Injunction For Alleged Violation Of A Non Competition Clause In An Employment Contract Denied
In the restrictive covenant, non- competition, business litigation case of WMI Group, Inc. v. Fox, LLC, PICS Case No. 15-0251 (Pa. Super. Feb. 6, 2015), the Honorable James J. Fitzgerald, writing on behalf of the Pennsylvania Superior Court, ruled that the trial court properly denied a petition for a TRO and preliminary injunction for the alleged violation of a non-competition provision in an employment contract because appellants did not demonstrate that the restrictive covenant in a prior contract with another company constrained appellee.
Appellee Fox signed an employment agreement with a non-competition clause when he went to work for appellant WMI in 2004. The agreement was binding upon any successors or assigns to WMI.
In 2007, appellee signed a document entitled “Promotion to a New Position within the Company” on WM Robots, LLC stationary. That document described appellee’s new position and salary but did not contain a non-competition provision or refer to the provision in the 2004 agreement. In 2011, appellee signed a document on WM Robots stationary that identified appellee’s new title, described his commission and again did not contain a non-competition provision or reference the 2004 non-competition provision.
In 2012, appellee was offered a new employment agreement that included a non-competition agreement. Appellee believed he was not bound by a non-competition agreement, refused to agree to the employment agreement, resigned and started his own company to compete with his prior employer. Appellants filed a complaint against appellee and his new company alleging breach of contract, conversion of trade secrets, unfair competition and breach of duty of loyalty and sought a temporary restraining order and preliminary injunction. After a hearing, the court denied the petition for a temporary restraining order and for a preliminary injunction.
On appeal, appellants argued that the 2004 agreement with WMI, which included the non-competition clause, was not replaced by the 2007 and 2011 agreements with WM Robots and that the trial court should have disregarded the plain language of the 2007 and 2011 agreements and considered the parties intent which was to incorporate the 2004 agreement by implicit reference. The court found that when appellee terminated his employment with WMI and joined WM Robots in 2007, appellee did not assume a different position within WMI and joined WM Robots in 2007, appellee did not assume a different position within WMI. Accordingly, the non-competition clause in the 2004 agreement with WMI became effective for 12 months. Since there was no explicit assignment clause, the court declined to impute the non-competition clause to WM Robots. Furthermore, appellants failed to identify any ambiguous language in the contract that would support their request to the court to rely upon parol evidence to establish the parties’ intent.
Appellants’ argument that the 2004 agreement coexisted with the 2007 and 2011 agreements failed because the parties to the earlier and subsequent contracts were not identical. Absent identical parties, Restatement (First) of Contracts 408 was inapplicable and rescission could not occur.
Appellants also argued that their pricing method and their network of customer contacts, information and relationships were trade secrets. However, appellants never argued before the trial court that it was the unique combination or compilation of information that formed the basis of the trade secret regarding pricing and that argument was waived on appeal. The record evidence showed that the currency hedging used in pricing was common knowledge and that appellee did not engage in hedging. The other alleged trade secret information about customers and relationships was also publicly available.
Reference: Digest of Recent Opinions, Pennsylvania Law Journal, 38 P.L.W.182 (February 24, 2015)
Filed Under: Business Litigation, Employment Contracts; Restrictive Covenants; Non-Competition Clauses
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