author:
SHEPPARD JR., J.,
     SHEPPARD JR., J.,

text:
    Morrison v. Correctional Physician Services Inc.

      C.P. of Philadelphia County,
    October Term 2000,
    nos. 3040, 3041, 3042.

      William Mathews and Richard M. Jordan, for plaintiff.

      Derrick Howard, for defendant.
    March 8, 2001
    December 20, 2000
   SHEPPARD JR., J.,

This opinion is submitted relative to the appeals in three cases of this court’s order of December 20, 2000 which denied defendant’s three petitions to strike off and/or open confessed judgment.

For purposes of this appeal this court respectfully resubmits and relies upon the opinion filed in support of that December 20, 2000 order. (That opinion is attached as exhibit “A”.)

It is respectfully submitted that based on that opinion, this court’s order should be affirmed.

EXHIBIT “A”

SHEPPARD JR., J.,

Presently before this court are three petitions to strike off and/or open the judgments by confession of defendant, Correctional Physician Services Inc., and the consolidated answer of plaintiff, Maria Morrison on behalf of her minor son, Joseph Morrison. For purposes of economy, this court will consider the three petitions as one, since they are identical, except for the respective amounts of the judgments.

For the reasons stated, this court denies the petitions to strike off and/or open the judgments by confession.

BACKGROUND

In 1989, Dr. Kenan Umar, as president and founder of CPS, organized the company as a health care provider to service individuals incarcerated in state prisons. Petition at ¶1. At some point, Dr. Umar employed his son, Emre Umar, to assist him with CPS’s operations. Id. at ¶2. At some later date, Emre became a vice president of CPS. See 12/4/00 N.T. at 12:13. On August 28, 1991, Dr. Umar executed a document entitled “Limited power of attorney” in favor of Emre. Answer, exhibit A. Pursuant to the power of attorney, Emre was granted the power “to transact business, make, execute and acknowledge all agreements, contracts, orders, deeds, writings, assurances and instruments for any matter, with the same powers and for all purposes with the same validity as [Dr. Umar] could, if personally present, with regard to CPS Inc.” Id. at 1. Specifically, Emre was granted the power “[t]o endorse notes, checks and other instruments which may require [Dr. Umar’s] endorsement,” as well as the power to pay debts, borrow money and mortgage real or personal property. Id. at section 1(c), (d) and (e). The power of attorney was not terminated or canceled until July 10, 2000, when Dr. Umar wrote a certified letter to Emre to that effect. Answer, exhibit B.

In September of 1999, Emre had allegedly removed all of the funds from CPS’s bank account, in excess of $1,000,000, without authorization. Petition at^3. When questioned by Dr. Umar, Emre allegedly insisted that he was entitled to the money, but he offered to return it in exchange for an interest in CPS. Id. at ¶4. Accordingly, on September 17,1999, father and son arranged a settlement agreement in principle providing, inter alia, that Emre would receive 50 percent of the stock of CPS and that he would return any funds taken from CPS; and setting forth other limitations on the spending of funds, responsibilities for the corporate debt, and requiring approval from the board of directors for payments made other than Dr. Umar’s salary. Petition, exhibit A. The settlement agreement also contemplated the negotiations for the sale of the company. Id. at ¶4. On September 23, 1999, Dr. Umar executed a letter acknowledging receipt of a cash payment from Emre in the amount of $53,000 which constituted payment in full of the sum of $701,000 borrowed from CPS on September 11, 1999. N.T., exhibit P-1. See also, N.T. at 41:18-44:7.

During this same time period, Emre had executed three promissory notes, in his capacity as vice president and on behalf of CPS, in which CPS promised to pay the respective amounts to the order of Joseph Morrison, in care of his parent and guardian, Maria Morrison. Petition, exhibits B and C. See also, N.T. 12:13; 19:16; 79:23-25 (referring to testimony that Emre was a vice president when he signed the notes). Specifically, on August 13, 1999, Emre executed a note for $140,000; on September 17, 1999, Emre executed a note for $100,000; and on September 23, 1999, Emre executed a note for $8,000. Each note had a zero percent interest rate and each had an identical confession of judgment clause and “disclosure for confession of judgment.” The confession of judgment clause stated as follows:

“Protest waived. On nonpayment of any installment when due, all remaining installments shall, at the option of the holder, become immediately due and payable. I agree to pay if this note is placed in the hands of an attorney for collection, a reasonable attorney’s fee of 25 percent of the amount due and owing on the defaulted note. And to secure the payment of said amount, I hereby authorize, irrevocably, the prothonotary, clerk of court, or any attorney of any court of record to appear for me in such court, in term time, or vacation, at any time before or after maturity and confess judgment without process in favor of any holder of this note, with or without the filing of an averment or declaration of default, for such amount as may appear to be unpaid thereon, together with charges, costs and attorney’s fee, as above provided, and waive and release all errors which may intervene in any such proceedings and waive all right to appeal and consent to immediate execution upon such judgment nor shall any bill in equity be filed to interfere in any manner with the operation of such judgment, hereby ratifying and confirming all that said attorney may do by virtue hereof, and waiving and releasing benefit of all appraisement, inquisition of real estate, hereby voluntarily condemning said real estate and authorizing the entry of such condemnation upon any writ issued, stay of execution and all rights under the exemption laws of any state, now in force, or hereafter to be passed.” Answer, exhibits C, D and E. (emphasis added)

These notes did not set forth the circumstances for the respective loans, nor did they define what constituted a default nor what date the loan had to be repaid or to whom. Id. See petition at ¶10. These notes were purportedly executed in exchange for loans made to CPS from the Joseph Morrison Trust Fund, in order for CPS to meet its payroll and operating expenses. N.T. 7:8-15; 19:14-21; 63:16-23. See answer, exhibit F.

In March 2000, Dr. Umar and Emre finalized an agreement to sell two contracts of CPS to Prison Health Services Inc. for $14,000,000. As testified by Manrico A. Troncelliti, counsel for CPS, some of the proceeds were used to pay off corporate debts and major creditors. N.T. at 45:17-47:14. See also, N.T. 22:11-28:22 (Dr. Umar’s testimony which describes the disbursement of the $14 million and reveals that he and Emre had each received $500,000 from these proceeds). To complete this transaction, CPS, Dr. Umar and Emre were advised by the CPS oversight committee of the need to set forth all major outstanding debts of CPS, but the alleged debt owed to the Morrison Trust Fund was not mentioned. Petition, at ¶¶15-16. See also, petition, exhibit D.

On May 17, 2000, Maria Morrison Umar filed for divorce from Emre Umar. Answer, exhibit G. Pursuant to the divorce complaint, she requested equitable distribution pursuant to section 3502 of the Divorce Code. Id. at Count II.

On October 20, 2000, Ms. Morrison, on behalf of her minor son, filed three complaints in confession of judgment against CPS, as defendant, as well as PNC Bank, Manrico Troncelliti, Stewart Greenleaf, Robert Boland, oversight committee, Dr. Kenan Umar, and First Union National Bank, as garnishees. In her complaints, Ms. Morrison asserts, essentially, that her son’s trust fund loaned money to defendant on three separate occasions and executed three separate promissory notes in connection with, and as security for, these loans. Complaints at ¶¶4 and 5. The respective complaints basically contained all the necessary averments, as required by Pa.R.C.P. 2952(a). With respect to the default, plaintiff alleged the following:

“(6) Defendant breached and/or defaulted under the note by failing to pay the principal amount of the note upon demand by plaintiff.

“(7) Defendant has made no payment on account of the amount owed under the note.” Id. at ¶¶6-7.

Moreover, plaintiff included the following necessary documents with her complaints: (1) an entry of appearanee; (2) a praecipe for writ of execution pursuant to Pa.R.C.P. 2958.3; (3) notice under Rule 236; (4) entry of appearance, confession of judgment and praecipe for assessment of damages (including a breakdown of the principal, authorized attorney’s fees and costs for each respective note); (5) an affidavit of addresses, income, commercial transaction, nonmilitary service, non-retail installment sales transaction, and to complaint in confession of judgment for money damages and waiver of rights; and (6) an affidavit of default.

On November 14, 2000, defendant filed its petitions to open/strike the confessed judgments. On November 21, 2000, plaintiff filed her consolidated answer. This court conducted a hearing on December 4, 2000. Following this hearing, the parties filed supplemental briefs in support of their respective positions.

DISCUSSION

I. Legal Standards

Rule 2959 of the Pennsylvania Rules of Civil Procedure provides that all grounds for relief whether to strike or open the judgment must be stated in a single petition. The Pennsylvania Supreme Court has stated that “a petition to strike and a petition to open are two distinct forms of relief, each with separate remedies.” Resolution Trust Corp. v. Copley Qu-Wayne Assocs., 546 Pa. 98, 105, 683 A.2d 269, 273 (1996). Accordingly, there are two different standards to discuss.

A petition to strike a judgment operates as a demurrer to the record and “may be granted only for a fatal defect or irregularity appearing on the face of the record.” Resolution Trust Corp. at 106, 683 A.2d at 273. In deciding the merits of a petition to strike, the court is limited to review only “the record as filed by the party in whose favor the warrant is given, i.e., the complaint and the documents which contain confession of judgment clauses.” Id. (emphasis in original) “Matters dehors the record filed by the party in whose favor the warrant is given will not be considered. If the record is self-sustaining, the judgment will not be stricken.” Id. See also, Dollar Bank v. Northwood Cheese Co. Inc., 431 Pa. Super. 541, 547, 637 A.2d 309, 311-12 (1994) (stating that “[a] warrant to confess judgment must be explicit and will be strictly construed, with any ambiguities resolved against the party in whose favor the warrant is given”). Moreover, “if the truth of the factual averments contained in such record are disputed, then the remedy is by a proceeding to open the judgment and not to strike.” Resolution Trust Corp., 546 Pa. at 106, 683 A.2d at 273.

In contrast, a petition to open a judgment is governed by the standard listed in Pa.R.C.P. 2959. Subsection (e) of Rule 2959 states, in pertinent part, that:

“The court for cause shown may stay proceedings on the petition insofar as it seeks to open the judgment pending disposition of the application to strike off the judgment. If evidence is produced which in a jury trial would require the issues to be submitted to the jury the court shall open the judgment.”

Traditionally, the court must open a judgment taken by confession where the petitioner acts promptly, alleges a meritorious defense and presents sufficient evidence of that defense to raise a jury question. See Germantown Savings Bank v. Talacki, 441 Pa. Super. 513, 520, 657 A.2d 1285, 1288-89 (1995). “In making such a determination, the court employs the same standard as that of the directed verdict — ‘viewing all the evidence in the light most favorable to the petitioner and accepting as true all evidence and proper inferences therefrom supporting the defense while rejecting adverse allegations of the party obtaining the judgment.’ ” Iron Worker’s Savings and Loan Association v. IWS Inc., 424 Pa. Super. 255, 261, 622 A.2d 367, 370 (1993). (citations omitted) Moreover, opening a judgment pursuant to Rule 2959(e) requires “the judgment debtor to offer clear, direct, precise and ‘believable’ evidence of its meritorious defense.” Id. at 262, 622 A.2d at 370. See also, Manor Building Corp. v. Manor Complex Associates Ltd., 435 Pa. Super. 246, 251 n.2, 645 A.2d 843, 845 n.2 (stating that “[proceedings to open a judgment involve equitable principles and only those judgments which warrant equitable interference will be opened”).

Here, CPS has properly asserted its request to strike off and/or open the confessed judgments in the same respective petitions pursuant to subsection (a) of Rule 2959, Pa.R.C.P. Their arguments will each be addressed under the different standards for relief as mandated by our Supreme Court.

II. Emre’s Authority to Sign Notes With Confession of Judgment Clauses

As grounds for striking the judgments, CPS first asserts that it did not waive its rights knowingly, voluntarily and intelligently where Emre had conducted a fraud upon CPS, had breached his fiduciary duties, and had taken funds that are not rightfully his. Petition at ¶¶19-21. While this assertion attempts to make a constitutional claim, CPS’s argument is primarily based on Emre’s alleged lack of authority to bind CPS to a confession of judgment clause where he purportedly committed a fraud on the corporation in stealing funds and in executing the notes without authorization. See pet’r. mem. of law, at 3-5. In analyzing this issue, this court recalls certain principles.

First, it has been stated that “Pennsylvania’s practice in allowing the entry of judgments by confession is not unconstitutional.” Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1270 (3d Cir. 1994). All that is required is that there be “a voluntary, knowing and intelligent waiver of the party’s due process rights.” Federman v. Pozsonyi, 365 Pa. Super. 324, 329, 529 A.2d 530, 533 (1987). In addition, because of the severity of the consequences attached to a warrant of attorney to confess judgment, the courts have required that as a matter of public policy the consent of the party authorizing confession be clearly given.” Egyptian Sands Real Estate Inc. v. Polony, 222 Pa. Super. 315, 319-20, 294 A.2d 799, 803 (1972).

Emre’s signature on all three promissory notes, containing confession of judgment clauses, includes the notation that he executed them as a vice president of CPS. See petition, exhibits B and C. He also signed a “Disclosure for confession of judgment,” on CPS’s behalf, which included the following statement: “I am knowingly, intelligently, and voluntarily waiving [rights to advance notice and a hearing after judgment is entered].” Id.

As a vice president of CPS, it appears that Emre had either express, implied or apparent authority to execute the notes. It is a matter of hornbook law “that a corporation is a legal fiction which can act only through its officers, directors and other agents.” Biller v. Ziegler, 406 Pa. Super. 1, 6-7, 593 A.2d 436, 439 (1991). (citations omitted) A corporation is bound by its agents’ acts where those acts are performed by any express grant of power, as well as those acts which are performed within the agent’s implied or apparent authority, unless the agent acted for his own benefit without the corporation’s ratification of his action. Lokay v. Lehigh Valley Cooperative Farmers Inc., 342 Pa. Super. 89, 97, 492 A.2d 405, 409 (1985). “ ‘Apparent authority’ arises when a corporation permits its agent to assume a certain power or authority, or represents him as having it.” Id. at 98, 492 A.2d at 409. In addition, a corporation is estopped from raising the defense that an officer acted outside the scope of his authority where the corporation received and enjoyed the benefits of the act or contract. Id.

On the face of the record presented to confess judgment, this court cannot conclude that Emre’s signature as a vice president of CPS did not effectively constitute a waiver of CPS’s constitutional rights. Therefore, the court cannot strike the judgments on this ground.

Moreover, the issue of whether Emre had authority to execute the notes containing confession of judgment clauses, or whether he exceeded his corporate authority, cannot be decided by a petition to strike but must be resolved by a petition to open since the issue raises potential disputes of fact. See Resolution Trust Corp., 546 Pa. at 113-14, 683 A.2d at 277 (concluding that the issue of express authority of a managing partner to bind the general partner and the partnership to a confession of judgment clause is properly addressed by a petition to open and not a petition to strike).

Under the standard for determining whether to open the judgment, the court finds that CPS failed to present sufficient credible evidence that Emre was without authority to sign the notes with confession of judgment clauses. Alternatively, CPS should be estopped from asserting such a defense since the evidence clearly showed that it received and used the monies from the Morrison Trust Fund to meet payroll expenses. Answer, exhibit F (photocopies of three checks made payable to CPS on the same respective dates as the notes).

First, the notes were executed when Emre had Dr. Umar’s power of attorney, which enabled him to “endorse notes, checks and other instruments which may require [Dr. Umar’s] endorsement.” Answer, exhibit A. While the power of attorney did not expressly state that Emre may execute instruments containing confession of judgment clauses, this omission should not negate his authority. Dr. Umar, himself, testified that he had asked Emre to borrow money since the banks were not extending any more money because CPS had filled up its line of credit. N.T. 7:8-15. Dr. Umar had been the 100 percent shareholder at the time the loans were made and the notes were executed. N.T. 11:23-12:5. Dr. Umar had actually deposited the $100,000 check made out on August 13, 1999. N.T. 7:17-18. He also admitted that Emre as vice president, was authorized to borrow the money to meet CPS’s payroll expenses. N.T. 19:13-20:2. Moreover, others testified that the money loaned from the Morrison Trust Fund was supposed to pay CPS’s payroll and/or operating expenses. N.T. 63:13-64:3; 78:7; 93:10-13.

In light of both the documentary evidence, that is, the notes, the photocopies of the checks, the power of attorney, along with the testimonial evidence, this court finds that it cannot open the judgments on the ground that Emre did not have authority to execute these notes.

III. Whether the Notes Are Ambiguous

CPS also contends that the confession of judgment clauses in the notes are unenforceable since the notes are ambiguous and fail to set forth when payments were due, whether payments could be made in installments, and to whom payments should be directed. Petition at ¶¶23-25. In response to this assertion, plaintiff maintains that these notes are “payable on demand” and need not state when installments should be made. Answer at ¶10. Though CPS’s argument attempts to raise factual issues, the court may determine the nature of the notes as a matter of law.

It is true that an ambiguity in the terms of a note and/ or the confession of judgment clause can affect the validity of a confessed judgment and must be construed against the holder of the note. See Willits v. Fryer, 734 A.2d 425, 428-29 (Pa. Super. 1999); Dollar Bank, 431 Pa. Super. at 547, 637 A.2d at 311-12; Manor Building, Corp. v. Manor Complex Associates Ltd., 435 Pa. Super. 246, 252, 645 A.2d 843, 846 (1994). In Willits, our Superior Court addressed a consumer credit transaction where the debt was incurred by a natural person. 734 A.2d at 428. The court held that Rule 2950, combined with Rules 2951 and 2952, prohibited judgment by confession in such instance. Id. In dicta, however, the court addressed the ambiguity issue and found that the payment terms of the promissory note in that case were not clear on their face. Id. The promissory notes in Willits included payment terms which provided the following:

“Two years after date we promise to pay to the order of George D. Willits $2,900 at his residence in monthly payments of $38.13 per month, including principal and interest with interest 8 1/4 percent and without defalcation, value received [ ] (9 yr. amortization with two yr. balloon)[.]” Id.

The court concluded that “[ujnder the express language of the promissory note, it is unclear whether appellants were obligated to begin payments to appellees as of August 1996 or as of July 1998.” Id. Based on these ambiguities, the court found that the appellants had alleged a meritorious defense and provided sufficient evidence of that defense to create a jury issue. Id. at 428-29.

Willits is distinguishable from the present case. Here, the promissory notes are payable “to the order of Joseph Morrison, in care of his parent and guardian, Maria Morrison.” Petition, exhibits B and C. However, the notes contained no date for payment to be made. As plaintiff correctly points out, “[a] promise or order is ‘payable on demand’ if it:... does not state any time of payment” under 13 Pa.C.S. §3108. Therefore, these notes can logically be construed as demand notes, meaning that the promisor (CPS) must pay these notes on demand by the promisee (Joseph Morrison).

Moreover, the reference to installments in the confession of judgment clauses of these notes does not change their nature, nor render them defective or ambiguous. In Master Homecraft Co. v. Zimmerman, 208 Pa. Super. 401, 403-404, 222 A.2d 440, 441-42 (1966), the court addressed a note containing a confession of judgment clause which left blank when installments were to be made. The appellate court held that this omission did not render the note defective and did not change the presumption that the note was payable on demand. Id. at 404-405, 222 A.2d at 441. It reversed the trial court’s order striking the confessed judgment but did not preclude the debtor from bringing a petition to open to determine the intent of the parties in not filling in the blanks. Id. at 405, 222 A.2d at 442-43.

Here the notes do not contain any such blanks, nor do they imply any date to make payment. The warrant of attorney allows for confession of judgment upon “nonpayment of any installment when due ... at any time before or after maturity ... with or without the filing of an averment or declaration of default.” Petition, exhibits B and C. The court finds that the warrant of attorney is explicit and unambiguous, containing no condition or limitation upon the entry of judgment by confession. See Dollar Bank, 431 Pa. Super. at 548-49, 637 A.2d at 312 (“Unquestionably, if a warrant of attorney clause authorizes entry of judgment by confession only after default, a judgment entered prior to default or lacking an averment of default is invalid.”) (“Where the warrant of attorney contains no condition, limitation, or restriction of any kind as to when judgment may be entered, the authority to issue judgment for the full amount of the loan is immediate.”), (citations omitted)

Therefore, the court finds that the judgments have not been undermined by the unambiguous language in the notes and their confession of judgment clauses. Similarly, this court cannot conclude that CPS has asserted a meritorious defense or presented sufficient evidence to raise a jury question regarding the alleged ambiguity in the notes. The remaining defenses asserted in the petitions are merely legal conclusions which have not been supported by argument, and this court need not consider them at this time. Estate of Silvestri v. Kinest, 318 Pa. Super. 14, 18-19, 464 A.2d 494, 496 (1983) (holding that judgment debtor failed to preserve his defense by first raising it generally in his petition and then specifically in his subsequent memorandum of law).

CONCLUSION

For these reasons, this court denies defendant, CPS’s petitions to strike and its petitions to open the confessed judgments issued in favor of plaintiff Maria Morrison, on behalf of her minor son, Joseph Morrison.

ORDER

And now, December 20, 2000, upon consideration of defendant’s petitions to strike off and/or open confessed judgments, the plaintiff’s consolidated answer, all other matters of record, and after a hearing on December 4, 2000, and in accordance with the opinion being filed contemporaneously with this order, it is hereby ordered that defendant’s petitions to strike off and/or open the confessed judgments are denied.

      . The three cases were heard as one matter. Each involved a confessed judgment on a different note, but involved the same parties.

      . This background is presented to give factual context to these petitions. These facts were gleaned from the petitions, the consolidated answer, the complaints and the hearing held on December 4, 2000. Though the court cannot go outside the record to dispose of the petitions to strike and is limited to the complaints and documents filed to confess judgment, the factual context is necessary to rule on the petitions to open in order to determine if defendant has a meritorious defense to the confessed judgments. See Resolution Trust Corp. v. Copley Qu-Wayne Associates, 546 Pa. 98, 106, 683 A.2d 269, 273 (1996) (comparing the different parameters for reviewing a petition to strike versus a petition to open).

      . At least $658,000 of the $701,000 was used by Emre to pay his and his estranged wife, Maria Morrison’s mortgage company, as well as their personal taxes. N.T. 14:21-16:19; 74:21-18. Both Emre and Maria testified that Maria had loaned Emre a substantial amount of money to pay back these borrowed funds from her own real estate transactions, but that the $658,000 had nothing to do with the $248,000 that was loaned by the Joseph Morrison Trust Fund. In addition, they both testified that the $248,000 was borrowed prior to Emre’s taking funds from CPS for their personal needs. N.T. 75:25-76:22; 91:21-98:12.

      . Answer, exhibits C, D and E are copies of all three notes. Petitioner/defendant did not attach a copy of the August 13, 1999 note, which is represented by answer, exhibit C.

      . Answer, exhibit C.

      . Petition, exhibit B; or answer, exhibit D.

      . Petition, exhibit C; or answer, exhibit E.

      . Ironically, the check made out on August 13,1999, is in the amount of $100,000. Answer, exhibit F. However, the note, executed on this same date, is in the amount of $140,000. Answer, exhibit C. In its petitions, defendant did not raise, as a defense, any discrepancy between the check and the note. However, defendant, does raise this inconsistency in its supplemental brief. See supplemental brief at 2 n.l.
      Normally, failure to raise this issue in its petitions constitutes waiver of this defense under Rule 2959(c) of the Pennsylvania Rules of Civil Procedure. See Estate of Silvestri v. Kinest, 318 Pa. Super. 14, 18-19, 464 A.2d 494, 496 (1983) (holding that debtor waived his defenses which were asserted generally in his petition and then specifically in a subsequent memorandum of law because he had failed to give proper and timely notice to opposing counsel).
      Even assuming arguendo that defendant did not waive the inconsistency defense, Emre testified that a total of $248,000 was loaned from the Joseph Morrison Trust Fund, which would account for the $40,000 discrepancy. N.T. at 77:19-80:23. The court finds his testimony on this point to be credible. Moreover, Dr. Umar only admitted that CPS received $100,000, which he maintains that Emre obtained, but he denies having any knowledge that the monies came from Maria or Joseph Morrison. Further, he does not admit that CPS received any money other than the $100,000. N.T. 7:1-9:21; 18:18-22:4. Dr. Umar’s testimony, on this point, seems dubious in light of the fact that the court has photocopies of the three checks made payable to CPS, along with the notes. Answer, exhibits C-F.
      For this reason, the court finds that the inconsistency between the check and the note of August 13,1999, does not constitute a meritorious defense which would warrant opening the judgment.

      . The complaints are identical with respect to the allegations, except for the dates and amounts of the respective loans and promissory notes. Each complaint demanded the amount of the respective note and 25 percent attorney fees and costs.

      . The only action which included the wording of Rule 2958.3 was no. 3042.

      . The state and/or local rules to confess judgment, Pa.R.C.R 2950 et seq., typically require separate affidavits, but defendant did not assert this technical defect in its petition which constitutes a waiver of that defense. Pa.R.C.P. 2959(c). In addition, this defect is of the sort which could be overlooked or amended nunc pro tunc. West Penn Sand & Gravel Co. v. Shippingport Sand Co., 367 Pa. 218, 221, 80 A.2d 84, 85 (1951) (permitting amendment to affidavit of default); Tabas v. Robert Development Co., 223 Pa. Super. 290, 294, 297 A.2d 481, 484 (1972) (holding that allowance of affidavit of nonmilitary service to be entered nunc pro tunc was not abuse of discretion where defendants were not actually in the military service).

      . It is unclear whether CPS is raising the ambiguity issue as grounds for striking or opening the judgment, However, this court need only address it in determining whether to strike the judgment since it does not require this court to consider matters outside of the record filed to confess judgment.

      . The interpretation and construction of a contract is a matter of law to be decided by the court. Roman Mosaic & Tile Co. v. Thomas P. Carney Inc., 729 A.2d 73, 77 (Pa. Super. 1999).

      . Specifically, the note in Zimmerman provided, in pertinent part, as follows:
      “For value received, I/we or either of us promise to pay to the order of Master Homecraft Company, the sum of $9,747 in_monthly installments of $_each, beginning on the day of_, 19, and continuing on the same day of each and every month thereafter until the full amount thereof is paid.” Id. at 403,222 A.2d at 441-42.

      . Thus, defendant contends that “the minor Morrison’s claims are barred by the doctrine of estoppel... the lack and/or failure of consideration ... by the doctrine of laches ... by the doctrine of release... due to fraud... due to the doctrine of impossibility of performance ... due to the doctrine of mistake... due to his failure to state a claim upon which relief may be granted ... by the doctrine of waiver ... by the statute of frauds ... by the doctrine of setoff. .. because of illegality ... [and] by the doctrine of duress.” Petition at ¶¶ 24-39.

      . There are three separate actions on three notes which are identical except for the note and judgment amounts.


source: Caselaw Access Project

author: CARUSO, J.,

license: Public Domain

text:
    Medical Wellness Associates P.C. v. Heithaus

      C.P. of Westmoreland County,
    no. 6500 of 2000.

      Charles Artz and Timothy Fedele, for plaintiffs.

      Eugene Berry, for defendant.
    February 13, 2001
   CARUSO, J.,

This matter is before the court for adjudication as the result of a complaint in equity filed on October 17, 2000, containing six counts. On October 20, 2000, the plaintiff filed a motion for preliminary or special injunction. The court scheduled a hearing on said motion for November 3, 2000. At the request of Eugene G. Berry, Esq., counsel for the defendant, the hearing of November 3, 2000, was continued by order of court dated November 1, 2000, to the date of November 28, 2000. The order of court of November 1, 2000, also directed that upon agreement of counsel the hearing to be held on November 28, 2000, would be for a final adjudication of a permanent injunction. The hearing scheduled for November 28, 2000, was once again continued but this time at the request of counsel for the plaintiff. The hearing was continued to January 4, 2001. On December 12, 2000, the defendant filed an answer, new matter, and counterclaim. Thereafter, hearings were held on January 4, 2001; January 19, 2001; and January 30, 2001. After the taking of said testimony, the court enters the following adjudication.

ISSUES

(1) Is the restrictive covenant contained in the employment agreement dated October 23, 1994, as amended by the amendments thereto of July 22, 1996, and October 22, 1996, supported by adequate consideration?

(2) Is the restrictive covenant not to compete reasonable in terms of time and geographical restriction?

(3) Is the plaintiff/employer entitled to injunctive relief and/or damages for breach of the restrictive covenant?

(4) Did the defendant misappropriate “confidential information” in violation of paragraph 19(d) of the said employment agreement as amended?

(5) Is the plaintiff/employer entitled to injunctive relief as a result of said violation?

(6) Did the defendant breach the said employment agreement as amended, specifically the provisions set forth in paragraphs 19(b) and 19(d)?

(7) Is the plaintiff/employer entitled to liquidated damages in the amount of $25,000, together with attorney’s fees and costs of suit pursuant to paragraph 19(f) of said agreement as amended?

(8) Is the plaintiff/employer entitled to unliquidated damages and/or punitive damages?

(9) Did the defendant intentionally interfere with the doctor-patient contract and relationships?

(10) Is the plaintiff/employer entitled to damages for intentional interference with the doctor-patients contracts and relationships?

(11) Did the plaintiff/employer engage in fraud?

(12) Does the plaintiff/employer have “unclean hands” so as to bar plaintiff’s entitlement to equitable remedies?

(13) Did the plaintiff/employer unlawfully and unjustly terminate the defendant for his religious beliefs in direct contravention of his civil rights under the state and federal constitutions?

(14) Did plaintiff/employer wrongfully and unjustly terminate the defendant without just cause in violation and in breach of the said employment agreement as amended?

(15) Did the plaintiff/employer methodically work to reduce the defendant’s patient load causing his productivity to decline and thus constructively discharge the defendant?

(16) Did the plaintiff/employer breach a covenant of good faith and fair dealing implied in said employment agreement, as amended, by engaging in a continuing pattern of harassment of the defendant and by failing to pay for reports generated by the defendant?

(17) Is the defendant entitled to money damages on his counterclaim?

FINDINGS OF FACT

(1) The plaintiff is Medical Wellness Associates P.C., a Pennsylvania corporation, with offices located at 91 Lincoln Way East, Jeannette, Westmoreland County, Pennsylvania.

(2) Chiropractic Nutritional Associates P.C., was the corporate predecessor to MWA. On or about July 23, 1996, CNA merged with and into MWA.

(3) The defendant is Richard J. Heithaus D.C., and has established an office at 533 Washington Avenue, Suite 204, Bridgeville, Allegheny County, Pennsylvania.

(4) The defendant has executed a series of employment agreements with CNA and MWA. The first was executed on October 23, 1991, and had a term of one year. The second was entered into on October 23,1992, and had a term of two years. The third employment agreement was entered into on October 23, 1994, and had a term of two years.

(5) The defendant executed an addendum to the 1994 employment contract under which addendum the defendant’s rights, duties, and obligations were assigned to MWA, the surviving entity of the CNA-MWA merger. This addendum was effective July 22, 1996.

(6) The defendant executed an amendment to the 1994 employment contract with MWA which was effective October 22, 1996. In this amendment, MWA increased the term of the contract, the compensation to be paid to the defendant, the amount of the health insurance premium to be paid by the employer and the amount of vacation to which the defendant was entitled each year.

(7) The defendant executed the employment agreement dated October 23, 1991, on the same date he began employment with CNA which is MWA’s corporate predecessor. This first agreement terminated on October 23,1992. The defendant entered into a new and second employment agreement with CNA on October 23, 1992. This second employment agreement terminated on October 23, 1994.

On October 23, 1994, the defendant entered into a new and subsequent employment agreement with CNA. This agreement was to have a term of two years. Thereafter on July 22,1996, the defendant executed an amendment to the employment agreement wherein the defendant acknowledged that the rights and responsibilities under the agreement were to be assigned by CNA to MWA effective July 22, 1996. This amendment provided that all other terms and conditions in the agreement remain the same and unaffected by the amendment. Thereafter on October 22, 1996, one day prior to the expiration of the term of the employment agreement dated October 23, 1994, the defendant executed an amendment to the employment agreement wherein, in pertinent part, the term of the employment agreement of October 23,1994, was extended for a period through and including October 22, 2001. In addition, the compensation of the defendant was increased, as well as the period of vacation to which the defendant was entitled to each contract year. Also, the employer agreed to pay an additional $800 towards the defendant’s hospitalization insurance. All other terms and conditions in the agreement of October 23, 1994, were to remain the same and unaffected by this amendment.

(8) Paragraphs 19(b)(1) and (3) of the employment agreement, as amended, prohibited defendant from practicing chiropractic within a 45-mile radius of MWA’s office for two years following the termination of his employment with MWA. MWA terminated the defendant’s employment for cause on May 27, 2000.

(9) The defendant opened a practice in the month of July in the year 2000 at 533 Washington Avenue, Suite 204, Bridgeville, Pennsylvania.

(10) The straight-line distance between MWA’s offices in Jeannette and the defendant’s location in Bridgeville is 26.775 miles as established by Richard F. Territ, a registered professional land surveyor.

(11) The defendant is practicing chiropractic within the 45-mile radius and two-year restriction prohibited by section 19(b)(1) and (3) of the employment agreement of October 23, 1994, as amended.

(12) The defendant caused to be published in the Greensburg and Pittsburgh editions of the Tribune Review as well as the Almanac, a local newspaper in Bridgeville, Pennsylvania, an advertisement of the opening of his practice and caused the same to be circulated within the geographic and time limitations contained in the restrictive covenant.

(13) The defendant has also broadcast a weekly one-hour radio program entitled “Health Matters” on WKHB 620 AM located in Greensburg. This broadcasting began in September of 2000 within the geographic and time limitations contained in the restrictive covenant. During said broadcast the defendant invites patients to seek professional treatment and care at his Bridgeville location.

(14) The defendant has also presented three seminars and public informational events in September, October, and November 2000 in Allegheny County at which he distributed business cards and fliers promoting his practice at the Bridgeville location.

(15) The noncompetition covenants under section 19(b)(1) preclude the defendant from soliciting MWA’s patients. The advertisements, radio program, and seminar presentations constituted solicitation of potential patients within the geographic and time limitations in the subject restrictive covenant and specifically violated paragraph 19(b)(1).

(16) In paragraph 19(b)(4), the defendant agreed that he would not provide, within a 45-mile radius of MWA, professional chiropractic, rehabilitation or nutritional services to any customer of the MWA with whom or with which he was a principal contact at any time during his employment with the employer. The defendant has treated at least 41 patients he had previously treated while at MWA.

(17) Paragraph two of the employment agreement dated October 23, 1994, as amended, provided that the employer may terminate the agreement at any time during the term of that agreement with or without cause, for any or no reason, by giving 30-days written notice of termination to the employee. This paragraph also provided, however, that it would not prohibit the employer from immediately terminating employees’ employment at any time for “cause” pursuant to paragraphs 18 and 19 of the agreement. Paragraph 18(g) of the employment contract permits MWA to terminate the defendant immediately for cause. Paragraph 19(c) of the said employment agreement defines cause to include the defendant’s failure or refusal to perform his duties or obligations under the contract; defendant’s failure to correct, to MWA’s satisfaction, within 15 days after written notice, any deficiency of his performance under the agreement; theft or abuse of MWA’s property or the property of its patients; and violation of MWA’s rules, policies, procedures, or practices.

(18) MWA provided written notice to the defendant that his efforts to recruit new patients were inadequate; that his productivity in terms of total patient visits and revenues generated was insufficient; and that he was habitually late for work causing problems with MWA’s patients.

(19) MWA has proven by a preponderance of the evidence that the defendant was habitually tardy and that his productivity was below acceptable levels consistent with MWA’s policies and procedures.

(20) MWA had established a written policy, that was distributed to all employees, including the defendant, that prohibited use of a specific copying machine. The defendant violated this policy on several occasions after it was published on April 5, 2000, by nevertheless copying patient files and records by using said copying machine.

(21) Paragraph 19(d) of the employment agreement provides that the defendant was not to remove any writings or materials containing “confidential information” from the employer’s premises or possession and that he was not to use such confidential information for his own benefit. The defendant violated this prohibition by copying and taking from MWA’s premises specific patient information and records.

(22) Following the termination of the defendant by MWA, for cause, on May 27, 2000, there was no serious impairment of the ability of MWA to deliver medical care to the patients of the defendant. MWA is a group practice consisting of eight medical or chiropractic physicians. Further, given the number of chiropractors working within the geographic area covered by restrictive covenant, it appears that patients treated by the defendant while employed at MWA would have not have had any problem accessing available chiropractic and nutritional care within that geographical limitation.

(23) The practice of MWA is local and regional and therefore draws patients from numerous counties surrounding Westmoreland County and from regions and jurisdictions beyond Pennsylvania, thus the market for patients extends up to and well beyond the 45-mile geographic limitation contained in the restrictive covenant.

(24) As part of the employment agreement of October 23, 1994, as amended, the defendant acknowledged that he was in a position to earn a livelihood without violating the provisions of the restrictive covenant contained in paragraph 19 and further acknowledged that the covenant was a material condition to the continuation of his employment by MWA. Notwithstanding this acknowledgement, the defendant did not obtain employment or practice opportunities in the remainder of the Commonwealth of Pennsylvania outside of the 45-mile restrictive covenant radius.

(25) Paragraph 19(f) provides that MWA may seek an injunction to protect their interest in the event the defendant breached the restrictive covenant contained in said paragraph 19, and also provides that MWA may seek attorney’s fees and court costs in addition to other damages or recovery, if MWA prevailed in any litigation to enforce the restrictive covenant.

(26) In 1998 and 1999, Dr. Martin Gallagher, a principal of MWA, began a practice of allowing the defendant, Dr. Heithaus, to perform reports of findings on patients following Dr. Gallagher’s initial cognitive examination of these patients. A method of payment was developed for this practice. Dr. Gallagher became dissatisfied with the manner in which Dr. Heithaus was performing the reports of findings and the method of payment and terminated this practice in January of 2000.

(27) At the time this practice was begun by Dr. Gallagher, the defendant, Dr. Heithaus, did not request or cause to be executed any addendum to his employment agreement with MWA requiring or imposing any legal obligation on MWA to compensate him for the reports of findings under the employment agreement.

(28) In June of 1999, MWA implemented a health care reimbursement compliance program. Raymond Carney, the chief executive officer of MWA, was appointed as the compliance officer under said plan. The plan that was developed was consistent with office of inspector general’s model guidelines. This plan conferred the right and imposed the obligation upon the defendant, Dr. Heithaus, to place in writing any improprieties or allegations of fraud. Dr. Heithaus acknowledged in July of 1999 that he had read, reviewed, and understood the compliance plan and agreed to abide by its terms.

(29) At no time did Dr. Heithaus submit any written complaint about billing or coding improprieties at MWA.

(30) There has been no evidence presented that Dr. Gallagher or any other employee of MWA engaged in a conduct or practice that was inconsistent with any federal, state, or commercial health insurer, billing and coding rule. Further, there is no evidence that MWA engaged in any billing fraud.

(31) Dr. Rita Ellithorpe submitted a complaint pursuant to the aforesaid compliance plan. This complaint was investigated by Robert Ridge, Esq., a former U.S. attorney in the Department of Justice’s Civil Fraud Division. This investigation was conducted at the request of MWA. It was the determination of Mr. Ridge that MWA complied in all material respects with its compliance plan and that the compliance plan worked as it was intended. Mr. Ridge further concluded that MWA had not engaged in any conduct that could be construed as fraudulent or improper.

(32) The evidence presented by the defendant, Dr. Heithaus is insufficient to establish by a preponderance of the evidence that his termination for cause was a pretext.

(33) The defendant was habitually tardy and continued to be habitually tardy following written warnings concerning said tardiness.

(34) The defendant, Dr. Heithaus, photocopied confidential information and removed the same from the office, including patient records and documentation. This copying and removal was in violation of MWA’s written policies and contractual rules to the contrary.

(35) The defendant has failed to prove by a preponderance of the evidence that any statements made to him concerning praying with patients was in any way religious discrimination, or impeded his ability to pray with patients or violated any other provision of the employment agreement of October 23, 1994, as amended.

(36) The employment agreement of October 23, 1994, as amended, provides that the defendant would pay to MWA, as liquidated damages for his violation of the restrictive covenant contained in paragraph 19 thereof, the sum of $25,000. This agreement also provided that “the parties agree that this provision for liquidated and agreed upon damages is a bona fide provision for such, and is not a penalty.” However, the plaintiffs have presented no evidence that the amount set forth in said employment agreement had any relation to the extent of the injury that may be caused by a breach of the covenant or that the amount fixed as liquidated damages was a reasonable forecast of the just compensation for the harm that could be caused by the breach. There has been no evidence presented that the amount set forth as liquidated damages was reasonably related to a reasonable estimate of just compensation for actual damages as opposed to a provision that was set forth in the agreement only to secure compliance with the restrictive covenant and therefore to act as a penalty for noncompliance.

CONCLUSIONS OF LAW

(1) A restrictive covenant not to compete must satisfy three requirements:

“(a) the covenant must be related to a contract for employment;
“(b) the covenant must be supported by adequate consideration; and
“(c) the application of the covenant must be reasonably limited in both time and territory.”

(2) The restrictive covenant to which the defendant, Dr. Heithaus, was subjected, was ancillary to his employment with MWA beginning October 23, 1994.

(3) The bargained-for exchange of the promises of MWA to the defendant, Dr. Heithaus, and from Dr. Heithaus to MWA contained in the employment agreement of October 23, 1994, constituted adequate consideration to support the covenant.

(4) The two-year, 45-mile radius restrictive covenant is reasonable in duration of time and in geographic scope as it is reasonably necessary for the protection of the employer, MWA, and does not impose an undue hardship on the employee.

(5) The defendant, Dr. Heithaus is in violation of the two-year, 45-mile radius restrictive covenant contained in paragraph 19 of the employment contract. The defendant materially breached paragraph 19(b)(1) and (3) by establishing a chiropractic and nutritional practice at 533 Washington Avenue, Bridgeville, Pennsylvania, in July 2000 and continuing through trial. In addition, the defendant materially breached paragraph 19(b)(4) of the employment agreement by treating patients at the Bridgeville location for whom he provided chiropractic and nutritional services while at MWA.

(6) The aforesaid breach by the defendant, Dr. Heithaus, interfered with MWA’s business relationships with its patients.

(7) The evidence is insufficient to establish that the plaintiff/employer, MWA, engaged in fraud.

(8) The evidence is insufficient to establish that the plaintiff/employer, MWA, has “unclean hands.”

(9) The evidence is insufficient to establish that the plaintiff/employer, MWA, unlawfully and unjustly terminated the defendant for his religious beliefs.

(10) The evidence is insufficient to establish that the plaintiff/employer, MWA, wrongfully and unjustly terminated the defendant without just cause.

(11) The evidence is insufficient that the plaintiff/ employer, MWA, methodically worked to reduce the defendant’s patient workload and thus the evidence is insufficient to establish a constructive discharge of the defendant.

(12) The evidence is insufficient to establish that the plaintiff/employer, MWA, breached a covenant of good faith and fair dealing implied in the employment agreement of October 23, 1994, as amended, by engaging in a continuing pattern of harassment.

(13) The evidence is insufficient to establish that the plaintiff/employer, MWA, breached the employment agreement by failing to pay for reports generated by the defendant, Dr. Heithaus.

(14) MWA did not materially breach the employment agreement of October 23, 1994, as amended.

(15) The practice established by Dr. Gallagher to pay Dr. Heithaus for reports of findings that were prepared by Dr. Heithaus on behalf of Dr. Gallagher and other chiropractors and/or medical doctors, constituted the payment of a bonus as permitted under paragraph 11 of the said employment agreement. This practice did not rise to a modification of the employment agreement. Therefore, the discontinuation of the practice of Dr. Heithaus preparing reports of findings for others and the payment therefore, did not constitute a material breach of the employment agreement.

(16) The defendant failed to prove by a preponderance of the evidence that his termination for cause was pretextual in that sufficient reasons actually existed for the termination.

(17) The defendant, Dr. Heithaus, materially breached paragraph 19(d) of the employment contract by removing from MWA’s premises originals and copies of patient medical records and documentation.

(18) The defendant, Dr. Heithaus, has failed to carry his burden of proof with regard to his counterclaim and the same shall be dismissed with prejudice.

(19) Paragraph 19(f) of the employment agreement of October 23, 1994, as amended, provides that in the event it is necessary for the employer to sue to enforce the provisions of this agreement, the employee shall be liable to the employer if the employer prevails in the suit for attorney’s fees and costs of suit; in addition to damages or other recovery. However, there has been no evidence presented relating to the issue of attorney’s fees and therefore the same have not been specifically proven.

DISCUSSION

Plaintiff Medical Wellness Associates P.C. seeks an injunction against defendant Richard J. Heithaus D.C. as a result of Heithaus’ violation of an enforceable noncompetition clause in his employment agreement with MWA.

MWA is a multi-disciplinary health care practice offering, inter alia, professional chiropractic and nutritional counseling services as an alternative to traditional medicine, whose market and patient base extends within a radius of at least 60 miles from its location in Jeannette, Pennsylvania. But for the covenants in his contract with MWA, defendant, Heithaus, a licensed chiropractor, may practice chiropractic anywhere else in Pennsylvania by virtue of his license and may also provide nutritional counseling services anywhere in Pennsylvania, as such services do not require separate licensure in the Commonwealth.

MWA and its predecessor in interest, Chiropractic Nutritional Associates Inc., have offered professional chiropractic and nutritional counseling services in the general proximity of its present address in Jeannette, Pennsylvania, since 1974.

On or about October 23, 1991, defendant Heithaus entered into an employment agreement with CNA detailing the rights, duties and responsibilities of Heithaus relating to the practice of chiropractic and nutritional services he would render for the practice, confidential patient records and information, trade secrets and noncompetition. On October 23, 1992, and October 23, 1994, Dr. Heithaus was re-employed by further agreements executed by the parties on those dates. CNA’s rights and responsibilities as the employer under the aforesaid agreements were assigned on July 22, 1996, to plaintiff MWA (contemporaneous with the merger of CNA with and into MWA). The employment agreement was further amended on October 22, 1996, to increase Heithaus’ compensation and fringe benefits as well as to extend the term of Heithaus’ employment with MWA.

During defendant Heithaus’ employment with MWA, defendant provided chiropractic treatment and nutritional counseling to hundreds of patients developed by MWA.

On or about January 7,2000, MWA’s CEO, Raymond T. Carney, met with defendant Heithaus to discuss defendant’s low productivity and habitual tardiness, in contravention of his obligations under the employment agreement.

On or about April 5, 2000, Mr. Carney transmitted a memorandum to all staff at MWA restricting use of copying equipment. Despite repeated offers of help and warnings concerning low productivity and perpetual tardiness, defendant Heithaus failed to comply with his duties and responsibilities under the employment agreement throughout the year 2000. On or about May 1, 2000, Mr. Carney again met with defendant Heithaus to discuss defendant’s low productivity and continued unacceptable tardiness in contravention of the terms of the employment agreement.

Defendant Heithaus was employed in a position of trust and confidence, and had access to MWA’s trade secrets, including but not limited to patient lists, patient names, addresses and telephone numbers, medical records, pricing information, billing procedures, patient good will, and patient development and advertising techniques, all of which were highly confidential and valuable assets of MWA. On or about May 25, 2000, defendant Heithaus, was observed by Gloria Dell, a fellow employee of MWA, copying confidential patient medical records on MWA’s copying equipment subject to the earlier communique to staff and in direct contravention of defendant Heithaus’ employment agreement. Later, under oath, defendant Heithaus admitted that he had taken from MWA’s premises confidential patient information without the consent of MWA. As a result of defendant Heithaus’ violations of his obligations under the employment agreement and acts of misconduct delineated above, MWA terminated defendant Heithaus’ employment for cause effective May 31, 2000.

Pursuant to the terms of the amended employment agreement of October 23, 1994, as amended, defendant Heithaus explicitly covenanted not to provide chiropractic, rehabilitation, or nutritional services of the types provided by MWA in any capacity and at any location within a 45-mile radius of MWA’s office for two years after termination of his employment. A restrictive covenant was contained in each of the employment contracts entered into by defendent Heithaus with MWA and its predecessor in interest and was therefore ancillary to Heithaus taking employment at MWA and he executed the initial employment agreement containing the restrictive covenant prior to performing any professional services on behalf of MWA and its predecessor. All professional employees of MWA are required to have executed employment agreements containing covenants not to compete substantially identical to the covenant signed by defendant Heithaus.

Subsequent to his termination of employment for cause with MWA defendant Heithaus established at 533 Washington Avenue, Suite 204, Bridgeville, Pennsylvania, located 26.775 miles away from MWA’s location, his own office for the practice of chiropractic and nutritional counseling identical to those services provided by MWA. Defendant Heithaus has also solicited MWA’s patients and other individuals with whom he established a professional relationship while employed by MWA through telephone contact, advertisements in the Greensburg Tribune announcing the opening of the “Heithaus Chiropractic and Nutrition Clinic” and indicating that new patients were being accepted by appointment. Likewise, he has actively solicited patients through copies of flyers released in the community and on-line advertising, together with a weekly radio program referred to as “Health Matters” aired on WKHB 620 AM in the Greensburg area. He actively solicits patients by advising listeners that he takes patients by appointment at the Bridgeville address. Moreover, he has participated in seminars where he has responded to personal health questions of attendees specifically involving the practice of chiropractic and nutritional counseling.

Pennsylvania courts have long held that separate and distinct standards govern the issuance of a preliminary injunction as opposed to a permanent injunction. “[A] preliminary injunction turns on the presence of imminent, irreparable harm, while a permanent injunction is warranted if no adequate remedy at law exists for a legal wrong.” City of Chester v. Chester Redevelopment Authority, 686 A.2d 30, 35 (Pa. Commw. 1996). See also, Fox-Morris Associates Inc. v. Conroy, 460 Pa. 290, 294, 333 A.2d 732, 734 (1975) (Roberts, J. concurring); Soja v. Factoryville Sportsmen’s Club, 361 Pa. Super. 473, 522 A.2d 1129 (1987); LARA Inc. v. Dorney Park Coaster Co., 116 Pa. Commw. 548, 542 A.2d 220 (1988), app. denied 522 Pa. 580, 559 A.2d 40 (1989).

West Penn Specialty MSO Inc. v. Nolan, 737 A.2d 295 (Pa. Super. 1999) and New Castle Orthopedic Associates v. Burns, 481 Pa. 460, 392 A.2d 1383 (1978), together with Geisinger Clinic v. Di Cuccio, 414 Pa. Super. 85, 606 A.2d 509 (1992), app. denied, 536 Pa. 625, 637 A.2d 285 (1993), provide the seminal analysis in the enforcement of noncompete clauses in health provider employment contracts. West Penn Specialty and New Castle Orthopedic are instructive for the purpose of evaluating a noncompete covenant in a health care practitioner’s employment agreement.

Where a restrictive covenant seeks to limit the professional practice of a health care provider, the court will scrutinize the effect of the resulting loss of similar professional health care services on the public interest, but will also apply commercial standards related to an employer’s loss of business opportunity and competitive market advantage, damage to existing patient relationships, and foreshadowing of the disruption of business relations that may result in incalculable damage. West Penn Specialty, supra; New Castle Orthopedic, supra.

In order for MWA to show the activity of defendant Heithaus is actionable, and its right to an injunction is clear, the noncompetition agreement must be enforceable. To be enforceable, the restrictive covenant must meet three requirements: (1) the covenant must relate to the contract for employment; (2) the contract must be supported by adequate consideration; and (3) the covenant must be reasonably limited in both duration of time and geographical extent. Davis v. Warde Inc. v. Tripodi, 420 Pa. Super. 450, 616 A.2d 1384 (1992), app. denied, 536 Pa. 624, 637 A.2d 284 (1993); see also, Geisinger Clinic v. Di Cuccio, 414 Pa. Super. 85, 606 A.2d 509 (1992), app. denied, 536 Pa. 625, 637 A.2d 285 (1993).

A restrictive covenant that is a part of a contract of employment, and not an afterthought to impose additional restrictions, is ancillary to the employment relationship and thus supported by valid consideration. Beneficial Finance Co. of Lebanon v. Becker, 422 Pa. 531, 222 A.2d 833 (1966). On October 23, 1991, the date Heithaus began employment at MWA (formerly CNA) Heithaus executed an employment agreement containing a restrictive covenant prior to performing any professional duties on behalf of MWA. It is well established that when a restrictive covenant is part of a contract of employment the consideration for the covenant is the job itself. Geisinger Clinic v. Di Cuccio, supra; Quaker City Engine Rebuilders Inc. v. Toscano, 369 Pa. Super. 573, 535 A.2d 1083 (1987). Moreover, the noncompete covenant contained in the October 23, 1994 employment agreement, as amended, that MWA seeks to enforce, is supported by consideration in the form of the re-employment of Dr. Heithaus for an additional term and the bargained-for and exchanged promises of the parties contained therein. This employment agreement of October 23, 1994, was a new contract of employment and the restrictive covenant was ancillary thereto.

To be enforceable, a restrictive covenant must be reasonably limited in both duration of time and geographic extent. A covenant not to compete is reasonably limited if it is within the time and territory that is reasonably necessary for the protection of the employer and does not impose an undue hardship on the employee. Modern Laundry & Dry Cleaning Co. v. Farrer, 370 Pa. Super. 288, 536 A.2d 409 (1988); Jacobson & Co. Inc. v. International Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967). The restrictive covenant agreed to by the defendant, Heithaus, is reasonably limited in duration to a period of two years and reasonably limited in territory to a 45-mile radius from MWA’s principal place of business, which is far less than MWA’s general patient market. See e.g., Geisinger Clinic v. Di Cuccio, supra (two-year, 50-mile radius covenant upheld against physician); DeMuth v. Miller, 438 Pa. Super. 437, 652 A.2d 891 (1995) (five-year, 50-mile radius covenant upheld against accountant); John G. Bryant Co. Inc. v. Sling Testing and Repair Inc., 471 Pa. 1, 369 A.2d 1164 (1977) (three-year, geographic area covering parts or three different states covenant upheld against salesman). Moreover, the burden of proof is on the defendant to show that the covenant is unreasonable or that it should not be enforced. Bryant, supra, 471 Pa. at 12, 369 A.2d at 1169.

Pennsylvania courts have consistently affirmed covenants not to compete for terms between two and three years after employment ends. See Bryant, supra (three years); Geisinger Clinic, supra (two years against a physician); Hayes v. Altman, 424 Pa. 23, 225 A.2d 670 (1967) (three years against an optometrist); Worldwide Auditing Services Inc. v. Richter, 402 Pa. Super. 584, 587 A.2d 772 (1991) (two years). During defendant’s employment with MWA, the defendant provided chiropractic treatment and nutritional counseling to hundreds of patients developed by MWA. A two-year restrictive covenant is therefore reasonable under the circumstances.

Moreover, the 45-mile radius limitation from MWA’s place of business is reasonable. Pennsylvania courts have established a linear connection between reasonableness of a geographic restriction and the employer’s verifiable market. See Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250 (1976); Bryant, supra; Geisinger Clinic, supra; Worldwide Auditing Services, supra; Volunteer Firemen’s Insurance Services Inc. v. CIGNA Property and Casualty Insurance Agency, 693 A.2d 1330 (Pa. Super. 1997) (upholding nationwide noncompete agreement). MWA has established a patient base in excess of a 60-mile radius around its location at 91 Lincoln Way East, Jeannette, Pennsylvania. The covenant is designed to prevent a disturbance in the patient relationships that have been established between MWA and its patients developed over a period of time beginning in 1978, and adequately reflects MWA’s verifiable market area, therefore the 45-mile radius limitation is geographically reasonable and enforceable.

The injury caused by a violation of a covenant not to compete is particularly difficult to quantify for damage purposes. Records Center Inc. v. Comprehensive Management Inc., 363 Pa. Super. 79, 525 A.2d 433 (1987). The Superior Court in Records Center stated:

“ ‘The great weight of modem authority is to the effect that one who has been or will be injured [by violation of a covenant not to compete] is ordinarily entitled to the equitable remedy of injunction----’... The Pennsylvania Supreme Court has also stated that such covenants are prima facie enforceable in equity.” Id. at 86, 525 A.2d at 436.

The Superior Court recently explained why equitable relief is necessary in virtually all of these cases: “ ‘[i]t is not the initial breach of the covenant which necessarily establishes 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.” West Penn Specialty, supra at 299 (quoting Bryant, 471 Pa. at 8, 369 A.2d at 1167). (emphasis added)

“[G]rounds for an injunction are established ‘where the plaintiff’s proof of injury, although small in monetary terms, foreshadows the dismption of established business relations which would result in incalculable damage should the competition continue in violation of the covenant.’. . . 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.’ ” Id. at 299 (quoting New Castle Orthopedic, supra at 466, 392 A.2d at 1386 and Bryant, supra at 8, 369 A.2d at 1167).

In West Penn Specialty, the court enjoined a physician specializing in the treatment of cancer (oncology) from competing with her former employer under a restrictive covenant prohibiting her from establishing a practice within the entire time of her five-year contract plus one year subsequent thereto within 10-mile radius of the employer’s primary practice site. This court found the former employer’s loss of several patients reasonably foreshadowed a continuing exodus of more patients. The court analyzed the employer’s interest in terms of commercial concepts, finding that the physician’s “defection” imposed a “substantial-competitive disadvantage” on the employer, and that her “departure signaled a significant loss of business opportunity and market advantage.” Id. at 299.

The evidence in this case has shown that Dr. Heithaus has treated at least 48 patients that have had a prior connection to MWA. He has actively solicited patients by way of telephonic and written material to begin treating with him in Bridgeville. He conducts a weekly radio program referred to as Health Matters airing on WKHB 620 AM in the Greensburg area well within the 45-mile radius of MWA’s office and practice location, and has participated in health seminars within the restricted area where he has responded to personal health questions of attendees which specifically involve the practice of chiropractic and/or nutritional counseling. The threat of further patient losses to MWA is real and substantial yet impossible of calculation by an accurate pecuniary standard.

The services furnished by defendant are of special, unique, unusual, extraordinary and intellectual character giving them a peculiar value. MWA’s relationships with its patients are valuable assets acquired as a result of its efforts over a long period of time. The effect of the defendant’s interference with those relationships is unascertainable and irreversible. Therefore, such conduct is appropriately remedied by granting the permanent injunction requested by MWA.

Defendant Heithaus may practice chiropractic anywhere in Pennsylvania by virtue of his license and may provide nutritional counseling services anywhere in Pennsylvania, as such services do not require separate licensure in the Commonwealth. The entry of a decree nisi enjoining the defendant from practicing within the restrictive covenant area for which he bargained and to which he agreed would create no damage or undue hardship to him. This is so because the injunction would still permit the defendant to engage in the practice of chiropractic and nutritional counseling outside the reasonable geographic limitations.

The grant of an injunction against the defendant will not have an adverse impact on the public interest in the availability of chiropractic and nutritional counseling services in the restricted area. There is no dearth of qualified chiropractors and nutritional counselors offering alternatives to traditional medical treatment in the restricted area. On the contrary, the current public demand of alternative medical care provided by MWA and Dr. Heithaus is not great enough to outstrip the ability of MWA and other qualified health care providers to meet.

Defendant Heithaus has suggested that the term “radius” means a driving distance and not a straight line distance. Common understanding recognizes that a radius is a straight line measurement. See Webster’s New Collegiate Dictionary (1981 edition), p. 945 (“radius” is defined as “a line segment extending from the center of a circle or sphere to the curve or surface.. 1”). Expert testimony has established that the radius measured from MWA’s place of business in Jeannette to Heitheus’ chiropractic office in Bridgeville is 26.775 miles, well within the 45-mile restricted area to which Heithaus agreed.

The defendant contends that he was wrongly terminated by MWA. In support of this assertion, he indicates that he was “harassed” in the following ways: (1) although he admits to having been perpetually late to work and that he was aware of the policy concerning prompt arrival so as not to inconvenience patients, other people were late also and that should excuse him; (2) although he admits that his work bins were untidy, others had untidy bins also and that should excuse him; (3) he was advised by MWA that he could not pray with patients there; (4) MWA gradually decreased the number of patients referred to him for diagnosis and treatment and his productivity slumped as a result of this. The first and second contentions are not legitimate defenses to a violation of his employment contract causing his termination. The third contention has not been established by the evidence. The evidence has shown that defendant was referred patients on a rotation identical to that of the other chiropractors on staff.

The defendant has not proven that MWA materially breached any provision of the employment contract. Equity therefore demands that the injunction, together with other appropriate relief, be granted.

In addition to the equitable relief requested by the plaintiff, which this court shall grant, the plaintiff is also seeking damages. The damages being sought by plaintiff are unliquidated, actual damages as well as liquidated damages in the amount of $25,000, together with attorney’s fees and cost. The plaintiff has not presented evidence to this court regarding any specific actual damages that it has suffered. Its main contention has been that the same are difficult to measure and ascertain. Therefore, this court has no basis upon which to determine the amount of actual damages suffered by the plaintiff.

With regard to the request for liquidated damages, in situations where parties use a liquidated damages clause, the court must always first determine if this clause actually represents liquidated damages or is, in fact, a penalty. Holmes Electric Protective Co. v. Goldstein, 147 Pa. Super. 506, 24 A.2d 161 (1942). Therefore, since the presumption is that the clause is a penalty, the plaintiff must overcome this presumption by a preponderance of the evidence. The criteria that the court must review to determine whether or not the provision is valid or a penalty is as follows:

(1) The intention of the parties.
(2) The relation which the sum stipulated bears to the extent of the injury which may be caused by a breach.
(3) The ease or difficulty of measuring a breach in damages.
(4) The amount fixed must be a reasonable forecast of just compensation for the harm that may be caused by the breach. See Hanrahan v. Audubon Builders Inc., 418 Pa. Super. 497, 614 A.2d 748 (1992).

If the amount set forth is an amount meant only to secure compliance and not reasonably related to a reasonable estimate of just compensation for actual damages, then it would be a penalty and would fail as unenforceable. Hanrahan, supra. In the present case, the plaintiffs have not presented evidence concerning how it has been determined by the parties that $25,000 would be treated as liquidated damages. There is no evidence that has been presented that the amount set forth is in any way a reasonable forecast of the just compensation for the harm that may be caused by the breach. The plaintiff has presented no evidence that the amount set forth is reasonably related to an estimate of the just compensation for actual damages and thus have failed to overcome the presumption that the amount set forth was one meant only to secure compliance and thus a penalty in nature. Therefore, the request for liquidated damages shall be denied.

The plaintiff is also requesting attorney’s fees and costs. It is clear that the contract provides for such a remedy. However, once again the plaintiff has not, during the trial of this case, presented any evidence with regard to the matter of attorney’s fees and costs. Failing to do so, there is insufficient evidence upon which this court can determine the amount of such damages. Therefore, the request for such damages shall also be denied.

DECREE NISI

And now, February 13, 2001, in accordance with the foregoing decision, the following decree nisi is entered:

(1) The defendant, Richard J. Heithaus D.C., is ordered to cease practicing chiropractic and offering nutritional services to patients at his Bridgeville office within five days from the date of this decree.

(2) The defendant shall not compete in any way with employer, directly or indirectly, and will not consult with or have an interest in any business, firm, person, partnership, corporation, hospital, medical or chiropractic office, clinic or other health care provider or other entity which engages in the practice of chiropractic or provides chiropractic, rehabilitation, or nutritional services of the types provided by Medical Wellness Associates RC. at any location within a 45-mile radius of the office of Medical Wellness Associates, P.C.

(3) The defendant shall not accept employment with any business, firm, person, partnership, corporation, hospital, medical or chiropractic office, clinic, or other health care provider or other entity which engages in the practice of chiropractic or provides chiropractic, rehabilitation, or nutritional services of the types provided by Medical Wellness Associates, P.C. at any location within a 45-mile radius of the office of Medical Wellness Associates P.C.

(4) The defendant shall not practice chiropractic within a 45-mile radius of Medical Wellness Associates P.C.

(5) The defendant shall not provide, within a 45-mile radius of employer, professional chiropractic, rehabilitation or nutritional services, to any customer of Medical Wellness Associates P.C. with whom or with which he was a principal contact at any time during his employment with Medical Wellness Associates P.C.

(6) The defendant shall return to Medical Wellness Associates P.C. within five business days of this decree, all copies and originals of any documents he has removed from Medical Wellness Associates P.C.

(7) The defendant’s counterclaim is dismissed with prejudice.


author: CHESFOCK, J.,

text:
    Horwath v. Brownmiller

      C.P. of Monroe County,
    no. 7724 Civil 1999.

      Michael D. Collins, for plaintiff.

      Michael A. Gaul, for defendant.
    February 15, 2001
   CHESFOCK, J.,

On October 20, 1999, Richard J. Horwath and Kathryn Horwath, husband and wife, commenced this action by filing a complaint against Carlisle Brownmiller and Marian Brownmiller, husband and wife. In response, defendants filed preliminary objections to plaintiffs’ complaint on December 6, 1999, which this court disposed of by opinion and order dated March 3, 2000. Pursuant to an order of this court the plaintiffs filed an amended complaint on March 23, 2000. On April 12, 2000, the defendants filed an answer, new matter and counterclaim in response to plaintiffs’ amended complaint. Subsequently, on May 18, 2000, the plaintiffs filed a reply to the defendants’ new matter and counterclaim and asserting an additional new matter on their own behalf, to which the defendants filed a reply on May 30, 2000. Currently before this court is defendants’ second motion to compel discovery. Both parties filed briefs illustrating their respective position and this court heard oral arguments on this issue on January 2, 2001. We are now ready to rule upon defendants’ motion.

The following facts are relevant to the disposition of defendants’ motion. On November 1, 1998, plaintiffs entered into a two-year, written commercial lease agreement with the defendants. The lease contains a provision limiting the use of the premises to the “restoration, repair and sale of used cars” only. (See commercial lease ¶2.) The defendants also operated a business on the premises, namely, the sale of consigned children’s clothing. Prior to entering into the lease, plaintiffs had owned and operated a used automobile dealership in Stroud Township.

After taking possession of the premises, plaintiffs made various improvements necessary for the transfer of their used automobile dealership license and for the premises to conform to the Pennsylvania Department of Labor and Industry standards. In addition, plaintiffs moved their automobile repair equipment from their Stroud Township dealership to the leased premises.

In November 1998, a Chestnut Hill Township zoning officer issued a notice of violation to the defendants. According to a zoning ordinance, the premises had insufficient acreage on which to operate more than one business. The defendants appealed said notice to the Chestnut Hill Township Board of Zoning Appeals. After a hearing, the zoning hearing board concluded that plaintiffs could not use the premises for the “restoration, repair and sale of used cars.” (See In re Application for Zoning Permit Appeal of Marian and Carlisle Brownmiller opinion, p. 11.) Subsequently, this suit followed.

In filing the current motion to compel discovery, the defendants are seeking a more specific answer to interrogatory no. 13 served upon plaintiffs on April 19,2000, and copies of the plaintiffs’ federal, state and local tax returns for several recent years along with other accounting documentation. For the sake of judicial economy, defendants narrowed their request for copies of the plaintiffs’ federal, state and local tax returns to two years, 1998 and 1999. Defendants assert that this information is relevant because it is necessary to determine if the expenses concerning improvements to the leased premises applied to another income-producing enterprise. Defendants further assert that this information is necessary so that defendants may adequately prepare for trial.

Typically, the Rules of Civil Procedure pertaining to discovery permit discovery that is broad and liberal. Consequently, to determine whether defendants’ discovery requests are allowed by the rules, we must first examine the applicable language set forth in the rules regarding discovery. Specifically, Rule 4003.1 states, in relevant part:

“[A] party may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking a discovery or to the claim or defense of any other party . .. .” Pa.R.C.P. 4003.1.

Additionally, Rule 4003.3 provides, in pertinent part:

“[A] party may obtain discovery of any matter discoverable under Rule 4003.1 even though prepared in anticipation of litigation or trial by or for another party or by or for that other party’s representative, including by his or her attorney, consultant, surety, indemnitor, insurer or agent.” Pa.R.C.P. 4003.3.

Rule 4003.3 further states, by way of a limitation, that:

“The discovery shall not include disclosure of the mental impressions of a party’s attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories. With respect to the representative of a party other than the party’s attorney, discovery shall not include disclosure of his or her mental impressions, conclusions or opinions respecting the value or merit of a claim or defense or respecting strategy or tactics.” Pa.R.C.P. 4000.3

Finally, Rule 4011 sets forth the following restrictions and limitations on discovery contained in the rules.

“No discovery or deposition shall be permitted which
“(a) is sought in bad faith;
“(b) would cause unreasonable annoyance, embarrassment, oppression, burden or expense to the deponent or any person or party;
“(c) is beyond the scope of discovery as set forth in Rules 4003.1 through 4003.6; or
“(e) would require the making of an unreasonable investigation by the deponent or any party or witness.” Pa.R.C.P. 4011.

Thus, as the above language indicates, discovery under the rules is generously allowed, limitations and restrictions upon discovery are narrowly construed. See e.g., Schwab v. Milks, 8 D.&C.4th 557, 558 (C.P. Lackawanna Cty. 1990).

In relying on the above-quoted language, we find that the information requested in interrogatory no. 13 is reasonable and within the range of permissible discovery. With interrogatory no. 13, defendants seek the names and contact information for plaintiffs’ potential witnesses so that the defendants may adequately prepare for trial. Additionally, defendants request brief synopses of the expected testimony of these proposed witnesses. In considering defendants’ request, we find nothing in the rales which states that the information sought is outside the scope of allowable discovery or is privileged in some manner. Accordingly, we direct plaintiffs to provide a more specific answer to interrogatory no. 13 to the extent that they have not done so.

We now turn to the more difficult question of whether the plaintiffs should be required to provide the defendants with copies of their 1998 and 1999 federal, state and local tax returns. To begin, we note that there is a decisive split among the relevant authorities that have previously considered this question. For the reasons stated herein, we conclude that an individual’s tax return information is properly discoverable in certain situations despite conflicting opinions concerning disclosure of an individual’s tax returns.

Plaintiffs assert that defendants are not entitled to copies of their federal, state and local 1998 and 1999 tax returns because these documents carry a qualified privilege. We, however, disagree. “It has been held that federal income tax returns are not privileged, and that the courts have the power to compel the production of copies thereof where the information contained in the returns is relevant to the issues involved.” See e.g., Kine v. Forman, 205 Pa. Super. 305, 312, 209 A.2d 1, 4 (1965). Accordingly, we conclude that the better reasoned cases are those which hold that copies of a person’s tax return information are not privileged, particularly where the taxpayer’s income and/or business expenses pertain to the underlying suit.

Information concerning damages is as discoverable as information pertaining to liability. See e.g., The Hyman Cos. Inc. v. Brozost, no. 97-269,1997 U.S. Dist. Lexis 12129 at *3 (E.D. Pa. 1997). Generally, broad and liberal discovery is encouraged but this policy favoring generous discovery must be balanced against other public policies, which favor the nondisclosure of tax returns as confidential communications between the taxpayer and the government. Id. To balance these interests, we must apply a two-part test.

“First, the party seeking discovery must demonstrate relevance. Second, if relevant, the returns will be discoverable unless the party resisting discovery meets its burden of proving that there is no compelling need for the returns because an alternative source for the information exists.” See id. (citing Fort Wash. Resources Inc. v. Tannen, 153 F.R.D. 78, 80 (E.D. Pa. 1994)).

Applying this two-part test to the instant matter, we conclude that the defendants have established the relevance of the plaintiffs’ 1998 and 1999 federal, state and local tax returns to the underlying dispute. Defendants assert that this information is necessary to determine if plaintiffs’ business expenses and improvement costs actually pertained to the leased premises or another income generating, enterprise. Thus, we conclude that the plaintiffs’ income tax return information is relevant as it pertains to business expenses and/or deductions involving the leased premises and, therefore, we conclude that the defendants have satisfied the first element of this test.

We now consider the second element. To obtain discovery of an individual’s income tax return information, the defendants must show a compelling need for such documentation because the information is not available elsewhere. Upon review and thorough consideration of the record before us, we believe that the defendants have demonstrated that there is no adequate, alternative source for the information they seek. The plaintiffs have produced numerous receipts, and, admittedly, these receipts reflect the plaintiffs’ expenses for a building and/ or renovation project. However, these receipts are also generic and uninformative to the extent that these receipts do not indicate the items purchased or for what or where the plaintiffs used these items. Moreover, we note that these receipts provide little information other than providing a basis to calculate the total amount spent by plaintiffs in installing these improvements. However, very little other information may be gleaned from examining these receipts. Thus, we conclude that the defendants demonstrated a compelling need for the plaintiffs’ federal, state and local tax return information for 1998 and 1999, even with plaintiffs’ withdrawal of their claim for lost profits. Therefore, plaintiffs must turn over copies of their federal, state and local tax returns, accompanying schedules and worksheets for 1998 and 1999.

Despite our conclusion that plaintiffs should produce copies of their income tax returns for defendants’ inspection, we note that there are serious privacy interests implicated by the disclosure of this type of financial data. See e.g., The Hyman Cos. Inc., 1997 U.S. Dist. Lexis 12129 at *4 (citing DeMasi v. Weiss, 669 F.2d 114, 120 (3d Cir. 1982)). Therefore, we shall conduct an in camera review of such information and turn only those portions which are inherently pertinent to the underlying dispute regarding the alleged breach of a commercial lease. See e.g., Davis v. Buckhan, 68 D.&C.2d 734, 740 (C.P. Bucks Cty. 1975) (stating that income tax returns are not privileged but such information should be produced in camera for the trial court judge to determine what information, if any, is relevant to the within action and make only such latter information available to the moving party). Accordingly, plaintiffs should turn over their federal, state and local tax returns for 1998 and 1999 to the court so that we may conduct a preliminary in camera inspection of plaintiffs’ income tax returns. Upon determining which information set forth in plaintiffs’ income tax returns is relevant to the within action, we shall turn this information over to the defendants.

In light of the foregoing discussion, we enter the following order:

ORDER

And now, February 15, 2001, the defendants, Carlisle Brownmiller and Marian Brownmiller’s motion to compel discovery is hereby granted. Accordingly, the plaintiffs, Kathryn Horwath and Kathryn Horwath as administratrix of the estate of Richard J. Horwath a/k/a Rick J. Horwath must produce copies of their federal tax returns with accompanying schedules and worksheets for 1998 and 1999 within 20 days of receiving notification of this order. Further, these documents should be provided to this court for an in camera review in which this court will turn over the pertinent information to defendants and their counsel after blacking out any information unnecessary to the underlying dispute.

      . On October 26,1999, Richard J. Horwath (a/k/aRickJ. Horwath) suddenly passed away. On March 23,2000, pursuant to court order, the plaintiffs filed an amended complaint to eliminate Richard J. Horwath as a party and to include the estate of Richard J. Horwath and Kathryn Horwath as administratrix of her husband’s estate in his place.

      . Defendants filed their first motion to compel discovery on August 7, 2000. Defendants withdrew their first motion to compel discovery when the plaintiffs withdrew their claim for lost profits stemming from the underlying commercial lease dispute between these parties.

      . The defendants assert that the answer to the interrogatory was deficient and not in conformance with the Pennsylvania Rules of Civil Procedure relating to discovery. Specifically, defendants requested, per interrogatory no. 13, the plaintiffs to “[ijdentify all fact witnesses you intend to call at trial by name, address and telephone number and set forth the substance of their testimony.” (See defs.’ br. in supp. of mot. to compel disc, at p. 3.) The plaintiffs responded by providing the defendants with a list of potential witnesses, namely, Kathryn Horwath, Carlisle Brownmiller, Marian Brownmiller, Arnold Wallin, Robert Beers, Patricia Ferrara, Kevin Harrison, Connie Merwine, Emmanual DeStefano and David Graver. (See id.) The plaintiffs provided no other contact information for these individuals or any information as to their proposed testimony.
      Defendants’ request for production of documents served on April 19, 2000, together with defendants’ interrogatories asks plaintiffs to provide defendants with copies of the following:
      “(8) Plaintiffs’ federal, state and local tax returns for the years 1996, 1997.1998 and 1999.
      “(9) Plaintiffs’ general ledger, financial statements, balance sheets, cash flow statements and any other accounting records for the years 1996.1997.1998 and 1999.” (See defs.’ br. in supp. of mot. to compel disc, at p. 4.)
      In response to defendants’ request for these documents, plaintiffs provided none of their federal, state or local tax returns for the above-mentioned years or any other accounting documentation.

      . While we direct plaintiffs to provide the defendants with a brief encapsulation of the expected testimony of the proposed witnesses, plaintiffs are not required to provide defendants with a detailed or extensive summary of the proposed testimony. Rather, a brief sentence or two such that the defendants will not be unfairly surprised or prejudiced at trial should suffice.
      In reviewing the defendants’ motion, we note that the plaintiffs provided the defendants with additional information pertaining to their proposed witnesses, particularly, David Graver. Thus plaintiffs are required to provide any additional information only to the extent that the information subsequently provided to the defendants following the filing of this motion does not render this issue moot.

      . In support of the proposition that a person’s federal, state and/or local tax returns carry a qualified privilege, plaintiffs rely on the decision in Webb v. Standard Oil Company of California issued by the California Supreme Court en banc. See Webb v. Standard Oil Co. of California, 319 P.2d 621 (Cal. 1957). In Webb, the California Supreme Court ruled that an individual’s tax returns carried a statutory privilege and, therefore, was not discoverable. Id. at 623-24. The Webb court reached this conclusion by relying on California statutes that stated that a person’s tax returns could only be disclosed in certain, narrow circumstances. Id. The court in Webb concluded that to hold otherwise would nullify the effect of the applicable state statutes. Id. Thus, the California Supreme Court did not compel plaintiffs in Webb to produce copies of their federal or state tax returns. Id.

      Plaintiffs also rely on Schnabel v. The Superior Court of Orange County. See Schnabel v. The Superior Court of Orange County, 854 P.2d 1117 (Cal. 1993). Relying on the decision in Webb, the Schnabel court concluded that this type of financial information carried a qualified privilege in that California enacted several state statutes relating to the filing of tax returns carried secrecy provisions. Id. at 1126-27. Accordingly, the California Supreme Court concluded that the wife was entitled to discovery concerning the husband’s personal tax returns because of the nature of the underlying dispute as to alimony. Id. at 1128-29. Additionally, the Schnabel court permitted disclosure of certain corporate records and tax returns pertaining solely to the husband. Schnabel, 854 P.2d at 1128-29. The court in Schnabel however, drawing support from the Webb decision refused to allow disclosure of any corporate tax returns that could contain information regarding third parties not involved in the underlying alimony action because such financial information was subject to a judicially created privilege. Id. at 1126-27.
      In the instant matter, however, we find the plaintiffs’ reliance on the Webb and Schnabel decisions to be misplaced. As stated above, we find the cases, which conclude that a person’s tax returns are discoverable in certain, narrow situations to be more persuasive. When the party seeking disclosure of an individual’s tax returns through discovery can effectively demonstrate that such information is relevant and unavailable through alternative sources, then that party is entitled to obtain copies of those tax returns from the opposing party. Thus, we cannot conclude that an individual’s federal, state or local income tax returns carry either a qualified or absolute privilege, judicially created or otherwise.

      . See e.g., In re Greco Appeal, 30 D.&C.3d 661, 662 (C.P. Beaver Cty. 1984) (holding that federal tax returns are not privileged); Davis v. Buckham, 68 D.&C.2d 734, 737-38 (C.P. Bucks Cty. 1975) (concluding that if copies of a person’s tax returns were meant to be privileged then Congress would have chosen to enact an appropriate statute); Havetford Hall Inc. v. Hamilton Arms Inc., 34 D.&C.2d 22 (C.P. Delaware Cty. 1962) (permitting disclosure of the requested tax returns); and Noonan v. McGuire, 11 D.&C.2d 543, 547 (C.P. Allegheny Cty. 1953) (stating that “copies of tax returns have been held not to be privileged”). See also, PaineWebber Inc. v. Devin, 442 Pa. Super. 40, 658 A.2d 409 (1995) (here, the trial court permitted disclosure of corporate and personal tax returns because the party opposing such discovery failed to establish that such discovery would be oppressive, burdensome or harassing). But see, Sprague v. Philadelphia Newspapers Inc., 27 Phila. 333, 433 (Phila. Cty. 1993) (concluding that income tax returns are privileged); Schnabel v. The Superior Court of Orange County, 854 P.2d 1117 (Cal. 1993) (concluding that a judicially created privilege applied to income tax retuns); and Webb v. Standard Oil Company of California, 319 P.2d 621 (Cal. 1957) (court found that income tax returns were privileged because to do otherwise would nullify California state statutes.)

      . With respect to this first requirement, relevancy should be broadly and liberally interpreted and if there is any conceivable basis for relevancy, then the discovery should be permitted. In re Greco Appeal, 30 D.&C.3d 661, 662-63 (C.P. Beaver Cty. 1981).