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HomeMy WebLinkAbout91-4072 CivilDONALD L. DeMUTH, Plaintiff V. DANIEL C. MILLER Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 4072 CIVIL 1991 IN RE: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS.I AND II OF PLAINTIFF'S COMPLAINT BEFORE HOFFER HESS* AND OLER JJ. ORDER OF COURT AND NOW, this `�[( day of February, 1993, upon consideration of Defendant's Motion for Summary Judgment, the pleadings and depositions of the parties, as well as Defendant's responses to Plaintiffs interrogatories, Defendant's motion is DENIED. Samuel L. Andes, Esq. Attorney for Plaintiff Daniel L. Sullivan, Esq. Attorney for Defendant rc BY THE COURT, *Judge Hess did not participate in this decision. J. DONALD L. DeMUTH, Plaintiff V. DANIEL C. MILLER Defendant Oler, J. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 4072 CIVIL 1991 IN RE: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS I AND II OF PLAINTIFF'S COMPLAINT BEFORE HOFFER, HESS' AND OLER, JJ. OPINION AND ORDER OF COURT At issue in the present case is a motion for summary judgment filed by Daniel C. Miller (Defendant) in an action commenced by Donald L. DeMuth (Plaintiff). For the reasons set forth in this Opinion, Defendant's motion must be denied. Pursuant to Pennsylvania Rule of Civil Procedure 1035, a court should grant a motion for summary judgment only if "the pleadings, depositions, answers to interrogatories and admissions on file ... show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "In considering a movant's motion for summary judgment, the court must view the record in the light most favorable to the non -movant." McNeal v. City of Easton, 143 Pa. Commw.151,155, 598 A.2d 6381 639 (1991). Furthermore, "the court must ... resolve all doubts as to the existence of material facts against the moving party." Elder v. Nationwide Insurance Co., 410 Pa. Super. 290, 294, 599 A.2d 996, 998 (1991). In accordance with these principles, the facts of this case may be summarized as follows: ' Judge Hess did not participate in this decision. No. 4072 Civil 1991 Plaintiff, a certified public accountant, trades and conducts his business as "Donald L. DeMuth Professional Management Consultants" in Camp Hill, Cumberland County, Pennsylvania.' From December, 1985, until October, 1990, Plaintiff employed Defendant as a certified public accountant in this business.' During these five years, Plaintiff and Defendant executed written employment agreements for the one-year periods of 1986-87,1987-88, and 1988-89.4 Moreover, Plaintiff has stated that although he was unable to find a copy of a written employment agreement for 1989-90, such an agreement did exist for that time period.' On the other hand, Defendant contends that no written agreement existed for this period.' In addition to setting forth the numerous factors of employment, such as Defendant's job responsibilities and compensation, these employment agreements contained a provision entitled "Contingent Note Payable," reading as follows: ' Plaintiff's Complaint, paragraph 1. 3 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 5. 4 Deposition of Donald L. DeMuth, October 22,1992, N.T. 5-6. From December, 1985, until May, 1986, Plaintiff had utilized Defendant as an independent contractor. Id. 5 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 6. 6 Defendant's Answer, paragraph 4. 3 No. 4072 Civil 1991 If within five years of the termination of this Agreement if the Employee terminates the Agreement or the Employer terminates the Agreement for cause, and the Employee establishes a professional management consulting or accounting firm in Pennsylvania, he agrees to pay the Employer 125% of the previous 12 months' charges for each of the Employer's clients who retain his professional management or consulting services. Cause shall include, but is not limited to, moral turpitude ... and homosexuality.' Despite the parties' disagreement as to the existence of a written employment agreement for 1989-90, Plaintiff continued to employ Defendant until May 31, 1990.8 Furthermore, at the end of the 1989-90 employment year, Defendant remained in the Plaintiff s employ notwithstanding the fact that neither party had agreed to the terms of a written employment agreement for the 1990-91 employment year. On October 17, 1990, Plaintiff terminated Defendant's employment, telling Defendant that this decision was based upon the fact that "he had ... gone public with an area of a controversial ' Deposition of Daniel C. Miller, May 5, 1992, Exhibit 3. This "Contingent Note Payable" provision is contained in the 1988-89 employment agreement and consists of the same language as the "Contingent Note Payable" provisions in the 1986-87 and 1987-88 agreements. Id., Exhibits 1, 2. 8 Plaintiffs Complaint, paragraph 4; Defendant's Answer, paragraph 4. 4 No. 4072 Civil 1991 nature.t9 Following Defendant's termination by Plaintiff on October 17, 1990, Defendant established an accounting firm in Harrisburg, Pennsylvania.10 In so doing, Defendant contacted several of the clients with whom he had associated while employed by Plaintiff." Of the clients whom Defendant had contacted, at least seven discontinued Plaintiff's services and went to Defendant's f1rm.12 Plaintiff has filed the present action, contending that pursuant to the "Contingent Note Payable" provision found in the employment contracts, "Defendant owes Plaintiff a sum of money equal to 125 percent of the previous twelve months' charges for each of Plaintiffs clients who retained Defendant to provide professional services for them following his termination."13 Furthermore, Plaintiff contends that "Defendant has misappropriated, ...to the detriment and loss of Plaintiff, property 9 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 15-16. It appears from the pleadings that Defendant had conducted a television interview, advocating the rights of homosexuals, in September of 1990. Defendant's New Matter, paragraph 24. Despite Defendant's contention that this incident was the reason for his termination, Plaintiff states that it was "one of several reasons stated by DeMuth for terminating Miller's employment." Plaintiff's Answer, paragraph 25. 10 Deposition of Daniel C. Miller, May 5, 1992, N.T. 48. 11 Id. 12 Deposition of Daniel C. Miller, May 5, 1992, N.T. 49. " Plaintiff's Complaint, paragraph 13. 5 No. 4072 Civil 1991 rights belonging to Plaintiff. 14 At the close of the pleading stage of this case, Defendant moved for judgment on the pleadings with respect to Plaintiffs claim arising from the "Contingent Note Payable" provision in the employment agreement. In so doing, Defendant contended that no written contract existed as of May 31, 1990, and, consequently, that Plaintiff had nothing upon which to base his claim. Said motion was denied by this Court on April 15, 1992. Presently, Defendant has filed a motion for summary judgment contending as follows: (1) that, at the time of Defendant's termination, he was not employed under a written agreement containing a "Contingent Note Payable" provision; (2) that, even if Defendant was employed under a written agreement, Defendant was not terminated "for cause" as defined in the "Contingent Note Payable" provision; and (3) that Plaintiff "has failed to identify any property or property right protected by law that gives rise to a misappropriation cause of action."" With respect to Defendant's contention that no written agreement existed when he was terminated, we believe that this Court's earlier holding on Defendant's motion 14 Plaintiff's Complaint, paragraph 22. Plaintiff's claim to misappropriated property rights is premised on the contention that Defendant received "information on Plaintiff's clients, Plaintiff's business and practice procedures, and other information of a proprietary nature ...." Plaintiffs Complaint, paragraph 18. On the other hand, Defendant contends that the information he obtained while employed by Plaintiff was neither proprietary nor confidential in nature. Defendant's Answer, paragraph 18. 15 Defendant's Motion for Summary Judgment, paragraph 21. - No. 4072 Civil 1991 for judgment on the pleadings is applicable.18 In denying Defendant's motion, the Court relied upon the holding of Burge v. Western Pennsylvania Higher Education Council, to the effect that "[w]here a contract of employment for a definite time is made and the employee's services are continued after the expiration of the time, without objection, the inference is that the parties have assented to another contract for a term of the same length with the same salary and conditions of service." Burge v. Western Pennsylvania Higher Education Council, Inc., 391 Pa. Super. 108, 112, 570 A.2d 5361 538 (1990), quoting Smith v. Shallcross,165 Pa. Super. 472, 475, 69 A.2d 156, 158 (1949). This Court further stated that, [a]lthough the language in Burge may leave open the possibility that in some cases a continued relationship between parties to an employment contract will not have the effect of extending the contract or particular terms thereof, it certainly cannot be said that it is clear that the Defendant will prevail in his position that the noncompetitive provision was extinguished when the formal contract expired. For this reason, Defendant's motion for judgment on the pleadings must be denied. DeMuth v. Miller, 4072 Civil 1991, slip. op at 4-5 (Cumberland Co., 1992) (footnote omitted). Defendant also contends that he was not fired "for cause," as defined in the employment agreement, and, therefore, that the "Contingent Note Payable" provision is DeMuth v. Miller, 4072 Civil 1991, slip. op. (Cumberland Co. 1992). 7 No. 4072 Civil 1991 is inapplicable to this case. With respect to that provision, the 1988-89 employment agreement between Plaintiff and Defendant provided for liability on the part of the Defendant "[ilf within five years of the termination of this Agreement if the Employee terminates the Agreement or the Employer terminates the Agreement for cause, and the Employee establishes a professional management consulting or accounting firm in Pennsylvania ....i17 The employment agreement further states that "[clause shall include, but is not limited to ... homosexuality.i18 Defendant contends that "[ilt is not disputed that DeMuth's stated reason for terminating Miller was that Miller had 'gone public with an area of a controversial nature,' a reason which is not an enumerated reason for termination for cause.i19 Consequently, Defendant contends that "[blecause Miller was not terminated for cause, DeMuth is not entitled to any payments under the 'Contingent Note Payable' provision of the Employment Agreement."20 As mentioned previously, summary judgment can be entered only if there are no issues of material fact, and the moving party is entitled to judgment as a matter of law. In the present case, we believe that there are issues of material fact as to the 17 Deposition of Daniel C. Miller, May 5, 1992, Exhibit 3. 18 Deposition of Daniel C. Miller, May 5, 1992, Exhibit 3. is Defendant's Motion for Summary Judgment, paragraph 15. 20 Defendant's Motion for Summary Judgment, paragraph 17. EN No. 4072 Civil 1991 reasons for which Defendant was terminated. Plaintiff informed Defendant that he was terminated because he had "gone public with an area of a controversial nature. 1121 This statement was made by Plaintiff in reference to Defendant's appearance on "television being interviewed in support of a public issue relating to gay/lesbian rights. 1122 Moreover, in contrast to Defendant's contention that the sole reason for his termination was his appearance on television, Plaintiff has stated that his "primary reason for terminating Miller's employment was that [he] realized that Miller had violated for some time the express terms of the employment contract Based upon this, we believe that a material issue exists as to whether Plaintiff terminated Defendant for a reason specified as constituting cause. Consequently, Defendant's motion for summary judgment on this point must be denied. Finally, Defendant moves for summary judgment on Plaintiffs misappropriation claim, contending that Plaintiff "has failed to identify any property or property rights protected by law that gives rise to a misappropriation cause of action.i24 In many businesses, permanent and exclusive relationships are established between customers and salesmen. The customer list and customer information which have been compiled 21 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 16. 22 Defendant's New Matter, paragraphs 25, 26; Plaintiff"s Reply, paragraphs 25, 26. 23 Plaintifrs Reply, paragraph 33. 29 Defendant's Motion for Summary Judgment, paragraph 21. 0 No. 4072 Civil 1991 by such firms represent a material investment of the employer's time and money .... Such data has been held to be property in the nature of a 'trade secret' for which an employer is entitled to protection." Morgan's Home Equipment u. Martucci, 390 Pa. 618, 623,136 A.2d 838, 842 (1957). Furthermore, an employer is entitled to protection of confidential customer information if "the information [is] a particular secret belonging to the employer, developed through its efforts or investments, and of value to the continuation of the employer's business." Bell Fuel Corp. v. Cattolico, 375 Pa. Super. 238, 258, 544 A.2d 450, 461 (1988).25 Plaintiff has stated that Defendant "did not know [his] specific clients, their specific situations, [and] family needs."28 Plaintiff has also stated that "[w]ith any clients, you may handle different business or social situations in a different manner .... And essentially, those are things that belong to [my firm]."27 Additionally, Plaintiff contends that his firm is "heavily involved in retirement plan work, giving people advice on types of retirement plans they have, types of investments they should make, ... the duties of their employees, the type of people they should have working for ' In Bell, the Pennsylvania Superior Court reversed a lower court's denial of an employer's request for a preliminary injunction to restrain a former employee from competing with the employer, holding that "[t]he trial court did not have ... a sufficient basis to conclude as a matter of law that Cattolico had not and could not divulge or otherwise use protectible customer or other information ... which had been disclosed ... in the course of a confidential relationship." Bell Fuel Corp. v. Cattolico, 375 Pa. Super. 238, 260-61, 544 A.2d 450, 461(1988). 26 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 34. 27 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 34. 10 No. 4072 Civil 1991 them, ... [and] how much should they charge their patients for specific procedures."" By contending that Defendant acquired this specific knowledge of Plaintiffs clients, and by contending that Defendant took this knowledge with him upon his termination, Plaintiff has at least indicated the possibility that Defendant has misappropriated protected customer information. For this reason, we cannot, as a matter of law, grant Defendant's motion for summary judgment on that point. ORDER OF COURT AND NOW, this y. day of February, 1993, upon consideration of Defendant's Motion for Summary Judgment, the pleadings and depositions of the parties, as well as Defendant's responses to Plaintiffs interrogatories, Defendant's motion is DENIED. Samuel L. Andes, Esq. Attorney for Plaintiff Daniel L. Sullivan, Esq. Attorney for Defendant : rc BY THE COURT, 28 Deposition of Donald L. DeMuth, October 22, 1992, N.T. 35. 11 'J J.