Thomas & Betts Corporation v. Richards Manufacturing Company

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-3117
THOMAS & BETTS CORPORATION,
Appellant
v.
RICHARDS MANUFACTURING COMPANY;
BLEEMA MANUFACTURING CORPORATION;
GLENN J. LUZZI
No. 08-3269
THOMAS & BETTS CORPORATION
v.
RICHARDS MANUFACTURING COMPANY;
BLEEMA MANUFACTURING CORPORATION;
GLENN J. LUZZI,
Appellants
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 01-cv-04677)
District Judge: Honorable Stanley R. Chesler
Argued: June 26, 2009

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Honorable Jan E. DuBois, Senior Judge, United States District Court for the Eastern*
District of Pennsylvania, sitting by designation.
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Before: BARRY, SMITH, Circuit Judges, and DuBOIS District Judge*
(Opinion Filed: July 30, 2009)
Kevin McNulty, Esq. (Argued)
Gibbons
One Gateway Center
Newark, NJ 07102-5310
Counsel for Appellant/Cross-Appellee
Steven B. Pokotilow, Esq. (Argued)
Stroock, Stroock & Lavan
180 Maiden Lane
38th Floor
New York, NY 10038-0000
Counsel for Appellees/Cross-Appellants
OPINION
BARRY, Circuit Judge
This appeal arises out of a former employment relationship between plaintiff
Thomas & Betts Corporation (“T&B”) and defendant Glenn Luzzi. In an action
commenced in 2001, T&B claimed that when Luzzi left T&B to work for a competitor,
defendant Richards Manufacturing Company (“Richards”), he misappropriated

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Defendants have litigated the case jointly and, therefore, reference to “Richards” as a1
party refers to all defendants, including Bleema Manufacturing Corp., a company that
provides employees and management services to Richards and has played no meaningful
role in this litigation.
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information concerning the design, manufacture, and marketing of a line of underground
electrical connector products, and that Richards used this information to capture a
lucrative market sector that T&B had dominated for years. T&B also brought breach of1
contract, breach of the duty of loyalty, and fraud claims against Luzzi, and tortious
interference with prospective advantage and unjust enrichment claims against Richards.
After an exhaustive litigation, which we will reference only as necessary to decide the
issues before us, the District Court granted summary judgment for defendants on the
misappropriation claim and dismissed T&B’s remaining claims. Final Judgment was
entered on June 18, 2008. The Court subsequently denied defendants’ motion for
sanctions. This appeal and cross-appeal followed. We have jurisdiction to consider
these appeals pursuant to 28 U.S.C. § 1291.
T&B contends before us that the District Court formulated and thereafter applied
a standard by which to assess whether T&B had a protectible interest in its allegedly
misappropriated information, and that that standard was wrong as a matter of New Jersey
law. It contends, as well, that the Court misapplied the familiar summary judgment
standard of Rule 56 of the Federal Rules of Civil Procedure by finding facts and by
failing to draw key inferences in favor of it, T&B, as the non-moving party. Finally,

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T&B contends that the Court erred in excluding significant portions of the testimony of
its primary expert witness. Richards, on the cross-appeal, argues that the Court erred in
denying the motion for sanctions.
Because we conclude that the District Court (1) applied an incorrect body of New
Jersey law in evaluating T&B’s misappropriation claim and (2) applied too restrictive a
standard in evaluating the admissibility of T&B’s expert, we will vacate the order of
Final Judgment, and remand for further proceedings. We, therefore, need not discuss
Rule 56 and the parties’ positions as to whether its requirements were satisfied, although
we commend to all involved a review of that Rule. We will affirm the order of the Court
denying sanctions.
I.
Glenn Luzzi was the Director of Engineering at T&B’s Elastimold division, which
manufactures, among other things, 600-amp underground oil-resistant electrical
connectors, primarily for use by Consolidated Edison (“Con Ed”). In 1998, Luzzi began
to explore alternate job opportunities and sought employment with Richards, a company
that also manufactured electrical components. Richards told Luzzi that it would not hire
him unless T&B released him from the obligations undertaken by him in his 1996
employment agreement, which contained both restrictions on his future employment and
confidentiality stipulations in the event of his departure from T&B. By letter of
December 17, 1998, T&B stated that “Thomas & Betts hereby releases you from any

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Luzzi also may have been bound by the terms of a 1978 agreement that he signed2
while working for a predecessor of T&B. The District Court discussed the parties’
dispute as to whether the confidentiality provision of the 1978 or 1996 agreement, both,
or neither, controls, but did not resolve it. (App. at 12-13 & n.1.) We note the parties’
stipulation that “T&B released Luzzi from only the non-compete restriction within his
[employment agreement]” (App. at 18615 (emphasis added)), which suggests that Luzzi
remained contractually bound not to disclose T&B’s confidential information.
In 1996, Richards developed a prototype for the same type of electrical connector3
manufactured by T&B for Con Ed. Though the product was successfully tested in
isolation, Con Ed informed Richards that, in order to be marketable as a second source,
the product had to be physically and electrically compatible with the T&B products
already in service, which it was not. In addition, Luzzi testified in his deposition that Con
Ed approached him in 1997, in his official capacity as Elastimold’s Director of
Engineering, to ascertain whether Elastimold would license its design specifications to
Richards to create another product supplier. Luzzi’s superiors rejected Con Ed’s request.
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previous employment restrictions which you have signed,” but cautioned Luzzi that,
“[n]otwithstanding [this release], it is understood that you are not permitted to share or
release information proprietary to Thomas & Betts - Elastimold.” (App. at 5281.) Luzzi2
joined Richards in January 1999.
It is undisputed that Luzzi retained a number of T&B documents (called the
“Closet Documents”) in his home after he ended his employment with T&B. These
documents fall into two main categories by content: (1) financial reports, customer lists,
and sales charts (the “customer data”); and (2) various product specifications, standard
operating procedures, and technical drawings (the “product data”). It is also undisputed
that T&B had been the sole supplier of a line of 600-amp disconnectable connector
products to Con Ed for approximately twenty years, but that, approximately eighteen3
months after Luzzi began working for Richards, Richards was able to develop a

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In an order dated October 28, 2005, the District Court realigned the parties to their4
natural pleading positions, making T&B the plaintiff and the collective Richards the
defendants.
The District Court discussed separately the well-defined New Jersey standard for a5
misappropriation of trade secrets claim in its opinion of January 12, 2004.
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compatible product line and, in January 2001, obtained a sole-source contract from Con
Ed for the products after offering them at a lower price than T&B.
Richards brought a declaratory judgment action in October 2001, seeking a
declaration that it had not misappropriated T&B’s trade secrets or other confidential
information. T&B counterclaimed, bringing the claims set forth above. In a series of4
successive interrogatory responses, T&B identified ten trade secrets and ninety-two
discrete items of confidential information that it claimed defendants had misappropriated.
The parties set forth in detail their positions as to each of these trade secrets and items of
confidential information in the Final Pretrial Order (“PTO”).
In its opinion of October 7, 2005, the District Court denied Richards’s motion for
partial summary judgment on several of T&B’s counterclaims. In that opinion, the Court
articulated the standard by which it would determine whether or not T&B could claim a
protectible interest in each item of confidential information identified in the PTO–that is,
whether the allegedly misappropriated information was, in fact, confidential. Believing
that there was not a clearly-defined standard in New Jersey case law, the Court fashioned
its “protectibility” standard from two holdings of the Supreme Court of New Jersey. In5
the first, Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609 (1988), the Supreme Court

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assessed the propriety of a species of post-employment restrictive covenants (i.e.,
inventorship “holdover” agreements), while, in the second, Lamorte Burns & Co. v.
Walters, 167 N.J. 285 (2001), it discussed the tort of misappropriation of confidential
information. The District Court’s resultant test consisted of four factors: (1) the degree
to which the information is generally known in the industry; (2) the level of specificity
and specialized nature of the information; (3) the employer/employee relationship and the
circumstances under which the employee was exposed to the information; and (4)
whether the information is “current” (i.e., of current value to the employer).
In its next opinion, dated April 4, 2006, and following an extensive hearing
pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the
District Court significantly limited the testimony of T&B’s primary expert, Van T.
Walworth. The Court found that Walworth lacked experience in the field of
underground electrical connectors, and found his methodology unreliable.
In opinions dated April 26, 2007 and June 18, 2008, the District Court held that
T&B failed to furnish sufficient evidence to demonstrate (1) that any of its ten claimed
trade secrets were, in fact, secrets, and (2) that it had a protectible interest in any of the
discrete items of confidential information. On that basis alone, the Court granted
summary judgment on T&B’s misappropriation claim. As T&B’s claims of breach of
contract, breach of the duty of loyalty, and unjust enrichment were “premised on” the

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The District Court also dismissed T&B’s tortious interference claim on the ground6
that it was undisputed that Con Ed approached Richards as a potential second source
supplier. The Court had earlier dismissed T&B’s fraud claim on separate grounds in an
opinion dated April 3, 2006. T&B does not challenge either dismissal here.
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survival of its misappropriation claim, the Court dismissed those claims as well.6
At oral argument before us, counsel for T&B confirmed that T&B is not appealing
the District Court’s ruling as to its claimed trade secrets. Accordingly, with reference to
T&B’s appeal of the grant of summary judgment, we decide whether the Court
formulated an erroneous standard, or otherwise erred in granting summary judgment for
Richards, only as to its analysis of T&B’s claim for the misappropriation of confidential
(i.e., non-trade secret) information. We exercise plenary review over the Court’s grant of
summary judgment. Kossler v. Crisanti, 564 F.3d 181, 186 (3d Cir. 2009). In
conducting our review, we view the underlying facts, and all reasonable inferences
therefrom, in the light most favorable to the party opposing the motion. Fasold v.
Justice, 409 F.3d 178, 180 (3d Cir. 2005).
II.
As noted above, T&B argues that the District Court erred in its determination of
the legal standard for a protectible interest in information under New Jersey law. Under
New Jersey law, information that does not rise to the level of a trade secret may
nevertheless be entitled to protection and may serve as the basis for a tort action.
Lamorte Burns, 167 N.J. at 299. In Lamorte Burns, an insurance company sued two

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The more recent Restatement is not fundamentally different: “An agent has a duty7
(1) not to use property of the principal for the agent’s own purposes or those of a third
party; and (2) not to use or communicate confidential information of the principal for the
agent’s own purposes or those of a third party.” Restatement (Third) of Agency § 8.05
(2006).
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former employees who admitted taking client information from the company (while they
were still employed) in order to solicit those clients for their newly formed competitive
business. The Supreme Court of New Jersey held as a matter of law that the information
was confidential and proprietary–and, thus, legally protectible–because it was “specific
information provided to defendants by their employer, in the course of employment, and
for the sole purpose of servicing plaintiff’s customers.” Id. at 301. The Court found
persuasive that the information was not generally available to the public, that the
defendants would not have been aware of the information but for their employment, that
the information gave the defendants a competitive advantage over their former employer,
and that defendants knew that the plaintiff had an interest in protecting the information.
Id. It drew heavily on principles of agency law, which provide that an agent has a duty
to the principal “‘not to use or to communicate information confidentially given him by
the principal . . . in competition with or to the injury of the principal.’” Id. at 300-01
(quoting Restatement (Second) of Agency § 395 (1958)).7
The District Court understandably, albeit mistakenly, invoked case law dealing
with the interpretation of post-employment restrictive covenants (commonly referred to
as “non-compete agreements”), likely because the record was, and remains, unclear

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whether Luzzi had any forward-looking contractual obligations. See supra note 2. In
any event, whatever obligations remained were not the sort of pernicious temporal or
geographical restraints of trade frowned upon by the Supreme Court in cases
implementing New Jersey non-competition law. See Whitmyer Bros., Inc. v. Doyle, 58
N.J. 25 (1971) (temporal and geographical restraint); Solari Indus., Inc. v. Malady, 55
N.J. 571 (1970) (temporal restraint). In those cases, the Court’s searching reasonableness
review of non-compete clauses was designed to alleviate concerns–the hardship on the
employee and the public interest in free competition, see Whitmyer, 58 N.J. at 33–that
are not relevant in this case, where, whether expressed contractually or not, Luzzi had a
common law obligation to maintain the secrecy of his employer’s proprietary
information. Lamorte Burns, 167 N.J. at 299. Thus, in setting its standard, the District
Court erred in factoring in Ingersoll-Rand.
On remand, the District Court should consider whether the allegedly
misappropriated information was provided to Luzzi by T&B in the course of his
employment for the sole purpose of furthering T&B’s business interests. See Lamorte
Burns, 167 N.J. at 301. To answer that question, the Court should consider the following
factors: (1) whether the information was generally available to the public; (2) whether
Luzzi would have been aware of the information if not for his employment with T&B;
(3) whether the information gave Luzzi–and, by extension, Richards–a competitive
advantage vis-à-vis T&B; and (4) whether Luzzi knew that T&B had an interest in

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protecting the information to preserve its own competitive advantage. This inquiry does
not entail a “rigorous examination of the information sought to be protected,” as in trade
secret law, but rather a focus on the relationship between employer and employee, the
expectations of the parties, and the intended use of the information. Id. at 300 (quoting
Roboserve Ltd. v. Tom’s Foods, Inc., 940 F.2d 1441, 1456 (11th Cir. 1991)). Moreover,
it appears to us that, unlike in trade secret law, these four factors are not to be treated as
essential elements of a cause of action for the misappropriation of confidential
information.
With regard to the first of the Lamorte Burns factors – whether the information is
generally available to the public – in Platinum Management, Inc. v. Dahms, 285 N.J.
Super. 274 (Law Div. 1995), a New Jersey case cited favorably in Lamorte Burns, the
court held that customer names were protectible as confidential information, despite the
fact that they were “publicly available” in trade directories, because “the fact that they are
customers of [the plaintiff]” was not publicly available. Id. at 295; see Lamorte Burns,
167 N.J. at 299-300. In this case, the District Court should consider that the items of
confidential information cited by T&B may serve as the basis for a tort action despite the
fact that many of the items of information, examined in isolation, constitute
manufacturing techniques that are generally known in the industry. Even if other
engineers may have known of these techniques, inferences drawn from the marketplace,
where for years no other competitor could duplicate the T&B product line, suggest a

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fundamental public unawareness that T&B incorporated those techniques in the
development and production of 600-amp underground electrical connectors.
With respect to the third of the Lamorte Burns factors, in evaluating whether T&B
had a protectible interest in the information, the District Court should consider that the
competitive value an employer ascribes to certain information may derive solely from its
relation to other information, even when, taken in isolation, that information is neither
novel nor unknown. We have explicitly recognized this principle in the context of New
Jersey trade secret law, see Rohm & Haas Co. v. Adco Chemical Co., 689 F.2d 424, 433
(3d Cir. 1982), and it is equally relevant in the confidential information context. And,
importantly, the Court should consider that, at this juncture, it is asked only to determine
whether there are genuine issues of material fact in dispute as to whether the information
at issue is confidential and proprietary.
III.
We review a district court’s decision to admit or exclude expert testimony for
abuse of discretion. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999); Pineda v.
Ford Motor Co., 520 F.3d 237, 243 (3d Cir. 2008). We may find that the District Court
abused its discretion if its decision “rests upon a clearly erroneous finding of fact, an
errant conclusion of law or an improper application of law to fact.” Pineda, 520 F.3d at
243 (quoting In re TMI Litig., 193 F.3d 613, 666 (3d Cir. 1999)). To the extent that the
Court’s decision involved a legal interpretation of the Federal Rules of Evidence,

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however, our review is plenary. Id.
Federal Rule of Evidence 702 provides that a qualified expert witness may testify
to assist the trier of fact if his testimony is based on sufficient facts or data and is the
product of reliable principles and methods, and if the expert applied those principles and
methods reliably to the facts of the case. Fed. R. Evid. 702; see Daubert, 509 U.S. at
595. We have interpreted Rule 702’s qualification requirement liberally, and we recently
reversed a district court’s conclusion that an expert was unqualified. See Pineda, 520
F.3d at 243 (holding that an engineer with an expertise in glass could testify as to the
issue of safety warnings, despite the fact that he was not experienced in the design of
automobile rear liftgates (the type of glass at issue) or in the drafting of service manual
instructions). We noted that “it is an abuse of discretion to exclude testimony simply
because the trial court does not deem the proposed expert to be the best qualified or
because the proposed expert does not have the specialization that the court considers
most appropriate.” Id. at 244 (quoting Holbrook v. Lykes Bros. S.S. Co., 80 F.3d 777,
782 (3d Cir. 1996)). In Pineda, we emphasized that the inquiry as to reliability is
flexible, id. at 248, and that “[a]ny dispute between the parties about the strength of the
evidence in this case should be resolved by the jury,” id. at 249 (emphasis added).
The District Court significantly limited the testimony of Walworth, the expert on
whom T&B primarily relied, deciding that Walworth could testify as to only: (1) general
concepts within the rubber molding industry; (2) his personal observations of T&B’s and

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Richards’ processes; and (3) his observations of the materials in the case, such as design
drawings, that demonstrate similarities between the processes. The Court barred
Walworth from offering any testimony as to: (1) what is commonly known in the rubber
molding industry; (2) what is generally done in the rubber molding industry with respect
to maintaining secrecy in manufacturing operations and whether T&B’s efforts were
consistent with such practices; (3) whether or not Richards reverse engineered T&B’s
products and what it would take, or how long it would take, to reverse engineer and
manufacture the products; (4) the transferability of processes regarding injection molding
plastics to manufacturing the products at issue; and (5) whether the information at issue
is protectible information (i.e., the ultimate issue in this case).
As we held in Pineda, we interpret Rule 702’s qualification requirement liberally
and the reliability analysis is flexible. Applying this liberal standard, we conclude that,
although the District Court correctly barred Walworth from testifying as to the ultimate
legal issue, the Court erred in excluding the remainder of his testimony. Walworth,
whose qualifications as an expert in the manufacturing and engineering of products
utilizing rubber injection molding are extensive and were not in dispute, should not have
been considered unqualified merely because he was not the “best qualified” expert in
“the specialization that the court considers most appropriate.” See Pineda, 520 F.3d at
244. For the same reason, Walworth’s testimony would not be unhelpful to a finder of
fact merely because it references the rubber molding industry generally and not the subset

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For example, Walworth testified that he has participated in developing systems to8
maintain the secrecy of manufacturing and engineering processes for rubber molding
products at various companies. The Court rejected Walworth’s testimony regarding
security and secrecy because what is done in the rubber molding industry is not
necessarily material to what is done in the market for underground electrical connectors.
It is difficult to see, however, how Walworth’s expertise in the larger industry of rubber
injection molding would be irrelevant and unhelpful to a finder of fact charged with
analyzing a subset of the industry, particularly given the relatively low standard for
admissibility under Rule 702.
Although before the District Court Richards sought sanctions under both Rule 119
and 28 U.S.C. § 1927, it presses only the denial of Rule 11 sanctions before us.
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industry of underground electrical connector manufacturing. Moreover, the Court’s8
concerns about Walworth’s reliability–in particular, his “moving target” identification of
claims and reliance on the literature in his personal library to formulate his opinion–go to
the strength, not the admissibility, of his testimony. Accordingly, we will reverse the
District Court’s Daubert holding and permit Walworth’s testimony, save for his
testimony as to ultimate legal issue in this case.
IV.
We review a district court’s ruling on a motion for sanctions under Rule 11 for
abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990);9
Churchill v. Star Enters., 183 F.3d 184, 189 (3d Cir. 1999). Richards argued to the
District Court that sanctions against T&B were warranted given T&B’s failure to
stipulate, after the Court’s summary judgment ruling of April 26, 2007, that its remaining
claims could not survive summary judgment based on law of the case. In denying
Richards’s motion, the Court expressed its frustration with the manner in which the case

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had been litigated, but ultimately concluded that T&B’s conduct was not sanctionable.
The Court did not abuse its discretion in so concluding, and we will affirm its order
denying sanctions without further discussion.
V.
For the reasons discussed above, we will vacate the District Court’s order of Final
Judgment entered June 18, 2008 and remand for proceedings consistent with this
Opinion. We will affirm the Court’s order denying defendants’ motion for sanctions.

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