Howard Hanna v. Hornung, M. ( 2022 )

J-A06034-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
HOWARD HANNA D/B/A HOWARD : IN THE SUPERIOR COURT OF
HANNA REAL ESTATE SERVICES : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
: No. 967 WDA 2021
MICHAEL HORNUNG, AN :
INDIVIDUAL; JENNIFER CROUSE, AN :
INDIVIDUAL; LEAH GEORGE, AN :
INDIVIDUAL; COMPASS, INC. F/K/A :
URBAN COMPASS, INC., A :
DELAWARE CORPORATION AND :
COMPASS PENNSYLVANIA, LLC, A :
DELAWARE LIMITED LIABILITY :
COMPANY :
Appeal from the Order Entered August 6, 2021
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): GD 21-001894
BEFORE: MURRAY, J., SULLIVAN, J., and COLINS, J.*
DISSENTING STATEMENT BY COLINS, J.: FILED: JUNE 23, 2022
Based upon the nature of the non-compete clauses at issue here, I agree
with the learned Majority’s conclusion that this case falls within the capable-
of-repetition mootness exception. But see infra. However, I disagree with
the Majority’s determination that the trial court abused its discretion in finding
that Howard Hanna (“Hanna”) failed to establish that (1) a preliminary
injunction was necessary to prevent immediate and irreparable harm from the
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* Retired Senior Judge assigned to the Superior Court.
J-A06034-22
alleged breach by Appellees Jennifer Crouse and Leah George of their non-
compete clauses that could not be adequately compensated by money
damages and (2) greater injury would have occurred from denying the
preliminary injunction than from granting it. Therefore, I respectfully dissent.
I begin my discussion with the well-established precept that this Court
“exercises a highly deferential [abuse of discretion] standard of review with
respect to the grant or denial of a preliminary injunction.” Pittsburgh
Logistics Sys., Inc. v. Beemac Trucking, LLC, 249 A.3d 918, 923 (Pa.
2021); see also Weeks v. Department of Human Services, 222 A.3d 722,
727 (Pa. 2019).
[O]n 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 [trial court].
Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828
A.2d 995, 1000 (Pa. 2003) (citation omitted; emphasis added).
The trial court in this matter quite clearly set forth “apparently
reasonable grounds,” supported by the preliminary injunction record, to
bolster the court’s determination that Hanna failed to meet its burden of
proving the first two preliminary injunction requirements. Summit Towne
Centre, 828 A.2d at 1000 (citation omitted). Moreover, contrary to the
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Majority, I do not believe that the trial court palpably erred when applying the
relevant legal standards.
The trial court first found that Hanna failed to demonstrate that a
preliminary injunction was necessary to prevent immediate and irreparable
harm that could not be adequately compensated by money damages. See
Pittsburgh Logistics, 249 A.3d at 934 n.7. Hanna attempted to show at the
preliminary injunction hearing that it was harmed when, in the period covered
by the non-compete agreements, Crouse and George listed multiple properties
within a five-mile radius of their prior Hanna offices and that these listings
damaged Hanna’s existing client relationships as well as its goodwill in the
Pittsburgh area.
However, as the trial court recognized, the only harm that Hanna had
proved it suffered at the injunction hearing was lost commissions on identified
home sales, which “could of course be calculated, and [Hanna] could therefore
be adequately compensated in monetary damages.” Trial Court Opinion
(“TCO”), 10/25/21, at 4 (unnumbered). The evidence Hanna submitted at the
hearing was confined to commissions on specific properties that Appellees
listed within the five-mile exclusion area during the relevant non-compete
terms. N.T., 6/3/21, at 57-72; N.T., 6/7/21, at 23-26, 39-49; Hearing
Exhibits 3, 5-6, 8, 12-14. Thus, Hanna’s claimed damages related only to a
limited number of properties and are readily amenable to calculation based
upon Hanna’s commission schedules agreed to between Hanna and Appellees.
See Amended Complaint, 3/23/21, Exhibit B ¶4, Exhibit C ¶4; see also
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Summit, 828 A.2d at 1002-03 (irreparable harm is not shown where records
are kept that allow for quantification of business loss); Greenmoor, Inc. v.
Burchick Construction Co., Inc., 908 A.2d 310, 315 (Pa. Super. 2006)
(monetary loss that is compensable via a breach of contract action and
subsequent money judgment does not constitute irreparable harm).
Furthermore, the trial court appropriately concluded on the record
before it that Hanna’s claimed harm of a loss of clients was belied by the fact
that Hanna “repeatedly acknowledged that the clients and client loyalty . . .
belonged to [Appellees] as self-employed independent contractors,” not to
Hanna.1 TCO at 4. The evidence at the hearing showed that Hanna not only
acknowledged, but actually promoted to prospective hires, that clients and
client loyalty belong to the agent rather than Hanna. N.T., 6/17/21, at 118-
21; Hearing Exhibits G-I (recruiting material stating that “[m]aintaining your
clients” is a benefit of becoming a Hanna agent and that Hanna agents are
permitted “[m]ore time focusing on their clients and growing their business”).
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1 Hanna challenges this finding on appeal, arguing that the Sales Associate
Agreements and Pennsylvania law both provide that listings are the property
of real estate broker rather than agents. See 63 P.S. §§ 455.606,
455.606a(b)(1); Amended Complaint, 3/23/21, Exhibit B ¶8, Exhibit C ¶8.
Crucially, however, the question is not the ownership of the property listings—
there is no allegation that Appellees violated state law by transferring listings
without the clients’ consent—but instead whether a departing Hanna agent
can continue their relationship with their clients at a new brokerage. In any
event, the sole question before this Court is whether there were any
“apparently reasonable grounds” for the trial court’s finding that client loyalty
belonged to Hanna’s agents. Summit Towne Centre, 828 A.2d at 1000
(citation omitted). Here, the record supported the trial court’s finding as to
client loyalty.
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As the trial court explained in its ruling, Hanna did not present any evidence
that it had a pre-existing relationship with Appellees’ clients whose sales
allegedly violated the restrictive covenants. TCO at 4. Moreover, Hanna’s
claims that Appellees’ actions harmed its overall goodwill and reputation in
the Pittsburgh market were based upon vague, speculative testimony and
were properly rejected by the trial court. See Summit, 828 A.2d at 1001-
02; Greenmoor, 908 A.2d at 315 (preliminary injunction must be based upon
“concrete evidence” of irreparable harm to movant).
The Majority concludes that Hanna should not be penalized based upon
the fact that it only showed “limited damages” but instead that irreparable
harm existed as a result of “the threat of the unbridled continuation of the
violation and resultant incalculable damage to [Hanna’s] business.” Majority
Opinion at 10-11 (quoting John G. Bryant Co., Inc. v. Sling Testing &
Repair, Inc., 369 A.2d 1164, 1167 (Pa. 1977)). However, what the Majority
overlooks is that Hanna was not only required to allege ongoing, incalculable
harm from the violation of the non-compete agreements, but it was also
required to prove that such harm would occur. See West Penn Specialty
MSO, Inc. v. Nolan, 737 A.2d 295, 299 (Pa. Super. 1999) (“[G]rounds for
an injunction are established ‘where the plaintiff’s proof of injury, although
small in monetary terms, foreshadows the disruption of established business
relations which would result in incalculable damage should the competition
continue in violation of the [restrictive] covenant.’”) (citation omitted). The
trial court reasonably concluded that Hanna did not make such a showing. As
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the trial court explained, not only are the claimed damages easily calculable
from a discrete number of listings or sales within the designated five-mile area
over a finite period of six or eight months, but the record also supported the
conclusion that Appellees’ actions would not lead to an ongoing interference
with Hanna’s customer base as Hanna’s policy was that client loyalty belonged
to the agents, not Hanna. Cf. Rollins Protective Services Co. v. Shaffer,
557 A.2d 413, 414-15 (Pa. Super. 1989) (to show irreparable harm in order
to obtain a preliminary injunction to enforce a non-compete clause, the
movant must show unwarranted interference with customer relationships, use
of confidential information, or the like).
The trial court’s well-reasoned finding that Hanna did not demonstrate
irreparable harm is alone sufficient grounds for this Court to affirm the denial
of the preliminary injunction. See Pittsburgh Logistics, 249 A.3d at 934
(appellate court shall affirm denial of preliminary injunction when it finds that
trial court properly determined that any one of the six elements of standard
was not met). Nevertheless, I would also hold that the trial court correctly
ruled that Hanna did not prove the second element of the preliminary
injunction standard, that greater injury would result from refusing to grant
the injunction than from granting it. Pittsburgh Logistics, 249 A.3d at 934
n.7.
The Majority determined that the trial court improperly balanced the
large economic disparity between Hanna, a “well-established” real estate
brokerage, against Appellees’ interest in earning a living in their chosen trade
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and, in fact, the non-compete clauses only minimally affected Appellees from
pursuing their vocation. Majority Opinion at 12-14 (quoting TCO at 5); see
also AmQuip Crane Rental, LLC v. Crane & Rig Services, LLC, 199 A.3d
904, 918 (Pa. Super. 2018) (noting that courts must avoid comparing the
financial positions of a large employer to an individual employee who violates
a non-compete clause as doing so would always weigh in favor of the
employee whose livelihood would be affected by the enforcement of the
restrictive covenant).
However, I read the trial court’s ruling differently. The trial court
focused on the fact that the only proven harm to Hanna from the denial of the
injunction would be lost commissions on specific sales during the non-compete
clause terms and it would not suffer incalculable harm on future sales in light
of the fact that client loyalty belonged to Appellees. TCO at 4-5. As the trial
court noted, Hanna would still be able to recover the lost commissions as
damages if it ultimately prevailed in this litigation. Id. at 5. On the other
hand, the trial court found, based upon ample testimony from the preliminary
injunction hearing, that a much more pervasive harm would befall Appellees
if they were prohibited from working as agents in the geographic area in which
they focused their careers. Id. at 5; see also N.T., 6/3/21, at 93-96; N.T.,
6/17/21, at 20-21. The trial court’s balancing of harm thus was not based
simply upon a comparison of the parties’ relative financial positions but instead
was grounded on the fact that, under the unique facts of this case, Hanna
simply had not proven any harm aside from compensable monetary damages.
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I additionally note one other point of disagreement with the Majority.
The trial court here only ruled on the first two of the six elements of the
preliminary injunction standard. After finding that the trial court abused its
discretion as to the first two elements, the Majority would remand to allow the
trial court to address the remaining four prerequisites for a preliminary
injunction. Majority Opinion at 14.
While I agree with the Majority that we are permitted to address the
issues raised by Hanna in the current appeal via the capable-of-repetition
exception to the mootness doctrine, I do not believe that it would be a prudent
use of judicial resources to stretch this exception farther to permit an
additional round of litigation on a preliminary injunction to enforce the non-
compete clauses that have long since lapsed. Therefore, even assuming I
were to agree with the Majority’s analysis of the issues before us in this
appeal, I would remand to the trial court solely for further litigation regarding
the merits of the non-compete clauses.
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