American Red Cross v. Palm Beach Blood Bank, Inc. , 143 F.3d 1407 ( 1998 )

United States Court of Appeals,
Eleventh Circuit.
No. 96-5092.
AMERICAN RED CROSS, Plaintiff-Appellee,
v.
PALM BEACH BLOOD BANK, INC., Defendant-Appellant.
June 16, 1998.
Appeal from the United States District Court for the Southern District of Florida. (No. 96-1584-CIV-
KING), James lawrence King, Judge.
Before TJOFLAT and BIRCH, Circuit Judges, and RONEY, Senior Circuit Judge.
BIRCH, Circuit Judge:
In this diversity case, we review the propriety of a preliminary injunction entered against one
blood bank to prohibit it from using "trade secret" donor lists compiled by another, competing blood
bank. On appeal from the district court's injunction, defendant-appellant argues both that
plaintiff-appellee's lists are not protectable trade secrets and that the injunction is impermissibly
vague. We vacate the injunction and remand the case to the district court for further proceedings.
I. BACKGROUND
Defendant-appellant, Palm Beach Blood Bank, Inc. ("Palm Beach"), is a non-profit Florida
corporation engaged in the business of collecting, processing, and distributing blood components.
Similarly, plaintiff-appellee, American Red Cross ("Red Cross"), is also a non-profit corporation
engaged in collecting, processing, and distributing blood components, though its activities are more
national in scope. Despite a history of at least limited cooperation, Palm Beach and Red Cross
compete with each other for sponsors and donors. Competition between the two companies is
especially keen regarding recruitment of apheresis donors, a small subset of blood donors willing
to undergo a longer and less-comfortable donation procedure.
In October 1995, Palm Beach opened a Miami branch and over the next several months hired
a number of Red Cross's Miami personnel. At least one of these former Red Cross employees took
a list of Red Cross donors with her to Palm Beach, where she used the list to contact and recruit
blood donors for her new employer. Soon after opening its Miami office, Palm Beach succeeded
in recruiting several former Red Cross donors, including apheresis donors, to participate in Palm
Beach's blood collection program.
In April 1996, Red Cross discovered that Palm Beach was using at least one of Red Cross's
donor lists for Palm Beach's own solicitations, leading Red Cross to demand that Palm Beach cease
all efforts to contact Red Cross's donors. Unsatisfied with Palm Beach's response, Red Cross sought
emergency relief on June 11, 1996, from the district court. Persuaded by Red Cross to take
immediate action, the district court entered a broad temporary restraining order ("TRO") against
Palm Beach.1 Substantively, the TRO prohibited Palm Beach from, inter alia, "soliciting donations
from any Red Cross donor" or engaging "in any way adversely affecting Red Cross's reputation or
goodwill." R1-25-5. In addition, the TRO authorized Red Cross to enter Palm Beach's premises,
access Palm Beach's computer files, and to recover any documents that "resemble[d]" Red Cross's
"trade secrets." Id. at 8-12. Red Cross, accompanied by United States Marshals, entered Palm
Beach's office and seized various pieces of evidence, including one of Red Cross's donor lists, on
June 14, 1996.
1
Unfortunately, neither the district court nor its court reporter has been able to locate any
record of the ex parte proceeding conducted by the district court.
2
On several days in late June and early July, 1996, the district court held evidentiary hearings
on Red Cross's motion to convert the TRO into a preliminary injunction. On July 5, Palm Beach
moved to modify the TRO to allow Palm Beach to accept donations from persons whom it had not
solicited from any Red Cross list. Although the district court expressed its hope that Palm Beach's
"reasonable request" might form the basis of a compromise between the parties, Red Cross objected
on the ground that "basically, they are going to be exacerbating what they have already done by
using our donors." R6-64-87, 91. Following Red Cross's objection, the district court chose not to
modify the TRO, without further explanation.
On August 6, 1996, the district court entered the following preliminary injunction that
restrained Palm Beach from:
(a) possessing, copying, or making unauthorized use of Plaintiff's lists or any other
documents that contain trade secrets that are the proprietary property of Plaintiff;
(b) contacting and/or soliciting donations from any donor whose name is contained on
Plaintiff's lists;
(c) engaging in any other activity constituting a misappropriation of Plaintiff's lists, or in any
way adversely affecting Plaintiff's reputation or good will;
(d) using any false designation of origin or false description which can or is likely to lead
the trade or public or individual members thereof to erroneously believe that Defendant is
affiliated with Plaintiff;
(e) disposing of or destroying any documents that are relevant to the Complaint in this
action, including but not limited to Plaintiff's lists, or Defendant's donor lists, or donor
information, whether in hard copy form or on a computer, or any simulation or copy thereof,
or any document or computer data which has its genesis from any of Plaintiff's lists;
(f) disposing of or destroying any documents or related materials that evidence, relate, or
pertain to Defendant's misappropriation of Plaintiff's lists, as well as the records of donations
solicited and obtained from Plaintiff's donors.
3
R2-49-2-3. Soon thereafter, Palm Beach filed an emergency motion for clarification, expressing
concern that the injunction appeared to allow Red Cross to determine which of Palm Beach's
competitive practices were illegitimate (and which might therefore might lead to sanctions for
contempt). Rejecting Palm Beach's motion, the court accepted Red Cross's representation "that it
[Red Cross] is not concerned by legitimate recruiting efforts and unsolicited donations" and ruled
that any further clarification or explanation of its order would amount to an "advisory opinion." R2-
48-1-2.
II. DISCUSSION
Palm Beach argues that the district court should not have issued the preliminary injunction
because Red Cross's lists are not trade secrets. Additionally, Palm Beach contends that the
preliminary injunction is impermissibly vague. We review the district court's grant of a preliminary
injunction for abuse of discretion, but we examine its legal determinations de novo. See Lucero v.
Trosch, 121 F.3d 591, 599 (11th Cir.1997). We will not disturb the district court's factual
determinations unless they are clearly erroneous. See id. at 599.
A. RED CROSS'S DONOR LISTS AS TRADE SECRETS
In order to secure a preliminary injunction, a plaintiff must show (1) a substantial likelihood
of success on the merits, (2) a substantial threat of irreparable injury if the injunction were not
granted, (3) that the threatened injury to the plaintiff outweighs the harm an injunction may cause
the defendant, and (4) that granting the injunction would not disserve the public interest. See
Church v. City of Huntsville, 30 F.3d 1332, 1342 (11th Cir.1994). Accepting arguendo that Red
Cross has satisfied the latter three of these requirements, Palm Beach argues that Red Cross cannot
4
show a substantial likelihood of success on the merits because Red Cross has not kept its donor lists
sufficiently confidential for them to qualify as trade secrets.2
Under Florida law, a trade secret consists of information that (1) derives economic value
from not being readily ascertainable by others and (2) is the subject of reasonable efforts to maintain
its secrecy. See Fla. Stat. § 688.002(4). Information that is generally known or readily accessible
to third parties cannot qualify for trade secret protection. See Bestechnologies, Inc. v. Trident Envtl.
Sys., Inc., 681 So.2d 1175, 1176 (Fla.Dist.Ct.App.1996). Moreover, an employer may not preclude
its former employee from "utilizing contacts and expertise gained during his former employment."
Templeton v. Creative Loafing Tampa, Inc., 552 So.2d 288, 290 (Fla.Dist.Ct.App.1989). In a trade
secret action, the plaintiff bears the burden of demonstrating both that the specific information it
seeks to protect is secret and that it has taken reasonable steps to protect this secrecy. See Lee v.
Cercoa, Inc., 433 So.2d 1, 2 (Fla.Dist.Ct.App.1983).
After reviewing the incomplete record in this case, we are unable to determine that Red
Cross is substantially likely to establish that its donor lists are trade secrets. Palm Beach has offered
us a variety of evidence tending to show that Red Cross has not been particularly careful to protect
the secrecy of its lists of names.3 Some of Red Cross's lists appear to have been posted on a
computer bulletin board freely accessible to Red Cross's competitors, while many of Red Cross's
donor groups have publicly revealed their sponsorship of Red Cross's blood drives. It may also be
2
Although Palm Beach has not raised any issue regarding the "public interest" prong of the
preliminary injunction test on appeal, the district court may wish to consider, on remand,
whether trade secret injunctions between non-profit organizations serve the public interest.
3
We note, however, that there is no evidence in the record that Red Cross has failed to keep
its donors' personal medical information confidential.
5
the case, as Palm Beach claims, that some former Red Cross employees have professional
relationships with individual Red Cross donors, relationships which these workers may now rely
upon without infringing any of Red Cross's rights. See Templeton, 552 So.2d at 290.
To rebut this evidence, Red Cross presents us with a number of confidentiality agreements
that it requires its employees to sign. From the incomplete record now before us, though, it appears
that many, if not all, of these confidentiality agreements protect donors' personal medical
information, not their identities. Further, even if we were to assume that these agreements proved
that Red Cross had taken reasonable steps to protect the secrecy of its lists, Red Cross has pointed
us to no evidence to rebut Palm Beach's contention that the lists at issue are not in fact secret but
have instead entered the public domain.
Because the record at this preliminary stage is incomplete, and because we have decided to
remand for reconsideration of the wording of the injunction, we do not think it prudent to reach any
conclusion now regarding the protectability of Red Cross's lists. Instead, we remand the case to the
district court for further development of the record and entry of more particularized findings of fact.
B. THE SCOPE OF THE PRELIMINARY INJUNCTION
Palm Beach argues that several provisions of the preliminary injunction are so vague as to
violate Rule 65(d) of the Federal Rules of Civil Procedure ("Rule 65(d)"). As we have previously
held, a court must craft its orders so that those who seek to obey may know precisely what the court
intends to forbid. See Hughey v. JMS Dev., 78 F.3d 1523, 1531 (11th Cir.1996). Thus, Rule 65(d)
of the Federal Rules of Civil Procedure provides that "[e]very order granting an injunction ... shall
be specific in terms; [and] shall describe in reasonable detail ... the act or acts sought to be
restrained...." Fed.R.Civ.P. 65(d). Under this rule, "an ordinary person reading the court's order
6
should be able to ascertain from the document itself exactly what conduct is proscribed." Hughey,
78 F.3d at 1531 (quoting 11A Wright et al., Federal Practice and Procedure § 2955 at 308-09
(1995)).4
Applying Rule 65(d), we believe that two significant portions of the injunction do not give
Palm Beach sufficient notice as to what actions the district court means to prohibit. First, the
injunction prohibits "contacting and/or soliciting donations from any donor whose name is contained
on Plaintiff's lists." R2-49-2. Although at first glance this directive from the district court may seem
simple enough, Palm Beach has no way to determine whether a given member of the public might
happen to appear on a Red Cross list not in Palm Beach's possession. As the district court itself
acknowledged during its preliminary injunction hearing:
Well, almost everybody that has ever donated before as a Red Cross donor, therein lies one
of the problems. The American Red Cross has been in existence for 50-odd years according
to the testimony, or maybe longer, so it is very difficult, I presume, to go out and compete
in the recruiting of donors without touching upon someone in this five percent of the
donating population that is or has been at some point in time a Red Cross donor.
I mean, if the two entities are going to compete at all, if they are entitled to compete,
it is obvious they are going to be competing for each others' donors.
R6-88. Since an ordinary person in Palm Beach's position could not ascertain which members of
the public might be off-limits for its recruitment efforts, this provision contravenes Rule 65(d).5
4
Rule 65(d) not only serves the interest of fairness but also helps to ensure informed and
intelligent appellate review. See Hughey, 78 F.3d at 1531.
5
We are also concerned that this portion of the injunction, along with the section banning
Palm Beach from "in any way adversely affecting Plaintiff's reputation or goodwill," R2-46-2,
may constitute an impermissible prior restraint on Palm Beach's legitimate competitive speech.
See In re Nat'l Serv. Corp., 742 F.2d 859, 862 (5th Cir.1984) (holding that injunction prohibiting
advertising of company's bankruptcy was unconstitutional prior restraint). Because we conclude
that the injunction is improper under Rule 65(d), however, we do not reach this constitutional
issue.
7
Second, the injunction bars Palm Beach from "possessing, copying, or making unauthorized
use of Plaintiff's lists or any other documents that contain trade secrets that are the proprietary
property of Plaintiff." R2-46-2 (emphasis added). As Red Cross argues, a nonspecific injunction
may sometimes be justified "when the information needed to make the order specific in form is
known only to the party to be enjoined." Wright, § 2955 at 323. In this case, though, Red Cross has
not suggested even a genre of trade secret beyond its donor lists that Palm Beach might
misappropriate, nor has Red Cross explained why only Palm Beach should be thought to have
knowledge of those Red Cross trade secrets that the injunction might protect. Indeed, the lack of
any apparent factual basis for this open-ended portion of the injunction has left Palm Beach
understandably uncertain as to what the district court means to prohibit. While we would not expect
an injunction in a case such as the one at bar to describe with particularity each of the documents
that Palm Beach might misappropriate, we do think that the district court's injunction should put
Palm Beach on notice as to the types of information, "other" than "lists," to which it applies. See
E.W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1114 (8th Cir.1969); Hughey, 78 F.3d at
1531. The district court may not simply order Palm Beach to "obey the law." See Hughey, 78 F.3d
at 1531.
Finally, we note that, assuming Red Cross's lists are protectable trade secrets, the district
court could readily have drafted a more narrow injunction. Such an injunction would presumably
have prohibited Palm Beach from (1) possessing, using, or copying Red Cross's lists or any other
specific types of valuable confidential documents identified by the district court, (2) using false
designations or descriptions to mislead individuals or businesses into believing that Palm Beach is
8
affiliated with Red Cross,6 and (3) disposing of or destroying material evidence. Such an injunction
would have given Palm Beach much fairer notice of what the district court intended to prohibit,
without compromising whatever legitimate need Red Cross may have for protection of its trade
secrets.
In sum, the district court has crafted an injunction that leaves Palm Beach without reasonable
notice of what the court means to prohibit. Regardless of whatever assurances Red Cross may have
given the district court or Palm Beach regarding its intended manner of enforcing the injunction,
Palm Beach should not have to risk citation for contempt in order to determine the true scope of
activity barred by the district court's order. See Hughey, 78 F.3d at 1531. Therefore, we hold that
the preliminary injunction is impermissibly vague under Rule 65(d), and we vacate the district
court's order.
III. CONCLUSION
In its attempt to protect Red Cross from misappropriation of its trade secrets, the district
court has fashioned an injunction that is impermissibly vague under Rule 65(d). Further, the district
court has based its injunction on an incomplete record that may not establish a substantial likelihood
that Red Cross's lists are in fact trade secrets. Therefore, we VACATE the preliminary injunction
and REMAND this case to the district court for further development of the record and entry of more
particularized findings of fact. If, upon reconsideration, the district court concludes that Red Cross
6
Though such a provision would not have any basis in trade secret law, it would address the
trademark or fraud related issues that apparently motivated the district court to include it in the
current injunction. Because neither party has questioned the propriety of the current provision,
we assume, without deciding, that it is appropriate.
9
can show a substantial likelihood of success on the merits of its claims, the district court may craft
a more narrow injunction to protect Red Cross's rights from abuse by Palm Beach.
10