The Bert Company v. Turk, M. ( 2021 )

J-A12005-20
2021 PA Super 87THE BERT COMPANY D/B/A : IN THE SUPERIOR COURT OF
NORTHWEST INSURANCE SERVICES : PENNSYLVANIA
:
:
v. :
:
:
MATTHEW TURK, WILLIAM COLLINS, :
JAMIE HEYNES, DAVID MCDONNELL, :
FIRST NATIONAL INSURANCE :
AGENCY, LLC, FIRST NATIONAL :
BANK, AND FNB CORPORATION :
:
:
APPEAL OF: MATTHEW TURK, FIRST : No. 817 WDA 2019
NATIONAL INSURANCE AGENCY, :
LLC, FIRST NATIONAL BANK, AND :
FNB CORPORATION :
Appeal from Judgment Entered June 3, 2019
In the Court of Common Pleas of Warren County Civil Division at No(s):
AD 260 of 2017
THE BERT COMPANY D/B/A : IN THE SUPERIOR COURT OF
NORTHWEST INSURANCE SERVICES : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
:
MATTHEW TURK, WILLIAM COLLINS, :
JAMIE HEYNES, DAVID MCDONNELL, :
FIRST NATIONAL INSURANCE :
AGENCY, LLC, FIRST NATIONAL :
BANK AND FNB CORPORATION :
:
---------------------- :
: No. 975 WDA 2019
MATTHEW TURK :
:
v. :
J-A12005-20
:
THE BERT COMPANY, NORTHWEST :
BANK, AND NORTHWEST :
BANCSHARES, INC. :
:
APPEAL OF: THE BERT COMPANY :
D/B/A NORTHWEST INSURANCE
SERVICES
Appeal from the Judgment Entered June 3, 2019
In the Court of Common Pleas of Warren County Civil Division at No(s):
260 OF 2017
BEFORE: KUNSELMAN, J., KING, J., and COLINS, J.*
CONCURRING/DISSENTING OPINION BY COLINS, J.: FILED: MAY 5, 2021
Because I disagree with the learned majority’s conclusions that the
evidence at trial was sufficient to support the jury’s verdicts against appellants
First National Bank (FN Bank), and FNB Corporation (FNB) and that the
contract between The Bert Company d/b/a Northwest Insurance Services
(Plaintiff) and appellant Matthew Turk provided for recovery of attorney fees
incurred solely in litigation to recover damages, I dissent from the majority’s
affirmation of the trial court’s judgments against FN Bank and FNB and dissent
in part from its affirmance of the attorney fee award against Turk. In addition,
while I agree with the majority’s conclusions that compensatory and punitive
damages awards against appellants First National Insurance Agency, LLC
(FNIA) and Turk must be affirmed, I would affirm the judgment against Turk
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* Retired Senior Judge assigned to the Superior Court.
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and the punitive damages awards against FNIA and Turk on different grounds
than the majority.
Plaintiff’s Claims Against FN Bank and FNB
Appellants argue that the evidence at trial was insufficient for the jury
to find defendants FN Bank and FNB liable for conspiracy and unfair
competition and that the awards of compensatory punitive damages against
them therefore cannot stand. I agree.
Whether the trial court erred in denying these defendants’ motions for
judgment notwithstanding the verdict (JNOV) is a question of law subject to
our plenary review. Shamnoski v. PG Energy, 858 A.2d 589, 593 (Pa.
2004); Phillips v. A–Best Products Co., 665 A.2d 1167, 1170 (Pa. 1995).
A trial court’s denial of JNOV is reversible error where, viewing the evidence
admitted at trial in the light most favorable to the verdict winner and granting
that party every favorable inference therefrom, there was not sufficient
competent evidence to sustain the verdict. Shamnoski, 858 A.2d at 593, 602,
606; Wenrick v. Schloemann–Siemag Aktiengesellschaft, 564 A.2d
1244, 1246, 1248 (Pa. 1989); Diffenderfer v. Staner, 722 A.2d 1103, 1104
(Pa. Super. 1998).
Both causes of action on which the jury found FN Bank and FNB liable
require proof of intent to commit a wrongful act or intent to harm. Plaintiff’s
unfair competition claim required proof that these defendants acted either
with a purpose to cripple Plaintiff’s business or a purpose to have the
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employees commit wrongs against Plaintiff. Reading Radio, Inc. v. Fink,
833 A.2d 199, 212 (Pa. Super. 2003); Boyce v. Smith–Edwards–Dunlap
Co., 580 A.2d 1382, 1390 (Pa. Super. 1990). A plaintiff has a cause of action
for unfair competition against a competitor who hires away a group of its
employees for the purpose of crippling and destroying the plaintiff’s business,
rather than to benefit itself. Reading Radio, Inc., 833 A.2d at 212; Boyce,
580 A.2d at 1390; Ozburn–Hessey Logistics, LLC v. 721 Logistics, LLC
(Ozburn-Hessey I), 13 F.Supp.3d 465, 476-78 (E.D. Pa. 2014).
[S]ystematically inducing employees to leave their present
employment is actionable “when the purpose of such enticement
is to cripple and destroy an integral part of a competitive business
organization rather than to obtain the services of particularly
gifted or skilled employees.”
Reading Radio, Inc., 833 A.2d at 212 (quoting Albee Homes, Inc. v.
Caddie Homes, Inc., 207 A.2d 768 (Pa. 1965)). Hiring a competitor’s
employees for purposes of having them commit wrongful acts against their
former employer can also support a cause of action for unfair competition, but
it is an alternative basis for a cause of action for unfair competition, and is not
an essential element where the plaintiff shows systematic hiring of employees
to cripple and destroy the plaintiff’s business. Reading Radio, Inc., 833 A.2d
at 212.
Evidence that a defendant offered employment to at-will employees of
a competitor for the purpose of acquiring valuable employees for its own
business, however, is not sufficient to support a cause of action for unfair
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competition even if the competitor is harmed by that action. Albee Homes,
Inc. v. Caddie Homes, Inc., 207 A.2d 768, 771 (Pa. 1965); Reading Radio,
Inc., 833 A.2d at 212; Boyce, 580 A.2d at 1390. Absent evidence of a
purpose to cripple the competitor or have the employees commit wrongful
acts against their former employer, the hiring away of even a large number of
a competitor’s employees does not satisfy the elements of the tort of unfair
competition and is not actionable. Albee Homes, Inc., 207 A.2d at 771-72
(hiring of seven of competitor’s salesmen was not actionable where the record
supported only the conclusion that the defendant’s purpose was to obtain
experienced salesmen); Boyce, 580 A.2d at 1390 (defendant that hired “a
substantial number” of plaintiff’s employees was entitled to nonsuit where
there was “no evidence” that it did so “in order to cripple and destroy” plaintiff
rather than to obtain employees to start up its printing business); Ozburn-
Hessey Logistics, LLC v. 721 Logistics, LLC (Ozburn-Hessey II), 40
F.Supp.3d 437, 453 (E.D. Pa. 2014) (no unfair competition cause of action for
hiring nine of plaintiff’s employees where employees were hired for their value
to the hiring company, not to harm plaintiff).
A cause of action for civil conspiracy requires that the plaintiff prove that
the defendant combined or agreed with one or more other parties to do an
unlawful act or to do a lawful act by unlawful means or for an unlawful
purpose. Phillips v. Selig, 959 A.2d 420, 437 (Pa. Super. 2008); Goldstein
v. Phillip Morris, Inc., 854 A.2d 585, 590 (Pa. Super. 2004). Proof of malice,
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that the defendant had an intent to injure, is an essential element of a
conspiracy claim. Skipworth v. Lead Industries Association, Inc., 690
A.2d 169, 174 (Pa. 1997); Lackner v. Glosser, 892 A.2d 21, 35 (Pa. Super.
2006); Grose v. Procter & Gamble Paper Products, 866 A.2d 437, 440
(Pa. Super. 2005); Goldstein, 854 A.2d at 590.
Here, the evidence with respect to FN Bank and FNB showed that these
defendants approved the hiring of Turk and as many as seven other
employees of Plaintiff. Plaintiff’s Exs. 57, 60 (3/24/17 email), 61 at 2-3, 147,
149, 151, 152, 159, 164, 168, 170, 171, 172, 174; N.T. Trial, 12/14/18, at
226-28, 244-54; N.T. Trial, 12/17/18, at 95-96. In contrast to the evidence
against FNIA, however, the record at trial was devoid of any evidence that FN
Bank or FNB was aware of the effect on Plaintiff or considered that as a reason
for hiring the employees in question. No FN Bank or FNB employees testified
at trial and no witness testified that either of these defendants expressed or
knew of an intent to cripple Plaintiff’s business. While there was evidence in
communications between FNIA President Martin Muchnok and employees of
Plaintiff that Muchnok had an intent to harm Plaintiff’s ability to service its
customers and knew that Turk was soliciting customers of Plaintiff, no FN Bank
or FNB employee was a party to any of those communications. See Plaintiff’s
Exs. 54, 61 at 1, 62, 104. To the contrary, the documents to which FN Bank
and FNB were parties showed only that the approval was based on the value
of the employees to FNIA; these documents refer to the desirability of
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expanding FNIA in the Erie, Pennsylvania area and project that hiring the
employees would be profitable for FNIA. Plaintiff’s Exs. 57, 147, 149, 151,
159, 170. The fact that FN Bank and FNB approved the hiring of a significant
number of Plaintiff’s employees and did so for the purpose of quickly
expanding FNIA’s geographical reach is neither tortious or sufficient to support
an inference of intent to destroy a competitor. Albee Homes, Inc., 207 A.2d
at 771; Boyce, 580 A.2d at 1390; Ozburn-Hessey II, 40 F.Supp.3d at 453
(“coordinated lift-out” of employees of a competitor hired for their value to
the company does not constitute unfair competition).
Nor was there any evidence that FN Bank or FNB sought to have the
employees from Plaintiff breach their non-solicitation agreements. The
evidence showed that after FN Bank and FNB were informed of the non-
solicitation agreements, their analysis of the profitability of hiring the
employees was based on an assumption that none of Plaintiff’s customers
would transfer their business to FNIA during the one-year non-solicitation
period under those agreements. Plaintiff’s Exs. 147, 159, 170. Neither FN
Bank nor FNB was a party to Muchnok’s and Turk’s communications
concerning moving customers of Plaintiff to FNIA. See Plaintiff’s Exs. 61 at 1,
62.
There was evidence that FN Bank and FNB were aware that FNIA was
offering to buy a book of business from Plaintiff and approved the making of
such an offer. Plaintiff’s Ex. 172; N.T. Trial, 12/14/18, at 264-65; N.T. Trial,
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12/17/18, at 95-96. That fact, however, does not show an intent to injure
Plaintiff. Plaintiff’s president admitted that it is a common and standard
practice in the industry for a competitor who hires an insurance agency
employee who has built up a book of business to offer to purchase that book
of business. N.T. Trial, 12/11/18, at 115-16.
Neither Plaintiff nor the majority point to any evidence from which the
jury could find that FN Bank or FNB had an intent to harm Plaintiff rather than
a permissible intent to obtain valuable employees for FNIA or that either of
these companies intended to induce Plaintiff’s departing employees to violate
their non-solicitation agreements. Rather, the evidence that the majority cites
as supporting the verdict against FN Bank and FNB simply shows that these
companies approved FNIA’s hiring of a group of Plaintiff’s employees that they
believed would be valuable to FNIA and would expand its business and that
they approved FNIA offering to purchase a book of business from Plaintiff.
Neither of these facts constitutes tortious conduct or is sufficient to show the
tortious intent required for unfair competition and conspiracy.
The majority also concludes that the judgment against FN Bank can be
sustained on the basis of vicarious liability for FNIA President Muchnok’s
actions. Majority Opinion at 30-33. This basis for affirming the judgment fails
for two reasons. First, it was not a theory that was asserted and presented
to the jury at trial. Plaintiff did not base its claims against FN Bank and FNB
on any contention that these defendants were vicariously liable for FNIA’s or
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Muchnok’s actions. Rather, Plaintiff made it clear at trial that its claims against
FN Bank and FNB were based solely on these companies’ own acts and
knowledge. N.T. Trial, 12/18/18, at 34-35. The jury was instructed that it
“must decide whether punitive damages are to be assessed against each
Defendant by that Defendant’s conduct alone.” N.T. Trial, 12/20/18, at 172.
While the jury was instructed that a principal is liable for the acts of its agent,
it was not instructed that an individual may be an agent of more than one
principal. Id. at 150-54.1
Secondly, even if the jury had found that FN Bank was vicariously liable
on the ground that Muchnok was its agent, that could not support its additional
$500,000 punitive damage awards against FN Bank and FNB. Vicarious
liability for an agent’s acts and the agent’s liability are a single tort for which
both defendants are liable, not separate claims. Mamalis v. Atlas Van
Lines, Inc., 560 A.2d 1380, 1383 (Pa. 1989); Forbes v. King Shooters
Supply, 230 A.3d 1181, 1189 n.11 (Pa. Super. 2020). “A claim of vicarious
liability is inseparable from the claim against the agent since any cause of
action is based on the acts of only one tortfeasor.” Mamalis, 560 A.2d at
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1To the extent that the majority is holding that FN Bank or FNB can be liable
not because Muchnok was their agent but because a conspirator is liable for
co-conspirators’ actions, see Majority Opinion at 27, 32-33, that cannot
support the verdicts against FN Bank and FNB because Plaintiff failed to prove
an essential element of a cause of action for conspiracy, that FN Bank and
FNB had malice, an intent to injure Plaintiff. Skipworth, 690 A.2d at 174;
Lackner, 892 A.2d at 35.
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1383. Thus, if the jury’s verdicts against FN Bank and FNB were based on
vicarious liability for Muchnok’s conduct as their agent, the verdict could give
rise to only a single, joint punitive damages award, not multiple cumulative
awards, and the $500,000 punitive damages awards against FN Bank and FNB
could not be added to and collected in addition to the $1.5 million punitive
damages award against FNIA for the same conduct by Muchnok.
Because the evidence at trial showed only that FN Bank and FNB
approved FNIA’s hiring of employees that it considered to be economically
valuable to FNIA and FNIA’s offer to purchase a book of business from Plaintiff
and Plaintiff introduced no evidence from which the jury could infer that FN
Bank or FNB had an intent to harm Plaintiff, rather than benefit FNIA, Plaintiff
did not prove the essential elements of its conspiracy and unfair competition
claims against FN Bank and FNB. Lackner, 892 A.2d at 35; Boyce, 580 A.2d
at 1390. Accordingly, FN Bank and FNB were entitled to JNOV in their favor
on these claims and the punitive damages awards against these defendants
on these claims must be set aside.
The Attorney Fees Award Against Turk
The trial court held that Plaintiff was entitled to attorney fees against
Turk under Turk’s 2017 non-solicitation agreement and awarded Plaintiff a
total of $361,093.74, consisting of $244,579.00 in attorney fees incurred by
Plaintiff in the injunction proceedings and $116,514.74 in attorney fees
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incurred by Plaintiff in litigating its damages claims. Trial Court Opinion,
4/29/19 at 28.
Turk challenges this award of attorney fees and costs on two grounds:
(1) that his non-solicitation agreement only permits Plaintiff to recover
attorney fees incurred in the injunction proceedings; and (2) that the trial
court erred in the percentages of Plaintiff’s attorney fees and costs that it
awarded against Turk. While I join in the majority’s rejection of the latter
argument and its affirmance of the award of attorney fees for the injunction
proceedings, I would reverse the $116,514.74 award of attorney fees incurred
by Plaintiff in litigating its damages claims.
As the majority correctly states, the issue of whether attorney fees in
the damages litigation are recoverable under Turk’s non-solicitation
agreement is a question of law over which our review is plenary and de novo.
Under Pennsylvania law, litigants cannot recover their attorney fees from an
opposing party unless there is an express statutory authorization for award of
attorney fees, a clear agreement by the parties that attorney fees may be
recovered, or some other established exception. Trizechahn Gateway LLC
v. Titus, 976 A.2d 474, 482-83 (Pa. 2009); Lavelle v. Koch, 617 A.2d 319,
323 (Pa. 1992); Bayne v. Smith, 965 A.2d 265, 267 (Pa. Super. 2009). The
burden is on the party seeking attorney fees to show that it has the right to
recover such fees. Petow v. Warehime, 996 A.2d 1083, 1087 (Pa. Super.
2010); Gall v. Crawford, 982 A.2d 541, 549 (Pa. Super. 2009).
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Section 8(d) of Turk’s 2017 non-solicitation agreement contained the
following provisions concerning remedies for breach of the agreement:
(i) I acknowledge that any violation of this Agreement may result
in immediate termination of my Relationship with [Plaintiff] and
may subject me to a civil action for money damages by [Plaintiff]
for any and all losses sustained as a result of the unauthorized
disclosure of any Confidential Information or other actions which
breach any provision of this Agreement or any covenants
contained herein.
(ii) I recognize that [Plaintiff’s] remedies at law may be
inadequate and that [Plaintiff] shall have the right to seek
injunctive relief in addition to any other remedy available to it. If
I breach this Agreement or any of the covenants contained herein,
[Plaintiff] has the right to see[k] issuance of a court-ordered
injunction as well as any and all other remedies and damages, to
compel the enforcement of the terms stated herein. This provision
with respect to injunctive relief shall not, however, diminish the
right of [Plaintiff] to claim and recover damages in addition to
injunctive relief. If court action is necessary to enforce this
Agreement, I shall be responsible for [Plaintiff’s]
reasonable attorney’s fees and costs; provided that
[Plaintiff] prevails i[n] said enforcement action as
determined by the appropriate court or tribunal before which
matter is pending.
Plaintiff’s Ex. 26 at § 8(d) (emphasis added).
Thus, the parties’ agreement here clearly permitted recovery of attorney
fees, but only for “court action … to enforce this Agreement.” This language
is not broad and does not expressly provide that Plaintiff can recover attorney
fees in any action brought under the agreement or for breach of the
agreement. Compare Bayne, 965 A.2d at 269 (parties’ agreement provided
for attorney fees “in an action brought for the recovery of rent or other
money’s [sic] due or to become due under this lease or by reason of a breach
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of any covenant herein contained or for the recovery of the possession of said
premises, or to compel the performance of anything agreed to be done herein,
or to recover for damages to said property, or to enjoin any act contrary to
the provisions hereof”); Profit Wize Marketing v. Wiest, 812 A.2d 1270,
1272 (Pa. Super. 2002) (“if Employer prevails in any suit or action under this
Agreement, Employee shall reimburse Employer for its expenses incurred in
connection with such suit or action, including without limitation, its attorney’s
fees and costs”) (emphasis omitted).
The injunction proceedings were unquestionably “court action … to
enforce this Agreement;” the issue is whether the litigation that sought only
to recover damages, rather than to compel compliance with the agreement,
constitutes enforcement of the agreement. I conclude that it does not.
The word “enforce” indicates an intent to allow attorney fees in
proceedings brought to compel Turk to comply with the non-solicitation
agreement and the obligations that it imposed, not to recover damages for a
breach. See Merriam-Webster’s Collegiate Dictionary 413 (11th Ed.
2003) (defining “enforce” as “constrain,” “compel,” and “carry out
effectively”). An action for payment of money falls within a provision for
attorney fees in an action to enforce a contract where the money sought
consists of payments that the defendant is required to make under the
contract. See Trizechahn Gateway LLC, 976 A.2d at 477, 482-84 (attorney
fees in action for moneys due under lease were recoverable under agreement
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“to pay a reasonable attorney’s fee if legal action is required to enforce
performance by Tenant of any condition, obligation or requirement
hereunder”). Here, however, the relief that Plaintiff sought in the damages
litigation consisted of recovering compensation for harm caused by the breach
of the agreement, not the compelling of payments required under the
agreement or the compelling of compliance with any obligation under the
agreement.
Moreover, the attorney fees provision is set forth in the section of the
non-solicitation agreement, Section § 8(d)(ii), providing for injunctive relief,
not the section that set forth Plaintiff’s right to bring an action for damages,
Section § 8(d)(i). This fact would not compel the conclusion that attorney
fees are limited to actions for injunctive relief if the language of the attorney
fees provision clearly encompassed actions for damages. Trizechahn
Gateway LLC, 976 A.2d at 482-84. The language “court action … to enforce
this Agreement,” however, does not clearly refer to damages actions, as
opposed to enforcement of obligations under the agreement. The placement
of the attorney fees provision in the section of the agreement authorizing
injunctive relief to enforce compliance with the agreement therefore further
suggests that the attorney fees provision was not intended as an authorization
of attorney fees incurred in recovering damages for harm caused by a breach
of the agreement.
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Neither of the cases relied on by the majority, McMullen v. Kutz, 985
A.2d 769 (Pa. 2009) and DiLucente Corp. v. Pennsylvania Roofing Co.,
655 A.2d 1035 (Pa. Super. 1995), supports its conclusion that the attorney
fees provision in the 2017 non-solicitation agreement encompasses Plaintiff’s
attorney fees in the damages litigation. In McMullen, the attorney fees that
were awarded under a provision that “the party breaching this contract shall
be responsible for payment of legal fees and costs incurred by the other in
enforcing their rights under this Agreement” were incurred in obtaining
payments that were owed the agreement, not consequential damages caused
by a past breach of the agreement. 985 A.2d at 771-72. Thus, as in
Trizechahn Gateway LLC, the proceeding in which the fees were incurred
was an enforcement of a payment obligation under the contract and therefore
fell within the attorney fees provision. DiLucente Corp. did not involve any
contractual provision for payment of attorney fees and did not hold that a
consequential damages claim constitutes an action to enforce a contract.
Rather, it involved the issue of injunctive relief to enjoin an arbitration and did
not discuss what constitutes enforcement of a contract at all.
Because it was Plaintiff’s burden to show a clear agreement to pay the
attorney fees that it sought and it showed only a clear agreement to pay
attorney fees incurred in litigation to enforce compliance with Turk’s
obligations under the non-solicitation agreement, the trial court’s award of
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$116,514.74 in attorney fees incurred by Plaintiff in pursuing its damages
claims must be set aside.
Plaintiff’s Tort Claims Against Turk
The sole basis for Turk’s claim that he is entitled to JNOV is the argument
that Plaintiff’s breach of fiduciary duty and civil conspiracy claims against him
are barred by the gist of the action doctrine. I agree with the majority that
this argument fails, but for reasons different than those set forth by the
majority.
As the majority states, the gist of the action doctrine prohibits a plaintiff
from suing and recovering in tort on claims that are in fact breach of contract
claims. B.G. Balmer & Co. v. Frank Crystal & Co., 148 A.3d 454, 468 (Pa.
Super. 2016); Knight v. Springfield Hyundai, 81 A.3d 940, 950 (Pa. Super.
2013); see also Bruno v. Erie Insurance Co., 106 A.3d 48, 60 (Pa. 2014).
The existence of a contract between the parties, however, does not make all
claims for damages breach of contract claims. Bruno, 106 A.3d at 69; B.G.
Balmer & Co., 148 A.3d at 469. The nature of the duty that the plaintiff
alleges that the defendant breached is the critical factor in determining
whether a tort claim is truly a breach of contract claim and therefore barred
by the gist of the action doctrine. Bruno, 106 A.3d at 68.
The majority holds that the gist of the action does not apply because
some of Turk’s conduct on which Plaintiff’s claims for breach of fiduciary duty
and conspiracy were based occurred before Turk’s 2017 non-solicitation
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agreement and because his solicitation of a prospective employee of Plaintiff
did not violate the 2017 non-solicitation agreement. I do not agree that tort
judgment against Turk can be upheld on this basis.
Contrary to the majority’s statements, the record demonstrates that all
the breaches of fiduciary duty and conspiracy claims that Plaintiff alleged were
violations of provisions of Turk’s non-solicitation agreements. Before he
entered into the 2017 non-solicitation agreement, Turk was already subject
to a 2005 non-solicitation agreement and Plaintiff contended at trial that Turk
was bound by the 2005 agreement. That 2005 agreement expressly
prohibited the solicitation of employees and the disclosure of Plaintiff’s
customer lists and commission and fee information during Turk’s employment.
Plaintiff’s Ex. 3 ¶¶(2), (3). With respect to Turk’s later conduct, the solicitation
of a prospective employee of Plaintiff violated Section 5 of the 2017 non-
solicitation agreement, which provided:
During my Relationship with [Plaintiff], I will not, alone or with
others, directly or indirectly, work on, plan, prepare for, organize
or engage in any consulting, employment or other business
activity (whether or not for compensation) that is competitive with
the business in which [Plaintiff] is involved or may hereafter
become involved, nor will I engage in any other activity that
conflicts with my obligations to [Plaintiff].
Plaintiff’s Ex. 26 § 5.
The fact that the tort claims were based on the same conduct that also
breached the parties’ contracts does not, however, mandate the conclusion
that they are barred by the gist of the action doctrine. Rather, the critical
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issue is whether the tort claims are based on a violation of a social duty
imposed by the law of torts that exists independent of the terms of the parties’
contract. Bruno, 106 A.3d at 68. Thus, where a tort claim is based on a
fiduciary duty that exists by virtue of the defendant’s employment separate
and apart from the terms of any contract between the parties, it is not barred
even though the same conduct also constitutes a breach of an express
contractual obligation. Teva Pharmaceuticals USA, Inc. v. Sandhu, 291
F.Supp.3d 659, 678 (E.D.Pa. 2018) (breach of fiduciary duty claim for
disclosing confidential information to competitor not barred by gist of the
action doctrine even though same conduct violated employee’s confidentiality
agreement).2
Here, the breach of fiduciary duty and conspiracy claims against Turk
were premised on tort law duties that arose out of his position with Plaintiff,
not on the provisions of his non-solicitation agreements. An employee owes
his employer a duty of loyalty not to act during his employment for a
competitor of his employer, even if he is not under any non-competition or
non-solicitation agreement. AmQuip Crane Rental, LLC v. Crane & Rig
Services, LLC, 199 A.3d 904, 913-15 (Pa. Super. 2018); Reading Radio,
Inc., 833 A.2d at 204, 211. Turk, as Plaintiff’s Senior Vice President
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2 Although federal court decisions are not binding on this Court, we may rely
on them for persuasive value. AmQuip Crane Rental, LLC v. Crane & Rig
Services, LLC, 199 A.3d 904, 918 n.4 (Pa. Super. 2018).
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Property/Casualty, therefore owed Plaintiff a duty to not assist Plaintiff’s
competitor, FNIA. Turk’s solicitation of employees and customers to leave
Plaintiff and go to FNIA and his work with FNIA to move the employees and
customers from Plaintiff to FNIA and time the employee departures to
maximize harm to Plaintiff violated this tort law duty. AmQuip Crane Rental,
LLC, 199 A.3d at 913-15; Reading Radio, Inc., 833 A.2d at 211.
Because Plaintiff’s breach of fiduciary duty and civil conspiracy claims
against Turk were based on duties that arose under tort law and not from the
provisions of his non-solicitation agreements, I would therefore hold that
those claims are not barred by the gist of the action doctrine even though they
were also breaches of those contracts. Teva Pharmaceuticals USA, Inc.,
291 F.Supp.3d at 678.
Constitutionality of the Punitive Damages Award
Appellants argue that the $2.8 million in punitive damages awarded by
the jury is unconstitutionally disproportionate to Plaintiff’s compensatory
damages under State Farm Mutual Automobile Insurance Co. v.
Campbell, 538 U.S. 408 (2003), because it is over 10 times the amount of
the $250,000 in compensatory damages that the jury found that Plaintiff
suffered. In light of my conclusion that FN Bank and FNB are entitled to JNOV
on all claims and that only the $300,000 punitive damage award against Turk
and $1.5 million punitive damage award against FNIA should remain, the ratio
of the total legally valid punitive damages awards, $1.8 million, to the
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$250,000 in compensatory damages is 7.2 to 1, significantly less than 10
times the compensatory award. I therefore do not find it necessary to consider
the validity of a $2.8 million punitive damages award in this case or to address
the majority’s analysis of whether the punitive damages awards may be
separately analyzed for each defendant without considering their cumulative
effect and do not join in the majority’s conclusions on these issues.
Appellants also contend that any ratio of punitive to compensatory
damages above 2 to 1 is constitutionally excessive. That argument is without
merit. In State Farm, the Supreme Court stated that “an award of more than
four times the amount of compensatory damages might be close to the line of
constitutional impropriety” and concluded that where the compensatory award
was $1 million and contained a noneconomic, punitive element, analysis of
the due process considerations “likely would justify a punitive damages award
at or near the amount of compensatory damages.” 538 U.S. at 425, 429. The
Court, however, declined to impose a specific ratio that punitive damages
cannot exceed and held that “because there are no rigid benchmarks that a
punitive damages award may not surpass, ratios greater than those we have
previously upheld may comport with due process where ‘a particularly
egregious act has resulted in only a small amount of economic damages.’” Id.
at 425 (quoting BMW of North America, Inc. v. Gore, 517 U.S. 559(1996)).
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Here, the compensatory award consisted of solely economic damages
with no punitive component. Moreover, the compensatory damages that the
jury found that Plaintiff suffered were low in proportion to the harm that
Plaintiff showed that FNIA and Turk sought to inflict on Plaintiff. While Plaintiff
ultimately suffered only $250,000 in damages, the amount of business that
FNIA and Turk sought to make Plaintiff lose was at least $1.3 million. N.T.
Trial, 12/11/18, at 51. The amount of the total punitive award, $1.8 million,
while high in comparison to Plaintiff’s actual loss, is not extraordinary in
comparison to the harm and gain that FNIA and Turk sought from their
conduct. Given these facts, a 7.2 to 1 ratio of punitive damages to
compensatory damages is not unconstitutional under the decisions of the
United States Supreme Court or our courts. See Empire Trucking Co. v.
Reading Anthracite Coal Co., 71 A.3d 923, 938-39 & n.3 (Pa. Super. 2013)
($1.5 million award in business tort case was not unconstitutionally
disproportionate to $271,000 compensatory damages award).
For the foregoing reasons, I would vacate Plaintiff’s judgments against
FN Bank and FNB and the trial court’s award of attorney fees against Turk
insofar as it included attorney fees incurred by Plaintiff in its litigation of its
damages claims and would affirm the breach of fiduciary duty judgment
against Turk and the punitive damages awards against Turk and FNIA solely
on the grounds discussed above.
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