Webcraft Technologies, Inc. v. McCaw

• Decision Date: 25 November 1987
• Docket Number: No. 87 Civ. 6642 (PNL).,87 Civ. 6642 (PNL).
• Citation: 674 F. Supp. 1039
• Parties: WEBCRAFT TECHNOLOGIES, INC., Plaintiff, v. Margo C. McCAW, Defendant.
• Court: U.S. District Court — Southern District of New York

674 F. Supp. 1039

WEBCRAFT TECHNOLOGIES, INC., Plaintiff, v. Margo C. McCAW, Defendant.

No. 87 Civ. 6642 (PNL).

United States District Court, S.D. New York.

November 25, 1987.

Golenbock and Barell, New York City, Arthur M. Handler, Robert S. Goodman, Brian J. Kearney, Kimmelman, Wolff & Samson, P.A., of counsel, for plaintiff.

Brauner Baron Rosenzweig Kligler Sparber Bauman & Klein, New York City, Mel P. Barkan, Amy D. Levine, of counsel, for defendant.

LEVAL, District Judge.

This is a motion for a preliminary injunction. Plaintiff Webcraft Technologies, Inc., seeks to enjoin defendant Margo McCaw, a former employee of Webcraft, from disclosing confidential proprietary information relating to Webcraft's business and from soliciting or servicing any Webcraft customers for two years. Webcraft further seeks an order requiring McCaw to return to Webcraft any documents obtained by McCaw in the course of her employment at Webcraft. Webcraft contends that McCaw is in violation of a contractual obligation not to compete or expose trade secrets, as well as of fiduciary duties arising out of the employment relationship.

The parties first appeared on Webcraft's application for a temporary restraining order on September 18, 1987. No action was taken on the application and the conference was adjourned until September 22 to allow McCaw an opportunity to retain counsel. When the parties returned on September 22, counsel for both parties executed a consent temporary restraining order. It was also ordered on consent that discovery take place on an expedited schedule and that the preliminary injunction hearing be conducted on a submitted record of affidavits, depositions, and exhibits.

The record amply supports Webcraft's application for preliminary relief. The motion is accordingly granted.

Background

Webcraft in the business of manufacturing custom printed material such as catalogs, free-standing inserts, computer-related promotional games, printed fragrance samples, personalized printed documents, lotteries, and cosmetic samples. Most of Webcraft's products are produced by "inline finishing," whereby a finished product is produced in one continuous multi-step procedure, including printing on both sides and finishing through such steps as folding, turning, gluing, scoring, perforating, and cutting.

McCaw was hired as a sales representative by Webcraft in November 1984. She signed an employment agreement with covenants prohibiting her from competing with Webcraft or soliciting Webcraft customers within the continental United State for a period of two years and from disclosing any trade secrets relating to Webcraft's business. For the next four months, McCaw familiarized herself with Webcraft's products, business procedures, and technical capabilities. She visited the various departments at the plant and attended a week-long training course. She learned Webcraft's production capabilities and its method for estimating and quoting prices.

In late March 1985, after completing her training, McCaw started work at Webcraft's New York City office. As a condition of continuing employment, she was requested to sign a superceding, and somewhat more restrictive, employment contract. The superceding agreement contains a broad, worldwide covenant not to compete or solicit customers for a period of two years from the date of termination of employment; a trade secrets provision barring the disclosure of confidential information relating to Webcraft's business, including the names and needs of Webcraft customers and Webcraft pricing information; and a provision designating certain material —such as notes, specification and lists compiled while at Webcraft — as property of Webcraft and requiring its return upon leaving Webcraft. McCaw signed the superceding agreement on May 6, 1985.

In June 1987, McCaw was approached by William Mattran, the Eastern Regional Sales Manager of Tech Web, Inc. Tech Web is a competing printing firm based in Wheeling, Illinois which, like Webcraft, does in-line finishing. Mattran explored with McCaw the possibility of her coming to work as a sales representative at Tech Web's New York office. McCaw made a brief visit to Tech Web's New York office and met over lunch with Mattran to discuss employment with Tech Web. During the lunch meeting, McCaw made a list for Mattran of her fifteen or twenty best known customers and prospects at Webcraft. McCaw maintains that the list was made so that Mattran could assess her selling experience and also discern whether there were any conflicts between her list and the customer/prospect lists being serviced by Tech Web.

On July 9, 1987, upon visiting Tech Web's plant in Wheeling, Illinois, McCaw was offered a position in Tech Web's New York sales office; she accepted the offer and agreed to start work just over three weeks later on August 3.

McCaw neither tendered her resignation nor gave notice to Webcraft, but stayed on for three weeks concealing both the fact of her expected departure and that she was going to a competing firm. On Friday, July 31, 1987, she submitted her resignation, effective immediately. Her supervisor reminded her of the obligations under the employment contract. In addition, Webcraft's counsel sent her a letter restating these obligations. The following Monday, McCaw began work for Tech Web.

During the three week interlude between accepting employment with Tech Web and notifying Webcraft that she would be leaving, McCaw passed confidential Webcraft information to Tech Web. She spoke with Gerald Shapiro, Tech Web's Vice President of Sales and Marketing, on several occasions. She provided him with the job specifications on at least two accounts sought by Webcraft. In addition, she provided pricing information. As to one customer she advised Shapiro of the need to beat $29 per thousand. She also telecopied a sketch of a proposed product to Tech Web's New York production manager. McCaw testified that her reason for passing the information to Tech Web while still employed at Webcraft was to allow Tech Web to prepare a price estimate to be ready as soon as she arrived at Tech Web. Within two days of arriving at Tech Web, McCaw sent price quotes to both prospective customers.

Also upon arriving at Tech Web, McCaw sent letters to most of her former Webcraft customers and viable prospects. The letters indicated that she had left Webcraft for Tech Web and that Tech Web offers many of the same services provided by Webcraft. She followed up most of these letters with telephone calls and, in many cases, with personal visits. In addition, McCaw submitted a list of her Webcraft customers and viable prospects to Shapiro, which he entered, in part, into Tech Web's computer data base.

McCaw also removed certain tangible property from the Webcraft office.¹ Before leaving Webcraft, McCaw photocopied her rolodex. She then left the copy with Webcraft and brought the original with her to Tech Web. The rolodex contains 113 cards, 28 of which identified companies (and the appropriate contact) also appearing on McCaw's customer list. In addition, McCaw removed eight pages of Webcraft quotes and pricing sheets relating to three possible jobs she pursued while at Webcraft. These included the two jobs she discussed with Shapiro while still at Webcraft, as well as a third. As with the first two, although McCaw made a bid on the third job upon arriving at Tech Web. McCaw also brought with her a statement of Webcraft's commission plan for its sales representatives.

Webcraft also alleges that, after the imposition of the consent temporary restraining order, McCaw sent a job quote to a customer she learned of while at Webcraft.

Discussion

To win a preliminary injunction in this Circuit, the moving party must demonstrate "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them fair ground for litigation and a balance of hardship tipping decidedly toward the party requesting the preliminary relief." Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam); see also LeSportsac, Inc. v. K-Mart Corp., 754 F.2d 71, 74 (2d Cir.1985). I am convinced that both branches of the Jackson Dairy test are satisfied.² The evidence reviewed above shows that McCaw was guilty of serious breaches of not only her employment agreement but also of the fiduciary obligations of trust that grow out of the employment relationship. During her last three weeks of employment, after accepting employment with a competitor, she embezzled and converted valuable trade secrets of her employer, passing them on to her future employer.

Although in some respects the restrictive covenants of the Webcraft agreement are overbroad, they are not so overreaching as to void the entire agreement including its reasonable portions. In many provisions that McCaw violated, the agreement is reasonably designed to protect Webcraft's trade secrets. The motion for a preliminary injunction is accordingly granted.

I.

The May 6, 1985, employment contract between McCaw and Webcraft imposes broad restrictions on competitive activity for two years after termination of employment. It provides that,

following the effective date of the termination of ... employment with Webcraft, ... she will not, for ... herself or as an ... agent or employee of any other person, firm or corporation, directly or indirectly, render any services in connection with the manufacture, development, sale or servicing of any product competitive with, or usable for substantially the same purpose as, any product manufactured or sold or in the process of development by Webcraft or, for a period of two years following said termination date, solicit business from or service the accounts of any customer of Webcraft during the two year period preceding said termination date.

(PX 7) (emphasis supplied.)

In addition, the contract...