The opinion of the court was delivered by: Simandle, District Judge:
HONORABLE JEROME B. SIMANDLE
This matter is before the court on the motion of Robert L. Desatnick ("Desatnick") for a preliminary injunction, pursuant to Federal Rule of Civil Procedure 65(a), enjoining Campbell Soup Company ("Campbell") from enforcing a 1997 non-competition agreement to prevent Desatnick from accepting an offer of employment from The Pillsbury Company ("Pillsbury"). Desatnick, who resigned from his position as Campbell's Vice President of Global Advertising and Promotion on April 8, 1999, argues that Campbell has no legitimate business interest in preventing him from joining Pillsbury as Chief Marketing Officer of Pillsbury North America because he does not possess any proprietary secrets or confidential information that require protection. Desatnick also contends that the non-competition agreement is unenforceable because (1) Campbell breached an oral contract of employment when it required him to execute the non-competition agreement and did not provide him with any additional valuable consideration in exchange for his promise not to compete, and (2) he executed the non-competition agreement under economic duress. The court has carefully considered the testimony and voluminous exhibits received into evidence at the hearing on June 18-19, 1999. Because the court finds that Desatnick has not met his burden of demonstrating likelihood of success on the merits at trial, the court denies Desatnick's motion for a preliminary injunction.
Desatnick's Advertising Agency Background
From 1979 to 1994, Desatnick worked for an advertising agency, first as an account executive and then as a member of the agency's management team. For the last four years of his employment with this agency, Desatnick managed the Campbell account. (Campbell Ex. 1.)
In early 1994, Desatnick was offered a lucrative position by another advertising agency. In February 1994, when it learned that Desatnick was considering leaving his agency position as manager of the Campbell account for a position with another advertising agency, Campbell inquired whether Desatnick would be interested in joining Campbell in an in-house capacity. Thereafter, Desatnick and Gary Moss, then Campbell's Vice President of Global Advertising, engaged in a series of discussions about Campbell's ability to offer a compensation package that was competitive with the offer Desatnick had received from the advertising agency.
Ultimately, Campbell extended Desatnick an offer of employment as Director -- Advertising Services. The terms of Campbell's offer were set forth in a February 25, 1994 letter. (Campbell Ex. 4.) The offer letter provided that Desatnick was to be paid a base salary of $140,000, a one-time signing bonus of $20,000, and standard medical and dental benefits. (Id.) The offer letter further provided that Desatnick would be eligible to participate in a short-term management incentive program and a long-term executive stock option program. (Id.) Finally, the offer letter reflected Campbell's commitment to provide some financial assistance with Desatnick's relocation expenses. (Id.) The terms of Desatnick's employment were governed by the February 25, 1994 letter and its attachments, and nothing therein promised Desatnick that he would receive stock options, let alone that he would receive a specified amount of such options. If Desatnick had formed any impression from Moss' prior oral statements that stock options were promised or guaranteed, these written materials defined the terms of his employment and contained no such promise or guarantee.
Desatnick signed Campbell's confidentiality agreement as he started employment in 1994, entitled the "Patent -- Trade Secret Agreement," dated April 4, 1994, promising to keep confidential, both during and after his employment, such information as "confidential marketing plans or data" and "potential new product introductions." (Campbell Ex. 8.) He testified that he refused to sign the "Employee Agreement Relating to Confidential and Proprietary Information" that contained a non-competition clause in 1994. He told Gary Moss he would be unable to sign the non-competition agreement based on advice of his attorney with whom he had reviewed the matter. Desatnick thus began work at Campbell with a signed trade secret agreement but no non- competition agreement. He received 1,800 stock options for 1994 and 2,400 stock options for 1995, consisting of the standard level of 1,800 plus 600 for a superior performance rating.
Under Campbell's long-term executive stock option program, Desatnick and other employees at or above job level 30 (Desatnick started at job level 38) were eligible to receive stock option grants that vested over a three-year period following the grant date. (See Declaration of Sarah Armstrong at ¶ 4.) *fn1 The awarding of stock option grants under the program involves a two step process. First, the Compensation and Organization Committee of the Board of Directors ("the Compensation Committee") decides whether stock options are to be awarded at all in a given year and, if so, determines guidelines for the awarding of such grants, including the number of stock options that may be granted for each particular job level. (Id. at ¶ 5.) If options are to be awarded, then each eligible employee's supervisor recommends the number of options that employee should be awarded based on his or her performance and the guidelines established by the Compensation Committee. (Id. at ¶ 6.) The stock option program does not obligate Campbell to make an award nor does it entitle an employee to an award; stock options awards are made at the discretion of the Compensation Committee and future awards may be terminated or changed at the sole discretion of Campbell. (Id. at ¶ 5.)
A stock option contains a "strike price," which is the price at which a share of Campbell's stock can be purchased if the employee chooses to exercise the option at a future date. If the price of the stock falls to a level below the "strike price," the option becomes essentially worthless, since the employee could purchase the stock at a lower price on the open market. If the price of the stock rises to a level exceeding the option price, the option has value roughly in proportion to the savings in purchase price that it enables the employee to recognize if the employee exercises the option. Thus, when Desatnick was weighing the competing offer of employment from FCB/Leber King, Desatnick testified that part of that offer was for a fixed allotment of 1,000 stock options, which he regarded as a valuable promise exceeding the value of Campbell's offer. Whether the FCB stock options would have any value compared with Campbell's would be based upon the stock's performance. (As a matter of fact, in hindsight, FCB's stock options proved to have little value due to poor stock performance, according to indications in the testimony.)
In any event, Desatnick received Campbell stock options in 1994 and 1995, pursuant to the 1984 Long-Term Incentive Plan, as amended May 27, 1993 (Campbell Ex. 52).
Desatnick signed another "Employee Agreement" in December, 1995, promising not to "divulge, use or appropriate for [his] own use or for the use of others...any trade secrets or other secret or confidential information or knowledge obtained by me during my employment." (Campbell Ex. 9.) "Trade secrets" were broadly defined to include information concerning business plans, financial information, strategic plans, advertising and marketing plans, pricing methods, and business relationships. (Id.)
The 1996 and 1997 Non-Competition Agreements
In June of 1996, Campbell asked all executives at Desatnick's level to sign a "Confidential and Proprietary Information Agreement" ("the 1996 agreement") that included a non-competition clause in consideration for being eligible for a discretionary grant of stock options, under a policy approved by the Compensation Committee of Campbell's Board of Directors. (Campbell Ex. 11.) The accompanying letter (Campbell Ex. 10), dated June 5, 1996, explained that Campbell sought to protect the company's proprietary and confidential information, and that Campbell sought to share competitively sensitive information with the entire management team, including corporate goals, strategic facts and plans. (Id.) The 1996 agreement provided essentially that an employee having access to this sensitive information could not thereafter leave Campbell's employment to join a competitor, and that Campbell's would pay a departing employee up to 75% of base salary until suitable new employment with a non-competing company could be found.
Desatnick testified that he was told that if he didn't sign the 1996 agreement, he would not receive stock options. It would also follow that he would not be permitted to share in the sensitive competitive information and strategic plans which the 1996 agreement sought especially to protect. He went to Campbell attorney Cary Metz to complain, telling Metz he assumed it was a mistake because former Vice President Gary Moss had agreed, two years earlier, that Campbell couldn't require Desatnick to sign a non-competition agreement, and that Campbell had promised to pay Desatnick the stock options nonetheless. Metz reiterated that Campbell's Compensation Committee had determined it would require Desatnick to have a non-competition agreement like other top executives in the company.
Campbell gave Desatnick and the other recipients of the letter about 30 days to respond, the deadline being July 8, 1996. Desatnick did not consult with counsel and, although he was angry and unhappy, he signed the 1996 non-competition agreement on June 28, 1996 (Campbell Ex. 11).
Desatnick's 1996 stock options increased, as he was awarded at least 5,287 from the 1996 program (Campbell Ex. 18), which was adjusted to 8,813 options to reflect a 2:1 stock split and an approximate 10% adjustment reflecting spin-off of the Vlasik pickle subsidiary. When he exercised the 5,287 options from 1996 on January 7, 1999, Desatnick realized a profit of $115,000. (Id.)
Factually, Desatnick's claim of duress in signing the 1996 agreement does not pan out. Although he felt he would be fired if he did not sign the 1996 agreement, no one ever communicated such a threat orally or in writing. *fn2 He chose not to consult with an attorney (despite his alleged 1994 consultation with counsel about the same subject) and he chose to sign the agreement several weeks before it was due, allegedly because he was departing the next day on a European trip. He also never asked for an extension of time to make up his mind, and he conceded that during his worldwide travels, whether on vacation or on the job, he is seldom out of touch with the home office for long; he easily could have continued the dialog if he felt it necessary to do so above attorney Metz' level, but he did not do so. He complained to no one but Metz.
In any event, his employment not only continued after he signed the 1996 agreement, but his compensation increased and he received a promotion on September 1, 1996 to Vice President of Global Advertising and Promotion, at a base salary of $156,000. (Ex. 21.) Together with the 1996 stock options themselves, the increases in salary and rank were further consideration for his signing the 1996 agreement.
Much of Desatnick's quarrel with the 1996 agreement -- although lacking merit for reasons explained in this Opinion -- is entirely beside the point. Campbell is not seeking to enforce the 1996 agreement but rather, the substantially different and (from the employee's perspective) improved "Nonqualified Stock Option and Non- Competition Agreement" that he signed without audible protest on July 25, 1997 ("the 1997 agreement"). (Campbell Ex. 13.) The 1997 agreement provides that during Desatnick's employment with Campbell, and for 18 months after such employment (if he leaves voluntarily), he agrees not to become employed by any business that competes with the business of Campbell in any part of the world. (Id. at ¶ 7(a)). A business "competes" if it "engages in, or plans to engage in, the production, marketing or selling of any product or service ... which resembles or competes with a product or service of Campbell Companies...during [the employee's] employment [with Campbell]." (Id. at ¶ 7(b)).
The 1997 agreement, quite significantly in this court's view, also provides a "safety net" in case Desatnick is unable to find employment with a non-competitor. Campbell agrees in this safety net to pay 100% of his base monthly salary (along with medical and dental benefits) beginning 90 days after his last employment at Campbell's and continuing for the 18-month duration of the non-competition provision or until he finds a suitable position, if sooner. (Id. at ¶ 8.) The 1997 agreement also evidences Desatnick's acknowledgment that "the restrictions in this agreement are necessary to protect the legitimate interests of Campbell Companies, and impose no undue hardship on [him]." (Id. at ¶ 10(a)).
This "safety net" in the 1997 non-compete agreement provides a reasonable financial cushion to soften the financial impact of the executive employee's job search with a non-competitor for a reasonable period of time. The 18-month period is reasonably long in recognition that senior executive opportunities may not be easy to obtain overnight.
Meanwhile, Desatnick's base salary as a corporate Vice President continued to increase, reaching $185,000 as of January 1, 1999. (Campbell Ex. 21.) Campbell granted Desatnick 4,488 stock options in June 1997, and 3,500 more stock options in 1998, which have not yet vested. (Campbell Ex. 17).
Desatnick's Exposure to Highly Sensitive Competitive Information
Throughout the hearing, Desatnick sought to minimize his duties in terms of exposure to strategic planning information, and he also sought to trivialize the competitive importance of the information that he received in the course of his duties. In fact, for the past two-plus years, Desatnick was a member of Campbell's Leadership Group, consisting of about 40 senior Campbell executives who meet on a monthly basis to discuss strategic planning, financial performance, financial forecasting, and resource allocations. Although Desatnick was not a member of the even more restrictive Senior Leadership Team consisting of a handful of the top executives, he was part of the important management team that planned and reviewed the company's performance.
Lisa Zakrajsek, Campbell Soup's Vice President of U.S. Soup, testified that the Leadership Team -- of which she is a member -- as consisting of very senior corporate officers who meet and communicate regularly with Campbell's CEO Dale Morrison to discuss how critical issues are being handled in the company. More detailed financial performance and projections are reviewed at the level of Campbell's various business components, in contrast to the generality of the corporate-level figures and documents that are released to financial analysts and shareholders. The ...