Softmart Commercial v. Mariani, J. ( 2015 )

J. A25035/15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
SOFTMART COMMERCIAL SERVICES INC. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
JACQUELYN MARIANI AND :
ARRAYA SOLUTIONS, INC., :
:
Appellant : No. 461 EDA 2015
Appeal from the Order January 13, 2015
In the Court of Common Pleas of Chester County
Civil Division No(s).: 2014-07615-CT
BEFORE: DONOHUE, MUNDY, and FITZGERALD,* JJ.
MEMORANDUM BY FITZGERALD, J.: FILED NOVEMBER 04, 2015
Appellant, Jacquelyn Mariani, appeals from the order entered in the
Chester County Court of Common Pleas that granted the petition of
Appellee, Softmart Commercial Services, Inc.,1 for a preliminary injunction.
Appellant contends the court misconstrued the restrictive covenant and the
record did not justify injunctive relief. We affirm.2
*
Former Justice specially assigned to the Superior Court.
1
Arraya Solutions, Inc. (“Arraya”), is not a party to this appeal.
2
As this Court recently observed:
Our affirmance is based on the preliminary nature of this
record. It is not a holding on the ultimate merits of [the]
claims, which can be developed more fully prior to trial. . .
.
It is somewhat embarrassing to an appellate
court to discuss the reasons for or against a
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We adopt the facts as set forth by the trial court’s opinion. 3 See Trial
Ct. Op., 4/21/15, at 1-4. Appellant timely appealed and timely filed a court-
ordered Pa.R.A.P. 1925(b) statement.4
Appellant raises the following six issues:
1. Did the Trial Court err by concluding that the Restrictive
Covenant Agreement (“RCA”) is enforceable when it was
not ancillary to an employment contract; when it was not
supported by adequate consideration; when it was not
reasonably limited in time and geographic territory; and
when it was not necessary to protect a legitimate business
interest of Softmart Commercial Services, Inc. (“Appellee”)
without imposing an undue hardship on Appellant?
preliminary decree, because generally in such
an issue we are not in full possession of the
case either as to the law or testimony—hence
our almost invariable rule is to simply
affirm the decree, or if we reverse it to give
only a brief outline of our reasons, reserving
further discussion until appeal, should there be
one, from final judgment or decree in law or
equity.
WMI Grp., Inc. v. Fox, 109 A.3d 740, 743 n.2 (Pa. Super. 2015) (citation
omitted).
3
Appellee did not raise a claim under the Pennsylvania Uniform Trade
Secrets Act (“PUTSA”), 12 Pa.C.S. §§ 5301-5308. See also 12 Pa.C.S. §
5308 cmt.
4
Appellee also moved for counsel fees and costs, averring fourteen
timekeepers, over 1,300 billable hours, and a noteworthy almost half-million
dollars in fees were required to obtain preliminary injunctive relief. See
Appellant’s Answer to Appellee’s Pet. for Att’ys’ Fees and Costs, 1/30/15; cf.
American Intellectual Property Law Association, Report of the Economic
Survey 36 (2013) (listing median fees for trade secret misappropriation
suit).
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2. Did the Trial Court err by concluding that Appellee
would likely succeed on the merits of its claims against
Appellant for breach of the RCA when there was no
evidence of harm (e.g., lost customers, lost partners, lost
revenues, or any other identifiable harm) to Appellee
which is an essential element of any cause of action for
breach of contract?
3. Did the Trial Court err by giving the RCA as expansive a
reading as possible instead of a more narrow reading
against Appellee, especially when any competition between
Appellant’s new employer, Arraya Solutions, Inc.
(“Arraya”), and Appellee was limited at most because no
witness could point to a single instance in which Arraya
and Appellee competed for a client or a project and not
one witness could point to a single customer that Appellee
lost as a result of Appellant’s employment with Arraya?
4. Did the Trial Court err by concluding that Appellant’s
employment at Arraya was unlawful or wrongful conduct
under the RCA when there was no evidence that she
utilized or was in physical possession of any confidential or
proprietary information of Appellee after she made all of
her phones and computers available to Appellee’s forensic
consultant, who found no wiping utilities used, no
confidential information taken, no documents printed or
downloaded, no spoliation of evidence, no theft of trade
secrets, and no transfer of any information to any third
parties?
5. Did the Trial Court err by concluding that a preliminary
injunction would restore the status quo existing prior to
Appellant’s departure from Appellee when the preliminary
injunction restricting her from working in eastern
Pennsylvania did not restore the status quo but disrupted
the status quo, which had her working for seven months in
Delaware and Chester counties for Arraya without any
harm to Appellee?
6. Did the Trial Court err by concluding that the harm to
Appellee outweighed the harm to Appellant if a preliminary
injunction were not issued when Appellant was forced out
of her local region into a smaller commission market with
significantly reduced income and new obstacles for travel
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and business development, especially where the evidence
suggested an abuse by Appellee of its superior bargaining
power and a callous disregard for Appellant’s interest in
pursuing her chosen occupation, neither of which serves
the public interest?
Appellant’s Brief at 7-9.
We summarize Appellant’s arguments in support of her first four
issues. In support of her first issue, Appellant claims the RCA is not
enforceable for four reasons. First, Appellant asserts that when she
accepted the job offer, no one mentioned a non-compete agreement.
Second, she contends she did not receive adequate consideration for the
RCA, as she signed it five years after starting her job. Third, Appellant
argues that the geographic restriction was unclear.5 Lastly, she insists the
RCA was unnecessary to protect Appellee’s business interest given the
existence of a non-solicitation clause.
Regarding her second issue, Appellant reasons Appellee failed to
establish harm and thus could not recover for its breach of contract claim.
For her third issue, Appellant maintains the court erred by holding Arraya
and Appellee are competitors. With respect to Appellant’s fourth issue, she
maintains that she never used or possessed any of Appellee’s trade secrets.
She insists that Appellee adduced no evidence that she possessed any
5
Appellee, however, counters that Appellant is restricted from contacting
customers within her assigned regions of eastern Pennsylvania and Georgia.
See Appellee’s Brief at 29; N.T. Prelim. Inj. Hr’g, 1/9/15, at 121-22.
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confidential information on any of her phones and computers. For these four
issues, we hold Appellant is due no relief.
Our scope and standard of review was recently set forth as follows:
Our scope of review is plenary.
Our review of a trial court’s order granting or
denying preliminary injunctive relief is highly
deferential. This highly deferential standard of
review states that in reviewing the grant or
denial of a preliminary injunction, an appellate
court is directed to examine the record to
determine if there were any apparently
reasonable grounds for the action of the court
below. . . .
We do not inquire into the merits of the controversy. 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 trial court.
A trial court has apparently reasonable grounds for
granting the extraordinary remedy of preliminary
injunctive relief if it properly finds that all of the essential
prerequisites are satisfied.
There are six essential prerequisites that a party
must establish prior to obtaining preliminary
injunctive relief. The party must show: 1) “that
the injunction is necessary to prevent
immediate and irreparable harm that cannot be
adequately compensated by damages”; 2) “that
greater injury would result from refusing an
injunction than from granting it, and,
concomitantly, that issuance of an injunction will
not substantially harm other interested parties
in the proceedings”; 3) “that a preliminary
injunction will properly restore the parties to
their status as it existed immediately prior to
the alleged wrongful conduct”; 4) “that the
activity it seeks to restrain is actionable, that its
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right to relief is clear, and that the wrong is
manifest, or, in other words, must show that it
is likely to prevail on the merits”; 5) “that the
injunction it seeks is reasonably suited to abate
the offending activity”; and, 6) “that a
preliminary injunction will not adversely affect
the public interest.” The burden is on the party
who requested preliminary injunctive relief.
A decision addressing a request for a preliminary
injunction thus requires extensive fact-finding by the trial
court because the moving party must establish it is likely
to prevail on the merits. If the moving party’s right to
relief is unclear, then a preliminary injunction should not
issue. . . .
To establish a clear right to relief on a claim for breach
of restrictive covenants of an employment contract, a
party must, inter alia, demonstrate the following:
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. Our law permits equitable enforcement
of employee covenants not to compete only so
far as reasonably necessary for the protection of
the employer. However, restrictive covenants
are not favored in Pennsylvania and have been
historically viewed as a trade restraint that
prevents a former employee from earning a
living.
Pennsylvania cases have recognized that trade secrets of
an employer, customer goodwill and specialized training
and skills acquired from the employer are all legitimate
interests protectable through a general restrictive
covenant. In essence, the court must examine and
balance the employer’s legitimate business interest, the
individual’s right to work, the public’s right to unrestrained
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competition, and the right to contract in determining
whether to enforce a restrictive covenant.
In construing a restrictive covenant, courts do not
assume that a contract’s language was chosen carelessly,
nor do they assume that the parties were ignorant of the
meaning of the language they employed. When a writing
is clear and unequivocal, its meaning must be determined
by its contents alone. It is not the function of this Court to
re-write it, or to give it a construction in conflict with the
accepted and plain meaning of the language used.
Only where a contract’s language is ambiguous
may extrinsic or parol evidence be considered to
determine the intent of the parties. A contract
contains an ambiguity if it is reasonably
susceptible of different constructions and
capable of being understood in more than one
sense. This question, however, is not resolved
in a vacuum. Instead, contractual terms are
ambiguous if they are subject to more than one
reasonable interpretation when applied to a
particular set of facts. In the absence of an
ambiguity, the plain meaning of the agreement
will be enforced. The meaning of an
unambiguous written instrument presents a
question of law for resolution by the court. . . .
Furthermore, with respect to restrictive covenants:
Courts have consistently held that the taking of
employment is sufficient consideration for a
covenant not to compete. An employee’s
promotion to a new position within the
company also constitutes sufficient
consideration.
Fox, 109 A.3d at 747-49 (citations omitted).
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As noted above, a restrictive covenant protects an employer’s trade
secrets. For a non-PUTSA6 claim,
[t]he very concept of a “trade secret” is itself “somewhat
nebulous.” Therefore, the decision of whether a particular
compilation of customer data deserves protection as a
trade secret necessarily must be made on a case-by-case
basis. Our law is well settled that, to be classified as a
trade secret, information must be an employer’s actual
secret and not comprise mere “general trade practices.”
Furthermore, the information must be of peculiar
importance to the employer’s business before the law will
protect it as a trade secret.
Iron Age Corp. v. Dvorak, 880 A.2d 657, 664 (Pa. Super. 2005) (citations
omitted).
[O]ur Supreme Court has held that, under certain
circumstances, customer lists and customer data may be
entitled to protection as trade secrets. Furthermore, a
trade secret may include compiled information which gives
one business an opportunity to obtain an advantage over
6
Appellee elected not to raise a claim under PUTSA, which defines “trade
secret” as follows:
“Trade secret.” Information, including a formula, drawing,
pattern, compilation including a customer list, program,
device, method, technique or process that:
(1) Derives independent economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use.
(2) Is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
12 Pa.C.S. § 5302.
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competitors. Nevertheless, customer lists are at the very
periphery of the law of unfair competition. There is no
legal incentive to protect the compilation of such lists
because they are developed in the normal course of
business anyway.
Id. at 663 (citations and quotation marks omitted). Even if such a list is not
entitled to protection as a trade secret, “the law will also prevent an
employe[e] from using customer contacts as well as confidential customer
information to his own advantage by soliciting the customers of his former
employer.” Morgan’s Home Equipment Corp. v. Martucci, 136 A.2d
838, 843 (Pa. 1957) (footnote omitted).
After careful review of the parties’ briefs, the record, and the reasoned
decision of the Honorable Edward Griffith, we affirm Appellant’s first four
issues based on the trial court’s decision. See Trial Ct. Op. at 5-14 (holding
(1) RCA executed in connection with Appellant’s promotion within company;
(2) Appellant’s promotion resulted in increased compensation; (3) RCA
limited to eastern Pennsylvania and Georgia; (4) record substantiates
multiple solicitations such that enforcement of RCA reasonably necessary to
protect Appellee; and (5) grounds exist supporting determination of harm to
Appellee and that Appellee is competitor to Arraya).7 We need not resolve
whether the identity of Appellee’s customers is a trade secret, see Dvorak,
7
As noted above, Appellee maintains Appellant’s regions are limited to
eastern Pennsylvania and Georgia. See Appellee’s Brief at 29; N.T. Prelim.
Inj. Hr’g, 1/9/15, at 121-22.
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880 A.2d at 663, as Appellant admitted to soliciting those customers, which
both the RCA and the law forbids. See Martucci, 136 A.2d at 843; see
also In re Strahsmeier, 54 A.3d 359, 364 n.17 (Pa. Super. 2012) (“As an
appellate court, we may uphold a decision of the trial court if there is any
proper basis for the result reached; thus we are not constrained to affirm on
the grounds relied upon by the trial court.” (citation omitted)).
For her fifth issue, we reproduce the entirety of Appellant’s argument
below:
The preliminary injunction did not restore the status
quo existing prior to Appellant’s departure from Appellee
because Appellant had been working in Delaware and
Chester counties for Arraya without any harm to Appellee
for over seven months. To the contrary, the preliminary
injunction restricting her from working in these counties
could not restore the status quo but only disrupt it.
Appellant’s Brief at 36. Appellant is not due any relief.
As a prefatory matter, Appellant’s one-paragraph argument is devoid
of any legal analysis. Id. Appellant has not explained how or why the trial
court erred. “It is the appellant who has the burden of establishing his
entitlement to relief by showing that the ruling of the trial court is erroneous
under the evidence or the law. Where the appellant has failed to cite any
authority in support of a contention, the claim is waived.” Bunt v. Pension
Mortg. Assocs., Inc., 666 A.2d 1091, 1095 (Pa. Super. 1995) (citations
omitted); accord Korn v. Epstein, 727 A.2d 1130, 1135 (Pa. Super. 1999).
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Because Appellant has cited no legal authority, she has waived this claim on
appeal. See Bunt, 666 A.2d at 1095.
Regardless, we would have discerned no trial court error. As our
Supreme Court explained, the “status quo to be maintained by a preliminary
injunction is the last actual, peaceable and lawful noncontested status which
preceded the pending controversy.” Valley Forge Historical Soc’y v.
Washington Mem’l Chapel, 426 A.2d 1123, 1129 (Pa. 1981) (citation
omitted). As the trial court observed, the status quo is prior to Appellant’s
unlawful actions. See id. Accordingly, we would not have granted Appellant
relief.
Appellant lastly argues that the harm from the preliminary injunction
outweighed the harm to Appellee from not granting a preliminary injunction:
Appellant was forced out of her local region of Chester
and Delaware Counties into a smaller commission market
with significantly reduced income and new obstacles for
travel and business development. By contrast, Appellee’s
claims of greater injury are merely speculative harms
about its reputation and the potential loss of goodwill and
future business. These harms pale in comparison to the
harm Appellant faces. Thus, by granting the preliminary
injunction, the Trial Court rewarded the abuse by Appellee
of its superior bargaining power and its callous disregard
for Appellant’s interest in pursuing her chosen occupation
despite suffering no identifiable harm, neither of which
served the public interest.
Appellant’s Brief at 36-37 (citations omitted). As with Appellant’s fifth issue,
her bald allegations are not supported by legal analysis and thus she has
waived them on appeal. See Bunt, 666 A.2d at 1095.
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In any event, in Ogontz Controls Co. v. Pirkle, 499 A.2d 593 (Pa.
Super. 1985), this Court addressed whether “the lower court incorrectly
found that greater harm would be done by refusing the preliminary
injunction than by granting it.” Id. at 597. In resolving this issue, the
Pirkle Court referenced
cases in which a former employer alleges that his former
employee has violated an anti-competition provision of an
employment contract. In those cases, the defendant can
often claim great harm, because a preliminary injunction
puts him out of business or out of a job. However,
preliminary injunctions have been approved in those
situations due to the very nature of the agreed upon
restriction, to prevent the way in which the former
employee goes about making his or her livelihood after
leaving the former employer.
Id. (citations omitted).
Instantly, Appellant noted she would be inconvenienced and earn less
income if she complied with the injunction—less impactful than having no
business or no job. Cf. id. While we do not minimize the gravity of the
harm to Appellant, we discern no basis—particularly given this preliminary
record, cf. Fox, 109 A.3d at 743 n.2—to conclude the trial court abused its
discretion by improperly weighing the harms attendant to a preliminary
injunction. Accordingly, after careful consideration of the record, grounds
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exist for the trial court’s ruling and thus we discern no abuse of discretion.8
See id. at 748.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/4/2015
8
It bears repeating that “our standard of review for preliminary injunctive
relief is highly deferential” and thus, Appellant has “an opportunity to
develop the record further at trial.” See Fox, 109 A.3d at 753 n.2.
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SOFTMART COMMERCIAL SERVICES, IN THE COURT OF COMMON PLEAS
INC.
Plaintiff CHESTER COUNTY, PENNSYLVANIA
v. NO. 2014-07615
JACQUELYN MARIANI and ARRAYA CIVIL ACTION - LAW
SOLUTIONS, INC.
Defendants
Attorneys for Plaintiff' James T. Smith, Esq., William R. Cruse, Esq., Lauren M. Fitzgerald, Esq.,
Thomas A. Riley, Jr., Esq., Jane Richardson, Esq.
Attorneys for Defendants: Garlh G. Hoyt, Esq., Dianne G. Moretzsohn, Esq.
OPINION
Defendant, Jacquelyn Mariani ("Mariani"), has appealed from the Order entered
January 13, 2015 granting Plaintiff, Softmart Commercial Services, Inc. ("Softmart"),
preliminary injunctive relief and enforcing the terms of a restrictive covenant entered
when she was employed by Softmart.
Procedural and Factual Background:
Softmart commenced this action against its former employee on August 6, 2014
for breach of two agreements, the Employee Innovation and Non-Disclosure Agreement
and the Confidentiality, Non-Solicitation and Restrictive Covenant Agreement
("Restrictive Covenant Agreement"). At the same time, Softmart petitioned for
preliminary injunctive relief to enforce the terms of the Restrictive Covenant Agreement.
On October 31, 2014, Softmart filed an amended complaint and added Arraya
Solutions, Inc. ("Arraya"), Mariani's current employer, as a defendant. Following
discovery, a hearing was held over five days beginning January 6, 2015. On January
13, 2015, we entered an Order granting Softmart preliminary relief, which required
Mariani to comply with the terms of the Restrictive Covenant Agreement.
Mariani was hired by Softmart in April, 2008 as a small business account
manager and was responsible for increasing sales to Softmart's small business
customers. On July 1, 2011, Mariani was promoted to the position of inside account
manager for the south region where she had responsibility for Softmart's accounts in
Georgia, working remotely from Pennsylvania. On March 1, 2013, Mariani was
promoted to the position of strategic account manager in the eastern region of
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Pennsylvania. In this position, she was the face of Softmart and responsible for
prospecting new business, while maintaining a presence with Softmart's existing
account base. In connection with this promotion, Mariani entered into the disputed
Restrictive Covenant Agreement.
Mariani was solicited by Arraya for employment on May 12, 2014 and she
accepted a sales position on May 23, 2014. Later on May 23, 2014, Mariani resigned
from Softmart. Mariani started working for Arraya on May 29, 2014.
The provisions of the Restrictive Covenant Agreement that Softmart seeks to
enforce are:
NO COt\JTACT WITH OR SOLICITATION OF SUPPLIERS, CUSTOMER
REFERRAL SOURCES, AND CUSTOMERS:
I agree that, during my employment and for a period of fifteen (15) months
after my employment with Softmart terminates for any reason, voluntary or
involuntary, I will not solicit, contact, or provide services to (or attempt to
do any of the foregoing,) directly or indirectly, for the purpose or effect of
competing or interfering with any part of Softmart's Business: (1) any
Customer of Softmart within my Region; (2) any Customer of Softmart that
I contacted, solicited, or in any way dealt with at any time during the last
two years of my employment; (3) any prospective Customer of Softmart
that I contact, solicit or in any way supported or dealt with at any time
during the last two years of my employment; or (4) any existing or
prospective Customer of Softmart for whom I had any direct or indirect
responsibility at any time during the last two years of my employment. For
purposes of this Agreement, 'Customer' shall include, without limitation,
any company, person or entity that Softmart provides services to,
including its director, officers, executive, managers, and representatives.
For purposes of this Agreement, my 'Region' shall mean any geographic
area to which I have been assigned with the last two years of my
employment with Softmart, or, if I was not assigned to a specific
geographic area, my 'Region' shall mean the United States of America.
NO COMPETITION IN SAME REGION:
I agree that, during my employment and for a period of eighteen (18)
months after my employment with Softmart terminates for any reason,
voluntary or involuntary, I will not, directly or indirectly, compete with
Softmart's Business in my Region, as defined above. With respect to the
restricted Region, this means that I will not be involved in the Business on
my own behalf or on behalf of any Competitor of Softmart in a managerial,
marketing, sales, administrative, test lead or other test capacity, whether
as an owner, principal, partner, employee, consultant, contractor, agent or
2
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representative. 'Competition', as used in the Agreement, shall mean any
persons or entities who now, or in the future, develop, provide, offer or
intend to offer or provide services in the Business described above.
(Restrictive Covenant Agreement, pp. 4, 5)
Softmart described its business as:
... reselling of computer software, hardware, peripherals, accessories,
supplies and other products used in connection with the operation and
maintenance of computers, and provides consultation, license management,
and training services related to the products described above, and also the
quantitative analysis services know[n] as Analytics and SAM engagement, as
well as software licensing and management (SLMS).
(Restrictive Covenant Agreement, p. 1)
CONFIDENTIALITY:
I understand that Softmart's proprietary and confidential information includes
(without limitation): (1) customer lists or data, customer contact information,
customer referral lists or data, customer referral sources, and customer
preferences or records; (2) pricing information and policies, billing information
and policies, business methods and philosophies of delivering services,
business plans and analyses, contractual arrangements, marketing and sales
strategies; (3) physical security systems, access control systems, network and
other equipment designs; (4) information about products, proposed products,
services, developments, processes, procedures, technical information, know-
how, expertise, drawings, designs, specifications, scripts; (5) employment and
payroll records; (6) tax information, forecasts, budgets, projections and other
non-public financial information; (7) expansion plans, management policies
and other business strategies and policies; (8) office procedures and
protocols; and (9) Analytics" spreadsheets and/or work product. In exchange
for my being provided access to such information, I agree that, at all time
during and after my employment with Softmart, I will not disclose or
communicate any of this information to any competitor or other third party, or
use or refer to any of this information for any purpose, including but not limited
to in the course of future employment for myself or any entity other than
Softmart, or remove materials concerning any of this information from
Softmarl's premises, except as necessary for me to properly perform services
for Softrnart during my employment. Upon termination of my employment, I
will immediately return to Softmart all correspondence files, business card
files, customer and supplier source lists and files, software, manuals,
forecasts, budget notes, electronically stored information or data, and other
materials that contain any of this information, and I will not retain any copies of
the materials. I understand that these provisions apply even to information of
this type that is developed or conceived by me, alone or with others, at
3
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Softrnart's instruction or otherwise. I also understand that these provisions
apply to all information I may receive that is confidential and/or propriety to
any customer, supplier, or other person or entity who does business with
Softrnart.
(RestrictiveCovenantAgreement, pp. 2-3)
Discussion:
To obtain preliminary injunctive relief, Softmart must establish six prerequisites:
1) that the injunction is necessary to prevent immediate and
irreparable harm that cannot be adequately compensated by
damages;
2) that greater injury would result from refusing an injunction than
from granting it, and, concomitantly, that issuance of an injunction
will not substantially harm other interested parties in the
proceedings;
3) that a preliminary injunction will properly restore the parties to
their status as it existed immediately prior to the alleged wrongful
conduct;
4) that the activity it seeks to restrain is actionable, that its right to
relief is clear, and that the wrong is manifest, or, in other words,
must show that it is likely to prevail on the merits;
5) that the injunction it seeks is reasonably suited to abate the
offending activity; and,
6) that a preliminary injunction will not adversely affect the public
interest.
Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828 A.2d 995, 1001
(Pa. 2003).
We first consider whether Softmart has produced sufficient evidence to establish
a clear right to relief on a claim for breach of restrictive covenants of an employment
contract Synthes v. Harrison, 83 A.3d 242 (Pa.Super.2013). To do so, Softmart must
show that:
1) the restrictive covenant is incident to an employment relationship
between the parties;
2) the restrictive covenant is supported by adequate consideration;
3) the restrictive covenant is reasonably necessary to protect the
legitimate interests of the employer; and,
4) the restrictive covenant is reasonable in time and geographic
scope.
4
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Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912, 917 (2002); Kistler v. O'Brien, 464
Pa. 475, 347 /-\.2d 311 (1975); Capital Bakers, Inc. v. Townsend, 426 Pa. 188, 231 A.2d
292 (1967).
Incident to the emplovment relationship
A restrictive covenant entered into as part of a change in a position of
employment is incident to the employment relationship. Jacobson & Co. v. International
Environment Corp., 427 Pa. 439, 235 A.2d 612, 618-619 (1967). On February 19,
2013, John Henkels, Mariani's supervisor at Softmart, delivered a letter to Mariani
containing an "internal transfer promotional offer" to the position of "Strategic Account
Manager-Easter[n] Pennsylvania, Northern Region" to commence March 1, 2013. At
the same time, Henkels handed Mariani related documents, including the Restrictive
Covenant Agreement. Mariani accepted the offer by signing the letter the same day.
However, she took the Restrictive Covenant Agreement for further review. (N.T. Vol. 1,
68:22-69:9, 81:19-82:11; Exh. P-60)
Mariani reviewed the Restrictive Covenant Agreement with an attorney,
requested changes, which were refused, and signed the document on March 1, 2013,
the same day she commenced her new position. (N.T. Vol. 2, 206:5-214:14, Vol. 3,
134:9-135:12; Exh. P-60)
The preamble of the Restrictive Covenant Agreement recites that Mariani
entered the same "in consideration of the commencement of my employment as a
"Strategic Account Manager-Eastern PA". (Exh. P-60) Although Mariani cannot clearly
recall when she received the Restrictive Covenant Agreement and she contends that it
was delivered to her by Susan O'Neill, Softmart's director of Human Relations, and not
by Henkels, Mariani nonetheless acknowledged that signing the Restrictive Covenant
Agreement was a condition of her acceptance of the Strategic Account Manager
position. (N.T. Vol. 2, 204:17-205:5, 205:6-206:4, 214:10-14, Vol. 3, 136:12-20)
In Kistler v. O'Brien, supra, cited by Mariani, a restrictive covenant was not
enforced because, in part, the requirement of a restrictive covenant was not a term
agreed upon when employment was accepted. In fact, O'Brien commenced
employment before the requirement of a restrictive covenant was even raised. In our
case, there is no dispute that the execution of the Restrictive Covenant Agreement was
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necessary if Mariani wished to commence employment as a Strategic Account
Manager.1 We therefore concluded that the Restrictive Covenant Agreement was
incident to the employment relationship between Softmart and Mariani.
Supporled bv adequate consideration
A beneficial change in employment status is adequate consideration for
enforcement of a restrictive covenant. Davis & Warde, Inc. v. Tripodi, 420 Pa.Super.
450, 616 A.2d 1384 (1992). Mariani contends that despite language in Softmart's offer
letter, identifying her transfer to Strategic Account Manager as an "internal transfer
promotional offer", the new position was simply a transfer, not a promotion.
Mariani's promotion to Strategic Account Manager came with an increase in her
guaranteed monthly draw from $4,583 to $6,667 for twelve months, set against a
commission rate of 12% of her gross profit margin on sales. At the end of twelve
months, Mariani would continue to receive 12% of her gross profit margin and a
refundable draw for an additional year. (N.T. Vol. 1, 65:19-66:23, 76:3-18; Exh. P-60)
Mariani also received the benefit of an expansion in the geographic region for which she
could obtain a bonus, an established customer base and a change in job duties allowing
her to be more self-directed. (N.T. Vol. 1, 70:9-71:12)
Mariani contends that she did not receive a raise in pay with her new position.
To support her claim, she averaged her monthly pay before the job change and
determined that she was paid $6,022 per month based upon her commissions. (Exh. 0-
104) Therefore, her guaranteed pay increase amounted to only an additional $645 per
month. In her new position, Mariani first exceeded her guaranteed draw in October,
2013 and by March, 2014 she was consistently exceeding .her guaranteed draw each
month. (Exh. D-104) Over the sixteen months that Mariani was employed as a Strategic
Account Manager, she earned on average $7, 144. (Exh. 0-104) Comparing averages
instead of draws, Mariani's pay increased by $1, 122 per month.
It is evident that despite Mariani's contention, she did receive an enhanced
compensation package when she accepted the Strategic Account Manager position.
Furthermore, because more of her pay was structured as a guaranteed draw, Softmart
1
Contrary to Mariam's assertion, there is no evidence that her position as an inside
account manager was at risk if she refused to sign the Restrictive Covenant Agreement.
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took the risk of her performance. Mariani's transfer was a promotion to a position where
she had greater income potential, more responsibility and greater autonomy. As such,
she enjoyed a. beneficial change in her employment status which served as adequate
consideration for the restrictive covenant.
Reasonably necessary to protect Softmart's legitimate business interests
An employer may use a restrictive covenant to protect its business interests,
including its trade secrets (e.g., pricing), confidential information, customer goodwill,
and business opportunities. Hess, 808 A.2d at 920. Employers have protectable
interests in customer relationships that have been acquired through the efforts of its
sales representatives.
In almost all commercial enterprises ... contact with customers or
clientele is a particularly sensitive aspect of the business.... In most
businesses . . . as the size of the operation increases, selling and
servicing activities must be at least in part decentralized and entrusted
to employees whose financial interest in the business is limited to their
compensation. The employer's sole or major contact with buyers is
through these agents and the success or failure of the firm depends in
part on their effectiveness. . . . (t)he possibility is present that the
customer will regard, or come to regard, the attributes of the employee
as more important in his business dealings than any special qualities of
the product or service of the employer, especially if the product is not
greatly differentiated from others which are available. Thus, some
customers may be persuaded, or even be very willing, to abandon the
employer should the employee move to a competing organization or
leave to set up a business of his own... The employer's point of view is
that the company's clientele is an asset of value which has been
acquired by virtue of effort and expenditures over a period of time, and
which should be protected as a form of property. Certainly, the argument
goes, the employee should have no equity in the customer which the
business had developed before he was employed. Similarly, under
traditional agency concepts, any new business or improvement in
customer relations attributable to him during his employment is for the
sole benefit of the principal. This is what he is being paid to do. When he
leaves the company he should no more be permitted to try to divert to
his own benefit the product of his employment than to abscond with the
company's cashbox.
John G. Bryant Co., Inc. v. Sling Testing & Repair. Inc., 471 Pa. 1, 369 A.2d 1164,
1167-1168 (1977)(citation omitted). Restrictive covenants may not be used to limit
competition. Omicron Sys. Inc. v. Weiner, 860 A.2d 554, 560 (Pa.Super.2004).
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Mariani acknowledged, when she signed the Restrictive Covenant Agreement,
that Softmart is in "a highly competitive industry" and that she would be given access to
and would be required "to maintain, supervise, develop and initiate client relationships,
referral sources and goodwill that are valuable to Softmart and which it has a legitimate
interest in protecting." (N.T. Vol. 3, 45: 18-21, 46:7-9, 133:8-1 O; Restrictive Covenant
Agreement, pp. 1 at (3), 2 at (7)) The Restrictive Covenant Agreement addresses the
protection of these customer relationships by providing for "no contact with or
solicitation of suppliers, customer referral source and customers" and "no competition in
the same region" for fifteen months and eighteen months, respectively, after her
employment with Softmart ended. (Restrictive Covenant Agreement, pp. 4, 5) Absent
the agreement, Mariani would be free to sell to Softmart's customers, trading on the
relationships she established while a Softmart employee, immediately after leaving
Softmart's employ. The Restrictive Covenant Agreement was reasonably necessary for
the protection of these customer relationships.
In addition, Mariani was given access to Softmart's customer information,
including customer names and contacts, customer purchases by product, date and
price, customer preferences, profit information, contract terms, contract expiration dates
and license renewal timing, to perform her job. Mariani acknowledged that such
information was proprietary and confidential and promised, when she signed the
Restrictive Covenant Agreement, that she would "not disclose or communicate any of
this information to any competitor or other third party, or use or refer to any of this
information for any purpose, including but not limited to in the course of future
employment for myself." (Agreement, p. 3) Although there are times when Softmart has
shared limited amounts of this information with its partners2 and customers, protecting
this information from competitors is a legitimate concern of Softmart. The Restrictive
Covenant Agreement was reasonably necessary for the protection of this proprietary
and confidential information.
2
When shared with partners, the use of such confidential information was controlled by
the partnership agreement. (Exh. P-8)
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Reasonable in time and geographic location
Mariani bears the burden proving that the temporal and geographic restrictions
set forth in the Restrictive Covenant Agreement are unreasonable. Bryant, 369 A.2d at
1169. Mariani argues that an eighteen month prohibition on competition is excessive,
particularly when the broad geographic scope of the covenant is considered.
An eighteen month prohibition is not per se unreasonable as Pennsylvania courts
have routinely enforced restrictive covenants longer than eighteen months. Hayes v.
Altman, 424 Pa. 23, 225 A.2d 670, 673 (1967)(3 years), Worldwide Auditing Services,
Inc. v. Richter, 402 Pa.Super. 584, 587 A.2d 772, 776 (1991)(2 years), Boyce v. Smith-
Edwards-Dunlap Co., 398 Pa.Super. 345, 580 A.2d 1382 (1990)(2 years). At Arraya,
Mariani is restricted for eighteen months based on the employment agreement she
signed there. (N.T. Vol. 2, 219:19-220:9; Exh. P-9) Mariani only claimed that the
duration was too long because eighteen months is a long time for her to be precluded
from working for whomever and wherever she chooses. (N.T. Vol. 2, 218:10-20) When
dealing with sales employees, time limitations on restrictive covenants are set to permit
an employer sufficient time to train, deploy and establish a new sales representative to
manage its customers. Hillard v. Medtronic, Inc., 910 F.Supp. 173, 179 (M.D.Pa.,1995);
Bryant, 369 A.2d at 1170. Mariani failed to address this issue and argued instead that
the eighteen month prohibition is inconvenient for her.
As to geographic scope, the Restrictive Covenant Agreement is limited to
Mariani's region. Region is defined as "any geographic area to which I have been
assigned within the last two years of my employment with Softmart, or, if I was not
assigned to a specific geographic area, my 'Region' shall mean the United States of
America." (Restrictive Covenant Agreement, p. 4) Mariani was assigned to the
"Easter[n] Pennsylvania, Northern Reqion'" when she accepted her promotion to
Strategic Account Manager. (Vol. 3, 6:17-7:11; Exh. P-60) The Eastern Pennsylvania-
Northern Region is that section of Pennsylvania defined by drawing a line from the
western boundary of Chester County straight to the New York border, bordered to the
3
The offer letter Mariani signed stated, " ... this letter will confirm your acceptance of the
position of Strategic Account Manager - Easter[n] Pennsylvania, Northern Region."
(Exh. P-60)
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north by New York, to the east by New Jersey and to the south by Delaware. (N.T. Vol.
1, 160:2-161: 1) Prior to commencing work as Strategic Account Manager, Mariani was
assigned Georgia as an Inside Account Manager. Therefore, by geography, Mariani
was barred from Softmart accounts and prospects in the Eastern Pennsylvania -
Northern Region and Georgia, a restriction that Mariani agreed was fair. (N.T. Vol. 3,
7:15-8:5; Vol. 4, 122:17-21)
The language in the Restrictive Covenant Agreement defining "region" is clear
and unambiguous. The language in the offer letter assigning Mariani a region is clear
and unambiguous. No one disputes the geographic boundaries of the "Eastern
Pennsylvania, Northern Region." Mariani maintains that "region" is vaguely described
or ambiguous because she is barred from contact with some customers outside of
Georgia and Eastern Pennsylvania. However, this bar is separate and apart from her
regional bar. To understand why Mariani is barred from customers outside of Georgia
and Eastern Pennsylvania, the specific terms of the non-solicitation paragraph must be
reviewed. Mariani agreed, when she signed the Restrictive Covenant Agreement, that
she would not:
solicit, contact, or provide services to ...
(1) any Customer of Softmart within my Region;
(2) any Customer of Softmart that I contacted, solicited, or in any way
dealt with at any time during the last two years of my employment;
(3) any prospective Customer of Softmart that I contacted, solicited, or in
any way supported or dealt with at any time during the last two years of
my employment; or
(4) any existing or prospective Customer of Softmart for whom I had any
direct or indirect responsibility at any time during the last two years of my
employment.
(Restrictive Covenant Agreement, p. 4) Therefore, under paragraphs (2) - (4), Mariani
is barred from contact with her former customers and prospects in areas outside of her
region. However, contrary to Mariam's contention, her region is not expanded to include
all areas in which her former customers and prospects are located.4
4
Mariani acknowledged that there were procedures in place at Softmart if she wanted
to work with customers outside of her assigned region, which further confirms that
Mariam's region was clearly defined and known to her. (N.T. Vol. 3, 8:6-12:5, 172:7-24)
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The evidence supports a conclusion that the restrictions on time and geography
in the Restrictive Covenant Agreement are reasonable. However, before we can
conclude that Softmart has produced sufficient evidence to establish a clear right to
relief, we must consider Mariani's conduct after leaving Softmart as well as defenses
Mariani has raised.
Mariani's conduct
Mariani created a list of her current customers and prospects that she carried to
her second interview with Arraya to discuss her employment. (Exh. P-25) The list
identified twenty-five customers and five prospects by name and location (city and state
only). Christian Gingras, Director of Sales at Arraya, had requested the list for an
interview that he set up with Mariani and Daniel Lifshutz, Arraya's CEO and co-owner.
(N.T. Vol. 3, 23:9-24:1) Although Mariani denies having used Softmart's resources to
create the list, we do not find her credible on this point. Nonetheless, even if she
created the list from memory, the information was protected under the Restrictive
Covenant Agreement as confidential information. (Restrictive Covenant Agreement, p.
2) While Mariani argues that she provided nothing more than data that is available in a
phone directory, such information in a phone directory is not identified as "customers"
and "prospects" of Softmart.
After leaving Softmart, Mariani immediately began to work for Arraya in her
former region. (N.T. Vol. 4, 138: 10-17). With the belief that the only restriction limiting
her conduct was that she could do nothing that would hurt Softmart, Mariani began to
contact her former Softmart accounts to let them know that she had changed
employment. (N.T. Vol. 3, 28:20-29:5, 49:10-14, 77:20-79:9, Vol. 4, 138:18-24) Very
quickly, what Mariani contends were innocent, informational contacts, became
solicitations for work on behalf of Arraya.
Chaning Bete was Mariani's customer at Softmart. On June 5, 2014, Mariani was
in contact with Roger Bailey at Chaning Bete on behalf of Arraya by email and stated, "If
you need any Cisco, EMC, VMware, Microsoft Services, managed services (remote
helpdesk, cloud back up or DR, Infrastructure management), you know where to find
me". (Exh. P-83) Mariani conceded that this was a solicitation. (N.T. Vol. 3, 82:19-20,
83: 18-22) As a result of this contact, another employee of Chaning Bete, Deepu
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Javaramu began a dialogue with Mariani about business they could do together.
Mariani agreed that this was the desired outcome of her contact. (N.T. Vol. 3, 82:23-
83: 10) Mariani professes to have encouraged Chaning Bete to continue to work with
Softmart, but her all of her emails with Bailey promote Arraya and encourage Bailey to
rely on her for help. (N.T. Vol. 3, 146:1-9; Exhs. 0-78, D-79)
HSC was Mariani's customer at Softmart. On June 9, 2014, Mariani was in
contact with Glen Sides at HSC to invite him to an Arraya hosted suite at a Phillies
game. Mariani conceded that the purpose of inviting him to the game was to build
rapport and tell him about Arraya. (N.T. Vol. 3, 90:1-5, 90:14-16; 92:2-20; Exh. P-67)
To the extent that HSC was not interested in the VMware being demonstrated at the
Phillies event, Mariani encouraged Sides to come out because other people from Arraya
would be on hand to provide "insight and education around what might work for HSC."
(N.T. Vol. 3, p. 93:14-15) Mariani claims that out of respect for the close relationship
she had with Sides, she was compelled to let him know that she had left Softmart.
However, in the email that she communicates that she has left, Mariani promotes
Arraya and encourages Sides to rely on her for help. (N.T. Vol. 3, 150:21-151:7; Exh.
0-87)
Chatham Financial was Mariani's customer at Softmart. (N.T. Vol.3, 95: 17-19)
On July 14, 2014, Mariani was in contact with Steve Olshevski and Patrick Miller at
Chatham Financial by email and introduced Arraya as "a technology planning, design,
and implementation partner that focuses on enterprise solutions from EMC, Cisco,
VMware and Microsoft services." (Exh. P-90) Mariani admitted that the content of this
email amounted to a solicitation. (N.T. Vol. 3, 98:20-22) Within the email, Mariani
continued a discussion about work that she had begun while still with Softmart. In other
words, Mariani was trading on confidential client information obtained from Softmart
,vi) '7
while shesellmq Chatham Financial Arraya's services directly, whereas earlier she had
been trying to bring Arraya in as Softmart's partner. Softmart would have received a fee
if Arraya had been brought in as a partner. (N.T. 98:24-99:17; Exh. P-90) Mariani
admitted that her conduct interfered with Softmart's partner business. (N.T. 101 :8-9)
Untra was Mariani's customer at Softmart. (N.T. Vol. 3, 103:16-19) On June 10,
2014, David Grunwald at Untra was invited as Arraya's guest to a Phillies game at
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Mariani's request. (Exh. P-112) VMware Horizon Suite 6 was to be demonstrated at the
game. When Grunwald could not attend the game, Mariani followed up with an email
offering a meeting, along with her VMware lead, to discuss the VMware product.
Although Mariani would only concede that she was offering services that Softmart could
not provide directly, the fact remains that she would have been selling the same
services a month earlier as a Softmart representative and Softmart would have been
paid a fee for bringing in a partner to do the work. (N.T. Vol. 3, 106:14-107:13, 108:14-
109:22; Exh. P-112)
Entercom was Mariani's customer at Softmart. On June 3, 2014, Mariani was in
contact with John Graefe and Craig Canter at Entercom to invite them to a Phillies
game as Arraya's guests. As part of the event, VMware and EMC products would be
demonstrated. (N.T. Vol. 3, 109:24-111 :2) Mariani conceded that she had invited a total
of ten Softmart customers to events, such as a Phillies game, on behalf of Arraya. (N.T.
Vol. 3, 105:1-10) The purpose of these events was to educate customers about Arraya
and build rapport.
Vertex was Mariani's customer at Softmart. Vertex also had an ongoing
business relationship with Arraya and Mariani was assigned the Vertex account by
Arraya. In June, 2014 Mariani sent a fruit basket to Vertex to announce her new
position with Arraya. (N.T. Vol. 3, 167:15-168:23) In August or September, 2014
Mariani processed a license renewal for Vertex that had historically been renewed with
Arraya. (N.T. Vol. 3, 164:12-165:12) In late September, 2014, a million dollar deal was
struck by Vertex and Arraya. Mariani had little to do with this deal, which was well along
when she was hired by Arraya. (N.T. Vol. 3, 113:21-114:7, 163:22-164: 11, Vol. 4, 15: 19-
21) Mariani was paid 7.5% commission on the deal as compensation for the license
renewal. (J\J.T. Vol. 3, 115:16-18, 165:9-12) Mariani admitted that Softmart was
competitive in the marketplace for some of the products included in the deal. (N.T. Vol.
3, 111:9-115:18)
Despite her professed intent to do no harm to Softmart, Mariani immediately
began to work her Softmart accounts to transfer customer loyalty to Arraya. Mariani
tries to explain away her conduct. However, it is evident that Mariani meddled in
Softmart's established customer relationships to gain leverage for Arraya. Mariani
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sympathized with her customers about the difficulties they were encountering as
Softmart transitioned a new sales representative into her old position. She mined the
relationships she had built looking for chinks that would allow her to bring in Arraya.
She stayed present with her customers. She encouraged her customers to rely on her
for help. Mariani used every opportunity to put the products and competencies of
Arraya in front of her Softmart customers. Not once did Mariani tell her Softmart
customers that she was barred from contact due to the terms of her Restrictive
Covenant Agreement. In the single instance where she mentioned the bar, she
continued to promote Arraya in the same email. During our hearing, Mariani explained
repeatedly that her conduct was friendly, innocent and meant to be helpful to Softmart
or at least to do no harm. Unrestrained, Mariani would continue sell Arraya to her former
clients and prospects and in her former regions making use of her knowledge of
customer needs gained from her employment as a Softmart sales representative.
Competing business
Mariani claims that she cannot be in breach of the Restrictive Covenant
Agreement because Softmart and Arraya are not competing businesses.
The Restrictive Covenant Agreement defines a "Competitor" of Softmart as "any
persons or entities who now, or in the future, develop, provide, offer or intend to offer or
provide services in the Business described above." (Restrictive Covenant Agreement,
p. 5) Softmart defines its business in the Restrictive Covenant Agreement as the
"reselling of computer software, hardware, peripherals, accessories, supplies and other
products used in connection with the operation and maintenance of computers, and
provides consultation, license management, and training services related to the
products described above, and also the quantitative analysis services know[n] as
Analytics and SAM engagement, as well as software licensing and management
(SLMS)". (Restrictive Covenant Agreement, p. 1)(italics added) In other words,
Softmart sells software, hardware and IT consulting services to its customers to solve
information technology issues. (Vol. 1, 42:14-17, 84:10-22)
On her Linkedln account, Mariani described Softmart as "a global provider of all
things IT. From software to hardware to services, Softmart provides a complete solution
for organizations in both the private and public sector." (N.T. Vol. 4, 133:20-134:15;
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Exh. P-132) IVlariani described her work with Softmart as: "Responsible for helping
customers understand and manage their software licensing agreements and hardware
procurements. VVe have an analytical approach to dissecting your agreements and
presenting scenarios for moving forward. We reduce IT spend[ing] by helping you
reduce overhead associated with purchasing managing produce. Sales professional
certified by over 15 companies including Microsoft, Adobe, IBM, HP, Symantec and
more." (Exh. P-132)
Mariani's employment agreement with Arraya states that Arraya is "engaged in
the business of Information Technology, Computer Hardware Sales and Computer
Software Sales." (Exh. P-1, p. 1) Mariani testified that she is engaged in selling products
and solutions for Arraya. (N.T. Vol. 4, 135:22-136:3) On her Linkedln profile, Mariani
described her work on behalf of Arraya as "responsible for driving Arraya Solutions'
technology portfolio, including products and solutions from top manufacturers including
EMC, Cisco, VMware, Microsoft, and VCE Company, as well as Arraya's suite of 356+
Managed Services." (N.T. Vol. 4, 135:10-19; Exh. P-132) Arraya's business is the sale
of software, hardware and consulting services. (N.T. Vol. 4, 142:14-143:10)
The parties each presented Venn diagrams to illustrate the overlap of products
sold by Softrnart and Arraya. As illustrated by Mariani, Softmart and Arraya both sell
VMware, sorne Cisco, Microsoft Open, Eaton, APC, some IBM and EMC. These
products, some of which are hardware and some of which are software, are the source
of 80% of Arraya's annual revenue. (N.T. Vol. 4, 142:14-143:10; Exhs. P-127, D-63A)
In comparison, Softmart revenues are 80% attributable to hardware, 15% to software
and 5% to service. Softmart's top five hardware producers are HP, Dell, Lenovo, Cisco
and Apple. Softmart's top four software producers are Microsoft, Adobe, VMware and
Symantic. (N.T. Vol. 3, 9:15-21, 40:14-41:9, 41:16-20)
In addition to selling the same products and services, Softmart and Arraya
compete for the same customers. If a customer calls Softmart first, Softmart's objective
is to get as much of the business as it can handle, including bringing in a partner for
which Softmart will be paid a referral fee. Similarly, if the customer calls Arraya first,
Arraya's objective is to get as much of the business as it can handle and to bring in a
partner for which it will be paid a referral fee only if necessary. (N.T. Vol. 4, 136:13-
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138:5) Mariani agreed that the key to who gets the business is who the customer calls
first. (N.T. Vol. 4, 137:17-19) Mariani conceded that when she was selling for Softmart
in 2013, she was competing with Arraya. (N.T. Vol. 2, 197:8-13) Similarly, in March,
2014, when Mariani was exploring the potential for new business for Softmart in a
discussion with her counterpart at Arraya, she learned that Arraya could not help her
because Arraya was already selling a competing product to the targeted customer.
(N.T. Vol. 4, 148:13-150:14; Exh. P-131) Finally, in July, 2014, when she was
communicating with a Softmart customer on behalf of Arraya, Mariani compared
Arraya's capacity to that of Softmart stating, "[l]ike I used to at Softmart, we do a lot of
whiteboarding and helping customers start from square one of thought planning and
design." (Exh. P-90)
Both Softmart and Arraya are in the business of solving the same types of
technology issues for their customers; however, they differ in their approach. Softmart
generally sells its customers products first and then up sells services using the access
gained through product sales to establish a relationship of trust with its customer. ((N.T.
Vol. 1, 45:8-21) Softmart will bring in a partner to provide services that it cannot provide
in-house to insure that it is a one-stop shop. (N.T. Vol. 1, 58:5-59:22, Vol. 3, 14:23-5)
Arraya approaches its customers as a consultant and then moves to product sales
using the access gained through its consulting services. (N.T. Vol. 3, 177:16-178:4,
179:9-11) Both companies are selling the same hardware, software and related
consulting services to business customers in Eastern Pennsylvania.
In Omicron Systems, the court held that two companies were competitors where
one company sold a single computer program as_ a solution to the customer's needs
and another company analyzed the needs of a customer, including marketing/sales
needs, and provided the best solution possible, whether by creating a new program or
utilizing existing software. Omicron Systems, Inc. v. Weiner, 860 A.2d at 560. In other
words, even when two companies appear on their face to be different, if the two
companies offer a solution to the same problem, they are competitors. Here, Softmart
and Arraya are competitors because both are engaged in the business of selling
computer hardware, software and related consulting services to business customers in
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eastern Pennsylvania. Their approaches may t 2 different, but both companies are
engaged in the same business.
Absence of Gingras and Lifshutz from trial
Mariani complains that we erroneously drew an adverse inference from the
absence of Gingras and Lifshutz from the preliminary hearing. Contrary to Mariani's
assertion, no inference was drawn from their absence. During closing argument we
questioned Mariani's attorney about their absence, which counsel reasonably explained.
(N.T. Vol. 5, 47:3-49:11) Counsel misunderstood our concern, which was focused on
whether Marini had the support of Arraya in these proceedings. Mariani noted several
times in testimony that she had received support from Arraya, including payment of the
cost of her defense, but she was uncertain as to how far Arraya's support would extend
if injunctive relief was granted.
Having determined that Softmart has produced sufficient evidence to establish a
clear right to relief on the claim for breach of the Restrictive Covenant Agreement, we
consider the six prerequisites that must be fulfilled to obtain a preliminary injunction.
1. Availabilitv of damages as compensation
Mariani maintains that any harm to Softmart is adequately compensable by
money damages because mere loss of business, no matter how great, does not
constitute irreparable harm. In fact, at our hearing, Softmart could show little in lost
sales. However, "[i]t is not the initial breach of the covenant that establishes the
existence of irreparable harm but rather the threat of unbridled continuation of the
violation and the resultant incalculable damage to the former employer's business that
constitutes the justification for equitable-intervention." Bryant, 369 A.2d-at 1167. - The-
purpose of the Restrictive Covenant Agreement was to prevent more than just the sales
that might result from Mariani's solicitation of Softmart's customers and prospects. The
Restrictive Covenant Agreement was meant to "prevent disturbance in the relationship
that has been established between [Softmart] 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." Bryant, 369 A.2d at 1167. Where the interest sought to be protected
is the relationship that had been established on behalf of the employer through the
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efforts of the former sales employee, this interest is incapable of adequate protection by
monetary damages and the use of injunctive relief is proper to avoid the threatened
harm. Irreparable harm is likely to result when a sales employee resigns to work for a
competitor, carrying with her the employer's goodwill, customer relationships, and
confidential information. Nat'I Bus. Servs., Inc. v. Wright, 2 F. Supp. 2d 701, 709 (E.D.
Pa. 1998); Fisher Bioservices, Inc. v. Bilcare, Inc., 2006 WL 1517382, 20
(E.D.Pa.,2006). Softmart entrusted Mariani with its confidential and proprietary
information and gave her access to its business relationships. The relationships at issue
represent significant investment by Softmart. Mariani has been compensated by
Softmart for her role in creating and developing those relationships. These customer
relationships are entitled to protection based upon the terms of the Restrictive Covenant
Agreement.
2. Greater iniury from refusing than granting iniunction; iniunction will not substantially
harm other interested parlies
"[T]he basic purpose behind the task of balancing the hardships to the respective
parties is to ensure that the issuance of an injunction would not harm the infringer more
than a denial would harm the party seeking the injunction." Prudential Ins. Co. of
America v. Stella, 994 F. Supp. 308, 316-17 (E.D. Pa. 1998). The preliminary injunction
we entered was tailored to abate only activity prohibited by the Restrictive Covenant
Agreement. During the injunction period, Mariani is free to work in any capacity,
including for Softmart's competitors, as long as she does not work in her former region,
sell to certain of her former customers and prospects or use Softmart's confidential
information. Furthermore, during this period, Arraya is free use another sales
representative to sell within- Mariarii's region- as· well as to her--f6rmer customers and
prospects.
Mariani expressed concern about her ability to perform in a field sales position
any distance from her Downingtown home, due to family demands on her time. (N.T.
Vol. 4, 127:1-14) Mariani is the parent of two children under the age of three and at the
time of the hearing was helping her husband with driving since his arm was in a cast.
(N.T. Vol.4, 118:11-120:2, 126:20-24) Arraya's objective is to develop business within a
2-hour radius of Philadelphia. (N.T. Vol. 4, 129:11-23) While Gringas can redraw sales
territories and reassign sales representatives for Arraya, each territory currently has a
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sales representative assigned. (N.T. Vol. 4, 123:5-23, 125:23-126:19) Furthermore, the
region assigned Mariani is more lucrative than other regions. (N.T. Vol. 4, 127: 15-
128: 13, 151 :2-15) Finally, Mariani expressed some uncertainty about the level of
support she would be given by Arraya if injunctive relief were to be granted.
We considered the issues Mariani raised. We also considered that Mariani may
have been operating under the misguided notion that the Restrictive Covenant
Agreement would be unenforceable.5 However, Mariani "does not have a right to the
ideal job, but rather, to be able to earn a livelihood." Nat'I Bus. Servs., 2 F. Supp. 2d at
709. Working further from home may inconvenience Mariani or she may have a lower
income due to assignment to a less lucrative area and Arraya may be inconvenienced
by having to redraw and/or reassign sales territories; however, neither is irreparably
harmed. Softmart will have its customer relationships further eroded unless Mariani is
precluded from using Softmart's confidential information and from soliciting business
opportunities from Softmart's customers. The harm Softmart will suffer due to Mariani's
continued violation of the Restrictive Covenant Agreement is insidious and
immeasurable. If Mariani is permitted to circumvent her contractual obligations, then
the sanctity of the covenants Softmart has with other employees will be diminished and
Softmart's ability to enforce these covenants will be curtailed. Graphic Management
Associates, Inc. v. Hatt, 1998 WL 159035, *18 (E.D.Pa.,1998). On balance, the
r
hardships weigh in favof.granting Softmart relief.
3. Restoration of status quo
The status quo to be maintained by preliminary injunction is the last actual,
peaceable and lawful uncontested status which preceded the pending controversy.
-----~--·---
Valley Forge Historical Soc'y v. Washington Memorial Chapel, 493 Pa. 491, 426 A.2d
5Mariani had consulted with an attorney before she signed the Restrictive Covenant
Agreement who, she stated, had advised her that she could sign the agreement
because it was unenforceable. (N.T. Vol. 2, 213:19-21) Although Mariani says she
believed the Restrictive Covenant Agreement was unenforceable, there is no evidence
that she expressed this view when she gave a copy to Gingras and Lifshutz.
Additionally, Mariani's position has been that when she began working for Arraya, she
understood she could take no action to harm Softmart under the Restrictive Covenant
Agreement, not that she was unrestrained by an unenforceable agreement.
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1123, 1129 (1981 ). The preliminary injunction entered restores the status quo as it
existed prior to Mariani's wrongful conduct.
4. Likely to prevail on the merits.
As discussed at length above, Softmart has demonstrated that it is likely to
prevail on the merits.
5. lniunction is reasonablv suited to abate the offending activity
The preliminary injunction we entered prohibits Mariani from acting contrary to
the terms of her Restrictive Covenant Agreement. She must refrain from selling in her
former regions and to certain other former customers and prospects. She is prohibited
from using Softmart's confidential information. Mariani is free to otherwise engage is
sales activities. The injunction is limited and reasonably suited to abate just the
offending activity.
6. No adverse affect to the public's interest
The enforcement of restrictive covenants serves a number of public purposes,
including discouraging unfair competition, the misappropriation and wrongful use of
confidential information and the disavowal of freely contracted obligations. Merrill Lynch,
Pierce, Fenner, & Smith, Inc. v. Napolitano, 85 F. Supp. 2d 491,499 (E.D. Pa. 2000);
Minnesota Mining & Mfg. Co. v. Gessner, 78 F. Supp. 2d 390, 393 (E.D. Pa. 1999); Nat'!
Bus. Servs., Inc. v. Wright, 2 F. Supp. 2d 701, 709 (E.D. Pa. 1998); Graphic Mgmt.
Associates, Inc. v. Hatt, No. 97-CV-6961, 1998 WL 159035, at *19 (E.D. Pa. Mar. 18,
1998). Arraya is free to compete with Softmart, but may not do so with Mariani as its
representative in Eastern Pennsylvania, Georgia or with certain other former customers
or prospects of Mariani. Mariani is free to work in sales, even selling the very same
products she previously sold for Softmart, but may not do so for a limited period within
her former regions or to certain other former customers or prospects or using or
disclosing Softmart's confidential information. We can see no harm to the public by the
enforcement of Mariani's lawful employment agreement.
Having determined that Softmart established all of the prerequisites entitling it to
preliminary injunctive relief, we entered our Order on January 13, 2015.
Mariani raises an additional issue in her Statement of Matters Complained of on
Appeal. Mariani claims that we erred by awarding attorneys' fees when we granted
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preliminary injunctive relief. Softmart sought attorneys' fees under the terms of the
Restrictive Covenant Agreement, which provides "I agree to indemnify Softmart for its
attorneys' fees and costs incurred in enforcing the terms of this Agreement should I
violate any of its terms." (Restrictive Covenant Agreement, p. 7) Our Order required
Mariani
to indemnify Softmart for its reasonable attorneys' fees and costs incurred
in enforcing the terms of the Restrictive Covenant Agreement, as provided
by the 'Attorneys' Fees' provision of the Restrictive Covenant Agreement.
Softmart shall submit a fee petition to the Court within ten days of the
entry of this Order. Any response thereto shall be due ten days thereafter.
(Order, pp. 3-4) Mariani argues that attorneys' fees are not properly awarded as part of
preliminary injunctive relief.
Softmart commenced this action seeking relief for breach of contract and
injunctive relief and therefore had made a claim for legal and equitable relief. A court in
equity has jurisdiction to award damages, in addition to providing for equitable relief.
Puleo v. Thomas, 425 Pa.Super. 285, 290, 624 A.2d 1075, 1078 (Pa.Super., 1993).
Two cases cited by Mariani, Holiday Lounge, Inc. v. Shaler Enterprises Corp., 441 Pa.
201, 272 A.2d 175 (1971) and Martindale Lumber Co. v. Trusch, 452 Pa.Super. 250,
681 A.2d 802 (1996), were reversed when damages were awarded as part of equitable
relief because the reviewing courts found that money damages had not been pied.
However, we have been unable to find a case in which attorneys' fees were awarded as
part of preliminary injunctive relief. In our case, we made the award believing that doing
so would promote the efficient resolution of claims. Nonetheless, when Mariani's
counsel raised this issue by correspondence after entry of our Order, we responded by
email on February 10, 2015 and notified all parties that we would proceed to a final
injunctive hearing and enter a final order before addressing counsel fees. Therefore,
despite the provision in the Order, we had already advised counsel that we would not
proceed as stated prior to the date that Mariani filed her appeal.
DATE:
Edwcri.d-Griffith, J.
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