Victaulic Co v. Tieman ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
8-23-2007
Victaulic Co v. Tieman
Precedential or Non-Precedential: Precedential
Docket No. 07-2088
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-2088
VICTAULIC COMPANY,
v.
JOSEPH L. TIEMAN;
TYCO FIRE PRODUCTS, LP
(E.D.P.A. Civil No. 06-cv-05601)
JOSEPH L. TIEMAN;
TYCO FIRE PRODUCTS, LP
v.
VICTAULIC COMPANY
(E.D.P.A. Civil No. 07-cv-00512)
Victaulic Company,
Appellant
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 07-cv-00512)
District Judge: Honorable Stewart Dalzell
Argued July 11, 2007
Before: RENDELL, AMBRO and
NYGAARD, Circuit Judges
(Opinion filed : August 23, 2007)
Oldrich Foucek, III, Esquire (Argued)
Kelly M. Smith, Esquire
Tallman, Hudders & Sorrentino
1611 Pond Road
The Paragon Centre, Suite 300
Allentown, PA 18104
Counsel for Appellant
Stephen G. Harvey, Esquire
Cara M. Kearney, Esquire
Pepper Hamilton
18th & Arch Streets
3000 Two Logan Square
Philadelphia, PA 19103
2
Edward L. Friedman, Esquire (Argued)
Scott K. Davidson, Esquire
Christopher Dove, Esquire
Locke, Liddell & Sapp
600 Travis Street
3400 JP Morgan Chase Tower
Houston, TX 77002
Counsel for Appellees
OPINION OF THE COURT
AMBRO, Circuit Judge
This is a classic case of jumping the gun. The dispute
centers on a covenant not to compete between an employer and
former employee. All parties admit that the employee is
violating the covenant; the question is whether it is
unreasonable, and thus not appropriately enforced through an
injunction. Because reasonableness is a fact-intensive inquiry,
we hold that it should not have been determined on the
pleadings. After resolving that we have jurisdiction over the
interlocutory dismissal of claims related to the covenant because
it effectively denied a request for a preliminary injunction, we
vacate the District Court’s order and remand for further
proceedings.
3
I. Facts and Procedural History
Victaulic Company manufactures valves, couplings,
sprinkler heads, and other mechanical devices for use in a
variety of industries, one of which is fire protection. Joseph
Tieman worked as a sales representative for Victaulic from
April 1998 until December 2006. He primarily worked in Ohio,
West Virginia, and western Pennsylvania, but, according to
Victaulic, he had relationships with Victaulic customers
throughout the United States. He also trained new sales
representatives in various states, thus becoming familiar with the
company’s customers outside his three-state focus area.
As a condition of his employment, Tieman signed a
covenant not to compete with Victaulic. In relevant part, he
agreed that upon leaving Victaulic he would not sell or
distribute the types of items regularly sold (or contemplated for
sale) by Victaulic for 12 months (1) within a ten-state Restricted
Victaulic Sales Region, or (2) in any area in which Victaulic
products are sold on behalf of nine named competitors (of which
Tyco is one). He further agreed (3) not to solicit any past or
present Victaulic customer on behalf of any business in
competition with it.1
1
Section 4 of the non-compete agreement states, in relevant
part:
b) I [Tieman] further agree that[,] for twelve (12)
months following the date of termination of my
4
employment with [Victaulic] . . . , I will not, within any
[ten-state] Victaulic Restricted Sales Region, engage
either directly or indirectly in the sale or distribution of
the types of items or products regularly sold, offered for
sale, or contemplated for sale by [Victaulic] as an
employee, consultant or independent contractor of any
business in competition with [Victaulic]. For purposes
of this paragraph, a Restricted Victaulic Sales Region
shall mean any sales region in which I had or shared a
sales territory or any sales region in which I had
responsibility or significant involvement during the three
year period prior to my termination of employment.
c) I further agree that[,] for twelve (12) months
following the date of termination of my employment with
[Victaulic] . . . , I will not, within any geographic region
in which Victaulic products are sold (which includes all
of the continental United States, Canada & Mexico),
engage either directly or indirectly in the sale or
distribution of the types of items or products regularly
sold, offered for sale, or contemplated for sale by
[Victaulic] as an employee, consultant or independent
contractor for or on behalf of any of the following
businesses: Tyco International Ltd.; Star Pipe Products;
Anvil International Inc.; Shurjoint Piping Products Inc.;
Modgal Metal Ltd.; Viking Corporation & Viking SA;
Mueller Indistries, Inc.; Viega International; The
Reliable Automatic Sprinkler Co., Inc.; and any and all
of their subsidiaries, affiliates, or successors.
d) I further agree that[,] for twelve (12) months
following the date of termination of my employment with
5
Upon leaving Victaulic, Tieman immediately began
working as a sales representative for Tyco, selling the same
kinds of products he sold for Victaulic. Tieman alleges (and
Victaulic appears to admit) that he does not sell Tyco products
in his former three-state focus area, but he does sell within the
ten-state Restricted Victaulic Sales Region.
Tieman and Tyco filed a declaratory judgment action
against Victaulic in December 2006 in the Southern District of
Ohio seeking a declaration that the covenant not to compete was
invalid under Pennsylvania law. Victaulic counterclaimed
against both for breach of contract, misappropriation of trade
secrets, tortious interference with contractual relations, and
unfair competition. It also filed its own substantially identical
suit in the Eastern District of Pennsylvania. The Ohio District
Court transferred its case to Pennsylvania’s Eastern District, and
the two cases were consolidated.
At the time of consolidation, two motions were pending:
(1) Victaulic’s request for a preliminary injunction, and (2) Tyco
and Tieman’s motion to dismiss for failure to state a claim. The
District Court granted the motion to dismiss on the breach of
contract, tortious interference, and unfair competition claims.
[Victaulic] . . . , [I will not] contact or solicit any past or
present [Victaulic] customers on behalf of any business
in competition with [it].
App. at A71.
6
In so doing, it ruled that the covenant not to compete was invalid
because it was unreasonable as a matter of law. Because the
dismissed claims were premised on the agreement’s validity,
none could survive this ruling. The Court reserved judgment on
the trade secrets claim, asking the parties for supplemental
briefing. Because the Court stayed its actions when Victaulic
appealed, the motion to dismiss that count is still pending.
II. Appellate Jurisdiction
Victaulic argues that we have jurisdiction under 28
U.S.C. § 1292(a)(1), which provides for appellate review of
interlocutory orders “refusing . . . injunctions.” Here, the
District Court did not explicitly deny an injunction, but
Victaulic argues that the dismissal of four counts of the
complaint effectively denied Victaulic’s requests for preliminary
(and permanent) injunctions related to those claims.
An order that has the “practical effect of refusing an
injunction” can be appealable under § 1292(a)(1). Carson v.
Am. Brands, Inc., 450 U.S. 79, 84 (1981). But “the mere fact
that injunctive relief is requested and is therefore encompassed
within the ruling made by the court on other grounds does not
transform the ruling into one denying an injunction.” Shirey v.
Bensalem Twp., 663 F.2d 472, 477 (3d Cir. 1981). Rather, §
1292(a)(1) covers situations in which “the requested injunction
was the predominant relief sought.” Id. at 478. By moving for
a preliminary injunction, Victaulic demonstrated that one of its
7
chief goals was to end Tieman’s (admitted) violation of the
covenant not to compete. Thus, the dismissal had the practical
effect of refusing an injunction.
Even so, an interlocutory appeal only lies if the District
Court’s order has “‘serious, perhaps irreparable,
consequence[s],’ and . . . the order can be ‘effectually
challenged’ only by immediate appeal.” Carson, 450 U.S. at 84(quoting Baltimore Contractors, Inc. v. Bodinger, 348 U.S. 176,
181 (1955)). We have interpreted Carson as establishing a two-
pronged test for determining whether an order such as this is
appealable: it must (1) have serious consequences, and (2)
immediate appeal must be the only means of effective challenge.
See Ross v. Zavarella, 916 F.2d 898, 902 (3d Cir. 1990).
Our opinions in this area have not been careful to
distinguish Carson’s “serious consequences” and “effective
challenge” prongs. Nevertheless, it appears that urgency is the
touchstone of the former. When the appellee’s actions are not
causing any continuing harm, we generally have held that this
prong is not met; when they are, we have held the opposite.
Compare United States v. RMI Co., 661 F.2d 279, 282 (3d Cir.
1981) (disclaiming jurisdiction when no continuing harm), with
Rolo v. Gen. Dev. Corp., GDV, 949 F.2d 695, 703 (3d Cir. 1991)
(exercising jurisdiction when appellee was allegedly liquidating
assets to render itself judgment-proof). We have written that
whether the appellant moved for a preliminary injunction is
evidence of the case’s urgency. See United States v. Wade, 713
8
F.2d 49, 53 (3d Cir. 1983); Shirey, 663 F.2d at 476; see also
Samayoa v. Chicago Bd. of Educ., 783 F.2d 102, 104 (7th Cir.
1986). In addition, we have denied one request for appellate
review on the ground that while the appellant was suffering
continuing harm, it was too minimal to meet the “serious
consequences” prong. Ross, 916 F.2d at 902 (disclaiming
jurisdiction when appellant, a state-court judge challenging her
transfer to a different subject-matter division, suffered no
diminution in status or pay (merely the inconvenience of a
different docket) during the pendency of the litigation).
In our case, Tieman continues to work for Tyco in a
position substantially similar to the one he held at Victaulic
(selling the same kinds of equipment). Victaulic alleges that his
employment is harming it, and we must accept that allegation as
true at this stage of the litigation. Adding to the urgency is that
seven months have elapsed since Tieman began working for
Tyco, utterly frustrating the purpose of the covenant: to keep
Tieman from competing with Victaulic for one year. Moreover,
this is an appeal from the (implicit) denial of the preliminary
injunction, which, we have held, is the primary purpose of §
1292(a)(1). Shirey, 663 F.2d at 476. The efficacy of any
remedy is likely declining as time passes, so we have little
trouble concluding that Tieman’s conduct is causing Victaulic
a serious injury.2
2
We note that the section 5 of the covenant contains a
provision that tolls the one-year non-competition period during
9
The “effective challenge” prong deals with whether the
appellant can get substantially similar relief without an
immediate appeal. Here, the relief requested was a preliminary
injunction enforcing the covenant not to compete. Tyco and
Tieman argues that Victaulic asked for a preliminary injunction
on the basis of all of its claims, including the trade secrets claim
that has not been dismissed. Thus, they argue, Victaulic may
yet receive similar relief if that request is granted.
We disagree. The language of Victaulic’s motion is
telling. It asked that Tieman be enjoined:
(1) for a period of twelve (12) months
following the date of termination of his
employment with Victaulic, [from]
engag[ing] . . . in the sale or distribution of
the type of items or products regularly sold
. . . by [Victaulic] within any Restricted
Victaulic Sales region or any geographic
region in which Victaulic products are
sold, as an employee . . . of Tyco . . . .
the time of breach. App. at A72. While this might mitigate
some of the harm that Tieman is causing, it is more likely a
deterrent measure (which obviously failed here). The fact
remains that Tieman is currently working for Victaulic’s
competitor in violation of the covenant. Moreover, it is likely
that Tieman can do the most damage now—while he is still most
familiar with Victaulic’s business.
10
(2) for a period of twelve (12) months
following the date of termination of his
employment from Victaulic, [from]
contact[ing] or solicit[ing] any past or
present customer of [Victaulic] on behalf
of Tyco . . . .
App. at A77. This language is all but lifted from the covenant
not to compete, see App. at A71, which supports Victaulic’s
claim that enforcement of the covenant (and not preliminary
relief on the trade secrets claim) was its only aim in seeking
preliminary injunctive relief. In addition, in its briefing before
the District Court on likelihood of success, Victaulic argued that
its covenant was enforceable. Id. at A84–89. In so doing, it set
out the key elements of the claim—that the covenant was
incident to an employment relationship, protected legitimate
interests, and was reasonable in scope—and explained how it
intended to prove each one. Id. It did not set out the elements
of a trade secrets claim (or any other). We acknowledge that its
briefing did reference trade secrets, but it did so as one of three
legitimate interests that the covenant allegedly protected. Id. at
A85–86. Thus we conclude that Victaulic did not request a
preliminary injunction on its trade secrets claim, so the District
Court’s dismissal of the covenant claims left it with no means of
receiving preliminary relief.
Even if we believed that Victaulic requested a
preliminary injunction on its trade secrets claim, we would find
11
jurisdiction here. As noted, Tyco and Tieman argue that we
should not because an injunction based on the trade secrets
claim could provide the same relief as one of the covenant
claims. In effect, they maintain that because similar relief is
hypothetically possible, the “effective challenge” prong is not
met. Again, we disagree. We acknowledge that we have held
that orders are not appealable when the district court’s ruling
does not effectively narrow the scope of the requested
injunction. Plantamura v. Cippola, 617 F.2d 344, 347 (3d Cir.
1980). Plantamura was a claim against a New Jersey police
department and various officials for sex discrimination in hiring.
The District Court granted partial summary judgment in favor of
all defendants but the police department because those
defendants were not named in the plaintiff’s Equal Employment
Opportunity Commission complaint. We dismissed the appeal
because obtaining an injunction against the police department
was “the heart of Plantamura’s claim.” Id. We reasoned that an
injunction against it alone “would provide the full relief sought.”
Id.We expressly distinguished Plantamura from Build of
Buffalo, Inc. v. Sedita, 441 F.2d 284, 287 (2d Cir. 1971), in
which the Second Circuit Court of Appeals held that it had
jurisdiction because the District Court’s dismissal of a key
defendant effectively narrowed the scope of injunctive relief
available. In that case, the plaintiffs alleged that the Buffalo
Police Department was systematically discriminating against
12
them and violating various constitutional rights.3 The District
Court dismissed a number of defendants, including the police
commissioner, leaving only a handful of individual officers as
proper defendants. The plaintiffs appealed the dismissal,
arguing that because they sought to enjoin the police department
from engaging in a pattern of abuse, injunctions against a few
individual officers would do them little good. The Court agreed:
“[e]ven if injunctive relief were eventually awarded against each
of the named individual police defendants, it would not at all
satisfy plaintiffs’ claim for relief from systematic misbehavior
at levels of authority higher than that of a patrolman on the
beat.” Id. Therefore, the Court held that it had jurisdiction to
hear the appeal.
We agree that something like Victaulic’s requested relief
(preventing Tieman from selling similar products for Tyco for
a year) could fit a trade secrets claim, as it is possible for a court
to enjoin an employee working in the relevant industry or
soliciting customers for some period of time. Air Prods. &
Chems., Inc. v. Johnson, 442 A.2d 1114, 1123 (Pa. 1982). But
such a wide-ranging injunction is atypical; rather, the usual
injunction merely prevents the employee from disclosing
3
The underlying claim in Build of Buffalo was, to say the
least, odd. As the majority put it, the plaintiffs alleged
“systematic or purposeful police abuse distributed over many
years and apparently not directed at a particularly identifiable
class of persons.” Build of Buffalo, 441 F.2d at 289.
13
specified trade secrets. RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 44 cmt. d (1995) (“An injunction ordinarily
prohibits only use or disclosure of the trade secret and
information substantially derived from the trade secret.”).
Under Pennsylvania law, a broader injunction only lies when it
is “virtually impossible . . . [for the employee] to perform his .
. . duties for [his new employer] without in effect giving [it] the
benefit of [his] confidential information.” Air Prods., 442 A.2d
at 1123 (quoting Emery Indus. v. Cottier, 202 U.S.P.Q. 830, 835
(S.D. Ohio 1978)).
Because Victaulic has not alleged or argued inevitable
disclosure, the real result of the District Court’s dismissal of the
covenant claims is to limit the scope of injunctive relief
available under the facts pled. Thus, this case is similar to Build
of Buffalo, 441 F.2d at 287, insofar as the District Court has
effectively denied the relief that is at the heart of Victaulic’s
claims. As in that case, appellate jurisdiction exists here.
III. Merits
We review a dismissal for failure to state a claim de
novo. To survive a motion to dismiss, a civil plaintiff must
allege facts that “raise a right to relief above the speculative
level on the assumption that the allegations in the complaint are
true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly,
___ U.S. ___, 127 S.Ct. 1955, 1965 (2007) (internal citations
omitted).
14
Here, Victaulic has alleged that it and Tieman entered
into a covenant not to compete, which Tieman is now breaching
at Tyco’s behest by working for it in a substantially similar
position. Tyco and Tieman do not deny this; rather, they argue
that the breach is permissible because the covenant is too
unreasonable to be enforced. Unreasonableness is an
affirmative defense on which Tyoc and Tieman bear the burden
of proof. WellSpan Health v. Bayliss, 869 A.2d 990, 999 (Pa.
Super. Ct. 2005).
“Generally speaking, we will not rely on an affirmative
defense . . . to trigger dismissal of a complaint under Rule
12(b)(6). A complaint may be dismissed under Rule 12(b)(6)
where an unanswered affirmative defense appears on its face,
however.”4 In re Tower Air, 416 F.3d 229, 238 (3d Cir. 2005)
(internal citations omitted). In trying to show that
unreasonableness is clear from the face of the complaint, Tyco
and Tieman bear a particularly heavy burden, as “the
determination of reasonableness is a factual one, requiring
4
We cannot construe Tyco and Tieman’s motion as one for
judgment on the pleadings under Federal Rule of Civil
Procedure 12(c) because the pleadings are not closed. See 5C
CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE & PROCEDURE § 1367 (3d ed. 1998). Tyco and
Tieman have not answered Victaulic’s complaint in the
Pennsylvania action, nor have they answered Victaulic’s
counterclaims in the Ohio action. Instead, they moved for
dismissal.
15
consideration of all the facts and circumstances.” WellSpan, 869
A.2d at 999.
Under Pennsylvania law, mandating compliance with a
covenant not to compete is disfavored; it is, however,
appropriate where the covenant is “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.” Hess v. Gebhard Co. & Inc.,
808 A.2d 912, 917 (Pa. 2002).5
To be reasonably necessary for the protection of the
employer, a covenant must be tailored to protect legitimate
interests. “Generally, interests that can be protected through
covenants include trade secrets, confidential information, good
will, and unique or extraordinary skills.” Id. at 920. Similarly,
5
Like any other contract, Pennsylvania courts will enforce an
unreasonable covenant at law (i.e., through money damages)
unless it is unconscionable or otherwise defective. See Krauss
v. M.L. Claster & Sons, Inc., 254 A.2d 1, 5 (Pa. 1969); accord
Boyce v. Smith-Edwards-Dunlap Co., 580 A.2d 1382, 1386 (Pa.
Super. Ct. 1990). As the Distirict Court did not find Tieman’s
covenant unconscionable, we are unclear why it dismissed
Victaulic’s entire breach of contract claim (which included a
request for money damages). But, as the issue is not raised here,
we leave it for the parties and District Court to sort out on
remand.
16
not allowing competitors to profit from an employer’s
“specialized training and skills” is a legitimate use of a
covenant. Morgan’s Home Equip. Corp. v. Martucci, 136 A.2d
838, 631 (Pa. 1957). Here, Victaulic claims that the covenant
protects its interests in (1) the specialized skills and training it
invested in Tieman over a period of eight years, (2) its trade
secrets (though it gives little indication of their nature), and (3)
its goodwill.
Tyco and Tieman respond, however, that the covenant is
broader than necessary to protect these interests. In particular,
they claim that its prohibitions on selling “the types of products
regularly sold, offered for sale, or contemplated for sale by
[Victaulic],” and on “contact[ing] or solicit[ing] any past or
present customer on behalf of any [competitor],” are overbroad.
In addition, they argue that it is not reasonably limited in
geographic scope. We deal with each of their objections in turn.
A. Product-Type Restriction
Sections 4(b) and (c) of the covenant prevent Tieman
from selling “the types of items or products regularly sold,
offered for sale, or contemplated for sale by [Victaulic].” App.
at A71. Tyco and Tieman allege that Tieman was only familiar
with one of Victaulic’s product lines, namely, products designed
for the fire protection industry. Victaulic, according to Tyco
and Tieman, manufactures a wide variety of other product lines
for use in other industries. Preventing Tieman from selling
17
similar products in those other industries is unreasonable, they
argue, because he learned nothing about those products or
industries from Victaulic.
The District Judge agreed, ruling that “Victaulic fail[ed]
to explain, and [I] do not see, why it is reasonable to prohibit
Tieman from working in industries unrelated to fire protection.”
App. at A15. This statement has two problems. First, it appears
to misplace the burden of proof. It is Tyco and Tieman’s
responsibility to prove unreasonableness, not Victaulic’s to
prove reasonableness. WellSpan, 869 A.2d at 999. Moreover,
we are not at a stage in which Tyco and Tieman’s proof may be
considered. Second, on the pleadings, one can envision
scenarios in which the restriction is reasonable. We do not
know anything of substance about Victaulic’s product lines.
Even if we accept—which we cannot at this stage—that
Tieman’s job was limited to a small subset of Victaulic’s
products, we do not know how similar the various product lines
are, how transferable knowledge of one product line is to the
others, or whether there is substantial overlap in customers.
Moreover, we know virtually nothing about the goodwill, trade
secrets, and specialized training that Victaulic is seeking to
protect, or how those things might be of use in other industries
that also use Victaulic piping systems. These are but a few of
the relevant factual gaps, but they are sufficient to illustrate that
it is premature to make a judgment about the reasonableness of
the product-type restriction because of the little we know from
the pleadings.
18
Of particular concern is that the District Court used the
website at http://www.victaulic.com to establish certain facts
about Victaulic’s business. While it is proper for a court to take
judicial notice of facts not reasonably subject to dispute, FED. R.
EVID. 201(b), several concerns come into play here. First, we
require that evidence be authenticated before it can be admitted.
Id. 901(a). Thus we allow judicial notice only from sources not
reasonably subject to dispute. Id. 201(b). Anyone may
purchase an internet address, and so, without proceeding to
discovery or some other means of authentication, it is premature
to assume that a webpage is owned by a company merely
because its trade name appears in the uniform resource locator.
Cf. United States v. Jackson, 208 F.3d 633, 638 (7th Cir. 2000)
(holding that information from the internet must be properly
authenticated to be admitted); In re Homestore.com, Inc. Sec.
Litig., 347 F. Supp. 2d 769, 782–83 (C.D. Cal. 2004) (“Printouts
from a web site do not bear the indicia of reliability demanded
for other self-authenticating documents under FED. R. EVID.
902. To be authenticated, some statement or affidavit from
someone with knowledge is required . . . .”).
Second, a company’s website is a marketing tool. Often,
marketing material is full of imprecise puffery that no one
should take at face value. Cf. Catrol, Inc. v. Pennzoil Co., 987
F.2d 939, 945 (3d Cir. 1993) (distinguishing between mere
puffery and actual misrepresentations). Thus courts should be
wary of finding judicially noticeable facts amongst all the fluff;
private corporate websites, particularly when describing their
19
own business, generally are not the sorts of “sources whose
accuracy cannot reasonably be questioned,” FED. R. EVID.
201(b), that our judicial notice rule contemplates.
We also note that the District Court employed judicial
notice at an early stage in this litigation and outside the context
of an evidentiary proceeding. While the rules allow a court to
take judicial notice at any stage of the proceedings, FED. R.
EVID. 201(f), we believe that it should be done sparingly at the
pleadings stage. Only in the clearest of cases should a district
court reach outside the pleadings for facts necessary to resolve
a case at that point. Resolving a thorny issue like
reasonableness by resorting to a party’s unauthenticated
marketing material falls far short of the bar.
Moreover, having taken judicial notice of the nature of
Victaulic’s business, the District Court used this to infer that
Tieman’s training, specialized knowledge, and trade secrets—in
short, all of the things that the covenant not to compete
legitimately protects—are not transferrable among industries the
company serves. Taking a bare “fact” that is reflected not in the
pleadings, but on a corporate website, and then drawing
inferences against the non-moving party so as to dismiss its
well-pleaded claims on the basis of an affirmative defense, takes
us, as a matter of process, far too far afield from the adversarial
context of litigation.
B. Customer Restriction
20
Tyco and Tieman argue, and the District Court ruled, that
the customer restriction in Section 4(d) is overbroad because it
is not limited to customers that Tieman worked with during his
tenure at Victaulic. Even if we accept Tyco and Tieman’s broad
reading of the restriction, we cannot determine on the pleadings
that it is unreasonable. It may be, for example, that Tieman has
specialized knowledge of Victaulic’s pricing structure and
marketing techniques that he could use to woo away its
customers, or access to other protectable customer-specific
information. Moreover, we know little about the extent of
Tieman’s contacts, relative to the total number of Victaulic
customers. Again, we emphasize that reasonableness under
Pennsylvania law is a fact-intensive inquiry; indeed, “[a]
restrictive covenant found to be reasonable in one case may be
unreasonable in others.” Insulation Corp. of Am. v. Brobston,
667 A.2d 729, 734 (Pa. Super. Ct. 1994). Moreover, though still
disfavored, Pennsylvania courts recognize that “covenants have
developed into important business tools to ‘allow employers to
prevent their employees and agents from learning their trade
secrets, befriending their customers and then moving into
competition with them.’” Hess, 808 A.2d at 159 (quoting Miller
Mech., Inc. v. Ruth, 300 So.2d 11, 12 (Fla. 1974)). At this stage,
Victaulic has asserted a legitimate interest in protecting its
customer relationships. See Thermo-Guard, Inc. v. Cochran,
596 A.2d 188, 194 (Pa. Super. Ct. 1991). Whether the covenant
reasonably protects that interest is not a question that can be
resolved on the pleadings.
21
C. Geographic Limitation
Tyco and Tieman also contend that the covenant is not
“reasonably limited in . . . geographical extent,” Hess, 808 A.2d
at 917, because section 4(c) prevents Tieman from selling
certain products for nine named competitors (one of which is
Tyco) anywhere Victaulic products are sold. Once again we
cannot reach this conclusion on the pleadings. In this
Information Age, a per se rule against broad geographic
restrictions would seem hopelessly antiquated, and, indeed,
Pennsylvania courts (and federal district courts applying
Pennsylvania law) have found broad geographic restrictions
reasonable so long as they are roughly consonant with the scope
of the employee’s duties. See, e.g., Volunteer Fireman’s Ins.
Servs., Inc. v. CIGNA Prop. & Cas. Ins. Agency, 693 A.2d 1330,
1338 (Pa. Super. Ct. 1997); Nat’l Bus. Servs. v. Wright, 2 F.
Supp. 701, 708 (E.D. Pa. 1998); Graphic Mgmt. Assocs. v. Hatt,
No. 97 Civ. 6961, 1998 WL 159035, at *14 (E.D. Pa. Mar. 18,
1998) (Van Antwerpen, J.); Kramer v. Robec, Inc., 824 F. Supp.
508, 512 (E.D. Pa. 1992). Here, we do not know from the
pleadings where Victaulic sells products.6 Victaulic has alleged
6
The District Court took judicial notice of the fact that
Victaulic sells products everywhere in the world because it
claims on its website to be a “global” company. In addition to
the problems with taking judicial notice of this “fact,” see Part
III.A, supra, the word “global” in a company’s marketing
material (where puffery is the norm) needs more context.
Among other deficiencies, it certainly gives no useful indication
22
that Tieman developed relationships with customers across
North America. From this, it is possible that the geographic
scope of the covenant is reasonable.
Moreover, the District Court should have considered the
geographic element of section 4(c) in the context of the overall
restriction. That section only prevents Tieman from working for
nine named competitors—presumably businesses that, like
Victaulic, are large-scale suppliers of the same kinds of
products. These competitors might be able to use a former
Victaulic employee’s specialized knowledge of Victaulic’s
product lines and sales strategies anywhere in the world that the
two compete. See Insulation Corp. of Am., 667 A.2d at 734
(“An employee may receive specialized training and skills, and
learn the carefully guarded methods of doing business which are
the trade secrets of a particular enterprise. To prevent an
employee from utilizing such training and information in
competition with his former employer, for the patronage of the
public at large, restrictive covenants are entered into.”). In
addition, if Victaulic gave Tieman some sort of specialized
training, it would be legitimate for it to prevent him from using
that training for the benefit of its primary competitors anywhere
they compete. Id. Thus, the District Court should not have
concluded at this stage that the geographic scope of section 4(c)
was unreasonable.
of exactly where Victaulic products are actually sold for
comparison against the scope of Tieman’s work.
23
IV. Conclusion
Whether a covenant not to compete is unreasonable is a
holistic inquiry, particularly when the covenant is detailed and
nuanced. It requires balancing the employer’s need to protect its
investment and disclosures against the employee’s need to earn
a living in his chosen field and the public interest, and then
determining whether the covenant comes reasonably close to
that balance. Hess, 808 A.2d at 917. At the pleadings stage, a
court rarely knows enough about the substance of this balancing
act to make a judgment as to whether the covenant is
reasonable.7
Having determined that we have appellate jurisdiction
under 28 U.S.C. § 1292(a)(1), we vacate the District Court’s
order dismissing Victaulic’s claims, reinstate its complaint and
motion for a preliminary injunction, and remand for further
proceedings.
7
In the alternative, Victaulic argues that District Court
should have attempted to “blue pencil” (i.e., amend) the
covenant to make it reasonable. Though we agree that, absent
bad faith, Pennsylvania courts do attempt to blue pencil
covenants before refusing enforcement altogether, see Sidco
Paper Co. v. Aaron, 351 A.2d 250, 254–57 (Pa. 1976), we need not
decide whether blue pencilling would be appropriate here, as it
was improper for the District Court to conclude at this stage that
the covenant is unreasonable as written.
24