Court Opinion

ID: 4161579
Source: CourtListenerOpinion
Date Created: 2017-04-19 19:16:57.849943+00
Date Added: 2024-06-11T09:36:38.090954
License: Public Domain

J-A33020-16

                                  2017 Pa. Super. 109

METALICO PITTSBURGH INC.                          IN THE SUPERIOR COURT OF
                                                        PENNSYLVANIA
                            Appellant

                       v.

DOUGLAS NEWMAN, RAY MEDRED, AND
ALLEGHENY RAW MATERIALS, INC.

                                                       No. 354 WDA 2016

                 Appeal from the Order Dated January 20, 2016
               In the Court of Common Pleas of Allegheny County
                      Civil Division at No(s): GD 15-019082

BEFORE: LAZARUS, J., SOLANO, J., and STRASSBURGER, J.*

OPINION BY SOLANO, J.:                                 FILED APRIL 19, 2017

        Appellant Metalico Pittsburgh, Inc. appeals from the order granting

partial 1 summary judgment in favor of Appellee Allegheny Raw Materials,

Inc. (“ARM”) and its current employees, Appellees Douglas Newman and Ray

Medred (together, “Employees”). We reverse.

        Newman and Medred formerly were employed by Metalico, a scrap

metal broker, and Metalico brought this action to enforce non-solicitation

provisions in their Metalico Employment Agreements. Newman and Medred

began working for Metalico in 2011 and signed Employment Agreements that

were effective as of September 19, 2011. The Agreements, which were the

____________________________________________

*
    Retired Senior Judge assigned to the Superior Court.
1
    As set forth below, all outstanding claims were resolved prior to appeal.
J-A33020-16

                                        2
same in all material respects,              stated that each employee would be

employed for a term of three years, with an option to renew, and also set

compensation and benefits.

       Each Employment Agreement included the following non-solicitation

provisions:

       (b) Covenants of the Executive. In consideration of            the
       acknowledgments by the Executive, and in consideration of      the
       compensation and benefits to be paid or provided to            the
       Executive by the Employer, the Executive covenants that he     will
       not, directly or indirectly:

                                       *       *   *

       (ii) whether for the Executive’s own account or for the account of
       any other person, at any time during the Employment Period or
       the Post-Employment Period, solicit business of the same or
       similar type being carried on by the Employer, from (A) any
       person listed on Schedule A to this Agreement and (B) any other
       person known by the Executive to be a supplier of the Employer
       on or before the Termination Date, in either case whether or not
       the Executive had personal contact with such person during and
       by reason of the Executive’s employment with the Employer;

       (iii) whether for the Executive’s own account or the account of
       any other person at any time during the Employment Period and
       the Post-Employment Period, (A) solicit, employ, or otherwise
       engage as an employee, independent contractor, or otherwise,
       any person who is or was an employee of the Employer at any
       time during the Employment Period or in any manner induce or
       attempt to induce any employee of the Employer to terminate
       his employment with the Employer; or (B) interfere with the
       Employer’s relationship with any person, including any person
____________________________________________

2
   Newman’s Agreement referred to him as “the Executive,” and his
Agreement is quoted in this opinion; Medred’s Agreement referred to him as
“the Employee.” In all other pertinent respects, the Agreements are
substantially identical.

                                            -2-
J-A33020-16

     who at any time during the Employment Period was an
     employee, contractor, supplier, or customer of the Employer
     ....
Employment Agreements, § 8(b).

        The Agreements defined “Employment Period” as “the term of the

Executive’s employment under this Agreement as set forth in § 2(b).”

Employment Agreements, § 1. Section 2(b), in turn, stated:

        Subject to the provisions of § 6 [Termination], the term of the
        Executive’s employment under this Agreement will be three (3)
        years, beginning on the Effective Date [September 19, 2011]
        and ending on the day before the third (3rd) anniversary of the
        Effective Date (the “Termination Date”). Thereafter this
        Agreement may be renewed for additional three-year terms at
        the Employer’s option, subject to the agreement of the
        Executive, and the Termination Date will be automatically
        extended to the end of such renewal term.

Id. § 2(b).      For purposes of the non-solicitation provisions, the “Post-

Employment Period” began “on the last day of the Executive’s employment

by [Metalico].” Id. § 1. The length of the Post-Employment Period depended

on the manner in which the Executive was terminated. See id. If the

Executive     was    terminated      for   cause   or   voluntarily   terminated   his

employment with Metalico “during or after the Employment Period,” then the

Post-Employment Period was two years. Id. §§ 1, 6(c), 6(e). If Metalico

terminated the Executive without cause, the Post-Employment Period was

one year. Id. §§ 1, 6(d).3 The Employment Agreements also provided that,
____________________________________________

3
    The definition of “Post-Employment Period” in Section 1 reads:

        “Post-Employment Period” means a period of time, determined
        as of and commencing on the last day of the Executive’s
(Footnote Continued Next Page)

                                           -3-
J-A33020-16

“[i]f the Executive’s employment hereunder expires or is terminated, this

Agreement will continue in full force and effect as is necessary or

appropriate to enforce the covenants and agreements of the Executive in [§]

8,” the section including the non-solicitation provisions. Id. § 9(b).

      On September 4, 2014, Newman sent an e-mail to Arnie Graber, the

General Counsel of Metalico’s parent company, with copies to Medred, Carlos

Agüero (President of Metalico), and another Metalico executive. The

message began:

      As I am sure you are aware, both Ray [Medred] and I have
      contracts that expire on September 18th (two weeks from
      today). We are looking for clarity on what will happen on
      September 19th 2014. We are under the assumption from

                       _______________________
(Footnote Continued)

      employment by the Employer or any affiliate of the Employer,
      equal to:

            (i)   For purposes of § 6(b) below [relating to termination
      upon disability], twelve (12) months commencing on the later to
      occur of (a) the Executive’s date of termination and (b) the last
      date on which the Executive is issued a Disability insurance
      payment.

             (ii)  For purposes of §§ 6(c) [relating to termination for
      cause], 6(e) [relating to voluntary termination], and 7(b)
      [relating to agreements regarding confidentiality and inventions]
      below, two (2) years.

           (iii) For purposes of § 6(d) below [relating to termination
      by Metalico without cause], one (1) year.

             (iv) For purposes of § 8(b) [relating to the non-
      solicitation provisions], the period set hereinabove forth for the
      subsection of § 6 applicable to the Executive’s termination.

                                            -4-
J-A33020-16

        previous discussions that we will become employee[s] at will
        once the contracts expire.

Mot. for Partial Summ. J., Ex. 1.4 Newman then asked about the effect of

the contracts’ expiration on his and Medred’s salary, benefits, expenses,

vacations and holidays, bonuses, and annual reviews. Id. That same day,

Agüero responded, stating, in pertinent part:

        We are aware that the 3 year agreement for both you and Ray
        matures on the 18th.

        As I have mentioned before after the 18th you each become an
        employee at will.

        I believe that you are both valued employees that make
        important contributions to the business and have the company’s
        best interest at heart. Therefore it is our goal that you both
        continue to be employed by Metalico even though your
        preference is to not renew the 3 year agreements.

Mot. for Partial Summ. J., Ex. 1. Agüero then explained:

       Salary would not change, but raises would be discretionary, rather
        than contractual;

       Medical coverage would not change;

       Normal and ordinary business expenses would continue to be covered,
        but corporate credit cards may be eliminated and replaced by a
        reimbursement plan5;
____________________________________________

4
  The parties disagree as to who first suggested non-renewal of the
Employment Agreements. That dispute, however, does not affect our
resolution of this appeal.
5
  ARM and the Employees note that Metalico later discontinued Newman’s
vehicle allowance. Appellees’ Brief at 11. However, this change did not occur
until August or September of 2015. See Ex. 2 in Support of Mot. for Partial
Summ. J. (Deposition of Kristen Kacik), at 123-24. ARM and the Employees
cite the discontinuation as evidence of a change in benefits.

                                           -5-
J-A33020-16

       Vacation days and holidays would not change;

       Bonuses would fall under the “IFCO” 6 formula that Metalico was
        moving towards for the entire company, but there could still be
        subjective or discretionary bonuses; and

       Contractual deferred stock grants would end with the agreement, but
        Medred and Newman would still be eligible to participate in the
        corporate pool of stock grants.

Id. This e-mail exchange did not contain any discussion of restrictive

covenants.

        The three-year terms of Newman and Medred under the Employment

Agreements ended on September 18, 2014, and those terms were not

renewed.      However, both Newman and Medred continued to work for

Metalico as employees at will, and they remained in that status until

September 21, 2015, when their employment with Metalico ended. 7 Shortly

thereafter, Newman and Medred began working for ARM, another scrap

metal supplier.

        Metalico alleges that once they began their employment with ARM,

Newman and Medred solicited Metalico customers and employees to move to

ARM.     Accordingly, on October 28, 2015, Metalico initiated this action, in

____________________________________________

6
  “IFCO” is not otherwise identified or defined in the record. Agüero
explained that the formula was “based on profits of the Pittsburgh division”
and did “not distinguish between ferrous and non-ferrous” results. Mot. for
Partial Summ. J., Ex. 1.
7
  Newman and Medred claim they were terminated. Metalico contends that
they resigned. As we later explain, this dispute is not material to our
disposition of this appeal.

                                           -6-
J-A33020-16

which it alleges, among other things, that Newman, Medred, and ARM

tortiously interfered with Metalico’s employee and customer contracts (Count

V), and that Newman and Medred breached their Employment Agreements

(Count VI). On January 14, 2016, Metalico filed a motion for a preliminary

injunction to prohibit ARM, Newman, and Medred from contacting any of

Metalico’s previous or current customers, suppliers, and employees.

      On January 19, 2016, the day before the trial court was scheduled to

hold a hearing on the preliminary injunction, ARM, Newman, and Medred

filed a motion for partial summary judgment with respect to Counts V and VI

of Metalico’s complaint. They contended that the non-solicitation provisions

were unenforceable because the “Employment Agreements had expired in

September 2014, more than a year prior to the termination of [Medred and

Newman’s] employment with [Metalico], and . . . by agreement of the

parties, those Agreements were replaced with at will relationships that did

not include non-solicitation provisions or any other restrictive covenants.”

Mot. for Partial Summ. J. at ¶ 3. In their supporting brief, the movants

argued that “the parties’ agreement to terminate the 2011 Employment

Agreements and to replace them with new at will relationships effected

novations of the 2011 Employment Agreements.” Brief in Support of Mot. for

Partial Summ. J. at 10.

      After considering the parties’ written submissions and oral arguments,

the trial court granted the motion for partial summary judgment and denied

Metalico’s motion for a preliminary injunction as moot. The trial court’s order

                                     -7-
J-A33020-16

was dated January 20, 2016, and was entered on the docket on March 3,

2016.

        The trial court issued an opinion on February 5, 2016, explaining its

summary judgment ruling. The trial court reasoned that the Agreements

explicitly stated that the consideration for the non-solicitation provisions was

“the compensation and benefits to be paid or provided.” Trial Ct. Op.,

2/5/16, at 3. Thus, according to the trial court, when Metalico unilaterally

and materially changed the compensation and benefits, consideration for the

non-solicitation provisions failed. Id. The trial court further reasoned that

when the Employment Agreements expired, Medred and Newman were

terminated without cause. Id. at 4. Thereafter, “employment restarted . . .

with none of the provisions of the Employment Agreements.” Id. According

to the trial court, the non-solicitation provisions continued in effect for one

year after the purported termination without cause, that is, until August

2015. Id. Thus, they were no longer in effect when Employees allegedly

solicited Metalico’s customers, suppliers, and/or employees. Id.

        On March 7, 2016, Metalico filed a Praecipe for Discontinuance with

respect to all unresolved counts of the complaint. On March 8, 2016,

Metalico filed its notice of appeal from the grant of partial summary

judgment.

                                     -8-
J-A33020-16

       Metalico timely filed a Pa.R.A.P 1925(b) statement, raising the

following issues: (1) the trial court erred by finding that the non-solicitation

provisions were unenforceable for lack of consideration 8; (2) the trial court

erred by finding the non-solicitation provisions could be enforced for only

one year after expiration of the Employment Agreements, rather than for

two years after Medred and Newman resigned; (3) the trial court erred by

resolving material issues of fact and inferences in favor of ARM and the

Employees; and (4) the trial court erred by granting summary judgment to

ARM and the Employees on grounds not raised by them in their motion and

brief, without giving the parties an adequate opportunity to develop the

record on summary judgment. Metalico’s Pa.R.A.P. 1925(b) Statement,

3/21/16.

       The trial court issued a Pa.R.A.P. 1925(a) opinion on June 30, 2016.

The court reiterated its conclusions that (1) Metalico “changed the material

terms of the agreement” when the Employment Agreements expired, and

thus consideration for the non-solicitation provisions failed; and (2) when

the Agreements were not renewed, “Newman and Medred’s employment was

terminated without cause given and replaced by a new at will employment

under different, inconsistent terms.” Trial Ct. Op., 6/30/16, at 7. The trial

court further responded that it was not able to identify which material fact(s)

____________________________________________

8
  Metalico broke this purported error into three listed issues, but all of them
related to consideration.

                                           -9-
J-A33020-16

Metalico thought it resolved, and it was not aware of any such facts. Id. at

8. Finally, the trial court rejected the claim that its rationale differed from

the grounds raised in the motion for summary judgment:

         In their Brief in Support of Motion for Partial Summary
         Judgment, Newman and Medred argued that Metalico’s
         agreement to terminate the 2011 Employment Agreements and
         to replace them with new at will relationships constituted
         novations that extinguished the terms of the non-solicitation
         covenants. Newman and Medred argued in their brief that one of
         the elements for a novation of a contract was the displacement
         and extinction of consideration. Buttonwood Farms, Inc. v.
         Carson, 478 A.2d 484, 487 (Pa. Super. 1984), citing Yoder v.
         T.F. Scholes, Inc., 173 A.2d 120, 121-22 (Pa. 1961). We
         agreed and found that because Metalico disavowed its obligation
         to continue to provide the benefits to Newman and Medred
         under the Employment Agreements, the non-solicitation
         covenants failed for lack of consideration.

Id. at 8-9.

         In this appeal, Metalico raises the following issues, as stated in its

brief:

               Did the Trial Court err, as a matter of law, by holding that
         the non-solicitation covenants in the employment agreements of
         Newman and Medred, which were supported by adequate
         consideration when Newman and Medred were first hired,
         subsequently became unenforceable for lack of consideration
         merely because the employment agreements expired and
         Newman and Medred continued as at-will employees?

               Did the Trial Court err, as a matter of law, in granting
         summary judgment . . . by resolving material disputes of facts
         and inferences in favor of [ARM and the Employees] and against
         Metalico when it found there were material changes to the
         employment of Newman and Medred after they became at-will
         employees?

                                       - 10 -
J-A33020-16

Metalico’s Brief at 8-9.9

       Our standard of review for a trial court’s order granting summary

judgment is as follows:

       A reviewing court may disturb the order of the trial court only
       where it is established that the court committed an error of law
       or abused its discretion. As with all questions of law, our review
       is plenary.

       In evaluating the trial court’s decision to enter summary
       judgment, we focus on the legal standard articulated in the
       summary judgment rule. Pa.R.C.P. 1035.2. The rule states that
       where there is no genuine issue of material fact and the moving
       party is entitled to relief as a matter of law, summary judgment
       may be entered. Where the non-moving party bears the burden
       of proof on an issue, he may not merely rely on his pleadings or
       answers in order to survive summary judgment. Failure of a
       nonmoving party to adduce sufficient evidence on an issue
       essential to his case and on which it bears the burden of proof
       establishes the entitlement of the moving party to judgment as a
       matter of law. Lastly, we will view the record in the light most
       favorable to the non-moving party, and all doubts as to the
       existence of a genuine issue of material fact must be resolved
       against the moving party.

Socko v. Mid-Atl. Sys. of CPA, Inc., 99 A.3d 928, 930 (Pa. Super. 2014)

(citation omitted), aff’d, 126 A.3d 1266 (Pa. 2015).

       In its first issue, Metalico argues that the trial court erred in finding

that consideration for the non-solicitation provisions failed.   The Supreme

Court of Pennsylvania has stated:

       [I]n Pennsylvania, restrictive covenants are enforceable only if
       they are: (1) ancillary to an employment relationship between
____________________________________________

9
 Metalico has also filed an application to amend the reproduced record. We
grant that application.

                                          - 11 -
J-A33020-16

     an employee and an employer; (2) supported by adequate
     consideration; (3) the restrictions are reasonably limited in
     duration and geographic extent; and (4) the restrictions are
     designed to protect the legitimate interests of the employer.

Socko, 126 A.3d at 1274. The only one of these elements at issue in this

appeal is the second: whether the non-solicitation provisions in the

Employment Agreements were supported by adequate consideration.

     As the trial court recognized, “under Pennsylvania law, adequate

consideration is found where a restrictive covenant is signed as part of the

initial employment relationship.” Trial Ct. Op., 6/30/16, at 6 (citing Pulse

Techs., Inc. v. Notaro, 67 A.3d 778, 781 (Pa. 2013)). Further, “it is

possible for a non-solicitation covenant to survive the end of a term of an

employment contract, when the employee stays on as an at-will employee.”

Trial Ct. Op., 6/30/16, at 6-7 (citing Boyce v. Smith-Edwards-Dunlap

Co., 580 A.2d 1382 (Pa. Super. 1990), appeal denied, 593 A.2d 413 (Pa.

1991)).

     In Boyce, the employer and employee entered into a three-year

contract with restrictive covenants that applied “both during and for a two-

year period after the period of [the employee’s] employment by Employer

. . . (whether pursuant to this Agreement or otherwise).” Boyce, 580 A.2d

at 1384. The contract also stated, “It is expressly understood by the parties

to this Agreement that certain provisions, rights and obligations pursuant to

this Agreement, are expressly meant to survive the termination date of this

Agreement and shall be given full effect pursuant to their terms.” Id. After

the contract expired, Boyce continued to work for the employer for more

                                   - 12 -
J-A33020-16

than two years, and then began working for a competitor. Id. at 1385. In

the ensuing litigation, Boyce claimed that he was no longer bound by the

restrictive covenants because they expired two years after his contract

expired. Id. at 1387. This Court disagreed, holding that under the terms of

the contract, Boyce was bound by the covenants for two years following his

employment, “whether pursuant to this Agreement or otherwise.” Id.

      The trial court concluded that this case differs from Boyce because

here, “employment did not continue as before.       Rather, Metalico changed

the material terms of the agreement” because it employed Newman and

Medred as employees at will under different terms than those that had

applied during their three-year term under the Employment Agreements.

Trial Ct. Op., 6/30/16, at 7; see also Appellees’ Brief at 28-29.            We

disagree. In Boyce, this Court did not hold that application of the restrictive

covenants depended on whether the terms of employment continued as

before or materially changed. Rather, in holding that Boyce was bound by

the restrictive covenants in his employment contract while working for the

employer after the contract expired, we relied only on the explicit language

in the contract. Thus, Boyce does not support the trial court’s rationale.

      The language of the Metalico Employment Agreements anticipated

three relevant time periods when Newman and Medred would be subject to

the restrictive covenants.   First, they would be subject to the covenants

during the three-year terms of their employment under the Agreements, as

well as during any renewal of those terms. See Employment Agreements,

                                    - 13 -
J-A33020-16

§§ 8(b) (making the covenants applicable during the “Employment Period”),

1 & 2(b) (defining “Employment Period” to mean three-year term plus any

renewals).     Second, they would be subject to the covenants during any

continued employment with Metalico after expiration of their terms under

the Employment Agreements, at the time when they were employees at will.

See id. § 9(b) (if employment under the Agreement “expires,” the

Agreement continues in effect “as is necessary or appropriate to enforce” the

covenants in Section 8).10 Third, they would be subject to the covenants

for one or two years after they left Metalico’s employment, depending on the

reason why they left.       See id. § 8(b)(ii), (iii) (providing that the relevant

covenants apply during the “Post-Employment Period”), 1 (defining the

“Post-Employment Period” as a time running one or two years from “the last

day of the Executive’s employment by the Employer”). See also id. § 9(b)

(Agreement      continues     in   effect      for   enforcement   of   covenants   after

employment expires or is terminated).11 Notably, this period runs from the

“last day of the Executive’s employment by the Employer” (thus including

____________________________________________

10
   Employment under the Agreements would expire when the three-year
term ended.     See Employment Agreements, § 2(b).     The Agreements
contemplated, however, that employment could continue after expiration of
the Agreements’ terms. See, e.g., id. § 6(e)(1) (discussing voluntary
termination “after the Employment Period”).
11
   Because both Newman and Medred are accused of violating the covenants
within one year of leaving employment by Metalico, it is not necessary here
to determine whether the one- or two-year period is applicable.

                                            - 14 -
J-A33020-16

the time of employment at will), and not from the date when the three-year

term of employment under the Employment Agreements ended. See id. §§

1, 2(b) (defining “Post-Employment Period” and “Termination Date”).12

       In sum, the specific language of the Employment Agreements made

the restrictive covenants apply to Newman and Medred both throughout the

time of their employment by Metalico and in the relevant time at issue here

after they left Metalico’s employ. Indeed, this case resembles Boyce, 580
A.2d at 1384, in that, like the contract in Boyce, the Metalico Employment

Agreements contain a special provision, Section 9(b), that reinforces the fact

that the non-solicitation covenants survive termination of the contract. We

find this language controlling. See generally Synthes USA Sales, LLC v.

Harrison, 83 A.3d 242, 250 (Pa. Super. 2013) (“In construing a restrictive

covenant, ‘courts do not assume that a contract’s language was chosen

carelessly, nor do they assume that the parties were ignorant of the

meaning of the language they employed’” (citations and brackets omitted)).

Therefore, under Boyce, Newman and Medred were subject to the

covenants’ terms.

       The trial court held, however, that the Employees’ transition to at-will

employment following the end of their three-year contract terms wiped away
____________________________________________

12
   The Agreements also provided for extension of the period of the
covenants’ coverage. See Employment Agreements § 8(b) (penultimate
paragraph) (“The period of time applicable to any covenant in this § 8(b) will
be extended by the duration of any violation by the Executive of such
covenant . . .”).

                                          - 15 -
J-A33020-16

the restrictive covenants because such covenants were not specific terms of

the at-will employment relationship. Trial Ct. Op., 2/5/16, at 3-4. Without

explicitly holding that a novation had occurred, 13 the trial court, citing

Buttonwood Farms, 478 A.2d at 487, stated that “one of the elements for

a    novation   of   a   contract    [is]      the   displacement   and    extinction   of

consideration.” Trial Ct. Op., 6/30/16, at 9. In the trial court’s view, the fact

that the compensation and benefits under the at-will arrangement were

different from the terms of the Employment Agreements meant that the

consideration for the restrictive covenants failed. In the trial court’s words,

“Metalico’s failure to continue the compensation and benefits provided under

the contract invalidated the non-solicitation clause.             Metalico cannot claim

the benefit of its bargain while denying its employees the same.” Id. at 7.

Once again, we disagree.

       The   Metalico    Employment         Agreements      set   forth   the   restrictive

covenants in Section 8(b) and, under Sections 8(b) and 9(b), made them

applicable both after the Agreements’ expiration and during a one- or two-

year “Post-Employment Period.” They recited that the Employees agreed to

those covenants “in consideration of the compensation and benefits to be

paid or provided by the Employer.” Employment Agreements § 8(b). There

is no dispute that Metalico paid that compensation and those benefits to

____________________________________________

13
  ARM and the Employees acknowledge that the trial court “did not base its
decision on a finding that a novation had occurred.” Appellees’ Brief at 26.

                                            - 16 -
J-A33020-16

Newman and Medred throughout the Agreements’ three-year terms.

Therefore, contrary to the trial court’s decision, there was no failure of

consideration.   “Failure of consideration . . . shows that the consideration

contemplated was never received.” McGuire v. Schneider, Inc., 534 A.2d
115, 1119 (Pa. Super. 1987), aff’d, 548 A.2d 1223 (Pa. 1988). Here,

Newman and Medred received the consideration they were promised in the

Agreements, and, in return, they continue to be bound by the Agreements’

restrictive covenants for the full period — both after the expiration of their

three-year terms, and after their at-will employment — during which they

agreed to be bound under Sections 8(b) and 9(b).       Newman and Medred

specifically acknowledged the importance of the non-competition provisions

to Metalico, see Employment Agreements, § 8(a), 9(b), and the contention

that these essential terms would evaporate merely because Metalico agreed

to retain Newman and Medred on its payroll under a different contractual

arrangement once the three-year Agreements expired is unsupported by

anything in the Agreements or the parties’ employment relationship.

      The trial court’s reliance on Buttonwood Farms was misplaced. In

Buttonwood Farms, this Court explained:

      The required essentials of a novation are the displacement and
      extinction of a valid contract, the substitution for it of a valid
      new contract, a sufficient legal consideration for the new
      contract, and the consent of the parties. The party asserting a
      novation or substituted contract has the burden of proving that
      the parties intended to discharge the earlier contract.

                                    - 17 -
J-A33020-16
478 A.2d at 486 (citations, quotation marks, ellipsis, and italics removed). A

novation, or substituted agreement, extinguishes all rights and duties under

the earlier agreement. Id. However, contrary to the trial court’s opinion,

“the displacement and extinction of consideration” is not one of the elements

of a novation. See id. Because the trial court did not find that all elements

of a novation were present, Buttonwood Farms does not apply here. The

trial court cites no other authority for its holding.

       In their brief, ARM and the Employees rely on Innoviant Pharm. Inc.

v.   Morganstern, 390 F. Supp. 2d 179     (N.D.N.Y. 2005) (applying

Pennsylvania law), but Innoviant is factually distinguishable from this

case.14 In Innoviant, Morganstern signed an employment agreement with

restrictive covenants. Id. at 184. Approximately two years later, the

employer required Morganstern to sign a written document acknowledging

that he had no employment contract with the employer. Id. at 185. After

Morganstern resigned the next year, the District Court held that the

restrictive   covenants     were    not    enforceable.    Id.   at   193.   The   court

acknowledged that, “under Pennsylvania law an intent to terminate a

____________________________________________

14
  Innoviant is not binding on this Court. See Branham v. Rohm and
Haas Co., 19 A.3d 1094, 1103 (Pa. Super. 2011) (“This Court is not bound
by the decisions of federal courts, other than the United States Supreme
Court, . . . on a matter of Pennsylvania law”), appeal denied, 42 A.3d 289
(Pa. 2012). We also do not find Appellees’ reliance on numerous cases from
other jurisdictions that do not apply Pennsylvania law to be helpful in
resolving the issues in this appeal.

                                          - 18 -
J-A33020-16

contractual agreement must be mutual, and demonstrated by clear, precise

and convincing evidence that the parties agree to terminate the contract.”

Id. (quotation marks and citations omitted). The court found that the

parties’ intent to reform the contract was clear because (1) the employer

required Morganstern to sign a document acknowledging the non-existence

of any employment contract; and (2) Morganstern signed it. Id. Here, unlike

in Innoviant, Medred and Newman never signed a document disavowing

the Employment Agreements and they never were asked to do so.

Therefore, Innoviant is inapposite.

       In sum, we hold that the trial court erred in finding that the non-

solicitation provisions were not applicable because there was a failure of

consideration with respect to them. We therefore reverse the trial court’s

order granting summary judgment in favor of ARM and the Employees.15

       Application to amend the reproduced record granted. Order reversed.

Case remanded. Jurisdiction relinquished.

____________________________________________

15
   As we reverse on the basis of Metalico’s first issue, we need not address
its second.

                                          - 19 -
J-A33020-16

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 4/19/2017

                          - 20 -