Court Opinion

ID: 4198012
Source: CourtListenerOpinion
Date Created: 2017-08-22 18:13:22.957049+00
Date Added: 2024-06-11T14:40:12.488275
License: Public Domain

J-A20015-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

LAURIE A. JOSEPH                                IN THE SUPERIOR COURT OF
                                                      PENNSYLVANIA

                    v.

JOHN B. O’LAUGHLIN

                         Appellant                  No. 1706 WDA 2015

                  Appeal from the Order September 30, 2015
               In the Court of Common Pleas of Fayette County
                   Civil Division at No(s): 1691 of 2015 G.D.

BEFORE: BOWES, STABILE AND MUSMANNO, JJ.

                                               FILED AUGUST 22, 2017

CONCURRING AND DISSENTING MEMORANDUM BY BOWES, J.:

      The learned majority misapplied the restrictive covenant by extending

it to organizational measures related to the future operation of a veterinary

clinic after the covenant expires.     As I do not agree that Appellant’s

preparations are tantamount to competition in violation of the covenant not

to compete, I respectfully dissent from that aspect of the memorandum.

      The majority accurately outlined the relevant facts, procedural history,

and the applicable standard of review.       Similarly, it cogently explained

Appellee’s burden of establishing the three components of a permanent

injunction:   (1) clear right to relief; (2) necessary to avoid an injury that

cannot be compensated by damages; and (3) greater injury will result from
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refusing   rather   than   granting    the   relief   requested.    Kuznik    v.

Westmoreland County Bd. of Comm'rs, 902 A.2d 476, 489 (Pa. 2006).

      I agree with the majority’s analysis regarding the trial court’s improper

reliance upon Atkinson & Mullen Travel, Inc., et al. v. O’Brien, et al,

2944 EDA 2012 (unpublished memorandum, filed May 5, 2014) as

authoritative precedent.     Likewise, I join the well-reasoned discussion

affirming the trial court’s imposition of a permanent injunction relating to

Appellant’s use of social media.      In my view, any and all communications

with the public relating to veterinary services equates to soliciting clients and

therefore is a clear violation of the asset transfer agreement.

      I write separately because, unlike my learned colleagues, I believe

that the asset transfer agreement does not bar Appellant’s preparatory

measures and that, by creating that requirement on Appellee’s behalf, the

majority deprived Appellant of the benefit of his bargain.          Plainly, the

majority and I have a contrasting view of what constitutes a business or

practice that is in “competition” with Appellee.       While we agree that the

defendant’s Facebook page violates the restrictive covenant, we view the

remaining activities in divergent lights. Unlike my colleagues, I believe that

the contract permits Appellant to mobilize his resources for immediate

competition once the restrictive covenant expires. In my view, Appellant’s

nonpublic preparatory measures fall short of competition.

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      As contract interpretation is a question of law, we are not bound by

the trial court's construction of the writing. See Kraisinger v. Kraisinger,

928 A.2d 333, 339 (Pa.Super. 2007).          We have explained the relevant

principles as follows: “In construing a contract, the intention of the parties is

paramount and the court will adopt an interpretation which under all

circumstances ascribes the most reasonable, probable, and natural conduct

of the parties, bearing in mind the objects manifestly to be accomplished.”

Charles D. Stein Revocable Trust v. General Felt Industries, Inc., 749
A.2d 978, 980 (Pa.Super. 2000).         As we explained in In re Jerome

Markowitz Trust, 71 A.3d 289, 301 (Pa.Super. 2013),

      In determining the intent of the parties to a written agreement,
      the court looks to what they have clearly expressed, for the law
      does not assume that the language of the contract was chosen
      carelessly.

            When interpreting agreements containing clear and
      unambiguous terms, we need only examine the writing itself to
      give effect to the parties' intent. The language of a contract is
      unambiguous if we can determine its meaning without any guide
      other than a knowledge of the simple facts on which, from the
      nature of the language in general, its meaning depends. When
      terms in a contract are not defined, we must construe the words
      in accordance with their natural, plain, and ordinary meaning. As
      the parties have the right to make their own contract, we will not
      modify the plain meaning of the words under the guise of
      interpretation or give the language a construction in conflict with
      the accepting meaning of the language used.

Id. (citation omitted).

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      The instant restrictive covenant prohibited Appellant from engaging in

the practice of veterinary medicine for five years within a fifty-mile radius of

Appellee’s clinic. The pertinent clause provided as follows:

      Seller acknowledges and agrees that he will not be involved in
      any of the following activities at any location within fifty (50)
      miles of the veterinary clinic ("Geographic Area"). Seller
      covenants and agrees that for a period of five (5) years following
      the execution of this Agreement, he shall not directly or
      indirectly, as an employer, employee, principal, agent,
      consultant, partner, stockholder, creditor or in any other
      capacity, engage or participate in any business or practice within
      the Geographic Area that is in competition in any manner
      whatsoever with the Buyer. Further, Seller shall not contact,
      solicit, or engage in any activity to contact or solicit, indirectly or
      directly, any client, past, present, or future, during that five (5)
      year period.

Asset Transfer Agreement, 12/24/14, ¶ 3 (at unnumbered page 3).

      The majority reads the proviso as a broad prohibition that equates

preparatory measures as competition.            However, that is not the parties’

agreement. In reality, the provision is refined and reasoned. “[Appellant]

shall not directly or indirectly . . . engage or participate in any business or

practice within the Geographic Area that is in competition in any manner

whatsoever with [Appellee].”        Id.    Thus, at a minimum, to establish a

violation of the clause, Appellee was required to demonstrate that Appellant

participated in a business or practice that was in competition with her

veterinary clinic.    The majority construed the accord as precluding

organizational   measures     and    concluded     that   Appellee   satisfied   her

evidentiary burden by introducing evidence that Appellant incorporated a

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business, purchased equipment, acquired land, and sought a zoning variance

to operate a clinic in the future.       Similarly, the trial court inferred from

Appellant’s actions that Appellant was preparing to violate the agreement

before its expiration. In my view, both the majority’s broad interpretation of

the restrictive convent and the trial court’s supposition run contrary to the

ensconced principle of contract interpretation that courts should avoid

reading clauses into the agreement terms that do not exist.             See In re

Jerome Markowitz Trust, supra, at 301 (“we need only examine the

writing itself to give effect to the parties' intent.”).

      Under    the   majority’s   far-reaching    perspective   of   “competition,”

Appellant is precluded from engaging in any preparatory activity for the

entire five-year period.       That view gives Appellee the benefit of the

additional time that it would take Appellant to launch his veterinary practice

once the covenant expires. Applying the suggested reasoning, the effective

term of the five-year covenant necessarily would exceed the parties’ stated

intent without compensating Appellant for the additional impairment. From

my perspective, the majority’s suggestion that Appellant is not entitled to

make preparations before opening a practice after December 24, 2019 is

untenable.

      Although the majority frames its discussion in reference to cases that

address non-compete clauses included in employment contracts, the case at

bar involves an interpretation of the restrictive covenant that the parties

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negotiated as part of the asset transfer agreement.        In Morgan's Home

Equipment Corp. v. Marticci, 136 A.2d 838, 846 (Pa. 1957), our High

Court explained that different reasons motivate covenants not to compete

attendant to employment and those dependent upon the sale of a business.

As to the former type of non-compete clauses, the Court explained that they

are “enforced by the courts as reasonably necessary for the protection of the

employer.” Id.

      In contrast to covenants not to compete in employment contracts,

restrictive covenants included in agreements for the sale of an established

business are intended to temporarily limit a seller’s competition with a

purchaser in order for the purchaser to establish its own cliental. The Court

elucidated this point as follows:

      General covenants not to compete which are ancillary to the sale
      of a business serve a useful economic function; they protect the
      asset known as ‘good will’ which the purchaser has bought.
      Indeed, in many businesses it is the name, reputation for
      service, reliability, and the trade secrets of the seller rather than
      the physical assets which constitute the inducements for a sale.
      Were the seller free to re-enter the market, the buyer would be
      left holding the proverbial empty poke.

Id. Hence, consistent with our Supreme Court’s perspective, I would review

the restrictive covenant in the present case with an eye toward ensuring that

both sides to the asset transfer agreement obtain the benefit of their

bargain.

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      Unlike the non-compete clauses in employment contracts that the

majority references in its analysis, where, as here, the parties to an

agreement stand on equal footing, courts simply ensure that both sides get

the deal they negotiated.          Instantly, Appellee paid $17,973.50 for

Appellant’s   promise   to    forego   competition with her     in any manner

whatsoever.    While Appellant had a contractual duty to avoid competition

with the Grace Veterinary Clinic, nothing in the sales agreement imposed the

correlate duty to refrain from getting ready to compete once the restrictive

covenant expired on December 24, 2019.            Although Appellee was free to

negotiate for the inclusion of preliminary and preparatory activities in the

non-compete, presumably for an increased premium, she neglected to

include such a clause, and this Court should be opposed to fashioning one

for her benefit. Thus, unless or until Appellant engages in an activity that is

tantamount to competition, whether direct or indirect, in my view, he is not

in violation of the accord.

      Appellant neither practiced veterinary medicine within the geographic

area nor engaged or participated directly or indirectly, in any business in

competition with Appellee’s practice.         To the contrary, in anticipation of

opening a veterinary practice at some unknown future point, Appellant

formed a limited liability company styled, “O' Laughlin Veterinary Services,”

acquired medical equipment, purchased real estate, and applied for a special

use zoning exception that would permit him to build and use a facility as a

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veterinary clinic. None of the foregoing actions can be convincingly argued

to equate with competition with Appellee’s veterinary clinic.                  Plainly,

Appellant, who continued to practice veterinary medicine outside the

territorial scope of the covenant, did not operate a veterinary clinic in

contravention of the agreement.1           He did not conduct examinations, treat

animals, or provide any other veterinary services.            At most, the evidence

revealed Appellant’s intention to operate a clinic on the site in the future.

However, that does not render Appellant’s actions to be in present

competition with Appellee.

       I find instructive the Ohio Court of Appeals discussion in Berardi’s

Fresh Roast, Inc. v. PMD Enter., Inc. 2008 WL 4681825, 2008 Ohio App.

Lexis 4618 (Ohio Ct. App. 2008), wherein the appeals court examined

whether an appellee’s actions violated the terms of a restrictive covenant

negotiated as part of an agreement for the sale of a coffee roasting

business.     The court determined that the appellee did not violate the

restrictive covenant when he organized a new coffee roasting enterprise,

investigated finance options, leased warehouse space, hired employees, and

ordered     equipment      and    supplies     prior   to   the   expiration   of   the

noncompetition agreement.            Significantly, the appellee made all of the

____________________________________________

1
  Appellant testified that, after leaving Pennsylvania, he practiced at a clinic
in Florida until July 2015. N.T., 9/24/15, at 88.

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preparations in anticipation of operating the business immediately after the

restriction expired. In concluding that the agreement was not violated, the

court observed that the appellee’s actions “constituted ‘preparations’ to

compete” rather than actual competition insofar as the appellee never

engaged in actual competition until after the the noncompetition agreement

expired.   Id. at *5.   In short, the court reasoned, “preparing to compete

does not equate to actively competing.”    Id.   I would apply the identical

reasoning herein to find that Appellant’s preparatory measures did not

breach the asset transfer agreement.

     The majority discounts the appeals court’s holding in Berardi’s Fresh

Roast, Inc. because that decision did not reveal the precise terms of the

restrictive covenant that was under review.      However, this attempt to

bypass the appeals court’s cogent reasoning misses the mark. It is obvious

from the Ohio court’s opinion that the non-compete clause at the center of

the dispute prohibited “competition” and did not specifically exclude

“preparations”—if the covenant had precluded preparations than the case

would have been a nonstarter. Furthermore, whether the prohibition related

to an identified industry, e.g., coffee roasting, or included any competing

business or practice whatsoever is of no moment.      The crux of the Ohio

Court of Appeals’ legal rationale, which the majority is determined to avoid,

is that preparations do not equate to competition. Id. at *5 (preparing to

compete is not equivalent to competing.).         As the pertinent holding

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Berardi’s Fresh Roast, Inc. was not dependent upon the specific language

in the restrictive convent, I would apply that holding herein as persuasive

legal authority in Appellant’s favor.

      Moreover, I observe that there was no evidence in the certified record

to support the conclusion that Appellant’s organizational measures caused

Appellee harm.     Indeed, Appellant’s preparations existed in chorus with

Appellee’s continued operation of Grace Veterinary Clinic without violating

the non-compete clause. Accordingly, I believe that the trial court erred in

finding that the above-cited examples of Appellant’s anticipated opening of

the O’Laughlin Veterinary Services within the territorial scope of the

covenant evinced Appellant’s intention to initiate competition prior to the

date that the agreement expires on December 24, 2019. To the contrary, I

would find that Appellant’s measures did not breach the non-competition

provisions contained in the sales agreements, and therefore, the trial court

erred in concluding that Appellant established a clear right to injunctive relief

based upon those actions.

      Finally, I note that, in contrast with my colleagues, I am not

persuaded by the the trial court’s supposition that Appellant was preparing

to violate the non-compete agreement.            First, the trial court’s theories do

not warrant the deference reserved for factual findings and credibility

determinations.     Since   the   facts    regarding     Appellant’s   actions   were

unchallenged, that evidence is not subject to a credibility determination. In

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reality, the trial court’s purported finding was, in fact, a legal conclusion

drawn from the defendant’s preparations as well as his creation of the

Facebook page.       It is beyond peradventure that we are not bound by the

trial court's deductions or inferences drawn from the facts. A.V. v. S.T., 87
A.3d 818 (Pa.Super. 2014) (appellate court is not bound by deductions or

inferences made by trial court from its findings of fact). Thus, the court’s

belief that Appellant was preparing to violate the non-compete agreement is

not entitled to the heighten deference typically associated with its role as the

ultimate arbiter of facts.        Moreover, whether characterized as inference,

finding of fact, or legal conclusion, the trial court’s anticipation of a violation

is not supported by the certified record.

       Instantly, aside from the Facebook page, none of the remaining

activities in which Appellant engaged, i.e., incorporating a business,

purchasing equipment, acquiring land, and seeking a zoning variance,

announced a practice to the public or entailed the participation of a business

or practice in competition with Appellee’s clinic.2        To the contrary, the

evidence in this case demonstrated that the preponderance of Appellant’s

actions were preparatory.

____________________________________________

2
  I recognize that the zoning form that the defendant submitted to the
review board indicated that the intended use of his property was for a
“veterinary clinic,” however, I do not think that a required entry on a form
equates with a public announcement.

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      For all of the foregoing reasons, I would affirm the order granting the

permanent injunction insofar as it prohibited Appellant from operating a

veterinary clinic in contravention of the restrictive covenant contained in the

asset transfer agreement, including the solicitation of former clients,

whether directly or indirectly, by advertisement or social media. However, I

would reverse the order granting a permanent injunction to the extent that it

purported to enjoin Appellant from engaging in organizational activities.

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