In the
United States Court of Appeals
For the Seventh Circuit

No. 02-1482

Lucini Italia Company,

Plaintiff-Appellant,

v.

Giuseppe Grappolini and Grappolini G.S.R.L.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 C 6405--Charles R. Norgle, Sr., Judge.

Argued April 18, 2002--Decided May 7, 2002



  Before Flaum, Chief Judge, and Harlington
Wood, Jr. and Posner, Circuit Judges.

  Flaum, Chief Judge. On January 31, 2002,
the district court denied as moot Lucini
Italia Company’s ("Lucini’s") motion for
preliminary injunction. Because we find
that an incorrect legal standard for
mootness was employed and that several
facts supporting the court’s holding
appear unsupported by the record, we
vacate and remand for immediate discovery
and an expedited preliminary injunction
hearing.

  I.   Background/1

  Lucini, an Illinois corporation,
develops and markets gourmet food
products including high-end, extra-virgin
olive oil. In 1997, Lucini entered into a
consulting agreement with Giuseppe
Grappolini, an Italian citizen who was
known in the industry to be an olive oil
expert, and a supply agreement with his
company, Grappolini G.S.R.L./2
Grappolini’s primary responsibilities
were to identify Italian producers of
olive oil, market, and promote Lucini’s
products. In 1998, Lucini decided to add
to its product line olive oil flavored
with natural extracts--garlic or lemon,
for example. This flavor-added product is
known as "essential oil." Arthur Frigo,
Lucini’s chairman, discussed the idea,
termed the "LEO Project," standing for
Lucini Essential Oils, with Grappolini.
They agreed orally that Lucini would be
responsible for the business end of the
project--advertising, marketing,
distribution, and the like--and
Grappolini would conduct studies
involving the taste and smell of
potential products, and find an Italian
supplier of the necessary oils and
extracts./3

  For about two years, both Lucini and
Grappolini appeared to be upholding their
ends of the bargain, and the LEO project
seemed to be approaching fruition. Lucini
performed extensive research into the
potential U.S. market for essential oil
products, identified target markets and
customers, and created a strategy
determining, among other things, which
flavors to market to which types of
stores, which flavors to forgo
altogether, advertising, packaging, and
price points that would best allow the
establishment of a market. Lucini, to its
current dismay, disclosed this
information to Giuseppe Grappolini after
he signed two confidentiality agreements.
Lucini guarded the results of its
research, giving access only to high-
level employees and to Grappolini.

  Grappolini, on the culinary side of the
project, located a company--Vegetal--to
supply the necessary natural extracts./4
Lucini authorized Grappolini to negotiate
and obtain for Lucini an exclusive supply
arrangement with Vegetal, and drafted a
supply contract for Grappolini to present
to the company. Grappolini, Lucini
asserts, agreed to do so. He reassured
Frigo that the contract with Vegetal
would be executed within 1 to 2 months,
and Lucini planned to launch the LEO
Project at a food show in San Francisco.

  In late 1999, Lucini discovered that
Grappolini himself entered into a supply
agreement with Vegetal instead of
executing one between Vegetal and Lucini.
In December 2000, Lucini learned that
Grappolini had brought to market his own
essential oil product, termed "Res
Essenziale." Res Essenziale, Lucini
argues, is an imitation of the LEO
product--it uses the flavors that Lucini
found to be successful, and avoids those
Lucini found would fail. Lucini also
asserts that Grappolini relied on the
trade secret marketing and packaging
information that Lucini disclosed,
inconfidence, to Grappolini. Although
Lucini learned of Res Essenziale from an
Italian magazine article, it found the
product for sale in a food store in Salt
Lake City, Utah. Later, after this
litigation had begun and Grappolini had
contended that the few bottles in Utah
were the only ones sold in the United
States, Lucini discovered that a nation-
wide specialty food store was selling Res
Essenziale across the United States.
Grappolini, at this point, provided the
court with a declaration that he and his
company had sold 1,200 bottles to this
store. The parties have not performed any
additional discovery because the district
court has not required Grappolini to
respond to Lucini’s requests for
information about the development of Res
Essenziale or the quantities of essential
oil sold in the United States.

  In July 2001, Lucini filed suit against
Grappolini, seeking a preliminary
injunction and other relief based
onGrappolini’s misappropriation of
Lucini’s essential oil trade secrets.
Grappolini filed, and lost, a motion to
dismiss for lack of jurisdiction but did
not respond to the motion. Several months
later, the court denied Lucini’s motion
as moot, stating in a three-paragraph
order that the parties had agreed to
maintain the status quo and that they
were engaging in ongoing efforts to
settle the case. Later, the district
court ruled that discovery should be
stayed until March 26, 2002--the
anticipated date of ruling from an
Italian arbitration considering a breach
of contract claim that Grappolini
initiated against Lucini. That ruling has
yet to occur.


  II.   Discussion

  We find that the district court’s denial
as moot of Lucini’s motion for
preliminary injunction was in error. The
correct standard for mootness--that no
reasonable expectation exists that the
alleged wrong will be repeated--was
notapplied. Wilk v. American Medical
Ass’n, 895 F.2d 352, 367 (7th Cir. 1990);
see also Friends of the Earth, Inc. v.
Laidlaw Envtl. Services, 528 U.S. 167,
189 (2000) (citing United States v.
Concentrated Phosphate Exp. Ass’n, 393
U.S. 199 (1968)). The burden of
persuasion that such conduct cannot
reasonably be expected to reoccur lies
with the defendant. E.g., Wilk, 895 F.2d
at 367.

  In reaching its decision, the court did
not point to any evidence showing that no
reasonable expectation existed that,
before a ruling on the merits of the
case, Grappolini would sell essential oil
products in the United States or continue
to use Lucini’s marketing strategy in
developing his own product. Instead, it
states in its order that because the
parties have maintained the status quo
thus far in the litigation and have
attempted to settle the case, the request
is moot.

  A request for an injunction, preliminary
or otherwise, simply is not mooted
because the parties have, for the course
of the litigation and by their own
agreement, maintained the status quo. See
Friends of the Earth, 528 U.S. at 189
("It is well settled that a defendant’s
voluntary cessation of a challenged
practice does not deprive a federal court
of its power to determine the legality of
the practice.") (internal citations
omitted). The district court cited two
facts to support its finding of mootness:
Grappolini’s agreement to maintain the
status quo, and the parties’ efforts to
settle the case. However, even accepting
these assertions as true, they fail to
demonstrate that no reasonable chance
exists that Grappolini will sell flavored
oils or that he will apply the trade
secret information misappropriated from
Lucini. Indeed, Grappolini does not argue
that these facts establish mootness.
Rather, he contends that the district
court denied the injunction on the
merits. We disagree. Because the court
stated specifically that "plaintiff’s
motion for preliminary injunction is
moot," we will take it at its word.
Nothing in the order applies the facts of
the case to the substantive elements that
a party must show when requesting a
preliminary injunction: 1) a reasonable
likelihood of success on the merits of
the underlying claim; 2) no adequate
remedy at law; and 3) irreparable harm if
the injunction is not granted. Ty, Inc.
v. Jones Group, Inc., 237 F.3d 891 (7th
Cir. 2001). After a court has considered
these three issues, it must weigh the
potential harms (although such balancing
may be inapplicable if Grappolini’s
violation of Lucini’s rights was willful)
and consider the public interest.
PepsiCo., Inc. v. Redmond, 54 F.3d 1262
(7th Cir. 1995). Although the court used
the phrase "irreparable harm" during a
hearing several weeks after denying the
motion for preliminary injunction, such
language does not modify or appear in the
order at issue. The district court never
applied the facts of this case to the
substantive standard a party must meet to
show the need for a preliminary
injunction./5

  Moreover, we find the court’s statements
of fact to be erroneous. The parties have
not agreed to maintain the status quo; in
fact, they have agreed on little
throughout this litigation. While
Grappolini declared in an affidavit that
he had sold only 1,200 bottles of Res
Essenziale in the United States, the
court has not allowed sufficient
discovery for Lucini to determine the
veracity of this statement. Particularly
because Grappolini has shown his
declarations to be unreliable, the
evidentiary value of this statement is
extremely limited. He never agreed to
forgo selling any product in the future,
and Lucini never agreed that his sales
were limited to the 1,200 bottles. In
fact, Lucini has consistently contended
that Grappolini continues to sell
essential oil products in the United
States. Furthermore, the sale of Res
Essenziale is not the only action that
Lucini seeks to enjoin; because it argues
that Grappolini used its trade secret
marketing and business plan to develop
his oil, it seeks to enjoin any action
whereby Grappolini could continue to do
so. Grappolini has not agreed to stop
using or disclosing the trade secret
essential oil design and marketing
information that Lucini developed and
contends that he has been using in
developing his Res Essenziale. Neither
have the parties attempted to settle the
case; the ongoing arbitration in Italy
deals with a separate issue--whether
Lucini breached its contract with
Grappolini. Lucini attempted to bring the
instant claims in that arbitration, but
was told it could not do so; the fact
that both actions are ongoing does not
indicate any willingness to settle either
one.

  The facts, as stated by the court below,
do not show that the request for an
injunction is moot. Beyond that, they are
unsupported and therefore should not be
relied upon in the district court’s
decision of the motion on the merits.

  The facts that should be relied upon--
those related to Grappolini’s sales,
marketing, and developing of essential
oil products--are sparse. The contention
that Lucini has not established
irreparable injury and therefore cannot
obtain the injunction it seeks appears
highly speculative given that the
district court has stayed discovery and
Grappolini, therefore, has yet to respond
to Lucini’s requests for information
regarding the scope of the essential oil
agreement and of his actions. The extent
of the irreparable harm, therefore, is
impossible to assess at this point. The
court’s statement in its February 19
order (issued 2 weeks after denying the
injunction) that the facts may argue
against a preliminary injunction because
"if these sales [of Res Essenziale] are
known and ascertainable, the
irreparability argument seems to fail" is
untelling. The fact remains that the
extent of the sales and other trade
secret usage is not known.

  The district court, in the above-
mentioned order, granted Grappolini’s
request to stay discovery pending a
ruling from the Italian arbitration which
was set for March 26, 2002. Neither that
ruling nor the discovery Lucini seeks has
yet to occur. More information is
necessary to move forward with the
preliminary injunction hearing; without
it, the court is unable to fully assess
the request on the merits.

  III.   Conclusion

  For the reasons stated above, we VACATE
the finding of mootness by the district
court and REMAND for immediate discovery
and an expedited hearing on the merits of
the motion for preliminary injunction.

FOOTNOTES

/1 Several key facts in this case are in dispute.
Because Grappolini has not yet responded to
Lucini’s discovery requests and has failed to
include a factual background section of his brief
on appeal, we will set out the facts as Lucini
presents them to us, noting, when necessary,
Grappolini’s version as presented in affidavits
to the district court.

/2 In this opinion, Giuseppe Grappolini and Grap-
polini G.S.R.L will be referred to collectively
as "Grappolini."

/3 Grappolini disputes facts surrounding the LEO
agreement. He did admit to the district court
that some form of oral agreement existed regard-
ing the LEO product line.

/4 Grappolini asserts that he had formed a relation-
ship with Vegetal and had researched the develop-
ment of essential oils before his relationship
with Lucini began.

/5 In fact, the court could not have done so at the
time of its order given that so little discovery
had occurred.
