Tyson Foods, Inc. v. Conagra, Inc.

• Decision Date: 27 June 2002
• Docket Number: No. 01-737.,01-737.
• Citation: 349 Ark. 469,79 S.W.3d 326
• Parties: TYSON FOODS, INC. v. CONAGRA, INC., and ConAgra Poultry Co.
• Court: Arkansas Supreme Court

79 S.W.3d 326

349 Ark. 469

TYSON FOODS, INC. v. CONAGRA, INC., and ConAgra Poultry Co.

No. 01-737.

Supreme Court of Arkansas.

June 27, 2002.

Conner & Winters, PLLC, by: William B. Putman and Ruth A. Wisener, Fayetteville; and Quattlebaum, Grooms, Tull & Burrow, PLLC, by: Leon Holmes, Little Rock, for appellant.

McGrath, North, Mullin & Kratz, P.C., by: Leo A. Knowles and Patrick E. Brookhouser, Jr., Omaha, NE, and Cypert, Crouch, Clark & Harwell, by: James E. Crouch, Springdale, for appellee Con Agra, Inc.

Everett Law Firm, by: John C. Everett and Jason H. Wales, Fayetteville, for appellee ConAgra Poultry Co.

ROBERT L. BROWN, Justice.

Appellant Tyson Foods, Inc., appeals the granting of a motion for judgment notwithstanding the verdict in favor of appellees ConAgra, Inc., and ConAgra Poultry Co. (both companies referred to collectively in this opinion as ConAgra). Tyson essentially mounts two arguments in its appeal: (1) that Arkansas law does not invariably require employers to enter into postemployment confidentiality agreements with departing employees for company information to qualify as a trade secret, and (2) Tyson's nutrient profile qualifies as a trade secret. We affirm the trial court's order granting the motion for judgment notwithstanding the verdict, but we do so for reasons other than those stated by the trial court in its order.

In 1984, David Purtle began his employment with Tyson.¹ At the time of his resignation from Tyson in 1999, Purtle held the position of Senior Vice-President in charge of Retail Poultry. In 1997, he directed Dr. Roy Brister, Vice-President of Nutrition Research at Tyson, to develop two nutrient profiles (described as "normal" and "reduced") for use in formulating Tyson's poultry feed to avoid having different nutrient profiles at each Tyson complex. Dr. Brister did so. The two profiles were compiled into a single document, the "nutrient profile," which Tyson used to formulate feed for its chickens, based on varying combinations and levels of amino acids. In June 1999, Purtle left Tyson and began his employment with ConAgra, because he had become unhappy with a reorganization of management at Tyson. Soon after he began work with ConAgra, Purtle gave ConAgra the Tyson nutrient profile, which ConAgra then implemented.

That same year, Tyson initiated tradesecret litigation against ConAgra in which it contended that ConAgra had "raided" Tyson and hired away four top management executives, including Purtle, and that those executives would inevitably divulge or had divulged trade secrets to ConAgra. Tyson's prayer for relief included an injunction against disclosure of Tyson's trade secrets and damages for misappropriation of the same. Allegations against Purtle were severed, because it was alleged that he had actually given trade secrets to ConAgra. The trial of the remaining three executives proceeded. The trial court in that trial found that certain pricing information and marketing strategies were trade secrets, and it enjoined the three former Tyson executives from revealing those trade secrets for a period of one year. This court reversed and held that the trial court erred in granting the injunction, because Tyson had made no efforts to restrain disclosure of information postemployment. See ConAgra, Inc. v. Tyson Foods, Inc., 342 Ark. 672, 30 S.W.3d 725 (2000) (Tyson I).

The case involving Purtle was tried in October 2000, and a jury was impaneled, though the matter was in chancery court. Evidence was presented on (1) whether the nutrient profile was a trade secret; (2) whether it was misappropriated; and (3) what damages may have resulted from a misappropriation. Following a trial on liability, the trial court found that the "nutrient profile" was a trade secret under Arkansas law and was misappropriated. The trial court so instructed the jury, and the matter of damages was submitted to a jury. The jury returned a verdict in favor of Tyson for trade secret misappropriation in the amount of $20,094,531. On October 26, 2000, the trial court entered a judgment in the amount of $20,094,531 against ConAgra.

On November 8, 2000, ConAgra filed a Motion for Judgment Notwithstanding the Verdict, or Alternatively, Motion for Remittitur or New Trial. On December 7, 2000, the trial court entered its Order Regarding Trade Secret Misappropriation, which included the following findings:

1. That Tyson's nutrient profile (the "Profile") is a formula, and

2. The Profile has independent economic value from not being generally known; and

3. The Profile is not readily ascertainable because it is not readily available on the open market and it is not capable of being reverse engineered; and

4. Tyson took reasonable efforts to protect the secrecy of the Profile by instituting Tyson's Code of Conduct and Compliance Policy that contains a confidentiality provision, by having verbal understandings with its employees and by taking other measures that are equivalent to those standards in the industry.

Also on December 7, 2000, and because of this court's decision in Tyson I, which was handed down on November 16, 2000, the trial court granted the motion for judgment notwithstanding the verdict and concluded that Tyson I "appears to require a written contract prohibiting postemployment disclosure of information and upon no other grounds."

On December 29, 2000, the trial court entered an Order of Modification nunc pro tunc, adding two additional findings to the December 7, 2000 Order Regarding Trade Secret Misappropriation:

5. The Profile constitutes a trade secret under the ATSA.

6. Because David Purtle supplied the Profile to ConAgra which immediately implemented it without the knowledge or permission of Tyson, the Profile was misappropriated pursuant to the ATSA.

It is from the order of December 7, 2000, granting the motion for judgment notwithstanding the verdict and the modification order of December 29, 2000, that Tyson appeals. However, we note that the December 7, 2000 Order Regarding Trade Secret Misappropriation, as modified, was favorable to Tyson. The second December 7, 2000 order was the grant of the motion for a judgment notwithstanding the verdict. Tyson urges that this court reverse the trial court's order granting the motion for judgment notwithstanding the verdict and reinstate the jury's original damage award. ConAgra filed a notice of cross-appeal and in its brief argued before this court that Tyson's proof could not support the verdict and judgment.

We first admit to some confusion over the postjudgment relief requested by ConAgra in the form of a judgment notwithstanding the verdict or, alternatively, motion for remittitur or new trial. Part of our confusion may relate to impaneling a jury in chancery court. It appears clear to us that it was the trial court that first concluded that the nutrient profile was a trade secret that was misappropriated by Purtle and so instructed the jury. The trial court then submitted the issue of damages to the jury. The jury found that Tyson had been damaged and in what amount. This all seems akin to a judge directing a verdict in favor of a plaintiff with the jury fixing damages. In effect, ConAgra's posttrial motion was a motion for the trial court to reconsider its December 7, 2000 Order Regarding Trade Secret Misappropriation in light of this court's decision in Tyson I. Thus, we will treat the motion for judgment notwithstanding the verdict as one for reconsideration of the trial court's original order based on our decision in Tyson I.

The question then becomes: what is this court's standard of review for the trial court's order granting ConAgra's motion for judgment notwithstanding the verdict? The trial court read our decision in Tyson I as requiring a reversal of its initial ruling as a matter of law. The trial court reversed itself solely for the reason that it believed it was mandated to do so by Tyson I, due to the absence of a postemployment confidentiality agreement.

Our standard of review in chancery cases is de novo. See Tyson I; Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979). As we said in Tyson I:

All of the issues raised in the court below are before the appellate court for decision and trial de novo on appeal in equity cases involves determination of fact questions as well as legal issues. The appellate court reviews both law and fact and, acting as judges of both law and fact as if no decision had been made in the trial court, sifts the evidence to determine what the finding of the chancellor should have been and renders a decree upon the record made in the trial court. The appellate court may always enter such judgment as the chancery court should have entered upon the undisputed facts in the record.

342 Ark. at 677, 30 S.W.3d at 728-29 (quoting Ferguson, supra, 266 Ark. at 564, 587 S.W.2d at 23 (1979) (citations omitted)). We have further stated that we do not reverse a chancery court's findings of fact unless we conclude the chancery court has clearly erred. See Tyson I,. Bendinger v. Marshalltown Trowell Co., 338 Ark. 410, 994 S.W.2d 468 (1999). Accordingly, our standard of review in this case is de novo, but we will apply the clearly-erroneous standard to any findings of fact made by the trial court.

a. Postemployment confidentiality agreement.

Turning to the merits, we first consider whether the trial court erred in concluding that this court held in Tyson I that a postemployment confidentiality agreement be signed in all instances as an absolute prerequisite for trade-secret status and protection. We hold that the trial court did err in this regard. Our decision in Tyson I was not limited to the failure to have a postemployment contract. Rather, we concluded:

As best we can tell, there were no efforts on Tyson's part to restrain disclosure of information postemployment. And that distinguishes the facts in this case from the facts in Cardinal Freight. Obviously, the failure of a...