Four Seasons Hotels & Resorts, B v. v. Consorcio Barr, S.A.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
_________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
February 05, 2003
No. 01-16588
THOMAS K. KAHN
_________________________ CLERK
D.C. Docket No. 01-4572-CIV-PAS

FOUR SEASONS HOTELS AND RESORTS, B.V.,
FOUR SEASONS HOTELS (BARBADOS),
FOUR SEASONS HOTELS LIMITED,

Plaintiffs-Appellees,

versus

CONSORCIO BARR, S.A.,
CARLOS L. BARRERA,

Defendants-Appellants.

_________________________

Appeal from the United States District Court
for the Southern District of Florida
_________________________
(February 5, 2003)

Before EDMONDSON, Chief Judge, ANDERSON, Circuit Judge, and POGUE *,
Judge.

*
Honorable Donald C. Pogue, Judge, United States Court of International Trade, sitting
by designation.
POGUE, Judge:

Appellants Consorcio Barr, S.A., and Carlos L. Barrera (collectively,

“Appellants” or “Consorcio”) appeal the district court’s entry of a preliminary

injunction in favor of Appellees Four Seasons Hotels and Resorts, B.V., Four Seasons

Hotels (Barbados) Ltd., and Four Seasons Hotels Limited (collectively, “Appellees”

or “Four Seasons”) restraining Appellants’ access to a computer network and

requiring Appellants to return certain items of computer equipment to the custody of

Appellees. This Court exercises jurisdiction over this appeal under 28 U.S.C. §

1292(a)(1).1 For the reasons expressed below, we reverse and vacate the injunction.

In April 1997, Four Seasons and Consorcio entered into a licensing agreement

for the operation of a Four Seasons hotel in Caracas, Venezuela (the “Four Seasons

Caracas”). The agreement provided that Consorcio would build a luxury hotel in

1
The district court exercised jurisdiction over the underlying action on the basis of
contractual consent. Four Seasons Hotels and Resorts, B.V. is a Dutch corporation domiciled in
Amsterdam. Four Seasons Hotels (Barbados) Ltd. is a Barbadian corporation domiciled in
Bridgetown, Barbados. Four Seasons Limited is a Canadian corporation domiciled in Toronto,
Ontario, Canada. Appellants indicate in their brief that the Four Seasons Hotel in Caracas is
operated by Four Seasons Caracas, C.A., a wholly owned Venezuelan corporate subsidiary of
Four Seasons Hotels Ltd. Appellant’s Br. at 5. Consorcio Barr is a Venezuelan corporation
domiciled in Caracas. Carlos Barrera is a citizen of Venezuela and a resident of Caracas. The
licensing agreement between Consorcio and Four Seasons includes dispute resolution provisions
which, inter alia, entitle Four Seasons to “commence legal proceedings in the City of Miami,
Florida” in connection with a breach of any provision of the agreement “relating to the
Trademarks or the Proprietary Materials.” Hotel License Agreement, Rec. Ex. 1, § 11.06(a)(ii).

2
Caracas, and Four Seasons would license its trademark to the hotel and provide

“advisory, operations, and management services.” Compl., Rec. Ex. 1 at 5 ¶ 13.

On November 6, 2001, Four Seasons filed a complaint in the District Court

for the Southern District of Florida alleging that Consorcio was gaining

unauthorized access to the Four Seasons computer network, and thus to e-mail and

other proprietary and confidential materials located on the network, in violation of

the Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030(a)(4) and 1030(a)(2)(d),

the Wire and Electronic Communications Interception Act, 18 U.S.C. §§

2511(1)(a) and 2511(1)(d), and the Florida Uniform Trade Secrets Act, Fla. Stat. §

688. On the same date, Four Seasons filed an emergency motion for an ex parte

temporary restraining order (“TRO”), seeking to prevent Consorcio from accessing

its computer network.

On November 12, 2001, Appellants were served with the complaint, motion,

and written notice of a preliminary injunction hearing to be held on November 14,

2001 in Miami, Florida. Appellants’ counsel at the November 14 hearing stated

that he had learned of the action late in the day on November 13 and requested

additional time to prepare. The district court proceeded with the hearing and Four

Seasons presented witness testimony to support its allegations. Appellants’ lawyer

cross-examined Four Seasons’ witness but did not present any witnesses or

3
affidavits.

The facts surrounding the alleged unauthorized computer use are in dispute.

Dr. Jozel Venegas, a Four Seasons employee who investigated the computer

problems at the Four Seasons Caracas, testified at the November 14 hearing that by

using a protocol called NetBEUI, he was able to ascertain that Consorcio

computers were accessing the Four Seasons network and that packets of data,

including files from a Four Seasons guest history database, were being sent

between Consorcio’s computers and the Four Seasons network. Dr. Venegas

named specific Consorcio employees whose computers were accessing the

network, and stated that at one point, the unauthorized access took place almost

daily and was continuing at the time of the preliminary injunction hearing. Dr.

Venegas admitted on cross examination that he had no direct evidence that

trademark or proprietary information had been accessed; however, he indicated

that such information would be freely available to anyone who gained access to the

network. Four Seasons also alleged that Eduardo Bencomo, a former Four Seasons

employee later hired by Consorcio, appropriated computer equipment owned by

Four Seasons and a CD-ROM containing proprietary and confidential information,

and that Consorcio had refused to grant Four Seasons employees access to the Four

Seasons server and other equipment located at the Caracas hotel.

4
Following the hearing, the district court issued an injunction restraining

Appellants from (1) gaining access to Appellees’ computer network; (2) obtaining,

disclosing, or using any information or data accessible through Four Seasons’

computer network and e-mail system; and (3) denying Four Seasons access to any

computer connected to the Four Seasons network systems. The injunction further

ordered Appellants to return to Four Seasons’ custody and control certain items of

computer equipment, including a three-com switch, a server, and a computer used

by Eduardo Bencomo, and any information obtained through access to Four

Seasons’ computer systems.

On November 19, 2001, Consorcio filed an emergency motion to dissolve,

stay, or modify the injunction. Attached to the motion were affidavits presenting a

serious factual dispute on issues essential to Four Seasons’ claim. Specifically, the

affidavit of Consorcio’s vice president, Lautaro Barrera, indicated that the

computer activity data submitted by Four Seasons in support of its allegations of

computer hacking demonstrated only that Four Seasons used the shared building

computer network. The affidavit indicated that packets of information sent over

the network arrive at each computer connected to the network, and computers that

are not the intended recipients of a particular information packet simply reject or

deny the packet. Therefore, the computer activity reports showing transmission of

5
information packets merely illustrate the network’s normal functioning. The

affidavits also asserted that the computer equipment ordered returned to Four

Seasons was owned by Consorcio and formed part of the building computer

network used by Consorcio, Four Seasons, and other building tenants.

The district court scheduled an evidentiary hearing to consider Consorcio’s

motion on November 28, 2001. The November 28 hearing, however, was not held;

instead, the court held a telephone hearing on November 21, 2001. During the

telephone hearing, Consorcio asserted that it had not appropriated any proprietary

information belonging to Four Seasons or gained unauthorized access to the Four

Seasons network, and that Consorcio owned the computer equipment at issue.

Consorcio disputed that the evidence offered by Four Seasons indicated computer

hacking, arguing that it indicated only that Consorcio, Four Seasons, and other

building tenants shared the building computer network. Consorcio also requested

that the district court hold the November 28 evidentiary hearing so that Consorcio

could present evidence, including witness testimony, to disprove the allegations of

hacking and unauthorized access.

At the conclusion of the November 21 telephone hearing, the district court,

without issuing any further findings on the disputed issues of fact, denied

Consorcio’s motion to dissolve, stay, or modify the preliminary injunction. No

6
evidentiary hearing was held. This appeal ensued.

II.

This Court reviews a district court’s order granting or denying a preliminary

injunction for abuse of discretion. McDonald’s Corp. v. Robertson, 147 F.3d

1301, 1306 (11th Cir. 1998) (citing Baker v. Buckeye Cellulose Corp., 856 F.2d

167, 169 (11th Cir. 1988)).2

A district court may issue a preliminary injunction where the moving party

demonstrates (1) a substantial likelihood of success on the merits; (2) that

irreparable injury will be suffered unless the injunction issues; (3) the threatened

injury to the movant outweighs whatever damage the proposed injunction may

cause the opposing party; and (4) if issued, the injunction would not be adverse to

2
Appellees argue that the appeal is moot because Consorcio has already returned the
computer equipment in question. Alternatively, Appellees contend that Consorcio waived any
objection to the prohibitory portion of the injunction. These assertions are without merit. The
appeal is not moot, as the parties retain a “legally cognizable interest in the outcome.” Bekier v.
Bekier, 248 F.3d 1051, 1054 (11th Cir. 2001)(quoting Reich v. Occupational Safety & Health
Review Comm’n, 102 F.3d 1200, 1201 (11th Cir. 1997)). Moreover, compliance with the terms
of an injunction does not moot a case where the action in question could be resumed or undone.
See Bakery Sales Drivers Local Union v. Wagshal, 333 U.S. 437, 442 (1948); see also United
States v. Concentrated Phosphate Export Ass’n, 393 U.S. 199, 203-04 (1968).
Appellees’ claim of waiver rests on Appellants’ statements that they had “no problem
with” the prohibitory portion of the injunction. Telephone Hrg. Trans. at 14, 20-22.
Appellants’ counsel stated, for example, that if the court chose to prohibit defendants from
“attempting to or gaining unauthorized access to the plaintiff’s network, frankly, we would have
no problem with that because we are not doing it from our vantage point.” Id. at 14. Appellants’
statements constitute substantive denials of wrongdoing, rather than acquiescence to the
injunction, and will not be construed to bar Appellants’ right to defend against the allegations or
appeal the injunction.

7
the public interest. Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000);

McDonald’s Corp., 147 F.3d at 1306; All Care Nursing Serv., Inc. v. Bethesda

Mem’l Hosp., Inc., 887 F.2d 1535, 1537 (11th Cir. 1989). “[A] preliminary

injunction is an extraordinary and drastic remedy not to be granted unless the

movant clearly established the ‘burden of persuasion’” as to each of the four

prerequisites. McDonald’s Corp., 147 F.3d at 1306 (internal citations and

quotations omitted); see also Texas v. Seatrain Int'l, S.A., 518 F.2d 175, 179 (5th

Cir. 1975) (grant of preliminary injunction "is the exception rather than the rule,"

and movant must clearly carry the burden of persuasion).

In order for a preliminary injunction to issue, the nonmoving party must

have notice and an opportunity to present its opposition to the injunction.3 Fed. R.

Civ. P. 65(a)(1) (“No preliminary injunction shall be issued without notice to the

adverse party.”); Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 434 n.7

(1974). While Rule 65 does not define “notice,” and the sufficiency of notice “is a

matter left within the discretion of the trial court,” United States v. Alabama, 791

F.2d at 1458, the Supreme Court has stated that the notice requirement “implies a

hearing in which the defendant is given a fair opportunity to oppose the application

3
The district court may convert a hearing for a temporary restraining order into a hearing
for a preliminary injunction as long as the adverse party had notice of the hearing. See United
States v. Alabama, 791 F.2d 1450, 1458 (11th Cir. 1986) (citing Dilworth v. Riner, 343 F.2d 226,
229 (5th Cir. 1965)).

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and to prepare for such opposition.” Granny Goose Foods, Inc. v. Teamsters, 415

U.S. at 434 n.7 (internal citations omitted); see also McDonald’s Corp., 147 F.3d at

1311; All Care Nursing, 887 F.2d at 1538. Furthermore, “[a]lthough the timing

requirements are applied flexibly in practice, the underlying principle of giving the

party opposing the application notice and an adequate opportunity to respond is

carefully honored by the courts.” Wright et al., Federal Practice and Procedure §

2949 at 215.

This principle is reflected in case law. In All Care Nursing, defendants

opposing an emergency motion for a preliminary injunction received two days’

notice that oral argument on the motion had been scheduled, and that the court

would accept affidavits and written submissions at that time. On appeal, this Court

stated that “[a] two-day notice, coupled with thirty minutes for oral presentations[,]

can hardly be said to constitute a meaningful opportunity to oppose appellees’

motion for preliminary injunction. The court thus determines that under the facts

of this case appellants were deprived of a fair and meaningful opportunity to

oppose appellees’ motion.” All Care Nursing, 887 F.2d at 1538. In Marshall

Durbin Farms, Inc. v. Nat’l Farmers Org., Inc., 446 F.2d 353 (5th Cir. 1971),4 the

4
Decisions rendered by the former Fifth Circuit prior to October 1, 1981 were adopted as
binding precedent by the Eleventh Circuit. See Bonner v. City of Prichard, 661 F.2d 1206, 1209
(11th Cir. 1981).

9
court found that service of notice of a preliminary injunction hearing five days

prior to the hearing was insufficient where the underlying complaint and nine

attached affidavits described over fifty incidents, and plaintiffs provided

defendants with only forty-seven of the sixty-eight additional affidavits presented

at the hearing. The court stated that defendants must have “fair notice and an

effective opportunity to controvert the facts adduced in support of plaintiffs’

motion.” 446 F.2d at 356. The court further stated that a

[h]earing requires a trial of issues of fact. Trial of issues of fact
necessitates an opportunity to present evidence, and not by only one side
of the controversy. The right of defendants to present controverting
factual data is illusory unless there is adequate notice of plaintiffs’
claims. It goes without saying that the requirements of a fair hearing
include notice of the claims of the opposing party and an opportunity to
meet them. . . . [T]he right to a hearing means the right to a meaningful
hearing.

Marshall Durbin Farms, 446 F.2d at 356 (internal citations and quotations

omitted). The court found that the defendants were placed in an “impossible

position insofar as both preparing and presenting an effective response to the

motion,” as the defendants, “within a few days,” had to “retain[] counsel, locat[e]

the numerous persons and investigat[e] the multitude of occurrences alleged . . .

determin[e] if there was evidence to controvert what was said to have occurred,

and either procur[e] affidavits or arrang[e] for live testimony from witnesses.” Id.

at 356-57.

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While an evidentiary hearing is not always required before the issuance of a

preliminary injunction, “where facts are bitterly contested and credibility

determinations must be made to decide whether injunctive relief should issue, an

evidentiary hearing must be held.” McDonald’s Corp., 147 F.3d at 1312 (citing

All Care Nursing, 887 F.2d 1535). Where conflicting factual information “place[s]

in serious dispute issues central to [a party’s] claims” and “much depends upon the

accurate presentation of numerous facts, the trial court err[s] in not holding an

evidentiary hearing to resolve these hotly contested issues.” All Care Nursing, 887

F.2d at 1539; cf. McDonald’s Corp., 147 F.3d at 1308 (concluding that no

evidentiary hearing was necessary where the nonmoving party did not deny the

moving party’s factual allegations and offered no contradictory evidence).

III.

In the instant case, a corporation and an individual in Venezuela were served

with a motion for a TRO and notice of a hearing only two days before the hearing

was to take place in Miami, Florida. Appellants’ attorney stated at the hearing that

he had learned of the matter at the close of business on the previous day and was

not sufficiently prepared for the hearing. Counsel requested a delay in order to

familiarize himself with the documents, locate witnesses, and prepare a response to

Four Seasons’ allegations. While the circumstances here involve fewer persons

11
and incidents than in Marshall Durbin Farms, the difficulties faced by the

appellants were similar. The two day notice period provided insufficient time to

read the pertinent documents, obtain and consult with counsel, and locate witnesses

or obtain affidavits supporting Appellants’ position.

Appellees correctly argue that the decision to determine the appropriate

amount of notice is properly left to the district court’s discretion, relying on cases

in which the courts have determined that short notice may be adequate.5

Nonetheless, while courts have, on occasion, accepted short notice periods, we

conclude that under the circumstances of this case, the notice was insufficient and

the district court’s decision to issue the injunction was an abuse of discretion.

The district court compounded its error by declining to hold the subsequent

evidentiary hearing. The court did hold a telephone hearing, providing the parties

an opportunity to argue Consorcio’s emergency motion to dissolve, stay, or modify

the injunction. However, where, as here, the material facts underlying the

complaint and the injunction are disputed, the district court is required to hold a

hearing which affords both parties an adequate opportunity to present their

5
Short notice periods have been accepted as adequate where, for example, appellants did
not establish prejudice due to inadequate notice, see, e.g. United States v. Alabama, 791 F.2d at
1458; did not protest the lack of notice or request additional time to prepare; see Dominion
Video Satellite, Inc. v. Echostar Satellite Corp., 269 F.3d 1149, 1153-54 (10th Cir. 2001); or had
ample actual notice of the request for preliminary relief. See Anderson v. Davila, 125 F.3d 148,
156-57 (3d Cir. 1997).

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arguments and educate the court about the complex issues involved. See Marshall

Durbin Farms, 446 F.2d at 356 (evidence should not come from only one side of a

controversy); Sims v. Greene, 161 F.2d 87, 88-89 (3d Cir. 1947) (“Trial of an issue

of fact necessitates opportunity to present evidence and not by only one side to the

controversy;” additionally, both sides must be afforded the opportunity to argue the

effect of the evidence to the court.); see also Wright et al. § 2949 at 228-32. Here,

the district court’s decision to cancel the November 28 evidentiary hearing in favor

of a telephone hearing deprived the Appellants of any meaningful opportunity to

adequately present their evidence rebutting the Appellees’ assertions. Rather, the

district court effectively issued and upheld the injunction based on evidence

presented by only one party. Consequently, we hold that the district court abused

its discretion by issuing and affirming the injunction without holding an

evidentiary hearing.

For the foregoing reasons, we REVERSE the decision of the district court

and VACATE the injunction.

Appellees’ suggestion of partial mootness of this appeal, construed as a

motion to dismiss this appeal in part as moot is DENIED.

Appellants’ motion to stay the pending appeal and to remand jurisdiction to

13
the district court for further proceedings is DENIED AS MOOT.

REVERSED and VACATED.