. Wetzel was involved in the preparation, coating, and firing of the glass used to line and reline the vessels. Despite his lack of formal education, he rose over the 34 years of his employment from helper in the coating department to general ceramics foreman. In 1974, however, at age 55, Wetzel took early retirement on reduced pension and moved to Florida.

In early 1977, defendant De Dietrich (USA), an American subsidiary of the French De Dietrich & Cie, advertised the installation in Union, New Jersey, of a new furnace for reglassing reactors and tanks. As a principal competitor of Sybron, De Dietrich has reglassed some 4,500 of Sybron's "Pfaudler" vessels in its French plants, and intends for its New Jersey plant to reglass Sybron equipment.

This action was started after Sybron learned that De Dietrich's American manager of manufacturing, a former chief ceramist at the Pfaudler division for whom Wetzel worked for many years, approached Wetzel in Florida and asked him to supervise the New Jersey facility. Evidently, only one other person, also a former Pfaudler employee, was interviewed for the position.

Plaintiff, regarding the methods, processes, and techniques employed in its glassing operations as proprietary secrets, seeks to bar Wetzel from working for De Dietrich in its American plant and from divulging protected trade secrets. Also relied upon is a certain Patent and Trade Secret Agreement signed by Wetzel after he became a line foreman in 1961. According to plaintiff, each employee with access to proprietary secrets is required to agree that he "will preserve in confidence, and in accordance with established Company policy, all secret and confidential matters of the Company and others with whom the Company may have confidential relations both during (his) employment and thereafter." Defendants deny that Wetzel possesses trade secrets or confidential information, and insist that his new position will entail only application of De Dietrich processes and techniques.

Following plaintiff's motion for a preliminary injunction, a two-day hearing was conducted. Plaintiff conceded that Wetzel was not involved in laboratory development of new glass formulas. Emphasized, however, was his extensive experience and responsibility in the glassing and reglassing of "Pfaudler" vessels. Even after his retirement, Wetzel was sent by Sybron as a technical consultant to its Mexican division. There was testimony that De Dietrich, like Sybron, regards its glass lining techniques, and not only its glass formulas, as proprietary secrets. Wetzel, on the other hand, testified that he took no Sybron files with him, that he was not consulted with respect to the composition or preparation of the glass, and that his job at Sybron was merely to carry out procedures established by others. If he detected flaws, Wetzel would simply inform his superiors. In addition, defendants introduced testimony that Sybron had conducted tours of its plant for nonemployee engineers.

Special Term, denying defendants' motion to dismiss for lack of jurisdiction, enjoined both De Dietrich's employment of Wetzel and the disclosure of trade secrets pending the action. The Appellate Division reversed, unanimously holding that De Dietrich was not subject to the personal jurisdiction of the court and that Wetzel, although subject to the court's jurisdiction, did not possess trade secrets. Dismissal of the complaint, even though it had not as yet been served, was directed.

There is no disagreement in the court with the Appellate Division and Special Term that Wetzel was subject to personal jurisdiction and that service upon him was sufficient. The jurisdictional issue disputed in the court involves De Dietrich. A Delaware corporation based in New Jersey, De Dietrich is not qualified to do business in New York and has no New York office or employees. Of the 20 to 40 New York customers it has had, only Eastman Kodak and perhaps another are substantial. Kodak is also a major customer of Sybron.

CPLR 302, the "long-arm statute", did not always expressly provide for personal jurisdiction over those whose tortious acts outside the State cause injury in New York (see L.1962, ch. 308). It was only in response to Feathers v. McLucas, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68, that in 1966 such a provision was added (L.1966, ch. 590; Memorandum of the Judicial Conference, 2 McKinney's 1966 Sess.Laws of N.Y., p. 2911; Twelfth Ann. Report of N.Y. Judicial Conference, 1967, pp. 339-344). In the Feathers case, the court held that CPLR 302 (subd. (a), par. 2), which covers one who commits a tortious act within the State, did not apply to a nondomiciliary who improperly manufactured a tank in Kansas, even though the tank exploded in New York (Supra, pp. 458-464, 261 N.Y.S.2d pp. 19-24, 209 N.E.2d pp. 76-79).

The 1966 addition allows the court to exercise personal jurisdiction when a nondomiciliary

"3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he

"(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or

"(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce".

The Appellate Division, 61 A.D.2d 697, 403 N.Y.S.2d 931, held the statute of no avail because no tortious act had as yet been committed. The dissenters would agree. True, the agreement signed by Wetzel does not prohibit employment with a competitor, and, thus far, the dissenters argue, all De Dietrich has done is to hire Wetzel. If Wetzel possesses trade secrets, however, and if De Dietrich by its hiring agreement with Wetzel intends to obtain them from him, a tortious act will have been committed. The probable inferences from the admitted and controverted facts indicate a conscious plan to engage in unfair competition by misappropriation of Sybron's trade secrets. Indeed, if that eventually be found to be true, a tortious act resulting in the breach by Wetzel of his contractual obligation to Sybron has occurred in New Jersey, although the consequential economic injury in this State is still only anticipated (cf. Mendel v. Pittsburgh Plate Glass Co., 25 N.Y.2d 340, 346-347, 305 N.Y.S.2d 490, 495-496, 253 N.E.2d 207 (dissenting opn.), overruled Victorson v. Bock Laundry Mach. Co., 37 N.Y.2d 395, 400, 373 N.Y.S.2d 39, 40, 335 N.E.2d 275, 276). For such an intentional tortious act a remedy would be available at law, as for most intentional torts, as completed torts, even if the damages are nominal or unascertainable (see Prosser, Torts (4th ed), pp. 35, 66-67; cf. Id., pp. 762-763, 948).

It is not from the mere hiring of Wetzel that...