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HomeMy WebLinkAbout98-0837 equityPFA GENERAL PURPOSE EXPENSE : IN THE COURT OF COMMON PLEAS OF ACCOUNT PARTNERSHIP Plaintiff Ve ANTHONY BRISELLI Defendant CUMBERLAND COUNTY, PENNSYLVANIA NO. 98-0837 EQUITY TERM IN RE: P~INTIFF'S REQUEST FOR PRELIMINARY INJUNCTION BEFORE GUIDO, J. AND NOW, this ORDER day of APRIL, 1998, Plaintiff's request for a Preliminary Injunction is DENIED. Defendant is directed to return the originals of all files he removed from Plaintiff's offices. Provided, however, that Defendant may retain the original documents in his personnel file if he returns copies of those documents to Plaintiff. Edward E. Guido, J. Thomas P. Gacki, Esquire For the Petitioner Carol J. Lindsay, Esquire For the Defendant :sld PFA GENERAL PURPOSE EXPENSE : IN THE COURT OF COMMON PLEAS OF ACCOUNT PARTNERSHIP Plaintiff Ve ANTHONY BRISELLI Defendant CUMBERLAND COUNTY, PENNSYLVANIA NO. 98-0837 EQUITY TERM IN RE: PLAINTIFF'S REQUEST FOR PRELIMINARY INJUNCTION BEFORE GUIDO, J. OPINION AND ORDER OF COURT On February 11, 1998, Plaintiff filed a complaint in Equity seeking enforcement of certain restrictive covenants contained in an independent contractor agreement between the parties. On February 13, 1998, Plaintiff requested the issuance of a Preliminary Injunction against Defendant to prevent him from competing against Plaintiff during the pendency of this action. On March 2, 1998, a hearing was held before this Court for the purpose of determining whether or not a preliminary injunction should be granted. For the reasons hereinafter set forth, we feel that it should not. FINDINGS OF FACT Plaintiff is a Pennsylvania partnership. Its general managing partner is Matthew Amos (hereafter "Amos"). Ail of the partners in Plaintiff are also shareholders in PFA, Inc. P~A, Inc. is a Pennsylvania Corporation which is in the business of financial planning for a fee. Ail of the shareholders of PFA, Inc. are certified financial planners. They are also licensed to sell financial products, such as annuities, securities and NO. 98-0837 EQUITY insurance contracts. Typically, a financial plan would be prepared for a fee by one of the shareholders for a client of PFA, Inc. Any financial products recommended as part of that plan would be sold to the client by the individual shareholders. Plaintiff was formed by the individual shareholders of PFA, Inc. for the sole purpose of sharing office expenses. Plaintiff has no clients, generates no income, and does not file any tax returns. Defendant graduated from Shippensburg University in the summer of 1996. He sent a resume to Amos in August of 1996. In September of 1996, it was agreed that Amos would hire Defendant.~ However, Defendant was directed to secure various licenses to sell financial products before he started work. Between September and the end of the year, Defendant and Amos met at least ten (10) times to discuss the terms of his employment.2 During the course of those meetings Amos and Defendant agreed that Defendant would be paid an annual salary of $18,000 plus commission. In addition, he was to be paid a $2000 bonus for obtaining his various licenses.3 ~It was not clear at that time for whom Defendant would be working. ~They also discussed his progress in obtaining his licenses. Amos agreed for certain reimbursement of costs to be paid to Defendant, and helped him prepare the necessary applications to obtain said licenses. 3There was never any discussion at these meetings regarding Defendant's employment being conditioned upon his willingness to agree to a non-competition provision in his employment agreement. NO. 98-0837 EQUITY Defendant obtained all of his licenses by the end of 1996. He started work on January 15, 1997.4 On that date Amos asked Defendant to sign a "Para-Planner, Financial Advisor Trainee, and Independent Contractor Agreement." The agreement was prepared by Amos from a form he had on his computer. Paragraph 9 of the agreement contains "Restrictive Covenants" which would prevent Defendant from, inter alia, working for, or owning, any firm which "engages .in a competing line of business to that of [Plaintiff] ." It also would preclude him from doing business with "clients carried on the books of [Plaintiff] with whom there has been any transaction within the forty-eight (48) calendar months prior to the termination date" of Defendant. Amos, his partners, and Defendant were not aware of the existence, let alone the terms, of the restrictive covenants when the agreement was signed on January 15, 1997.s Although the contract for employment was with Plaintiff, Defendant actually performed services for, and was paid by, the 4It was still not clear for whom he would be working. SDefendant testified that he only reviewed the agreement to make sure that the financial terms were correct. The actions of Amos and the other partners, when Defendant announced his intention to leave and to go into a competing business of his own convinced this Court that no one was aware of the existence of the restrictive covenant at the time the agreement was signed. When told by Defendant that he was going to set up his own business, each partner wished him luck and expressed the hope that they might even do business together. Amos even gave him a "big hug". Some of the partners actually referred clients to him, and continued to take him on business calls after his termination. NO. 98-0837 EQUITY individuals who were parties to the partnership agreement. He basically sold insurance and other financial products to customers of PFA, Inc. During his tenure, he did not receive any specialized knowledge or training that is not common in the field of selling financial products. He would have received the same training and knowledge at any one of the dozens of financial planning firms doing business in Dauphin and Cumberland Counties. At the end of 1997, Defendant advised Amos and the other partners that he was going to go into business on his own. When he left, he took his personnel file, which contained his licenses, as well as the file of his father and one other client of PFA, Inc. Since setting up his own business, he has not sold financial products to any client of the individual shareholders of PFA, Inc. except to clients of Albert D'Agostino. His dealings with Mr. D'Agostino's clients have been at the request of Mr. D'Agostino. DISCUSSION The standards for granting a preliminary injunction are extremely high. All-Pak, Inc. v. Johnston, Pa. Super. , 694 A.2d 347 (1997). This is because "a preliminary injunction is somewhat like a judgment and execution before trial." Herman v. Dixon, 393 Pa. 33 at 36, 141 A.2d 576 at 577 (1958). It will not be granted unless the Plaintiff's right is clear and the wrong is manifest. Sinqzon v. Dept. of Public Welfare, 496 Pa. 8, 436 A.2d 125 (1981). Since we are far from convinced that NO. 98-0837 EQUITY Plaintiff's right is clear, we are not willing to grant a preliminary injunction in the instant case. The general rule in Pennsylvania is that restrictive covenants in restraint of trade are enforceable if all of the following conditions are met: 1) They are incident to an employment relationship between the parties to the covenant.6 2) The restrictions are necessary for the protection of the employer. 3) The restrictions are reasonably limited in duration and geographical extent. 4) There is adequate consideration. Morqan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957) and Maintenance Specialties, Inc. v. Gottus, 455 Pa. 327, 314 A.2d 279 (1974). At the very least, it appears that Plaintiff's evidence falls short in connection with the second and fourth conditions. PROTECTION OF THE EMPLOYER In order to be enforceable, the restrictive covenant must be reasonably necessary to protect a legitimate business interest of the employer. Thermo-Guard, Inc. v. Cochran, 408 Pa. Super. 54, 596 A.2d 188 (1991). As the Thermo-Guard Court noted, "we must balance the interest the employer seeks to protect against the 6Most of the cases we have found deal with an employer- employee relationship. However, in 0uaker City Engine Rebuilders v. Toscano, 369 Pa. Super, 573, 535 A.2d 1083, (1987) the Superior Court held that a restrictive covenant may be enforced against an independent contractor if it meets the other requirements. NO. 98-0837 EQUITY important interest of the employee in being able to earn a living in-his chosen profession." 408 Pa. Super. at 65, 596 A.2d at 194. Defendant has chosen to make his living selling insurance policies, annuities, securities and other financial products. He has obtained his licenses to do so. Plaintiff did not provide him with any specialized training or knowledge that was not available at any one of the dozens of other firms in this area that sell these financial products. The Court in Thermo-Guard found that the employees received no specialized training or knowledge and refused to issue an injunction. We feel that Thermo-Guard is very similar to the case at bar. For that reason we are not prepared to issue a preliminary injunction. However, there is another reason to deny the requested relief. Plaintiff has absolutely no business interest which will be protected by enforcing the covenant. Plaintiff does not sell financial products, nor does it have any clients or employees. As Plaintiff's partnership agreement provides: The primary purpose of the PARTNERSHIP is to allocate common office expenses among the PARTNERS and function as an entity to enter into leases for office space and other contracts relating to the operation of a common office shared by the PARTNERS. (See Defendant's Exhibit #1) . ? The contract creating the 7Since Plaintiff is simply an expense sharing entity, the language of the restrictive covenant does not make any sense. As indicated in our findings of fact, we are satisfied that neither party was aware that the covenant not to compete was in the contract at the time it was executed. We are certain that Mr. NO. 98-0837 EQUITY employment relationship is between Plaintiff and Defendant. It is not between PFA, Inc. and Defendant. The only one with any arguable business interest to protect is PFA, Inc. However, since covenants not to compete must be strictly construed against the employer, (See All-Pak v. Johnston), Plaintiff's request for a preliminary injunction must fail. ADEQUACY OF CONSIDERATION We find this case to also be strikingly similar to Georqe W. Kistler, Inc. v. O'Brien, 464 Pa. 475, 347 A.2d 311, (1975). In the instant case, as in Kistler, the parties had agreed to the Defendant's pay and duties prior to his start of work. As the Kistler Court stated: ·.. (E)vidence of mutual assent to employ and be employed which contains all of the elements of a contract may. be construed as a binding contract of employment though not reduced to writing. 464 Pa. at 483-484. 347 A.2d at 315. We are satisfied that an oral contract existed between the parties prior to January 15, 1997. Since the restrictive covenant was not part of that oral contract, it must be viewed as a post employment covenant. Therefore, it must be supported by new consideration.8 However, Plaintiff has not offered evidence Amos simply found a form contract on his computer, typed in the names of the parties and the financial terms, and the contract printed out. Since neither party was aware of the terms, Defendant may well prevail at trial on the underlying action because of mutual mistake. 8"While a restrictive covenant, in order to be valid need not appear in the initial contract, if it is agreed upon at some later time it must be supported by new consideration." Kistler v. O'Brien supra, 347 A.2d at 316. NO. 98-0837 EQUITY to support the existence of any such new consideration. For the reasons stated above, we find it necessary to deny Plaintiff's request for a Preliminary Injunction. However, Defendant did agree at the hearing to return certain files to Plaintiff. We feel that is appropriate. AND NOW, this /~~ ORDER day of APRIL, 1998, Plaintiff's request for a Preliminary Injunction is DENIED. Defendant is directed to return the originals of all files he removed from Plaintiff's offices. Provided, however, that Defendant may retain the original documents in his personnel file if he returns copies of those documents to Plaintiff. By the Court, /s/ Edward E. Guido Edward E. Guido, J. Thomas P. Gacki, Esquire For the Petitioner Carol J. Lindsay, Esquire For the Defendant :sld