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Home My WebLink About94-3517 Civil LAWCO, INC., : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : CIVIL ACTION - EQUITY : TIMOTHY GREENFIELD and : SCOTT PERRY, : individually and t/d/b/a : HYDROTECH MECHANICAL : SERVICES, : Defendants : NO. 94-3517 EQUITY TERM IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT SCOTT PERRY and DEFENDANT HYDROTECH MECHANICAL SERVICES BEFORE HOFFER, BAYLEY and OLER, JJ. ORDER OF COURT AND NOW, this ZI~ day of November, 1994, after careful consideration of the preliminary objections of Defendants Scott Perry and Hydrotech Mechanical Services, the preliminary objections are DENIED. BY THE COURT, Wesley Oler~r., J. Diane G. Radcliff, Esq. 3448 Trindle Road Camp Hill, PA 17011 Attorney for Plaintiff Mary A. Etter Dissinger, Esq. 28 North 32nd Street Camp Hill, PA 17011 Attorney for Defendants :re LAWCO, INC., : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : CIVIL ACTION - EQUITY : TIMOTHY GREENFIELD and : SCOTT PERRY, : individually and t/d/b/a : HYDROTECH MECHANICAL : SERVICES, : Defendants : NO. 94-3517 EQUITY TERM IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT SCOTT PERRY and DEFENDANT HYDROTECH MECHANICAL SERVICES BEFORE HOFFER, BAYLEY and OLER, JJ. OPINION and ORDER OF COURT Oler, J. This case arises out of an alleged breach of a covenant not to compete contained in a contract of employment between Plaintiff and Defendant-Greenfield. At present, Defendants Perry and Hydrotech Mechanical Services have filed preliminary objections in the nature of a demurrer. For the reasons stated in this Opinion, the preliminary objections will be denied. STATEMENT OF FACTS and PROCEDURAL HISTORY Statement of facts. The facts, as averred by Plaintiff, can be summarized as follows: Plaintiff is a Pennsylvania corporation with its principal place of business at 1156 York Road, Mechanicsburg, Cumberland County, Pennsylvania.~ At all times relevant to the present action, Plaintiff has been engaged in the "water utility service" business, including the sale, service, repair, manufacture, fabrication, calibration, testing, certification, and installation of water meters, back flow ~ Plaintiff's Complaint, paragraph 1. No. 94-3517 EQUITY TERM preventers and related products.2 Plaintiff's business operates and has operated within a radius of approximately 200 miles from its principal place of business.3 On or about February 19, 1988, Plaintiff hired Defendant- Greenfield as an employee.4 At the time of his employment, Defendant-Greenfield and Plaintiff entered into an agreement, a clause of which was titled "Noncompetition."s This clause contained, in pertinent part, Defendant-Greenfield's agreement that · during his employment and for a period of fi~e (5) years immediately following the termination of said employment he shall not, either as a principal, ~closed 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 ... within a territory defined by a radius of 250 miles from the EMPLOYER'S principal place of business ... 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 Plaintiff's Complaint, paragraph 4. Plaintiff's Complaint, paragraph 4. Plaintiff's Complaint, paragraph 5. Plaintiff's Complaint, paragraph 6; Exhibit A, Section B. 2 No. 94-3517 EQUITY TERM or similar nature provided by the EMPLOYER. c. He shall not solicit, divert, take away or induce any of the customers of EMPLOYER.6 In or around February of 1993, Defendant-Greenfield and Defendant-Perry formed a partnership under the name of Hydrotech Mechanical Services for the purpose of establishing a water utility service business.7 Around this time, they approached Plaintiff and inquired as to purchasing certain of Plaintiff's business assets necessary for the water utility service business.8 Plaintiff reminded them that Defendant-Greenfield was still bound by the terms of the agreement, including the covenant not to compete.9 The negotiations for sale and purchase of Plaintiff's business assets never came to fruition.~° On or about June 29, 1993, Defendant-Greenfield severed his employment relationship with Plaintiff.~ Thereafter, according to Plaintiff, Defendant-Greenfield began soliciting the customers of Plaintiff for the purpose of diverting their business to the individual defendants and their partnership, Hydrotech Mechanical Plaintiff's Complaint, Exhibit A , Section B. Plaintiff's Complaint, paragraph 11 and Exhibit B. Plaintiff's Complaint, paragraph 12. Plaintiff's Complaint, paragraph 13. Plaintiff's Complaint, paragraph 14. Plaintiff's Complaint, paragraph 15. 3 No. 94-3517 EQUITY TERM Services.~2 Additionally, Plaintiff avers that Defendants, with full knowledge of the agreement, commenced operation of their business in violation of Defendant-Greenfield's covenant not to compete.~3 Procedural History. Plaintiff initiated this action on June 29, 1994, by filing a complaint in equity alleging breach of contract for a violation of the covenant not to compete and seeking injunctive relief as well as damages.TM Plaintiff requests that this court enjoin Defendant-Greenfield from engaging in the water utility service business within a radius of 200 miles of Plaintiff's business until June 29, 1998, and from soliciting any person or entity who was or is a client of Plaintiff.~s Additionally, Plaintiff requests the court to enjoin Defendant- Perry from participating in any business venture with Defendant- Greenfield, either directly or indirectly, which competes with Plaintiff's business until June 29, 1998, within a 200-mile radius of Plaintiff's principal place of business and to enjoin Defendant- Perry from participating directly or indirectly with Defendant- Greenfield in soliciting any of Plaintiff's customers.~ Defendant- Plaintiff's Complaint, paragraph 16. Plaintiff's Complaint, paragraph 17. See Plaintiff's Complaint, Demand Clause. Plaintiff's Complaint, Demand Clause, paragraphs a, b. Plaintiff's Complaint, Demand Clause, paragraphs c, d. 4 No. 94-3517 EQUITY TERM Greenfield filed an Answer with New Matter and a Counterclaim on June 28, 1994. Defendants Perry and Hydrotech Mechanical Services filed preliminary objections to the Complaint in the nature of a demurrer on June 28, 1994, which are the subject of this Opinion. They allege that Plaintiff's Complaint fails to state a cause of action against them because (1) neither defendant was employed by Plaintiff, (2) neither entered into any agreement with Plaintiff, and (3) neither had or has any relationship with Plaintiff. STATEMENT OF LAW The standard for a demurrer in Pennsylvania is well settled: [A]ll material facts set forth in the complaint, as well as all inferences reasonably deducible therefrom, are admitted as true for purposes of review. However, [the Court] cannot accept as true conclusions of law. The question presented by a demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. A demurrer should be sustained only in cases where the plaintiff has clearly failed to state a claim on which relief can be granted. A demurrer should not be sustained if there is any doubt as to whether the complaint adequately states a claim for relief under any theory. Pittsburgh Nat'l Bank v. Perr, 431 Pa. Super. 580, 584, 637 A.2d 334, 336 (1994) (citations omitted). The standard for the enforcement of a restrictive covenant in Pennsylvania has been stated as follows: The law in this Commonwealth for more than a century has been that in order to be 5 No. 94-3517 EQUITY TERM enforceable a restrictive covenant must satisfy three requirements: (1) the covenant must relate to either a contract for the sale of goodwill or other subject property or to a contract for employment; (2) the covenant must be supported by adequate consideration; and (3) the application of the covenant must be reasonably limited in both time and territory. Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 506-7, 351A.2d 207, 210 (1976). "A court sitting in equity may issue an injunction to enforce a covenant not to compete where it is ancillary to an employment relationship between parties to the covenant." Wainwright's Travel Serv., Inc. v. Schmolk, 347 Pa. Super. 199, 203, 500 A.2d 476, 478 (1985). "Restrictive employment covenants (covenants not to compete) are valid only if they are reasonably limited in duration of time, geographic extent and are 'reasonably necessary for the protection of the employer ... without imposing undue hardship on the employee .... '" Girard Inv. Co. v. Bello, 456 Pa. 220, 222-23, 318 A.2d 718, 719-20 (1974), quoting Restatement of Contracts §516(f) (1932). The issuance of an injunction to enforce a restrictive covenant against an ex-employee and his or her new employer has been held proper in Pennsylvania. Air Prod. and Chem., Inc. v. Johnson, 296 Pa. Super. 405, 415-16, 442 A.2d 1114, 1119-20 (1982). Pennsylvania law permits the issuance of an injunction against an employee and employer to prevent the disclosure of information obtained by the employee while in the employ of the complainant ex-employer when an effective restrictive covenant is present in or incident to an employment contract or where 6 No. 94-3517 EQUITY TERM trade secrets exist under circumstances when the Pennsylvania law of unfair competition requires that protection from disclosure be ordered. Id. at 415-16, 442 A.2d at 1119-20. APPLICATION OF LAW TO FACTS In accordance with the foregoing principles of law, it appears that Plaintiff has permissibly included Defendants Perry and Hydrotech Mechanical Services in this action. In this regard, the business partner and partnership of Defendant-Greenfield are in positions analogous to that of a new employer of Defendant- Greenfield and are subject to the possibility of an injunctive order in connection with his covenant not to compete. Plaintiff has thus averred sufficient facts to avoid a conclusion at this stage of the pleadings that as a matter of law no relief could be obtained as to these moving parties.~7 For the foregoing reasons, the following Order will be entered: ORDER OF COURT AND NOW, this 2~ day of November, 1994, after careful consideration of the preliminary objections of Defendants Scott Perry and Hydrotech Mechanical Services, the preliminary objections ~7 Nothing in this Opinion is intended to address the issue of the enforceability of the particular covenant not to compete in this case. 7 No. 94-3517 EQUITY TERM are DENIED. BY THE COURT, s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr., J. Diane G. Radcliff, Esq. 3448 Trindle Road Camp Hill, PA 17011 Attorney for Plaintiff Mary A. Etter Dissinger, Esq. 28 North 32nd Street Camp Hill, PA 17011 Attorney for Defendants : re 8