Fres-Co System USA Inc v. Kevin Hawkins
690 F. App'x 72
| 3rd Cir. | 2017Background
- Hawkins worked 16 years as a Fres-co sales rep and signed Fres-co’s Confidentiality and Non-Competition Agreement in 2000 (one-year post-employment restriction; broad “Line of Business” definition).
- Hawkins resigned in July 2016 to join Transcontinental in a similar sales role serving west-coast coffee packaging clients; his top 12 former Fres-co customers averaged >$1M/year each.
- Fres-co sued Hawkins and Transcontinental for breach of contract, misappropriation of trade secrets (federal DTSA and Pennsylvania UTSA), and interference, and moved for a TRO/preliminary injunction.
- The District Court granted injunctive relief: return Fres-co materials; enjoin use/disclosure of Fres-co confidential information/trade secrets; bar Hawkins from soliciting the top 12 coffee clients he had served for Fres-co (allowed Transcontinental to solicit them without Hawkins).
- On appeal, the Third Circuit held the District Court properly found likely irreparable harm but failed to analyze three required preliminary-injunction factors (likelihood of success on the merits; balance of equities; public interest) and remanded for further findings; injunction to remain pending reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Irreparable harm | Fres-co: Hawkins’ identical role, client access, and refusal to commit not to solicit create a substantial threat of misuse of confidential info causing irreparable injury. | Hawkins/Transcontinental: Hawkins affidavit and employer directives promise no disclosure; no imminent threat. | Court: District Court did not abuse discretion in finding likelihood of irreparable harm. |
| Likelihood of success on the merits | Fres-co: trade-secret and contract claims supported by Hawkins’ access to customer lists, pricing, strategies, and a signed non-compete. | Hawkins/Transcontinental: information may not be trade secrets; non-compete may be unenforceable (prior Bodell decision argued to preclude enforcement). | Court: District Court failed to analyze this factor; remand required to assess elements (trade-secret status, secrecy efforts, enforceability/scope of non-compete, issue-preclusion). |
| Balance of equities & public interest | Fres-co: protecting employers from misappropriation justifies injunction despite employment restrictions. | Hawkins/Transcontinental: injunction restricts employee mobility and employer hiring; public interest favors labor mobility. | Court: District Court provided no reasoning on these factors; remand required for explicit balancing. |
| Form of order / Rule 65(d) reason requirement | Fres-co: narrow relief justified by irreparable harm. | Hawkins/Transcontinental: district court failed to state reasons for injunction per Rule 65(d) and omitted analysis on three factors. | Court: FRCP 65(d) requires stating reasons; remedy is remand for further factual findings and legal analysis (possible evidentiary hearing). |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (four-factor preliminary injunction standard; injunctions are extraordinary relief)
- Nken v. Holder, 556 U.S. 418 (2009) (likelihood of success must be more than negligible; more than mere possibility)
- Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192 (3d Cir. 2014) (courts may draw reasonable inferences in injunction context; threatened misappropriation suffices)
- Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010) (analysis of trade-secret claims and balance between protecting trade secrets and employee mobility)
- Arrowpoint Capital Corp. v. Arrowpoint Asset Mgmt., LLC, 793 F.3d 313 (3d Cir. 2015) (trial court should analyze claim elements to assess likelihood of success)
- Bradley v. Pittsburgh Bd. of Educ., 910 F.2d 1172 (3d Cir. 1990) (district courts must provide conclusions of law and factual bases to permit appellate review of injunction rulings)