HomeMy WebLinkAbout2019-09423
AIA AMERICAN INSURANCE : THE COURT OF COMMON PLEAS
ADMINISTRATORS, LLC, : CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiff :
:
v. : No. 2019-09423 CIVIL TERM
:
JOSEPH G. BUYAKOWSKI, :
Defendants : CIVIL ACTION
OPINION
IN RE: DEFENDANT’S PRELIMINARY OBJECTIONS
BEFORE PLACEY AND SMITH, J.J.
Smith, J., January 31, 2020
FACTS
On October 26, 2010, the parties entered into an agreement that (1) Plaintiff, AIA
American Insurance Administrators, LLC (“AIA”) would purchase Defendant, Joseph G.
Buyakowski’s, business, Insurance & Surety, Inc.; and (2) that Defendant would begin
1
employment with Plaintiff. To facilitate both the purchase of Defendant’s business and
establish the terms of his employment, the parties entered into an Asset Purchase
2
Agreement (“Purchase Agreement”) and an Employment Agreement. The agreements
were prepared by Plaintiff and signed by all necessary parties. The Defendant began
work for the Plaintiff on October 26, 2010, the day the agreement was signed and left
1
See Complaint, AIA American Insurance Administrators, LLC v. Buyakowski, No. 2019-09423
(September 17, 2019) and Defendant’s Preliminary Objections to Plaintiff’s Complaint, AIA American
Insurance Administrators, LLC, No. 2019-09423 (October 22, 2019).
2
See Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423 at Exhibits A and B.
Page 1 of 10
employment on March 8, 2019, approximately eight years and four months later. He
3
then began working for M&T Bank.
On September 17, 2019, Plaintiff filed their complaint, alleging four counts:
4
Count I, Breach of Contract of the Employment Agreement; Count II, Conversion of
5
assets acquired “mostly” through the Purchase Agreement; Count III, Misappropriation
6
of Trade Secrets under the Uniform Trade Secrets Act, namely client lists, client
7
financial information and contact information; and Count IV, Injunctive Relief based on
8
restrictive covenants of the Employment Agreement.
On October 22, 2019, Defendant filed Preliminary Objections averring: (1)
Counts I, II, and III should be dismissed because Plaintiff failed to follow both an internal
dispute resolution mechanism pursuant to the Employment Agreement and an
arbitration mechanism pursuant to the Purchase Agreement; (2) Count I must be
stricken because the restrictive covenant contained in the Employment Agreement no
longer applies; and, (3) Count II must be stricken because Plaintiff did not demand the
return of any items, an element essential to a conversion claim.
3
There is no record in any of the pleadings when he actually began work for M&T Bank.
4
See Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423 ¶ 24.
5
See Id., ¶¶ 28-33. In paragraph 29 of the Complaint, Plaintiff alleges it “…had an express property
interest in its confidential proprietary information,…” (emphasis added), which does not specifically
reference assets acquired through the Purchase Agreement. However, in paragraphs 31, Plaintiff asserts
“The majority of these policyholders were customers of Defendant’s prior business,… and purchased by
AIA through Purchase Agreement.” (emphasis added) Similarly, paragraph 32 references the Purchase
Agreement as well.
6
12 Pa.C.S.A. §§ 5301-5308.
7
Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423, ¶ 36.
8
Id., ¶ 42.
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DISCUSSION
Defendant filed Preliminary Objections under Pa.R.C.P 1028(a)(3), (4), and (6),
9
claiming insufficient specificity, legal insufficiency, and agreement to arbitrate. The
general law on preliminary objections is well settled:
Preliminary objections may be sustained only if the law says with certainty
that no recovery is possible. To sustain preliminary objections a complaint
must be clearly insufficient to establish any right to relief, and preliminary
objections will not be sustained if any theory of law will support a
10
claim. Any doubt should be resolved against the objecting party.
Employment Agreement
At the heart of Plaintiff’s Count I – Breach of Contract claim, is whether the
Employment Agreement controls. Defendant claims the ‘Agreement not to Compete’
11
clause does not apply because the five year prohibition began to run after the
agreement ended as opposed to when his employment ended. Plaintiff counters that
although the initial agreement was only for three years, the Defendant’s continued
employment after the initial 3-year term created an at-will employment that extended the
3-year term. Thus, according to Plaintiff, the five year prohibition is triggered upon the
end of Defendant’s employment and not the agreement.
12
Both parties cite to Metalico Pittsburg, Inc. v. Newman for their respective
positions. Plaintiff block cites Metalico from which the Court discerns their position is
that their contract language is similar enough to that in Metalico for the subsequent at-
9
See Defendant’s Preliminary Objections to Plaintiff’s Complaint, AIA American Insurance Administrators,
LLC, No. 2019-09423, introductory paragraph and ¶ 24.
10
Koken v. Steinberg, 825 A.2d 723, 726 (Pa. Commw. Ct. 2003)(internal citations and notations
omitted).
11
See Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423, Exhibit B, para. 10
12
Metalico Pittsburg, Inc. v. Newman, 160 A.3d 205 (Pa. Super. 2017)
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will employment to incorporate the non-compete clause. Defendant, in his reply brief,
counters the holding was decided on the specific language of the Metalico contracts ,
i.e., the word “employment” as opposed to the word “agreement”.
The Superior Court in Metalico relies heavily on both the contract language in the
Metalico contracts and the contracts it cites in the case of Boyce v. Smith–Edwards–
13
Dunlap Co. Regarding Boyce, the Metalico Court stated:
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 ...
14
(whether pursuant to this Agreement or otherwise).”
The Metalico Court further noted the Boyce contract contained the language,
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
15
shall be given full effect pursuant to their terms.
In analyzing the contracts in Metalico, the Court noted the restrictive covenants in
those contracts applied, per the contract, during the “Employment Period” and “Post-
Employment Period.” Those terms were further defined in the contract with “Post–
Employment Period” defined as a time running one or two years from “the last day of
16
the Executive's employment by the Employer”. The contract also stated, “Agreement
continues in effect for enforcement of covenants after employment expires or is
13
Boyce v. Smith–Edwards–Dunlap Co., 580 A.2d 1382 (Pa. Super. 1990), appeal denied, 593 A.2d 413
(Pa. 1991).
14
Metalico, 160 A.3d at 211 (emphasis added).
15
Id.
16
Id. at 212 (emphasis added).
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17
terminated.” In summation, the Metalico Court said, “…this case resembles Boyce, in
that, like the contract in Boyce, the Metalico Employment Agreements contain a special
provision, …that reinforces the fact that the non-solicitation covenants survive
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termination of the contract.”
Here, in the present case, the Employment Contract falls somewhere short of
both Metalico and Boyce. The Employment Contract does contain some of the exact
language of the Boyce contract, in that paragraph 18 of the Employment Agreement,
states:
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
19
shall be given full effect pursuant to their terms.
This exact clause is found in the Boyce contract, but while Boyce and Metalico have
further language referencing the end of the employer’s employment, the present
20
contract references the end of the agreement. The question for this Court then, is
whether to extend Metalico and Boyce to the present contract. It declines to do so, for
in construing a restrictive covenant,
\[c\]ourts 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. When a writing is clear and unequivocal, its
meaning must be determined by its contents alone. It is not the function of
this Court to re-write it, or to give it a construction in conflict with the
21
accepted and plain meaning of the language used.
17
Id. (emphasis added).
18
Id. at 212-213 (internal citations omitted).
19
Id.
20
Employment Contract, ¶ 10A
21
Synthes USA Sales, LLC v. Harrison, 2013 PA Super 324, 83 A.3d 242, 250–51 (2013) (internal
quotations and citations omitted).
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Therefore, as a matter of law, Defendant’s Preliminary Objection II as to Count I
of Plaintiff’s Complaint for Breach of Contract is sustained, because Defendant cannot
breach a contract that did not apply. Defendant’s Preliminary Objection I as to Count I
is consequently deemed moot.
Arbitration Clause
Defendant’s Preliminary Objection I asks that Counts I, II and III of the Complaint
be dismissed because “under the Purchase Agreement, this matter is arbitrable before
22
the American Arbitration Association.” Defendant further refers to page 26, paragraph
12(D) of the Purchase Agreement, which states in part,
In the event of any dispute concerning this Agreement, its effect, or the
transactions contemplated by it, the same shall be settled by written opinion of a
single private arbitrator selected by mutual agreement of the parties, pursuant to
the provisions of the America Arbitration Association using the rules of procedure
23
of the Commonwealth of Pennsylvania.
Under Pa.R.C.P. No. 1028(a)(6), a party may file preliminary objections when there is
an agreement to arbitrate. Pennsylvania Courts and Federal Courts applying
Pennsylvania law have emphasized that “courts are obligated to consider questions of
24
arbitrability with a ‘healthy regard for the federal policy favoring arbitration.” Further, it
is well-established in this Commonwealth that “if a valid arbitration agreement exists
between the parties and appellants’ claim is within the scope of the agreement, the
22
See Defendant’s Preliminary Objections to Plaintiff’s Complaint, AIA American Insurance
Administrators, LLC, No. 2019-09423 ¶ 26
23
Id.
24
Saltzman v. Thomas Jefferson University Hospitals, Inc., 166 A.3d 465, 471 (Pa. Super. 2017) (citing
Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490, 509 (Pa. 2016)) (quoting Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (2017)).
Page 6 of 10
25
controversy must be submitted to arbitration.” In this matter, it is not disputed that an
agreement to arbitrate under the Purchase Agreement exists. Rather, Plaintiff contends
that the claims do not fall under that arbitration agreement because the claims do not
arise out of the Purchase Agreement.
Plaintiff argues in its Brief in Opposition that “Defendant is misguided as Plaintiff
26
has not alleged a breach of the Asset Purchase Agreement.” Plaintiff further contends
that the Complaint only alleges a breach of the Employment Agreement. Looking to the
Complaint, however, Count II for Conversion alleges a breach of the Purchase
27
Agreement. Plaintiff alleges that the Defendant solicited AIA’s policyholders, the
majority of which were acquired from Defendant under the Purchase Agreement, and
28
that the Defendant is now “depriving AIA of the benefit of that Purchase.”
The gist of the action doctrine is instructive in this matter. The Superior Court
analyzed the gist of the action doctrine in eToll, Inc. v. Elias/Savion Advertising, Inc.,
811 A.2d 10 (Pa. Super. 2002). In that matter, the Court indicated that, “\[g\]enerally, the
doctrine is designed to maintain the conceptual distinction between breach of contract
claims and tort claims. As a practical matter, the doctrine precludes plaintiffs from re-
29
casting ordinary breach of contract claims into tort claims.”
25
Davis v. Center Management Group, LLC, 192 A.3d 173, 183 (Pa. Super. 2018) (citing Smith v.
Cumberland Grp. Ltd., 687 A.2d 1167, 1171 (Pa. Super. 1997)).
26
Plaintiff’s Brief in Opposition Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423
at 6 (November 12, 2019).
27
Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423, ¶¶ 30-32.
28
Id.
29
eToll, Inc., 811 A.2d 10, 14 (citing Bash v. Bell Tel. Co., 601 A.2d 825 (Pa. Super. 1992)).
Page 7 of 10
With regard to Count II – Conversion, it appears that the Plaintiff is “re-casting” a
breach of contract claim under the Purchase Agreement as a tort claim for conversion.
The averments of Plaintiff’s Complaint plainly indicate that the Defendant sold
policyholders to Plaintiff under the Purchase Agreement and that after the Defendant
left employment with the Plaintiff, the Defendant “solicited” those policyholders to cancel
30
their policies with Plaintiff and re-write them with Defendant. Here, Plaintiff is alleging
that Defendant took back property which he sold to Plaintiff under the terms of the
Purchase Agreement, thereby breaching the contract between the parties, and, thus,
placing the dispute within the scope of the arbitration agreement. Defendant’s
Preliminary Objection I as to Count II – Conversion is sustained.
TRADE SECRETS
With regard to Count III – Misappropriation of Trade Secrets under 12 Pa.C.S. §
5301, et. seq., Plaintiff alleges the use of client lists, client financial information and
contact information violates the Unfair Trade Secrets Act. In determining whether Count
III falls within the scope of the arbitration agreement, “we must consider the factual
31
underpinnings of the claim rather than the legal theory alleged in the complaint.” The
Superior Court has stated, “where the arbitration provision is a broad one, and ‘in the
absence of any express provision excluding a particular grievance from
arbitration,…only the most forceful evidence of a purpose to exclude the claim from
32
arbitration can prevail.’”
30
Complaint, AIA American Insurance Administrators, LLC, No. 2019-09423, ¶ 29-30
31
Saltzman , 166 A.3d 465, 476 (Pa. Super. 2017) (citing Medtronic AVE, Inc. v. Advanced
rd
Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3 Cir. 2001)).
32
Id. at 477 (citing Provezano v. Ohio Valley General Hospital, 121 A.3d 1085, 1096 (Pa. Super. 2015))
rd
(quoting E.M. Diagnostic Sys., Inc. v. Local 169, 812 F.2d 91, 95 (3 Cir. 1987)).
Page 8 of 10
The arbitration clause in this matter is a broad provision. The first line states “\[i\]n
the event of any dispute concerning this Agreement, its effect, or the transactions
contemplated by it…” (emphasis added), the matter should be compelled to
33
arbitration. The plain language of the arbitration clause itself anticipates that any
matter that could foreseeably arise out of the Purchase Agreement should be compelled
34
to arbitration. The Purchase Agreement contemplates “acquired assets” including
35
contracts and related information for all active customers. That is, client lists, client
financial information, and contact information by another name. As such, the Court
finds that Count III arises from the effect of the Purchase Agreement and is subject to
the arbitration clause contained therein. Defendant’s Preliminary Objection I as to
Count III – Misappropriation of Trade Secrets is sustained.
By the Court,
__________________________
Matthew P. Smith, J.
33
Purchase Agreement 26 ¶ 12(D)
34
Id. at 1 ¶ 1(1.1)(A)
35
Id. at 2 ¶ 1(1.1)(A)(v)
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Kimberly A. Bonner, Esq.
11 E. Chocolate Avenue, Suite 300
Hershey, PA 17033
Wade D. Manley, Esq.
301 Market Street
P.O. Box 109
Lemoyne, PA 17043-0109
Chrisopher C. Coss, Esq.
111 Presidential Boulevard, Suite 214
Bala Cynwyd, PA 19004
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