Loading...
HomeMy WebLinkAbout93-0008 CivilCOMPUTER RESOURCE ASSOCIATES, INC., Plaintiff V. DOUGLAS MUSSELMAN, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 8 EQUITY 1993 IN RE: PLAINTIFF'S PETITION FOR PRELIMINARY INJUNCTION BEFORE OLER, J. PRELIMINARY INJUNCTION AND NOW, this 147 day of March, 1993, upon consideration of Plaintiffs Petition for Preliminary Injunction, and following a hearing, the Petition is GRANTED and Defendant is ENJOINED from performing services as a computer systems engineer, within a radius of 50 miles of Plaintiff s offices at 3314 Market Street, Camp Hill, Cumberland County, Pennsylvania, for Pennsylvania Blue Shield, AMP, Inc., IBM Corp., or Pennsylvania National Insurance Companies, while an employee of Devon Consulting, pending further Order of Court, but in no event for a period in excess of one year. THIS preliminary injunction shall be effective upon Plaintiff s filing of a bond, with court -approved surety, or legal tender, in the amount of $20,000, conditioned that, if the injunction is dissolved because improperly granted, Plaintiff shall pay to any person injured all damages sustained by reason of granting the injunction and all legally taxable costs and fees, in accordance with Pa. R.C.P. 1531(b). BY THE COURT, � o J. esley Oler, J. J. Jay Cooper, Esq. Attorney for Plaintiff John B. Langel, Esq. David S. Fryman, Esq. Peter J. Norman, Esq. Attorneys for Defendant :rc COMPUTER RESOURCE IN THE COURT OF COMMON PLEAS OF ASSOCIATES, INC., CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff V. CIVIL ACTION - LAW DOUGLAS MUSSELMAN, Defendant NO. 8 EQUITY 1993 IN RE: PLAINTIFF'S PETITION FOR PRELIMINARY INJUNCTION BEFORE OLER, J. OPINION AND PRELIMINARY INJUNCTION Oler, J. This equity case arises out of an alleged breach by an employee of a covenant not to compete in an employment agreement. For disposition at this time is a petition for preliminary injunction filed by the employer, seeking preliminary enforcement of the covenant. A hearing on the petition was held on Wednesday, March 10, 1993. For the reasons stated in this Opinion, the petition for preliminary injunction will be granted. Factual background. The facts in this case are not substantially in dispute. Plaintiff -Petitioner is Computer Resource Associates, Inc., a company knowledgeable through its employees in computer programming, program analysis and systems analysis. Its service to customers, or clients, consists primarily of furnishing its employees, designated as systems engineers, to persons or entities in need at the moment of such expertise, payment for which service is on a time and materials basis, or on a fixed price basis. Plaintiff s offices are presently located at 3314 Market Street, Camp Hill, Cumberland County, Pennsylvania. No. 8 Equity 1993 Defendant -Respondent is Douglas Musselman, an adult individual residing at 4611-B Florence Avenue, Mechanicsburg, Cumberland County, Pennsylvania, and an experienced systems engineer as that term is used above. On or about March 26, 1991, the parties entered into an Employment Agreement, whereby Plaintiff employed Defendant as a systems engineer with a gross starting salary of $2,866.67 per month.' The agreement, which comprises less than two pages and is written in plain language, contains the following promise by the employee: Covenant Not to Compete [Employee] agrees not to engage in any form of business that is in competition with CRA within 50 miles of CRA's corporate offices or with any previous or then existing client, during the term of employment with CRA and for 1 year thereafter. On or about December 24, 1992, Defendant submitted a letter of resignation to Plaintiff, effective January 6, 1993. The letter resulted from employment obtained by Defendant with a competitor of Plaintiff, Devon Consulting.' It was Defendant's understanding with Devon that he would be furnished by Devon to Pennsylvania Blue Shield, an existing client of Plaintiff and situated within a radius of 50 miles of ' Defendant had previously been employed by Plaintiff in the same capacity from approximately July 9, 1987, to approximately June 9, 1989. ' Defendant's employment agreement with Devon, a company with offices in Wayne, Montgomery County, Pennsylvania, was dated December 23, 1992, and contained a clause providing that the term of employment would commence on January 7, 1993. 2 No. 8 Equity 1993 Plaintiff, for duties as a systems engineers Plaintiff attempted to dissuade Defendant from leaving, by proposals of monetary incentives and warnings of contract enforcement. However, Defendant undertook the new employment with Devon and commenced the assignment arranged for him at Pennsylvania Blue Shield. He remains there for the moment, receiving a gross salary from Devon of approximately $1100 per week. Although Plaintiff has, in the past, accepted as permissible the engagement of its former systems engineers as direct employees of clients,' sometimes with payments being received by Plaintiff from the clients, it is not willing to forgo enforcement of the covenant not to compete in the context of an employee's engagement as an employee of a competitor such as Devon. In this regard, Plaintiff is injured by the adverse effect upon good will which an employee's transfer of allegiance to a competing enterprise in the area creates and by the diminution of available sources for engagement of its 3 Defendant's letter of resignation indicated only that an "opportunity that [he had been] presented with [was] the best one for [his] career." He had had an interview with Pennsylvania Blue Shield in December of 1992, for the purpose of determining whether that company would accept his services if furnished through Devon; such interviews are customary in the business of firms such as Plaintiff and Devon, which offer their employees to the offices of clients for certain projects. Devon was not aware, when it employed Defendant, of the covenant not to compete which has become the subject of this litigation. a Defendant was a beneficiary of this policy of Plaintiff after his prior departure from the company. 3 No. 8 Equity 1993 services.' Plaintiff has indicated in the present case that it would be satisfied with a proscription on Defendant's activities as a competitor's employee at only four businesses, which are current clients of Plaintiff — Pennsylvania Blue Shield, AMP, Inc., IBM Corp., and Pennsylvania National Insurance Companies. It appears that if the covenant not to compete is found to preclude Defendant's continued performance of services at Pennsylvania Blue Shield as Devon's employee, the latter company will not be in a position to continue his employment. On the other hand, Plaintiff would in that event be interested in rehiring him. Statement of law. Several principles of law are of importance in the present matter. First, with respect to preliminary injunctions, the Pennsylvania Supreme Court has stated as follows: Three criteria have been established for the granting of a preliminary injunction .... They are: (1) the preliminary injunction must be necessary to prevent immediate and irreparable harm which could not be compensated for by damages; (2) greater injury would result from the denial of the preliminary injunction than from the granting of it; and (3) it would operate to restore the parties to the status quo as it existed prior to the alleged wrongful conduct. In addition to meeting all three criteria, the court must be convinced that [plaintiffs] right to a preliminary injunction is clear ... and general equity jurisdiction must be warranted. Committee of Seventy v. Albert, 33 Pa. Commw. 44, 49, 381 A.2d 188,190 (1977). ' Both Plaintiff and Devon compete for engagement by clients for work as to which the clients seek non -employees, usually of limited duration. 9 No. 8 Equity 1993 Second, with respect to covenants not to compete, it has been noted by Judge Hess of this Court that "[c]ourts of equity will enforce ... covenants [not to compete] ... 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, 351 A.2d 250, 257 (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 Woodco Co., Inc. v. Hickey, 40 Cumberland L.J. 51t 514 (1990) (preliminary injunction issued). Where unreasonableness 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, 369 A.2d 1164 (1977) (issuance of preliminary injunction affirmed). Furthermore, an assessment of irreparable harm in the context of breach of a covenant 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." Id. at 7, 369 A.2d at _. Third, with respect to contract law, "[t]he cardinal rule of construction is to ascertain the intent of the parties at the time of making the contract and to give effect 5 No. 8 Equity 1993 to such intent." 8 P.L.E. Contracts §144, at 172 (1972). Application of law to facts. In this case, it appears to the Court that the covenant not to compete entered into by the parties was intended to encompass the sort of activity which Defendant has engaged in at Pennsylvania Blue Shield as an employee of Devon Consulting. The provision is incident to an employment relationship between the parties. It is, to the degree sought to be enforced, reasonably necessary for protection of the employer in terms of preservation of good will and sources of business. In addition, it is reasonably limited in duration and geographic extent. It further appears that the harm occasioned to Plaintiff by this breach and the threat of a continuation of the covenant's violation is immediate and irreparable — diminishing both Plaintiff's reputation and its sources of business in a manner not conducive to liquidation in terms of monetary loss. A refusal to issue a preliminary injunction in the case of a relatively short-term covenant such as the one involved herein, particularly where the offending activity may by its nature be terminable prior to the normal course of judicial action and where the employee's skills are reasonably marketable, would appear to carry more risk of harm than issuance of the injunction. finally, issuance of a preliminary injunction in the present circumstances would operate to restore the parties to the status quo as it existed prior to the alleged wrongful conduct. 0 No. 8 Equity 1993 The Court is of the opinion that general equity jurisdiction is warranted in the present case and that Plaintiff's right to a preliminary injunction is clear. For these reasons, the following decree will be entered: PRELIMINARY INJUNCTION AND NOW, this 14t4 day of March, 1993, upon consideration of Plaintiff's Petition for Preliminary Injunction, and following a hearing, the Petition is GRANTED and Defendant is ENJOINED from performing services as a computer systems engineer, within a radius of 50 miles of Plaintiffs offices at 3314 Market Street, Camp Hill, Cumberland County, Pennsylvania, for Pennsylvania Blue Shield, AMP, Inc., IBM Corp., or Pennsylvania National Insurance Companies, while an employee of Devon Consulting, pending further Order of Court, but in no event for a period in excess of one year. THIS preliminary injunction shall be effective upon Plaintiffs filing of a bond, with court -approved surety, or legal tender, in the amount of $20,000, conditioned that, if the injunction is dissolved because improperly granted, Plaintiff shall pay to any person injured all damages sustained by reason of granting the injunction and all legally taxable costs and fees, in accordance with Pa. R.C.P. 1531(b). BY THE COURT, s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr. J. 7 No. 8 Equity 1993 J. Jay Cooper, Esq. Attorney for Plaintiff John B. Langel, Esq. David S. Fryman, Esq. Peter J. Norman, Esq. Attorneys for Defendant :rc