Blair Design & Construction Co. v. Kalimon , 366 Pa. Super. 194 ( 1987 )

DEL SOLE, Judge:

Before us is an appeal from the Order entered May 2, 1986. The Order consisted of a preliminary injunction prohibiting Appellant from conducting business in violation of a restrictive covenant he entered into with Appellee pursuant to an employment contract.

By his brief, Appellant raises the following issues:

1. Can a restrictive covenant which specifically prohibits a former employee only from dealing with customers named on a list attached to the employment agreement be construed to prohibit the former employee from dealing with customers not named on the list?;

2. Is the non-competition covenant involved in this action unenforceable because, as interpreted and enforced by the court below, its prohibitions are broader than necessary to protect the former employee’s interests?;

3. Is the non-competition covenant involved in this action unenforceable because it is not reasonably limited in duration?; and,

4. Is the injunction issued by the lower court overbroad and indefinite?

The underlying facts of this case may be briefly summarized as follows. Appellee is in the business of retail store construction and remodeling. In December of 1983, Appellant was hired by Appellee to work as a project manager. Subsequent to commencement of work, Appellant signed an employment agreement which contained the following provisions:

DISCLOSURE OF INFORMATION: The Employee recognizes and acknowledges that the list of the Employee’s [sic] customers which is attached hereto, and made a part hereof and designated Exhibit “A”, and any new customers obtained during his employment with Em-. ployer, constitute a valuable, special and unique assets [sic] of the Employer’s business. The Employer [sic] further recognizes and acknowledges that the Employer’s customers are not located in any single geographical area but are situated throughout the entire United States of America. The Employee will not, during or after the terms of his employment, disclose the list of the Employer’s customers or any part thereof to any person, firm, corporation, association or other entity for any reason or purpose whatsoever. In the event of a breach or threaten to breach of the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction restraining the employee from disclosing, in whole or part, has been disclosed or is threatened to be disclosed. Nothing herein shall be construed as prohibiting the Employer from pursuing any other remedies available to the Employer from such breach or threatened breach, including the recovery of damages from the Employee. RESTRICTIVE COVENANT: For a period of three (3) years after the termination of this Agreement for any reason, the Employee will not directly or indirectly, own, manage,' operate, control, by [sic] employed by, participate in, or be connected in any manner with the ownership management, operation or control of any business similar to the type of business conducted by the Employer at the time of termination of this Agreement, which deals in any manner or solicits any business from customers named on the list referred to in the immediately preceding paragraph. In the event of any actual or threatened breach by the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction restraining the Employee from owning, managing, operating, controlling, being employed by, participating in, or being in any so connected with any business similar to the type of business conducted by the Employer at the time of termination. Nothing herein stated shall be construed as prohibiting the Employer from prusuing [sic] any other remedies available to the employer including the recovery of the damages from the employee. (Emphasis supplied).

In February of 1985, Appellant terminated his employment with Appellee so that he could pursue a career in the painting business. However, this plan did not transpire; therefore, Appellant entered the remodeling business as an independent contractor. Appellant proceeded to either bid upon, or perform construction work on, certain Corn Dog, Hot Sam Pretzel, and Original Cookie stores. Although these companies had been customers of Appellee, they did not appear on the customer list designated as Exhibit “A” in the employment contract. Likewise, they were not new customers obtained during Appellant’s tenure with Appellee. Despite protests received by Appellee, Appellant continued to conduct business with these clients.

Appellee thereafter filed a complaint in equity requesting preliminary and permanent injunctive relief. On February 25, 1986, following a hearing on this matter, the Honorable Maurice Louik denied Appellee’s request for a preliminary injunction. Upon receiving information that Appellant had performed work for, and was continuing to solicit work from, the Original Cookie store chain, Appellee filed another complaint in equity. A preliminary injunction hearing was scheduled to be held before the Honorable I. Martin Wekselman on May 2, 1986. Following arguments by both parties, Judge Wekselman granted Appellee’s request for a preliminary injunction. The hearing court fashioned the Order, sub judice, which provides:

Michael J. Kalimon ... is preliminarily enjoined from doing business with customers of the plaintiff Blair Design and Construction Company, Inc. in violation of the restrictive covenants contained in the contract between the parties, or otherwise interfering with the plaintiff’s relationship with plaintiff’s customers in any manner or method whatsoever.

This timely interlocutory appeal follows. See Pa.R.A.P. 311(a)(4) (an appeal may be taken as of right for an order granting an injunction).

Preliminarily, we discuss our appellate scope of review. A preliminary injunction is an extraordinary remedy which should be granted only after careful deliberation by the hearing court has resulted in the conclusion that such relief is a necessity. Beck Computing Services, Inc. v. Anderson, 362 Pa.Super. 505, 508, 524 A.2d 990, 991 (1987). Prior to granting a preliminary injunction, four essential prerequisites of law must be found by the hearing court to coalesce:

immediate and irreparable harm which could not be compensated by damages; the greater injury would result by refusing it than by granting it; that it.would properly restore parties to their status as existing immediately prior to the alleged wrongful conduct; and that the activity sought to be restrained is actionable and that an injunction is reasonably suited to abate such activity.

Id., 362 Pa.Superior Ct. at 508, 524 A.2d at 991-992. See New Castle Orthopedic Associates v. Burns, 481 Pa. 460, 392 A.2d 1383, 1385 (1978).

Our scope of review in these matters is narrowly defined. It is not the function of this court to explore the merits of the controversy. Rather, our examination of the record must be confined to whether or not there exists any apparently reasonable grounds for the hearing court’s actions. Ogontz Controls Co. v. Pirkle, 346 Pa.Super. 253, 257, 499 A.2d 593, 595 (1985). Only if it is plain that no grounds exist to support the decree or that the rule of law relied upon was palpably erroneous or misapplied will we interfere with the decision of the chancellor. Sidco Paper Co. v. Aaron, 465 Pa. 586, 600, 351 A.2d 250, 257 (1976).

In keeping with our appellate scope of review, we shall refrain from addressing Appellant’s contentions with respect to the merits of the covenant. Such determinations are reserved to the chancellor in equity. However, it is within the purview of this court to discern whether the hearing court acted reasonably in enforcing the covenant and in applying relevant principles of law.

We have examined the record and find that the hearing court acted reasonably in enforcing the covenant. Testimony elicited during the hearing demonstrated that the restrictive covenant was needed to protect Appellee’s legitimate business interests. Appellee’s associate explained that it took many years to develop Appellee’s client list. This list was regarded as Appellee’s most important asset. During the hearing, the Appellee adequately described a course of conduct taken by Appellant which threatened Appellee’s interests in maintaining its exclusive clientele list. Thus, the enforcement of an anticompetition agreement that was to prevent this from occurring was an appropriate remedy.

Furthermore, there is not indication that the hearing court either relied upon palpably erroneous law or misconstrued applicable law. Equitable enforcement of restrictive covenants is permitted when they are incident to an employment relation between the agreement’s parties, they are reasonably necessary for the protection of the employer, and they are reasonably limited in duration and geographic extent. Sidco supra, 465 Pa. at 591, 351 A.2d at 252. The record demonstrates that the restrictive covenant was signed by both parties incident to Appellant’s contract of employment. The clause, as pointed out, supra, was written expressly to protect Appellee from business competition by former employees. Further, the terms of the covenant did not manifest unreasonable limitations in either duration or geographic extent.

Accordingly, we conclude that the hearing judge’s decision to uphold the restrictive covenant was in accordance with the legal principles established in this Commonwealth.

Next, we must determine whether the hearing court acted reasonably in fashioning the preliminary injunction. The breadth of the injunction was confined to business relations in violation of the restrictive covenant entered into by the parties. By his brief, Appellant argues that the preliminary injunction is overbroad as applied to Corn Dog, Hot Sam Pretzel, and Original Cookie, which are Appellee’s customers. Appellant relies on the fact that these stores were not specified on the customer list attached to the employment contract and had already been Appellee’s clients prior to, and during, Appellant’s tenure. Arguably, these customers fall within a gray area of the restrictive covenant inasmuch as they are not listed as Appellee’s customers or were acquired after Appellant was hired. Nonetheless,- the record is replete with testimony to the effect that Appellant knew that Corn Dog, Hot Sam Pretzel, and Original Cookie were Appellee’s customers at the time he was employed by Appellee. Moreover, Appellant was even assigned to work on these accounts during his employment with Appellee. (N.T. 31, 32, 40).

From these undisputed facts, we conclude that the hearing court acted reasonably in holding that Appellant’s knowledge of the status of these stores as Appellee’s customers established grounds on which to restrain Appellant from dealing with Corn Dog, Hot Sam Pretzel, and Original Cookie under the restrictive covenant.

We are mindful that a chancellor may decide later, upon final hearing, that the restrictive covenant was improperly construed. A determination of that nature would be proper by virtue of the fact that it is the chancellor’s function to address the merits of the case. If, for any reason, the chancellor should find error with the preliminary injunction, Appellant would not be without recourse. It was established during the preliminary injunction hearing that bond would be set at $25,000.00 in the event a chancellor, by final decree, disposes of the instant case in a contrary manner.

Accordingly, we affirm the granting of the preliminary injunction.

BROSKY, J., files a dissenting opinion.