
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
