text:
    National Casualty Company v. McCleron

      C.P. of Monroe County,
    No. 10410 CV 2010.

      Robert J. Grimm and Ryan M. Joyce, for plaintiff.

      David S. Smacchi, for defendants Mike McCleron and John Kinney.
    March 21, 2013
   ZULICK, J.,

On December 16, 2009, defendants Mike McCleron, John Kinney, Alex Ostopick, Joseph Price, and Stephen Beck (“defendants”) were carpooling from their respective homes to their place of work at the Tobyhanna Army Depot (“Tobyhanna”). Together they had leased avan for the purpose of carpooling to work, and Stephen Beck was driving the van that day. En route to their jobs at Tobyhanna, the van was involved in a collision. John Kinney sued Stephen Beck and Trygar Transportation, Inc. (“Trygar”), the company which rented the van to the individual defendants. Mr. Kinney alleged that he suffered personal injuries as a result of Mr. Beck’s negligence. Trygar was named as a defendant as Mr. Kinney alleged that Mr. Beck, the driver, was acting on behalf of Trygar as their agent, servant or employee.

Trygar maintained an automobile liability insurance policy with plaintiff National Casualty (“NCC”). NCC has moved for summary judgment, alleging that the passengers involved in the collision were acting in the course of their employment at the time, and are thus barred from making claims against NCC’s insureds under the Workers’ Compensation Act.

DISCUSSION

“Summary judgment is only appropriate in cases where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” Gleason v. Borough of Moosic, 609 Pa. 353, 361 (2011). A material fact is one that directly affects the outcome of the case. Bartlett v. Bradford Publ’g, Inc., 885 A.2d 562, 568 (Pa. Super. 2008). A court must view the evidence in the light most favorable to the nonmoving party, and all doubts as to a genuine issue of material fact must be resolved against the moving party. Gleason, 609 Pa. at 361 (citing Fine v. Checcio, 582 Pa. 253 (2005)). When the moving party satisfies its initial burden, the nonmoving party may not simply rest upon the allegations or denials contained in the pleadings, instead the nonmoving party must show there is a genuine issue for trial. Preferred Fire Prot., Inc. v. Joseph Davis, Inc., 984 A.2d 20, 24 (Pa. Super. 2008). A nonmoving party’s failure to adduce sufficient evidences on an issue essential to the case establishes that no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. Ario v. Ingram Micro, Inc, 965 A.2d 1194, 1207 n.15 (Pa. 2009).

Plaintiffs argue that defendant Kinney should be barred from suing Mr. Beck and Try gar, as his claim is covered by the Pennsylvania Workers’ Compensation Act (“Workers’ Comp Act”). 77 P.S. § 1 et seq.

As part of the quidpro quo of the Workers’ Compensation Act (the “Act”), an employee surrenders the right to sue an employer in tort for injuries received in the course of employment to obtain the benefit of strict liability. If an injury is compensable under the Act, the compensation provided by that Act is the employee’s exclusive remedy. A compensable injury includes any injury to an employee, regardless of his previous physical condition, arising in the course of his employment and related thereto, and such disease or infection as naturally results from the injury or is aggravated, reactivated or accelerated by the injury.

Wasserman v. Fifth & Reed Hosp., 660 A.2d 600, 604 (Pa. Super. 1995) (internal quotations and citations omitted). In addition to limiting employer liability, the Workers’ Compensation Act also immunizes co-employees, except in such instances as where they do intentional harm. 77 P.S. §72.

Not all inj uries suffered by an employee are compensable under the Workers’ Comp Act. Only injuries which are sustained in the course and scope employment fall under the act. Thompson v. W.C.A.B. (Cinema Center), 981 A.2d 968, 970 (Pa. Cmwlth. 2009). An injury is only in the course and scope of employment when it occurs on the employer’s premises or while furthering the employer’s business. 77 P.S. § 411(1). The main question presented here is whether the individual defendants were acting in the course and scope of their employment with Tobyhanna at the time of the crash on December 16, 2009.

Generally, injuries sustained by employees commuting to and from work are not compensable under the Workers’ Comp Act. Bensing v. W.C.A.B. (James D. Morrissey, Inc.), 830 A.2d 1075, 1078 (Pa. Cmwlth. 2003). This is grounded in the recognition that in most cases, an employee traveling to and from work is not furthering the business of his or her employer. Id. at 1078. This is known as the “coming and going” rule, which functions as a bar to benefits under the Workers’ Comp Act.

However, there is an exception to the “coming and going” rule, known as the “employment contract” exception.

In order for an employee to sustain the employment contract exception to the coming and going rule, he must establish that: (1) he was commuting to or from work; (2) the employer controlled the means of transportation; and (3) the company provided for the costs and expenses related to the employee’s commute.

Schiavone v. Aveta, 41 A.3d 861, 867 (Pa. Super. 2012). The first element is not in dispute, as the defendant employees clearly were commuting to their job at Tobyhanna.

The relevant facts about the Tobyhanna carpool program, viewed in a light most favorable to the non-moving parties, are as follows: the defendants were involved in a program administered by the federal government, and offered at Tobyhanna, whereby employees received carpooling vouchers to help defray the costs of commuting. Lydia Tokash Dep. Tr. (August 17, 2012) at 6.24-7.1. Tobyhanna required that employees sign up and use qualified carpooling transportation more than fifty percent of the days in a given work month to qualify for funds. Id. at 13.21-24. The vendors who wished to provide vans or carpools for employees taking part in the carpool program were also required to obtain approval from Tobyhanna. Id. at 17.8-18.5. Of the vendors who applied, all were granted eligibility to participate in the government program. Id. at 18.16-18. The program also made no stipulations as to how the vehicles were to be used, other than that the vouchers were to be used only for commuting expenses. Id. at 26.6-13. Approved employees were given vouchers to pay the van or car rental company, and were free to choose amongst any of the several approved vendors. Id. at 25.3-6. It appears that the voucher amount was based upon the employee’s status (fulltime, part-time, etc.) and that the vouchers were fringe-benefits, and did not come from employees’ salaries. Id. at 24.9-25 and 12.6-13.2.

The Schiavone court held that the control element of the employment contract exception was met where the employee “was involved in an accident during his commute home from work in a vehicle owned and insured by his employer, Aveta. Aveta provided the vehicle as part of Amoul’s employment contract and Aveta paid for all costs of operating the vehicle, including repairs and fuel.” Schiavone, 41 A.3d at 868. This is consistent with other Pennsylvania decisions. See, Rox Coal Co. v. W.C.A.B. (Snizaski), 768 A.2d 384 (Pa. Cmwlth. 2001) (holding that where transportation to and from work was a term in the employment contract, deceased employee’s widow was entitled to Workers’ Comp benefits); Lesiure Line v. W.C.A.B. (Walker), 986 A.2d 901 (Pa. Cmwlth. 2009) (holding that a flat per diem granted for travel expenses is not the kind of control necessary to satisfy the employment contract exception to the coming and going rule).

In sum, for the employment contract exception to apply, the employer must exercise significant control over the program. Here, Tobyhanna exercised very little control. Tobyhanna allowed all interested vendors to participate in the program. Lydia Tokash Dep. Tr. (August 17, 2012) at 18.16.-18. Tobyhanna did not mandate that employees choose any specific vendor, and instead left the choice of vendors to the employees. Id. at 25.3-6. The oversight of compliance with the program’s requirements was minimal. Id. at 13.25-15.12. Most importantly, Tobyhanna paid a flat rate to all employees, regardless of the length of the commute. The value of the voucher was based upon the employment status of the requesting employees. Id. at 24.9-25. This is not enough to establish employer control. See, Williams v. W.C.A.B. (Matco Elec. Co., Inc.), 721 A.2d 1140 (Pa. Cmwlth. 1998).

It is beyond dispute that Kear, Peer, and Bechtel and this case all share the same material fact pattern. That is, the claimant received some additional compensation based upon the location of his job site or as a travel allowance, but was not directly compensated for his particular expense of commuting. The employers neither provided nor controlled the means of transportation... We believe that Peer and Bechtel state the correct principle of law, i.e., that where travel allowances are not directly related to the expense or distance of the employee’s commute, and where the employer does not provide or control the means of transportation used, the contract cannot be deemed to include transportation to and from work.

Id. at 1144. As Tobyhanna did not sufficiently control the means of transportation, and the travel allowances were not related to the distance traveled or the expense of travel, the employment contract exception to the coming and going rule does not apply.

Even if it did, summary judgment would still be denied as this case falls squarely within the bounds of the Ride Sharing Act. 55 RS. § 695.1.

The Ride Sharing Act provides, inter alia'.

[a] ride sharing agreement shall mean any one of the following forms of transportation:
(1) the transportation of not more than 15 passengers where such transportation is incidental to another purpose of the driver who is not engaged in transportation as a business. The terms shall include ride sharing arrangements commonly known as car pools and van pools, used in transportation of employees to or from their place of employment.
(2) the transportation of employees to or from their place of employment in a motor vehicle owned or operated by their employer.
(3) the transportation of persons in a vehicle designed to hold no more than 15 people and owned or operated by a public agency or a non-profit organization for that agency’s clientele or for a program sponsored by the agency.

55 P.S. § 695.1. The car pooling agreement between the defendant employees clearly falls under the first definition of “ride sharing arrangement.” Defendant Kinney was a passenger in the van, where transportation was incidental to another purpose of the driver (Mr. Beck), who was not engaged in transportation as a business. The Ride Sharing Act specifically states that where it is applicable, the Workers’ Comp Act will not apply to injured passengers. 55 RS. § 695.3. The Ride Sharing Act further provides under 55 P.S. § 695.4 — Liability of Employer:

a. An employer shall not be liable for injuries to passengers and other persons resulting from the operation or use of a motor vehicle, not owned, leased or contracted for by the employer, in a ridesharing arrangement.

ORDER

And now, March 21, 2013, upon consideration of plaintiff’s motion for summary judgment, the response by defendant Kinney, and the briefs and arguments of the parties, it is ordered that plaintiff’s motion for summary judgment is denied.


source: Caselaw Access Project

author: MOTTO, J.,

license: Public Domain

text:
    R.E. Whittaker Co. v. Offutt

      C.P. of Lawrence County,
    No. 11794 OF 2008, C.A.; 10055 OF 2009, C.A.

      Michael K. Parrish and Dana Basci, for plaintiffs.

      Stanley M. Stein, for defendants.
    April 16, 2013
   MOTTO, J.,

Before the court for disposition is the defendants’ motion for summary judgment. In their motion, the defendants contend that the current state of the record, including the testimony at all prior proceedings and evidence developed by deposition in discovery and otherwise, establishes that there exists no evidence to support any cause of action set forth in the complaints filed in the above captioned cases. The complaints allege that defendants Offutt and Stephenson breached written and oral contracts of employment and engaged in a conspiracy with defendant Peek to unlawfully compete with plaintiff Whittaker by utilizing Whittaker’s confidential and trade secret information, and that in so doing created the corporate defendant, Clear Floor Care, Inc. (“Clear Floor”) to unlawfully engage in business in competition with Whittaker.

Procedural Histoiy

Whittaker filed its ten-count complaint against the individual defendants, Offutt, Stephenson and Peek on October 22, 2008. Offutt and Stephenson were former employees of Whittaker. Although Peek was never employed by Whittaker, the complaint alleges that Offutt, Stephenson and Peek engaged in a conspiracy to compete unfairly and unlawfully with Whittaker by using confidential and trade secret information belonging to Whittaker and appropriated by Offutt and Stephenson. According to the complaint, Offutt breached a written employment agreement that contained a two-year no-compete clause and that Stephenson breached an oral employment agreement. Plaintiff further alleged that Offutt, Stephenson and peek were interfering with Whittaker’s contractual business relations by having misappropriated Whittaker’s trade secrets and confidential business information.

On October 27, 2008 Whittaker filed a petition for preliminaiy injunction to enjoin defendants from competing with Whittaker and from utilizing the misappropriated trade secrets and confidential information. Whittaker is engaged in the business of selling carpet cleaning machines and chemicals utilized in its machines. Whittaker has consistently alleged that defendants are seeking to unlawfully compete against Whittaker in the same business and to further that objective have created a corporate entity, defendant Clear Floor Care, Inc. (“Clear Floor”) for such purposes.

Defendants’ answers denied any misappropriation of trade secrets or confidential information and any unlawful conspiracy, and, further, Peek, being a domiciliaiy of Georgia and having done no business in Pennsylvania, sought to dismiss the complaint against him for lack of personal jurisdiction.

In December of2008 this court conducted four days of hearing on plaintiff’s petition for preliminary injunction.

On January 13, 2009 Whittaker filed its complaint against Clear Floor with the two actions being consolidated by order dated February 23, 2009.

On April 14, 2009 the court issued its opinion and order which granted plaintiff’s petition for preliminary injunction and enjoined the defendants from directly or indirectly engaging in any business which competed with Whittaker; soliciting or attempting to solicit, directly or indirectly, any former or current customer or client, or prospective customer or client of Whittaker; from directly or indirectly soliciting, recruiting or encouraging any employee of Whittaker to terminate employment with whittaker; from using, reproducing, distributing, transmitting, disclosing, or otherwise transferring in any form directly or indirectly, any of Whittaker’s trade secrets or confidential information, and specifically enjoining defendant Offutt from violating specific provisions of the employment agreement dated May 21, 2007 entered into between Offutt and Whittaker.

Defendants appealed the issuance of the preliminary injunction to the Superior Court of Pennsylvania. The court’s issuance of the preliminary injunction was affirmed by the Superior Court.

On December 1, 2010 defendants filed a petition to dissolve injunction. After hearing and by order dated December 5, 2011 the court modified the injunction by limiting it to use of Whittaker’s trade secrets, including the chemistry and/or formula of Whittaker’s “Crystal” cleaning products and the compilation of the identity of Whittaker’s customers and customers’ preferences. Otherwise, the defendants were permitted to engage in competition with Whittaker.

Since the entry of the order granting the initial preliminary injunction, the parties have engaged in substantial discovery having significant relevance to the defendants’ pending motion for summary judgment.

Factual Background

Whittaker is engaged in the business of selling carpet cleaning equipment and a line of chemicals designed to be used in connection with that equipment. Whittaker sells its products throughout the United States, Canada, Mexico, and also sells in South America, Europe, Japan and the African continent. The Whittaker equipment is known as Roto — Wash carpet cleaning machines, manufactured in Australia, and Scott Labs produces the chemistries for use with that equipment. The cleaning products provided to Whittaker by Scott Labs is known as “Crystal Dry”, a trademark name and all of the related cleaning products utilize the word “Crystal”.

Offutt became employed by Whittaker as director of sales and executed an employment agreement dated May 22, 2007. Although Offutt’s primary responsibility was to manage the sales force, Offutt had access to trade secrets and confidential information relating to all aspects of Whittaker’s business. The employment agreement provided for a term of employment beginning June 21, 2007, to continue to June 21, 2008, unless extended by the parties and further providing for the agreement to be automatically renewed for a term of one year commencing on the anniversary of employment. Whittaker decided not to renew the employment agreement, and on May 5,2008, Offutt was notified that he was not to perform any further service for Whittaker but would be paid through the end of the contract term of one year. Offutt’s employment agreement contained a covenant not to compete and a covenant not to solicit any former or current customer or client or prospective customer or client of Whittaker with whom Offutt had material contact for a period of twenty-four months following the termination of employment. The employment agreement also required Offutt to hold confidential information in strict confident and to not utilize confidential information for a period of twenty-four months after termination of employment, and with regard to trade secrets, to hold such information in confidence as long as such information remained a trade secret under applicable law.

Immediately after being informed that his contract would not be renewed, Offutt and Peek proceeded to make plans to start a new business to compete with Whittaker. Peek contacted the chief operating officer of Roto-Wash to determine if Roto — Wash would sell the same machines as sold to Whittaker direct to Peek. Peek also contacted Scott Labs to solicit Scott Labs to sell cleaning products to Peek. Peek and Offutt created a new corporate entity under the name “Crystal Carpet Systems, L.L.C.”

Stephenson began his employment with Whittaker in August of 2001 as an outside sales representative, and in connection therewith, executed the employment handbook which contained a non-disclosure provision relating to trade secrets and confidential information. In connection with his employment as a outside sales representative, Stephenson knew Whittaker’s suppliers and the contracts at the suppliers; had direct contact with clients and prospective clients; knew customer preferences; knew sales strategy and was aware of the financial details of gross profit margins. After Offutt ceased to work for Whittaker, and during the summer months of 2008, Stephenson and Offutt discussed Stephenson’s participation in creation of the new business created by Offutt and Peek that would compete with Whittaker. During his employment with Whittaker, Stephenson created boxes of hand written notes, which Stephenson removed from the business premises of Whittaker. The notes in particular contained detailed information relative to customer lists, customer contact and customer preferences, including full contact information for thousands of Whittaker customers and their preferences. In the fall of2008, Stephenson obtained a western digital passport device designed to copy all the information contained on a computer hard drive to the external western digital passport. Stephenson installed the western digital sync software on the laptop computer provided to him by Whittaker. Utilizing the western digital sync software, an external hard drive device, everything in the network in which the computer is connected can be copied. This software was utilized on September 5, 2008, on September 26,2008, on October 7,2008, on October 8, 2008, and lastly on October 12,2008.

Whittaker maintains its confidential business information in an everest database and an ACT database. The everest database is the main piece of financial software that Whittaker uses for everything from inventory control, payroll, as well as sales orders and related information. The ACT database contained the identities of all of Whittaker’s customers.

Stephenson also attached to the laptop computer a more limited external storage device referred to as a “thumb drive”.

Whittaker terminated Stephenson on October 13, 2008. In response to Whittaker’s request for the return of company property and information, Stephenson returned the thumb drive, a small amount of Stephenson’s notes, the laptop, his desk top computer and Blackberry. After Stephenson’s termination, he became formally employed by Defendant Clear Floor Care, L.L.C., which is the same legal entity originally incorporated as “Crystal Carpet Systems, L.L.C.”, with the name changed after the filing of the within lawsuit. Clear Floor Care, L.L.C., when established, was owned 47.5 percent by Peek, 47.5 percent by Offutt, and 5 percent by Stephenson.

The defendants have abided by the terms of the original preliminary injunction issued on April 14, 2009 and as modified by order dated December 5, 2011.

Standard of Review

A motion for summary judgment is authorized by Pa. R.C.P. 1035.2, which provides as follows:

After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law.
(1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or
(2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to the jury.

Summary judgment may be granted only in cases where the record demonstrates that there remains no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fine v. Checcio, 870 A.2d 850, 857 (Pa. 2005); Chepkevich v. Hidden Valley Resort, L.P., 2 A.3d 1134 (Pa. 2010). The moving party bears the burden of proving that no genuine issue of material fact exits. Rush v. Philadelphia Newspapers, Inc., 732 A.2d 648, 650 (Pa. Super. 1999). For the purposes of summary judgment, material facts are those which have a direct effect on the outcome of the case. Kuney v. Benjamin Franklin Clinic, 751 A.2d 662, 664 (Pa. Super. 2000).

In determining whether summary judgment is appropriate, the trial court is required to review the record in a light most favorable to the non-moving party, in “all doubts as to the existence of a genuine issue of material fact must be resolved in favor of a non-moving party”. P.J.S. v. Pennsylvania State Ethics Commission, 723 A.2d 174 (Pa. 1999). A trial court should only grant a motion for summary judgment when the facts of record are so clear that reasonable minds could not disagree on the outcome. Basille v. H & R Block, Inc., 761 A.2d 1115, 1118 (Pa. 2000), (citing Cochrane v. G.A.F. Corp., 666 A.2d 245, 248 (Pa. 1995). It is not the function of the court ruling on a motion for summary judgment to weigh evidence and to determine the truth of the matter. Keenheel v. Pennsylvania Securities Commission, 579 A.2d 1358, 1363 (Pa. Cmwlth. 1990).

Where the defendant is a moving party, he may make the showing necessary to support the entry of summary judgment by pointing to materials that indicate that the plaintiff is unable to satisfy any element of his cause of action. Basille v. H & R Block, Inc., Supra, at p. 100. Therefore, if a plaintiff fails to present sufficient evidence of any element of the cause of action, the defendant is entitle to judgment as a matter of law. Ertel v. Patriot News Co., 674 A.2d 1038, 1042 (Pa. 1996).

Discussion

The general rule is that an employee, after termination of employment, is free to compete with his former employer and engage in a rival business, even though such competition relates to the same business in which the former employee had been involved prior to termination of the employment. Spring Steels, Inc. v. Molloy, 400 Pa. 254, 162 A.2d 370 (1960). Spring Steels notes that Pennsylvania has adopted comment “e” of §393 of the Restatement (2d) of Agency, which comment provides as follows:

After termination of his agency, and in the absence of a restrictive agreement, the agent can properly compete with his principal as to matters for which he has been employed. See Sec. 396. Even before the termination of the agency, he is entitled to make arrangements to compete, except that he cannot properly use confidential information peculiar to his employer’s business and acquired therein. Thus, before the end of his employment, he can properly purchase a rival business and, upon termination of employment, immediately compete...

In Spring Steels v. Molloy, 400 Pa. at 363, 162 A.2d at 375, the Supreme Court said the following:

It is not a phenomenal thing in American business life to see an employee, after a long period of service, leave his employment and start a business of his own or an association with others. And it is inevitable in such a situation, where the former employee has dealt with customers on a personal basis, that some of those customers will want to continue to deal with him in his new association. This is so natural, logical and part of human fellowship, that an employer who fears this kind of future competition must protect himself by a preventive contract with his employee ...

Thus, competition from former employees is lawful, unless such competition is violative of an enforceable restrictive covenant, or, unless the former employee is unlawfully utilizing the former employers’ trade secrets or protected confidential information. Thus, in BEIC Int’l Inc. v. Global Steel Services, Ltd., 791 F. Sup. 489, (E.D.Pa. 1992), the district court held that the employee’s individual Rolodex files, even if maintained in a computer file prepared by secretaries employed by the former employer or in a manual file, were not trade secrets of the former employer. The court in BEIC relied upon the third circuit decision in S.I. Handling Systems, Inc. v. Haisley, 753 F.2d at 1258 which expressly held that an employee’s personal business contacts, although made while in plaintiff’s employ, are not plaintiff’s trade secrets. The third circuit in S.I. Handling in turn relied upon Spring Steels, citing the quote from Spring Steels above set forth.

A cause of action for misappropriation of a trade secret is governed by the Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 Pa.C.S.A. §5301 et.seq. PUTSA defines a “trade secret” as follows:

Information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that:
(1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use;
(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

12 Pa.C.S.A. §5302

A compilation of a company’s clientele or a compilation constituting a list of customers is an asset or value acquired by virtue of efforts and expenditures over a period of time and should be protected as a form of property. John G. Bryant Co. v. Sling Testing and Repair, Inc., 369 A.2d 1164 (Pa. 1977); A.M. Skier Agency v. Gold, 747 A.2d 936 (Pa. Super. 2000). Although the identity of customers may be found through public sources such a telephone book, it is the compilation of thousands of customer names with contact information, customer preferences and peculiarized information relative to each customer that would be valuable to competitors and must be protected, as no public source could be the equivalent of such a compilation. Thus, a compilation of customer data that is not readily available from other sources will qualify as a trade secret. See Spring Steels, Inc. v. Molloy, Supra. On the other hand, an employee not subject to a non-compete agreement, is free to solicit customers whose names and other information the former employee retains in his memory. As noted in Spring Steels v. Molloy, Supra, it is inevitable that where an employee leaves his employment and starts a business of his own, or an association with others, customers with whom the former employee dealt on a personal basis may want to continue to deal with the employee in his new association after he has left the employer’s business and that is to be protected. If the employer fears such competition then he must protect himself with a no-compete clause.

Here, the court concludes that plaintiff has failed to meet its burden to prove that any defendant obtained any trade secret; there exists no evidence that any defendant obtained a compilation of Whittaker’s customers and customer data. Whittaker has produced evidence that Stephenson attached the western digital passport device to his laptop computer on several occasions and athumb drive. Whittaker has contended that Stephenson downloaded customer lists and other confidential information from the everest and ACT databases utilizing the passport or thumb drives attached to his laptop computer. Whittaker has produced evidence that the western digital passport is in fact designed to copy all the information contained on a computer hard drive to the external western digital passport. The external device is capable of copying the entire contents of a computer and the network to which the computer is attached. However, during the course of discovery, the deposition of Tom Whittaker, the CEO of the plaintiff, revealed that Stephenson’s laptop did not have accessibility to the everest database and that only Tom Whittaker and John Sloan, Whittaker’s I.T. outside vendor, had access to the everett database remotely through a desktop computer. Additionally, Tom Whittaker testified that once one obtained entiy into the ACT database, one could not download or copy information from that database. Thus, although there is evidence that Stephenson attached the external hard drive to the laptop computer, it is established by plaintiff’s own CEO and I.T. expert that Stephenson could not have downloaded to the external hard drive any of the information contained in the everest or ACT databases.

Stephenson also had a desktop computer which was in fact connected to the network. No evidence has been produced that the western digital passport or any other external hard drive was attached to the desktop or that there was any effort to download information from the desktop by Stephenson.

Defendants also took the deposition of Mark Stephen Pridon, Whittaker’s corporate deposition designee who confirmed Whittaker’s testimony that access to the everest digital passport or ACT databases could not be obtained through the use of the laptop computer.

The thumb drive that was attached to Stephenson’s computer worked in a similar way to the western digital passport device and had no more ability to copy information from the everest and ACT databases than the western digital passport.

Information contained on the passport device and thumb drive identified by Stephenson as the ones that he had attached to his laptop computer revealed no contents therein that could be considered to be trade secret or confidential.

The court therefore concludes that Whittaker is unable to prove that Stephenson downloaded customer lists, customer data, or any other information that could be considered trade secret onto any external hard drive device.

Whittaker has alleged that another source of trade secret information misappropriated by Stephenson was the numerous yellow pads which Stephenson created over the years as a Whittaker employee, which he stored in boxes under his desk. Evidence was produced that Stephenson removed the boxes of yellow pads from his office in August of 2008, prior to leaving his employment with plaintiff. When Whittaker demanded that the yellow pads be returned, Stephenson returned eight yellow pads and advised that the remainder of the yellow pads had been destroyed. Other than the eight yellow pads returned, the remaining yellow pads are not available for review as to their contents. In general, the information contained on the yellow pads related to customers with whom Stephenson dealt. It can be expected therefore that these pads would contain identification of customers, customer preferences, contact information and pricing. There is no indication that these pads contained any information beyond information recorded by Stephenson as to those customers with whom he personally dealt.

The court here concludes that Whittaker cannot prove that Stephenson has possession of boxes of yellow pads that contain trade secret information. Whittaker cannot prove that they currently exist, as Stephenson has testified that he personally destroyed them, nor can Whittaker prove with any degree of specificity the information contained therein. The best description of the information contained in the yellow pads indicate that they contain the identity of some customers of Whittaker, and not any beyond those with whom Stephenson dealt. Tom Whittaker describes Stephenson as a copious note-taker and that he continuously made notes during meetings, phone calls and “pretty much everything” that went on during his day. However, this type of note taking does not rise to the level of a compilation of Whittaker’s customer lists. The identification of the customers with whom Stephenson dealt would be no different than Stephenson having knowledge of a customer with whom he has dealt through his own memory. Without a restrictive covenant binding upon him, Stephenson would have every right to call upon those customers once leaving Whittaker’s employ.

Whittaker also argues that the identity of Scott Labs as the manufacturer of its carpet cleaning chemical products is a trade secret. However, Whittaker’s corporate designee, Mark Pridon, at his deposition acknowledged that Scott Labs is well known in the industry as a manufacturer of chemical encapsulation fluids to clean carpets. Pridon also acknowledged that once Stephenson left the company, there would be nothing wrong with Stephenson left the company, there would be nothing wrong with Stephenson contacting Scott Labs to request it to manufacture encapsulation products for Stephenson like the ones it manufactures for Whittaker. It is also in evidence that Scott Labs displays its products and manufacturing capabilities at the largest industry trade shows in the country including the well-known ISSA show and the Vacuum Dealers Trade Association show, these shows being well known to businesses and individuals involved in the carpet cleaning industry. Additionally, it is generally held that information as to the identity of a material supplier is not considered a trade secret as that information can be readily learned. Den-Tal Ez. Inc. v. Seamons Capital Corp., 389 Pa. Super. 219, 566 A.2d 1214, 1229 (1989).

Whittaker has argued that the formula for the cleaning fluid utilized in its machines is a trade secret. However, the evidence obtained through discovery reveals that the formula is created by Scott Labs and not by Whittaker. In fact, Whittaker itself does not know the formula. Whittaker advises Scott Labs of what it would like the formula to do when used in its equipment, and Scott Labs develops the formula to fit Whittaker’s request. It is impossible for any employee of Whittaker to misappropriate a trade secret as to the formula from Whittaker when there is no knowledge or record of what that formula consists which would be available to any Whittaker employee. The ability or inability to obtain that formula or have it duplicated for competitive use would be the same for the defendants in this case as it would be for any other competitor that would have had no prior association with Whittaker. Whether Scott Labs has the ability to duplicate this formula for others is an issue that would arise out of the legal relationship between Scott Labs and Whittaker. No evidence has been produced by Whittaker that Scott Labs is under a legal duty to Whittaker to keep the formula confidential. A representative of Scott Labs testified at deposition that the formulas were never given to Whittaker and that Scott Labs considered the formulas to be its intellectual property which Scott Labs manages through a computerized confidential storage and handling system. This witness also testified that the formulas are capable of being reverse engineered using appropriate equipment. Information which may be obtained by reversed engineering has been held not to constitute a trade secret. Van Product Co. v. General Welding & Fabricating Co., 419 Pa. 248, 213 A.2d 769, 776-77 (1965). PUTSA provides that information that may be obtained by proper means is not trade secret information. This includes discovery by “reverse engineering”. Reverse engineering consists of starting with a known product and working backward to find the method by which it was developed. See comments to Pennsylvania Trade Secrets Act, 12 Pa.C.SA. §5302.

Other matters which Whittaker has identified as trade secrets misappropriated by defendants include special customer needs; its prices; customer price discounts; identify of Roto-Wash as the source of Whittaker’s floor cleaning machines; contacts with Gregor Morokutti, agent of Roto-Wash; Whittaker’s margins; methods of marketing and doing business, particularly the promotion of “claims” services to carpet manufactures; a brochure describing Whittaker’s products; Whittaker’s plans to introduce a new floor cleaning machine manufactured by a company other than Roto-Wash; and design of its brushes. Although Whittaker has identified each of the foregoing items as trade secrets, it has not come forth with specific evidence showing why it considers these subjects to be trade secrets, and, in fact, defendants have introduced evidence that these matters are in the public domain. Whittaker’s customers are under no obligation to hold their pricing structure in confidence and would therefore be free to disclose that information to a Whittaker competitor. Whittaker provides standard discounts that are based upon the dollar amount of product purchased which are available to customers in general. Whittaker’s prices can be obtained on its website. The identity of Roto-Wash as the source of Whittaker’s floor cleaning machines is well known in the industry as well as the identity of Gregor Morokutti, the agent of Roto-Wash. As to Whittaker’s margins and methods of marketing and its “brochure” there is no evidence that any defendant misappropriated or utilized such information in any manner. There is no evidence that the design of the brushes used on Whittaker’s machines is not available upon a simple inspection thereof.

Count I of plaintiff’s complaint asserts the cause of action against defendant Offutt for breach of a two-year post-employment restrictive covenant and the provision of the two-year confidentiality agreement. Although Offutt did not view these provision of the agreement to be enforceable, this court has clearly held that the agreement is enforceable. There is also evidence that clearly shows that Offutt intended to ignore the provisions of the agreement and enter into competition against plaintiff. However, the court enjoined Offutt from doing so before plaintiff suffered any damages and before Offutt engaged in any meaningful competition. The injunction remained in effect for a period beyond the two years required by the agreement. Thus, at this point, the restrictive covenant is no longer enforceable as it has expired and plaintiff can show no damages for a violation thereof.

As to the claim that Offutt obtained or used a trade secret belonging to Whittaker, the court has above explained that Whittaker has failed to show the existence of any trade secret misappropriated by any defendant.

Whittaker also alleges in count 1 that Stephenson breached an oral employment agreement with Whittaker and that he engaged in a course of conduct of planning to sell products in the future to plaintiff’s customers or potential customers, divulged confidential and privileged business information and trade secrets, arranged meetings with plaintiff’s supplies, vendors, customers, potential customers, representatives and employees and diverted the business of plaintiff by soliciting business and current employees of plaintiff and provided or offered services to plaintiff’s customers and potential customers, all of which is alleged to be contrary to the terms of the employee handbook and company policies.

However, the evidence establishes that Stephenson was in fact an “at will” employee and Whittaker has failed to present the terms of any specific oral agreement relating to any of the matters which Whittaker alleges to be wrongful conduct of Stephenson. It has already been determined in this case as affirmed by the Superior Court that the terms of the employee handbook do constitute a contract. No evidence has been produced by Whittaker that Stephenson actually engaged in a competitive business prior to the issuance of the preliminary injunction. At best the evidence is that Stephenson began planning for the creation of a business competitive to the business of plaintiff, which business was never put into active operation. The court has already explained why there is no evidence that Stephenson or any other defendant misappropriated any trade secret information or in any way made use of any information that could be considered to be a trade secret.

In count 2 of the complaint, plaintiff alleges that Offutt and Stephenson breached fiduciary duties while they were in Whittaker’s employ by selling or planning to sell plaintiff’s products and services, performing work adverse to plaintiff, disclosing plaintiff’s confidential and privileged information and trade secrets and diverting business away from plaintiff in violation of Offutt’s employment agreement and Whittaker’s employee manual and polices. However, there is simply no evidence that Stephenson or Offutt did anything adverse to Whittaker’s business interests or in any way in competition with Whittaker while employed by Whittaker except as to some evidence that Stephenson engaged in some planning for a competitive business shortly before leaving Whittaker’s employ. However, as to such evidence, Stephenson would have engaged in such conduct on his own time and utilizing his own resources. It is clear that under Pennsylvania law an employee is free to plan to sell products and services in competition with those of his former employer, so long as he does so on his own time and does not use the resources of his former employer to do so. Spring Steels, Inc. v. Molloy, 400 Pa. 354, 162 A.2d 370 (1960). As above set forth, Spring Steels, Inc. v. Molloy adopted comment “e” of §393 of the Restatement (2d) of Agency which has been previously quoted in this opinion, and allows for the employee to make arrangements to compete before termination of his employment.

The plaintiff has identified a number of other items which plaintiff has claimed to be subject to trade secret protection and which were appropriated by defendants, such as corporate strategies, sales plans, supplier names, its carpet cleaning formulas, research and development of new products, gross profit information, supplier information and supplier lists, customer preferences, marketing strategies and miscellaneous financial information. However, plaintiff has not come forward with evidence explaining why these various items are entitled to trade secret protection.

Any of the financial or marketing information that plaintiffs would have been exposed to is simply too general and non-specific or readily available from other sources to qualify as a trade secret. Although plaintiff has identified customer preferences as a trade secret stolen by defendants, the only evidence of any customer preferences is information as to some customers as to what quantities of product they purchase from plaintiff. There is no evidence of any compilation of preferences of plaintiff’s customers.

In count 2 of the complaint, plaintiff alleges that defendants Offutt and Stephenson breached their fiduciary duties to plaintiff while they were employed by plaintiff by selling or planning to sell plaintiff’s products and services, performing work adverse to plaintiff, disclosing plaintiff’s confidential and privileged information and trade secrets and diverting business away from plaintiff in violation of the Offutt’s employment agreement and plaintiff’s employee manual and policies. However, the court has already explained that Stephenson was an at will employee and was free to engage in planning to enter into a competitive business while still employed with plaintiff as long as he did so on his own time and with his own resources and that there is no evidence of any trade secrets taken or misappropriated by Offutt or Stephenson. To the extent that Offutt can be considered to have breached his employment agreement, Offutt was enjoined from engaging in any competition with plaintiff for the period of two years required by the employment agreement and beyond and plaintiff can show no damages suffered as the result of any effort made by Offutt to engage in a competitive business. Counts 1 and 2 must also be dismissed against defendant Peek, as Peek was not at any time an employee of plaintiff. Defendant Peek was free to enter into competition with Whittaker any time he chose. However, Peek cannot be permitted to use any trade secrets misappropriated by Offutt and/or Stephenson in entering into any competitive business. However, the court has above explained that at this juncture there is no evidence that Offutt or Stephenson misappropriated any trade secrets or confidentiality of plaintiff; therefore, there is no evidence that Peek at any time has utilized or attempted to utilize any trade secrets or confidential information of plaintiff. In issuing a preliminary injunction, this court previously found based upon the evidence presented at the preliminary injunction hearing that Peek sent an email to Gregor Morikutti, the CEO of Roto-Wash asking Roto-Wash to sell carpet clearing machines to Peek and that Peek was aware that Whittaker had the sole rights to the Roto-Wash machine. However, the evidence now establishes that plaintiff did not have the sole rights to the Roto-Wash machine. Thus, there was no impediment to peek contacting Morikutti as to any other competitor.

All of the remaining counts of the complaint, including count 4 alleging the misappropriation of trade secrets, must fail once it is determined that there does not exist evidence that any of the defendants misappropriated any trade secrets or confidential information and that there is no evidence of any damages suffered by plaintiff as the result of any conduct of the defendants. In count 3 plaintiff contends that Peek aided and abetted breaches of fiduciary duty by Offutt and Stephenson. In count 5 plaintiff alleges that defendants Offutt, Stephenson and Peek unlawfully interfered with plaintiff’s contractual relationships with Offutt and Stephenson. In count 6 plaintiff alleges that Stephenson and Peek have unlawfully interfered with the business relationships between plaintiff and its customers, suppliers and vendors by encouraging them to terminate their relationships with plaintiff. In count 7 plaintiff alleges that defendants Offutt, Stephenson and Peek have unlawfully interfered with the relationship that plaintiff had with its employees. In count 8 plaintiff alleges that defendants Offutt, Stephenson and Peek had been unjustly enriched. In count 9 plaintiff alleges that defendants Offutt, Stephenson and Peek are liable for conversion of chattel and proprietary information. And in count 10 plaintiff alleges that defendants Offutt, Stephenson and Peek engaged in conspiracy.

For all of the reasons set forth as to why plaintiff cannot sustain at this juncture a cause of action as to count 4, the misappropriation of trade secrets and confidential information, the same analysis applies as to each of the foregoing counts in that there simply is no evidence that defendants engaged in any prohibited conduct, except as to Offutt’s attempt to violate the restrictive covenants and prohibitions contained in his employment agreement. However, Offutt was enjoined from carrying out this purpose, and, as a result, plaintiff can show no damages arising out of any conduct of any of the defendants.

The items of damages claimed by plaintiff are attorneys’ fees and the cost of the trip by plaintiff CEO, Thomas Whittaker, to Australia to repair his relationship with Roto-Wash. The only cause of action which could lead to a recovery of attorneys’ fees is count 4 alleging misappropriation of trade secrets, which if proven would allow a claim under PUTSA. However, the court has found that there was no misappropriation of any trade secrets and therefore a claim under PUTSA cannot lie. No other count of the complaint could result in an award of legal fees. Insofar as Thomas Whittaker may have made a trip to Australia to repair his relationship with Roto-Wash because of contact made by any of the defendants, particularly defendant Peek, since plaintiff did not have an exclusive contract with Roto-Wash, the trip to Australia was a business decision made to maintain a good relationship with its supplier but not shown to be necessitated because of any wrongful conduct of any defendant. Thus, the cost of that trip is not recoverable.

Plaintiff has argued that summary judgment cannot be granted in this case without violating the “Nanty-Glo” Rule. The Nanty-Glo Rule prohibits summary judgment from being based upon testimonial affidavits of a moving party or his witnesses since the credibility of the testimony is still a matter for the jury. Nanty-Glo v. American Sureties, Co., 309 Pa. 236, 238 (1932). However, Nanty-Glo does not apply here since summary judgment is not dependent solely upon testimonial affidavits and depositions of defendant’s witnesses, but rather is based upon testimony of plaintiff’s own agents and witnesses by which plaintiff is bound, and because of the absence of evidence that can support plaintiff’s claims of misappropriation of trade secrets and confidential information.

Plaintiff also relies upon the fact that this court granted a preliminary injunction, which was affirmed by the Superior Court wherein the court found in support of that preliminary inj unction that defendants had misappropriated trade secrets or protected confidential information. However, the record presently before the court is much different that the record upon which the court relied on issuing its preliminary injunction. The court’s findings in support of a preliminary injunction is not res judicata as to a subsequent motion for summary judgment based upon additional or different evidence. There simply is no support in the applicable rules of civil procedure relating to injunction proceedings or in any case law that the court’s research can find that gives any conclusive effect to a preliminary injunction.

Plaintiff also raises a “substantial question” as to whether the passport device produced by Stephenson is the one attached to the computer by Stephenson. However, the evidence presently of record establishes that it was impossible for Stephenson to have downloaded proprietary information by attaching the passport device to his laptop as the laptop did not contain any proprietary information and only Plaintiff’s CEO, Thomas Whittaker, had remote access to the databases containing the customer information or other proprietary information. Although there is evidence that Stephenson removed a large quantity of his own handwritten notes from the premises and claims to have destroyed all but a small portion thereof, the result is that it is presently impossible for plaintiff to prove the content of the boxes of notes removed by Stephenson and whether these notes contained any proprietary information, or their continued existence.

Conclusion

For the reasons set forth above, the court will enter a separate order granting the motion of the defendants for summary judgment and dismissing plaintiff’s complaints in their entirety.

ORDER OF COURT

And now, this 16th day of April, 2013, for the reasons set forth in the accompanying opinion of even date herewith, it is ordered, adjudged and decreed that the defendants’ motion for summary judgment is granted and the plaintiff’s complaint in each case is dismissed in its entirety. It is further ordered and decreed that the preliminary injunction issued April 14, 2009 and as modified by order of court dated December 5, 2011 is dissolved.


author: MINORA, J.,

text:
    International Salt Co., LLC v. Jones

      C.P. of Lackwanna County,
    No. 2012-CV-6303.

      John T. Clary, for plaintiff.

      Daniel L. Schwartz and Brian P. Stahl, for defendant
    April 23, 2013
   MINORA, J.,

Before the court is the plaintiff International Salt Company, LLC’s (herein after plaintiff) petition for preliminary injunction, for the reasons that follow the petition is dismissed and denied.

FACTUAL AND PROCEDURAL HISTORY

Plaintiff is seeking a preliminary injunction based upon an action for breach of employment agreement and violation of the Pennsylvania Uniform Trade Secrets Act. In support, plaintiff alleges that Robert H. Jones (herein after defendant) violated his employment agreement with plaintiff by becoming vice president of Frontier Bulk Solutions, LLC, a competing corporation, after resigning his position with plaintiff company on July 27, 2012. Plaintiff also claims that defendant solicited two of plaintiff’s employees for potential employment at Frontier in violation of §6, paragraph Ai of the employment agreement. F inally, plaintiff alleges that defendant removed information from the company’s computer system in July of 2012 including historical consumer information which plaintiff claims constitutes “confidential and proprietary information” pursuant to §6, paragraph B of the employment agreement. It is asserted that the removal of this information is also in violation of the Pennsylvania Uniform Trade Secrets Act, 12 Pa. C.S. §5301. Plaintiff requests that the court enjoin defendant from working for a competing company for twenty-four months, from using trade secrets, to return proprietary information taken from plaintiff’s computers, from soliciting plaintiff’s employees, to disclose to plaintiff the password for the protected files, and that defendant pay plaintiff $50,000.00 in compensatory and punitive damages. Plaintiff filed its petition for preliminary injunction on October 23, 2012.

Defendant responded to plaintiffs allegations and petition for preliminary injunction by claiming that he did not work as a direct sales person, that promotion requests were denied, that he has not used any confidential information while working at Summit Salt Company, Inc. (parent company to Frontier Bulk Solutions, LLC). Defendant avers that the January 4, 2008 offer letter for his employment at plaintiff company did not contain any non-competition or non-solicitation restrictive covenants. Defendant also claims that later in 2008 when he became a consultant for plaintiff company, the consulting agreement also did not contain any non-competition or non-solicitation restrictive covenants. In October of 2008, defendant returned to his former position with plaintiff and a second employment agreement (herein after agreement) dated October 3, 2008 was signed. Defendant stresses that the October employment agreement was drafted by plaintiff’s attorneys, that plaintiff did not recommend that defendant retain counsel, did not inform defendant that restrictive covenants were added, that it did not contain any severance provisions, and that the agreement imposed significant restrictions on post-employment activities.

Furthermore, defendant declares that the legal requirements for injunctive relief have not been met. Specifically, defendant claims that plaintiff has not suffered any injury, much less irreparable injury, due to his actions and that the issuance of an injunction in this case would be contrary to public policy. Defendant also claims that plaintiff’s right to relief is unclear due to the inadequacy of the consideration paid, the unreasonable duration, time and scope of the restrictions, that such restrictions are not reasonably necessary to protect plaintiff, and that plaintiff has unclean hands. Finally, defendant asserts that greater injury will result from granting the injunction that refusing it.

Hearings in case were conducted in this court on January 3rd 2013 and January 15th 2013. The record was kept open for proposed findings of fact and conclusions of law to be submitted after the transcript was prepared. This matter is now ripe for disposition.

STANDARD OF REVIEW

A preliminary injunction seeks to maintain the status quo until the rights of the parties can be fully adjudicated. New Castle Orthopedic Associates v. Burns, 481 Pa. 460 (1978). In Allegheny Anesthesiology Assocs. v. Allegheny Gen. Hosp., 826 A.2d 886 (Pa. Super. Ct. 2003), our Superior Court held that:

[a] preliminary injunction should be granted only if all of the following four “essential prerequisites” are proven: (i) a strong likelihood of success on the merits; (ii) a showing of immediate and irreparable harm that cannot be compensated by money damages; (iii) a showing that the greater injury will result if preliminary injunctive relief is denied than if such injunctive relief is granted; and (iv) a showing that a preliminary injunction would restore the status quo.

Id. at 891.

Distinct burdens ofproofgovernrequests for preliminary injunctions as opposed to applications for permanent injunctions. Chester v. Chester Redevelopment Auth., 686 A.2d 30, 35 (Pa. Commw. 1996). Since a preliminary injunction merely serves as a temporary remedy pending a full hearing on the merits, the criteria for the issuance of a preliminary injunction are less demanding than that applicable to requests for a permanent injunction. LARA, Inc. v. Dorney Park Coaster Co., Inc., 116 Pa. Commw. 548, 553, 542 A.2d 220, 223 (1998). For instance, a party seeking a preliminary injunction is not necessarily required to establish the absence of an adequate remedy at law. Chester, 686 A.2d at 35. Furthermore, “unlike a party seeking a permanent injunction, a party ‘seeking a preliminary injunction is not required to establish his or her claim absolutely.’” Boyle v. PIAA, 676 A.2d 695, 699 (Pa. Commw. 1996). Instead of demonstrating that the right to relief is clear, the moving party need only establish a likelihood of success on the merits. Sheridan Broadcasting Networks, .Inc. v. NBN Broadcasting, Inc., 693 A.2d 989, 992 (Pa. Super. 1997).

In Insulation Corp. v. Brobston, 667 A.2d 729 (Pa. Super. Ct. 1995), our Superior Court held that in order to be enforceable, non-competition covenants must “relate to a contract for employment, be supported by adequate consideration and be reasonably limited in both time and territory.” Id. at 773. Particularly, the enforcement of post-employment restraints is permitted “only where they are ancillary to an employment relationship between the parties, the restrictions are reasonably necessary to protect the employer, and the restrictions are reasonably limited in duration and geographic extent.” Id. When determining whether the non-competition covenant is reasonable in time and territory, the trial court must weigh the employer’s need for protection from the covenant against the hardship that the covenant might impose on the employee. Id. at 734. Generally covenants are reasonably limited if they are within such territory and during such time as may be reasonably necessary for the protection of the employer without imposing undue hardship on the employee. Hayes v. Altman, 225 A.2d 670, 672 (1967) (citing Restatement of Contracts §516(f) (1932)). As a general rule, non-competition covenants should be construed narrowly because they impose a restraint on the ability of an employee to earn a livelihood. Allegheny, at 892.

Regarding the irreparable harm prong of the preliminary injunction test, the Supreme Court of the United States has held that the key word in this consideration is ‘irreparable’ and that mere injury, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough. The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm. Chambliss v. City of Philadelphia, 535 A.2d 291, 294 (1987) (citing Sampson v. Murray, 415 U.S. 61, 90 (1974). Also, in assessing the immediate and irreparable harm prerequisite, the trial court should consider harm to the public. Allegheny, at 893. The status quo to be maintained by a preliminary injunction is the last actual, peaceable and lawful non-contested status which preceded the pending controversy. Valley Forge Historical Society v. Washington Memorial Chapel, 426 A.2d 1123, 1129 (1981). Finally, Plaintiff’s right to a preliminary injunction must be clear to be awarded. Id. at 1128.

DISCUSSION

Plaintiff contends that the noncompetition clause contained within defendant’s October 3,2008 employment agreement bars defendant from engaging in the salt business in any state where plaintiff currently operates, and thereby from working for Summit Salt Company, Inc. The employment agreement between defendant and plaintiff company contains a two year non-compete clause which states that defendant may not “engage in or be financially interested in any business competitive with the business of company or in the sale or distribution of salt in any state in the United States of America in which company sells or distributes salt, or in which company plans to sell or distribute salt at the time of such termination of employment.” {See paragraph 6(A)(iii) of employment agreement). However, at or about the same time defendant terminated his employment with plaintiff company, he almost simultaneously engaged in the employ of Frontier Bulk Solutions, LLC, which through its subsidiary Summit Salt Company, LLC planned to begin selling salt products during the winter of 2012-13.

In his answer and brief to the petition for preliminary injunction, defendant asserts that plaintiff has not met the legal requirements for injunctive relief; specifically that plaintiff has not suffered any injury, much less irreparable injuiy. “An injury is regarded as ‘irreparable’ if it will cause damage which can be estimated only by conjecture and not by an accurate pecuniary standard.” Sovereign Bank v. Harper, 449 Pa. Super. 578, 674 A.2d 1085, 1091 (1996). Our courts have held accordingly, that “it is not the initial breach of the covenant which necessarily established the existence of irreparable harm but rather the unbridled threat of the continuation of the violation,” and incumbent disruption of the employer’s customer relationships. John G. Bryant Co. v. Sling Testing and Repair, 471 Pa. 1, 8, 369 A.2d 1164, 1167 (1977).

Defendant has breached the non-competition clause of his employment agreement by engaging in employment with Summit Salt Company, however, defendant argues that plaintiff is unable to demonstrate that it will suffer any harm, much less irreparable harm, from his continued employment at Summit Salt Company, Inc. In Pennsylvania, the grounds for an injunction are established “where the plaintiff’s proof of injury, although small in monetary terms, foreshadows the disruption of established business relations which would result in incalculable damage should the competition continue in violation of the covenant.” New Castle Orthopedic Assoc’s v. Burns, 481 Pa. 460, 466, 391 A.2d at 1383, 1386 (1978). The effect of such disruption may manifest itself in a loss of new business not subject to documentation, the quantity and quality of which are “inherently unascertainable.” John G. Bryant Co., at 8, 369 A.2d at 1167. In its complaint, plaintiff claims that it is concerned that it may have lost business to Frontier and/or will lose business to Frontier in the future due to defendant’s wrongful conduct and breach of the employment agreement, allegedly to ISCO’s financial detriment. (See complaint, paragraph 41). During the proceedings that were held on January 3rd and January 15th, it was established that defendant was generally not involved in direct sales or marketing of product during his employment at plaintiff company. He therefore claims that he lacked special knowledge of, or relations with, plaintiff’s customer base or any other secret information. Defendant argues that such information is readily ascertainable from other sources and can be used to ISCO’s detriment. Plaintiff argues that the information that defendant took from plaintiff’s computers for the purpose of preparing sales projections at home may now be used unfairly in competing with plaintiff. However, defendant’s flash drive that contained plaintiff’s three year products history with each customer was returned to plaintiff and plaintiff cleared it of such information before returning the flash drive to defendant. Trial tr. Jan. 3, 2013 at 106. Although plaintiff argues that Summit Salt Company, as a start up, may eventually impinge upon plaintiff’s sales, this competitive risk is inherent in the industry itself and would not be any different from other competition which exists in the salt industry. Plaintiff also seems to lack proof that it will be irreparably injured, which is an essential prerequisite to establish justification for an injunction. Allegheny Anesthesiology Assocs., supra at page 3.

Defendant asserts that plaintiff’s right to relief is far from clear due several factors. First, that inadequate consideration exists to enforce the non-compete covenant because the restrictive covenant was added to an existing employment relationship. Pennsylvania law does hold that when an employee enters into an employment contract containing a covenant not to compete subsequent to employment, the covenant must be supported by new consideration which can be in the form of a corresponding benefit to the employee or a beneficial change in his employment status. Davis & Warde, Inc. v. Tripodi, 420 Pa. Super. 450 (1992). These are the not facts in the present case. The employment agreement entered into between plaintiff and defendant on October 3, 2008, sets forth that “This agreement contains the entire understanding among the parties hereto ... and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained.” (See paragraph G of employment agreement). Although defendant was previously employed by plaintiff from January 4, 2008 to February 2008, he ceased to work as an employee of plaintiff and became a consultant for the plaintiff by forming Logistics Consulting Services, LLC (“LCS”). Plaintiff and LCS entered into a consulting agreement, the term of which was March 31, 2008 through October 3, 2008. It was not until October 3, 2008 that defendant again became an employee of plaintiff by entering into the new employment agreement which contained the non-compete clause. Therefore, the adequate consideration for the restrictive covenant contained in this new contract of employment was the new employment itself.

Defendant next argues that the non-compete clause is not reasonably limited in job description, duration of time and/ or geographical scope. The October 3, 2008 employment agreement described defendant’s new employment position as that of a “sales analyst” and did not delineate any of defendant’s responsibilities. Enforcing a restrictive covenant based upon such a broad job description would conceivably bar defendant from working for any company that sells a number of products if that company somehow engages in the sale of a salt product. Thereby, applying plaintiff’s interpretation, defendant would be unable to work in a multitude of industries since salt is a basic element of many everyday products.

As seen above, the employment agreement bars plaintiff from competing for a period of two years in any state in the United States of America in which the company sells or distributes salt. In Wainwright’s Travel Service, Inc. v. Schmolk, 347 Pa. Super. 199, 500 A.2d 476 (1985), the court held that where a five-state area encompasses the primary business area of a company, a geographic restriction and a covenant not to compete encompassing this area may be found to be reasonable. Id. at 479. Since the competition in the salt market is nation-wide and since International Salt Company distributes throughout most of the nation, the geographic extent of this agreement would essentially prohibit defendant from becoming employed in the salt business across the entire nation. However, under the proper circumstances, even a nationwide covenant not to compete may be appropriate. National Business Services, Inc. v. Wright, 2 F. Supp. 2d 701 (E.D. Pa. 1998). In Wright, the court upheld a nation-wide covenant. Although nationwide covenants are disfavored by Pennsylvania courts, where the companies in question were established nationwide businesses, and where the employee also had responsibility for the employer’s product as shown on the internet, which had a nationwide scope, and where the employee had extensive contacts with customers all over the nation, such a covenant was found enforceable. Id. at 708. But in the present case, defendant’s employment position was rarely directly involved with contacting current or prospective customers of plaintiff. He did not have the employment opportunity to develop trust or confidence with customers or become involved with client development and sales presentations to major accounts. Instead defendant primarily worked on sales forecasts and analysis which contained the past three year history of client purchases, much of which can be weather driven. Trial tr. Jan. 3, 2013 at 145. Therefore a restrictive covenant of such breadth and scope would not be sufficiently reasonable under these circumstances.

But, although defendant worked primarily on sales forecasts and analysis which contained the past ordering history of plaintiffs customers, this information may still be construed as constituting a trade secret under Pennsylvania law. A trade secret is defined under the Uniform Trade Secrets Act, 12 Pa. C.S.A. §5301 as “Information, including a formula, drawing pattern, compilation including a customer list, program, device, method, technique or process that:

(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

12 Pa. C.S.A. §5302.

When considering whether certain information is a trade secret, some factors to be considered include, (1) the extent to which the information is known outside the owner’s business; (2) the extent to which it is known by employees and others involved in the owner’s business; (3) the extent of measures taken by the owner to guard the secrecy of the information; (4) the value of the information to the owner and to his competitors; (5) the amount of effort or money expended by the owner in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Restatement of Torts §757 comment b (1939); International Election Systems Corp. v. Shoup, 452 F.Supp. 684, 706 (E.D. Pa. 1978). In order to be protected, the trade secrets “must be the particular secrets of the complaining employer, not general secrets of the trade in which he is engaged.” Renee Beauty Salons, Inc. v. Blose-Venable, 438 Pa. Super. 601, 607-08, 652 A.2d 1345, 1348-49 (1995). Mere names and addresses easily ascertainable by observation or reference to directories will not be protected as trade secrets. Id. at 1349. Therefore, general information that defendant gained during his employment, such as the locations of salt storage facilities used in the industry, are certainly not trade secrets that warrant protection. However, the information that defendant worked with while creating plaintiff’s sales forecast, which helped to determine the company’s supply and demand for various products at their different locations, may be considered a trade secret. This information was password protected and the plaintiff expended effort and money, mainly through the employment of the defendant, to compile this information. These factors tend to show that the information in the sales forecast could potentially be viewed as a trade secret.

However, this information, which basically constitutes a client list with information on each client’s past salt needs, is most likely not a trade secret because the information can be easily obtained from the clients themselves. In Renee Beauty Salons, Inc., the names of hair stylist’s customers and their preferences, known to employees through serving those customers, did not constitute a customer list which hair stylist could protect when employees left employment of stylist and set up competing business. Id. at 609, 652 A.2d at 1349. Similarly, in the present case, any salt company could phone various known prospective clients, whether they be government entities, distributors, etc., and gain information as to the salt needs of those entities. Furthermore, the parties admit that many of these entities are served by various salt companies simultaneously; therefore, it is reasonable to conclude that this information is generally known throughout the salt trade.

CONCLUSION

Finally, much of the government salt procurement, which makes up a substantial portion of plaintiff’s sales, is publicly advertized and bid. This open and transparent procedure can hardly be viewed as a trade secret. In the present case, the hardship to the defendant of essentially being barred from the salt trade, and thereby his livelihood, for a period of two years nationwide would greatly outweigh any conjectural detriment that the plaintiff may incur. The restrictions in the employment agreement are not reasonably necessary to for the protection of plaintiff.

As noted in Brobston, supra at page 4, 5 we are directed to weigh the reasonableness of the covenant and the employer’s need for protection against the hardship the covenant might impose on the employee. The employer’s need for protection has not been sufficiently proven to the court. The competitive threat that this defendant represents is indistinguishable from the competitive threats that exist in the industry generally. Plaintiff has failed to show that defendant represents irreparable harm to the plaintiff. Plaintiff has failed to show that defendant represents an “unbridled threat...and incumbent disruption of employer’s customer relationships.” Bryant, supra at page 6. Finally, plaintiff, in its quest for the extraordinary remedy of injunctive relief has also failed to show defendant’s employment would, “...foreshadows the disruption of established business relations which would result in violation of the covenant.” New Castle, supra at page 7. Therefore, plaintiff’s petition for preliminary injunction is denied and the viability of these competitors is left to the crucible of the marketplace and/or an action in assumpsit.

An appropriate order follows.

ORDER

Accordingly, this 23rd day of April, 2013 plaintiff’s petition for preliminary injunction is both dismissed and denied.


author: TUNNELL, J.,

text:
    In re Adoption of B.E.M.A.

      C.P. of Chester County,
    No. AD-12-0018.

      Deborah A. McKenty, for Clementine Mary Arnold.

      Craig Bluestein, for Gerald D. and Margaret Thompson.

      Lawrence J. Persick, for Chester County Department of Children and Youth Services.

      Jeremiah F. Kane, for adoptee.
    May 9, 2013
   TUNNELL, J.,

In this contested adoption proceeding, the court is called upon to decide whether the adoptee, B.E.M.A., should be adopted by her paternal grandmother, Clementine Mary Arnold, or by her foster parents, Gerald D. and Margaret W. Thompson. The adoptee, now 2 Vz years old, has resided with the latter since her discharge from the hospital where she was bom on October 7, 2010.

The biological father is deceased and the parental rights of the mother were terminated by the court on July 3,2012.

The court heard two days of testimony, on May 1 and May 3, 2012. From the testimony, the court quickly concluded that it is easy to love B.E.M.A. Everyone who has come into contact with her loves her. B.E.M.A. reciprocates easily and naturally with her love.

The court will first address the case presented by Mrs. Arnold. The court is convinced that she is loyal, calm, patient and stable. She raised four boys as a single parent. She has held down a responsible job in the court system of the City of Philadelphia for over 35 years. She is proud of her Polish heritage which she wants to instill in her extended family. She is in good health, and her hearing loss has not slowed her in the least. She is well known in the area of Queen Village on Beck Street where she lives. There she maintains a comfortable home with a room all prepared for B.E.M.A.

Although Mrs. Arnold initially offered to become a kinship resource for B.E.M.A. after her birth, a number of adverse circumstances caused her to rescind that offer. The court does not fault Mrs. Arnold in the slightest for doing so, although unfortunately it caused an unexpected delay in her ability to establish a relationship with her granddaughter.

Certain attempts were made during the trial to blame Mrs. Arnold for the drug addiction and tragic death of her son, Christopher Arnold, the baby’s biological father. This was offered as if to suggest that she had failed in some way as a mother, and that the court should draw an adverse inference in this adoption proceeding. Mrs. Arnold did nothing wrong and the court will not draw any such inference.

Out of sheer tenacity, Mrs. Arnold was finally able to arrange for visits with B.E.M.A., at first supervised and later unsupervised at her home in Queen Village. The court finds that the baby fares well during the visits, although there is some anxiety during transfers which is quite understandable for a child of her age. Mrs. Arnold is now “Babcia” to B.E.M.A., that is, “grandma”. B.E.M.A. has bonded with Brendan and Andrew Arnold, two of Mrs. Arnold’s other sons, as well as with the neighborhood children on Beck Street.

The time came when reunification was no longer a goal in the planning for B.E.M.A. Chester County Department of Children, Youth and Families considered who might become a permanent adoptive resource for the child. As testified by its witnesses, CYF went through a lengthy process of assessments and visits which culminated in a 4 Y hour long selection meeting. The committee members selected Mrs. Arnold over Gerald and Margaret Thompson for a number of reasons. They considered her to be a “viable relative” who maintained an unwavering commitment to raise B.E.M.A. They cited her tenacity, her heritage, the facts that she was herself a mother, had a long-standing job and exhibited other strengths. CYF’s witnesses testified that Mrs. Arnold and the baby were bonding nicely, but conceded that they would be surprised and concerned if B.E.M.A. were not by now bonded to the Thompsons. Mrs. Arnold advised CYF, and testified later to the court, that if she is permitted to adopt B.E.M.A. she will certainly keep Mr. and Mrs. Thompson in the child’s life.

The court also carefully considered the case presented by Gerald D. and Margaret W. Thompson. They not only showed stability in the length of time they have lived in their home, and in the length of their marriage, but also their talents in the sheltering of foster children. They have had some 16 of them in their home primarily through the auspices of Chester County Department of Children. Youth and Families. Their recognized strength is in caring for drug-addicted babies. This is how they came to be chosen when B.E.M.A. was bom without available family resources. If it takes a special gift to nurse a micro-premature baby, or a drug-addicted infant to health, then the Thompsons surely have it.

Mr. Thompson is a mechanic and Mrs. Thompson is a veterinarian. They and their other children live on a 10-acre farmette which includes a bam, barnyard, llamas, potbellied pigs, dogs and cats, lambs, a steer, two ponies and chickens, all fenced in. There is a playset in the front yard. This is the world B.E.M.A. has known all her life. She gets along well with the other children, and refers to Jerry Thompson as “Daddy” and Meg Thompson as “Mommy”. By all accounts, the child has bonded to and is affectionate with the Thompsons, and vice-versa. Developmentally, B.E.M.A. is “on target”.

Although country life differs from city life, from the testimony the court has heard the home settings are both strong and equivalent. The Thompsons as well as Mrs. Arnold have family and friends to support them and, in the court’s estimation, their ability to provide a safe and enriching environment in which to raise B.E.M.A. are both superior. Like Mrs. Arnold, Mrs. Thompson is of Polish extraction. They are both church goers. They both value education. Their approach to discipline is the same.

When it was Mrs. Thompson’s turn, she testified that if permitted to adopt B.E.M.A. she would certainly protect the child’s relationship with her paternal grandmother, Mrs. Arnold. Mrs. Thompson stated that she lived with her own grandmother for some years and “understands that bond.” She also testified that “no one else can do it — it’s incredibly important.” Thus, while considering what decision to reach, the court was buoyed by the sworn testimony that the child would not vanish no matter which party prevailed.

One difference was apparent to the court. Mrs. Arnold, as she freely stated, did not understand how the process worked, how CYF was departmentalized, nor whom to call. The Thompsons were very versed in that and were already well known to CYF.

In any event, the court emphasizes that Mrs. Arnold did nothing wrong. Due to events not altogether of her choosing, she could not initially be a kinship resource. Then, at the time of her first visit, she was unfairly accused of breaking the rules by bringing the biological mother to the visit, which was not the case. Meanwhile, the Thompsons were a constant presence in B.E.M.A.’s life. The child regards them today as her parents, naturally enough.

In adoption cases, as in custody matters, the paramount concern of the court is to discern the best interests of the child. In re: Adoption of A.S.H., 449 Pa. Super. 497, 674 A.2d 698 (1996). The determination of what is the “best interests” is made on a case-by-case basis, and requires the trial court to weigh all the factors which bear upon a child’s physical, intellectual, moral and spiritual well being. In the interest of C.F., 436 Pa. Super. 83, 89, 647 A.2d 253,256(1994).

The existence of an emotional bond between the child and the prospective parents is an important factor. In re: Adoption ofA.S.H., supra.

There are cases in which the record could equally support a placement with both competing parties. This is one of them. Such cases are difficult precisely because the child will receive good, loving care in both households. Nevertheless, the fact is that the trial court can only grant adoption to one party. See, In re: A.S.H., supra, at 701.

Chester County Department of Children, Youth and Families wanted the court to take note of the fact that Mr. and Mrs. Thompson had signed a Resource Parent Agreement in which they acknowledged that CYF had all final responsibility for planning for the child. They acknowledged that if the goal should change to adoption, they could request consideration to be an adoptive resource for the child. They acknowledged “that the ultimate decision rests with the Agency.” To the extent that the Agency selected Mrs. Arnold to be the adoptive resource, the Thompsons did not acquiesce in that decision, as they previously promised they would. The court detected that some hostility resulted. But, where there is an assertion that a placement might contravene a prior agreement, the Superior Court has stated in the strongest terms that “a child is not a chattel, to be finally disposed of by agreement among the parties.” Matter of Adoption of Sturgeon, 300 Pa. Super. 92, 107, 445 A.2d 1314, 1321 (1982). Notwithstanding any prior agreement between the parties, the court must be guided by its own independent analysis of the best interests of the child. Id., see also, In re: Adoption of A.S.H., supra.

Weighing the scales carefully, the balance tips in favor of granting the petition for adoption of Gerald D. and Margaret W. Thompson. Although they are not blood relatives, they are surely parents in every way that matters to this child. Her roots today are very much with her family at the residence of the Thompsons in Cochranville, PA, and this court will not uproot her. There was some suggestion at trial that such removal would not be overly traumatizing to B.E.M.A., but the court does not credit that testimony. The child’s best interests are met by her adoption by the Thompsons.

Although Mrs. Arnold will not be able to be “Mommy” to B.E.M.A., she is and will remain “Babcia”, a loving grandmother with much to offer, whose spirit, grace and familial links are irreplaceable.

An appropriate order follows.

FINAL DECREE

And now, May 8, 2013, upon consideration of the petition for adoption of Gerald D. Thompson and Margaret W. Thompson, his wife, and after hearing had thereon, the court having made an investigation to verify the statements in the petition and other facts to give the court full knowledge as to the desireability of proposed adoption; and

The court, being satisfied, finds that the statements made in the petition are true, that the welfare of the person proposed to be adopted will be promoted, and that the child’s best interests will be served, by this adoption and that all requirements of the Adoption Act have been met; and it is hereby

Ordered, adjudged and decreed that Brooklynn Elizabeth Muller Arnold, the person proposed to be adopted, shall have all the rights of a child and heir of Gerald D. Thompson and Margaret W. Thompson, and each of them, the adopting parents and shall be subject to all the duties of such child. When the parents choose a name for her, they may submit an order to the court.