Uncle B's Bakery, Inc. v. O'ROURKE
| Citation | 920 F. Supp. 1405 |
| Decision Date | 01 April 1996 |
| Docket Number | No. C 96-3016-MWB.,C 96-3016-MWB. |
| Parties | UNCLE B'S BAKERY, INC., Plaintiff, v. Kevin O'ROURKE and Brooklyn Bagel Boys, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
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Dennis W. Johnson of Dorsey & Whitney, P.L.L.P., Des Moines, Iowa, for plaintiff Uncle B's Bakery.
Richard H. Moeller of Berenstein, Moore, Moser, Berenstein & Heffernan, Sioux City, Iowa, for defendants Brooklyn Bagel Boys and Kevin O'Rourke.
TABLE OF CONTENTS
I. INTRODUCTION ...............................................................1409
A. Procedural Background .....................................................1409
B. Findings Of Fact ..........................................................1411
1. The Provisional Nature Of Findings And Conclusions .....................1411
2. The bagel makers and their products ....................................1411
3. Bagels, shelf life, and technology .....................................1412
4. Uncle B's Bakery's efforts to protect its secrets ......................1413
5. Kevin O'Rourke's employment with Uncle B's Bakery ......................1416
6. O'Rourke's employment with Brooklyn Bagel Boys .........................1420
II. LEGAL ANALYSIS .............................................................1421
A. Standards For Preliminary Injunctions ...................................1421
1. "Dataphase" standards ................................................1422
2. Other standards ......................................................1422
B. Application Of The Standards ............................................1423
1. Likelihood of success on the merits ..................................1423
a. The law governing misappropriation of trade secrets ...............1424
i. The Iowa Uniform Trade Secrets Act .............................1425
ii. Is the information in question "trade secrets"? ................1428
iii. Is there a likelihood of disclosure by "improper means"? .......1429
iv. Likelihood of a successful common-law claim ....................1430
v. Substantial defenses ...........................................1430
b. Non-competition ...................................................1432
2. Irreparable harm .....................................................1434
3. Balance Of Harm ......................................................1436
4. The Public Interest ..................................................1438
C. The Requirements Of Fed.R.Civ.P. 65(c) & (d) ............................1438
1. The scope of a preliminary injunction ...............................1438
2. Fed.R.Civ.P. 65(c)'s security requirement ............................1439
III. CONCLUSION..................................................................1440
Although the court had not imagined that supermarket bagels could spawn rivalries more intense than that between cream cheese and butter, the court has discovered in this "trade secrets" case that rival bagel makers hone their competitive edges with as much alacrity as other entrepreneurs. Presently before the court is the application of one maker and distributor of supermarket bagels for a preliminary injunction seeking to protect its "trade secrets" in bagel making and packaging by enjoining a former employee from disclosing those secrets to, or working for, a competitor, and the competitor's misappropriation of any of those secrets. The court must decide what is, or was, "secret" in this case, and what "secrets," if any, it should protect. The former employee argues that the "secret" in the case, at least from him, was the non-disclosure and non-competition agreement the bagel maker seeks to enforce against him, but which he claims he never saw, signed, or otherwise agreed to. Governing law and a balance of equities must determine what are protectable secrets in this case, whether those secrets should be protected by a preliminary injunction, and what is the proper scope of such an injunction should the court find that one must issue.
Plaintiff Uncle B's Bakery, Inc., filed its complaint in this matter on February 6, 1996, against defendant Kevin O'Rourke, the former manager of Uncle B's Bakery's Ellsworth, Iowa, plant, and defendant Brooklyn Bagel Boys, Inc., O'Rourke's current employer. Diversity jurisdiction is asserted pursuant to 28 U.S.C. § 1332(a) and (c). Uncle B's Bakery is an Iowa corporation with its principal place of business in Iowa. O'Rourke is a citizen of the State of Virginia, but is currently employed as the plant manager of one of Brooklyn Bagel Boys' bagel manufacturing plants in Franklin Park, a suburb of Chicago, Illinois. Brooklyn Bagel Boys is an Illinois corporation with its principal place of business in Illinois.
Uncle B's Bakery's complaint in this matter is in eight counts, each alleging misconduct under Iowa law following O'Rourke's termination of his employment with Uncle B's Bakery and subsequent employment with Brooklyn Bagel Boys, which Uncle B's Bakery asserts is one of its direct competitors in the business of making and distributing bagels sold through supermarkets. Uncle B's Bakery's claims center upon alleged disclosure by O'Rourke of Uncle B's Bakery's trade secrets and O'Rourke's alleged violation of a non-competition agreement as the actual or threatened results of his employment with Brooklyn Bagel Boys. The complaint also alleges Brooklyn Bagel Boys' misappropriation of Uncle B's Bakery's trade secrets, as well as alleged interference by Brooklyn Bagel Boys with Uncle B's Bakery's prospective business advantage or Uncle B's Bakery's contractual relationship with O'Rourke.1
The matter immediately pending before the court is Uncle B's Bakery's motion for a preliminary injunction, filed the same day as Uncle B's Bakery's complaint, seeking to enjoin O'Rourke's violation of a non-competition agreement and the defendants' misappropriation of Uncle B's Bakery's trade secrets.2 In its motion for a preliminary injunction, Uncle B's Bakery also requested an expedited evidentiary hearing. On March 8, 1996, the court granted the request for an expedited hearing, and scheduled a hearing on the motion for a preliminary injunction for March 25, 1996, in Fort Dodge, Iowa.
In the interim, on February 28, 1996, Brooklyn Bagel Boys and O'Rourke filed a joint answer to the complaint denying all of Uncle B's Bakery's claims. In addition, the defendants asserted three affirmative defenses: (1) Uncle B's Bakery's complaint fails to state a claim upon which relief can be granted; (2) Uncle B's Bakery first breached its employment agreement with O'Rourke by failing to pay him for moving expenses and vacation pay; and (3) O'Rourke never signed nor agreed to the terms of any restrictive covenant with Uncle B's Bakery. On February 28, 1996, Brooklyn Bagel Boys and O'Rourke also filed a motion for an extension of time to respond to Uncle B's Bakery's motion for a preliminary injunction. The court granted the defendants' motion for an extension of time, requiring a response to the motion for preliminary injunction on or before March 6, 1996. A timely response to the motion for preliminary injunction was therefore filed on March 6, 1996.
This matter proceeded to hearing on March 25 and 26, 1996. At the hearing, plaintiff Uncle B's Bakery was represented by counsel Dennis W. Johnson of Dorsey & Whitney, P.L.L.P., in Des Moines, Iowa. Defendants Brooklyn Bagel Boys and Kevin O'Rourke were represented by local counsel Richard H. Moeller of Berenstein, Moore, Moser, Berenstein & Heffernan, in Sioux City, Iowa. At the hearing, Uncle B's Bakery presented numerous exhibits and the testimony of several witnesses, including Uncle B's Bakery's CEO, William Rose, Jr., and six other officers and employees of the company. Defendants also presented exhibits and the testimony of two witnesses, Kevin O'Rourke and Christopher Scott, Brooklyn Bagel Boys' vice president for operations.
At the hearing, the parties submitted a stipulation for a protective order to protect information the parties perceived to be sensitive or confidential from disclosure except to authorized persons and the court. A courtesy copy of the stipulation and proposed protective order had been transmitted to the court by facsimile on March 21, 1996. During the hearing, the court granted the parties' motion for a protective order, and entered the protective order as proposed by the parties. Thus, several portions of the preliminary injunction hearing were closed to the public and the representative for Brooklyn Bagel Boys, Christopher Scott, also left the courtroom.
The parties declined the opportunity for any post-hearing briefing. This matter is therefore fully submitted.
Although the court is disposing of Uncle B's Bakery's motion for a preliminary injunction following briefing by all parties and an evidentiary hearing lasting a day and a half, it is well to remember that in the context of preliminary injunction applications, the court typically operates under "severe time constraints" and must customarily decide the motion "on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1835, 68 L.Ed.2d 175 (1981). Thus, the Supreme Court in Camenisch stated the general rule that "the findings of fact and conclusions of law made by a court granting a preliminary injunction are not...
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