PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 10-1510
BIMBO BAKERIES USA, INC.
v.
CHRIS BOTTICELLA,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 2-10-cv-00194)
Honorable R. Barclay Surrick, District Judge
Argued June 3, 2010
BEFORE: SMITH, FISHER, and
GREENBERG, Circuit Judges
(Filed: July 27, 2010)
Michael L. Banks (argued)
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attorney for Appellee
Elizabeth K. Ainslie
Joseph Anclien (argued)
Schnader Harrison Segal & Lewis LLP
1600 Market Street
Philadelphia, PA 19103
Attorneys for Appellant
OPINION OF THE COURT
GREENBERG, Circuit Judge,
I. INTRODUCTION
This matter comes on before this Court on an
interlocutory appeal from an order of the District Court dated
February 9, 2010, and entered on February 12, 2010, granting
appellee’s motion for a preliminary injunction. Bimbo
Bakeries USA, Inc. v. Botticella, No. 10-0194, 2010 WL
2
571774 (E.D. Pa. Feb. 9, 2010). The issue on appeal is
whether the District Court erred in enjoining appellant Chris
Botticella, formerly a senior executive at appellee Bimbo
Bakeries USA, Inc. (“Bimbo”), from working for one of
Bimbo’s competitors until after the Court resolved the merits
of Bimbo’s misappropriation of trade secrets claim against
Botticella. The Court intended that the preliminary injunction
would last for about two months until the trial but, because of
this appeal and a stay of the District Court proceedings
following the filing of this appeal, the preliminary injunction
has remained in effect. For the reasons we set forth below,
we will affirm the order of the District Court.
II. BACKGROUND
A. Botticella’s Employment at Bimbo
Bimbo, a Delaware corporation with its principal place
of business in Pennsylvania, is one of the four largest
companies in the United States baking industry. Bimbo and
its affiliates produce and distribute baked goods throughout
the country under a number of popular brand names including
Thomas’, Entenmann’s, Arnold, Oroweat, Mrs. Baird’s,
Stroehmann, and Boboli. Botticella, a California resident,
who already had experience in the baking industry, began
working for Bimbo in 2001 and was, until January 13, 2010,
its Vice President of Operations for California. In that
position in which Botticella earned an annual salary of
$250,000, he was directly responsible for five production
facilities and oversaw a variety of areas including product
3
quality and cost, labor issues, and new product development.
In addition Botticella worked closely with Bimbo’s sales staff
on sales promotion and capacity planning, and also was
responsible for overseeing the operations of “co-packers” in
his region, i.e., third-party manufacturers under contract with
Bimbo.
As one of Bimbo’s senior executives, Botticella had
access to and acquired a broad range of confidential
information about Bimbo, its products, and its business
strategy. For example, he was one of a select group of
individuals with access to the code books containing the
formulas and process parameters for all of Bimbo’s products.
He also regularly attended high-level meetings with other top
Bimbo executives to discuss the company’s national business
strategy. Significantly, as Bimbo repeatedly has noted
throughout these proceedings, Botticella was one of only
seven people who possessed all of the knowledge necessary to
replicate independently Bimbo’s popular line of Thomas’
English Muffins, including the secret behind the muffins’
unique “nooks and crannies” texture. Thomas’ English
Muffins is the source of approximately half a billion dollars
worth of Bimbo’s annual sales income.
While employed at Bimbo, Botticella signed a
“Confidentiality, Non-Solicitation and Invention Assignment
Agreement” with Bimbo on March 13, 2009, in which he
agreed not to compete directly with Bimbo during the term of
his employment, not to use or disclose any of Bimbo’s
confidential or proprietary information during or after the
term of his employment with Bimbo, and, upon ceasing
employment by Bimbo, to return every document he received
4
from Bimbo during the term of his employment. App. at 214-
18. The agreement, however, did not include a covenant
restricting where Botticella could work after the termination
of his employment with Bimbo. The agreement contained a
choice of law provision providing that Pennsylvania law
would govern any dispute arising from the agreement.
Moreover, the agreement provided that certain state and
federal courts in Pennsylvania would have jurisdiction over
litigation arising from the agreement and over the parties to
that litigation. Thus, although this litigation seems only
marginally related to Pennsylvania, Bimbo filed it in the
United States District Court for the Eastern District of
Pennsylvania, which has exercised jurisdiction.
B. The Hostess Job Offer
On September 28, 2009, one of Bimbo’s primary
competitors in the baking industry—Interstates Brand
Corporation, which later changed its name to Hostess Brands,
Inc. (collectively, “Hostess”)—offered Botticella a position in
Texas as Vice President of Bakery Operations for its eastern
region. The proposed position carried a base salary of
$200,000, along with various stock option and bonus
opportunities. On October 15, 2009, Botticella accepted the
Hostess position and agreed to begin in January 2010.
Botticella did not disclose his plans to Bimbo for several
months, and he therefore continued to be engaged fully in his
work at Bimbo and to have full access to Bimbo’s
confidential and proprietary information even after he
accepted the Hostess position. Botticella maintains that he
5
continued working for Bimbo notwithstanding his acceptance
of the Hostess position in order to receive his 2009 year-end
bonus and to complete two Bimbo projects for which he had
responsibility.
After Botticella accepted the Hostess offer and while
Bimbo still employed him, Hostess directed him to execute an
“Acknowledgment and Representation Form,” which
essentially indicated that Hostess was not interested in any
confidential information, trade secrets, or other proprietary
information that Botticella had acquired from Bimbo, and that
Botticella would not disclose such information to Hostess.1
1
The agreement stated:
I acknowledge that [Hostess] has advised
me that it is not interested in, nor does it want,
any confidential information or trade secrets or
other proprietary information that I may have
acquired through any prior employment or
business relationship, including without limitation
any information or ‘know-how’ related to the
manufacturing of Thomas brand products. I
further acknowledge that I have not previously,
and will not in the future, disclose to Hostess any
confidential or proprietary information belonging
to any previous employer. Specifically, I
acknowledge that Hostess has instructed me not to
disclose to it or to use in the course of any job for
it that I may be [sic] have at any time, any
confidential or proprietary information belonging
6
App. at 272. Botticella signed the form on December 7, 2009.
Botticella informed his supervisor at Bimbo on January
4, 2010, that he was planning to leave Bimbo on January 15.2
But Botticella did not at that time indicate that he was leaving
to any previous employer. I represent that I have
and will not bring to Hostess’[s] work place, use
for the benefit of, or in any way share with
Hostess any confidential or proprietary
information belonging to any previous employer.
I represent that I am not a party to any
currently effective employment contract, covenant
not to compete or other agreement that could
potentially have any bearing on my ability to
accept employment with Hostess, and that
Hostess has instructed me that I am not to perform
any action, directly or indirectly, in the course of
any duties or responsibilities that I may have at
any time for it, that would violate the terms of any
currently effective contract to which I am a party.
App. at 272.
2
Botticella asserts that he testified in his deposition that he
advised “his boss” at Bimbo in early December of 2009 “that he
would be leaving” Bimbo. Appellant’s br. at 8 n.1. But he
indicates that this testimony was not introduced at the hearing
on the preliminary injunction. He does not claim, however, that
at that time he advised Bimbo that he was joining Hostess.
7
to work for a competitor. Moreover, there is no indication in
the record that Bimbo asked him about his future employment
plans. On January 12, Hostess announced that its Vice
President of Bakery Operations for the eastern region was
retiring and that Botticella would be replacing him, effective
January 18. Bimbo personnel learned of the announcement
and the next day, January 13, the company’s Vice President
for Human Relations requested that Botticella contact him.
Botticella did so at approximately 10:00 a.m. PST and in the
course of the ensuing telephone conversation disclosed his
intention to work for Hostess. Bimbo directed Botticella to
vacate its offices that day.3
C. Botticella’s Use of Confidential Information
Following the Hostess Offer
In the period between when Botticella accepted the
Hostess offer on October 15, 2009, and when he ceased
working for Bimbo on January 13, 2010, he continued to have
all the access to Bimbo’s confidential and proprietary
information befitting a trusted senior executive. For instance,
Botticella attended a meeting with Bimbo’s president and
other Bimbo officers in December 2009 at which the
participants discussed confidential information regarding the
3
Because Botticella had accrued eleven weeks of vacation time
with Bimbo, he remained on the company’s payroll throughout
the District Court proceedings. Botticella’s present employment
status is not apparent from the record.
8
company’s strategic plan for California. Botticella concedes
that if he had disclosed his intention to work for Hostess,
Bimbo would have restricted his access to this and other types
of information. Indeed, Botticella maintains that he no longer
felt “comfortable” being privy to Bimbo’s confidential
information following his acceptance of the Hostess offer and
that, accordingly, when he received emails and electronic
documents containing confidential information, he deleted
them, and that when he was exposed to confidential
information during presentations at meetings, he “blocked it”
out of his head. App. at 195, 197.4
In one instance over the Christmas holiday, Botticella
deleted a number of documents from his company-issued
laptop computer. These documents included both items of a
personal nature, such as his resume, and a number of work-
related documents containing confidential information.
Botticella claimed that he deleted these documents because he
“didn’t think th[ey] would [have] any value to anybody.”
App. at 198. Nevertheless, when Botticella returned to his
office at Bimbo on January 4, 2010, he asked a computer
technician to restore the files because “he wanted to have
them back just in case for the next weeks we needed to have a
meeting or something.” App. at 198. Bimbo’s technician
then restored the files to the computer.
4
We are quite uncertain as to how an individual can block out
information from his head for a human mind does not function
like a computer from which, through an electronic process,
materials may be deleted.
9
Following Botticella’s departure, Bimbo hired E. Brian
Harris, a computer forensics expert, to investigate Botticella’s
use of his company laptop during December 2009 and
January 2010. Harris’s testing revealed that a user who
logged in as Botticella had accessed a number of confidential
documents during the final weeks of Botticella’s employment
at Bimbo. In particular, the testing revealed that the person
logging in as Botticella had accessed twelve files within a
span of thirteen seconds on January 13, 2010, Botticella’s last
day at Bimbo.5 Significantly this access occurred minutes
after the phone call in which Botticella finally disclosed to
Bimbo his plans to work for Hostess and Bimbo told him to
cease working for it.
There were several similar patterns of access in the
weeks leading up to January 13. According to Harris, this
type of activity—multiple files being accessed more or less
simultaneously—was “inconsistent with an ordinary usage
whereby individual files are opened and either read or edited.”
App. at 238. Harris concluded that the activity was, however,
consistent with copying a group of files at the same time, but
he could not determine conclusively whether the files
Botticella had accessed had been copied and deleted or never
copied at all. App. at 238. The testing also revealed that
three external storage devices—a portable device known as a
“thumb” or “flash” drive and two external hard drives—had at
one time or another been connected to Botticella’s computer,
although it was unclear exactly when these devices had been
5
Botticella does not deny that he was the person logging in under
his name.
10
used. Bimbo located the thumb drive and one of the hard
drives but Harris could not determine conclusively whether or
not any files had been copied onto the devices from
Botticella’s computer. Harris was not provided with the
second external hard drive. According to Bimbo, that device
“is unaccounted for.” Appellee’s br. at 11.
A number of the files accessed from Botticella’s laptop
during his final days at Bimbo were highly sensitive and their
possession by a competitor would have been damaging to
Bimbo. As described by the District Court, these documents
include “Bimbo’s cost-reduction strategies, product launch
dates, anticipated plant and line closures, labor contract
information, production strengths and weaknesses of many
Bimbo bakeries, and the cost structure for individual products
by brand.” Bimbo Bakeries, 2010 WL 571774, at *7. There
were, however, more mundane documents such as a
presentation titled “Safety Short - Wet Floors” included in
these groups of files. App. at 237. In his video-taped
deposition, portions of which were presented at the
preliminary injunction hearing, Botticella admitted to copying
files periodically from his laptop to external devices during
his final weeks at Bimbo, but maintained that he had done so
only to practice his computer skills in preparation for his new
position at Hostess. Despite an earlier denial, he eventually
admitted to conducting such “practice” exercises in January
2010. The District Court found that Botticella’s explanation
of his use of the laptop computer and the external devices was
“confusing at best” and “not credible.” Bimbo Bakeries, 2010
WL 571774, at *6.
11
D. Procedural History
After Botticella left Bimbo and joined Hostess, Bimbo
brought this action seeking to protect its trade secrets and then
promptly moved for preliminary injunctive relief. The
District Court held a hearing on Bimbo’s motion at which
Bimbo presented portions of Botticella’s video taped
deposition as well as live testimony from Harris and Daniel
Babin, one of Bimbo’s senior executives. Botticella’s counsel
cross-examined Bimbo’s witnesses but did not present any
evidence on Botticella’s behalf. The District Court granted
Bimbo’s motion and preliminarily enjoined Botticella from
commencing employment with Hostess and from divulging to
Hostess any confidential or proprietary information belonging
to Bimbo. The Court further ordered Botticella to return to
Bimbo any of the company’s confidential or proprietary
information in his possession. The Court issued the
preliminary injunction on February 9, 2010, and provided that
it was to remain in effect until a determination on the merits
of the controversy at a trial, which the Court scheduled to
begin on April 12, 2010. Nevertheless, notwithstanding the
early trial date, Botticella appealed from the February 9, 2010
order to this Court on February 16, 2010. The case remains
untried and pending in the District Court as that Court on
March 5, 2010, after a conference with the attorneys,
postponed the trial and stayed all proceedings until its further
order. We have expedited our consideration of this appeal.
III. JURISDICTION AND STANDARD OF REVIEW
12
The District Court had jurisdiction over this diversity
of citizenship action pursuant to 28 U.S.C. § 1332(a).6 We
exercise jurisdiction over Botticella’s interlocutory appeal
pursuant to 28 U.S.C. § 1292(a)(1). When reviewing a
district court’s grant of a preliminary injunction, we review
the court’s findings of fact for clear error, its conclusions of
law de novo, and the ultimate decision granting the
preliminary injunction for an abuse of discretion. Miller v.
Mitchell, 598 F.3d 139, 145 (3d Cir. 2010) (citing McTernan
v. City of York, 577 F.3d 521, 526 (3d Cir. 2009)).
IV. DISCUSSION
In determining whether to grant a preliminary
injunction, a court must consider whether the party seeking
the injunction has satisfied four factors: “(1) a likelihood of
success on the merits; (2) he or she will suffer irreparable
harm if the injunction is denied; (3) granting relief will not
result in even greater harm to the nonmoving party; and (4)
the public interest favors such relief.” Miller, 598 F.3d at 147
(citing Child Evangelism Fellowship of New Jersey Inc. v.
Stafford Twp. Sch. Dist., 386 F.3d 514, 524 (3d Cir. 2004)).
We turn first to the question of whether Bimbo has
demonstrated a likelihood of success on the merits, an inquiry
that was the primary focus of the District Court, and,
6
Bimbo is a citizen of Delaware and Pennsylvania and Botticella
is a citizen of California.
13
consequently, also is the primary focus of the parties on this
appeal.
A. Likelihood of Success on the Merits
The District Court found that Bimbo was likely to
prevail on the merits of its misappropriation of trade secrets
claim. Under the Pennsylvania Uniform Trade Secrets Act
(“PUTSA”), which is applicable in this case, a trade secret is
defined as:
Information, including a formula, drawing,
pattern, compilation including a customer list,
program, device, method, technique or process
that:
(1) 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.
(2) Is the subject of efforts that are
reasonable under the circumstances to
maintain its secrecy.
14
12 Pa. Cons. Stat. Ann. § 5302 (West 2004); see also Rohm
and Haas Co. v. Lin, 992 A.2d 132, 143 n.4 (Pa. Super. Ct.
2010) (“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.”)
(internal citation omitted). The Pennsylvania courts look to
the following factors to determine whether information is
protected as a trade secret: (1) the extent to which the
information is known outside of the company’s business; (2)
the extent to which the information is known by employees
and others involved in the company’s business; (3) the extent
of the measures taken by the company to guard the secrecy of
the information; (4) the value of the information to the
company and its competitors; (5) the amount of effort or
money the company spent in developing the information; and
(6) the ease or difficulty with which the information could be
acquired or duplicated legitimately by others.7 Crum v.
Bridgestone/Firestone North American Tire, LLC, 907 A.2d
578, 585 (Pa. Super. Ct. 2006).
Applying these standards, the District Court
determined that during Botticella’s employment at Bimbo, he
had access to and acquired a number of Bimbo’s trade secrets,
including:
7
“The PUTSA displaced Pennsylvania’s common law tort for
misappropriation of trade secrets, but there is no indication that
the statute effected a substantive shift in the definition of ‘trade
secret.’” Youtie v. Macy’s Retail Holding, Inc., 626 F. Supp. 2d
511, 522 n.10 (E.D. Pa. 2009).
15
a. Information in Bimbo’s code books, as well
as and including formulas and designs for
Thomas’ English Muffins, Oroweat brand
products, Sandwich Thins products, and other
Bimbo products.
b. Bimbo’s strategy for increasing profitability,
embodied in a road map in January of 2009,
which included line closures, plant closures,
new process improvements, formula
optimizations, and new product launches, and
which achieved cost savings of $75 million over
the course of a year.
c. Knowledge of how Bimbo produces bread
‘from scratch’ instead of using pre-mixed
ingredients.
d. Documents copied by [Botticella] from his
work computer onto an external storage device
with no credible explanation. . . .
e. Bimbo’s promotional strategies with respect
to specific customers.
f. Bimbo’s cost positions.
g. Identities of Bimbo’s customers targeted for
upcoming bids.
Bimbo Bakeries, 2010 WL 571774, at *10. The District
Court then determined that Bimbo likely would be able to
16
prove at trial that Botticella would misappropriate these trade
secrets if allowed to work at Hostess.
A person has misappropriated a trade secret under
Pennsylvania law when he acquires knowledge of another’s
trade secret in circumstances giving rise to a duty to maintain
its confidentiality and then discloses or uses that trade secret
without the other’s consent. 12 Pa. Cons. Stat. Ann. § 5302
(West 2004). A court may enjoin the actual or threatened
misappropriation of a trade secret. Id. § 5303(a). After
determining that Bimbo was seeking an injunction on the
basis of threatened misappropriation, the District Court found
there was “a substantial likelihood, if not an inevitability, that
[Botticella] will disclose or use Bimbo’s trade secrets in the
course of his employment with Hostess.” Bimbo Bakeries,
2010 WL 571775, at **11-14. Accordingly, the Court
concluded that Bimbo had demonstrated a likelihood of
succeeding on the merits of its claim.
Botticella contends this conclusion was wrong as a
matter of law because (a) a court only can enjoin a defendant
from beginning a new job to protect a former employer’s
technical trade secrets, (b) such an injunction only can issue
where it would be “virtually impossible” for the defendant to
perform his new job without disclosing trade secrets, (c)
Bimbo did not present any evidence from which the District
Court could conclude that Botticella’s responsibilities at
Hostess would lead him to disclose Bimbo’s trade secrets, and
(d) the District Court drew impermissible adverse inferences
against Botticella in a way that effectively shifted the burden
of proof from Bimbo to Botticella.
17
1. Air Products and Inevitable Disclosure
The parties disagree about the circumstances that must
be found to exist before a court can enjoin a defendant from
beginning new employment. In its opinion granting the
preliminary injunction, the District Court stated:
When analyzing threatened misappropriation of
trade secrets, Pennsylvania courts apply the
‘inevitable disclosure doctrine.’ That doctrine
essentially posits that ‘a person may be enjoined
from engaging in employment or certain aspects
of his employment where that employment is
likely to result in the disclosure of information,
held secret by a former employer, of which the
employee gained knowledge as a result of his
former employment situation.[’] The scope of
the injunctive relief depends on the particular
circumstances of the case.
Bimbo Bakeries, 2010 WL 571774, at *11 (citing Victaulic
Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (omitting
citations); Air Prods. & Chems., Inc. v. Johnson, 442 A.2d
1114, 1120 (Pa. Super. Ct. 1982)). In other words, the
District Court concluded, albeit somewhat paradoxically, that
Pennsylvania courts apply the “inevitable disclosure doctrine”
to grant injunctions based not on a trade secret’s inevitable
disclosure but on its likely disclosure. Cf. Pepsico, Inc. v.
Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (“[a] plaintiff
may prove a claim of trade secret misappropriation by
18
demonstrating that defendant’s new employment will
inevitably lead him to rely on the plaintiff’s trade secrets.”)
(emphasis added). While we agree with the District Court
that Pennsylvania law empowers a court to enjoin the
threatened disclosure of trade secrets without requiring a
plaintiff to show that disclosure is inevitable, we do not
consider that an injunction granted absent such a showing was
issued pursuant to the “inevitable disclosure doctrine.”
The leading Pennsylvania decision to discuss the
inevitability of trade secret disclosure is Air Products &
Chemicals, Inc. v. Johnson.8 In that case Air Products, a
manufacturer and distributor of industrial gas, sought an order
enjoining Johnson, one of its former employees who primarily
was responsible for selling on-site gas, from working in the
on-site gas division of a competitor, Liquid Air, that lagged
behind Air Products in the on-site gas market.9 442 A.2d at
1116-18. The trial court determined that Johnson, who had an
engineering background, had acquired a number of technical
and commercial trade secrets relevant to the operation and
8
While courts across the country have considered the
applicability and scope of the inevitable disclosure doctrine, see
generally Brandy L. Treadway, An Overview of Individual
States’ Application of Inevitable Disclosure: Concrete Doctrine
or Equitable Tool?, 55 SMU L. Rev. 621, 626-49 (2002), our
focus in this diversity action is on the decisions of the
Pennsylvania courts.
9
“‘On-site’ gas serves large industrial customers. Gas is piped
to the customer.” Air Prods., 442 A.2d at 1116.
19
sale of on-site gas during his employment at Air Products, and
that an injunction prohibiting Johnson from working in on-site
sales at Liquid Air was necessary because “[i]t would be
impossible [for Johnson] to perform his managerial functions
in on-site work without drawing on the knowledge he
possesses of Air Product[s]’s confidential information.” Id. at
1122 (quoting trial court opinion).
On appeal, the Superior Court affirmed, agreeing with
the trial court that Johnson possessed trade secrets belonging
to Air Products that included technological innovations as
well as commercial information such as “the status of
negotiations with customers, proposed plant configurations
and methods of delivery as well as analysis of market
opportunities.” Id. at 1121 (quoting trial court opinion). In
reaching this conclusion, the Court emphasized that “trade
secrets need not be technical in nature” to be protected under
Pennsylvania law. Id. at 1124 (citing Macbeth-Evans Glass
Co. v. Schnelbach, 86 A. 688 (Pa. 1913)).
With respect to the probability of disclosure required to
warrant an injunction, the Superior Court stated at the outset
of its analysis that Pennsylvania law permits the issuance of
an injunction where a defendant’s new employment “is likely
to result in the disclosure” of a former employer’s trade
secrets. Id. at 1120 (emphasis added). The Court then
determined that it was reasonable for the trial court to issue an
injunction based on the inevitability that Johnson would
disclose trade secrets, but the Superior Court explicitly chose
“not [to] adopt the reasoning of the trial court or its use of the
term inevitable.” Id. at 1124. Based on these statements it
seems clear that the Superior Court believed that the trial
20
court permissibly could have granted the injunction even if
the disclosure of trade secrets was not inevitable.
2. Protection for Non-Technical Trade
Secrets
Botticella argues that “[w]hile confidential information
concerning either technical or commercial issues can be
protected as a trade secret, the inevitable disclosure doctrine,
which prevents the defendant from taking on employment in
his chosen field, applies only to technical trade secrets.”
Appellants br. at 28 (citing Iron Age Corp. v. Dvorak, 880
A.2d 657, 665 (Pa. Super. Ct. 2005); Oberg Indus., Inc. v.
Finney, 555 A.2d 1324, 1327 (Pa. Super. Ct. 1989)). Our
review of the relevant decisional law leads us to reject
Botticella’s proposed distinction between technical and other
information. To start with, it is clear that “trade secrets need
not be technical in nature” to be protected fully by
Pennsylvania law, Air Prods., 442 A.2d at 1124; see also Den-
Tal-Ez, Inc. v. Siemens Capital Corp., 566 A.2d 1214, 1228
(Pa. Super. Ct. 1989) (en banc) (“[T]he particular character of
the information is not relevant . . . . [It] may consist of
compilations of purely commercial information.”) (citing
Morgan’s Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa.
1957)). Furthermore, courts applying Pennsylvania law are
empowered to enjoin both the actual and the threatened
misappropriation of trade secrets. 12 Pa. Cons. Stat. Ann. §
5303(a) (West 2004). An injunction against employment
therefore is simply one weapon in an equity court’s arsenal to
prevent the threatened misappropriation of trade secrets,
21
regardless of those secrets’ technical or non-technical
character.
In arguing that a court only may enjoin a defendant
from beginning a new job to protect a former employer’s
technical trade secrets, Botticella relies primarily on two
opinions of the Pennsylvania Superior Court applying Air
Products. In Oberg Industries, Inc. v. Finney, the trial court
had enjoined the general sales manager of a company that
manufactured carbide stamping dies from working for one of
that company’s competitors. 555 A.2d at 1325. The court
believed the employee, Finney, inevitably would disclose the
trade secrets of his former employer, Oberg Industries, if
allowed to work in the new position. Id. at 1326. The
information the trial court classified as trade secrets consisted
of customer information reports, including a master customer
directory and histories of quoted prices and completed sales
for various customers. Id. at 1325.
On appeal the Superior Court did not clearly state
whether or not it considered this information to constitute
trade secrets under Pennsylvania law. Nevertheless, the Court
vacated the injunction because (1) the case did not involve a
restrictive covenant, (2) there was no evidence that Finney
took Oberg’s confidential information to use in his new
position, (3) some of the confidential reports at issue, “such as
the list of customers and their contact persons, were so
voluminous that they could not have been committed to
memory,” and (4) Finney’s position at Oberg and the
knowledge he obtained while in that position did not
demonstrate an inevitability of disclosure comparable to that
found in Air Products. Id. at 1327. With respect to the latter
22
point, the Court opined that the focus of Air Products was on
the employee’s “engineering background and the special
knowledge he possessed relating to a method of oil recovery
not yet developed by the competitor company,” despite the
circumstance that the employee, like Finney, was involved in
sales. Id. at 1327.
In Iron Age Corp. v. Dvorak, both the trial court and
the Superior Court refused to enjoin a former district sales
manager of a footwear manufacturer from using or contacting
any of the company’s current or prospective customers. 880
A.2d 567. The employee, Dvorak, had left the company, Iron
Age, to work for a competitor. Id. at 661. The Superior
Court affirmed the denial of the requested injunction because
the trial court reasonably concluded that the information at
issue—Iron Age’s customer lists—was “available to
competitors through legitimate means and cannot be declared
a trade secret.” Id. at 664. The Court went on to distinguish
Air Products on the ground that:
In Air Products, the employee possessed
intimate knowledge of his former employer’s
research and development data for on-site gas
delivery technologies. The employee’s new
employer was attempting to develop similar
technologies, and the employee was hired to
provide research and development data obtained
through his previous employment. In the instant
case, [Dvorak] possesses no such technical
knowledge, and [his] new employer already has
an extensive customer base. [Dvorak] was not
23
hired to provide information he obtained
through his employment with [Iron Age].
Id. at 665 (citing Air Prods., 442 A.2d at 1117). The Court
also noted that Dvorak had signed an agreement with his new
employer promising not to disclose any of Iron Age’s secrets.
Id.
Though some passages in Oberg and Iron Age suggest
that Pennsylvania courts will enjoin new employment more
readily when the disclosure of technical trade secrets, as
distinguished from other materials, is threatened, those cases
do not purport to establish an inflexible rule defining the
scope of materials that can be subject to trade secret
protection, nor do they limit the granting of injunctive relief
affecting new employment to circumstances involving
technical trade secrets. Rather, these opinions reach fact-
specific conclusions that the former employer was not entitled
to injunctive relief against its departing employee barring him
from working for a competitor. Overall, we conclude that the
relevant Pennsylvania decisions, viewed as a group, suggest
that (1) a determination of whether to grant injunctive relief in
a trade secrets case and, if so, the proper scope of the relief,
depends on a highly fact-specific inquiry into the situation in
the case the court is considering and (2) a court conducting
this inquiry has discretion to enjoin a defendant from
beginning new employment if the facts of the case
demonstrate a substantial threat of trade secret
misappropriation.
24
Putting aside the fact that Botticella had access to and
acquired confidential information of a technical nature about
the formulas and ingredients for a variety of Bimbo products,
he also had access to and acquired confidential information
about Bimbo’s long term strategies, operating costs, and
customer negotiations. Botticella does not dispute that these
types of information qualify as trade secrets under
Pennsylvania law. 10 See Air Prods., 442 A.2d at 1121-22.
Accordingly, the District Court had discretion to enjoin
Botticella from working at Hostess to the extent this proposed
employment threatened to lead to the misappropriation of
these trade secrets.
3. The District Court Applied the Correct
Standard
Botticella next argues that an injunction against
employment can issue under Pennsylvania law only when it
10
By contrast, in Iron Age the Superior Court found that the
relevant information in that case did not even qualify as a trade
secret. 880 A.2d at 664-65. Hence, there was no threat that the
defendant’s change in employment would cause him to
misappropriate a trade secret. Likewise, the court in Oberg did
not find any threat that trade secrets would be misappropriated,
although its reasoning underlying that conclusion was not
particularly clear. See 555 A.2d at 1327 (“Finney’s position in
the company and the knowledge he obtained while in that
position do not demonstrate an inevitability of disclosure as that
found in Air Products which would require the issuance of an
injunction in this case.”).
25
would be “virtually impossible” for an employee to fulfill his
responsibilities for a new employer without disclosing a
former employer’s trade secrets. Appellant’s br. at 23.
Accordingly, Botticella contends that the District Court erred
as a matter of law when it granted Bimbo an injunction on the
basis that Botticella’s employment with Hostess would lead to
a “sufficient likelihood or substantial threat of disclosure of a
trade secret,” a lesser showing than it would have been
“virtually impossible” to avoid the disclosure of trade secrets
during Botticella’s employment at Hostess. Appellant’s br. at
22. Notwithstanding dictum to the contrary in one of our own
recent opinions, see Victaulic, 499 F.3d at 234, we conclude
that the District Court applied the correct standard.
The trial court in Air Products enjoined the defendant
from working in on-site gas sales at his new employer
because it concluded it would be impossible for the defendant
to work in that field without disclosing his former employer’s
trade secrets. 442 A.2d at 1122. On appeal the Superior
Court affirmed, but noted it was “not adopt[ing] the reasoning
of the trial court or its use of the term inevitable.” Id. at 1124.
The Superior Court subsequently has stated that “[t]he proper
inquiry” in determining whether to grant an injunction to
prevent the threatened disclosure of trade secrets is “whether
there is sufficient likelihood, or substantial threat” of a
defendant disclosing trade secrets. 11 Den-Tal-Ez, 566 A.2d at
11
While the threat of trade secret disclosure in Den-Tal-Ez arose
from a proposed merger between two companies and not from
an employee leaving one company to work for another, there is
no indication that the Superior Court’s discussion of the relevant
26
1232 (citing Air Prods., 442 A.2d at 1122-25; SI Handling
Sys., Inc. v. Heisley, 753 F.2d 1244, 1263-64 (3d Cir. 1985));
see also A.M. Skier Agency, Inc. v. Gold, 747 A.2d 936, 942
(Pa. Super. Ct. 2000) (citing Den-Tal-Ez, 566 A.2d at 1232).
The District Court in this case applied the standard that the
Superior Court applied in Den-Tal-Ez.
In arguing for a “virtual impossibility” standard,
Botticella understandably relies heavily on our decision in
Victaulic. In that case, Tieman, a sales representative, had
violated a covenant not to compete with his former employer
Victaulic, a mechanical device manufacturer, by working for
a competitor. Victaulic, 499 F.3d at 230-31. Victaulic
brought a misappropriation of trade secrets claim in addition
to asserting several claims based on the covenant not to
compete. Victaulic sought injunctive relief in the action. Id.
at 231. The District Court dismissed Victaulic’s covenant
claims and requested additional briefing on the trade secrets
claim. Id. But before the trade secrets claim was resolved
Victaulic filed an interlocutory appeal, asserting that we had
jurisdiction under 28 U.S.C. §1292(a)(1) on the ground that
the District Court’s dismissal of the covenant claims
effectively denied Victaulic’s request for a preliminary
injunction. Id.
In determining that we had jurisdiction to hear the
appeal, we concluded that “Victaulic did not request a
standard for injunctive relief in trade secrets cases, which was
gleaned from Air Products, was intended to be limited to the
merger situation. See Den-Tal-Ez, 566 A.2d at 1232-33.
27
preliminary injunction on its trade secrets claim, so the
District Court’s dismissal of the covenant claims left it with
no means of receiving preliminary relief.” Id. at 232. We
then went on to state that “[e]ven if we believed that Victaulic
requested a preliminary injunction on its trade secrets claim,
we would find jurisdiction” because any trade secrets
injunction potentially available to Victaulic necessarily would
be narrower than that requested on the covenant claims. Id.
We stated:
[S]omething like Victaulic’s requested relief
(preventing Tieman from selling similar
products for [his new employer] for a year)
could fit a trade secrets claim, as it is possible
for a court to enjoin an employee working in the
relevant industry or soliciting customers for
some period of time. But such a wide-ranging
injunction is atypical; rather, the usual
injunction merely prevents the employee from
disclosing specified trade secrets. . . . Under
Pennsylvania law, a broader injunction only lies
when it is ‘virtually impossible . . . [for the
employee] to perform his . . . duties for [his new
employer] without in effect giving [it] the
benefit of [his] confidential information.’
Id. at 234 (quoting Air Prods., 442 A.2d at 1123). Because
Victaulic “had not alleged or argued inevitable disclosure” in
its trade secrets claim, we concluded that the District Court
lacked the authority to issue a broad injunction based on that
claim. Id.
28
In light of the scope of the District Court’s injunction
in the case now on appeal before us, we acknowledge that
after one reads Victaulic it is possible to conclude that the
District Court erred by granting the injunction without
requiring Bimbo to show that it would be “virtually
impossible” for Botticella to work at Hostess without
disclosing Bimbo’s trade secrets. But that reading would
leave the following questions: (1) did Victaulic correctly
interpret Pennsylvania law, and (2) if not, are we nevertheless
bound by that interpretation in the present case because
Victaulic is a precedential opinion issued by a prior panel of
this Court?
Our review of Victaulic leads us to conclude that in
that case we did not interpret Air Products in a way precisely
consistent with Pennsylvania state precedents. The Court in
Air Products took the passage that Victaulic quoted and
containing the “virtually impossible” language directly from a
decision of a United States District Court in Ohio in a case
under Ohio law that had facts very similar to those in Air
Products. See 442 A.2d at 1123 (quoting Emery Indus., Inc.
v. Cottier, 202 U.S.P.Q. 829 (S.D. Ohio 1978)). The Superior
Court in Air Products found the reasoning of the Emery
decision “persuasive” and held that the trial court in Air
Products acted reasonably by granting a preliminary
injunction based on “precisely the reasoning of the court in
Emery.” Id. at 1124-25. Nevertheless, the Superior Court
explicitly chose “not [to] adopt the reasoning of the trial
court.” Id. at 1125. It follows that the Superior Court also
chose not to adopt the reasoning of the Emery court, it being
“precisely” the same as that of the trial court in the case on
appeal before the Superior Court.
29
The Superior Court subsequently stated that the
“proper inquiry” in determining whether to grant an
injunction to prevent the threatened disclosure of trade secrets
is not whether a defendant inevitably will disclose a trade
secret in the absence of injunctive relief, but instead whether
“there is sufficient likelihood, or substantial threat, of
defendant doing so in the future.” Den-Tal-Ez, 566 A.2d at
1232 (citing Air Prods., 442 A.2d at 1122-25; SI Handling
Sys.,753 F.2d at 1263-64). We therefore conclude that Air
Product’s repetition of the phrase “virtually impossible” in
describing the Emery holding should not be interpreted as a
statement of Pennsylvania’s standard for granting injunctions
in trade secrets cases, our suggestion to the contrary in
Victaulic notwithstanding.
Inasmuch as we have concluded that Victaulic
questionably interpreted Pennsylvania law, we next must
determine whether we nevertheless are bound by its statement
of that law. In this regard we start by recognizing that it is
“the tradition of this court that the holding of a panel in a
precedential opinion is binding on subsequent panels” and
cannot be overruled absent consideration en banc.12 Internal
12
A second panel has the obligation to follow the law that a prior
panel set forth even when the prior panel decision applied state
law unless “there is persuasive evidence that [the law] has
undergone a change” in which case “we are not bound by our
previous panel decision if it reflected our reliance on state law
prior to its modification.” Robinson v. Jiffy Executive
Limousine Co., 4 F.3d 237, 239-40 (3d Cir. 1993) (citing Smith
v. Calgon Carbon Corp., 917 F.2d 1338, 1343 (3d Cir. 1990)).
30
Operating Procedure 9.1. It is also well established, however,
that we are not bound by dictum in an earlier panel opinion.
Abdelfattah v. Dept. of Homeland §., 488 F.3d 178, 185 (3d
Cir. 2007) (citing Mariana v. Fisher, 338 F.3d 189, 201 (3d
Cir. 2003)).
We conclude that the Victaulic panel’s discussion of
Air Products and the interplay between virtual impossibility
and the inevitable disclosure doctrine was dictum and does
not bind us in the present case. That discussion was not
necessary to the panel’s jurisdictional holding that Victaulic
had failed to request a preliminary injunction on its trade
secrets claim. On the contrary, the discussion occurred only
in the context of a counterfactual hypothetical in which the
Victaulic panel posited that, even if Victaulic had requested a
preliminary injunction on its trade secrets claim, the Court
nevertheless would have had jurisdiction. While we
recognize that “where a decision rests on two or more
grounds, none can be relegated to the category of obiter
dictum,” Philadelphia M arine T rade A ss’n -Int’l
Longshoremen’s Ass’n. Pension Fund v. Comm’r, 523 F.3d
140, 147 n.5 (3d Cir. 2008) (quoting Woods v. Interstate
Realty Co., 337 U.S. 535, 537, 69 S.Ct. 1235, 1237 (1949)),
we do not consider the Victaulic decision on jurisdiction to
We decided Victaulic in 2007, and since that time so far as we
are aware there has not been a “clear statement by the
Pennsylvania Supreme Court to the contrary or other persuasive
evidence of a change in Pennsylvania law.” See Smith, 917
F.2d at 1343 (emphasis removed). Accordingly, the holdings of
the Victaulic panel bind us in the present case.
31
have rested on its interpretation of Pennsylvania’s law of
trade secrets with respect to its actual holding because with or
without discussion of the counterfactual hypothetical, we
would have held that we had jurisdiction. At bottom we
merely held that the District Court had denied Victaulic all
preliminary relief and thus we had jurisdiction. Accordingly,
Victaulic does not prevent us from concluding that the
District Court in this case applied the correct legal standard.13
13
Botticella further argues for an “impossibility” standard by
pointing to an unpublished memorandum opinion of the
Pennsylvania Superior Court in Bacharach, Inc. v. Testo, Inc.,
No. 1257 WDA 2001 (Pa. Super. Ct. 2000), App. at 279-301.
In that case, an employer argued that the Court could issue an
injunction pursuant to Air Products based on “the mere
‘likelihood’” that a trade secret might be disclosed. App. at 291.
The Superior Court rejected this argument noting that in Air
Products it only had “determined that the inevitable disclosure
doctrine might be properly applied because ‘it would be
impossible for the employee to perform his duties at the new
employer without disclosing trade secrets.’” App. at 291-92
(quoting Air Prods., 442 A.2d at 1124-25). Pursuant to
Pennsylvania Superior Court Rule 65.37, an unpublished
decision such as Bacharach cannot be considered as precedent
or cited for any purpose relevant to the present case. Thus,
Bacharach’s interpretation of Air Products deserves little weight
to the extent it conflicts with the Superior Court’s precedential
opinions. See A.M. Skier Agency, 747 A.2d at 942; Den-Tal-
Ez, 566 A.2d at 1232. In any event, Bacharach stopped well
short of requiring rigid adherence to the legal reasoning used by
the trial court in Air Products. App. at 287 (rejecting notion that
32
4. Evidence of Botticella’s Responsibilities
at Hostess
Botticella next contends that the District Court erred by
determining the probability that Botticella would disclose
trade secrets while working at Hostess without requiring
Bimbo to provide more detailed evidence of Botticella’s
anticipated responsibilities at Hostess. The record before the
District Court contained little evidence in this regard apart
from what could be inferred from Botticella’s compensation
package at Hostess and his title as the Vice President of
Baking Operations for the eastern region.14 Nevertheless the
District Court concluded that Botticella’s prospective position
at Hostess was “substantially similar” to his former position at
Bimbo, noting that the Hostess position was “an executive
level position, with a salary comparable to his salary at
Bimbo.” Bimbo Bakeries, 2010 WL 571774, at *13. We
agree that the record supports the conclusion that in his new
position at Hostess, Botticella would have broad oversight
over bakery operations, just as he had at Bimbo.
Accordingly, the District Court did not abuse its discretion by
preliminarily determining that the Bimbo and Hostess
positions were substantially similar.
“Air Products enshrines the ‘inevitable disclosure’ doctrine as
an inviolable rule of law”).
14
The District Court also noted that in his position at Hostess,
Botticella would report to Hostess’s Senior Vice President for
Bakery Operations. Bimbo Bakeries, 2010 WL 571774, at *13.
33
5. Adverse Inference Based on Botticella’s
Failure to Testify
The District Court determined that Botticella’s conduct
following his acceptance of the Hostess job offer
demonstrated his intention to use Bimbo’s trade secrets during
his employment with Hostess. The District Court bolstered
this determination by drawing an adverse inference from
Botticella’s failure to testify at the preliminary injunction
hearing. In so doing, the District Court relied on our decision
in SI Handling Systems, Inc. v. Heisley, where we stated that
because the misappropriation of a trade secret often must be
proved by “construct[ing] a web of perhaps ambiguous
circumstantial evidence” that outweighs the defendants’ direct
denial, the failure of defendants to testify in the face of a
strong showing that a misappropriation or misuse occurred
“justifies the inference that their testimony would be
unfavorable to their cause.” 753 F.2d at 1261 (internal
citations omitted). On the other hand, Botticella contends that
an adverse inference was inappropriate because he chose not
to put forward any evidence at the preliminary injunction
hearing. In support of this position he points to Stowe
Township v. Standard Life Ins. Co. of Indiana, where we
stated that “whatever inference might otherwise be available
from the failure to call a witness is not permissible when a
defendant chooses to put on no evidence at all, in apparent
reliance on its determination that plaintiff has not met its
burden.” 507 F.2d 1332, 1338 (3d Cir. 1975).
Even assuming that the District Court erred by drawing
an adverse inference from Botticella’s failure to testify, the
conclusion that Botticella intended to use Bimbo’s trade
34
secrets during his employment with Hostess rests on a solid
evidentiary basis, namely, Botticella’s “not disclosing to
Bimbo his acceptance of a job offer from a direct competitor,
remaining in a position to receive Bimbo’s confidential
information and, in fact, receiving such information after
committing to the Hostess job, and copying Bimbo’s trade
secret information from his work laptop onto external storage
devices.” Bimbo Bakeries, 2010 WL 571774, at *13.
Accordingly, the District Court did not abuse its discretion by
determining that Bimbo demonstrated a likelihood of success
on its misappropriation of trade secrets claim.
B. Irreparable Harm
The District Court concluded that Bimbo would suffer
irreparable harm absent injunctive relief because the
disclosure of its trade secrets to Hostess would put Bimbo at a
competitive disadvantage that a legal remedy could not
redress. On appeal, Botticella does not contest this finding
apart from arguing that any harm Bimbo potentially might
suffer from Botticella’s employment at Hostess could be
prevented by a narrow injunction—to which Botticella would
stipulate—prohibiting Botticella only from disclosing
Bimbo’s trade secrets. We recognize that the evidence at trial
may show that if Bimbo is entitled to relief that relief might
be narrow yet adequate, just as Botticella suggests.
Nevertheless, at this preliminary stage of the proceedings, the
District Court did not abuse its discretion when, faced with
evidence of Botticella’s suspicious conduct during his final
weeks at Bimbo, it determined that a stronger remedy was
35
needed in the interim to protect Bimbo from imminent
irreparable harm. See Den-Tal-Ez, 566 A.2d at 1232 (“It is
clear that under Pennsylvania law a court of equity may
fashion a trade secrets injunction that is broad enough to
ensure that the information is protected.”) (quoting SI
Handling Sys., 753 F.2d at 1265) (internal alteration
removed).
C. Harm to Botticella Caused by Injunctive Relief
The District Court concluded that the harm of Bimbo’s
trade secrets being disclosed to Hostess outweighed the harm
to Botticella of not being able to commence employment at
Hostess until the Court made a final determination of the
merits following a trial, which it scheduled to start about two
months from the date it issued the preliminary injunction.15
The Court noted that Botticella would continue to receive
compensation for the eleven weeks of vacation time that he
had accrued before leaving Bimbo. We agree with the
District Court’s determination. In so doing, however, we note
that even a temporary injunction prohibiting someone from
pursuing his livelihood in the manner he chooses operates as a
severe restriction on him that a court should not impose
lightly. Nevertheless, such a temporary restriction on his
15
Botticella in effect extended the duration of the preliminary
injunction by pursuing an interlocutory appeal for, as we
indicated above, the District Court has stayed this case during
this appeal.
36
employment is warranted where, as here, the facts
demonstrate that the restriction is necessary to prevent greater
irreparable harm from befalling another party. Following a
disposition on the merits which in the normal course of events
will follow the disposition of this appeal and the remand of
the case to the District Court, if the Court holds that Bimbo is
entitled to relief, the Court should fashion a remedy
appropriate to protect Bimbo’s trade secrets without unduly
imposing on Botticella’s right to pursue his chosen
occupation.
D. The Public Interest
We agree with the District Court’s conclusion that
granting the preliminary injunction was consistent with the
public interest. There are several public interests at play in
this case. As noted by the District Court, there is a
generalized public interest in “upholding the inviolability of
trade secrets and enforceability of confidentiality
agreements.” Bimbo Bakeries, 2010 WL 571774, at *16.
Additionally, there is a public interest in employers being free
to hire whom they please and in employees being free to work
for whom they please. Of these latter two interests,
Pennsylvania courts consider the right of the employee to be
the more significant. See Renee Beauty Salons, Inc. v. Blose-
Venable, 652 A.2d 1345, 1347 (Pa. Super. Ct. 1995) (“[T]he
right of a business person to be protected against unfair
competition stemming from the usurpation of his or her trade
secrets must be balanced against the right of an individual to
the unhampered pursuit of the occupations and livelihoods for
37
which he or she is best suited.”) (internal citation omitted);
see also Wexler v. Greenberg, 160 A.2d 430, 434-35 (Pa.
1960) (noting a societal interest in employee mobility). We
are satisfied on the facts of this case that the public interest in
preventing the misappropriation of Bimbo’s trade secrets
outweighs the temporary restriction on Botticella’s choice of
employment. See SI Handling Sys., 753 F.2d at 1265 (finding
unnecessary an “extended analysis of the public interest
[because] extensive precedent supports an injunctive remedy
where the elements of a trade secret claim are established”).
V. CONCLUSION
For the reasons stated above, we will affirm the order
of the District Court dated February 9, 2010, and entered on
February 12, 2010, granting Bimbo’s motion for a preliminary
injunction and will remand the case to that Court for further
proceedings.
38