Opinion
No. CV 03 0070432
July 15, 2003
MEMORANDUM OF DECISION RE MOTION FOR TEMPORARY INJUNCTION
The plaintiff, Fiberoptics Technology, Inc. (FTI), seeks a temporary injunction pursuant to General Statutes § 52-472, et. seq., against the defendants, Scott Mowry and Jo-Anna Mowry, arising out of alleged acts of misconduct by its former employee, Scott Mowry and his wife, Jo-Anna. The plaintiff seeks, inter alia, to enjoin the defendants from disclosing any confidential information that Scott Mowry obtained while employed by the plaintiff and to prohibit the defendants from engaging in any further involvement or have any contact with Gulf Fiberoptics Inc. (Gulf), the plaintiff's competitor. On May 13, 2003, the court, Cosgrove, J., granted the plaintiff's application for an ex parte restraining order with respect to the disclosure of confidential information. On June 17, 2003, an adversary hearing was held before this court on the issue of the temporary injunction.
The facts that were adduced at the hearing are as follows. FTI is a company that specializes in the manufacture of custom fiber optic components. Among the components that FTI manufactures, are custom fiberoptic cables used in endoscopes. Specifically, FTI is engaged in the business of creating cables for companies that refurbish or repair endoscopes. These companies include Medical Replacement Parts, Inc. and Total Scope, Inc. According to the testimony of FTI Vice President, Keith Knowlton, FTI's only competitor in the custom fiber optic cables used in endoscopes business, is the Florida company, Gulf.
An endoscope is a medical instrument used for visualizing the interior of a hollow organ such the rectum or urethra.
Typically in order to create these cables, the refurbish company sends a broken cable, created by an original equipment manufacturer, to FTI. The research and development team at FTI then reverse engineers the cable and creates a new cable to the specifications of the original cable. This reverse engineering process requires FTI to create, among other things, prints and drawings to facilitate the creation of the new cable. FTI has also developed a unique technical process for gathering thousands of glass fibers into a silicone sheath, to create the cable. CT Page 8413-v
Prior to this lawsuit, the defendant, Scott Mowry, had been employed by FTI for seventeen years. Scott Mowry did not graduate from high school and according to his testimony, he gained all his knowledge, with respect to fiber optic technology, from working at FTI. Scott Mowry was involved in the assembly and some research and development of endoscope cables and for three years prior to his termination, he served as a group leader at the company. In this position he had access to the drawings, schematics and other customer information, which was stored in a file cabinet on the engineering floor. As with nearly all the employees at FTI, Scott Mowry had significant access to the FTI facility. He had unlimited access to all but the inner offices of the president and vice president and he was given keys to the building so that he could come and go as he pleased, at anytime of day.
FTI never required Scott Mowry to sign a confidentiality agreement or a covenant not to compete agreement against FTI prior to or during his employment. According to the testimony of Knowlton, FTI employees were never trained in regard to secrecy or nondisclosure of confidential information and the employee handbook of ethics only made vague reference to confidentiality. By all accounts, FTI blindly trusted its employees in good faith.
Sometime in the early months of 2001, Scott Mowry established and began to operate a business out of the basement of his home known as Endo Precision Lighting (Endo). Scott Mowry, operating as Endo, was involved in the exact same business of manufacturing custom fiber optic endoscope cables as FTI. According to Scott's testimony and Endo customer invoices, Endo's customers were almost exclusively Medical Replacement Parts, Inc. and Total Scope, Inc., both customers of FTI. The evidence submitted at trial reveals that Endo issued more than twenty invoices to these two companies alone, totaling over $40,000 for custom fiber optic cables. Scott admitted that he knew, while operating as Endo, that at least one of these customers was a customer of his employer and he also knew what he was doing was wrong.
In order to manufacture some of the cables, Scott Mowry began to steal design prints from FTI. While he was unsure of the exact number of prints that he stole, he testified that it could have exceeded ten. He also admitted that he stole sheathing and epoxy from FTI to manufacture the cables. Scott Mowry testified that he ceased operating as Endo in September of 2001.
At the hearing, while Scott Mowry freely admitted that he stole the prints and epoxy, he claimed that FTI's purchasing agent was aware that he had taken the sheathing and he implied that he had her permission.
Concurrently in 2001, Scott Mowry also became involved with FTI's competitor, Gulf. Scott testified that in January of 2001, he entered into negotiations with Gulf principals, Christopher Kearns and Patrick CT Page 8413-w Bennetts, whereby Scott would provide "consulting" services for Gulf. Mowry solicited the help of his wife, Jo-Anna, and they formed a consulting business known as Jo-Anna's Consulting. Jo-Anna Mowry subsequently entered into a three-year consulting agreement with Gulf which, by the terms of the contract, began on February 3, 2001.
By virtue of the recitals in the agreement, Jo-Anna Mowry was an "expert in general fiber optic matters" and Gulf was to "utilize the experience and skill of [Jo-Anna Mowry]." In consideration for Jo-Anna's consulting services, Gulf agreed to pay $5,000 up front and make bi-weekly payments in the amount of $800 for the duration of the three-year period. While the payments set forth in the contract were never completed, through the exhibits and Scott's testimony, Jo-Anna's Consulting received nearly $20,000 in total. Scott Mowry also admitted that at some point, Gulf lent him $10,000. According to Scott, this "loan" was undocumented, unsecured, interest free and there was no agreement as to the date upon which the loan was to be repaid.
During the hearing, Scott denied that the establishment of Jo-Anna's Consulting and the fact that his wife was the named consultant in the agreement were part of an effort to conceal his identity, however, he admitted that his wife had no expertise in fiber optic technology and all of the consulting services for Gulf were to be performed by him. He also admitted that his consulting services essentially entailed sending copies of FTI's technical prints and drawings to Gulf. Scott Mowry admitted that he would steal the drawings from FTI, delete all reference to FTI on the documents using whiteout or other tools, and then send them to Gulf. A number of these drawings were introduced at trial, evidencing the modifications made by Mowry.
Scott Mowry also admitted that during this time he made two trips to Florida to visit Gulf. The first trip was paid for by Gulf and he stayed at the home of Gulf principal, Christopher Kerns. On the second trip, he went with a companion, Sandy Mayo, and he lied to FTI in order to get time off from work for the trip, stating that he was going to a wedding. All throughout the period in which Scott Mowry conducted business as Endo and under the guise of Jo-Anna's Consulting, he remained a full-time employee of FTI.
On April 22, 2003, FTI was alerted by a friend of Scott Mowry of his dealings with Gulf. FTI President, Robert Dowling, immediately called Scott Mowry into a meeting, during which Scott initially lied about the extent of his involvement with Gulf. Scott and Jo-Anna Mowry subsequently met with Dowling and another FTI employee, William Bailey, at Dowling's home the same evening and the parties discussed Jo-Anna's Consulting and CT Page 8413-x its involvement with Gulf Thereafter, Scott Mowry was terminated from FTI on April 23, 2003.
"The general rule is that a party seeking a temporary injunction needs to show the establishment of a legal right to the requested relief, which involves both the probability of success on the merits and the lack of an adequate remedy at law, as well as the imminence of substantial and irreparable injury to the plaintiffs, all in the context of weighing the benefits and harms to both parties . . . Factors to be weighed . . . include the probability of success on the merits, irreparability of harm, the impact on each party, and the public good." (Citations omitted; internal quotation marks omitted.) Hofffnagle v. Henderson, Superior Court, judicial district of Hartford, Docket No. CV 02 0813972 (March 21, 2002, Beach, J.) ( 31 Conn.L.Rptr. 644, 646).
Based on the facts adduced at the hearing, it is unquestionable that Scott Mowry engaged in egregiously disloyal and inequitable conduct by stealing from his employer and competing against his employer in various capacities while still employed by them. FTI, however, clearly took no steps to protect their confidential information or protect themselves against this type of employee misconduct. The issues before this court, therefore, are whether absent contractual provisions such as a covenant not to compete or a confidentiality agreement, an employee has an implied duty of loyalty to his employer and whether an egregious breach of such duty would entitle the employer to injunctive relief. The parties have neither briefed nor has this court found any Connecticut cases dealing with this issue in a non-contractual setting. Accordingly, the court may look to other jurisdictions for guidance. See Benavides v. Benavides, 11 Conn. App. 150, 152, 526 A.2d 536 (1987).
In United Board Carton Corp. v. Britting, 63 N.J. Super. 517, 524, 164 A.2d 824 (Ch.Div.), aff'd., 61 N.J. Super. 340, 160 A.2d 660 (App.Div. 1959), cert. denied, 33 N.J. 326, 164 A.2d 379 (1960), the defendants had been employed for many years as salesmen of the plaintiff's corrugated paper products company. While still in the plaintiff's employ and for several months prior to the termination of their employment relation with the plaintiff, the defendants set up their own rival corporation in competition with the plaintiff and pirated a substantial part of the plaintiff's corrugated business. The defendants also stole materials, such as dies for the stamping of customers' names on the corrugated products from their employer. Importantly, the defendants signed no written contracts of employment and were not bound by any explicit contractual obligation.
Despite the lack of contractual obligation and, rather, in reliance on CT Page 8413-y the implied duty of loyalty of an agent to a principal during employment, the court ordered a preliminary injunction, based upon the frank admissions of the defendants that they had engaged in the double-dealing and divided loyalty, while still on plaintiff's payroll.
As the court in United Board stated, "[t]here is no doubt that [the defendants] are liable in damages for their breach of the duty of loyalty owed by an agent to his principal . . . But, is the remedy by way of money damages adequate here? I think not. Any computation of money damages at this time cannot be made with any degree of reasonable certainty. Who can calculate the amount of future profits lost by reason of the wrongful taking away of plaintiff's customers? It is a well established rule that equity will intervene to grant equitable relief when the damages at law are inadequate, or not readily calculable . . . It is not enough that there is a remedy at law. It must be plain and adequate, or, in other words, as practical and efficient to the ends of justice and its prompt administration as the remedy in equity." (Citations omitted; internal quotation marks omitted.) Id., 532-33. The court subsequently granted an injunction restraining the defendants from soliciting or doing business with their employer's customers whom they did business with while employed by the plaintiff, for a period of two years. As the court concluded, "[t]he defendants should not be kept out of competition forever, for such a policy would destroy free enterprise and the wholesome benefits which fair and honest competition creates. Their need to earn a livelihood is no excuse or justification for stealing their employers' customers. So, I have concluded that if defendants are restrained for a limited period of two years from soliciting or doing business with those customers whom they sold, while working for the plaintiff, a proper, equitable solution of defendants' wrong will be reached. It shall be so ordered." Id., 534. Other courts have followed this rationale and imposed injunctions for an employee's breach of loyalty dining employment. See, e.g., Rego Displays, Inc. v. Fournier, 119 R.I. 469, 379 A.2d 1098 (1977); AGA Aktiebolag v. ABA Optical Corp., 441 F. Sup. 747 (E.D.N.Y. 1977), C-E-I-R, Inc. v. Computer Corp., 229 Md. 357, 366, 183 A.2d 374 (1962).
Thus, this court is persuaded by the rationale in United Board. Even without a contractual obligation, "the very relationship [between employer and employee] implies that the principal has reposed sonic trust or confidence in the agent and that the agent or employee is obligated to exercise the utmost good faith, loyalty and honesty toward his principal or employer . . . In the absence of clear consent or waiver by the principal, an agent, during the term of the agency, is subject to a duty not to compete with the principal concerning the subject matter of the agency." (Citations omitted.) Town Country House Homes CT Page 8413-z Service v. Evans, 150 Conn. 314, 317, 189 A.2d 390 (1963). An employee "is not . . . entitled to solicit customers for such rival business before the end of his employment . . . in direct competition with the employer's business . . . [and any] [k]nowledge acquired by an employee during his employment cannot be used for his own advantage to the injury of the employer during employment." (Citations omitted; internal quotation marks omitted.) Id.; see also Hoffnagle v. Henderson, Superior Court, judicial district of Hartford, Docket No. CV 02 0813972 (April 17, 2003, Beach, J.).
The court finds that Scott Mowry had a duty of loyalty to FTI, which he breached in the most egregious fashion. The court further finds that computation of money damages at this time cannot be made with any degree of reasonable certainty and that equity will intervene to grant equitable relief when the damages at law are inadequate, or not readily calculable. Moreover, based on the perfidious acts against his employer including theft, deceit and other treachery, which Scott Mowry freely admitted to at the hearing, FTI has demonstrated a high probability of success on the merits and an injunction would serve the interest of the public good. Thus, FTI has met its burden of alleging and proving irreparable harm and lack of an adequate remedy at law and is entitled to a temporary injunction.
The court, however, is also mindful of the impact on the defendants' livelihoods by imposing the injunction requested by FTI, which would preclude Scott Mowry from being employed by or associating with, Gulf. Mowry has, however, for almost three years, been receiving honest compensation from the plaintiff and dishonest compensation from Gulf. The surreptitious and deceitful conduct of both Mowry and Gulf require equitable relief in favor of the plaintiff. Accordingly, the court orders an injunction as follows:
1. The defendants, Scott A Mowry and Joanne Mowry, are restrained until final hearing by this court or for three years from July 15, 2003, whichever is sooner, from soliciting or doing business with, or being employed by Gulf Fiberoptics Inc., Medical Replacement Parts, Inc. and Total Scope, Inc.; directly or indirectly. This order further restrains the defendants from communication or contact with any director, officer, owner, agent or representative of Gulf Fiberoptics, Inc. Nothing herein shall interfere with the preparation or participation by the defendants in any lawsuit or litigation which may be brought with respect to the transactions herebefore mentioned.
2. The defendants are restrained until final hearing by this court or for three years from July 15, 2003, whichever is sooner, from being CT Page 8413-aa employed by or contracting with any company known to the defendants as soliciting or doing business with Gulf Fiberoptics, Inc, Medical Replacement Parts, Inc. or Total Scope, Inc.
3. The defendants are restrained from disclosing to any third party, any trade secrets, diagrams, drawings of technical data gained or acquired from the plaintiff Fiberoptic Technology, Inc. until final hearing by this court or for three years from July 15, 2003, whichever is sooner.
The court will not require the posting of a bond by the plaintiff, however, this is without prejudice in the event the defendants wish to raise the issue of a bond.
Foley, J.