Non Compete Restrictions Were Not Enforceable Because They Were Not Reasonably Limited In Duration And Geographic Extent
On the business law and business litigation case of iDropped, Inc. v. Summo, PICS Case No. 15-1147 (C.P. Lackawanna, May 7, 2015) the Honorable Carmen D. Minora ruled that the plaintiff’s non compete restrictions agreement was not enforceable because the restrictions it imposed were not necessary for plaintiff-employer’s protection, were not reasonably limited in duration and geographic extent and were improperly vague, and were overly burdensome trade restraint that prevented defendant from earning a living and plaintiff failed to proffer sufficient evidence to show that a permanent injunction was merited. Plaintiff’s request for a permanent injunction denied.
Plaintiff iDropped, a Pennsylvania corporation, specialized in the repair of Apple Electronic products, Samsung Galaxy smart phones and computers. It hired defendant Timothy Summo in 2012 as a part-time technician. In 2013, he was promoted to assistant manager.
As a condition of his employment, Summo executed a non-compete agreement that prohibited him from engaging in any business that competed with iDropped for five years after his employment ended “within the geographical area of Scranton, Pennsylvania as well as a 100 mile radius.”
Summo was terminated in July 2014. He subsequently began working as a part-time repair technician at FixAll Smartphones, a general electronic repair company in Dickson City that repaired all electronic products. Although the company repaired iPhones, Summo did not work on Apple products.
iDropped filed a request for a permanent injunction against Summo. The court found that the non-compete agreement was not enforceable. It said the restrictions in the non-compete agreement were not reasonably necessary for plaintiff’s protection. It said the type of interests that had been recognized in the context of a non-compete covenant included trade secrets or confidential information, unique or extraordinary skills, customer good will and investments in an employee’s specialized training. “Trade secret” did not include an employee’s aptitude, skill, dexterity, or manual or mental ability. Further, if a competitor could obtain the information by legitimate means, it would not be given injunctive protection as a trade secret.
The record demonstrated that Summo did not possess confidential business information because he was not integrally involved in any business planning, pricing, product design or marketing. Although he attended a few manager meetings, he testified that he was not privy to any inventions or proprietary information maintained by plaintiff. Further, he stated his skills were mostly self-taught from publicly- accessible internet videos.
The court also found that the restrictions were not reasonably limited in duration and geographic extent. It said where changes in the electronics industry and related repair market were happening every six to eight months, a five-year restriction that prevented Summo from doing any work for a company that directly of indirectly competed with plaintiff was unduly restrictive, burdensome and unreasonable for the industry. It also said the geographic restriction was improperly vague and overbroad since it did not define a location from which to measure the 100-mile radius.
The time and scope restrictions in the non-compete agreement were overly burdensome on Summo’s ability to earn a living. The combination of the five-year/100-mile restriction and defendant’s at-will employee status rendered the non-compete agreement unduly restrictive because it allowed for the possibility of abuse by plaintiff.
The court also found that an injunction was not necessary to avoid an injury that could not be compensated by damages. It said the mere risk of injury was insufficient to show irreparable injury and iDropped had not shown any pecuniary loss, a slower growth rate or any other negative consequences that could be attributed to Summo’s departure.
Also, the court said iDropped failed to show that greater injury would result if it did not grant the injunction where it failed to present any evidence of a loss or customers, financial loss, or a slower growth rate due to Summo’s employment at FixAll. Therefore, iDropped did not meet its burden of demonstrating the need for permanent injunctive relief.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 38 PLW 699 (July 28, 2015)
Filed Under: Non-Compete Agreement; Restrictive Covenants Unenforceable: Business Litigation.
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