USCA1 Opinion
March 29, 1993
United States Court of Appeals
United States Court of Appeals
for the First Circuit
for the First Circuit
____________________
No. 92-1939
ALAN SHAWN FEINSTEIN,
Plaintiff, Appellee,
v.
SPACE VENTURES, INC.,
Defendant, Appellant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, U.S. District Judge]
___________________
____________________
Before
Torruella, Circuit Judge,
_____________
Bownes, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________
Elizabeth Colt with whom Jeffrey S. Michaelson and Michaelson and
_______________ _____________________ ______________
Michaelson and Joel W. Mohrman and McGlinchey Stafford Lang were on
__________ _______________ _________________________
brief for appellant.
Mark B. Morse for appellee.
_____________
____________________
March 29, 1993
____________________
STAHL, Circuit Judge. In this appeal, defendant-
_____________
appellant Space Ventures, Inc. ("SVI" or "defendant")
challenges the entry of a preliminary injunction against it
and in favor of plaintiff-appellee Alan Shawn Feinstein
("Feinstein" or "plaintiff").1 Finding that the district
court erred in determining that plaintiff demonstrated a
likelihood of success on the merits of his claim, we vacate
and remand.
I.
I.
__
BACKGROUND
BACKGROUND
__________
On April 8, 1992, plaintiff, a marketer of
collectibles, initiated this litigation by filing a four
count complaint against defendant SVI, a manufacturer and
distributor of trading cards. Counts I and II asserted that
defendant had converted certain of plaintiff's goods and had
breached a duty of confidentiality owed to plaintiff. Counts
____________________
1. As an initial matter, we note that plaintiff challenges
our jurisdiction to hear this appeal. In so doing, he relies
upon authority indicating that an interlocutory order which
has the incidental effect of denying injunctive relief can
only be appealed under 28 U.S.C. 1292(a)(1) where the order
will have a "`serious, perhaps irreparable, consequence'" and
where it "can be `effectively challenged' only by an
immediate appeal." See Stringfellow v. Concerned Neighbors
___ ____________ ___________________
in Action, 480 U.S. 370, 379 (1987) (quoting Carson v.
__________ ______
American Brands, Inc., 450 U.S. 79, 84 (1981)). Such
_______________________
authority is inapposite here, however, where the order at
issue clearly and directly granted a preliminary injunction
after a hearing on plaintiff's request therefor.
Accordingly, because 28 U.S.C. 1292(a)(1) grants us
jurisdiction over "interlocutory orders of the district
courts . . . granting . . . injunctions," we find that we
have jurisdiction over this appeal.
-2-
2
III and IV stated that defendant had breached a contract
entered into by the parties on September 4, 1991. On April
28, 1992, plaintiff amended his complaint to include a fifth
count for unfair competition.2
The present appeal concerns only plaintiff's Count
II, which is entitled "Breach of Confidentiality." In
relevant part, Count II states:
8. On or about January 23, 1991, and
divers times thereafter, defendant held
goods consisting of a series of trading
cards known as the Moon-Mars cards. Said
cards had been purchased from defendant
by plaintiff and were being held in trust
for distribution by defendant; as a
bailee.
9. Defendant was obligated to ship the
Moon-Mars cards to plaintiff's customers
in accordance with the instructions of
plaintiff. . . .
15. While acting as a bailee, defendant
received confidential information from
plaintiff concerning plaintiff's
customers.
16. Defendant had a duty not to divulge
said information or use the information
for its own benefit.
17. Defendant indicated to plaintiff
that it has no intention of recognizing
its duty, and has caused plaintiff to
have reasonable grounds to believe that
defendant will breach its duty and shall
actively solicit plaintiff's customers. .
. . Defendant's principal officer has,
in subsequent conversations to plaintiff,
____________________
2. Defendant subsequently counterclaimed for breach of
contract.
-3-
3
orally evidenced his intent to solicit
plaintiff's customers.
18. Plaintiff will be irreparably harmed
if defendant solicits his customers in
that the confidentiality of his customer
list will be permanently and
irretrievably impaired.
19. As a further result, plaintiff will
sustain an irreparable loss to his
business reputation for which there is no
adequate remedy at law.
Count II concludes with a request for damages and a
preliminary and permanent injunction directing defendant (1)
to refrain from soliciting plaintiff's customers, (2) to
refrain from using plaintiff's customer list, (3) to refrain
from selling or distributing plaintiff's customer list, (4)
to return plaintiff's customer list, and (5) to provide an
account of plaintiff's customers solicited by defendant.
On July 2, 1992, the district court held a hearing
on the injunctive relief requested in plaintiff's Count II.
At this hearing, plaintiff proceeded as if the duty of
confidentiality referenced in Count II was contract-based.
More specifically, plaintiff testified that defendant was
about to breach an oral agreement between the parties that
defendant would not use plaintiff's customer list and would
keep the list confidential.3 Although it is not entirely
____________________
3. During the course of the hearing, plaintiff also
introduced affidavits from Beverly S. Vale and Edward P.
Walton tending to support plaintiff's claim that he and
defendant had an oral agreement, and that the duty at issue
in Count II arose from this agreement.
-4-
4
clear, it seems that the district court also operated under
this assumption. In the portion of its ruling which comes
closest to addressing (1) whether defendant had a duty not to
use the list and to keep the list confidential and (2) how
any such duty arose, the district court stated:
[T]he uncontradicted evidence
primarily in the form of testimony from
Mr. Feinstein was that the[re] were
discussions between him and Mr. White
[President of SVI] relating to the
confidentiality of these lists and he
entered into [the contract under which
plaintiff had provided defendant with his
customer list] with the express
understanding that these lists would be
held in confidence and he received
assurances to that [e]ffect from Mr.
White.
So based on all those things, it's
not difficult at all for the Court to
determine that . . . Mr. Feinstein has a
very good chance of succeeding in proving
that the list is his property, that it
was confidential and that the [d]efendant
has no right to use it.4
The district court also found that plaintiff would suffer
immediate and irreparable harm if the injunction were not
granted, that such harm outweighed any harm to defendant, and
that the public interest would not be adversely affected by
providing plaintiff with the relief requested. See id.
___ ___
Therefore, the district court entered an injunction
____________________
4. The district court made these findings in the course of
considering, as it must before issuing a preliminary
injunction, whether plaintiff was likely to succeed on the
merits of his claim. See, e.g., Narragansett Indian Tribe v.
___ ____ _________________________
Guilbert, 934 F.2d 4, 5 (1st Cir. 1991).
________
-5-
5
forbidding defendant from using plaintiff's customer list.
This appeal followed.
II.
II.
___
DISCUSSION
DISCUSSION
__________
On appeal, defendant argues, inter alia, that the
_____ ____
district court erred in ruling that plaintiff had
demonstrated a likelihood of success on the merits of his
Count II claim. After carefully reviewing the record, we are
constrained to agree.
It is settled that "`we scrutinize a district
court's decision to grant or deny a preliminary injunction
under a relatively deferential glass.'" Id. (quoting
___
Independent Oil & Chem. Workers of Quincy, Inc. v. Procter &
________________________________________________ _________
Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir. 1988)). Thus,
_______________
unless the district court has made a mistake of law or abused
its discretion, we will not disturb its ruling. See id.
___ ___
However, "`[a]pplication of an improper legal standard in
determining the likelihood of success on the merits or
misapplication of the law to particular facts is an abuse of
discretion.'" In re Rare Coin Galleries of America, Inc.,
____________________________________________
862 F.2d 896, 900 (1st Cir. 1988) (quoting Planned Parenthood
__________________
League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir. 1981)).
______ ________
In this instance, the district court applied an
improper legal standard in determining that plaintiff had
demonstrated a likelihood of success on the merits of his
-6-
6
breach of confidentiality claim. The record indicates that
the district court assumed that plaintiff's Count II claim
was based upon an oral contract between plaintiff and
defendant. The problem with this, though, is that Count II
does not sound in contract.5 As we read it, Count II
attempts to set forth a claim for breach of a common law duty
not to divulge or use "confidential" information.6 Thus,
the district court's ruling that plaintiff is likely to
succeed on his Count II claim, made as it was without
reference to common law confidentiality principles, was an
abuse of its discretion. Accordingly, the court's entry of
the preliminary injunction in favor of plaintiff, which is
anchored upon this faulty ruling, must be set aside.7
III.
III.
____
CONCLUSION
CONCLUSION
__________
For the reasons stated above, the preliminary
injunction entered in favor of plaintiff on his breach of
____________________
5. Nothing in Count II even remotely suggests that the duty
of confidentiality arises from an explicit contractual
provision.
6. In so stating, we do not decide whether Count II, in its
current incarnation, is sufficient to state such a claim.
7. Because we find that the district court abused its
discretion in determining that plaintiff was likely to
succeed on the merits of his breach of confidentiality claim,
we vacate and remand without considering defendants' other
challenges to the district court's injunction order.
-7-
7
confidentiality claim is vacated.8 This action is remanded
to the district court for further proceedings consistent with
this opinion.
Vacated and remanded.
_____________________
____________________
8. Of course, defendant should in no way construe our
dissolution of the injunction as an endorsement of its
argument that it is entitled to use plaintiff's customer
list.
-8-
8