Loading...
HomeMy WebLinkAbout94-3517 EquityLAWCO, INC., Plaintiff V® TIMOTHY GREENFIELD, and SCOTT PERRY, individually and t/d/b/a HYDROTECH MECHANICAL SERVICES, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 94-3517 EQUITY TERM IN RE: ADJUDICATION BEFORE OLER, J. DECREE NISI AND NOW, this2~L~ay of December, 1996, upon consideration of Plaintiff's complaint and of Defendant Greenfield's counterclaim, following a nonjury trial and for the reasons stated in the accompanying opinion, the court finds in favor of Plaintiff and against Defendants on Plaintiff's complaint, and in favor of Plaintiff and against Defendant on Defendant's counterclaim. It is further ordered, adjudged and decreed as follows: 1. Prior to June 29, 1998, Defendant Greenfield is enjoined, either as a principal, disclosed or undisclosed, on behalf of, or in conjunction with any other person, firm, partnership, company or corporation, either as an agent, employee, partner, officer, director, consultant or in any other capacity, directly or indirectly, within a territory of 250 miles from 1156 York Road, Mechanicsburg, Pennsylvania, from doing any of the following: a. Engaging in the business of installation, 'repair, calibration, sales and/or rentals of water meters of any kind; b. Soliciting orders or contracts for the installation, repair, calibration, sales and/or rentals of water meters of the same or similar nature provided by Plaintiff; or c. Soliciting, diverting, taking away or inducing any of the customers of Plaintiff. 2. Prior to June, 29, 1998, Defendant Perry is enjoined from facilitating, aiding or abetting, either directly or indirectly, personally or by way of any company, corporation, partnership, association or other entity in which he has an interest or by whom or which he is employed or engaged, Defendant Greenfield in any violati6n of paragraph 1 of this decree. 3. Defendants, jointly and severally, shall pay damages to Plaintiff in the amount of $30,000.00, with interest sec. leg. from November 13, 1995, attorney's fees in the amount of $20,000.00 and costs of suit. Diane G. Radcliff, Esq. 3448 Trindle Road Camp Hill, PA 17011 Attorney for Plaintiff Mary A. Etter Dissinger, Esq. 28 North Thirty-Second Street Camp Hill, PA 17011 Attorney for Defendants BY THE COURT, 'W~sley ' LAWCO, INC., Plaintiff Ve TIMOTHY GREENFIELD, and SCOTT PERRY, individually and t/d/b/a HYDROTECH MECHANICAL SERVICES, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 94-3517 EQUITY TERM IN RE: ADJUDICATION BEFORE OLER, J. OPINION and DECREE NISI Oler, J. In this equity case, a small corporation has sued a former employee and his business partner as a result of an alleged breach of a covenant not to compete; relief in the form of a prohibitory injunction and damages is sought. The employee has counterclaimed for damages as a result of an alleged breach of an obligation to pay him a bonus. The record in this case consists of numerous exhibits and over a thousand pages of testimony.~ During the course of the litigation one of the defendants burned the Defendants' records, rendering any computation of damages more difficult. For the reasons stated in this opinion, the court will find in favor of Plaintiff, prohibit by injunction further violation of the covenant not to compete and award damages. FINDINGS OF FACT Plaintiff is a Pennsylvania corporation with its principal See Order of Court, July 1, 1996. NO. 94-3517 EQUITY TERM place of business at 1156 York Road, Mechanicsburg, Cumberland County, Pennsylvania.2 Defendants are adult residents of Dillsburg, York County, Pennsylvania.3 Plaintiff is a small, solely-owned corporation engaging in the rather specialized business of "water utility service."4 Plaintiff's customers are water utilities, both investor-owned and municipally-owned, as well as a few factories,s The primary service performed by Plaintiff was described by its owner and president - "chief cook and bottle washer"6 - Norman Law, in the following terms: [P]rimarily we are called calibrators, meaning that we can certify, both in the field and in the test lab, the accuracy of their billing instruments or measuring instruments, whether these instruments are production meter or what we would call, maybe, a source meter coming out of the Susquehanna or the Yellow Bre[e]ches or the billing meter that would sell water to, say, the Hershey Medical Center or an industry.7 2 Plaintiff's complaint, paragraph 1; Defendants' answers, paragraph 1. 3 Plaintiff's complaint, paragraphs 2-3; Defendants' answers, paragraphs 2-3. 4 N.T. 4 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. Id. Id. 7 N.T. 8 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. NO. 94-3517 EQUITY TERM In addition to testing water measurement devices for accuracy, the company services and repairs such instruments, salvages and rebuilds them, and rents, sells and installs them. It also sells parts for them.8 Plaintiff has about seven competitors in the area of its operations,9 which extends across Pennsylvania and into Maryland, Virginia and West Virginia.~° The frequency with which customers require the services provided by Plaintiff varies from several times a year to once in ten years.~ Business in the "water utility service" industry is generated largely through customer referrals.~2 Plaintiff corporation has three full-time and two part-time employees.~3 The year of 1994 was described as a financial "nightmare" by its president.TM 8 N.T. 9-15 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 9 N.T. 129-30 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~0 N.T. 51-52 (testimony of Norman Law), Hearing on Plaintiff's motion for pre%iminary injunction, February 24, 1995. ~ N.T. 50 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995; N.T. 39-46 (testimony of Wendy Eby), Trial (July 3, 1996). ~2 N.T. 56 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~3 N.T. 85 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~4 N.T. 81 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. NO. 94-3517 EQUITY TERM In 1987, one of Plaintiff's two "field technicians" (the other being company president Law) resigned.~s Field technicians perform the services of the company in the field - testing and servicing meters, and so forth.~6 Their competency in the area may take as long as a year to fully develop.~7 In Plaintiff's organization, a field technician was also expected at times to solicit business and entertain customers.~8 Defendant Timothy Greenfield was employed by Plaintiff to replace the field technician who resigned.~9 His background was that of a high school graduate, with post-secondary school courses in water systems, sewage treatment and management. He was assistant director of public works for the Borough of Dillsburg in York County, Pennsylvania.2° He also held Pennsylvania operators' ~s N.T. 24, 31 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~6 N.T. 16-17, 28-29 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~7 N.T. 29 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~8 N.T. 20-21, 56-57 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ~9 N.T. 42 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 20 N. T. 12, 97 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. 4 NO. 94-3517 EQUITY TERM licenses for water and sewer plants.2~ Defendant Greenfield and Plaintiff's president Law met on January 13, 1988, to discuss the possibility of the former's employment.22 Defendant Greenfield was informed at that time that a covenant not to compete would be involved with his employment.23 On Friday, February 19, 1988, Defendant Greenfield was provided with an employment agreement executed by company president Law and dated the 19th.24 He took it home to review; he commenced work for Plaintiff on Monday, February 22, 1988; and he returned the agreement signed on Monday, February 29, 1988.25 The employment agreement contained, and Defendant Greenfield was aware of the import of,2~ the following provisions: B. NON-COMPETITION: 1. EMPLOYEE agrees that during his employment and for a period of five (5) years immediately following the termination of said 2~ N. T. 11 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. 2~ N.T. 32-33. (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 23 N.T. 34 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 24 N.T. 38 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 25 N.T. 38~39 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, February 25, 1995. 26 N. T. 21-22 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. NO. 94-3517 EQUITY TERM employment, for any reason whatsoever, he shall not, either as a principal, disclosed or undisclosed, on behalf of, or in conjunction with any other person, firm, partnership, company or corporation, either as an agent, employee, partner, officer, director, consultant or in any other capacity, without limitation by prior specification, directly or indirectly, within a territory defined by a radius of 250 miles from the EMPLOYER'S principal place of business, located at 1156 York Road, Mechanicsburg, Pennsylvania, do any of the following: a. He shall not engage in the business of installation, repair, calibration, sales and/or rentals of water meters of any kind. b. He shall not solicit orders or contracts for the installation, repair, calibration, sales and/or rentals of water meters of the same or similar nature provided by the EMPLOYER. c. He shall not solicit, divert, take away or induce any of the customers of the EMPLOYER. 2. EMPLOYEE acknowledges that the remedies at law for any breach by him of any of the provisions of Paragraph B 1 of this ~Agreement will be inadequate relief against him and in the event of any such breach, EMPLOYEE further acknowledges and warrants that he will be fully able to earn an adequate livelihood for himself and his~dependents if the terms of this Agreement should be specifically enforced against him. 3. If the provisions of Paragraph B 1 of this Agreement should be held to be invalid, illegal, or unenforceable by a court of competent jurisdiction because of the time limitation and geographical area therein provided, such provisions shall nevertheless be effective and enforceable for such a period of time and in such a geographical area as may be held to be reasonable by such court. Any 6 NO. 94-3517 EQUITY TERM provision of this Agreement that is invalid, illegal or unenforceable in any such jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating or rendering unenforceable the remaining provisions of this Agreement, and any such invalidity, illegality or unenforceability shall not, of itself, affect the validity, legality or enforceability of such provision in any other jurisdiction. 4. The parties agree that the provisions of this Agreement pertaining to the employment of EMPLOYEE by. EMPLOYER as set forth in Paragraph A herein is given in exchange for and act as consideration for this Covenant not to compete, provided, however, that this covenant not to compete shall be deemed separate and apart from the terms of the employment relationship and any other agreement set forth herein. C. NON-DISCLOSURE: 1. EMPLOYEE agrees not to solicit, divert or take away customers of EMPLOYER in any state, not included in the aforesaid territory heretofore mentioned, whether such customers become known to him during the course of his employment with EMPLOYER, nor shall he divulge to anyone the names of EMPLOYER'S customers or the details of its transactions with them. 2. EMPLOYEE shall not, directly, or indirectly, disclose or use at any time, either during or subsequent to the said employment, any secret or confidential information, knowledge or data of the EMPLOYER, whether or not obtained, acquired or developed by the EMPLOYEE, unless he shall first secure the written consent of the EMPLOYER. Upon the termination of his employment, EMPLOYEE shall turn over to the EMPLOYER all notes, memoranda, notebooks, drawings or other documents made by, complied NO. 94-3517 EQUITY TERM [sic] by, or delivered to him concerning any customers, distributors, distribution systems, products, apparatus, or methods used, developed, or investigated by the EMPLOYER during the period of his employment; it being expressly agreed that the same and all information contained therein are, at all times, the property of the EMPLOYER.27 In the ensuing four to six months, Plaintiff's president personally trained Defendant Greenfield in the field.28 Thereafter, Mr. Greenfield generally performed his duties alone.29 During the course of his employment, he had access to all of Plaintiff's customer files, which contained valuable background information on customers' equipment, suppliers and personnel,3° and to Plaintiff's pricing policies.3~ Defendant Greenfield also became acquainted with the managers of the utilities serviced by Plaintiff,32 and 27 Plaintiff's Exhibit 5 (employment contract), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 28 N.T. 45 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995; N. T. 27-28 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29,~1995. 29 N.T. 45 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 30 N.T. 53-55 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 3~ N.T. 81 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 32 N.T. 94 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. NO. 94-3517 EQUITY TERM entertained their employees.TM He obtained a certification for "back flow" testing while working for Plaintiff.34 While he was employed by Plaintiff, Defendant Greenfield opted to receive a salary increase instead of continuing to participate in a bonus program.~ However, the record does not support his contention that he was "cheated"~6 out of a $1,000.00 bonus. Around February of 1993, Mr. Greenfield expressed an interest in buying the testing portion of Plaintiff's business and going out on his own.~? In anticipation of such a venture, he had, a month or so earlier, formed a partnership with Defendant Scott Perry, who was not himself experienced in the water utility service field, and they had registered Hydrotech Mechanical Services as a fictitious name. 38 33 N.T. 96-97 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 34 N. T. 34 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. ~ N.T. 225-31 (testimony of Timothy Greenfield), Trial, July 3, 1996. 36 N.T. 197 (testimony of Timothy Greenfield), Trial, July 3, 1996. 37 N.T. 58 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 38 N. T. 38-40 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995; N.T. 90-95 (testimony of Scott Perry), Hearing on Plaintiff's motion for preliminary injunction, October 6, 1995. Hydrotech has since officially dissolved. See N.T. 9-10 (Testimony of Tim Greenfield), Hearing on July 1, 1996. NO. 94-3517 EQUITY TERM However, negotiations with Plaintiff did not produce an agreement.TM On June 29, 1993, Defendant Greenfield resigned, advising Plaintiff's.president that he would be going into the landscaping business.4° Prior to his resignation, Plaintiff's /preSident had reminded Mr. Greenfield of his contractual obligations and of Plaintiff's intent to enforce its proscriptive rights if necessary.4~ Defendant Perry was also aware of these contractual obligations.42 Defendant Greenfield did not enter the landscaping business. Instead, he and Defendant Perry commenced a water utility service operation under the name Hydrotech Mechanical Services at 10 Chestnut Grove Road, Dillsburg, York County, Pennsylvania.43 Some money was spent on this enterprise before Defendant Greenfield left 39 N.T. 60 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 40 N.T. 61 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 4~ N.T. 60 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 42 N.T. 84 (testimony of Scott Perry), Hearing on Plaintiff's motion for preliminary injunction, October 6, 1995. 43 N.T. 4 (testimony of Timothy Greenfield), Trial, July 1, 1996; Plaintiff's Exhibit 8 (brochure), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. Mr. Perry testified that Hydrotech Mechanical Services became operational in the summer of 1993. N.T. 84 (testimony of Scott Perry), Hearing on Plaintiff's motion for preliminary injunction, October 6, 1995. 10 NO. 94-3517 EQUITY TERM Plaintiff's employ.44 The brochure of Defendants' company included the following info£mation: Hydrotech Mechanical Services is a full service company offering expert consultation, as well as a variety of meter testing, modernization, replacement and repair services. Our technicians can repair any problem you have .... Hydrotech Mechanical Services is a PUC approved water meter testing agency and will test any style or size of meter from any manufacturer at any time. Meter testing will be done in-line with no interruptions or need for additional manpower and will be performed at the customers convenience. Hydrotech Mechanical Services comes to work with over 15 years of field experience in the water industry. This includes in excess of 15,000 water meters tested in the field as well as lab testing. It also includes thousands of installations or replacements, work within the municipal environment, membership on our local sewer and water authority board, valid Pennsylvania certifications in water and sewage treatment, a decade of design experience, and NEW-WA certification in back flow prevention. Hydrotech Mechanical Services is experienced in servicing all users of the water industry 44 N.T. 9 (testimony of Timothy Greenfield), Trial, July 1, 1996. 11 NO. 94-3517 EQUITY TERM in Pennsylvania and all neighboring states.45 The brochure listed as the company's field technician Defendant Greenfield. Defendant Perry was listed as its general manager. No other individuals' names appeared.46 A comparison of the very detailed test report forms used by Plaintiff and Hydrotech shows that for all practical purposes they were identical.~? The form had been designed by Plaintiff's president, and the conclusion is inescapable that Defendants adopted it for their own purposes.48 As a gesture toward the aforesaid contractual restrictions, Defendants during their first year of operation did not affirmatively solicit known customers of Plaintiff within a 100- mile radius, although such business was not refused when initiated by the customer.49 Defendants later abandoned this limitation in ~s Plaintiff's Exhibit 8 (brochure), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. ~7 Plaintiff's Exhibits 13 (Hydrotech form), 15 (Lawco form), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. ~8 N.T. 71 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 49 N. T. 178, 186 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. 12 NO. 94-3517 EQUITY TERM the operation of their business.5° Defendants succeeded in engaging a significant number of Plaintiff's customers,5~ and their solicitation of Plaintiff's customers can be said to have been pervasive.~2 In 1994, the major part of Defendants' business was with customers of Plaintiff.~3 The water utility service industry has become glutted in terms of competition.54 In 1992, Plaintiff's income from field testing labor sales was $79,215.00.~ In 1993, Plaintiff's income from these sales was $48,247.81.26 In 1994, Plaintiff's income from such sales was $37,225.05.57 50 N. T. 179 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. 5~ N.T. 65-73 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. s2 N.T. 73 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 53 N. T. 72 (testimony of Timothy Greenfield), Hearing on Plaintiff's motion for preliminary injunction, September 29, 1995. 54 N.T. 55 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. ss N.T. 78 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 56 N.T. 79 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 57 N.T. 79 (testimony of Norman Law), Hearing on Plaintiff's motion for preliminary injunction, February 24, 1995. 13 NO. 94-3517 EQUITY TERM In 1993, the net income of Hydrotech was $19,790.00.58 By 1995, it had risen to $53,307.70.59 Based upon all of the evidence in the case, the court finds that Plaintiff has suffered losses from Defendants' competition in at least the amount of $30,000.00. Plaintiff filed the instant complaint on June 29, 1994., A motion for a preliminary injunction was filed by Plaintiff on December 22, 1994. Following several days of testimony, a preliminary injunction was issued on November 13, 1995, against Defendants, temporarily enjoining further violation of the covenant not to compete.6° The preliminary injunction was accompanied by a detailed opinion expressing the court's view that Plaintiff was likely to prevail on the merits.6~ Almost immediately upon issuance of the preliminary injunction, Defendant Perry proceeded to burn financial and other records of Hydrotech, rendering any calculation of damages in favor of Plaintiff considerably more difficult.62 The ~8 N.T. 105 (testimony of Kimberly Brydon), Trial (July 1, 1996). 59 N.T. 99-105 (testimony of Kimberly Brydon), Trial (July 1, 1996). 60 Plaintiff failed to post a bond in accordance with the injunction, and the injunction was vacated by the Superior Court on February 22, 1996. Order of Court, No. 920 Harrisburg 1995, February 22, 1996 (Superior Court of Pennsylvania). Opinion and Order of Court, November 13, 1995. 62 N.T. 57 (testimony of Scott Perry), hearing on Plaintiff's motions for sanctions and protective order, June 10, 1996; N.T. 71- 14 NO. 94-3517 EQUITY TERM .coUrt is unable to accept Defendants' contention that this destruction of-records was undertaken in good faith. At about the same time, Defendants effected a formal dissolution of their partnership known as Hydrotech Mechanical Services.63 However, Defendant Perry immediately formed a corporation called Hydrotech Mechanical Services, Inc., and continued the same type of business out of the same office with the same telephone number.64 Hydrotech Mechanical Services, Inc., continued to pay Defendant Greenfield the same amount of money per week that he was receiving when he was a partner in Hydrotech Mechanical Services.65 These payments were made to a corporation owned by Defendant Greenfield rather than to him personally because "my accountant told me to do it that way."66 This corporation of Defendant Greenfield was formed six days after the preliminary injunction, 77 (testimony of Cecile Cobel), hearing on Plaintiff's motions for sanctions and protective order, June 10, 1995. 63 N.T. 54 (testimony of Scott Perry)~, hearing on Plaintiff's motions for sanctions and protective order, June 10, 1996. 64 N.T. 12 (testimony of Scott Perry), hearing on Plaintiff's motions for sanctions and protective order, June 10, 1996. ~ N.T. 16-18 (testimony of Timothy Greenfield), Trial, July 1, 1996. ~ N.T. 14 (testimony of Timothy Greenfield), Trial, July 1, 1996. In later testimony, Defendant Greenfield seemed to indicate that this procedure was devised by himself and Defendant Perry. Id. at 15. 15 NO. 94-3517 EQUITY TERM because "[w]e were advised by our attorney to do that.''67 Mr. Greenfield's corporation has apparently performed no services other than as a conduit for money.68 With respect to the possibility of obtaining employment instead of operating a business in competition with his former employer, Defendant Greenfield stated his position at the conclusion of the trial as follows: I don't want to work a job. I have worked a job. I don't want to - I live in the United States of America, free enterprise. I want to be self-employed. You are not going to tell me that I have to go get a job. I don't want to work a job. So please, you know, I want to support my family by being self-employed, and I think I have the right to do that.69 This litigation, in which Plaintiff has attempted to enforce its rights following a willful breach, has been protracted, difficult and expensive. In this regard, Plaintiff has incurred actual attorney's fees in excess of $34,000.00.TM The court has no difficulty in concluding that at least $20,000.00 of this amount 67 N.T. 13 (testimony of Timothy Greenfield), Trial, July 1, 1996. 68 N.T. 15 (testimony of Timothy Greenfield), Trial, July 1, 1996. 69 N.T., 246 (testimony of Timothy Greenfield), Trial, July 3, 1996. 70 N.T. 108-110 (testimony of Kimberly Brydon), Trial, July 1, 1996; Plaintiff's Exhibit 35 (total attorney's fees for D. Radcliff), Trial, July 1, 1996. 16 NO. 94-3517 EQUITY TERM can survive any challenge as to its fairness, reasonableness and necessity in connection with these proceedings. DISCUSSION Statement of Law Enforceability of covenants not to compete. With respect to the enforceability of covenants not to compete, it has been noted by Judge Hess of this court that "[c]ourts of equity will enforce restrictive covenants ... when they are (1) incident to an employment relationship between the employer and employee; (2) reasonably necessary for the protection of the employer; and (3) reasonably limited in duration and geographic extent. Sidco Paper Co. v. Aaron, 465 Pa. 586, 591, 351A.2d 250, [252] (1976). When restrictive covenants meet this three-prong test, they are prima facie enforceable. Bettinger v. Carl Berke Associates, Inc., et al., 455 Pa. 100, 103, 314 A.2d 296, 298 (1974)." The Wood Co., Inc. v. Hickey, 40 Cumberland L.J. 511, 514 (1990) (preliminary injunction issued). First, whether a restrictive covenant is incident to one's employment is not dependent upon a technical analysis of the precise timing of the employment agreement's execution. See, e.g., Beneficial Finance Co. of Lebanon v. Becker, 422 Pa. 531, 222 A.2d 873 (1966); cf. George W. Kistler, Inc. v. O'Brien, 464 Pa. 475, 347 A.2d 311 (1975). Second, regarding the necessity of a covenant for the 17 NO. 94-3517 EQUITY TERM protection of an employer, "[a]n employer's right to protect, by a covenant not to compete, interest in customer goodwill acquired through the efforts of an employee is well-established in Pennsylvania." Sidco Paper Co. v. Aaron, 465 Pa. 586, 591, 351 A.2d 250, 252-53 (1976). This aspect of a company's legally protectible interest has been discussed in the following terms: In almost all commercial enterprises ... contact with customers or clientele is a particularly sensitive aspect of the business .... The employer's sole or major contact with buyers [may be] through these agents and the success or failure of the firm [may depend] in part on their effectiveness .... The possibility is present that the customer will regard, or come to regard, the attributes of the employee as more important in his business dealings than any special qualities of the product or service of theemployer, especially if the product is not greatly differentiated from others which are available. Thus, some customers may be persuaded, or even be very willing, to abandon the employer should the employee move to a competing organization or leave to set up a business of his own .... [It is argued that when the employee] leaves the company he should no more be permitted to try to divert to his own benefit the product of his employment than to abscond with the company's cashbox. $idco Paper Co. v. Aaron, 465 Pa. 586, 593-94, 351 A.2d 250, 253-54 (1976), quoting Blake, Employee Agreements Not To Compete, 73 Harv. L. Rev. 625, 653-54 (1960); see Jacobson & Co., Inc. v. Int'l Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967). An assessment of irreparable harm in the context of a covenant 18 NO. 94-3517 EQUITY TERM not to compete is to be made with an understanding that "[i]t is not the initial breach of [the] covenant which necessarily establishes the existence of irreparable harm but rather the threat of the unbridled continuation of the violation and the resultant incalculable damage to the former employer's business." John G. Bryant Co., Inc. v. Sling Testing and Repair, Inc., 471 Pa. 1, 7, 369 A.2d 1164, 1167 (1977) (affirming issuance of preliminary injunction). Third, covenants are reasonably limited in duration and geographic extent if they are "within such territory and during such time as may be reasonably necessary for the protection of the employer ... without imposing undue hardship on the employee." Jacobson & Co.., Inc. v. Int'l Environment Corp., 427 Pa. 439, 452, 235 A.2d 612, 620 (1967) (citations omitted). "What limits as to activity, geographical area, and time are appropriate in a particular case depends upon all the circumstances." Restatement (Second) of Contracts ~188, comment d (1979). "The reasonableness of the temporal and geographic aspects of a restrictive covenant must be determined in light of the nature of the employer's interest sought to be protected." Boldt Machinery & Tools, Inc. v. Wallace, 469 Pa. 504, 513, 366 A.2d 902, 907 (1976) (per Pomeroy, J., with two judges joining). With regard to the temporal aspect of a covenant not to compete incident to an employment relationship, "restraints of [a 19 NO. 94-3517 EQUITY TERM 5-year] duration have been upheld in a wide variety of situations by courts in other jurisdictions." Id. at 515, 366 A.2d at 908. In this regard, "[f]requency of [customer] contact may ... control or affect the permissible period of the restraint .... [I]f the contact is less frequent, a longer period of restraint may be reasonable." Id. at 514, 366 A.2d at 907, quoting Blake, Employee Agreements Not To Compete, 73 Harv. L. Rev. 625, 659 n.1 (1960). With regard to the geographic aspect of a covenant not to compete, "[t]he principle of customer-contact protection finds its expression in the general rule that the territorial restraint in a covenant not to compete will, generally speaking, be considered reasonable if the area covered by the restraint is limited to the territory in which the employee was able, during the term of his employment, to establish contact with his employer's customers." Annotation, Enforceability of Restrictive Covenant, Ancillary to employment Contract, as Affected by Territorial Extent of Restriction, 43 A.L.R.2d 94, 162 (1955). In appropriate circumstances, a covenant encompassing the area of an entire country may be upheld. See, e.g., Plunkett Chemical Co. v. Reeve, 373 Pa. 513, 516, 95 A.2d 925, 927 (1953) (United States). Where reasonableness of a covenant not to compete is an issue, the burden is upon the party asserting such unreasonableness to demonstrate it. John G. Bryant Co., Inc. v. Sling Testing and Repair, Inc., 471 Pa. 1, 12, 369 A.2d 1164, 1169 (1977) (affirming 20 NO. 94-3517 EQUITY TERM issuance of preliminary injunction). Finally, if a covenant not to compete is reasonable, it is not a defense that the former employee did not actively pursue solicitation of the employer's prior customers. Sobers v. Shannon Optical Co., Inc., 326 Pa. Super. 170, 176, 473 A.2d 1035, 1038 (1984). Damages for violation of covenants not to compete. With respect to damages for violations of covenants not to compete, it may be noted initially that an argument can be made that the reasonableness of such a covenant is not an issue where a legal remedy (as opposed to an equitable one) is concerned. See generally Krauss v. M.L. Clasker & Sons, Inc., 434 Pa. 403, 254 A.2d 1 (1969);. Boyce v. Smith-Edwards-Dunlap Co., 398 Pa. Super. 345, 580 A.2d 1382 (1990). In any event, "[d]amages must be proven with all the certainty that the case permits."?~ In an action for damages resulting from the breach of a restrictive covenant, absolute or mathematical certainty is not required.72 "[T]he breach of non-competition agreements ... involves damages which are difficult to calculate with absolute precision."73 This indefiniteness, however, does not ?~ Ross v. Houck, 184 Pa. Super. 448, 451, 136 A.2d 160, 162 (1957). ~2 Id. ~ Aiken Indus., Inc. v. Estate of Wilson, 477 Pa. 34, 41, 383 A.2d 808, 812 (1978). 21 NO. 94-3517 EQUITY TERM by itself preclude relief.TM The Pennsylvania Supreme Court has stated: While damages ... cannot be based on a mere guess or speculation, yet where the amount may be fairly estimated from the evidence, a recovery will be sustained even though such amount cannot be determined with entire accuracy. Williston on Contracts, Revised Edition, Vol. 5, lays down these principles in respect to measuring damages: "Though any breach of contract entitles the injured party at least to nominal damages, he cannot recover more without establishing a basis for an inference of fact that he has been actually damaged. A mere possibility that the plaintiff might have made a profit if the defendant had kept his contract will not justify damages based on the assumption that the profit would have been made. But though there must be evidence of substantial damage in order to justify recovery of more than a nominal sum, the exact amount need not be shown. Where substantial damage has been suffered, the impossibility of proving its precise limits is no reason for denying substantial damages altogether." The essence of the legal principles above cited is that compensation for breach of contract cannot be justly refused because proof of the exact amount of loss is not produced, for there is judicial recognition of the difficulty or even impossibility of the production of such proof. What the law does require in cases of this character is that the evidence shall with a fair degree of probability establish a basis for the assessment of damages.75 Id. at 41-42, 383 A.2d at 812. 7~ Massachusetts Bonding & Ins. Co. v. Johnstone & Harder, Inc., 343 Pa. 270, 279-80, 22 A.2d 709, 714 (1941) (citations omitted). 22 NO. 94-3517 EQUITY TERM In a breach of covenant action, where the amount of damages cannot be determined with complete accuracy, a plaintiff can recover damages "to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty."76 Sometimes in the case of breach of a covenant not to compete, "the reasonable certainty required may be fulfilled by looking to a restitutionary measure of damages.77 Attorney's fees are generally not recoverable in an action for breach of contract. See Gorzelsky v. Leckey, 402 Pa. Super. 246, 251, 586 A.2d 952, 955 (1991). However, in egregious circumstances an award of attorney's fees may be sanctioned. Act of July 9, 1976, P.L. 586, S2, 42 Pa. C.S. S2503(7), (9). Spoiliation doctrine; missinq evidence rule. Under the spoiliation doctrine, where a party has destroyed evidence relevant to the dispute being litigated, an inference may be drawn that the destroyed evidence would have been unfavorable to the position of the offending party. Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994). Similarly, under the missing evidence 76 Ross v. Houck, 184 Pa. Super. 448, 451-52, 136 A.2d 160, 162 (1957) citation omitted). 77 Ebright v. Shutter, 254 Pa. Super. 509, 515, 386 A.2d 66, 69 (1978). 23 NO. 94-3517 EQUITY TERM rule, "[t]he failure to produce evidence which would properly be part of the case and which is within the control of a party whose interest it would naturally serve, militates strongly against such party and raises in the absence of explanation an inference of fact that it would be unfavorable to [the producing party]." Piwoz v. Iannacone, 406 Pa. 588, 596, 178 A.2d 707, 711 (1962). Application of Law to Facts In the present case, the covenant not to compete executed by Defendant Greenfield was incident to an employment relationship between Plaintiff as employer and Defendant Greenfield as employee. It was reasonably necessary for the protection of the Plaintiff, given the competitive nature of this rather unusual industry and the significant position occupied by Mr. Greenfield. And in view of the infrequency of contact between water utility service companies and some of their customers, and the extent of the area serviced by a field technician in Plaintiff's employ, the court is not in a position to find the covenant not to complete unreasonable as to duration or territorial restraint. The activity of Defendant Greenfield in association with Defendant Perry has been in the past clearly violative of the terms of the employment agreement in question. Under these circumstances, the court is of the view that the covenant is enforceable prospectively by way of injunction and retrospectively by way of damages. 24 NO. 94-3517 EQUITY TERM On the subject of damages, and being cognizant of the general difficulty of assessing losses in cases of this type, the additional problems created by the intentional destruction of records by one of the defendants, and the inference that may be drawn from such conduct, and upon consideration of all the evidence, the court believes that an award of compensatory damages in the amount of $30,000.00, with interest at the legal rate from November 13, 1995, represents a conservative figure in this case. Reasonable attorney's fees in the amount of $20,000.00, plus costs of suit, are also deemed appropriate. This award is considerably less than could be calculated pursuant to a restitutionary measure of damages based upon compensation paid to Defendant Greenfield by Plaintiff during the course of Mr. Greenfield's employment. CONCLUSIONS OF LAW 1. This court has jurisdiction over the parties and subject matter of this litigation. 2. The covenant not to compete in this case is valid and enforceable. 3. Prospective injunctive relief and retrospective relief in the form of damages are appropriate remedies available to Plaintiff. 4. Reasonable attorney's fees should be awarded to Plaintiff. DECREE NISI AND NOW, this 20th day of December, 1996, upon consideration 25 NO. 94-3517 EQUITY TERM of Plaintiff's complaint and of Defendant Greenfield's counterclaim, following a nonjury trial and for the reasons stated in the accompanying opinion, the court finds in favor of Plaintiff and against Defendants on Plaintiff's complaint, and in favor of Plaintiff and against Defendant on Defendant's counterclaim. It is further ordered, adjudged and decreed as follows: 1. Prior to June 29, 1998, Defendant Greenfield is enjoined, either as a principal, disclosed or undisclosed, on behalf of, or in conjunction with any other person, firm, partnership, company or corporation, either as an agent, employee, partner, officer, director, consultant or in any other capacity, directly or indirectly, within a territory of 250 miles from 1156 York Road, Mechanicsburg, Pennsylvania, from doing any of the following: a. Engaging in the business of installation, repair, calibration, sales and/or rentals of water meters of any kind; b. Soliciting orders or contracts for the installation, repair, calibration, sales and/or rentals of water meters of the same or similar nature provided by Plaintiff; or c. Soliciting, diverting, taking away or inducing any of the customers of Plaintiff. 26 NO. 94-3517 EQUITY TERM 2. Prior to June, 29, 1998, Defendant Perry is enjoined from facilitating, aiding or abetting, either directly or indirectly, personally or by way of any company, corporation, partnership, association or other entity in which he has an interest or by whom or which he is employed or engaged, Defendant Greenfield in any violation of paragraph 1 of this decree. 3. Defendants, jointly~ and severally, shall pay damages to Plaintiff in the amount of $30,000.00, with interest sec. leg. from November 13, 1995, attorney's fees in the amount of $20,000.00 and costs of suit. BY THE COURT, Diane G. Radcliff, Esq. 3448 Trindle Road Camp Hill, PA 17011 Attorney for Plaintiff Mary A. Etter Dissinger, Esq. 28 North Thirty-second Street Camp Hill, PA 17011 Attorney for Defendants : rc s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr., J. 27