Union Carbide Corp. v. UGI Corp.

• Decision Date: 11 May 1984
• Docket Number: No. 83-1383,83-1383
• Citation: 731 F.2d 1186
• Parties: UNION CARBIDE CORPORATION, Plaintiff-Appellee, v. UGI CORPORATION, AmeriGas, Inc. and James A. Sutton, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1186

731 F.2d 1186

UNION CARBIDE CORPORATION, Plaintiff-Appellee, v. UGI CORPORATION, AmeriGas, Inc. and James A. Sutton Defendants-Appellants.

No. 83-1383.

United States Court of Appeals Fifth Circuit.

May 11, 1984.

Strasburger & Price, Ernest R. Higginbotham, Wilson W. Herndon, Dallas, Tex., Walter F.X. Healy, Gen. Counsel, Ugi Corp., Valley Forge, Pa., for defendants-appellants.

Rain, Harrell, Emery, Young & Doke, Marshall M. Searcy, Michael V. Powell, Robb L. Voyles, Dallas, Tex., Harvey Belkin, Law Dept., Union Carbide Co., Danbury, Com., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before REAVLEY, TATE and GARWOOD, Circuit Judges.

REAVLEY, Circuit Judge:

Appellants UGI Corporation, AmeriGas, Inc., and James A. Sutton appeal a preliminary injunction under 28 U.S.C. Sec. 1292(a)(1) (1976). The district court enjoined Sutton, who formerly worked for Union Carbide (Carbide), from disclosing, revealing, or utilizing Carbide's trade secrets or confidential information in any situation where AmeriGas would be competing against Carbide in the industrial gas industry. Appellants raise two issues: (1) whether the district court properly asserted personal jurisdiction over Sutton; and (2) whether the district court abused its discretion in issuing the preliminary injunction. We affirm.

I. Facts

Union Carbide through its Linde Division, and AmeriGas, a wholly-owned subsidiary of UGI, compete directly in the production and supply of industrial gases. The Linde Division of Carbide is comprised of four departments or business groups, one of which is gas products. AmeriGas is composed of three groups or divisions, one of which is the production and sale of industrial gases. These gases, such as oxygen, nitrogen, and argon, are produced in air-separation plants and sold to various industries.

This dispute centers around the attempts of both Carbide and AmeriGas to supply oxygen to Nucor Steel's "mini mill" steel plant, located in Jewett, Texas. Carbide alleges that AmeriGas tortiously induced Nucor to breach its oxygen supply contract with Carbide and that AmeriGas was assisted by Sutton's disclosure of trade secrets or confidential information that he acquired while working for Carbide. This disclosure, Carbide contends, constitutes misappropriation of trade secrets and a breach of Sutton's fiduciary duty to a former employer. Carbide seeks damages and a permanent injunction that would continue the restraints now imposed on Sutton and AmeriGas by the preliminary injunction. ¹

Sutton, a Pennsylvania resident, began his employment at Carbide's Linde Division in late 1957. As a trusted and highly-valued employee, he rose through the ranks, moving from engineering positions to management positions. By 1978, Sutton was named vice president, general manager of gas products, a role he maintained until May 1982, when he left Carbide to become president of AmeriGas.

In January 1980, Nucor and Carbide entered into a five-year contract under which Carbide would supply Nucor with oxygen at a price of $.28 per hundred cubic feet (ccf). Carbide planned to produce the oxygen at its facility at Garland, Texas, and to deliver the liquid gas by truck. The contract was to expire in January 1985. Early in 1981 Carbide began a substantial expansion of the Garland production facility, partially to accommodate the Nucor business. Later in 1981 Nucor informed Carbide that someone (AmeriGas) had approached it with an offer to supply oxygen at a lower price. AmeriGas and Nucor executed an oxygen supply contract on September 23, 1981. AmeriGas planned to build an on-site air separation plant and to supply the Nucor steel mill with gaseous oxygen at $.24/ccf, beginning in January 1983. After Carbide learned of the AmeriGas-Nucor contract, Carbide officials, including Sutton, met in October 1981 to discuss the Nucor situation. Carbide officials discussed their business opportunities at Nucor's Jewett mill, in light of AmeriGas' $.24 offer, and calculated Carbide's estimated "disinterest" price, or the point at which the selling price would equal the Garland facility's production and distribution costs. Carbide's disinterest price was $.20/ccf. To preserve the opportunity to supply Nucor's future needs at other locations, Carbide agreed to meet the $.24 price and to shorten the supply contract by one year. The parties amended the contract accordingly by early November 1981.

Soon after Sutton joined AmeriGas he participated in two meetings in which the "Nucor situation" was discussed. Under the amended Carbide-Nucor contract Nucor would be obligated to purchase oxygen from Carbide until January 1984. As its air separation plant at Jewett was under construction, AmeriGas became concerned that Nucor would not begin taking oxygen in January 1983, as provided in the AmeriGas-Nucor supply contract. Thus, AmeriGas attempted to resolve the problem. At a July 1982 meeting, AmeriGas officials agreed to reduce to $.20/ccf the price of supplying oxygen to Nucor. Sutton attended the meeting and ultimately approved the lower price.

The general manager of Nucor's Jewett mill later notified Carbide, indicating that Nucor had received a lower price for oxygen and that it could terminate the Carbide supply contract. Nucor repudiated its contract with Carbide and began taking oxygen from AmeriGas in January 1983.

The district court found that Sutton's participation in formulating an offering price that equalled Carbide's disinterest price for selling oxygen from the Garland plant provided a sufficient basis for exposing Sutton to individual liability and for asserting personal jurisdiction over him. The court found that the requirements of Texas' long arm statute, Tex.Rev.Civ.Stat.Ann. art. 2031b (Vernon 1964), ² and due process had been satisfied. Moreover, the court found that the prerequisites for issuing a preliminary injunction had been met. Thus, the court restrained Sutton from disclosing or revealing Carbide's trade secrets or confidential information in 14 different areas ³ and enjoined UGI and AmeriGas from allowing Sutton to participate in situations where Carbide would be a competitor in bidding for industrial gas business.

II. Personal Jurisdiction

A. Long Arm Statute

Appellants contend that the district court lacked personal jurisdiction over Sutton. They claim that Sutton committed no tort with injurious consequences in Texas; therefore, article 2031b has not been satisfied. Sitting in diversity, we can allow federal jurisdiction over a nonresident defendant only to the extent permitted by Texas' long arm statute. Brown v. Flowers Industries, Inc., 688 F.2d 328, 331 (5th Cir.1982), cert. denied, --- U.S. ----, 103 S.Ct. 1275, 75 L.Ed.2d 496 (1983).

Article 2031b expressly authorizes service of process upon nonresident defendants who have engaged in business in Texas if the action "aris[es] out of such business." For purposes of the long arm statute, "the committing of any tort in whole or in part" in Texas is equivalent to "doing business." The Texas Supreme Court has construed the statute more broadly, obviating the requirement that "the cause of action ... arise from, or be connected with" an act done or transaction consummated by the nonresident defendant in the forum state when his "numerous contacts [are] of such a nature ... as to satisfy the demands of the ultimate test of due process." Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex.1982), rev'd on other grounds, --- U.S. ----, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). We need not decide whether Sutton's contacts with Texas that are unrelated to this cause would allow article 2031b to reach Sutton under Texas law, however, since the district court properly grounded jurisdiction on those activities implicated in this suit--the out-of-state acts giving rise to Carbide's alleged injury in Texas. ⁴ See Bennett Industries, Inc. v. Laher, 557 F.Supp. 965, 966 (N.D.Tex.1983).

Jurisdiction over Sutton is not based on the uncontested jurisdiction over UGI and AmeriGas. Rather, Sutton's personal participation in the actions causally related to Carbide's alleged injury provides a distinct basis for the assertion of personal jurisdiction over Sutton. See L.C.L. Theatres v. Columbia Pictures Industries, Inc., 619 F.2d 455, 457 (5th Cir.1980); Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 907 (1st Cir.1980). Sutton's admitted attendance at the July AmeriGas meeting wherein the $.20/ccf price was reached and his approval of the price causally relate to Carbide's damages flowing from loss of the Nucor contract under Carbide's claim of tortious interference.

Carbide carried its burden of establishing a prima facie case that appellants committed a tort partially in Texas. See Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1232 (5th Cir.1973). Carbide alleged that appellants intentionally arrived at a price equal to Carbide's disinterest price and tortiously induced Nucor to breach its supply contract with Carbide. Carbide sufficiently alleged all the elements of tortious interference with contract. See Cook Industries, Inc. v. Community Grain, Inc., 614 F.2d 978, 980 (5th Cir.), cert. denied, 449 U.S. 952, 101 S.Ct 356, 66 L.Ed.2d 216 (1980) (elements required under Texas law).

Appellants argue that any tortious interference occurred before Sutton left Carbide, when Nucor and AmeriGas signed their supply agreement in September 1981. We disagree. Carbide set forth two instances of tortious interference. Sutton was allegedly involved in interfering with the amended Carbide-Nucor contract, which provided a sale price of $.24/ccf and a termination date of January 1984. Any damage that Carbide suffered from the breach of that amended contract occurred after Sutton joined AmeriGas.

Appellants assert that Sutton's role in the Nucor incident was privileged. They cite B.,...