ORDER
JAMES CARR, District Judge
This is one of two lawsuits between the parties arising from an aborted sale of a Rite Aide drugstore in Lima, Ohio. The defendant in this case, owner of the drugstore, brought and prevailed on a declaratory judgment action in an Alabama state court. Plaintiff here, George Novogroder, the frustrated prospective purchaser, brought this suit after the owner filed its Alabama action.
I stayed this suit, permitting the first-filed Alabama suit to go forward.
That court determined, and its judgment is final, that the parties did not have a contract for the sale and purchase of the drugstore. That judgment precludes Novogorder's claims in this case. Remaining, however, are the owner's counter-claims: 1) for slander of title; 2) to quiet title; 3) for interference with business relationships; and 4) for fraud. Pending is the plaintiff's motion for summary judgment as to the counter-claims. (Doc. 53).
Novogroder also seeks summary judgment on the basis of res judicata, contending that the owner could and should have asserted the counter-claims in this suit in the Alabama complaint and litigation. I have previously rejected this contention, Novogroder v. NOM Lima Shawnee, LLC, 2009 WL 4283142 (N.D. Ohio). I decline to revisit my earlier decision.
The motion shall be granted in part and denied in part. To the extent I deny the motion it is because I find that material disputes of fact need to be tried.
The parties agree that the owner's title can be quieted without action by this court. That claim shall accordingly be dismissed as moot, without prejudice. I agree with Novogroder that the owner cannot make out a claim of fraud. This opinion deals, accordingly, with the slander on title and interference with business relationship claims.
Background
After extensive negotiations and three earlier drugstore sale/purchase transactions involving the same parties, the owner sent a signed purchase agreement to Novogroder. He did not return it. In the meantime, another prospective purchaser provided a letter of intent to the owner. That letter indicated a willingness to purchase the drugstore for $400,000 more than the Novogroder offer. The letter of intent conditioned proceeding with the contemplated transaction with, inter alia, the owner's delivery of clear title.
After receiving the letter of intent from the other possible purchaser, the owner notified Novogroder that it was rescinding its offer. Novogroder's counsel immediately contacted the owner, asking it to go through with the sale to Novogroder. It declined to do so.
Through counsel, Novogroder expressed an intent to take all possible legal steps to reconstitute the transaction and acquire the drugstore. Among those contemplated actions was filing of a lis pendens on the property. Doing so would preclude the owner's ability to sell the property for as long as the lis pendens was of record.
The owner filed their suit in Alabama, seeking a declaration that, under Alabama law, no binding contract existed. According to the owner, Novogroder and his counsel were served with the summons and complaint in the Alabama suit shortly after its filing.
Novogroder then filed this suit about three weeks later in the Allen County, Ohio, Court of Common Pleas. The owner removed it to this court.
Within a day of filing this suit, Novogroder filed a lis pendens on the drugstore property.
Novogroder's brief states that, when he filed the lis pendens he was unaware of the pendency of the Alabama suit. The record suggests otherwise, in light of the apparent proof of service on him and his counsel of the Alabama suit some weeks before he filed this suit and the related lis pendens.
In any event, Novogroder contends that his filing of the lis pendens was in good faith, because he reasonably believed that he was entitled to prevail in his legal efforts in Alabama and here to enforce the purchase agreement.
The owner claims that the lis pendens had the effect, as, in their view, Novogroder intended, of stymying their ability to sell to the party which had submitted the letter of intent or anyone else. According to it, market conditions have reduced the value of the drugstore substantially.
With regard to whether the lis pendens had an actual effect on the failure of the parties to proceed on the letter of intent, Novogroder points out that, so far as the record before this court shows, the owner took no action in response to that letter. Nor did it move to vacate the lis pendens, either before I stayed proceedings in this case, while the Alabama case was being adjudicated, or even to the present day. Nor did it make a demand on Novogroder that he simply vacate the lis pendens on his own.
Novogroder, in any event, contends that, when he filed this suit and the lis pendens, he was unaware that another possible purchaser had appeared on the scene.
The parties dispute the truthfulness of this contention. According to the owner, the following testimony by Wade Lennox, the real estate broker involved in the transaction between the parties, shows that Novogroder was on notice that someone else had expressed interest in purchasing the drugstore:
Q. Did you ever communicate to Mr. Novogroder or his people that, "Hey, we have other buyers that are interested. Please either don't file your lis pendens, or please remove your lis pendens to avoid causing us harm?"
A. That —
Q. Is that a "no?"
A. That's a no. No. I don't believe — now the fact that there was another offer there, I believe was imparted, you know, but not who it was from; not what it was for, you know, and certainly not — certainly not for the purposes of — I mean, it had nothing to do with the lis pendens, in that let me strike that.
Each party reads this testimony differently. The owner contends it shows that Novogroder knew someone else was in sight before he filed this suit and the lis pendens. Novogroder contends it shows that nothing was in fact told him, and that at most, Lennox merely believes he told him about another possible purchaser — belief not being enough, in Novogroder's view, to stand as proof of what he knew.
Discussion
The elements of the tort of slander of title are: "(1) there was a publication of a slanderous statement disparaging claimant's title; (2) the statement was false; (3) the statement was made with malice or made with reckless disregard for its falsity; and (4) the statement caused actual or special damages." Green v. Lemarr, 139 Ohio App. 3d 414, 430 (2000).
The elements of the tort of interfering with business relationships are: "(1) a business relationship, (2) the wrongdoer's knowledge thereof, (3) an intentional interference causing a breach or termination of the relationship, and (4) damages resulting therefrom." Geo-Pro Serv., Inc. v. Solar Testing Laboratories, Inc., 145 Ohio App. 3d 514, 525 (2000).
To prevail on either of these claims, the owner must show that Novogroder knew that another possible purchaser was in the picture. He denies any such knowledge. The owner points to Lennox's testimony of proof to the contrary.
As noted, the parties read that testimony in their own ways. I read it as ambiguous. Viewed most favorably to owner, Lennox can be heard saying that he (or someone — he spoke in the passive voice) "imparted" "that there was another offer there." Whether his belief to that effect would persuade a jury is for the jury itself to decide.
Most simply put: whether Novogroder knew about the competition when he filed the lis pendens is in dispute.
To be sure, even if the jury found that, despite his denials, Novogroder was aware of another's presence, the owner still has to show that he acted with malice, rather than in good faith.
That, too, is a disputed fact for the jury to find. Much of the outcome will depend on its assessment of Novogroder's credibility.
Summary judgment, accordingly, is not appropriate on the slander of title claim.
Whether to allow the claim of tortious interference with business relationships to go forward is a much closer question. For more than three weeks after getting the letter of intent, the owner, apparently, did nothing in response. That being so, how and why can it blame Novogroder that it did not get to sell the drugstore to someone else?
There is, moreover, the owner's failure to have made any efforts or taken any action to have the lis pendens lifted.
On the other hand, Novogroder filed the lis pendens. A jury could find that he knew, or reasonably should have known that its effect would be to make the property unmarketable to the party which had expressed interest in purchasing the property. By knocking that party out of the ring, Novogroder was left standing alone. And the owner's purse reduced by $400,000.
The jury might find, on the other hand, that the deal with the author of the letter of intent fell through for reasons having nothing to do with the lis pendens — including inaction on the owner's part.
Novogroder argues in his reply brief that the owner can prove no damages in view of his willingness to go forward with the transaction, which, despite the filing of the two lawsuits, apparently continued, at least for a while. A jury might well find that the owner's failure to do so constituted a failure to mitigate its damages.
Suffice to say that there are enough questions, the answers to which depend on findings as to disputed facts, for me to conclude that summary judgment would be appropriate as to neither of the pending claims.
It is, therefore,
ORDERED THAT the plaintiff's motion for summary judgment as to defendant's counterclaims be, and the same hereby is deemed moot with regard to the claim to quiet title; granted with regard to the fraud claim and denied with regard to the slander of title and interference with business relationships claim.
So ordered.
on — Noncompetition Injunction
Having carefully balanced the four factor test for the issuance of an injunction, the Court concludes that OfficeMax has satisfied its burden and the Court will enjoin activity by the individual defendants that violates the Agreements. The Court declines, however, to enjoin County Qwik Print. County Qwik Print is not a party to the noncompetition agreements and OfficeMax has not demonstrated that, as a separately organized and operating business, County Qwik Print itself should be subject to an injunction based on Agreements to which it was not a party.
C. OfficeMax's claimed breach of the Confidentiality Provision and Violation of the Maine Trade Secrets Act
Neither OfficeMax nor the Defendants clearly delineate their arguments regarding the Defendants' alleged breach of the confidentiality provision. The Court presumes that the parties arguments on this point mirror their arguments regarding violation of the Maine Trade Secrets Act (MTSA), 10 M.R.S.A. § 1541 et seq., as both claims rely on the same evidence.
The Confidentiality Provision states:
I understand I may have access to certain confidential information such as: names, addresses, price lists, purchasing histories and requirements of customers and potential customers; location, region, and division financial reports, sales and service manuals and bulletins; item file costs and special contract costs; floor plans and drawings of facilities; marketing strategies; and other similar information. I recognize that such information is the confidential information and trade secrets of LS H, and I agree to not divulge such confidential information or trade secrets to any person, firm, or institution, except as such disclosure is a necessary part of a bona fide merchandise sale negotiation with an actual or potential LS H customer. Further, upon termination of my employment with LS H, I will continue to treat such confidential information and trade secrets as private and privileged and will not, either for my own purposes or as an employee of or for the benefit of any other entity or person, use such information or disclose it to any person, firm, or institution.
Defs.' Ex. 1 at 1.
With respect to OfficeMax's claims under the MTSA, the Defendants challenge OfficeMax's request for a preliminary injunction on two points: first, asserting that OfficeMax has failed to adduce proof of violation to warrant a preliminary injunction, Defs.' Br. at 12-13, and second, that OfficeMax has failed to establish that it has or will suffer from any loss of business, Id. at 14-15. The Court concludes that the Defendants are correct on both points.
Before considering whether the Defendants have misappropriated OfficeMax's confidential information or trade secrets, the Court must consider what types of information fall within OfficeMax's allegations. With respect to OfficeMax's confidential information, the Court understands the confidentiality provision to cover:
names, addresses, price lists, purchasing histories and requirements of customers and potential customers; location, region, and division financial reports, sales and service manuals and bulletins; item file costs and special contract costs; floor plans and drawings of facilities; marketing strategies; and other similar information.
Defs.'s Ex. 1 at 1. This definition of "confidential information" sweeps broader than the statutory definition of a "trade secret."
Under the MTSA, a "trade secret" is defined as "information" that:
A. Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and
B. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
10 M.R.S.A. § 1542(4).
With these definitions in mind, the Court finds that only a portion of the allegedly misappropriated information may be properly regarded as confidential or a trade secret. OfficeMax has cited its gross profit margin, "its customers, and its sales and pricing strategies" as information that was misappropriated by the Defendants. Defs.' Br. at 8-9. However, much of it was already in the public domain, and was "easily ascertainable" by OfficeMax's competitors. See Hess v. Gebhard Co. Inc., 808 A.2d 912, 924 (Pa. 2002) ("Equity will not protect mere names and addresses easily ascertainable by observation or reference to directories.").
OfficeMax's senior security engineer, Jason Sullivan, admitted that one need look no further than a phone book to seek potential OfficeMax customers. Tr. 40:12-24. Moreover, OfficeMax's prices were widely distributed to many of its customers who had no legal duty to keep the information confidential. Tr. 129:11-130:6; see also Ne. Coating Techs., Inc. v. Vacuum Metallurgical Co., 684 A.2d 1322, 1234 (Me. 1996) (holding that summary judgment against a former employer was proper because its "unsolicited distribution of the information to various individuals who had no legal duty to maintain its secrecy precludes it from qualifying as a trade secret"). Based on the limited record before it, and the absence of more specific briefing, the Court concludes that of the allegedly misappropriated information, only OfficeMax's profit margins and pricing strategy have been shown to be arguably a secret.
The Court turns to whether OfficeMax is likely to prove that the Defendants used its confidential information or misappropriated its trade secrets. On this, OfficeMax makes much out of the Defendants' purported inability to remember OfficeMax information. Pl.'s Br. at 8. This argument misses the mark. The Defendants' recollection of OfficeMax information is relevant only if they actually used the information. There is scant evidence of such use.
Under the MTSA, "misappropriation" includes:
B. Disclosure or use of a trade secret of another without express or implied consent by a person who: . . .
(2) At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use;
10 M.R.S.A. § 1542(2).
OfficeMax points to an email exchange between Rattray and a former OfficeMax customer in which Rattray states that "I can provide the same services that I offered you in the past. Our pricing structure is very aggressive. Give me a call or drop me a line and I can give you some pricing, I think you will be pleasantly surprised." Pl.'s Br. at 9 (emphasis in Pl.'s Br.). The language strikes the court as nothing more than vague puffery without any reference to specific OfficeMax pricing. Indeed, when pressed on the email's underlying meaning, Mr. Rattray maintained that he was comparing his prices to any generic office supplier — "To Office Depot, to OfficeMax, to Staples, to whoever she was buying supplies from" — and not to OfficeMax in particular. Tr. 310:22-25.
Moreover, the value of OfficeMax's confidential information to the Defendants is both speculative and transient. As Mr. Polcaro confirmed, sales information constantly changes. See Tr. 41:21-25, 139:15-140:9. Although Mr. Polcaro testified about the Defendants' ability to back-calculate OfficeMax's pricing strategy from its prices and the Defendants' general understanding of the customer demands, see tr. 140:12-41:21, Mr. Palcaro's testimony is speculative. There is no direct evidence that Defendants used OfficeMax's confidential information to successfully compete against OfficeMax. See Roy, 34 A.2d at 480-81 ("[W]hile an employer, under a proper restrictive agreement, can prevent a former employee from using his trade or business secrets, and other confidential knowledge gained in the course of the employment . . . he cannot preclude him from exercising the skill and general knowledge he has acquired or increased through experience or even instructions while in the employment.").
Further, the temporal usefulness of OfficeMax pricing was extremely limited. The Defendants testified that office product pricing is highly volatile and changes monthly, weekly, and sometimes daily. The gap between November 17, 2009, when OfficeMax terminated Mr. Levesque, and late December 2009, when Mr. Levesque first began to compete against OfficeMax, is sufficient to render any confidential information stale. Although the gap for Mr. Rattray was a matter of days, there is insufficient evidence in this record that Mr. Rattray actually used any confidential information to compete against OfficeMax.
In short, OfficeMax has not shown that it is likely that the individual Defendants used OfficeMax confidential information or trade secrets. As a preliminary injunction requires a likelihood of success on the merits, the Court denies a preliminary injunction based on both breach of the confidentiality provision and violation of the MTSA.
III. CONCLUSION
The Court hereby GRANTS OfficeMax Incorporated's motion for preliminary injunction (Docket # 6) and DENIES the motion insofar as it seeks to enforce the Confidential Information clause of the Agreement or to enjoin the Defendants on the basis of a violation of the Maine Trade Secrets Act, 10 M.R.S.A. § 1541 et seq.
The Court hereby enjoins the individual Defendants as follows: The Defendants David Levesque and Dana Rattray are prohibited from directly or indirectly soliciting or selling office supplies, office furniture, office technology products, and copier and printer repair services to those customers whom they solicited and sold such products and services to on behalf of OfficeMax during the year before the end of their respective periods of employment with OfficeMax, where such customers are located within Aroostook County or within sixty (60) miles outside the border of Aroostook County. This prohibition does not extend to any former OfficeMax customers that the Defendants serviced during or prior to this one-year interval that OfficeMax diverted into telesales and lost as OfficeMax customers.
This injunction will remain in effect for a period of one year from the date of this Order.
The Court DENIES the Defendants' motions to dismiss. Defs.' Mot. to Dismiss Pl.'s Compl. for TRO, Injunctive Relief, and Damages (Docket # 16); Def.'s Mot. to Dismiss Pl.'s Compl. for TRO, Injunctive Relief, and Damages (Docket # 17).
The Court has not separately discussed the merits of the Defendants' motions to dismiss but the opinion discusses each of the legal issues raised in those motions and resolves them against the Defendants. Accordingly, the motions must be denied.
SO ORDERED.
ORDER ON MOTION TO STAY INJUNCTION PENDING APPEAL
The Court denies the Defendants' motion to stay an injunction pending an appeal. Having first failed to convince the Court they were right, the same arguments do not now convince the Court it was wrong.
I. STATEMENT OF FACTS
On November 8, 2010, the Court issued a preliminary injunction in favor of OfficeMax Incorporated and against David Levesque and David Rattray, enjoining both men for a period of one year from selling office products to some of the customers they had serviced while employed at OfficeMax. Order on Mot. for Prelim. Inj. and Mots. to Dismiss (Docket # 65) ( Prelim. Inj. Order). On December 1, 2010, Mr. Levesque and Mr. Rattray appealed to the Court of Appeals for the First Circuit. Notice of App. (Docket # 68). On the same day, they moved for a stay of the preliminary injunction pursuant to Rule 62(c) while the appeal is pending, arguing that they are likely to succeed on the merits of their appeal, that they will be irreparably injured if the stay is not granted, that OfficeMax will not be
substantially harmed by the stay, and that the public interest favors a stay. Defs.' Mot. for Stay of Inj. Pending App. (Docket # 69) ( Defs.' Mot.). OfficeMax objected. Pl.'s Opp'n. to Defs.' Mot. for Stay of Inj. Pending Appeal (Docket # 75) ( Pl.'s Opp'n). The Defendants replied. Defs.' Reply Mem. in Further Support of Their Mot. for Stay of Inj. Pending Appeal (Docket # 77) ( Defs.' Reply).
II. DISCUSSION
Rule 62 represents a limited departure from the general rule that the filing of a notice of appeal divests the district court of jurisdiction over the case:
For it is fundamental to a hierarchical judiciary that a federal district court and a federal court of appeals should not attempt to assert jurisdiction over a case simultaneously. The filing of a notice of appeal is an event of jurisdictional significance — it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal.
Bradford-Scott Data Corp. v. Physician Computer Network, Inc., 128 F.3d 504, 505 (1st Cir. 1997) (internal punctuation and citation omitted). Rule 62(a) clarifies that unless a court orders otherwise, an interlocutory injunction is not stayed pending appeal. FED. R. CIV. P. 62(a). However, Rule 62(c) provides:
When an appeal is pending from an interlocutory order . . . that grants . . . an injunction, the court may suspend [or] modify . . . an injunction on terms for bond or other terms that secure the opposing parties' rights.
FED. R. CIV. P. 62(c). In Hilton v. Braunskill, 481 U.S. 770, 776 (1987), the United States Supreme Court addressed the proper standard to evaluate a motion for stay pending appeal under Rule 62(c):
Different Rules of Procedure govern the power of district courts and courts of appeals to stay an order pending appeal.
See FED. R. CIV. P[.] 62(c); FED. R. APP. P[.] 8(a). Under both Rules, however,
the factors
regulating the issuance of a stay are generally the same: (1) whether the stay applicant has made a
strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.
(emphasis added). Consistent with Hilton, the First Circuit later explained:
The sine qua non of the stay pending appeal standard is whether the movants are likely to succeed on the merits. In essence, the issuance of a stay depends on whether the harm caused movant without the stay, in light of the movant's likelihood of eventual success on the merits, outweighs the harm the stay will cause the non-moving party.
Acevedo-Garcia v. Vera-Monroig, 296 F.3d 13, 16-17 (1st Cir. 2002) (citations and internal punctuation omitted).
Invariably, the party seeking the stay contends that the preservation of the status quo that existed before the order under appeal will prevent the harm the order has caused and will allow the appealing party to obtain a definitive ruling from the appellate court of a contested legal issue. But such an argument fails to fully credit the impetus for the issuance of the original order, including a finding of irreparable harm to the appellee. Accordingly, the First Circuit has cautioned that "[w]hat matters . . . is not the raw amount of irreparable harm [a] party might conceivably suffer, but rather the risk of such harm in light of the party's chance of success on the merits." P.R. Hosp. Supply, Inc. v. Boston Scientific Corp., 426 F.3d 503, 507 n. 1 (1st Cir. 2005) (quoting the Massachusetts standard, which "closely tracks the federal standard").
It is difficult for a losing party to successfully make a "strong showing" to the trial court that there is a likelihood of success on appeal, since "if the court had concluded it was likely making the wrong decision, it would have made the right one." United States v. Burk, 372 F. Supp. 2d 104, 106 (D. Me. 2005) (citing United States v. Bayko, 774 F.2d 516, 521-22 (1st Cir. 1985)) (addressing a motion for stay of execution of a sentence under 18 U.S.C. § 3143(b)). Even so, here, in their motion for stay, Mr. Levesque and Mr. Rattray simply reiterated precisely the same arguments the Court earlier considered and rejected. The Court's Orders — right or wrong — were not spontaneous, largely discretionary, trial rulings but were set forth in extended written decisions. Order on Mot. for TRO (Docket # 23); Prelim. Inj. Order; see Perez Rodriguez v. Rey Hernandez, 304 F. Supp. 2d 227, 231 (D.P.R. 2004) (denying a motion for stay pending appeal noting that "the Court has already examined and rejected these arguments"). Mr. Levesque and Mr. Rattray have not revealed an obvious error such as misciting a statute, misunderstanding of binding precedent, or overlooking a piece of crucial evidence.
After the briefing, Mr. Levesque and Mr. Rattray filed notice of supplemental authority, attaching a decision of the United States District Court in Vermont regarding a dispute among OfficeMax, W.B. Mason, and William Ramsey, a former salesman for OfficeMax currently employed by W.B. Mason. Def.'s Notice of Supplemental Auth. (Docket # 86) (citing OfficeMax Inc. v. W.B. Mason Co., Inc., No. 2:11-cv-21, 2011 U.S. Dist. LEXIS 17331 (D. Vt. Feb. 18, 2011)). In its decision, the District Court concluded that a 1996 non-competition agreement with a predecessor of OfficeMax terminated twelve months after the termination of the employee's employment with the predecessor. Id. *8.
The Court has no quarrel with the District Court's opinion as far as it went. In fact, like the Vermont District Court, this Court resolved that there had been no written or oral assignment from Loring Short Harmon to Boise Cascade Office Products. Order on Mot. for Prelim. Injunc. and Mot. to Dismiss at 34 (Docket # 65). Instead, this Court determined that the effectiveness of the Loring Short Harmon to Boise Cascade Office Products assignment depended on two critical facts: 1) whether the assignment manifested an intent of the parties to make an assignment; and 2) whether the parties' conduct before and after the transaction demonstrated an effective assignment. Id. at 34-37. The District Court in Vermont simply did not reach the critical factual and legal issues in this case. Although the District Court opinion is of some assistance, it involved different parties, different contracts, different evidence, and different law and the Court is not convinced by the subsequent authority that it erred.
Having failed to satisfy the first Braunskill factor — a likelihood of success on the merits, the Court need not consider the second, third and fourth factors.
III. CONCLUSION
The Court DENIES the Plaintiffs' Motion for Stay Pending Appeal (Docket # 69).
SO ORDERED.