849 F2d 1476 Team Inc v. Overstreet M Team Inc

849 F.2d 1476

Unpublished Disposition

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

TEAM, INC., a Texas corporation, and Leak Repairs, Inc., a
Texas corporation, Plaintiffs-Appellants,
Jonathan OVERSTREET, an individual, Koppl Company, a
California corporation, M. Douglas Coker, an
individual, and Koppl Industrial
Systems, a California
TEAM, INC., a Texas corporation, and Leak Repairs, Inc., a
Texas corporation, Plaintiffs-Appellants,
John A. EDMON, an individual, Koppl Company, a California
corporation, M. Douglas Coker, an individual, and
Koppl Industrial Systems, a California
corporation. Defendants-Appellees.

No. 87-6081.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 2, 1988.
Decided June 21, 1988.

Before HUG, KOZINSKI and DAVID R. THOMPSON, Circuit Judges.

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This appeal of a grant of defendants' summary judgment motion involves the question of whether there existed any genuine issue of material fact as to (1) the existence of a trade secret and (2) the allegation of interference with contractual relations; and whether both or either party had met its burden of production for the motion. The two parties are competitors in the leak repair business. The plaintiffs, Team, Inc. and Leak Repairs, Inc. (hereinafter collectively called "Team"), assert that Koppl Company and Koppl Industrial Systems (hereinafter collectively called "Koppl") acquired an unfair advantage over Team by wrongfully procuring trade secrets owned by Team and by enticing away key employees of Team. We conclude that Team did not possess any trade secrets and that there was no interference with contractual relations. We affirm.



Fed.R.Civ.P. 56(c) provides that summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Merely because some evidence has been presented by the party with the burden of proof does not warrant a grant of summary judgment; rather, "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251 (1986) (emphasis in original).


An issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. A fact is material if identifiable as such under the substantive law and might affect the outcome of the suit. Id. This does not mean that the court weighs the evidence or determines credibility, but that the court can grant summary judgment if only one reasonable conclusion can be drawn as to the verdict. Id. at 250. The moving party bears the burden of informing the court of the basis for its summary judgment motion; however, the nonmoving party must make a sufficient showing as to any element essential to its case and on which it will have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

1. Trade Secrets


Team contends that Koppl misappropriated Team's trade secrets, thereby becoming an "overnight competitor of Team's" and avoiding the necessary time and money to develop and design highly successful and marketable trade secrets. Team lists these trade secrets as "repair methods, hardware, sealants, customer lists, and written materials relative to sealing leaks on stream and under pressure." Koppl defends on the basis that there were no trade secrets and, in any case, Koppl independently developed all of its procedures and hardware.


This case was in the district court under diversity jurisdiction applying California law, an issue the parties do not contest. California law states that


a trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device or list of customers.

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Sinclair v. Aquarius Electronics, Inc., 42 Cal.App.3d 216, 221, 116 Cal.Rptr. 654, 658 (Cal.Ct.App.1974) (emphasis deleted) (citing 4 Rest., Torts Sec. 757, com. b (1939)). Although absolute secrecy is not a requirement, there must be a substantial element of secrecy so that unless improper means are employed, it would be difficult for one to obtain the information. 4 Rest., Torts Sec. 757, com. b (1939). The Restatement additionally notes that an exact definition of a trade secret is not possible. However, there are six factors to consider in determining whether one exists. They are as follows:


(1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees of others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.




Koppl properly informed the district court of the basis for its motion. Because Team would have to prove at trial that its hardware, sealants, information, and customer lists were, in fact, trade secrets, Team had the burden of establishing the existence of any facts upon which the jury reasonably could conclude that there were some trade secrets.


The lack of secrecy defeats Team's claim. As Koppl points out, secrecy was not established by Team. The procedures and hardware were commonly known in the industry and by the employees of Team. Team asserts that it guarded the secrecy of its trade secrets. For example, Team had employment contracts with its employees, which required the employees not to divulge any trade secrets without permission. The contracts, however, did not define what those trade secrets were.


Team also asserts that contracts with customers required that they keep the trade secrets secret. Team presented evidence that its offers to customers to repair leaks generally stated that the customer should not reveal any "proprietary techniques and processes," and the offers identified sealants and packings (pumps, valves, etc.) as having a "proprietary and trade secret nature." Team also presented evidence that these offers were usually accepted with only minor changes.


However, Team's process of leak repairing was done openly at its plant and at the customer's plant. The hardware was often left at the customer's plants. As a matter of fact, Team even had on its customer invoice an additional charge for hardware not returned.


Additionally, Koppl produced other evidence which established that it independently developed its own methods and customer lists. For example, in 1982, before Koppl hired any of Team's employees, Koppl first started developing and marketing a sealant. Koppl's and Team's sealants were tested by an independent laboratory, which determined that the two sealants were dissimilar. As to the customer lists, Koppl had been in the business for over 50 years. Koppl already had its own customer lists. It is logical that Koppl derived its leak repair customer lists from customers it serviced previously in the industry. Further, Team fails to demonstrate to this court that its customer lists were trade secrets at all or that Koppl acquired its customer lists from Team.


Since Team did not establish that any trade secrets to which it had a right of protection existed, Koppl could not have misappropriated them. Nor is the fact that Team had contracts with its employees and customers not to divulge trade secrets significant in light of the fact that there were no trade secrets. A jury could only come to the one reasonable conclusion that Team had not established an essential element of its case--that any trade secrets existed.

2. Interference with Contractual Relations


Team contends that Koppl improperly solicited employees from Team to come to work at Koppl. As the district court stated, the issue boiled down to "whether Koppl may approach plaintiffs' employees and offer jobs while those employees still work for plaintiffs." The district court basically found that although some disputed facts existed, these facts, seen in the light most favorable to Team, would fail to support its claim or affect the outcome of the case; thus, these facts were not material. Summary judgment was properly granted on this issue.


We have reviewed and reject plaintiffs' other arguments.




This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3