Court Opinion

ID: 4221642
Source: CourtListenerOpinion
Date Created: 2017-11-17 20:15:51.327235+00
Date Added: 2024-06-11T14:41:44.969163
License: Public Domain

J-A19010-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

TYCO FIRE PRODUCTS, L.P. D/B/A “TYCO             IN THE SUPERIOR COURT OF
FIRE PROTECTION PRODUCTS” AND                          PENNSYLVANIA
TYCO INTERNATIONAL MANAGEMENT
COMPANY, LLC,

                            Appellee

                       v.

RALPH M. FUCHS,

                            Appellant                     No. 20 EDA 2017

              Appeal from the Order Entered November 21, 2016
             In the Court of Common Pleas of Montgomery County
                      Civil Division at No(s): 2016-07384

BEFORE: BENDER, P.J.E., DUBOW, J., and MUSMANNO, J.

MEMORANDUM BY BENDER, P.J.E.:                   FILED NOVEMBER 17, 2017

       Appellant, Ralph M. Fuchs, appeals from the November 21, 2016 order

which granted a petition for a preliminary injunction filed by Appellee, TYCO

Fire Products, L.P., d/b/a TYCO Fire Protection Products and TYCO

International Management Company, LLC (“TYCO”).1            After careful review,

we affirm.

       The trial court summarized the relevant facts and procedural history of

this case in its Pa.R.A.P. 1925(a) opinion, as follows:

           TYCO     is a    worldwide   company    which  designs,
       manufactures and distributes chemical, water and mechanical
____________________________________________

1 An order granting a preliminary injunction is immediately appealable
pursuant to Pa.R.A.P. 311(a)(4).
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     products for the fire protection and building products businesses.
     [Appellant] was employed by TYCO, first as a sales manager and
     then as a senior sales manager, from February 27, 2006 through
     January 6, 2016. [Appellant’s] sales territory as a senior sales
     manager was the Northeast region, consisting of Pennsylvania,
     West Virginia, Delaware, New York, New Jersey, Maine,
     Massachusetts, New Hampshire, Vermont, Rhode Island and
     Maryland.

           On February 17, 2006, prior to beginning his job at TYCO,
     [Appellant] signed an Employee Confidentiality Agreement and a
     Non-Competition Agreement (hereinafter “NCA”).         The NCA
     contains a Confidentiality Clause … and a Non-Competition
     Clause[.] The Non-Competition Clause provides[:] “I agree,
     subject to the conditions stated, that I will not within twelve
     months after leaving [TYCO] employ, engage or enter into
     employment by, or self-employment or gainful occupations, a
     Competing Business or act directly or indirectly as an adviser,
     consultant or agent or representative for a Competing Business.”
     The NCA expressly provides for the entry of injunctive relief in
     the event of any breach of the agreement by [Appellant]. In
     2015, [Appellant] signed another employment agreement which
     contained a non-competition restriction and provided for
     injunctive relief [(“2015 Agreement”)].

            [Appellant] testified that he read and signed these three
     Agreements in connection with his employment with TYCO. He
     further testified that he understood that two of these
     Agreements contained non-compete provisions and non-
     solicitation provisions. He understood that the third Agreement
     he signed was a confidentiality agreement that provided for the
     protection of TYCO’s confidential information and trade secret
     information. [Appellant] testified at his deposition that he was
     provided with access to TYCO’s Salesforce Customer Relations
     Management Software, “which is a database of all the accounts
     TYCO had information about.”

           In January of 2016, [Appellant] resigned from his position
     at TYCO and went to work at [Reliable Automatic Sprinkler
     Company, Inc. (“Reliable”)]. Reliable is in the same type of
     business and is a competitor of TYCO. After his resignation from
     TYCO, [Appellant] received a letter from counsel for TYCO
     reminding him of his legal obligations under the NCA.1 The letter
     also informed [Appellant] that TYCO believed that by accepting

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      employment with Reliable, [Appellant] was in violation of his
      contract.2
         1The evidence presented showed that both [Appellant] and
         Reliable were well aware of the issues raised by
         [Appellant’s] employment with Reliable….
         2  After receipt of this letter, and after similar
         correspondence was sent to Reliable, [Appellant] was
         moved to work on an “internal project” by Reliable.
         [Appellant] testified that there was nothing “physically
         preventing” him from continuing to work on this internal
         project for a year. In addition, [Appellant] testified that he
         was aware that there were four other Reliable sales
         regions in addition to the Northeast territory and even
         states in the Northeast territory where he could legally
         work if the injunction were entered.

            While working for Reliable, [Appellant] accompanied other
      Reliable employees to see customers in places located in the
      states covered by his restrictive covenant. Several of these
      customers [Appellant] visited were TYCO customers, and
      although he testified he personally was not soliciting business
      while on these sales calls, [Appellant] agreed that the purpose of
      these visits was to sell Reliable products.           In addition,
      [Appellant] testified that he met with several of his former TYCO
      customers while working at Reliable.             [Appellant] also
      acknowledged an e-mail exchange he had with a friend who,
      when told by [Appellant] that he was taking a job with Reliable,
      asked, “what about the non-compete?” [Appellant] responded,
      “yea, going to be rolling the dice somewhat, but there is a
      backup plan.”

Trial Court Order (“TCO”), 1/26/17, at 2-4 (citations to record omitted).

      On April 13, 2016, TYCO filed a complaint in the Court of Common

Pleas of Montgomery County, seeking a preliminary injunction to restrain

Appellant from working in the eleven (11) states which make up his former

TYCO sales territory, for any company engaged in the same business as

TYCO, including Appellant’s current employer, Reliable. Id. at 1. TYCO then

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filed a motion for a preliminary injunction, and a hearing was held on the

matter on November 1, 2016. Id. Based on the evidence presented at the

hearing, Appellant’s testimony, and the testimony of TYCO and Reliable

customer, Carlos Antonia Fleming (“Mr. Fleming”), the trial court entered an

order on November 21, 2016, granting the preliminary injunction. The order

provided, in relevant part:

      1. [Appellant] is hereby enjoined from employment with, or
         providing services in any sales capacity, including
         management of a sales team, either directly or indirectly to
         [Reliable] or any of its affiliates, parents, subsidiaries, or
         employees, in Pennsylvania, West Virginia, Delaware, New
         York, New Jersey, Massachusetts, Maine, New Hampshire,
         Vermont, Rhode Island, Ohio or Maryland (“TYCO Sales
         Territory”) for a [o]ne[-y]ear time period from the date of this
         Order.

      2. [Appellant] is hereby enjoined from soliciting or inducing any
         TYCO [c]ustomer, either directly or indirectly, to purchase the
         goods and/or services of any other person or entity that is
         engaged in the same or similar lines of business as TYCO for
         a two[-]year period of time from the date of the Order.

      3. [Appellant] is hereby enjoined from misappropriating, using
         and/or disclosing TYCO’s [c]onfidential [i]nformation or
         [t]rade [s]ecrets;

      4. [Appellant] is hereby enjoined from seeking or accepting
         employment with, or from providing services either directly or
         indirectly to, any other person or entity that is engaged in the
         same or similar business as TYCO in his former TYCO Sales
         Territory for a one[-]year time period from the date of this
         Order.

      5. [Appellant] shall return to TYCO any and all[] information,
         documents, software, materials, work product[,] or
         equipment provided to him by TYCO or taken by him from
         TYCO or relating to TYCO, whether in printed or electronic
         form or otherwise.

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Id. at 4-5.

      On December 17, 2016, Appellant filed a timely notice of appeal and

now presents the following issues for our review:

      1. Did [TYCO] prove that, in order to protect [TYCO] from
         irreparable future harm, it was reasonably necessary to
         preliminarily enjoin [Appellant], for a period of one year, from
         acting in any sales capacity for [Reliable] in [Appellant’s]
         former [TYCO] sales territory?

      2. Did [TYCO] prove that, in order to protect [TYCO] from
         irreparable future harm, it was reasonably necessary to
         preliminarily enjoin [Appellant], for a period of two years and
         anywhere in the world, from directly or indirectly seeking to
         sell or selling products to any [TYCO] customer, regardless of
         whether [Appellant] had any contact with or knowledge of
         those customers during his employment at [TYCO]?

      3. Did the trial court abuse its discretion by ordering that the
         periods of prohibition under its injunction would commence
         running on the date the order was entered, rather [than] on
         the contractually specified termination date of [Appellant’s]
         employment at TYCO, thus expanding the injunctive
         provisions by a period of almost a year?

Appellant’s Brief at 4-5.

      In reviewing the grant of a preliminary injunction, we are guided by

the following principles:

         As a preliminary consideration, we recognize that on an
         appeal from the grant or denial of a preliminary injunction,
         we do not inquire into the merits of the controversy, but
         only examine the record to determine if there were any
         apparently reasonable grounds for the action of the court
         below. Only if it is plain that no grounds exist to support
         the decree or that the rule of law relied upon was palpably
         erroneous or misapplied will we interfere with the decision
         of the [court].

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Allegheny Anesthesiology Associates, Inc. v. Allegheny General

Hosp., 826 A.2d 886, 891 (Pa. Super. 2003) (quoting Shanaman v.

Yellow Cab Co. of Philadelphia, 421 A.2d 664, 666 (Pa. 1980)).

     We have also established that:

     To obtain a preliminary injunction, a petitioner must establish
     that: (1) relief is necessary to prevent immediate and irreparable
     harm that cannot be adequately compensated by money
     damages; (2) greater injury will occur from refusing to grant the
     injunction than from granting it; (3) the injunction will restore
     the parties to their status quo as it existed before the alleged
     wrongful conduct; (4) the petitioner is likely to prevail on the
     merits; (5) the injunction is reasonably suited to abate the
     offending activity; and (6) the public interest will not be harmed
     if the injunction is granted.

Shepherd v. Pittsburgh Glass Works, LLC, 25 A.3d 1233, 1241 (Pa.

Super. 2011).   “In Pennsylvania, restrictive covenants are enforceable if

they are incident to an employment relationship between the parties; the

restrictions imposed by the covenant are reasonably necessary for the

protection of the employer; and the restrictions imposed are reasonably

limited in duration and geographic extent.” Id. at 1244.

     Here, Appellant argues that the preliminary injunction entered by the

trial court was an abuse of discretion on the grounds that “TYCO failed to

demonstrate that it would suffer immediate and irreparable harm if the

injunction was not entered.”   Appellant’s Brief at 16.    Appellant suggests

that rather than provide actual proof of irreparable harm, TYCO inadequately

presented mere speculation about the remote possibility of future harm. Id.

at 22.   Moreover, Appellant asserts that the restrictions imposed by the

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preliminary injunction were “neither reasonably necessary for TYCO’s

protection nor reasonably limited in duration and geographic reach.” Id. at

17. After careful review, we deem Appellant’s claims to be meritless.

     In support of its decision to grant the preliminary injunction against

Appellant, the trial court provided the following thorough and well-reasoned

explanation:

            TYCO has established its right to enforcement of the
     restrictive covenants [Appellant] signed.    TYCO is likely to
     succeed in its claim against [Appellant] for breach of his
     agreement because[:] (1) the non-compete agreement is valid
     and enforceable; and (2) [Appellant] signed the agreement and
     admitted in his testimony and pleadings that he was aware of
     the agreement and its requirements and that it was a condition
     of his employment; (3) [Appellant] breached his obligations
     under his respective agreements by working for Reliable, which
     is a competitor of TYCO; and [Appellant] was making calls on
     TYCO customers while working for Reliable in the territory where
     he [had] worked for TYCO, which is the area covered by the NCO
     [sic]. The evidence in this case, including [Appellant’s] own
     testimony[,] shows that the covenants which are at issue were
     incident to [Appellant’s] employment with TYCO. [Appellant]
     clearly executed his agreement as a condition of full-time
     employment, making it incident to this employment and
     supported by adequate consideration.

            Second, the restrictive covenants in the non-compete
     agreements are reasonably necessary for the protection of
     TYCO’s legitimate business interests. The evidence shows that
     TYCO and Reliable, [Appellant’s] new employer, compete for the
     same business. Further[,] [Appellant] has testified that after he
     began working for Reliable[,] he visited customers that he had
     visited while working for TYCO.

            Third, the time duration and geographic range of the
     restrictions are reasonable.   [The] Agreement in this case
     restricts [Appellant’s] employment for one year. Non-compete
     restrictions longer than one year are routinely upheld as
     reasonable in Pennsylvania. See Worldwide Auditing Serv’s,

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       Inc. v. Richter, 587 A.2d 772 (Pa. Super. [] 1991) (upholding
       two-year restriction); see also John G. Bryant Co., Inc. v.
       Sling Testing & Repair, Inc., 369 A.2d 1164 (Pa. 1977)
       (upholding three-year restriction). Furthermore, the restriction’s
       geographical scope is the territory in which [Appellant] acted as
       TYCO’s sales manager immediately before leaving TYCO. This
       restriction is reasonable based on the nature of the work done
       by [Appellant] at TYCO, visiting customers in these geographic
       areas.     The testimony shows that Reliable has five sales
       territories, and [Appellant] is only precluded from working in one
       of these territories. Accordingly, for all of the above reasons,
       TYCO is likely to prevail on the merits.

          TYCO will suffer immediate and irreparable harm if
       [Appellant] is not enjoined because violating a restrictive
       covenant such as this clearly constitutes irreparable harm. As
       the Pennsylvania Supreme Court has specifically explained in
       [Sling Testing], 369 A.2d [at] 1167 … [,]

          [i]t is not the initial breach of a covenant which necessarily
          establishes the existence of irreparable harm but rather
          the threat of the unbridled continuation of the violation
          and the resultant incalculable damage to the former
          employer’s business that constitutes the justification for
          equitable intervention.[2]
____________________________________________

2Appellant avers that the trial court misapplied Sling Testing to the instant
matter, and suggests that our Supreme Court clarified in New Castle
Orthopedic Assocs. v. Burns, 392 A.2d 1383, 1387 (Pa. 1978), that it is
an error for a trial court to merely presume irreparable injury from the
nature of the business and the breach of the covenant. Appellant’s Brief at
20. Appellant’s conclusion ignores, however, the following portion of the
Sling Testing opinion which is quoted by the New Castle Court:

       The covenant seeks to prevent more than just the sales that
       might result by the prohibited contact but also the covenant is
       designed to prevent a disturbance in the relationship that has
       been established between appellees and their accounts through
       prior dealings. It is the possible consequences of this
       unwarranted interference with customer relationships that is
       unascertainable and not capable of being fully compensated by
       money damages. It is for this reason … that where a covenant
(Footnote Continued Next Page)

                                           -8-
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         Here, TYCO has a significant interest in protecting its
      customer base, and in protecting the confidentiality of its
      business and pricing information. [Appellant] has already visited
      some of TYCO’s customers with Reliable employees. This could
      certainly lead to harm to TYCO were these customers, some of
      whom have become friends of [Appellant], to give business to
      Reliable, rather than TYCO. The facts in this case lead to the
      conclusion that the threat of continuous violation of the [NCA]
      constitutes immediate and irreparable harm to TYCO.

TCO at 7-9.

      In response to Appellant’s assertion that the two-year non-solicitation

restriction set forth in the 2015 Agreement is broader than necessary to

protect TYCO’s interests, we note that this covenant is governed by New

(Footnote Continued) _______________________

      of this type meets the test of reasonableness, it is prima facie
      enforceable in equity.

New Castle, 392 A.2d at 1386 (quoting Sling Testing, 369 A.2d at 1167).

       The New Castle Court further explained that Sling Testing does not
conflict with the threshold evidentiary requirement that actual proof of
irreparable harm must be met before granting a preliminary injunction;
rather, Sling Testing supplements this threshold requirement in those
cases where the plaintiff’s proof of injury “foreshadows the disruption of
established business relations which would result in incalculable damage
should the competition continue in violation of the covenant.” Id. at 1387.
Moreover, New Castle is clearly distinguishable from the instant case, as it
is a non-compete case involving a specialist physician in an under-served
rural area, rather than a salesman. See id. (stating “[t]his is quite unlike
the normal commercial situation in which there are only a limited number of
prospective clients and the alleged breach significantly affects the share of
the former employer. Here, the potential pool of clients far exceeds the
appellee’s ability to serve them. Under these circumstances it is difficult to
find any irreparable injury wrought upon the appellee by the appellant”).

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Jersey    law.3      Appellant,     however,       erroneously   cites   to   inapposite

Pennsylvania case law, in an attempt to support his challenge to the

geographic scope of this restriction.4

       “New Jersey courts recognize protecting confidential business and

protecting customer relationships as legitimate employer interests. In cases

where the employer’s interests are strong, such as cases involving trade

secrets or confidential information, a court will enforce a restrictive

covenant.”     Trico Equipment, Inc. v. Manor, No. 08-5561, 2009 WL

1687391, at *7 (D.N.J. June 15, 2009).               Similar to Pennsylvania courts,

“[a]s to undue hardship, [New Jersey] courts will consider ‘the nature of the

profession, the duration of the restriction, the geographic area of the

restriction and the type of restriction.’”          Id. (quoting Maw v. Advanced

Clinical Communications, Inc., 359 N.J. Super. 420, 820 A.2d 105, 115

(N.J. Super. Ct. App. Div. 2003)). A two-year period has been found to be
____________________________________________

3  In the “Governing Law” section of the 2015 Agreement, the parties
expressly agreed that the contract “shall be governed by the laws of the
state of New Jersey without reference to principles of conflicts of laws that
would direct the application of the law of any other jurisdiction.” See 2015
Agreement. “Choice of law provisions in contracts will generally be given
effect.” Smith v. Commonwealth Nat. Bank, 557 A.2d 775, 777 (Pa.
Super. 1989).

4 Even if Pennsylvania law applied, a two-year restraint on solicitation of
former customers has been held to be reasonable and enforceable. See
Worldwide Auditing Services, Inc. v. Richter, 587 A.2d 772, 776 (Pa.
Super. 1991) (upholding covenant restricting solicitation of Worldwide’s
former customers “wherever located” for a period of two years).

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reasonable for both non-compete and non-solicitation provisions. Id.5 For

the foregoing reasons, we conclude that “apparently reasonable grounds”

existed for the injunctive relief entered by the trial court.

       Finally, Appellant claims that the trial court abused its discretion by

ordering that the periods of restriction imposed by the injunction run from

the date of the order, rather than from the date of Appellant’s resignation.

Appellant’s Brief at 35.       Again, we deem Appellant’s claim to be without

merit.    The trial court’s actions were entirely appropriate, considering

____________________________________________

5 In Trico, the district court upheld a non-solicitation provision, which barred
the former employee from soliciting “any entity that was a customer,
supplier, contractor, or subcontractor of Trico, for two years,” reasoning:

       In A.T. Hudson & Co. v. Donovan, 216 N.J. Super. 426, 524
       A.2d 412, 416 (N.J. Super. Ct. App. Div. 1987), the New Jersey
       court upheld a similar provision. While New Jersey courts seem
       to require geographic limits for non-compete clauses, geographic
       limitations do not appear necessary for non-solicitation
       provisions. See Platinum Management, Inc. v. Dahms, 285
       N.J. Super. 274, 666 A.2d 1028, 1040 (N.J. Super. Ct. Law Div.
       1995); Mailman, Ross, Toyes & Shapiro v. Edelson, 183 N.J.
       Super. 434, 444 A.2d 75, 79 (N.J. Super. Ct. Ch. Div. 1982) (“To
       impose a geographical limitation on a covenant which seeks to
       protect an established clientele instead of an area of non-
       competition would not make the burden imposed on the
       employee by a covenant ‘reasonable’ but would merely mandate
       an unwarranted change in the nature of the interest protected.”)

Trico, 2009 WL 1687391, at *7.

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Appellant failed to abide by the terms of the non-compete agreements after

his resignation from TYCO.6

       Although not binding on this Court, we are persuaded by Jackson

Hewitt Inc. v. Childress, 2008 WL 834386, at *10-11 (D.N.J. March 27,

2008), in which a former franchisee was enjoined from competing with the

former franchisor for a period of twenty-four (24) months, beginning from

the date of the former franchisee’s compliance with the non-compete

covenant, rather than the date that it abandoned the franchise.            The

Jackson Hewitt court reasoned that the extension of the restrictive period

was justified, as the defendant would otherwise “wrongfully benefit from his

refusal to comply with his contractual obligations.” Id. at *11.

       Appellant cites, to no avail, two Pennsylvania cases in which the

Courts refused to enforce a restrictive covenant by means of an injunction.

See Davis v. Buckham, 421 A.2d 427 (Pa. Super. 1980); see also Hayes

v. Altman, 266 A.2d 269, 271 (Pa. 1970) (holding “[a]n injunction will not

be granted to enforce a restrictive covenant when the restrictive period has

by its terms expired”).        Both of those cases are distinguishable from the

present matter, as in each of those cases, the court emphasized the fact that

____________________________________________

6 As stated supra, the trial court found that Appellant breached the NCA and
the 2015 Agreement by working for Reliable and by making calls, while
working for Reliable, to TYCO customers located in his former TYCO sales
territory. TCO at 7.

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the period of the restrictive covenant had expired.7      We determine Davis

and Hayes do not control in this case, where the restrictive covenants had

not yet expired at the time the injunction was ordered.

       Moreover, the Hayes Court indicated that fraud or unnecessary delay

by the appellant may serve as a basis for an extension. Hayes, 266 A.2d at

272.    The record in the instant matter reveals that Appellant has caused

unnecessary delay in the litigation of the validity and enforceability of the

non-compete and non-solicitation agreements.8        Appellant should not be

permitted to benefit from such actions and to avoid the restrictions set forth

in the covenants to which he knowingly agreed. It seems only appropriate

that the trial court refused to credit Appellant for time that had passed since

his resignation from TYCO, as such time was spent in non-compliance.

Equity demands that the period of restrictions runs from the date of the

preliminary injunction order.

       Accordingly, we conclude that the trial court did not err in granting

TYCO’s petition for a preliminary injunction against Appellant, and we affirm

the November 21, 2016 order.

____________________________________________

7The Davis court acknowledged that a case may arise where a court would
be justified in extending a period of a restrictive covenant, but that this was
not that case, due to the fact that the restrictive period had expired. Davis,
421 A.2d at 431.
8The trial court granted a motion for sanctions against Appellant on January
12, 2017, for failure to produce court-ordered discovery documents.

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     Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/17/2017

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