Course No. 9200-704 (& 804)-801
ID No. 85737 & 85736
Time: W 6:30 - 9:30 p.m.
Room Across from 231D (IP Alcove)
|Copyright © 2000, 2002, 2003, 2006, 2008, 2010 Jay Dratler, Jr. For permission, see CMI.|
Rice Researchers, Inc. v. Hiter512 So. 2d 1259 (Miss. 1987)
Robertson, J. [*1261]
I.Today's appeal involves us in a charge of stealing rice. The alleged thief is not an ordinary thief, but a renowned and respected pioneer in the development of high quality and highly successful rice strains, who left his employer's service and was then accused of taking with him that which was not his.
* * *
On September 10, 1984, Rice Researchers Inc. (hereafter "RRI"), a California corporation, filed in the Chancery Court of the First Judicial District of Bolivar County, Mississippi, an application for a Temporary Restraining Order, Preliminary Injunction, Permanent Injunction, and Appointment of Receiver. Named as Defendants were two Bolivar County farmers, Richard B. Hiter (hereafter "Hiter") and Loyd H. Canady (hereafter "Canady"). RRI alleged that Hiter and Canady, acting in concert with RRI's former research director, Arthur Hughes Williams (hereafter "Williams"), had wrongfully misappropriated and were then growing proprietary varieties of rice owned by RRI, including Kokuho Rose, a high quality strain of rice produced through costly genetic research. RRI sought to enjoin Hiter and Canady from harvesting, transferring and otherwise exploiting and profiting from Kokuho Rose rice and other rice then being grown in certain rice fields located east of Benoit, Mississippi.
* * * [*1262] * * *
and those in concert with the plaintiff from prosecuting any smilar claim.]
[T]his lawsuit boils down to a rather simple dispute. Rice Researchers, Inc. (RRI) claims that Arthur Hughes Williams stole protected varieties of rice seed from RRI and later planted these on the E. M. Barry Place near Benoit, Mississippi, planning to sell rice harvested from such planting. Williams, on the other hand, admits planting seed rice on the Barry Place but says he did not steal it. Williams contends that such rice was obtained via hand-harvesting another rice field and rice abandoned by RRI upon the closing of its research operation in Mississippi at the end of 1982. The [trial court] found for Williams, and RRI appeals. Because this simple suit should not be dispatched so simply, we will review the facts in more detail.
* * * [*1263] * * *
Williams later entered two employment agreements with RRI and served as RRI's Research Director. Both agreements required Williams not to disclose matters affecting or relating to RRI's business. Both of them also provided that all ideas, improvements or other developments conceived by Williams within the scope of RRI's business would be the exclusive property of RRI.
Later PIRMI and Nomura became co-owners
of RRI and (although they then co-owned it) entered into a second joint
venture agreement with RRI substantially the same as the first. Koda
Farms retained the trademark "Kokuho Rose" for rice but licensed
it exclusively to Nomura for marketing purposes. In 1980, Williams
moved from RRI's California research station to its newly-established
Mississippi research station at RRI's request. Effective year-end
1982, he resigned from RRI due to a disagreement with RRI's corporate
decision to sell PIMRI to Comet Rice Mills.]
* * * [*1264] * * *
A word about our scope of review. Whereas herea trial judge sits without a jury, this Court will not disturb his factual determinations where there may be found in the record substantial supporting evidence. This is true whether the findings relate to matters of evidentiary fact or ultimate fact.
* * * [*1265] * * *
* * *[Although casting a baleful eye on the lower court's wholesale adoption of the defendant's proposed findings of fact, after a review of applicable law the court decided: "In our view, the matter of whether a trial court may adopt verbatim, in whole or in part, the findings of fact and conclusions of law of a party is within the court's sound discretion." It reiterated, however, that a party's adopted findings are entitled to a lower level of deference.] * * * [*1266]
Our sensitivity to the possibility of error heightened, we confront RRI's
primary assignment of error, namely that the Chancery Court erred in finding
that Williams stole no RRI rice and, conversely, that what rice Williams
had and had planted in 1984 he came by honestly.
* * * The heart of RRI's claim that Williams wrongfully obtained
protected varieties of rice is that Williams and his son, Barton, came
to California in a van and took Kokuho Rose rice from the storage bins
maintained by the Latter Day Saints, a contract grower for Rice Researchers
in California. Williams admits that he and his son traveled to California
in May, 1983, and that they obtained rice. Williams' son, Barton,
substantiates this testimony. However, Williams' testimony and Barton's
was that Dr. Pope [Williams' successor as RRI's Research Director] gave
them bags of rice to take back to Mississippi, and that they did nothing.
Also substantiating Williams' and Barton's story is the testimony
of a witness, Sandy Cervantes, who rode with them in the van back from
California. Cervantes testified that there were bags of rice placed
in the wells of the van and that there was a mattress in the back of the
van. Further, Dr. Pope, when asked if he saw whether rice was in
the van, testified that he did not see whether rice was in it. Based
on this testimony, the Chancery Court's gross conclusion that Williams
did not steal any RRI rice is within the evidence and will not be disturbed.
* * *
A.RRI asserts that Williams made an unlawful and improper disclosure of trade secrets and confidential matters and information owned by his former employer and as such should not have been permitted to profit from his own wrongdoing. RRI claims that the evidence in the record clearly establishes Williams' improper disclosure of trade secrets. For example, RRI contends that Williams' contact with Japan Foods Corporation in December, 1982, [in which Williams sought help in marketing Kokuho Rose rice,] indicated improper disclosure of trade secrets. Also, there was evidence that Williams removed samples of RRI's seed rice stored at B & J Services warehouse. Additionally, RRI contends that evidence showed that Williams solicited Bolivar County rice farmers in 1984 to grow Kokuho Rose rice.
Williams, on the other hand, argues that because he rightfully had possession of the rice planted on the Barry Place, he became free to do whatever he wanted with that rice, so long as he did not unfairly compete with RRI. Williams argues that because Koda Farms owns the trademark to Kokuho Rose, there is no way that he can compete with RRI or the joint venture of which RRI is a part.
* * * Trade secrets are property and rights therein are protected. * * * [*1269] * * * Certainly, while Williams was an officer and director of RRI, he occupied a trust relationship and owed a fiduciary duty to the corporation. This duty carries with it the obligation to return any private property of the corporation after termination of employment. Furthermore, this duty carries with it the obligation not to disclose or impinge upon any of the secret processes or business secrets of his former employer.
Labels and linguistics aside, our question is whether Williams disclosed any RRI owned formula or other like information to third parties. When Williams and the others acquired the rice planted on the Barry place, they become free to do with it as they chose, so long as they did not unfairly compete with RRI. Implicated here are fact questions and we have before us a record reflecting substantially conflicting evidence. We decline to disturb the Chancery Court's gross resolution of the matter.
B.During RRI's case-in-chief at the trial on the merits, Williams was questioned about the paragraph in his employment contract with RRI labeled "Nondisclosure Of Information Concerning Business." The lower court made a bench ruling in which it recognized that RRI was not trying to have the subject employment agreements construed as covenants not to compete, reasoning that there was nothing in RRI's prayer for relief seeking to restrain Williams from any type of competition, provided Williams did not use what RRI contended was material belonging to it.
In Williams' June 6, 1973, employment contract with RRI, Williams agreed that he would not
Certainly a corporation has the right to contract to prevent disclosure of information so long as such agreement is not overreaching. Indeed, such an agreement cannot be challenged as an unreasonable restraint of trade. . . . RRI had every right to enter in such an agreement with Williams.
However, the important question in our appellate setting is whether there is overwhelming evidence in the record supporting the allegation that Williams disclosed any type of information protected by such agreement to a third party. Further, an even more fundamental question is whether Williams had lawful possession of the rice in controversy. For if Williams had rightful possession of the rice, then he had nothing of RRI and it would be impossible for him to disclose any such information as a result of obtaining the rice.
The Chancery Court appears to have been correct in focusing on the fundamental[*1270] question of whether the rice was wrongfully taken, for the question of disclosure of trade secrets pursuant to the contractual provision is not reached until it be shown Williams wrongfully acquired the property, or there was substantial evidence otherwise indicating that he disclosed trade secrets to third parties. Suffice it to say that the evidence supports neither of these contingencies.
RRI finally complains of the Chancery Court's awarding of damages upon dissolution of the preliminary injunction. These damages were assessed by reference to Defendants' attorneys fees and litigation expenses incurred in resisting the action and obtaining dissolution of the preliminary injunction.
RRI argues that the gravamen of this civil action was title to and ownership of certain rice varieties. As such, any other equitable relief in the form of injunctions flowed from and was dependent upon that issue of ownership, and the efforts of the Defendants' attorneys in defending the suit on its merits were addressed to that issue. Accordingly, the Defendants were not entitled to an award of attorneys fees for dissolution of the injunction, or so RRI argues. * * *
* * *If the relief sought is for an injunction alone, attorneys fees for dissolution must be allowed. However, where the prayer for injunction is ancillary to the main relief sought and the entire case is heard finally, and not separately on any preliminary motion to dissolve, attorneys fees should not be allowed. But, where the entire relief sought is controlled by the injunction, attorneys [*1271] fees are allowable, even though there is no preliminary motion to dissolve the injunction and the injunction is not dissolved until the final hearing on the merits.
All of this, upon reflection, only confuses the distinction between rights and remedies. RRI says the suit was about a matter of primary right, viz. title to and ownership of certain rice varieties. Williams and the other Defendants say the suit was for injunctive relief. Both are right. Properly understood, the rule is that, where injunctive relief is the primary remedy sought, fees and expense award follow dissolution of preliminary injunctive relief. And this is so wholly without regard to the nature of the primary right. The assignment of error is denied.
Walker, C.J., Roy Noble Lee, P.J.; Hawkins, P.J.; Dan M. Lee, Prather, Sullivan, Anderson and Griffin, JJ., concur.
1. [court's footnote 2] Shortly after Williams'
termination of employment with RRI, RRI filed a claim against him in the
Chancery Court of the Second Judicial District of Bolivar County, Mississippi.
This lawsuit was a charge by RRI that Williams had attempted to
purchase Kokuho Rose seed in March, 1983. The suit was ultimately
dismissed in consideration for which Williams transferred, quitclaimed
and delivered to RRI all of his right, title and interest in approximately
11,440 bushels of long grain rice and medium grain rice, including Kokuho
Rose type seed.