Xpert Automation Systems, Corp. v. Vibromatic Co., Inc.
| Decision Date | 25 March 1991 |
| Docket Number | No. 80A02-9006-CV-345,80A02-9006-CV-345 |
| Citation | 569 N.E.2d 351 |
| Parties | XPERT AUTOMATION SYSTEMS, CORP., Donald R. Gilliatt and Marc S. Gilliatt, Defendants-Appellants, v. VIBROMATIC CO., INC., Plaintiff-Appellee. 1 |
| Court | Indiana Appellate Court |
Jeffrey S. Nickloy, Campbell Kyle Proffitt, Carmel, for defendants-appellants.
The plaintiff, Vibromatic Co., Inc., initiated this action by filing a verified complaint seeking both preliminary and permanent injunctions as well as damages for unjust enrichment. This complaint named as defendants Xpert Automation Systems Corp., Donald R. Gilliatt, Marc S. Gilliatt, and Donald R. Bragg. After conducting a hearing, the court entered a preliminary injunction which was subsequently amended to prohibit the defendants from: 1) keeping or using copies of a list of clients generated in response to Vibromatic's discovery; 2) contacting, soliciting, or accepting business from any of the companies named on the list; and 3) identifying themselves with Vibromatic in any manner. In addition, the court ordered the defendants to pay Vibromatic 10% of the funds derived from work performed for companies which were named on the disputed list. Xpert and the Gilliatt brothers appealed the court's entry of the preliminary injunction, 2 but Bragg did not choose to participate in the appeal. (Hereinafter the collective term "defendants" shall refer only to the appealing defendants, except where another meaning is required by context).
Plaintiff failed to file a timely brief or petition for extension of time to file brief, and both his belated motion for extension of time and his petition to reconsider the belated motion were denied. Because the court of appeals need not burden itself with the responsibility of developing arguments for either party when an appellee fails to file a brief, we have the discretion to reverse the lower court if the appellant demonstrates prima facie error. Burroughs v. Burroughs (1913), 180 Ind. 380, 381, 103 N.E. 1; Fisher v. Board of School Trustees (1986), Ind.App., 514 N.E.2d 626, 628. Prima facie error is error appearing at first sight, on first appearance, or on the face of the argument. Johnson County Rural Electric Membership Corp. v. Burnell (1985), Ind.App., 484 N.E.2d 989, 991. In addition, the appellee may be considered to have confessed error by not filing a brief, and the appellate court may consider the statement of facts contained in appellant's brief both to be true and sufficient for the disposition of the appeal. Burnell, 484 N.E.2d at 991.
The defendants ask this court to remand this cause to the trial court with instructions to modify the injunction to allow defendants to use the disputed list and to do business with the companies named on the list. The defendants do not seek modification of the injunction insofar as it prohibits them from suggesting any connection between them and Vibromatic.
The defendants identify a single issue on appeal, which we restate:
Were the trial court's findings of fact and conclusions of law sufficient to establish that the disputed customer list was a trade secret under our statute?
The trial court made seventy detailed findings of fact in support of its judgment. We summarize the relevant facts as found by the court.
Vibromatic is an Indiana corporation which makes vibrating parts feeding systems. These systems are designed to move parts of various shapes and sizes to different areas of manufacturing plants. Defendants Donald and Marc Gilliatt were employees of Vibromatic. Donald had worked for Vibromatic for twenty-two years, had at one time been one of its owners, and, for some time before he left employment with Vibromatic, had been its plant manager. Marc had worked for Vibromatic for seven years, and, at the time he left Vibromatic, he was head of production control. Because of their positions, both Donald and Marc developed personal relationships with some of Vibromatic's customers and had access to information which Vibromatic attempted to keep secret by a variety of security measures. This confidential information included its customer list, which was kept on a secured computer disk. Of all of Vibromatic's employees, only Donald and Marc knew how to access the customer list from the disk using the database program on Vibromatic's computer.
On March 6, 1987, Donald gave Vibromatic notice that he intended to terminate his employment on April 15. Marc terminated his employment on April 19. The non-appealing individual defendant, Richard O. Bragg, terminated his employment on April 20. Eight days after the last of the individual defendants left Vibromatic, the three incorporated defendant Xpert. The trial court found that the individual defendants intended to form a corporation to compete with Vibromatic long before they quit. The court also found that Donald Gilliatt expressly misrepresented his intention to go into competition with Vibromatic when asked by its directors after he tendered his resignation but before his termination date.
Shortly after the individual defendants formed Xpert, they began to solicit business from companies which included some of Vibromatic's customers. Because all 228 companies named on a document prepared by the defendants entitled "Prospective Customers" had been customers of Vibromatic, the trial court explicitly found that the defendants built their customer list on Vibromatic's customer list. The court found that it was common industry practice to keep customer lists secret, and that Vibromatic's list had been purged of various types of problem customers.
Defendants' brief sets forth additional facts not specifically addressed by the court's findings and conclusions. Defendants state that the facts show that there are approximately sixty companies competing in the vibratory parts feeding business. Customers seeking vibratory parts feeding systems generally seek competitive bids on jobs, and usually buy systems from more than one system supplier. There are no exclusive vendor--vendee relationships in the vibratory parts feeder system business.
In their capacities as employees of Vibromatic, the individual defendants became acquainted with potential customers and their representatives. After they left Vibromatic, the individual defendants created a list of approximately five hundred potential customers. Many of these potential customers had been customers of Vibromatic in the past. In addition to the knowledge of the market they gained while employed at Vibromatic, the defendants used manufacturer's representatives, cold calls, and customer referrals to develop a customer base.
After Vibromatic filed suit, it served the defendants with interrogatories. One of these interrogatories requested that the defendants name all the customers which they solicited on behalf of Xpert. The defendants declined to submit a list of all potential customers which they had contacted; instead, they submitted a list of two hundred twenty-eight potential customers that had previously been customers of Vibromatic. It was this list that the trial court concluded was Vibromatic's customer list.
Vibromatic is a growing, successful business concern. It has annual sales of almost $6,000,000.00, and it has a sales base sufficient to allow it to turn down jobs which it believes to be only marginally profitable. Vibromatic has been forced to cut its prices in response to competition by the defendants.
In contrast, Xpert is not financially healthy. It has a substantial negative net worth, with debts amounting to nearly twice its assets. Defendants describe its condition as precarious.
The decision whether to issue a preliminary injunction is committed to the sound discretion of the trial court, and normally this court may not reverse unless the trial court abused its discretion. Harvest Insurance Agency v. Inter-Ocean Insurance Co. (1986), Ind., 492 N.E.2d 686, 688. The trial court commits an abuse of discretion only when it reaches an erroneous conclusion and judgment--that is to say, one which is clearly against the logic and effect of the facts or the reasonable, probable deductions which may be drawn from the facts. Boles v. Weidner (1983), Ind., 449 N.E.2d 288, 290.
The court's most important finding, and the finding most fatal to the issuance of the preliminary injunction, is its finding number 17., which reads:
"Cold calling" various industrial concerns listed in the "Thomas Register" would be less efficient, more time consuming and costly than using a list of existing customers and customer contacts with whom a good-will relationship was already established and who have bought such products and are known to be creditworthy.
Based on its findings of fact, the trial court made twenty conclusions of law. Three of these conclusions deal with the customer list:
# 2. Vibromatic's customer list together with knowledge of, and a relationship with, the customer contacts such as project engineers or purchasing agent, [sic] and knowledge of customer special requirements, isolates a pre-screened, creditworthy market of customers who are known buyers of parts feeding equipment and as such has "independent economic value" to both its creators and to competitors "who can obtain economic value from its disclosure or use". [citations omitted].
# 3. Although some customers, customer contacts and customer requirements may be known by some competitors, the evidence shows such evidence to be fragmentary and scattered, and customer lists contacts are not "generally known" to competitors. [citations omitted].
# 6. Vibromatic's customer list, contacts, customer requirements and its solutions developed to its customers' parts feeding problems are "trade secrets" and as such are entitled to judicial protection. [citations omitted].
Defendants argue that the trial court committed reversible error in finding that the list of 228 Vibromatic customers...
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