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HomeMy WebLinkAbout01-6560 EquityINVESTIGATIVE CONSULTANT SERVICES, INC., Plaintiff VS. ALBERT R. THOMAS, SHERI THOMAS and HAYES, STOUDT & ASSOCIATES, INC., Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 01-6560 EQUITY CIVIL ACTION - EQUITY PLAINTIFF' S MOTION FOR PRELIMINARY INJUNCTION BEFORE HESS, J. OPINION AND DECREE NISI In this case, the plaintiff, Investigative Consultant Services, Inc., has filed a complaint in equity against the defendants and has, in that connection, filed a motion for preliminary injunction. A hearing on the motion for preliminary injunction was held on December 19, 2001. For the reasons which follow, the motion will be denied. The plaintiff seeks to enjoin the defendants from contacting any of its clients or customers or divulging trade secrets of the plaintiff. At the hearing, the plaintiff limited its request for preliminary injunction to the defendant, Albert R. Thomas. Mr. Thomas had worked for Investigative Consultant Services, Inc., (hereinafter ICS) for approximately fifteen years as, first, an investigator, then a regional director and director of investigations. On December 1, 1995, many years after he had been first hired, Mr. Thomas was asked by ICS and, specifically, its president, Carl Schleigher, to sign an employment agreement. The employment agreement stated, in pertinent parts, as follows: 12. (a) I understand and agree that, during the term of my employment with ICS and within two (2) years after termination of employment with ICS, I 01-6560 EQUITY will not divulge the names or addresses of any of the clients or customers of ICS to any party not employed by ICS, nor will I call on or market any current client of ICS on behalf of myself or any other employer, with the exception that the identity of clients or customers may be provided to future clients as references. I agree that, ifI violate this provision and perform services for any client of ICS during said two (2) year period, either personally or on behalf of a new employer, I will pay ICS 100% of any fees paid by said client of ICS as liquidated damages for the breach of this provision .... (c) I further agree, during the term of my employment and for a period of two (2) years after termination of my employment with ICS, not to divulge any information which I learned while in the employ of ICS which could be construed as a "trade secret." All such disclosures must be approved, in advance, by ICS' Chief Executive Officer. It is clear that signing the employment agreement was not voluntary and that employees who refused to sign the agreement would be fired. Mr. Thomas voluntarily terminated his employment with ICS on October 30, 2000, and became associated with defendant Hayes, Stoudt & Associates, Inc., a competitor oflCS. Thereafter, he contacted four clients of the plaintiff. He has not received any business from three of the four clients contacted. He has, however, received some business from Travelers Investigative Services which is owned by Aetna Insurance. The standards for the issuance of a preliminary injunction are well established. Such an injunction may be granted only if the plaintiff establishes that relief is necessary to prevent immediate and irreparable harm which could not be compensated by damages; greater injury would result by refusing the injunction than by granting it; the injunction will restore the parties 2 01-6560 EQUITY to their status as it existed immediately prior to the alleged wrongful conduct; and the activity sought to be restrained is actionable and the injunction issued is reasonably suited to abate such activity. Anchel v. Shea, 762 A.2d 346, 351 (Pa. Super. 2000). In addition, an injunction cannot be granted unless the plaintiff establishes that the right to relief is clear. Id~. In this case, we agree with the defendant that the plaintiff has failed to prove the likelihood of success in enforcing its restrictive covenant. Non-compete covenants are agreements in restraint of trade and, thus, are not favored by the courts. They are, accordingly, narrowly construed. Jacobson & Co. v. International Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967). In Pennsylvania, restrictive covenants are enforceable but only if they are incident to an employment relationship between the parties, the restrictions imposed by the covenant are reasonably necessary for the protection of the employee, and the restrictions imposed are reasonably limited in duration and geographic extent. See Hess v. Gebhard & Co., Inc., 769 A.2d 1186, 1191 (Pa. Super. 2001) citing earlier cases. Important in the matter sub judice is the principle that, when a restrictive covenant is not executed until after the employee has agreed to the terms of employment and begun work, then the covenant may not be enforced absent new consideration. See Davis & Warde, Inc. v. Tripodi, 420 Pa. Super. 450, 455, 616 A.2d 1384, 1387 (1992). In the instant case, the testimony clearly indicates that the plaintiff operated its business for some time without requiring employees to sign any employment agreements. At the time the first agreement was signed by him, Mr. Thomas had worked for the plaintiff for many years. He had become a regional director of investigations. His salary and compensation did not change in exchange for signing the plaintiff' s agreement. Instead, he testified that at least one employee 01-6560 EQUITY was fired for refusing to sign the agreement. Thus, the instant agreement lacks consideration and is clearly unenforceable. ~ The plaintiff also argues that it is entitled to equitable relief because of the defendant's misappropriation of trade secrets. In asserting an equitable right to protection against the misuse of a trade secret, the burden is on the plaintiff to show that it held a trade secret and that the defendant had misappropriated it in violation of a confidential relationship. Fidelity Fund, Inc. v. DiSanto, 347 Pa. Super. 112, 121,500 A.2d 431,436 (1985). We agree with the defendant that neither the names of insurance companies, pricing agreements, nor reporting methods are confidential material in the investigative industry. The pricing arrangements which are dictated by the companies who refer work leave little, if any, room for negotiation. The names of the insurance companies and their structure is well known in the investigative industry and investigative work and techniques are not unique to the plaintiff. For all of the foregoing reasons, we will enter the following decree nisi. DECREE NISI AND NOW, this day of January, 2002, following hearing thereon, the motion of the plaintiff for preliminary injunction is DENIED. BY THE COURT, Kevin A. Hess, J. 1 Furthermore, it is well settled that an injunction is only available if the party seeking relief has no adequate remedy at law. Worldwide Auditing Services, Inc. v. Richter, 402 Pa. Super. 584, 586, 587 A.2d 772, 774 n. 1 (1991). The employment agreement here provides for the payment of 100% of any fees paid by a client as liquidated damages. By its very terms, the agreement provides for an adequate legal remedy. 4 01-6560 EQUITY Theodore Adler, Esquire For the Plaintiff Douglas Miller, Esquire For the Defendants :rlm INVESTIGATIVE CONSULTANT SERVICES, INC., Plaintiff VS. ALBERT R. THOMAS, SHERI THOMAS and HAYES, STOUDT & ASSOCIATES, INC., Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 01-6560 EQUITY CIVIL ACTION - EQUITY IN RE: PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION BEFORE HESS, J. DECREE NISI AND NOW, this day of January, 2002, following hearing thereon, the motion of the plaintiff for preliminary injunction is DENIED. BY THE COURT, Theodore Adler, Esquire For the Plaintiff Douglas Miller, Esquire For the Defendants Kevin A. Hess, J. :rlm