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Mitchell Lane Publishers, Inc. v. Rasemas

Court of Chancery of Delaware

September 30, 2014

MITCHELL LANE PUBLISHERS, INC., Plaintiff/ Counterclaim Defendant,
v.
JOSEPH RASEMAS, CYNTHIA RASEMAS A/K/A CYNTHIA COPE RASEMAS, Defendants, and PURPLE TOAD PUBLISHING, INC., Defendant/ Counterclaim Plaintiff,
v.
BARBARA MITCHELL, Counterclaim Defendant.

Date Submitted: September 15, 2014

Thomas E. Hanson, Jr., Esquire, Albert J. Carroll, Esquire, and Elizabeth A. Powers, Esquire of Morris James LLP, Wilmington, Delaware, Attorneys for Plaintiff/Counterclaim Defendant Mitchell Lane Publishers, Inc. and Counterclaim Defendant Barbara Mitchell.

David E. Wilks, Esquire, Thad J. Bracegirdle, Esquire, Laina M. Herbert, Esquire, and Andrea S. Brooks, Esquire of Wilks, Lukoff & Bracegirdle, LLC, Wilmington, Delaware, Attorneys for Defendants Joseph Rasemas and Cynthia Rasemas a/k/a Cynthia Cope Rasemas, and Defendant/Counterclaim Plaintiff Purple Toad Publishing, Inc.

MEMORANDUM OPINION

NOBLE, Vice Chancellor

Plaintiff Mitchell Lane Publishers, Inc. ("Mitchell Lane" or "Plaintiff") seeks a preliminary injunction to prevent Defendants Joseph Rasemas ("Rasemas"), Cynthia Rasemas ("Cynthia"), and Purple Toad Publishing, Inc. ("Purple Toad, " and collectively with Rasemas and Cynthia, "Defendants") from using Mitchell Lane's confidential and proprietary information to print, distribute, or otherwise engage in the business of developing, marketing, or selling children's series nonfiction books, or transferring or disclosing the confidential information to any third party. In addition, Mitchell Lane seeks the return of any and all of its confidential and proprietary information currently in the Defendants' possession.

I. BACKGROUND

Since its formation in 1992, Mitchell Lane has published educational series nonfiction books for children and young adults. To appeal to their particular audience, the books center on topics that interest young readers and contain colorful images and easy to follow text. Mitchell Lane sells primarily to schools and libraries through sales representatives and distributors.

Mitchell Lane is a small company led by founder and Counterclaim Defendant Barbara Mitchell ("Mitchell"), who serves as President and Publisher. Mitchell Lane does not employ many full-time employees. As is common in the industry, Mitchell Lane contracts with freelance authors to write about specific topics. These contracts are non-exclusive, and the authors tend to write for several different publishers. Mitchell Lane maintains an Author Contact List with the names and contact information of authors it has hired. Mitchell Lane also keeps a Vendor Contact List, including the names and contact information of the industry professionals the company engages to print, advertise, and distribute its books.

Mitchell Lane employees produce the books in a given series using Series Specifications, which describe the books' format, content, and organization, and Design Templates, which define the books' size, color, and layout. Mitchell Lane maintains its Design Templates on InDesign, a commonly used desktop publishing software application.

In September 2008, Mitchell Lane hired Rasemas as a fulltime employee with the title of Graphic Designer and Project Manager. Rasemas was chosen for his graphic design experience and skill. His responsibilities included redesigning the look and format of Mitchell Lane's books, developing certain Design Templates, and laying out certain books and readying them for transfer to the printer. Rasemas had access to the Series Specifications and Design Templates in order to perform his job responsibilities. He also attended Mitchell Lane's private publishing plan meetings where he received the company's confidential publishing plans. These plans were marked "confidential" and included the series and specific topics Mitchell Lane intended to publish during the upcoming year, as well as the projected publication dates.

Rasemas appeared to perform his job responsibilities without incident until the summer of 2013. Then, from June 27 to July 2, 2013, he called out of work sick each day. He returned to the office on July 3, 2013, with a note from a doctor seemingly confirming the excuse for his absence. Less than a week later, on July 8, Rasemas submitted a letter of resignation indicating that his last day of employment would be July 19, 2013.

Within a month of Rasemas's departure from Mitchell Lane, several individuals involved in the publishing industry called Mitchell to ask if she were aware of a new children's book publisher called Purple Toad. Due to apparent similarities between Purple Toad's books and those of Mitchell Lane, there was some confusion over whether Purple Toad was an "imprint, " or trade name, of Mitchell Lane. Based on these phone calls, Mitchell investigated the origins of the new publishing company and discovered that Rasemas had formed it.

Rasemas, along with his wife Cynthia, had incorporated Purple Toad on March 22, 2012, over a year before Rasemas left Mitchell Lane. Rasemas and Cynthia had the idea for establishing their own publishing company at least as early as December 2011, when they met with Thomas Cope and Patricia Cope to discuss the formation of such a company.[1] Rasemas had not signed a noncompetition agreement with Mitchell Lane, and his employment was at-will. After deciding to break away from Mitchell Lane eventually, Rasemas began to design books for the future Purple Toad, both at home, as well as on his work computer. When creating Purple Toad books while at work, Rasemas would utilize the Design Templates to format his books.

While at work, Rasemas became aware of which books purchasers ordered from Mitchell Lane, as well as the size of their orders. On some occasions, Rasemas forwarded this information to Cynthia and advised her to call those purchasers, since they might have further demand for books. Mitchell Lane claims that this information, as well as other information such as vendor and customer contacts, allowed Purple Toad to develop a business modeled very closely on that of Mitchell Lane.

Cynthia used information obtained from Mitchell Lane's Author Contact List to contact freelance authors, and used the Vendor Contact List to retain the services of printers, advertisers, and distributors. When making calls on behalf of Purple Toad, Cynthia used her maiden name to hide her connection to Rasemas and Mitchell Lane. Purple Toad has hired some employees away from Mitchell Lane.

According to Mitchell Lane, the emergence of Purple Toad has created a great deal of confusion in the educational publishing industry. Professionals in that industry who are familiar with Mitchell Lane's books have mistaken Purple Toad's books for those offered by its competitor. This alleged confusion is the result of similarities between the books' styles, dimensions, and lengths. Mitchell Lane believes that since professionals have a hard time telling the two brands of books apart, then customers, such as schools and libraries, will also be confused.

Mitchell Lane has asserted claims against Rasemas for breach of fiduciary duty, breach of fiduciary duty of disclosure, breach of fiduciary duty of confidentiality, conversion, and unjust enrichment. Mitchell Lane has asserted a claim for aiding and abetting a breach of fiduciary duty against Cynthia and Purple Toad. There are claims against all Defendants for misappropriation of trade secrets, intentional interference with existing contractual relationships and prospective business advantage, violation of the Misuse of Computer System Information Act, violation of the Deceptive Trade Practices Act, and unjust enrichment.

Mitchell Lane also seeks interim injunctive relief, alleging that it will be irreparably harmed by suffering a great loss of customers and business if Purple Toad is allowed to operate its business, which is based on Mitchell Lane's confidential, proprietary, and trade secret information. Mitchell Lane points to the alleged ongoing confusion in the children's nonfiction publishing industry and the impending publication of Purple Toad's 2015 books.

Mitchell Lane seeks provisional relief that would result in the return of its confidential and proprietary information currently in the Defendants' possession, and also would, in effect, cause Purple Toad to cease its operations.[2]

II. ANALYSIS

To succeed on its motion, Mitchell Lane must show (i) a reasonable probability of success on the merits after a full hearing, (ii) imminent and irreparable injury in the absence of immediate injunctive relief, and (iii) that the balance of equities tilts in its favor, i.e., the harm it would suffer in the absence of relief outweighs the harm the Defendants would suffer if the injunction is granted.[3]Because of the extraordinary nature of the relief sought, Mitchell Lane bears a considerable burden in demonstrating each of the relevant factors.[4] Although Plaintiff must establish all three necessary elements, "[a] strong showing on one element may overcome a weak showing on another element."[5] While the Court analyzes each element separately, it exercises discretion in assigning the relative weight that each element deserves.[6]

Because Mitchell Lane fails to establish all of the necessary prongs, its application for a preliminary injunction is denied. Further, the short period of time between this decision and the final hearing on the merits, as well as the Court's inability to tailor a form of preliminary injunction that would minimize any ...


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