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AIR PRODUCTS AND CHEMICALS v. RICHARD A. JOHNSON AND LIQUID AIR CORPORATION (02/19/82)

filed: February 19, 1982.

AIR PRODUCTS AND CHEMICALS, INC.
v.
RICHARD A. JOHNSON AND LIQUID AIR CORPORATION, APPELLANTS



No. 2127 Philadelphia, 1981, Appeal from the Order of the Court of Common Pleas of Lehigh County, Civil Division, at No. 81-E-25

COUNSEL

James D. Crawford, Philadelphia, for appellants.

Casper C. Schneider, Jr., New York City, for appellee.

Brosky, Popovich and Montgomery, JJ. Montgomery, J., concurs in result.

Author: Brosky

[ 296 Pa. Super. Page 408]

On March 4, 1981, appellee, Air Products and Chemicals, Inc., hereinafter, Air Products, brought an action in equity against appellants, Richard A. Johnson and Liquid Air Corporation, hereinafter Liquid Air, seeking declaratory and injunctive relief restraining Johnson from accepting employment with Liquid Air for two years. An ex-parte injunction issued on March 4, 1981.*fn1 A hearing was held from March 23, 1981 until April 6, 1981, at which the trial court heard testimony concerning the continuance of that injunction. The court concluded and ordered on April 6, 1981 that Johnson could begin to work with Liquid Air but enjoined Liquid Air from using Johnson in their on-site operations and prohibited Johnson from disclosing any confidential information. On August 7, 1981, the court ordered the injunction extended until March 7, 1982, after it considered the voluminous post-hearing submissions presented by the parties. This appeal followed.*fn2 We affirm.

Johnson and Liquid Air present three questions on appeal. First, they assert that the trial court improperly constrained Johnson from participating in full employment practices at Liquid Air in light of the fact that he was not in any way burdened by a restrictive covenant in his employment contract with Air Products. Secondly, they remonstrate that, even if the injunction properly issued, that it is impermissibly broad in scope. Thirdly, they contend that the trial court denied Liquid Air its constitutionally guaranteed right to due process when it was excluded from the in camera hearing held by the trial court, when it heard evidence from

[ 296 Pa. Super. Page 409]

    which it would determine whether and what trade secrets existed. We will address each issue seriatum.

It is clear that our review herein is very narrow. We will look only to determine whether there were reasonable grounds, which are apparent, which justified the trial court's actions. We will not scrutinize the actions of the lower court any further unless the reasons relied upon by it were simply unreasonable or the legal analysis presented by the trial court was inaccurate. Valley Forge Historical Society v. Washington Memorial Chapel, 493 Pa. 491, 426 A.2d 1123 (1981); Boyd v. Cooper, 269 Pa. Super. 594, 410 A.2d 860 (1979).*fn3

The facts involved in this dispute are very numerous. We will describe them at some length. Air Products and Liquid Air are among the largest manufacturers and distributors of industrial gases in the United States.*fn4 They trade in substantially similar types of gases though their relative market positions have resulted in Air Products possessing a superior position in "on-site" sales and Liquid Gas in "merchant" sales. "On-site" gas serves large industrial customers. Gas is piped to the customer.*fn5 "Merchant" gas is delivered to smaller customers in tanks or cylinders.

Johnson was an employee of Air Products from 1966 to 1981. He is a college graduate, with a degree in petroleum engineering from Pennsylvania State University. Most of the experience Johnson had at Air Products was in on-site

[ 296 Pa. Super. Page 410]

    gas sales. Notably, from 1975 to 1981, Johnson had charge of Air Products' on-site sales. In January, 1981, he was elected a vice-president of Air Products.

This dispute arose out of a decision made in 1980 by Liquid Air to hire a vice-president in charge of marketing. Thus, Liquid Air contacted an executive search firm in New York. Air Products was a natural place to search for such a person. Sometime later, the recruiter came upon Johnson, established contact with him, and found him receptive to its proposals.

In December, 1980, Liquid Air decided that it would employ, the executive it was able to obtain, as the president of its Canadian subsidiary. The candidate was to work first, however, with Liquid Air's industrial gas division headquartered in San Francisco. The duties required of the person who filled the position involved the full range of industrial gas operations, including the on-site mode of delivery. Johnson was offered the position. He accepted.*fn6 Air Products subsequently filed this action in the court below.

Air Products clearly is concerned that Johnson may use the knowledge he acquired at Air Products about its on-site business and disclose that information to Liquid Air. Specifically, Air Products fears that Johnson may disclose trade secrets to Liquid Air about which Johnson learned as an Air Products employee. Air Products has developed its on-site business with great energy and financial expense. Liquid Air has not procured similar information related to on-site activities. This information includes technical data concerning the methods of delivery of on-site gas, status of negotiations with customers, and the analysis of market opportunities. Johnson was knowledgeable about all of these programs and technologies. While Johnson clearly does not have detailed knowledge about Air Product's market opportunities or about the technological process involved in the on-site mode of delivery of industrial gas, the record supports the trial court, when it said:

[ 296 Pa. Super. Page 411]

Johnson does not know the minutiae of this process, but he well knows the problems Air Products encountered to make the process a success. Because he knows the conclusions of Air Products' research and field-testing, his knowledge would be extremely valuable to a competitor since it would cut the developmental risk involved in a similar project.

(Trial Court Opinion at page 7.)

Essentially, Air Products has developed substantial plans concerning the on-site delivery of gas. It has devoted significant resources to the development of these plans and considers their technological advancements and marketing strategies to be trade secrets. Johnson is familiar with these plans.

Air Products undertook to protect itself from disclosure of what it considers trade secrets by its employees by requesting its employees to agree to sign "Employee Patent and Trade Secret Agreements." In January of 1966, Johnson entered such an agreement in which he indicated that he would not disclose any information which Air Products considered confidential to anyone outside the corporation.*fn7

[ 296 Pa. Super. Page 413]

When Johnson was interviewed for a position with Liquid Air no inquiry was made about any knowledge of trade secrets which he might have had. For that matter, there is no evidence that Johnson ever offered to disclose any such information. In fact, there is testimony, given by Liquid Air officials, that Johnson was instructed to refrain from disclosing any such information he acquired at Air Products which was unknown to Liquid Air. It is clear also that Johnson took no documents or property with him from Air Products to Liquid Air. It is evident that he did not and does not possess the knowledge to replicate any of the plans for any equipment or about the technological processes involved in this dispute.

The record indicates that Johnson is an honest man. There is no dispute as to his integrity. It is certain that he intends to refrain from disclosing any of the proven trade secrets of Air Products. Johnson's responsibilities at Liquid Air will be broader than those he had at Air Products. Thus, the likelihood of disclosure of secret information, is arguably less likely because Johnson will not be faced with circumstances where specific, confidential information may be disclosed. Hence, Johnson and Liquid Air conclude, an inadvertent disclosure of confidential information is very unlikely. Nevertheless, as Johnson and Liquid Air state in their brief:

At the time he left Air Products on February 24, 1981, Johnson did have knowledge of a limited amount of specific information which he presently believes may be sensitive or confidential information of Air Products.

(Appellant's Brief at page 11.)

Air Products obtained an injunction against Johnson and Liquid Air on March 4, 1981. A hearing on the continuance of that objection was held from March 23, 1981 to April 6,

[ 296 Pa. Super. Page 4141981]

. These proceedings were conducted in the trial court as an in camera hearing and a representative of Liquid Air's executives was not permitted to participate in that portion of the hearing concerning the existence of trade secrets. Johnson participated in the hearing as did numerous attorneys who were actively involved in the representation of Liquid Air and an expert hired by Liquid Air. The trial court determined that Johnson did have knowledge of certain information which Air Products considered trade secrets and which the trial court concluded were trade secrets.*fn8

The trial court stated:

Air products is developing its on-site business in certain areas which are particularly sensitive to its competitive market position. One of these is in petroleum recovery systems, which involve the injection of pressurized nitrogen into oil wells to increase productivity. Nitrogen injection is not a new technology. Confidential to Air Products, however, is its own appreciation of technical problems and safety precautions associated with the technology. Probably of even greater significance is the information and data collected by Air Products on current and future projects as well as on potential future opportunities for the firm. This information consists of the status of negotiations with customers, proposed plant configurations and methods of delivery as well as analysis of market opportunities. Johnson was in receipt of all reports on these matters and, indeed, prepared some himself. The information contained in these reports was developed at considerable expense by Air Products' personnel, including Johnson's subordinates. It is not the work product of Johnson himself, although he certainly shared in its development and analysis. The point we emphasize is that the identification of opportunities in the field as well as the extremely complex technological problems and commercial plans which must be made to exploit those opportunities is enormously time consuming and expensive.

[ 296 Pa. Super. Page 415]

Many of these considerations apply with equal force to Air Products' business efforts in enhanced oil recovery. Air Products has developed a method of recovering heavy oil from the ground which would otherwise be nonrecoverable, and has successfully field-tested its method. While there has been disclosure as to the generalities of this project, the specifics are not generally known. Particularly sensitive are three technical factors relating to the treatment and ignitions of the gas and to the treatment of the well shaft . . .

(Trial Court Opinion pages 6-7.) Furthermore:

In addition, Air Products has developed a vacuum swing adsorption unit for the production of nitrogen. Johnson knows the material to be used as the adsorbent, the identity of which is not known outside of Air Products.

In addition to these matters of a technological nature, Johnson is in possession of great quantities of information which we characterize as commercial in nature. This information has been developed by Air Products through the concerted effort of all its employees in the on-site business.

(Trial Court Opinion page 8.) The trial court concluded that trade secrets existed in these areas.

Johnson and Liquid Air strongly note in their brief, and it is supported by the record, that no restrictive covenant into which Johnson entered concerning his employment after leaving Air Products exists. There is no evidence that any such covenant was contained in Johnson's original employment contract with Air Products in 1966. Nor is there any evidence of any contract including a restrictive covenant entered into by Johnson and Air Products at a later date.

Pennsylvania law permits the issuance of an injunction against an employee and employer to prevent the disclosure of information obtained by the employee while in the employ of the complainant ex-employer when an effective restrictive covenant is present in or incident to an employment contract or where trade secrets exist under circumstances when the Pennsylvania law of unfair competition

[ 296 Pa. Super. Page 416]

    requires that protection from disclosure be ordered. We need not review the law concerning restrictive covenants as Air Products did not choose to protect itself with an appropriate restrictive covenant. For a review of Pennsylvania case law in this area, see New Castle Orthopedic Associates v. Burns, 481 Pa. 460, 392 A.2d 1383 (1978); Aiken v. Estate of Wilson, 477 Pa. 34, 383 A.2d 808 (1978); Bryant v. Sling Testing & Repair, Inc., 471 Pa. 1, 369 A.2d 1164 (1977); Enforcement of Restrictive Covenants In Pennsylvania Employment Contracts, 80 Dick.L.R. 693 (1976) and cases cited therein.

Under Pennsylvania law, a person may be enjoined from engaging in employment or certain aspects of his employment where that employment is likely to result in the disclosure of information, held secret by a former employer, of which the employee gained knowledge as a result of his former employment situation. Thus, the issue herein is not whether Air Products took precautions to stop the disclosure of information, i.e., restrictive covenant, but whether Air Products possessed information which qualifies as trade secrets and whether a confidential relationship existed between Air Products and Johnson such that Johnson was prohibited from disclosing trade secrets revealed to ...


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