By Molly Joyce

In the recent decision of The Capability Group, Inc. v. American Express Travel Related Services Company, Inc.,658 F.3d 75 (1st Cir. 2011), the United States Court of Appeals, First Circuit, affirmed summary judgment in favor of a defendant accused of, among other things, breaching a confidentiality agreement between the parties. The court found that the plaintiff, The Capability Group, failed to establish that AmEx, the defendant, caused plaintiff damages or irreparable injury warranting injunctive relief.

The dispute arose out of a contract entered into between the two parties in 2000, pursuant to which The Capability Group provided Six Sigma training and related materials to AmEx employees. The contract gave AmEx a license to distribute and use The Capability Group’s materials for training AmEx employees and contractors and consultants who AmEx considered integral to AmEx’s business initiatives. Pursuant to the terms of the contract, these contractors and consultants (and their employers), were required to sign confidentiality agreements restricting their use of The Capability Group’s materials. 

The Capability Group claimed that AmEx breached the agreement between the parties, in part, by distributing its materials to contractors and consultants who had not signed confidentiality agreements and allowing former employees to retain materials after they left AmEx.

AmEx conceded that, in some instances, it did not properly police the materials or obtain signed confidentiality agreements. AmEx nevertheless maintained that such breaches were minor, the materials had not been distributed or used outside of the company since 2005, and in any event, did not result in any damages to The Capability Group. The Capability Group argued that AmEx’s agreement to pay it under the contract for the materials evidenced the inherent value of the materials and that summary judgment was improper because a jury could conclude that but for AmEx’s failure to secure signed confidentiality agreements, the recipient companies would have paid The Capability Group to use them.

The First Circuit agreed with AmEx’s position that The Capability Group could not establish damages and noted that the materials at issue were furnished to help third parties in AmEx’s business and were not otherwise used. 

The Capability Group was similarly unsuccessful on its claim that it was entitled to an injunction against AmEx. The contract at issue stipulated that a breach of the confidentiality provisions would amount to “irreparable and continuing damage or injury” entitling The Capability Group to seek an injunction. Despite this provision, however, the court noted that injunctions are rarely warranted where there is no threat of future harm or continuing disclosure and parties have no power to compel a court to grant equitable relief that a court finds unnecessary.

The Capability Group v. American Express Travel Related Services Company, Inc. establishes that at least in the First Circuit, a plaintiff who claims a minor or technical breach of a confidentiality agreement, but cannot establish any particular damages, will not likely survive summary judgment. Similarly, even though a contract might state that the non-breaching party is entitled to injunctive relief in the event of a breach, a request for an injunction is almost always within the court’s discretion, and will likely be denied if the plaintiff cannot point to an ongoing or future threat of harm.