author: DOWD, District Judge.

text:
    PENETONE CORPORATION, Plaintiff, v. PALCHEM, INC., et al., Defendant.
    No. C85-3373A.
    United States District Court, N.D. Ohio, E.D.
    Nov. 27, 1985.

      Robert V. Vickers, Body, Vickers & Daniels, Cleveland, Ohio, Paul Fields, Terry Sue Zisowitz, McAulay, Fields, Fisher, Goldstein & Nissen, New York City, for Penetone Corp.
    A.P. Leary, Chagrin Falls, Ohio, for Scott & Fetzer Co. d/b/s Scot Laboratories.
    Wayne H. Calabrese, Guy, Lammert & Towne, Akron, Ohio, for Palchem, Inc. and Carl J. Paolucci.
   DOWD, District Judge.

Plaintiff, the Penetone Corporation (hereinafter “Penetone”), filed its complaint against the defendants, Palchem, Inc. (hereinafter “Palchem”), Carl J. Paolucci, and the Scott & Fetzer Company, d/b/a Scot Laboratories (hereinafter “Scot”) on November 12, 1985, setting forth nine causes of action. In its complaint, plaintiff alleges, inter alia: (1) that the defendant Paolucci and “his essentially alter ego,” Palchem, have violated a noncompete clause in an employment agreement between defendant Paolucci and the plaintiff; (2) that the defendant Paolucci revealed trade secrets to the defendant Scott & Fet-zer Company; (3) that the defendants willfully and intentionally infringed upon plaintiff’s registered trademark in violation of 15 U.S.C. §§ 1114 and 1125(a); (4) that the defendants are guilty of common law trademark, service mark, and trade name infringement, as well as unfair competition; (5) that the defendants are guilty of converting plaintiff’s property; and, finally, (6) that the defendant Paolucci has abused the confidential relationship he enjoyed with his former employer, the plaintiff.

Before the Court is the plaintiff’s motion for a preliminary injunction. In his motion, plaintiff requests that the Court:

(a) enjoin the defendants from contacting plaintiff’s customers and diverting sales in breach of an employee agreement not to compete for one year following termination of employment;
(b) enjoin defendants from converting plaintiff’s storage tanks located on customers’ premises and filling said storage tanks with defendants’ goods;
(c) enjoin defendants from disclosing plaintiff’s trade secrets to third parties;
(d) using plaintiff’s trade secrets to manufacture and market defendants’ products; and
(e) enjoin defendants from infringing plaintiff’s common-law and registered trademarks and otherwise unfairly competing with plaintiff.

Plaintiff’s motion for preliminary injunction, pp. 1-2. For the reasons which follow, the motion for preliminary injunction is granted.

EVIDENTIARY SUBMISSIONS

An evidentiary hearing was held in the above-captioned matter on November 19, 1985. At the hearing, counsel for the plaintiff introduced the deposition testimony of the defendant, Carl J. Paolucci, Paul Distad, Vice-President of operations for the Scott & Fetzer Company, Scot Lab Division, and Frank Lombardi, Sales Manager at Scot Laboratories. At the hearing, counsel for the plaintiff made numerous references to these depositions, as follows.

Defendant Carl Paolucci testified upon deposition that he was employed by Pene-tone on August 29, 1977, see deposition of Paolucci, p. 26, to sell Penetone products (chemical cleaners). Defendant further testified as follows. Defendant learned about plaintiffs products by reading the “Tech Data Sheets,” the sales sheets that the plaintiff company distributes to its customers. See id. at 27. Defendant was initially assigned to what has been designated as Territory 807, which at that time primarily encompassed Jones & Laughlin Steel. See id. at 28. In 1979, defendant became more specialized in the steel industry, and in March of 1985, was “almost totally specialized,” and was “told [by his regional manager] to work nothing but steel accounts.” Id. at 29.

Defendant testified that in working as a salesman for the plaintiff company, he spent about 90% of his time at LTV Steel. Prior to October of 1984, when Republic Steel merged with Jones & Laughlin, defendant referred to Republic Steel as LTV Steel East and Jones & Laughlin as LTV Steel West. See id. at 42. Those two plants, including the Warren plant, were where defendant spent approximately 90% of his time. See id. at 48.

Defendant was given instructions on Penetone’s products at various sales seminars. See id. at 35. Sales seminars were given at least twice a year. “Solvent seminars” were also given to instruct people in the proper use of solvents by the then steel manager of the Penetone Corporation. See id. at 36.

Defendant testified that it is usually general foremen who are responsible for the ordering of the goods he sold. He explained the procedure that he follows to introduce a new product at LTV as follows. See id. at 44. He tries to determine the need for a product and then introduces a sample product which he demonstrates himself, if he is able, to a foreman. See id. at 44-55. Before a foreman can order any products, the Material Safety Data Sheets on the product must be approved by corporate safety. See id. at 45. Once a product is approved, defendant then approaches the purchasing department to ask them if they will put the product on a blanket purchase order. See id. at 48. So, in summary, if a foreman approves a product for use in the plant, he then contacts corporate safety with the Material Safety Data Sheets on the product, as well as the district safety office. The district safety office then sends a copy of the Material Safety Data Sheets to the general foreman, who in turn writes up a job safety analysis of the product. See id. at 49.

In August of 1985, a blanket purchase order was first issued to the defendant Palchem. See id. at 67. Defendant executed the articles for incorporation for Pal-chem on August 2, 1985. See id. at 78. Defendant formed the corporation “[sjtrictly as a protective measure.” See id. at 79. He explained his answer by stating that “Penetone was cutting [his] commissions drastically and [he] saw the handwriting on the wall what they were going to do next. [He] saw what happened to other people.” Id. He testified that:

Penetone had fired 50 percent of the sales force within six weeks. They had also harassed many people and they had cut compensation drastically in October of ‘84 and in the spring of ‘85 and took a third very drastic cut in August of ‘85. And when they did that I was prepared, because I saw it coming.

Id. He testified that he “was prepared to do what other Penetone salesmen have done in the past year, to bail out of the corporation because it was going down the tubes.” See id. at 79-80. Defendant intended for Palchem to enter into the chemical business with eleven products which were in competition with the highest selling Penetone products in the defendant’s selling area. See id. at 80-81.

Defendant is president of Palchem, and his wife, Kaylyn Ann Paolucci, is vice-president and treasurer. Defendant and his wife are the only two corporate officers. There are no corporate directors, and no stocks or shares in the corporation have been issued yet. See id. at 81. Defendant and his wife are the only employees of the corporation. Defendant sells Palchem products and his wife answers the telephone and does the billing work. See id. at 82.

Defendant first formed the idea of selling products in competition with Penetone in April of 1985, see id. at 82, which was when he first contacted Scot Laboratories about producing products to compete with Penetone. See id. at 83. Defendant spoke with Fred Lombardi at Scot Laboratories, and told him that:

[defendant] was being crucified by the Penetone Corporation and that I thought I should have a back door in case the company either went bankrupt or the fact that I was going to lose commission monies to the point where I was going to have to either go to work for another company or for my own company.

See id.

At defendant’s first meeting with Lombardi, defendant discussed with Lombardi the possibility of Scot producing products similar to Penetone’s products to meet the needs of LTV Steel. The two men discussed availability and transportation based upon defendant’s knowledge of the requirements of LTV Steel. See id. at 84. Defendant supplied Lombardi with a sample of materials for eleven products produced by Penetone. See id. at 85. The only products that Palchem is currently selling and offering for sale are the Palchem version of those same eleven Penetone products. See id. at 86.

Defendant testified that although he first met with Lombardi in April of 1985, it was not until May that he actually gave him samples of the eleven Penetone products. See id. at 86-87. Defendant testified that he probably spoke with Lombardi by phone in between those two meetings. See id. at 87. When defendant spoke with Lombardi, defendant was the one who actually offered the samples, which he had originally obtained from Penetone’s Akron warehouse. See id. at 87-88. Penetone owned the material. When defendant turned over the material to Lombardi, Paul Distad, operating manager of Scot Laboratories was present. Both men knew the defendant was then an employee of the plaintiff Penetone. See id. at 88. He further informed the men that he was giving them Penetone’s samples.

Defendant additionally gave Scot Laboratories Material Safety Data Sheets to assist them in analyzing the products. See id. at 90. Defendant Scot’s chemist requested the Material Safety Data Sheets in June of 1985, see id. at 91, and Paolucci supplied them shortly thereafter. Scot Laboratories, however, had analyzed some of the products with which defendant had supplied them prior to receiving the material safety data sheets. See id. at 92.

Defendant was given samples of the new products in July of 1985. Defendant informed Lombardi, Distad, and the chemist for Scot that he was going to attempt to market the products Scot Laboratories had produced to LTV. He testified that he selected the names of the products that Palchem was going to market. See id. at 94. He testified that he did not demonstrate the samples of the products that Scot Laboratories had produced to anyone at LTV until September of 1985. Defendant testified that prior to September 30, 1985, he discussed selling the products produced by Scot Laboratories to Barbara Wil-more, a purchasing agent for LTV. He testified that Wilmore was responsive to his overtures, as LTV had had many product complaints and product delivery problems (apparently from Penetone). See id. at 96.

Defendant told Wilmore that he was interested in selling his products in competition with Penetone. Defendant submitted the Material Safety Data Sheets from Scot Laboratories on the products he was interested in selling to LTV’s corporate safety department. Defendant did not submit any products produced by Scot Laboratories to LTV. He testified that the Material Safety Data Sheets filled out by Scot were the property of LTV Steel. See id. at 98. Defendant obtained the blank data sheets from records that he kept in his home files, see id. at 100, which he submitted to Scot Laboratories to fill in, and thereafter submitted to LTV Steel for approval. See id. at 101. Defendant finally got approval for his products from LTV’s corporate safety department around the first or second week of September. Defendant received the approval of corporate safety before September 15, 1985. See id. at 104. Barbara Wilmore issued a blanket purchase order from LTV to Palchem. See id. at 106.

When questioned about the pricing of his products, defendant testified that in arriving at the pricing for his various products which he offered for sale to LTV, he took into account the cost of manufacturing the product, the cost of delivery, and the profit margin that could be made on the product. See id. at 109.

Defendant first demonstrated two products (PC-42 and PC-80) to LTV somewhere between the 15th and 25th of September. See id. at 110. Defendant subsequently began soliciting orders from LTV for the Palchem products “[s]omewhere right after the 15th of September.” See id. at 111. Defendant received his first order from LTV for Palchem products somewhere around the 20th or 23rd of September. See id. at 112.

Defendant testified that Scot is advancing him a credit line for producing Palchem products, which he negotiated with Lombardi and Distad. See id. at 113. Once defendant receives an order from LTV he communicates the order to Scot Laboratories, see id. at 114, which arranges for the shipment of the products. Defendant does sell materials in bulk to LTV, which are stored, in some cases, in tanks LTV used to store Penetone products. Defendant testified that some of the tanks are owned by LTV and some are owned by Penetone. See id. at 115. Defendant testified that LTV’s general foreman of the tanks area has given him permission to use them. See id. at 118.

In 1984, defendant’s net sales for Pene-tone totaled about $830,000.00. See id. at 59. In 1985, through September 30, defendant’s net sales were about $841,000.00, See id. at 60.

The Material Safety Data Sheets referred to by the parties at the deposition of the defendant were introduced as exhibits in the deposition of Paul Distad. See exhibit PD-6. The Court has reviewed those data sheets, as well as the transcripts and other exhibits to the depositions of Paul Distad and Frank Lombardi, but finds the above related testimony of the defendant Paolucci to necessarily be the primary focus of the Court.

The plaintiff further introduced the testimony of Robert T. Steen, President and Chief Executive Officer of the plaintiff Penetone for the past fourteen months. At the hearing, Steen testified that Penetone’s policy regarding samples is that they are not to leave the premises since they may come in contact with people who do not know how to use them and may cause eye or skin damage. He testified that this policy is communicated to sales people at regional and national sales meetings, and at other corporate meetings. He conceded that it is impossible to keep the product from being copied, and stated that he realized that the policy would “probably [be] unsuccessful at stopping something like that.”

Steen testified that Penetone viewed the Material Safety Data Sheets sent to the environmental and safety departments of its prospective customers in a proprietary manner. He testified that it is only by exception that those sheets are sent to sales engineers, since the “right to know laws” require the listing of essential data and product information on those sheets, and the company does not want to disclose that data. He stated that the product mix of the various products is also viewed in a proprietary manner by the plaintiff Pene-tone, and that Penetone has a policy of maintaining secrecy as to the product mix by letting few people know of it. He further stated that Penetone viewed its negotiated pricing arrangements in a proprietary manner, and also maintained a secrecy policy toward them.

Steen also testified that Penetone paid for the liquid storage bins on LTV’s property. He testified that LTV was never charged for the bins, and that they were carried on Penetone’s books as capital expenditures.

Steen testified that sales to LTV have substantially decreased in the last two months.

At trial the defendants called as a witness Carl John Vincent Paolucci, as well as Paul Distad and Barbara Wilmore. Defendant testified that he worked for the plaintiff Penetone from August 29, 1977 to September 27, 1985.

Defendant testified that he was happy working at the plaintiff company until September or October of 1984, when various changes took place in the company. At that time there were 63 people on Pene-tone’s national sales force. In less than a two month period, 30 people were removed from the sales force. Defendant called the effect “catastrophic,” and testified that he felt his job was jeopardized. In April of 1985, defendant started looking at the possibility of marketing his own products if the plaintiff went out of business, and approached the defendant Scot to see if it could manufacture products Paolucci was then selling for the plaintiff.

Defendant’s testimony at the hearing substantially coincides with his testimony at his deposition. Defendant attended seminars at which he learned of Penetone’s new products and received written selling materials which he was instructed not to disclose. Defendant was not instructed not to disclose what he had been orally told. Defendant was given samples of Pene-tone’s products in metal pint containers to use to do demonstrations and to give as gifts to his customers. Defendant did give the samples as gifts to his customers, but did not instruct his customers on what they could or could not do with the samples. Defendant sometimes gave noncustomers, such as close friends, some of the samples of the Penetone products.

Defendant testified that the Material Safety Data Sheets which he gave to LTV he obtained from the safety department at LTV Steel. He testified that some he had in his own possession. He testified that he did not give those data sheets to friends.

Defendant testified that he had no access to any chemical formulations of the Pene-tone products. He states that the chemical formulas may have been mentioned by members of the safety department, but he did not take any formulas with him.

Defendant testified that he is aware that Penetone has made sales to LTV since he has left Penetone. He testified that last week (i.e., the week before the hearing), he saw a Penetone truck unload material at LTV. Defendant testified that most of the 500 and 300 gallon liquid storage bins on LTV’s facility are marked “Penetone.”

On cross examination, defendant testified that the biggest volume product which he sold for Penetone was NV-42 and NV-80.

Upon examination by the Court, the defendant testified that he first received an order from LTV for Palchem products on September 17. Defendant solicited the order that same date. He first started soliciting for Palchem on September 16 on a blanket purchase order for Palchem. Defendant testified that Scot Laboratories told him supplies of the competing products he wished to sell were ready in June. However, defendant testified that he did not take any samples of the product to LTV before September 16.

Defendant Paolucci testified that when he met with Lombardi, defendant supplied Lombardi with one pint samples of the type which he gave to customers to enable Scot Laboratories to reproduce the products he requested, including NV-42 and NV-80, solvent emulsion products. Lombardi told defendant that a number of products he wished to obtain could be obtained from a raw material supplier in the requested form. Defendant had no knowledge of whether Scot had or was making some of these products before it was approached by Paolucci.

Defendant did not begin testing the products which Scot Laboratories prepared for him until September 15, other than tests which he had done on his own garage floor. Defendant had a blanket purchase order from LTV before any tests were even performed on the products manufactured by Scot.

Defendant testified that some time after September 15, 1985, he demonstrated the Scot products to five general foremen at LTV. Defendant’s first order was delivered to LTV on September 23, 1985. The second order was delivered shortly thereafter. Defendant then proceeded to deliver about two to three orders a week. Defendant did not have to pay Scot in advance of their production of the eleven products.

Defendant testified that Palchem has placed approximately $100 to $110,000.00 worth of orders with LTV. Defendant has not received any money in payment from LTV, and has not yet paid Scot. He testified that to his knowledge only one order which has been placed with Palchem from LTV is unfilled.

Defendant testified that he earns a small profit margin on his products. Defendant’s gross income last year was approximately $84,000.00. Defendant earned approximately $74 to $75,000.00 of that from LTV on commissions. Defendant earned up to $69,000.00 working for Penetone in 1985 up until the time he left.

The eleven products that Palchem is currently selling correspond with Penetone’s highest selling products. Defendant testified that he makes his sales based upon the knowledge and experience he has attained from Penetone.

Defendants also called as a witness Paul Distad, Vice-President of Operations of Scot Laboratories. Distad testified that defendant Paolucci first approached him in April of 1985 because he was unhappy with his situation at the plaintiff company, and wanted to start his own business. He testified that Paolucci brought him samples of the products he wished Scot Laboratories to manufacture. He testified that he sees hundreds of such samples of competitor products every year, which are brought to him by an existing customer who wants to manufacture a competitor’s product. He testified that in reproducing the products, he looks at the product catalog sheets to see what the product is used for and what kind of performance is expected. On cross-examination, the witness testified that Pao-lucci guaranteed a large volume of sales to entice Scot to test the requested materials.

Defendants additionally called as a witness Barbara V. Wilmore, who is a buyer of production materials for LTV. Wilmore testified that Paolucci approached her in July of 1985, and told her that he was leaving the plaintiff Penetone, and was going into business for himself. She testified that before she would consider giving Pao-lucci a blanket purchase order for the products which he was going to produce, she told him that she would have to see the facilities at which the products would be produced. She testified that on July 30, 1985, she accompanied Paolucci to Scot Laboratories and was very impressed with the facilities. She told Paolucci that he would have to supply her with the Material Safety Data sheets filled out by Scot on the products he intended to sell. On cross-examination, the witness testified that she would not have released a blanket purchase order to Paolucci if she was not satisfied that Scot Labs could produce the material. She testified that Paolucci knew steel mill problems, such as how to clean “stuff” on the floor. She testified that that was one reason that she was so impressed with him was that he was very steel-oriented.

Regarding the liquid storage tanks on LTV’s property, Wilmore testified that a few weeks ago Penetone told LTV they were Penetone’s. She testified that she does not know who they belong to, and has no records of ownership on them.

DISCUSSION AND LAW

[Gjranting a preliminary injunction is the exception rather than the rule.... [I]t is an extraordinary and drastic remedy which should not be granted unless the movant has clearly carried the burden of persuasion State of Texas v. Seatrain International, S.A., 518 F.2d 175, 179 (5th Cir.1975). See also Cincinnati Bengals, Inc. v. Bergey, 453 F.Supp. 129 (S.D.Ohio 1974). “[T]he decision about an injunction is one addressed to the discretion of the Court.” Cincinnati Bengals, supra, at 145.

In Van Drivers Union Local No. 392 v. Neal Moving & Storage, 551 F.Supp. 429 (N.D.Ohio 1982), Judge Ann Aldrich of the United States District Court of the Northern District of Ohio recognized the standards for issuing a preliminary injunction in this Circuit, as follows:

Plaintiff must demonstrate that it has a substantial likelihood of prevailing on the merits; that it will suffer irreparable injury if the relief is not granted; that there will be no substantial harm to others if the relief is granted; and that the public interest will be served by the issuance of the injunction .... Moreover, a balancing of traditional equitable considerations is required, rather than a mechanical application of the four-part test .... When balancing these interests, the primary prerequisites for the issuance of an injunction are: (1) that plaintiffs threatened injury be irreparable; and (2) that public policy will not be offended by the issuance of the injunction.

Id. at 431 (citations omitted). See also Frisch’s Restaurant, Inc. v. Shoney’s, Inc., 759 F.2d 1261, 1263 (6th Cir.1985); In Re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir.1985).

Plaintiff seeks a preliminary injunction on numerous grounds. Specifically, plaintiff avers that it is entitled to preliminary injunctive relief under any of the following separate legal doctrines:

1. Plaintiffs Right To Relief Based Upon The Defendants’ Breach Of The Covenant Not To Compete
2. Plaintiffs Rights To Relief Under Trade Secret Law
3. Plaintiffs Right To Relief Based On Section 43(a) Of The Trademark Act Of 1946 And Trademark Infringement
4. Plaintiffs Right To Relief Based Upon Defendant Paolucci’s Abuse Of a Confidential Relationship
5. Plaintiffs Right To Relief Based Upon The Defendants’ Unlawful Interference With Plaintiffs Established Business Relationships
6. Conversion

See Plaintiff’s motion for a preliminary injunction. For the reasons which follow, the Court finds that the plaintiff is entitled to injunctive relief based upon its claims of defendants’ violations of Ohio trade secret law. The Court therefore need not consider the other theories advanced by the plaintiff.

The terms of Ohio Rev.Code § 1333.51(C) provide as follows:

No person, having obtained possession of an article representing a trade secret or access thereto with the owner’s consent, shall convert such article to his own use or that of another person, or thereafter without the owner’s consent make or cause to be made a copy of such article, or exhibit such article to another.

The words “trade secret” are defined in Ohio Rev.Code § 1333.51(A)(3), which provides as follows:

“Trade secret” means the whole or any portion or phrase of any scientific or technical information, design, process, procedure, formula, or improvement, or any business plans, financial information, or listing of names, addresses, or telephone numbers, which has not been published or disseminated, or otherwise become a matter of general public knowledge. Such scientific or technical information, design, process, procedure, formula, or improvement, or any business plans, financial information, or listing of names, addresses or telephone numbers is presumed to be secret when the owner thereof takes measures designed to prevent it, in the ordinary course of business, from being available to persons other than those selected by the owner to have access thereto for limited purposes.

Ohio case law has defined a trade secret as “[A]ny formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” See B.F. Goodrich Co. v. Wohlgemuth, 117 Ohio App. 493, 498, 192 N.E.2d 99 (9th Dist.1963), quoted in Richter v. Westab, Inc., 529 F.2d 896, 900 (6th Cir.1976) and G T I Corp. v. Calhoon, 309 F.Supp. 762, 768 (S.D.Ohio 1969). However, “[t]here is no presumption that any particular idea imparted to or acquired by an employee is a trade secret unless the possessor takes active steps to maintain the secrecy.” Water Management, Inc. v. Stayanchi, 15 Ohio St.3d 83, 85-86, 472 N.E.2d 715 (1984) (citations omitted).

The specific factors which should be considered in determining whether something. is a trade secret are as follows:

(1) the extent to which the information is known outside the business, (2) the extent to which it is known to those inside the business, i.e., by the employees, (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information, (4) the savings effected and the value to the holder in having the information as against competitors, (5) the amount of effort or money expended in obtaining and developing the information, and (6) the amount of time and expense it would take for others to acquire and duplicate the information.

Pyromatics, Inc. v. Petruziello, 7 Ohio App.3d 131, 134-135, 454 N.E.2d 588 (8th Dist.1983). See also Ruckelshaus v. Monsanto Co., 467 U.S. 986, 104 S.Ct. 2862, 2873, 81 L.Ed.2d 815 (1984); Water Management, supra, 15 Ohio St.3d, at 86, 472 N.E.2d 715. Further,

[1]n any trade secret case involving the alleged wrongful appropriation of trade secrets by former employees the Court must reconcile the conflicting rights of an employer to enjoy the use of secret processes and devices which were developed through his own initiative and investment and the right of employees to earn a livelihood by utilizing their personal skill, knowledge and experience.

G TI Corp., supra.

A plaintiff attempting to establish a cause of. action for wrongful appropriation of trade secrets must show by a preponderance of the evidence three things. First, a plaintiff must show that a trade secret exists. Second, the plaintiff must establish that the trade secret was acquired as a result of a confidential relationship, and third, as a result of the unauthorized use of the secret. See G T I Corp. v. Calhoon, supra, at 767.

As to whether or not a preliminary injunction is the appropriate remedy to prevent the defendants’ alleged unauthorized use of the plaintiff’s trade secrets, the Court notes the holding of the Court of Appeals in the Pyromatics case, supra, that “where competition arises solely from the misappropriation of trade secrets, injunction is the proper remedy.” Pyromatics supra, 7 Ohio App.3d, at 137, 454 N.E.2d 588 (citations omitted).

Applying the above law to the facts of the present case, the necessary inquiry for the Court thus becomes whether the information acquired by the defendant in his role as a salesman for the plaintiff company constituted protectable trade secrets, and whether the plaintiff took substantial steps to keep such information secret. See Pyromatics, Inc., supra, at 134, 454 N.E.2d 588.

The information which the plaintiff alleges constituted trade secrets which the defendant Paolucci disclosed to Scot Laboratories includes the Material Safety Data Sheets for plaintiffs products, as well as samples of plaintiffs products. Further, plaintiff argues that the defendant disclosed its chemical formulations, pricing policies (negotiated pricing structure), product mix, customer requirements, and the like, see plaintiffs motion, pp. 23, 26, which were also trade secrets.

Applying the factors raised by the Court in the Pyromatics case, supra, to the evidence before the Court in the case at bar, the Court finds first that the information which the plaintiff labels as trade secrets was not in large part “public” information; i.e., it was known outside the business to a very limited extent. Further, the Court finds that the evidence establishes that the information in question is known to a restricted and guarded few “inside” the business. Additionally, the Court finds that the defendant gained access to the information alleged to be trade secrets through his employer, and that the plaintiff took a number of precautions to safeguard the secrecy of much of the information disseminated by the defendant to Scot Laboratories.

Specifically, Robert Steen testified that the plaintiff regarded product formulas to be of a proprietary nature, and stated that anyone with direct or indirect contact or exposure to the formulas signed a secrecy agreement. He testified that the formulas are kept under lock and key at all times. Likewise, he testified that the company’s policy toward the submission of samples to customers was that all samples should be shipped directly to sales engineers or regional managers, should be demonstrated by the plaintiffs representatives, and should not be left behind. Steen testified that this policy was communicated to plaintiff’s salespeople at regional, national, and other sales meetings. Steen testified that the Material Safety Data sheets were viewed by Penetone as being absolutely proprietary. Steen testified that the plaintiff took certain steps to maintain the data sheets as proprietary. He testified that they were to be sent directly to the environmental and safety departments of both customers and prospective customers. From time to time, as an exception to the rule, the data sheets were delivered to sales engineers only when deemed necessary to maintain a customer relationship or prevent impeding the sales process. Steen testified that the reason for this restrictive policy was the right to know law that comes into effect November 25, which requires the plaintiff to list all the ingredients of its products on the Material Safety Data sheets. He testified that the data which the plaintiff is required to provide on the sheets in essence requires the plaintiff to give away the characteristics of the formula of the product. He testified that the company was therefore inclined to do everything in its power to avoid making the data sheets public knowledge. Steen also testified that the product mix which was sold to a customer was viewed to be of a proprietary nature, and added that only a select few people know of it. Lastly, Steen testified that the pricing arrangements which Penetone negotiated with the customer were also viewed as proprietary information and were maintained in that fashion. He testified that only a few people are brought into the “loop,” and those people would be key management personnel and the particular sales engineer who was serving a particular count. For example, he stated, no competitor knows what Penetone is charging LTV for the goods Penetone is selling LTV.

The Court finds that the evidence establishes that Penetone did take numerous precautions to guard the dissemination of the chemical formulas of its products, its sample products, its Material Sales Data sheets, its product mix, and its negotiated pricing arrangements with its customers. Further, the Court finds that for the reasons established by the testimony of the witness Steen, that the plaintiff Penetone had a strong interest in maintaining the secrecy of that information and guarding against dissemination to its competitors. Further, the plaintiff expended a great deal of thought and effort in securing the secrecy of the information in question. Lastly, the Court finds that Penetone’s competitors would find it much more difficult, in terms of time and expense, to duplicate the plaintiffs products and compete with the plaintiff as the seller of those products without the information which the plaintiff alleges to be trade secrets. The Court thus finds that this information rises to the level of trade secrets as defined by Ohio Law and are worthy of protection. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 474-475, 94 S.Ct. 1879, 1882-1883, 40 L.Ed.2d 315 (1974); CPG Products Corp. v. Mego Corp., 502 F.Supp. 42, 44 (S.D.Ohio 1980). The Court further finds that the evidence establishes that the defendant Scot Laboratories relied upon such information in producing the products which the defendant Paolucci sold to LTV Steel.

The Court further finds that preliminary injunction is an appropriate form of relief in this case. The Court concludes from the evidence as seen thus far that the plaintiff has a substantial likelihood of prevailing on the merits of its case. “Moreover, this is a complex case in which [plaintiff] has raised questions going to the merits which are serious and substantial and present fair grounds for litigation.” CPG Products Corp., supra, at 45 (citations omitted). The Court also finds that the plaintiff will suffer irreparable injury if the requested preliminary injunctive relief is not granted. Evidence before the Court establishes that plaintiffs sales of its products to LTV Steel constituted a large percentage of plaintiffs income in previous years and up to the last two months. Further, the evidence establishes that in the last two months, the plaintiffs sales to LTV have substantially declined. Additionally, the Court finds that the issuance of a preliminary injunction will uphold the public policies behind the enactment of Ohio Rev.Code § 1333.51. Moreover, when traditional equitable considerations are balanced, per Judge Aldrich’s directive in Van Driver’s Union Local No. 392, supra, the Court concludes that if not granted, plaintiff’s threatened injury will be irreparable, and that public policy will not be offended by the issuance of this injunction. On balance, the Court concludes that the plaintiff employer’s right to enjoy the use of trade secrets outweighs the defendants’ right to earn their livelihood by benefitting from those secrets. See G T I Corp., supra, at 768.

For the reasons above stated, the Court enjoins the defendants from soliciting and obtaining business from plaintiff’s former or current customers by utilizing the plaintiff’s trade secrets. Defendants are also enjoined from disclosing plaintiff’s trade secrets to third parties, and from using plaintiff’s trade secrets to manufacture and market defendants’ products.

Further, the Court finds that the evidence establishes that the storage tanks regarded as Penetone’s storage tanks on the property of the defendant Scot Laboratories were erected and are owned by the plaintiff Penetone and are currently being converted by the defendants. The Court thus enjoins the defendants from converting plaintiff’s tanks during the pendency of this action.

IT IS SO ORDERED.

JUDGMENT ENTRY

For the reasons stated in the Memorandum Opinion filed contemporaneously with this Judgment Entry, IT IS HEREBY ORDERED, ADJUDGED, and DECREED that the defendants are enjoined from soliciting and obtaining business from plaintiff’s former or current customers by utilizing the plaintiff’s trade secrets. Defendants are also enjoined from disclosing plaintiff’s trade secrets to third parties, and from using plaintiff’s trade secrets to manufacture and market defendants’ products. The Court further enjoins the defendants from converting plaintiff’s tanks during the pendency of this action.

The Court orders that the $5,000.00 bond previously submitted by the plaintiff be increased to $25,000.00. Plaintiff shall pay said bond to the Clerk of Courts by December 2; 1985 at 4:00 p.m.

      . On November 14, 1985, this Court issued a temporary restraining order in which it restrained the defendants from engaging in much of the conduct which plaintiff now seeks to enjoin. The Court extended that order to November 25, 1985 per order of November 21, 1985. On November 25, 1985, the Court extended the temporary restraining order until the filing of the Court’s opinion on the plaintiffs motion for a preliminary injunction.

      . The Court adopted this definition from the RESTATEMENT OF TORTS § 757 Comment b (1939).


source: Caselaw Access Project

author: THOMAS F. HOGAN, District Judge.

license: Public Domain

text:
    UNITED TRANSPORTATION UNION, Plaintiff, v. NORFOLK AND WESTERN RAILWAY COMPANY, Southern Railway Company, and Interstate Railroad Company, Defendants.
    No. Civ. A. 85-3410.
    United States District Court, District of Columbia.
    Nov. 29, 1985.
    Wm. G. Mahoney, John O’B. Clarke, Jr., Highsaw & Mahoney, Washington, D.C., for plaintiff.
    Jeffrey S. Berlin, Russell E. Pommer, Mark E. Martin, Donna L. Isaacks, Vemer, Liipert, Bernhard, McPherson & Hand, Washington, D.C., Wm. P. Stallsmith, Jr., Norfolk, Va., for defendants.
   MEMORANDUM OPINION . AND ORDER

THOMAS F. HOGAN, District Judge.

United Transportation Union (“UTU”) filed a complaint for declaratory and in-junctive relief with this Court on October 25,1985. The complaint sought review and the setting aside of an arbitration award (“the Award”) issued on September 25, 1985, in favor of the defendants, Norfolk and Western Railway Company (“N & W”), Southern Railway Company (“Southern”) and Interstate Railroad Company (“Interstate”). A three-member Arbitration Panel (“the Panel”), selected by the National Mediation Board (“NMB”) in response to a petition of the defendants and an Interstate Commerce Commission (“ICC” or “the ICC”) notice, had issued the Award. The Award authorized the November 1, 1985 effectuation of an April 17, 1985 document that was designed to implement three ICC-approved consolidation proposals of the defendants. The Panel had characterized said document as a tentative implementing agreement reached by the parties after considerable arbitration. UTU had, however, objected to the arbitration proceedings from their inception, and presently controverts the ICC’s characterization. In its complaint, UTU contends that, by forcing UTU to arbitrate and by abrogating certain employee protective conditions of twenty-seven UTU members during said arbitration, the defendants have violated several provisions of. the Railway Labor Act (“RLA” or “the RLA”), 45 U.S.C. § 151, et seq. As a result, UTU argues that the Award must be declared invalid and set aside.

The Court granted UTU’s application for a temporary restraining order on October 31, 1985, after conducting a hearing in which counsel for the defendants participated fully. That order enjoined the defendants from placing into effect the controversial implementing agreement until the Court could conduct a hearing on UTU’s motion for a preliminary injunction on November 14, 1985. In response to a subsequent request of the parties, the Court continued said hearing and extended the temporary restraining order until November 21, 1985, so that the parties could properly brief the numerous legal issues involved in this case.

At the preliminary injunction hearing, the Court focused chiefly on the motion of defendants to dismiss the complaint as to Southern for lack of subject matter jurisdiction. In addition, the Court addressed defendants’ motion as to both N & W and Interstate for lack of personal jurisdiction and for improper venue. Finally, the Court questioned counsel for the parties briefly about the merits of UTU’s motion for a preliminary injunction: in particular, counsel were required to discuss the likelihood of UTU’s success on the merits of the case.

After obtaining the consent of the parties to extend the temporary restraining order until it could render a memorandum opinion and order, the Court took the matter under advisement. Having evaluated the substantial papers filed and lengthy argument conducted in this case, the Court has concluded that in several respects it lacks subject matter jurisdiction and in other respects it would be inappropriate to address UTU’s complaint as to all of the defendants. The complaint must therefore be dismissed pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Accordingly, the Court declines to comment on the issues of in personam jurisdiction and venue where N & W and Interstate are concerned, and will not address the merits of UTU’s preliminary injunction motion.

Factual Background

UTU is an unincorporated labor organization. It is a “representative” as that term is used in the RLA, 45 U.S.C. § 151, et seq.

Defendant N & W is a Virginia corporation engaged in the transportation of property and goods by rail in interstate commerce; and, as such, N & W is a “carrier” within the meaning of the RLA and a “common carrier” subject to the Interstate Commerce Act (“ICA” or “the ICA”), 49 U.S.C. § 10101, et seq. Defendant Southern is a corporation, whose' state of incorporation has not been made clear to the Court, engaged in the transportation of property and goods by mail in interstate commerce; and, as such, it is also a carrier and common carrier subject, respectively, to the RLA and the ICA.

Defendant Interstate, twenty-seven of whose employees will allegedly be injured by the implementation agreement in question, is incorporated in Virginia. In addition, it is a wholly-owned subsidiary of Southern, and is also subject to both the RLA and the ICA. All three defendants are controlled by Norfolk Southern Corporation (“NSC”), whose state of incorporation is not known by the Court.

As a result of an earlier transaction approved of by the ICC in Norfolk Southern Corp.—Control—Norfolk & W. Ry. Co., 366 I.C.C. 171 (1982), N & W, Southern, and Interstate were consolidated as “mechanical services.” On November 5, 1984, N & W and Southern petitioned ICC (Finance Docket No. 30582) for an exemption under 49 U.S.C. § 10505 (“Authority to exempt rail : carrier transportation”) from the prior review requirements of 49 U.S.C. § 11343 (“Consolidation, merger, and acquisition of control”), to enable N & W to operate under contract the properties of Interstate. Concurrently, Interstate sought a similar exemption from the prior review requirements of 49 U.S.C. § 10901 (“Authorizing construction and operation of railroad lines”), so that it could construct “connecting tracks at Norton and Tacoma, Virginia”; and, finally, N & W sought an exemption from the same provision in order to conduct N & W operations over an additional 2.3 miles of Southern’s lines in southwestern Virginia.

UTU contends that, in their three-exemption petition, the defendants “stated in detail the manner in which they proposed to effectuate their contemplated transaction, including their intentions to alter seniority rights and to unilaterally [sic] select the forces to perform certain operations.” Complaint, at 4 (emphasis added). Thus, in response to the defendants’ petition, UTU, and the Railway Labor Executives’ Association (“RLEA”), filed a letter of protest with the ICC.

In mid-January, 1985, the defendants notified various UTU representatives of the carriers’ respective employees that NSC, the parent corporation, intended to “coordinate and/or consolidate track and engine service, forces and seniority rosters on the Interstate and ... [N & W]” in connection with the November 5, 1984 exemptions petition pending before the ICC. This notice was served on UTU pursuant to Article I, Section 4 of the employee protective conditions set forth in New York Dock Ry.—Control, 360 I.C.C. 60, aff'd, New York Dock Ry. v. United States, 609 F.2d 83 (2d Cir.1979). See infra note 8 and p. 9. Reluctantly, UTU participated in negotiations with the defendants during late January, late February, and mid-April of 1985. Although the Panel would later characterize an April 17, 1985 document as a “tentative implementing agreement,” UTU maintains that “[t]hese conferences failed to produce an implementing agreement acceptable to all the parties.” Complaint, at 5.

Meanwhile, on February 19, 1985, ICC issued a “Notice of Exemption” under 49 U.S.C. § 10505 that exempted from prior ICC review the “contract to operate” and “acquisition of trackage rights” proposals petitioned for by the respective defendants in November of 1984. In its decision, ICC stated that the exemptions were warranted, because N & W, Southern, and Interstate were already members of the same corporate family (i.e., that of NSC), so that the approved transactions would not result in changes in service levels, significant operational changes, or a change in the competitive balance with carriers outside the corporate family. See 49 U.S.C. § 10101; 49 C.F.R. § 1180.2(d)(3). ICC’s exemption order required, however, as follows:

As a condition to use of this exemption, any employees affected by N & W-Southern contract to operate the properties of Interstate will be protected pursuant to Mendocino Coast Ry., Inc.— Lease and Operate, 354 I.C.C. 732 (1978) and 360 I.C.C. 653 (1980). Any employees affected by N & W’s acquisition of trackage rights over Southern will be protected pursuant to Norfolk and Western Ry.Co. — Trackage Rights — BN, 354 I.C.C. 605 (1978), as modified in Mendocino Coast, supra, 360 I.C.C. 653 (1980). Together, these conditions satisfy the statutory requirements of 49 U.S.C. § 10505(g)(2).

(Emphasis added) (footnote added). On March 8, 1985, the ICC, under 49 U.S.C. § 10505, exempted from the prior review requirements of 49 U.S.C. § 10901 the defendants’ track construction proposal petitioned for in November of 1984, this time finding that the imposition of employee protective conditions would not be necessary. Thus, all three exemptions petitioned for by the defendants were granted.

Hours after ICC had issued its February 19 order, but several days before ICC had served the same on UTU, UTU submitted, again with RLEA, “Supplemental Comments” to its earlier letter of protest. The comments of UTU and RLEA noted

that the railroads intend to (1) consolidate seniority rosters of Interstate train and engine service employees with similar rosters of N & W’s Pocahontas Division, with the result that N & W employees on the consolidated roster will perform work on Interstate; (2) transfer Interstate train dispatching work to the N & W; (3) abolish four Interstate train dispatching positions; and (4) allow N & W employees to perform maintenance-of-way work on Interstate which is now being performed by employees of Southern.

In addition, the comments contended that, although “the railroads may ask the affected employees to agree to these changes in their seniority and working conditions ..., the railroads cannot unilaterally impose the changes or require the employees to arbitrate changes in the existing labor agreements.” (Emphasis added). ICC considered UTU’s challenges to the exemptions in its “Notice to the Parties,” dated April 1, 1985. ICC concluded therein that “[n]o evidence has been presented to demonstrate that the involved railroads intend to abrogate the contractual or statutory rights of employees.” ICC then reserved a determination of the issue, by stating as follows:

Although exemptions under 49 U.S.C. [§] 10505 do not operate to relieve carriers of applicable laws and agreements relative to labor relations, this [exemption] proceeding is not the appropriate forum to resolve the issue of whether applicable laws and labor agreements require the railroads to obtain the consent of employees before making employment changes....

On April 26,1985 the defendants notified UTU of the former’s desire to submit the matter to arbitration pursuant to Article I, Section 4 of the Mendocino Coast conditions, which provides that, when the parties have failed to reach an agreement through negotiation as to

a dismissal or displacement of employees or rearrangement of forces ..., the negotiations shall terminate and either party to the dispute may submit it for adjustment in accordance with the following procedures:
(a) Within five (5) days from the termination of negotiations, the parties shall select a neutral referee and in the event they are unable to agree uñthin said five (5) days upon the selection of said referee, the National Mediation Board [“NMB” or “the NMB’’] shall immediately appoint a referee.
(b) No later than twenty (20) days after a referee has been designated a hearing on the dispute shall commence.
(c) The decision of the referee shall be final, binding, and conclusive and shall be rendered within thirty (30) days from the commencement of the hearing of the dispute

(Emphasis added). UTU objected to the compelled arbitration. Accordingly, when NMB appointed Robert J. Abies as neutral referee on June 13, 1985, said appointment was made “[o]ver the jurisdictional objection of ... UTU_” Complaint, at 5.

On September 25, 1985, after conducting an arbitration hearing, evaluating both pre- and post-hearing briefs, and finding that the Panel had jurisdiction under Article I, Section 4, of the Mendocino Coast conditions, supra, the Panel issued the Award (UTU’s L.W. Swert dissenting). Referee Abies determined that the “Carriers ... [were] authorized to put into effect the tentative implementing agreement of the parties, dated April 17, 1985.” Defendants notified UTU shortly after the Award was issued that it planned to put the agreement into effect on November 1, 1985.

UTU filed its complaint with this Court on October 25, 1985, alleging that on November 1 the defendants “intend[ed] to alter seniority and to [sic] unilaterally select employees to perform operations in connection with defendants petition for exemptions filed with the ICC on November 5, 1984_” Complaint, at 7-8. UTU contended that such action by the defendants would violate the rights of UTU members, employed by Interstate, under the RLA and collective bargaining agreements. Id. at 8. UTU maintains that, under 45 U.S.C. § 157, defendants could only “request ... UTU to arbitrate any dispute over proposed changes to existing rates of pay, rules, or working conditions, but that ... [UTU] has an absolute right to refuse such a request-” Id. at 7. Thus, UTU seeks declaratory judgment, under 28 U.S.C. §§ 2201 and 2202, from this Court that the defendants (vis-a-vis the ICC) have violated 45 U.S.C. §§ 152, 156, and 157 (under the RLA) “by requiring plaintiff to arbitrate proposed changes to existing rules and working conditions.” Id. at 8. In addition, UTU requests that the Court preliminarily and permanently enjoin the defendants

from failing or refusing to participate in negotiations over the desired changes in existing collective bargaining agreements as required by ... [the RLA], 45 U.S.C. § 151, et seq., by not abrogating or refusing to apply to [the twenty-seven] Interstate-UTU employees, the UTU-Interstate rules and working conditions until defendants have complied with Section 6 of ... [RLA], 45 U.S.C. § 156 [“Procedure in changing rates of pay, rules, and working conditions”].

(Footnote added.)

DISCUSSION

Subject Matter Jurisdiction

“It is the burden of the party claiming subject matter jurisdiction to demonstrate that it exists.” Georgiades v. Martin-Trigona, 729 F.2d 831, 833 n. 4 (D.C.Cir.1984). See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). In a non-diversity context, the Court has “subject matter jurisdiction over cases that involve the violation of some federal law: the Constitution, a statute, or an agency regulation.” Orlowski v. Massachusetts Rehabilitation Comm'n, 585 F.Supp. 1408, 1409. In addition, “[i]t is up to the plaintiff in a federal case to point this law out; otherwise the Court is powerless to act.... It is not enough for ... [the plaintiff] to say he has been wronged; he must point to the laws that give the federal court the power to act in his case.” Id. Moreover, only in an exceptional case should a federal court defer the resolution of a jurisdictional issue in favor of a decision on the merits. Doe v. United States Dep’t of Justice, 753 F.2d 1092, 1101 (D.C.Cir.1985). Otherwise, a federal court must be “fastidious about the impropriety of reaching merits issues without first establishing jurisdiction....” Beattie v. United States, 756 F.2d 91, 126-27 (D.C.Cir.1984) (Scalia, J., dissenting, opinion filed Feb. 26, 1985).

In the present case, UTU contended originally that this Court was vested with subject matter jurisdiction to evaluate the merits of the instant case, “by virtue of 28 U.S.C. §§ 1331 [“Federal question”] and 1337 [“Commerce and antitrust regulations ...”], and 45 U.S.C. § 153 [“National Railroad Adjustment Board”] to issue the [declaratory and injunctive] relief requested herein under 28 U.S.C. §§ 2201 and 2202.” Complaint, at 2.

In its response to the defendants’ motion to dismiss for lack of subject matter jurisdiction (“Response”), UTU abandoned its claim for federal question jurisdiction by relying solely on the proposition that “this case is one arising under two Acts of Congress which regulate interstate commerce — i.e., the Interstate Commerce Act ... and the Railway Labor Act ... — and thus within this Court’s subject matter jurisdiction under 28 U.S.C. § 1337.” Response, at 5.

It is clear that UTU has failed to demonstrate a specific statutory basis under the RLA for subject matter jurisdiction, even though UTU relied on 45 U.S.C. § 153(q) in its original complaint: UTU is not petitioning this Court to review an “order” or “award” of the first division of the National Railroad Adjustment Board (“NRAB”). The action or actions challenged by UTU were obviously taken by ICC, NMB, and the Panel that issued the Award in question. In fact, counsel for UTU conceded during the November 21 preliminary injunction hearing that in the original complaint he had attempted in vain “to fit a square peg into a round hole.” Likewise, as defendants point out, UTU has failed to identify a specific statutory provision within the ICA that confers subject matter jurisdiction upon this Court to evaluate the Panel’s Award. See Reply, at 19. See also supra note 12.

Thus, UTU’s complaint boils down to a potential action for declaratory and injunc-tive relief, which concerns alleged abrogations of several employee protective provisions strewn throughout the RLA and the ICA. In such a case, “Gully v. First National Bank, 299 U.S. 109 [57 S.Ct. 96, 81 L.Ed. 70] ... [ (1936) ], prescribes the rules to be applied in determining whether an action arises [for purposes of 28 U.S.C. § 1337] under the provisions of the Interstate Commerce Act or the Railway Labor Act.” Brotherhood of Locomotive Engineers v. Chicago and North Western Railway Co., 314 F.2d 424, 428 (8th Cir.), aff'g, 202 F.Supp. 277 (S.D.Iowa 1962), cert. denied, 375 U.S. 819, 84 S.Ct. 55, 11 L.Ed.2d 53 (1963): “Gully ... states the test of jurisdiction: ‘The right of immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another.’ ” Id. (quoting Gully, 299 U.S. at 112, 57 S.Ct. at 97).

At this juncture, however, the Court need not address the Section 1337 characterization issue. Rather, it concludes that, whether or not UTU has made out a subject matter jurisdiction basis for a “civil action or proceeding arising under any Act of Congress regulating commerce ...,” judicial review of the Award is not appropriate for alternative reasons: if the Award as issued by the Panel is a “final order” of the ICC, it is reviewable only by the court of appeals under 28 U.S.C. §§ 2321(a) and 2342(5), see supra note 12; and, if it is not so characterized by the ICC, the Award is not an administrative decision presently ripe for judicial review. See Public Service Commission of Utah v. Wycoff Co., 344 U.S. 237, 246, 73 S.Ct. 236, 241, 97 L.Ed. 291 (“declaratory judgment procedure will not be used to preempt and prejudge issues that are committed for an initial decision to an administrative body”).

Final Order or Ripeness and Exhaustion

When it reserved its determination of the issue concerning whether “applicable laws and labor agreements require the railroads to obtain the consent of employees before making employment changes,” see supra p. 1011, the ICC apparently referred, sub si-lentio, said determination to the Panel. See In Re Norfolk and Western Railway, slip op., at 15 (Abies, Arb., decision filed September 25, 1985): “If the ... [ICC] meant that the appropriate forum was the courts, it was ducking ... [its] responsibilities- There is no need for this arbitration panel to duck.”

Under Article I, Section 4(c), of the Mendocino Coast conditions imposed on the defendants by the ICC in its February 19, 1985 exemption order, “The decision of the referee shall be final, binding, and con-clusive_” (Emphasis added). Thus, it seems that the ICC delegated its final order-making authority to the Panel, and that the resulting Award would therefore be appealable only to the United States Court of Appeals for the District of Columbia Circuit. See 28 U.S.C. § 2342(5) (court of appeals has “exclusive jurisdiction” to enjoin, set aside, suspend (in whole or in part), or to determine the validity of all final orders of ICC).

It would therefore be the responsibility of the circuit court to determine whether the exemption procedure designed and utilized by the ICC in this case comports with the standard established in Brotherhood of Locomotive Engineers (“BLE”) v. ICC, 761 F.2d 714, 724-25 (D.C.Cir.1985) (Wright, J.), that in granting consolidation-related exemptions under the ICA while waiving employee protective provisions of the RLA, the ICC exceeds its authority unless it makes an evidentiary determination that waiver is “necessary to effectuate the transactions at issue.”

If it is the ICC’s policy not to consider such an award a final order, then the ripeness doctrine, see Friends of Hop Marketing Order v. Block, 753 F.2d 777, 778 (9th Cir.1985) (per curiam), or the doctrine of exhaustion would preclude judicial review at this time. See McKart v. United States, 395 U.S. 185, 193-95, 89 S.Ct. 1657, 1662-63, 23 L.Ed.2d 194 (1969).

In any event, under either the final order or ripeness/exhaustion analysis, it is not for this Court to determine the merits of UTU’s purported RLA and ICA claims for declaratory and injunctive relief under Section 1337. See Telecommunications Research and Action Center (“TRAC”) v. FCC, 750 F.2d 70 (D.C.Cir.1984) and Air Line Pilots Association, International (“ALPA”) v. CAB, 750 F.2d 81 (D.C.Cir.1984) (where 28 U.S.C. § 2342 commits review of final agency action to court of appeals, any suit seeking relief that might affect that court's future jurisdiction is subject to its exclusive review). Thus, the appropriate remedy for this case is dismissal of the complaint. See Public Utility Commissioner of Oregon v. Bonneville Power Administration, 767 F.2d 622, 631 (9th Cir.1985) (complaint seeking district court review under Pacific Northwest Electric Power and Planning Act, 16 U.S.C. § 839, et seq., dismissed).

In accordance with this opinion, an order denying UTU’s motion for a preliminary injunction and dismissing UTU’s complaint for lack of subject matter jurisdiction shall be issued contemporaneously herewith.

      . The Panel consisted of the following people: a Neutral Referee, Robert J. Abies; the Director of Public Relations for Southern, David N. Ray; and the Vice President of UTU, L.W. Swert. Mr. Swert objected to the Award, and filed a dissenting opinion.

      . Finance Docket No. 30582.

      . In the alternative, defendants moved to dismiss the complaint as to Southern for failure to state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6).

      .Although defendants have moved to dismiss the complaint as to Southern only, the Court must dismiss the complaint in toto when it “appears ... that the court lacks jurisdiction over the subject matter.” Fed.R.Civ.P. 12(h)(3) (emphasis added).

      . Southern has conceded, however, that it does business in the District of Columbia.

      . Defendants concede, however, that NSC does business in the District of Columbia.

      . 49 U.S.C. § 10505(a) provides in pertinent part: ‘‘[the ICC] shall exempt ... a transaction or service because of the limited scope of the transaction or service, when the ... [ICC] finds that the application of a provision of this subtitle —(1) is not necessary to carry out the transportation policy of ... [49 U.S.C. § 10101]." (Emphasis added). 49 U.S.C. § 10505(g) provides in pertinent part: ‘‘[the ICC] may not exercise its authority under this section ... (2) to relieve a carrier of its obligation to protect the interests of employees as required by this subtitle.”

      . See supra, note 7. The “Mendocino Coast" and “New York Dock" (see supra, p. 1010) conditions are virtually the same. See infra, discussion, pp. 1011-1012.

      . See supra note 8.

      . UTU argues that Article I, Section 4 of the Mendocino Coast conditions are directly contrary to Article I, Section 2 of the same conditions, the latter of which provides as follows:
      The rates of pay, rules, working conditions and all collective bargaining and other rights, privileges and benefits (including continuation of pension rights and benefits) of employees under applicable laws and/or existing collective bargaining agreements or otherwise shall be preserved unless changed by future collective bargaining agreements or applicable statutes.

      (Emphasis added). In addition, UTU contends that, under 45 U.S.C. § 157, UTU had "an absolute right to refuse such a request to arbi-trate_” Complaint, at 7. That provision provides in pertinent part that "the failure or refusal of either party to submit a controversy to arbitration shall not be construed as a violation of any legal obligation imposed upon such party by the terms of this Act or otherwise." See infra, discussion, pp. 1012-1013.

      . In addition, UTU seeks an order that would "make whole all of their employees who are adversely affected ...” by the defendants’ alleged failure to comply with the RLA, and "other further relief as this Court may deem to be just and proper_” Given the Court’s resolution of the case on subject matter jurisdiction and judicial propriety grounds, it need not address these additional relief requests.

      . Defendants note correctly that, in its search for subject matter jurisdiction, UTU has, in effect, attempted to amend its complaint by bolstering its Section 1337 (commerce laws) assertion with a new allegation concerning violations of the ICA. See Reply Memorandum of Defendants in Support of their Motions to Dismiss ("Reply") at 18. UTU's quest for jurisdiction would proceed one step further: less than an hour before the Court conducted its hearing on UTU’s motion for a preliminary injunction, UTU filed a motion to amend its complaint. The proposed version of the complaint cited still another ground for jurisdiction: 28 U.S.C. § 1336(a) ("Interstate Commerce Commission’s orders”). Amended Complaint, at 2. UTU asserted therein that this action was being "brought to enforce the commands ... of the [February 19, 1985 "Notice of Exemption”] order of the Interstate Commerce Commission_” Id. at 1. However, Section 1336(a) grants jurisdiction to the district courts only over "any civil action to enforce, in whole or in part, any order of the Interstate Commerce Commission ... for the payment of money or the collection of fines, penalties, and forfeitures." (Emphasis added). The exemption order in question cannot be properly characterized under this provision: where a plaintiff challenges an ICC order that does not concern "the payment of money or the collection of fines, penalties and forfeitures," the order may be challenged only in the court of appeals under 28 U.S.C. §§ 2321(a) and 2342(5). See, e.g., State of Illinois, Dep’t of Public Aid v. Schweiker, 707 F.2d 273, 276 (7th Cir.1983) (district court appropriate forum); City of New Orleans v. Southern Scrap Metal Co., Ltd., 704 F.2d 755, 761 (5th Cir.1983) (same); Pullman Standard, A Division of Pullman, Inc. v. ICC, 705 F.2d 875, 878-79 (7th Cir.1983) (circuit court appropriate forum; Sections 1336(a) and 2321(a) "mutually exclusive”). Thus, plaintiffs Section 1336(a) argument is not only a late arrival — it missed the appropriate runway as well.

      . UTU represented during the preliminary injunction hearing that such awards were considered to be final ICC orders; in addition, UTU acknowledged that an informal agency procedure existed whereby aggrieved parties could request a clarification of the legal status of such award from the ICC.

      . BLE post-dated the exemption orders at issue here.

      .If, on the other hand, the Award at issue were unquestionably a final ICC order, the Court would not be compelled to order dismissal. Rather, it could exercise its option to transfer the case to the circuit court pursuant to 28 U.S.C. § 1631. See TRAC, 750 F.2d at 79 n. 37.


author: SCOTT 0. WRIGHT, Chief Judge.

text:
    Jane CATLETT, et al., Plaintiffs, v. MISSOURI STATE HIGHWAY COMMISSION, et al., Defendants.
    No. 78-4061-CV-C.
    United States District Court, W.D. Missouri, Central Division.
    Dec. 13, 1985.

      Lisa Van Amburg, Karen Plax, Raytown, Mo., for plaintiffs.
    John Gladden, Asst. Counsel, Paula Lambrcht, Asst. Counsel, Missouri Highway & Transp. Com’n, Jefferson City, Mo., for defendants.
   ORDER

SCOTT 0. WRIGHT, Chief Judge.

This is a class action sex discrimination case brought pursuant to 42 U.S.C. § 1983 and Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000eet seq. The Court previously ordered the suit to be severed into separate trials on the issues of (a) liability and (b) prospective equitable relief, monetary damages and attorneys’ fees. In its order of December 5, 1983, the Court found defendants liable under Title VII for sex discrimination against the four individually-named plaintiffs for failure to hire them as maintenance crew members, and liable for sex discrimination against the class in recruitment and hiring since 1975. Catlett v. Mo. Highway & Transp. Com’n, 589 F.Supp. 929 (W.D.Mo.1983) (Catlett I).

Pending before the Court are the parties’ motions for summary judgment on various issues concerning remedial relief pursuant to Title VII. There is no genuine issue as to the following material facts, and so under Fed.R.Civ.P. 56 summary judgment is appropriate on the following specified issues.

I. TITLE VII MONETARY RELIEF

A. Back Pay for Individually-named Plaintiffs

Defendants argue that because the jury verdict was adverse to the four named plaintiffs on their § 1983 claim, remedial relief for those plaintiffs would be improper. For two reasons, the Court disagrees.

First, the defendants have not previously raised this issue of collateral estoppel. Thus, the Court is faced with the identical problem presented to the Eighth Circuit in Goodwin v. Circuit Court of St. Louis County, Mo., 729 F.2d 541, 549 n. 11 (8th Cir.1984). There, as here, “counsel for all parties seem to have assumed that the court would make its own finding on the issue of discrimination, whichever way the jury verdict went on the § 1983 case.” In Goodwin the court refused to apply res judicata against the Circuit Court. Defendants also cite Brooks v. Carnation Pet Food Company, No. 84-6105-CV-SJ-6 (W.D.Mo., Sept. 17, 1985) in support of their proposition. However, Judge Sachs distinguished the Goodwin case by noting that defendant Carnation Pet Food Company had raised the argument that the court is bound by estoppel in its proposed conclusions of law. Id. at slip op. 4 n. 3. In the present case, defendants’ proposed conclusions of law failed to raise this issue.

Secondly, even if defendants had timely raised this issue, remedial relief would still be appropriate. In Brooks, supra, the plaintiff’s Title VII theory was one of disparate treatment, so the burden of establishing intentional discrimination was identical to that under § 1981. In the present case, the Court found evidence not only of disparate treatment but also disparate impact, for which no intent need be established. Therefore, even if defendants’ verdict on the § 1983 claim precluded a disparate treatment claim, the disparate impact claim would not be affected, and relief would be appropriate. Calculation of back pay is discussed infra.

B. Back Pay for Class Members

Excluding the individual plaintiffs, there are 161 claimants who seek back pay. Defendants seek to disqualify a number of class members on five different grounds: (1) lacked lightweight equipment experience; (2) lacked a valid Missouri driver’s license; (3) stated no discrimination against them; (4) stated would not have accepted a job in maintenance had she been offered one; (5) no vacancies occurred within 20 miles of residence. During the remedial stage, the burden of proof is on defendants to demonstrate that individual applicants were denied employment for lawful reasons. International Brotherhood of Teamsters v. United States, 481 U.S. 324, 362, 97 S.Ct. 1843, 1868, 52 L.Ed.2d 396 (1977).

In Catlett I, supra at 933, the Court made a finding of fact that the basic requirements for initial hire into the maintenance job are an eighth-grade education and an ability to operate lightweight motor equipment. Plaintiffs concede that ten of the class members did not list such experience on their claim forms, but wish to add new information by affidavit at this time. The Court finds it would be inappropriate to consider this additional evidence. Therefore, the following class members were not qualified applicants and not entitled to relief:

Bailey, Aughty L.
Buehler, Staci L.
Farris, Debra
Fowler, Debbie J. (Rodriquez)
Garrett, Jayne L. (Warren)
Lyons, Debbie J. (Deprender)
Maxwell, Lorenzo P.
Meyer, Paula (Fannon)
Rodgers, Janet L.
Stewart, Brenda.

The Court finds the remainder of defendants’ attempts at disqualification to be specious. An applicant could readily obtain a Missouri driver’s license, or if offered a job could relocate to live closer to the job site. Calculation of back pay for the remaining 151 members is discussed infra.

C. Calculation of Back Pay

1. Fringe benefits of mitigation

Plaintiffs are entitled to a back pay award pursuant to 42 U.S.C. § 2000e-5(g). In light of Title VIPs policy to make whole a victim of discrimination, the award of back pay should include not only the straight salary, but raises and fringe benefits as well. Rasimas v. Michigan Dept. of Mental Health, 714 F.2d 614, 626 (6th Cir.1983); Meyers v. I.T.T. Diversified Credit Corp., 527 F.Supp. 1064, 1070 (E.D.Mo.1981). Fringe benefits should include sick leave, vacation pay, pension benefits and any other benefits the claimants should have received but for the discrimination.

Additionally, under § 2000e-5(g), the claimants’ interim earnings are to be deducted from the awarded back pay. Fringe benefits should likewise be deducted as interim earnings. Defendants argue that unemployment benefits or workmen’s compensation should also be deducted. However, such benefits have been deemed by the Court to be a collateral source, and should not be deducted. Donovan v. George Lai Contracting, Ltd., No. 84-4154-CV-C-5 (W.D.Mo. July, 1985). See also Craig v. Y & Y Snacks, 721 F.2d 77, 83 (3rd Cir.1983); Rasimas, supra at 627.

Thus, for the individually-named plaintiffs, each should be awarded back pay and lost fringe benefits from the date she was deprived of the use of those monies when the Highway Department hired a comparable male in her place. This amount will then be offset by that plaintiff’s actual earnings and fringe benefits during the same time period.

2. Formula for Class Members

All parties agree that class-wide relief would be most appropriate in this case as explained in Hameed v. Ironworkers, 637 F.2d 506 (8th Cir.1980). However, the Hameed formula, id. at 520, must be adapted in this case to account for the discriminatory recruitment process. In its earlier findings of fact, Catlett I, 589 F.Supp. at 934, the Court determined the expected number of female hires for the years 1975— 79. The Court presented figures for both a moderate and conservative definition of women expected to be hired. While defendants argue it would be punitive to apply anything but the conservative definition, the Court finds that the moderate definition would best fulfill Title VII’s statutory purpose of making persons whole for injuries suffered through past discrimination. Therefore, back pay calculations will be based on thirty-eight vacancies. From these figures, the number of females actually hired should be subtracted, to equal the number of vacancies for which back pay must be calculated.

The next step is to assign the 151 remaining class members to subclasses based upon the year in which they applied for maintenance crew member positions. The number of vacancies for that year will be multiplied by the amount of money those positions would have yielded to date, less the average interim earnings (as opposed to the highest interim earnings) of those class members during the relevant time period. The money will then be divided equally among the members of that year’s subclass.

3. Pre-judgment Interest

Plaintiffs contend they should be granted an award of pre-judgment interest on any award of back pay and fringe benefits. Plaintiffs cite numerous cases where this Court and others have used their discretion to allow pre-judgment interest. However, all these cases deal with private sector employers, not the government as employer. The general rule when claims against the government are involved is that interest is proscribed absent express statutory or contractual authorization. Saunders v. Claytor, 629 F.2d 596, 598 (9th Cir.1980).

Plaintiffs cite no state or federal statute authorizing prejudgment interest. They do argue that, under 42 U.S.C. § 2000e-16, when Congress extended Title VII benefits to public employees, Congress intended them to receive the same rights as extended to private sector employees. See Chandler v. Roudebush, 425 U.S. 840, 841, 96 S.Ct. 1949, 1950, 48 L.Ed.2d 416 (1976). However, numerous courts have since interpreted this section not to include the right to pre-judgment interest. Saunders v. Claytor, supra, at 598; Blake v. Califano, 626 F.2d 891, 893 (D.C.1980); Richerson v. Jones, 551 F.2d 918, 925 (3rd Cir.1977).

While neither party has cited a case directly on point where interest was granted or denied in a Title VII case against a state agency as employer, defendants’ argument is more persuasive since the state is clearly more analogous to the federal government than to private sector employers. Therefore, the Court finds that “other equitable relief” as authorized by 42 U.S.C. § 2000e-5 does not include pre-judgment interest.

4. Special Master

While plaintiffs contend a special master should be appointed to compute the back pay award, defendants believe such computation should be relatively easy once the Court has ruled on the necessary elements. In light of this order’s rulings, plaintiffs should submit their calculations for back pay to the Court. Defendants will have an opportunity to object to any of the calculations, and if there are disagreements, then a special master may be appointed at that time.

II. INJUNCTIVE RELIEF

While defendants argue that their voluntary efforts in changing their hiring practices are enough to preclude additional affirmative relief, the Court finds the long history of discrimination and the comparatively short history of attempts to end such discrimination warrant further measures in the following respects:

(1) The Court will retain jurisdiction until January 1, 1990, to monitor the implementation of this order and to require additional specific action, if necessary, to eradicate any remaining discrimination;

(2) Between the date of this order and January 1,1990, the Missouri Highway and Transportation Commission shall comply with a hiring plan, attached to this order as Appendix A, the goal of which is to generate an actual pool of female applicants for maintenance jobs in District 8 of between 37%-48%, and to fill 37%-48% new vacancies for maintenance jobs in District 8 with women;

(3) To remedy the Highway Commission’s discriminatory recruitment policy, the title of the job category shall be changed from maintenanceman to reflect a job available to females as well as males. The Highway Department shall cease to utilize “word-of-mouth” or “walk-in only” recruitment, and instead implement recruitment literature and practices as set out in Appendix B, attached to this order;

(4) The Highway Commission shall develop a new application form which seeks relevant, non-discriminatory information from applicants and which incorporates the changes as set out in Appendix C, attached to this order;

(5) New procedures for interviews and the training of interviewers shall be implemented, as set out in Appendix D, attached to this order, to facilitate a non-discriminatory process for hiring;

(6) Those claimants who still seek employment as maintenance crew members shall be placed on a preferential hiring list. The first available vacancy at a particular maintenance shed shall be offered to the earliest applying claimant who would accept employment at that shed, and so on until the list of eligible claimants who seek employment is exhausted. Once a claimant turns down an offer of employment for any reason, she shall drop off the preferential hiring list, but may be considered for future employment.

III. CONCLUSION

In light of the foregoing, it is hereby

ORDERED that defendants’ motion for summary judgment is granted with respect to:

(1) disqualifying those class members who did not list lightweight motor equipment experience;

(2) precluding an award of pre-judgment interest; and

(3) declining the use of a special master absent any disagreements as to calculations of back pay.

It is further

ORDERED that the remainder of defendants’ motion for summary judgment is denied. It is further

ORDERED that plaintiffs’ motion for summary judgment is granted with respect to:

(1) back pay for individually-named plaintiffs;

(2) calculation of back pay for the remaining 151 class members as set out in this order; and

(3) additional affirmative relief as set out in the order and attached appendices.

It is further

ORDERED that plaintiffs should submit a motion for attorneys’ fees and costs within twenty (20) days of the date of this order, with defendants having an additional fifteen (15) days to respond.

APPENDIX A

PLAN FOR HIRING

1.The Missouri Highway and Transportation Commission shall, on February 1, 1986, and January 1 of each subsequent year thereto to and including January 1, 1990, file a report with the Court and serve a copy of same upon plaintiffs, which report shall contain the following information:

a. A breakdown of applicants for maintenance crew positions by sex, by month;
b. A breakdown of hires for maintenance crew by positions, by sex, by month, by maintenance shed;
c. A census of all employees in maintenance crew positions by name, sex, job title, and District.
2. To support such an accounting, the Highway Commission shall maintain all applications filed for maintenance crew positions and all personnel selection forms for hirees to maintenance crew positions in District 8.
3. Between the date of this order and January 1, 1990, the Highway Department in District 8 shall generate an actual pool of applicants for the maintenance job in District 8 which consists of between 37%-48% women. The Court shall review the actual applicant pool yearly and if, at the conclusion of 1988, substantial progress has not been made, further stringent measures may be imposed by the Court. If by January 1, 1990, the Court determines that these goals have been met, the Court will terminate its jurisdiction.
4. Between the date of this order and January 1, 1990, the Highway Department in District 8 shall fill between 37%-48% new vacancies for maintenance crew jobs in District 8 with women (which may include eligible class claimants). The Court shall review the hire rates by sex yearly and if at the conclusion of 1988, substantial progress has not been made, further stringent measures may be imposed by the Court. If by January 1, 1990, the Court determines that these goals have been met, the Court will terminate its jurisdiction.

APPENDIX B

RECRUITMENT

1. The Highway Commission shall develop local newspaper advertisements which clearly indicate that women applicants are desired for the entry maintenance crew positions.

2. The Highway Commission shall develop a brochure to be distributed to the local high schools in the area which describes the job of maintenance person and shows photographs of men and women doing the jobs.

3. The Highway Commission shall identify the sources of women applicants in the community: women’s organizations, social service agencies, etc., and shall distribute a brochure to advise them of the openings for women in these positions.

4. The Highway Commission shall post notices of maintenance crew vacancies in areas accessible to all employees.

5. For each job vacancy, the Highway Commission shall: (a) Review all active job applications for persons who have indicated they would consider a job at that location, (b) If no active female applications are on file for that location, advertise the position on local radio stations and in the newspapers before interviewing. Also, contact the Missouri Employment Security Service, and local women’s groups identified earlier to advise them of openings (if class member) before a selection is made.

APPENDIX C

APPLICATION PROCESS The following questions will be listed:

a. Will you accept a position at any location in the state? _Yes _No
b. Check each of the locations where you would accept a position, if offered. (You must be willing to move within approximately a 20-30 minute drive to work.) (List all maintenance sheds in the district and have a small map with number codes showing where each shed is located.)
c. Of the locations check in item 2, indicate, in order of preference, the top three locations at which you would prefer to work.
d. Check any of the following skills in which you have been trained.
_Operate Tractor _Diesel Engine Repair
_Operate Backhoe _Gasoline Engine Repair
_Drive Pickup Truck _Light Equipment Operator
_Small Engine Repair _Heavy Equipment Operator
_Snow Plow
e. Check any of the following skills which you now have from paid or unpaid experience.
_Operate Tractor _Diesel Engine Repair
— Operate Backhoe _Gasoline Engine Repair
_Drive Pickup Truck Light Equipment Operator
— Small Engine Repair _Heavy Equipment Operator
_Snow Plow
f.On section for employment history, add these instructions: ALSO LIST ANY SELF-EMPLOYMENT OR PAID OR NON-PAID FARM EXPERIENCE.

APPENDIX D

INTERVIEWS AND TRAINING OF INTERVIEWERS

1. A taped or videotaped description of the job will be developed to be shown to all interviewees.

2. The interview checklist shall be used in all interviews, that utilizes non-discriminatory, job-related criteria.

3. All discriminatory comments and references shall be eliminated from the interview.

4. No persons other than the interviewer and supervisory personnel shall be present for an interview.

5. All persons interviewing applicants for entry maintenance positions shall be given a one-day training course on conducting non-discriminatory interviews and using non-discriminatory evaluation criteria.

6. Supervisory personnel shall observe one interview per month of each interviewer for one year and evaluate the interviewer’s conduct in the interview with regard to equal employment opportunity.

      . "Just as the class members were subjected to a pattern of discrimination resulting from the biased interview process and the unregulated hiring procedure, similarly, these plaintiffs were the individual victims of the same practices.” Catlett /, supra at 949.

      .
      Total Expected Hires, Conservative Definition Expected Hires, Moderate Definition
      1975 8 3 4
      1976 22 8 10
      1977 23 8 11
      1978 26 9 12
      1979 16 6 8

      . This includes one additional expected female hire during the period of January 1 — May 31, 1980.

      . The Court rejects defendants’ argument of calculating the earnings of initial hires only. Instead, calculations will be based on vacancies; therefore, initial plus successive hires will be calculated.

      . Parson v. Kaiser Aluminum, 727 F.2d 473 (5th Cir.1984); EEOC v. Wooster Brush Co., 727 F.2d 566 (6th Cir.1984); Washington v. Kroger Co., 671 F.2d 1072 (8th Cir.1982); U.S. v. Lee Way Motor Freight, 625 F.2d 918, 919 (10th Cir.1979).