Tyco Fire Products v. Fuchs, R. ( 2017 )

J-A19010-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TYCO FIRE PRODUCTS, L.P. D/B/A “TYCO IN THE SUPERIOR COURT OF
FIRE PROTECTION PRODUCTS” AND PENNSYLVANIA
TYCO INTERNATIONAL MANAGEMENT
COMPANY, LLC,
Appellee
v.
RALPH M. FUCHS,
Appellant No. 20 EDA 2017
Appeal from the Order Entered November 21, 2016
In the Court of Common Pleas of Montgomery County
Civil Division at No(s): 2016-07384
BEFORE: BENDER, P.J.E., DUBOW, J., and MUSMANNO, J.
MEMORANDUM BY BENDER, P.J.E.: FILED NOVEMBER 17, 2017
Appellant, Ralph M. Fuchs, appeals from the November 21, 2016 order
which granted a petition for a preliminary injunction filed by Appellee, TYCO
Fire Products, L.P., d/b/a TYCO Fire Protection Products and TYCO
International Management Company, LLC (“TYCO”).1 After careful review,
we affirm.
The trial court summarized the relevant facts and procedural history of
this case in its Pa.R.A.P. 1925(a) opinion, as follows:
TYCO is a worldwide company which designs,
manufactures and distributes chemical, water and mechanical
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1 An order granting a preliminary injunction is immediately appealable
pursuant to Pa.R.A.P. 311(a)(4).
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products for the fire protection and building products businesses.
[Appellant] was employed by TYCO, first as a sales manager and
then as a senior sales manager, from February 27, 2006 through
January 6, 2016. [Appellant’s] sales territory as a senior sales
manager was the Northeast region, consisting of Pennsylvania,
West Virginia, Delaware, New York, New Jersey, Maine,
Massachusetts, New Hampshire, Vermont, Rhode Island and
Maryland.
On February 17, 2006, prior to beginning his job at TYCO,
[Appellant] signed an Employee Confidentiality Agreement and a
Non-Competition Agreement (hereinafter “NCA”). The NCA
contains a Confidentiality Clause … and a Non-Competition
Clause[.] The Non-Competition Clause provides[:] “I agree,
subject to the conditions stated, that I will not within twelve
months after leaving [TYCO] employ, engage or enter into
employment by, or self-employment or gainful occupations, a
Competing Business or act directly or indirectly as an adviser,
consultant or agent or representative for a Competing Business.”
The NCA expressly provides for the entry of injunctive relief in
the event of any breach of the agreement by [Appellant]. In
2015, [Appellant] signed another employment agreement which
contained a non-competition restriction and provided for
injunctive relief [(“2015 Agreement”)].
[Appellant] testified that he read and signed these three
Agreements in connection with his employment with TYCO. He
further testified that he understood that two of these
Agreements contained non-compete provisions and non-
solicitation provisions. He understood that the third Agreement
he signed was a confidentiality agreement that provided for the
protection of TYCO’s confidential information and trade secret
information. [Appellant] testified at his deposition that he was
provided with access to TYCO’s Salesforce Customer Relations
Management Software, “which is a database of all the accounts
TYCO had information about.”
In January of 2016, [Appellant] resigned from his position
at TYCO and went to work at [Reliable Automatic Sprinkler
Company, Inc. (“Reliable”)]. Reliable is in the same type of
business and is a competitor of TYCO. After his resignation from
TYCO, [Appellant] received a letter from counsel for TYCO
reminding him of his legal obligations under the NCA.1 The letter
also informed [Appellant] that TYCO believed that by accepting
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employment with Reliable, [Appellant] was in violation of his
contract.2
1The evidence presented showed that both [Appellant] and
Reliable were well aware of the issues raised by
[Appellant’s] employment with Reliable….
2 After receipt of this letter, and after similar
correspondence was sent to Reliable, [Appellant] was
moved to work on an “internal project” by Reliable.
[Appellant] testified that there was nothing “physically
preventing” him from continuing to work on this internal
project for a year. In addition, [Appellant] testified that he
was aware that there were four other Reliable sales
regions in addition to the Northeast territory and even
states in the Northeast territory where he could legally
work if the injunction were entered.
While working for Reliable, [Appellant] accompanied other
Reliable employees to see customers in places located in the
states covered by his restrictive covenant. Several of these
customers [Appellant] visited were TYCO customers, and
although he testified he personally was not soliciting business
while on these sales calls, [Appellant] agreed that the purpose of
these visits was to sell Reliable products. In addition,
[Appellant] testified that he met with several of his former TYCO
customers while working at Reliable. [Appellant] also
acknowledged an e-mail exchange he had with a friend who,
when told by [Appellant] that he was taking a job with Reliable,
asked, “what about the non-compete?” [Appellant] responded,
“yea, going to be rolling the dice somewhat, but there is a
backup plan.”
Trial Court Order (“TCO”), 1/26/17, at 2-4 (citations to record omitted).
On April 13, 2016, TYCO filed a complaint in the Court of Common
Pleas of Montgomery County, seeking a preliminary injunction to restrain
Appellant from working in the eleven (11) states which make up his former
TYCO sales territory, for any company engaged in the same business as
TYCO, including Appellant’s current employer, Reliable. Id. at 1. TYCO then
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filed a motion for a preliminary injunction, and a hearing was held on the
matter on November 1, 2016. Id. Based on the evidence presented at the
hearing, Appellant’s testimony, and the testimony of TYCO and Reliable
customer, Carlos Antonia Fleming (“Mr. Fleming”), the trial court entered an
order on November 21, 2016, granting the preliminary injunction. The order
provided, in relevant part:
1. [Appellant] is hereby enjoined from employment with, or
providing services in any sales capacity, including
management of a sales team, either directly or indirectly to
[Reliable] or any of its affiliates, parents, subsidiaries, or
employees, in Pennsylvania, West Virginia, Delaware, New
York, New Jersey, Massachusetts, Maine, New Hampshire,
Vermont, Rhode Island, Ohio or Maryland (“TYCO Sales
Territory”) for a [o]ne[-y]ear time period from the date of this
Order.
2. [Appellant] is hereby enjoined from soliciting or inducing any
TYCO [c]ustomer, either directly or indirectly, to purchase the
goods and/or services of any other person or entity that is
engaged in the same or similar lines of business as TYCO for
a two[-]year period of time from the date of the Order.
3. [Appellant] is hereby enjoined from misappropriating, using
and/or disclosing TYCO’s [c]onfidential [i]nformation or
[t]rade [s]ecrets;
4. [Appellant] is hereby enjoined from seeking or accepting
employment with, or from providing services either directly or
indirectly to, any other person or entity that is engaged in the
same or similar business as TYCO in his former TYCO Sales
Territory for a one[-]year time period from the date of this
Order.
5. [Appellant] shall return to TYCO any and all[] information,
documents, software, materials, work product[,] or
equipment provided to him by TYCO or taken by him from
TYCO or relating to TYCO, whether in printed or electronic
form or otherwise.
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Id. at 4-5.
On December 17, 2016, Appellant filed a timely notice of appeal and
now presents the following issues for our review:
1. Did [TYCO] prove that, in order to protect [TYCO] from
irreparable future harm, it was reasonably necessary to
preliminarily enjoin [Appellant], for a period of one year, from
acting in any sales capacity for [Reliable] in [Appellant’s]
former [TYCO] sales territory?
2. Did [TYCO] prove that, in order to protect [TYCO] from
irreparable future harm, it was reasonably necessary to
preliminarily enjoin [Appellant], for a period of two years and
anywhere in the world, from directly or indirectly seeking to
sell or selling products to any [TYCO] customer, regardless of
whether [Appellant] had any contact with or knowledge of
those customers during his employment at [TYCO]?
3. Did the trial court abuse its discretion by ordering that the
periods of prohibition under its injunction would commence
running on the date the order was entered, rather [than] on
the contractually specified termination date of [Appellant’s]
employment at TYCO, thus expanding the injunctive
provisions by a period of almost a year?
Appellant’s Brief at 4-5.
In reviewing the grant of a preliminary injunction, we are guided by
the following principles:
As a preliminary consideration, we recognize that on an
appeal from the grant or denial of a preliminary injunction,
we do not inquire into the merits of the controversy, but
only examine the record to determine if there were any
apparently reasonable grounds for the action of the court
below. 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 [court].
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Allegheny Anesthesiology Associates, Inc. v. Allegheny General
Hosp., 826 A.2d 886, 891 (Pa. Super. 2003) (quoting Shanaman v.
Yellow Cab Co. of Philadelphia, 421 A.2d 664, 666 (Pa. 1980)).
We have also established that:
To obtain a preliminary injunction, a petitioner must establish
that: (1) relief is necessary to prevent immediate and irreparable
harm that cannot be adequately compensated by money
damages; (2) greater injury will occur from refusing to grant the
injunction than from granting it; (3) the injunction will restore
the parties to their status quo as it existed before the alleged
wrongful conduct; (4) the petitioner is likely to prevail on the
merits; (5) the injunction is reasonably suited to abate the
offending activity; and (6) the public interest will not be harmed
if the injunction is granted.
Shepherd v. Pittsburgh Glass Works, LLC, 25 A.3d 1233, 1241 (Pa.
Super. 2011). “In Pennsylvania, restrictive covenants are enforceable 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 employer; and the restrictions imposed are reasonably
limited in duration and geographic extent.” Id. at 1244.
Here, Appellant argues that the preliminary injunction entered by the
trial court was an abuse of discretion on the grounds that “TYCO failed to
demonstrate that it would suffer immediate and irreparable harm if the
injunction was not entered.” Appellant’s Brief at 16. Appellant suggests
that rather than provide actual proof of irreparable harm, TYCO inadequately
presented mere speculation about the remote possibility of future harm. Id.
at 22. Moreover, Appellant asserts that the restrictions imposed by the
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preliminary injunction were “neither reasonably necessary for TYCO’s
protection nor reasonably limited in duration and geographic reach.” Id. at
17. After careful review, we deem Appellant’s claims to be meritless.
In support of its decision to grant the preliminary injunction against
Appellant, the trial court provided the following thorough and well-reasoned
explanation:
TYCO has established its right to enforcement of the
restrictive covenants [Appellant] signed. TYCO is likely to
succeed in its claim against [Appellant] for breach of his
agreement because[:] (1) the non-compete agreement is valid
and enforceable; and (2) [Appellant] signed the agreement and
admitted in his testimony and pleadings that he was aware of
the agreement and its requirements and that it was a condition
of his employment; (3) [Appellant] breached his obligations
under his respective agreements by working for Reliable, which
is a competitor of TYCO; and [Appellant] was making calls on
TYCO customers while working for Reliable in the territory where
he [had] worked for TYCO, which is the area covered by the NCO
[sic]. The evidence in this case, including [Appellant’s] own
testimony[,] shows that the covenants which are at issue were
incident to [Appellant’s] employment with TYCO. [Appellant]
clearly executed his agreement as a condition of full-time
employment, making it incident to this employment and
supported by adequate consideration.
Second, the restrictive covenants in the non-compete
agreements are reasonably necessary for the protection of
TYCO’s legitimate business interests. The evidence shows that
TYCO and Reliable, [Appellant’s] new employer, compete for the
same business. Further[,] [Appellant] has testified that after he
began working for Reliable[,] he visited customers that he had
visited while working for TYCO.
Third, the time duration and geographic range of the
restrictions are reasonable. [The] Agreement in this case
restricts [Appellant’s] employment for one year. Non-compete
restrictions longer than one year are routinely upheld as
reasonable in Pennsylvania. See Worldwide Auditing Serv’s,
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Inc. v. Richter, 587 A.2d 772 (Pa. Super. [] 1991) (upholding
two-year restriction); see also John G. Bryant Co., Inc. v.
Sling Testing & Repair, Inc., 369 A.2d 1164 (Pa. 1977)
(upholding three-year restriction). Furthermore, the restriction’s
geographical scope is the territory in which [Appellant] acted as
TYCO’s sales manager immediately before leaving TYCO. This
restriction is reasonable based on the nature of the work done
by [Appellant] at TYCO, visiting customers in these geographic
areas. The testimony shows that Reliable has five sales
territories, and [Appellant] is only precluded from working in one
of these territories. Accordingly, for all of the above reasons,
TYCO is likely to prevail on the merits.
TYCO will suffer immediate and irreparable harm if
[Appellant] is not enjoined because violating a restrictive
covenant such as this clearly constitutes irreparable harm. As
the Pennsylvania Supreme Court has specifically explained in
[Sling Testing], 369 A.2d [at] 1167 … [,]
[i]t is not the initial breach of a 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 that constitutes the justification for
equitable intervention.[2]
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2Appellant avers that the trial court misapplied Sling Testing to the instant
matter, and suggests that our Supreme Court clarified in New Castle
Orthopedic Assocs. v. Burns, 392 A.2d 1383, 1387 (Pa. 1978), that it is
an error for a trial court to merely presume irreparable injury from the
nature of the business and the breach of the covenant. Appellant’s Brief at
20. Appellant’s conclusion ignores, however, the following portion of the
Sling Testing opinion which is quoted by the New Castle Court:
The covenant seeks to prevent more than just the sales that
might result by the prohibited contact but also the covenant is
designed to prevent a disturbance in the relationship that has
been established between appellees and their accounts through
prior dealings. It is the possible consequences of this
unwarranted interference with customer relationships that is
unascertainable and not capable of being fully compensated by
money damages. It is for this reason … that where a covenant
(Footnote Continued Next Page)
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Here, TYCO has a significant interest in protecting its
customer base, and in protecting the confidentiality of its
business and pricing information. [Appellant] has already visited
some of TYCO’s customers with Reliable employees. This could
certainly lead to harm to TYCO were these customers, some of
whom have become friends of [Appellant], to give business to
Reliable, rather than TYCO. The facts in this case lead to the
conclusion that the threat of continuous violation of the [NCA]
constitutes immediate and irreparable harm to TYCO.
TCO at 7-9.
In response to Appellant’s assertion that the two-year non-solicitation
restriction set forth in the 2015 Agreement is broader than necessary to
protect TYCO’s interests, we note that this covenant is governed by New
(Footnote Continued) _______________________
of this type meets the test of reasonableness, it is prima facie
enforceable in equity.
New Castle, 392 A.2d at 1386 (quoting Sling Testing, 369 A.2d at 1167).
The New Castle Court further explained that Sling Testing does not
conflict with the threshold evidentiary requirement that actual proof of
irreparable harm must be met before granting a preliminary injunction;
rather, Sling Testing supplements this threshold requirement in those
cases where the plaintiff’s proof of injury “foreshadows the disruption of
established business relations which would result in incalculable damage
should the competition continue in violation of the covenant.” Id. at 1387.
Moreover, New Castle is clearly distinguishable from the instant case, as it
is a non-compete case involving a specialist physician in an under-served
rural area, rather than a salesman. See id. (stating “[t]his is quite unlike
the normal commercial situation in which there are only a limited number of
prospective clients and the alleged breach significantly affects the share of
the former employer. Here, the potential pool of clients far exceeds the
appellee’s ability to serve them. Under these circumstances it is difficult to
find any irreparable injury wrought upon the appellee by the appellant”).
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Jersey law.3 Appellant, however, erroneously cites to inapposite
Pennsylvania case law, in an attempt to support his challenge to the
geographic scope of this restriction.4
“New Jersey courts recognize protecting confidential business and
protecting customer relationships as legitimate employer interests. In cases
where the employer’s interests are strong, such as cases involving trade
secrets or confidential information, a court will enforce a restrictive
covenant.” Trico Equipment, Inc. v. Manor, No. 08-5561, 2009 WL
1687391, at *7 (D.N.J. June 15, 2009). Similar to Pennsylvania courts,
“[a]s to undue hardship, [New Jersey] courts will consider ‘the nature of the
profession, the duration of the restriction, the geographic area of the
restriction and the type of restriction.’” Id. (quoting Maw v. Advanced
Clinical Communications, Inc., 359 N.J. Super. 420, 820 A.2d 105, 115
(N.J. Super. Ct. App. Div. 2003)). A two-year period has been found to be
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3 In the “Governing Law” section of the 2015 Agreement, the parties
expressly agreed that the contract “shall be governed by the laws of the
state of New Jersey without reference to principles of conflicts of laws that
would direct the application of the law of any other jurisdiction.” See 2015
Agreement. “Choice of law provisions in contracts will generally be given
effect.” Smith v. Commonwealth Nat. Bank, 557 A.2d 775, 777 (Pa.
Super. 1989).
4 Even if Pennsylvania law applied, a two-year restraint on solicitation of
former customers has been held to be reasonable and enforceable. See
Worldwide Auditing Services, Inc. v. Richter, 587 A.2d 772, 776 (Pa.
Super. 1991) (upholding covenant restricting solicitation of Worldwide’s
former customers “wherever located” for a period of two years).
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reasonable for both non-compete and non-solicitation provisions. Id.5 For
the foregoing reasons, we conclude that “apparently reasonable grounds”
existed for the injunctive relief entered by the trial court.
Finally, Appellant claims that the trial court abused its discretion by
ordering that the periods of restriction imposed by the injunction run from
the date of the order, rather than from the date of Appellant’s resignation.
Appellant’s Brief at 35. Again, we deem Appellant’s claim to be without
merit. The trial court’s actions were entirely appropriate, considering
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5 In Trico, the district court upheld a non-solicitation provision, which barred
the former employee from soliciting “any entity that was a customer,
supplier, contractor, or subcontractor of Trico, for two years,” reasoning:
In A.T. Hudson & Co. v. Donovan, 216 N.J. Super. 426, 524
A.2d 412, 416 (N.J. Super. Ct. App. Div. 1987), the New Jersey
court upheld a similar provision. While New Jersey courts seem
to require geographic limits for non-compete clauses, geographic
limitations do not appear necessary for non-solicitation
provisions. See Platinum Management, Inc. v. Dahms, 285
N.J. Super. 274, 666 A.2d 1028, 1040 (N.J. Super. Ct. Law Div.
1995); Mailman, Ross, Toyes & Shapiro v. Edelson, 183 N.J.
Super. 434, 444 A.2d 75, 79 (N.J. Super. Ct. Ch. Div. 1982) (“To
impose a geographical limitation on a covenant which seeks to
protect an established clientele instead of an area of non-
competition would not make the burden imposed on the
employee by a covenant ‘reasonable’ but would merely mandate
an unwarranted change in the nature of the interest protected.”)
Trico, 2009 WL 1687391, at *7.
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Appellant failed to abide by the terms of the non-compete agreements after
his resignation from TYCO.6
Although not binding on this Court, we are persuaded by Jackson
Hewitt Inc. v. Childress, 2008 WL 834386, at *10-11 (D.N.J. March 27,
2008), in which a former franchisee was enjoined from competing with the
former franchisor for a period of twenty-four (24) months, beginning from
the date of the former franchisee’s compliance with the non-compete
covenant, rather than the date that it abandoned the franchise. The
Jackson Hewitt court reasoned that the extension of the restrictive period
was justified, as the defendant would otherwise “wrongfully benefit from his
refusal to comply with his contractual obligations.” Id. at *11.
Appellant cites, to no avail, two Pennsylvania cases in which the
Courts refused to enforce a restrictive covenant by means of an injunction.
See Davis v. Buckham, 421 A.2d 427 (Pa. Super. 1980); see also Hayes
v. Altman, 266 A.2d 269, 271 (Pa. 1970) (holding “[a]n injunction will not
be granted to enforce a restrictive covenant when the restrictive period has
by its terms expired”). Both of those cases are distinguishable from the
present matter, as in each of those cases, the court emphasized the fact that
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6 As stated supra, the trial court found that Appellant breached the NCA and
the 2015 Agreement by working for Reliable and by making calls, while
working for Reliable, to TYCO customers located in his former TYCO sales
territory. TCO at 7.
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the period of the restrictive covenant had expired.7 We determine Davis
and Hayes do not control in this case, where the restrictive covenants had
not yet expired at the time the injunction was ordered.
Moreover, the Hayes Court indicated that fraud or unnecessary delay
by the appellant may serve as a basis for an extension. Hayes, 266 A.2d at
272. The record in the instant matter reveals that Appellant has caused
unnecessary delay in the litigation of the validity and enforceability of the
non-compete and non-solicitation agreements.8 Appellant should not be
permitted to benefit from such actions and to avoid the restrictions set forth
in the covenants to which he knowingly agreed. It seems only appropriate
that the trial court refused to credit Appellant for time that had passed since
his resignation from TYCO, as such time was spent in non-compliance.
Equity demands that the period of restrictions runs from the date of the
preliminary injunction order.
Accordingly, we conclude that the trial court did not err in granting
TYCO’s petition for a preliminary injunction against Appellant, and we affirm
the November 21, 2016 order.
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7The Davis court acknowledged that a case may arise where a court would
be justified in extending a period of a restrictive covenant, but that this was
not that case, due to the fact that the restrictive period had expired. Davis,
421 A.2d at 431.
8The trial court granted a motion for sanctions against Appellant on January
12, 2017, for failure to produce court-ordered discovery documents.
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Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/17/2017
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