Joseph, L. v. O'Laughlin, J. ( 2017 )


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  • J-A20015-16
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    LAURIE A. JOSEPH                                IN THE SUPERIOR COURT OF
    PENNSYLVANIA
    v.
    JOHN B. O’LAUGHLIN
    Appellant                  No. 1706 WDA 2015
    Appeal from the Order September 30, 2015
    In the Court of Common Pleas of Fayette County
    Civil Division at No(s): 1691 of 2015 G.D.
    BEFORE: BOWES, STABILE AND MUSMANNO, JJ.
    FILED AUGUST 22, 2017
    CONCURRING AND DISSENTING MEMORANDUM BY BOWES, J.:
    The learned majority misapplied the restrictive covenant by extending
    it to organizational measures related to the future operation of a veterinary
    clinic after the covenant expires.     As I do not agree that Appellant’s
    preparations are tantamount to competition in violation of the covenant not
    to compete, I respectfully dissent from that aspect of the memorandum.
    The majority accurately outlined the relevant facts, procedural history,
    and the applicable standard of review.       Similarly, it cogently explained
    Appellee’s burden of establishing the three components of a permanent
    injunction:   (1) clear right to relief; (2) necessary to avoid an injury that
    cannot be compensated by damages; and (3) greater injury will result from
    J-A20015-16
    refusing   rather   than   granting    the   relief   requested.    Kuznik    v.
    Westmoreland County Bd. of Comm'rs, 
    902 A.2d 476
    , 489 (Pa. 2006).
    I agree with the majority’s analysis regarding the trial court’s improper
    reliance upon Atkinson & Mullen Travel, Inc., et al. v. O’Brien, et al,
    2944 EDA 2012 (unpublished memorandum, filed May 5, 2014) as
    authoritative precedent.     Likewise, I join the well-reasoned discussion
    affirming the trial court’s imposition of a permanent injunction relating to
    Appellant’s use of social media.      In my view, any and all communications
    with the public relating to veterinary services equates to soliciting clients and
    therefore is a clear violation of the asset transfer agreement.
    I write separately because, unlike my learned colleagues, I believe
    that the asset transfer agreement does not bar Appellant’s preparatory
    measures and that, by creating that requirement on Appellee’s behalf, the
    majority deprived Appellant of the benefit of his bargain.          Plainly, the
    majority and I have a contrasting view of what constitutes a business or
    practice that is in “competition” with Appellee.       While we agree that the
    defendant’s Facebook page violates the restrictive covenant, we view the
    remaining activities in divergent lights. Unlike my colleagues, I believe that
    the contract permits Appellant to mobilize his resources for immediate
    competition once the restrictive covenant expires. In my view, Appellant’s
    nonpublic preparatory measures fall short of competition.
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    As contract interpretation is a question of law, we are not bound by
    the trial court's construction of the writing. See Kraisinger v. Kraisinger,
    
    928 A.2d 333
    , 339 (Pa.Super. 2007).          We have explained the relevant
    principles as follows: “In construing a contract, the intention of the parties is
    paramount and the court will adopt an interpretation which under all
    circumstances ascribes the most reasonable, probable, and natural conduct
    of the parties, bearing in mind the objects manifestly to be accomplished.”
    Charles D. Stein Revocable Trust v. General Felt Industries, Inc., 
    749 A.2d 978
    , 980 (Pa.Super. 2000).         As we explained in In re Jerome
    Markowitz Trust, 
    71 A.3d 289
    , 301 (Pa.Super. 2013),
    In determining the intent of the parties to a written agreement,
    the court looks to what they have clearly expressed, for the law
    does not assume that the language of the contract was chosen
    carelessly.
    When interpreting agreements containing clear and
    unambiguous terms, we need only examine the writing itself to
    give effect to the parties' intent. The language of a contract is
    unambiguous if we can determine its meaning without any guide
    other than a knowledge of the simple facts on which, from the
    nature of the language in general, its meaning depends. When
    terms in a contract are not defined, we must construe the words
    in accordance with their natural, plain, and ordinary meaning. As
    the parties have the right to make their own contract, we will not
    modify the plain meaning of the words under the guise of
    interpretation or give the language a construction in conflict with
    the accepting meaning of the language used.
    
    Id. (citation omitted).
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    J-A20015-16
    The instant restrictive covenant prohibited Appellant from engaging in
    the practice of veterinary medicine for five years within a fifty-mile radius of
    Appellee’s clinic. The pertinent clause provided as follows:
    Seller acknowledges and agrees that he will not be involved in
    any of the following activities at any location within fifty (50)
    miles of the veterinary clinic ("Geographic Area"). Seller
    covenants and agrees that for a period of five (5) years following
    the execution of this Agreement, he shall not directly or
    indirectly, as an employer, employee, principal, agent,
    consultant, partner, stockholder, creditor or in any other
    capacity, engage or participate in any business or practice within
    the Geographic Area that is in competition in any manner
    whatsoever with the Buyer. Further, Seller shall not contact,
    solicit, or engage in any activity to contact or solicit, indirectly or
    directly, any client, past, present, or future, during that five (5)
    year period.
    Asset Transfer Agreement, 12/24/14, ¶ 3 (at unnumbered page 3).
    The majority reads the proviso as a broad prohibition that equates
    preparatory measures as competition.            However, that is not the parties’
    agreement. In reality, the provision is refined and reasoned. “[Appellant]
    shall not directly or indirectly . . . engage or participate in any business or
    practice within the Geographic Area that is in competition in any manner
    whatsoever with [Appellee].”        
    Id. Thus, at
    a minimum, to establish a
    violation of the clause, Appellee was required to demonstrate that Appellant
    participated in a business or practice that was in competition with her
    veterinary clinic.    The majority construed the accord as precluding
    organizational   measures     and    concluded     that   Appellee   satisfied   her
    evidentiary burden by introducing evidence that Appellant incorporated a
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    business, purchased equipment, acquired land, and sought a zoning variance
    to operate a clinic in the future.       Similarly, the trial court inferred from
    Appellant’s actions that Appellant was preparing to violate the agreement
    before its expiration. In my view, both the majority’s broad interpretation of
    the restrictive convent and the trial court’s supposition run contrary to the
    ensconced principle of contract interpretation that courts should avoid
    reading clauses into the agreement terms that do not exist.             See In re
    Jerome Markowitz 
    Trust, supra, at 301
    (“we need only examine the
    writing itself to give effect to the parties' intent.”).
    Under    the   majority’s   far-reaching    perspective   of   “competition,”
    Appellant is precluded from engaging in any preparatory activity for the
    entire five-year period.       That view gives Appellee the benefit of the
    additional time that it would take Appellant to launch his veterinary practice
    once the covenant expires. Applying the suggested reasoning, the effective
    term of the five-year covenant necessarily would exceed the parties’ stated
    intent without compensating Appellant for the additional impairment. From
    my perspective, the majority’s suggestion that Appellant is not entitled to
    make preparations before opening a practice after December 24, 2019 is
    untenable.
    Although the majority frames its discussion in reference to cases that
    address non-compete clauses included in employment contracts, the case at
    bar involves an interpretation of the restrictive covenant that the parties
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    negotiated as part of the asset transfer agreement.        In Morgan's Home
    Equipment Corp. v. Marticci, 
    136 A.2d 838
    , 846 (Pa. 1957), our High
    Court explained that different reasons motivate covenants not to compete
    attendant to employment and those dependent upon the sale of a business.
    As to the former type of non-compete clauses, the Court explained that they
    are “enforced by the courts as reasonably necessary for the protection of the
    employer.” 
    Id. In contrast
    to covenants not to compete in employment contracts,
    restrictive covenants included in agreements for the sale of an established
    business are intended to temporarily limit a seller’s competition with a
    purchaser in order for the purchaser to establish its own cliental. The Court
    elucidated this point as follows:
    General covenants not to compete which are ancillary to the sale
    of a business serve a useful economic function; they protect the
    asset known as ‘good will’ which the purchaser has bought.
    Indeed, in many businesses it is the name, reputation for
    service, reliability, and the trade secrets of the seller rather than
    the physical assets which constitute the inducements for a sale.
    Were the seller free to re-enter the market, the buyer would be
    left holding the proverbial empty poke.
    
    Id. Hence, consistent
    with our Supreme Court’s perspective, I would review
    the restrictive covenant in the present case with an eye toward ensuring that
    both sides to the asset transfer agreement obtain the benefit of their
    bargain.
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    Unlike the non-compete clauses in employment contracts that the
    majority references in its analysis, where, as here, the parties to an
    agreement stand on equal footing, courts simply ensure that both sides get
    the deal they negotiated.          Instantly, Appellee paid $17,973.50 for
    Appellant’s   promise   to    forego   competition with her     in any manner
    whatsoever.    While Appellant had a contractual duty to avoid competition
    with the Grace Veterinary Clinic, nothing in the sales agreement imposed the
    correlate duty to refrain from getting ready to compete once the restrictive
    covenant expired on December 24, 2019.            Although Appellee was free to
    negotiate for the inclusion of preliminary and preparatory activities in the
    non-compete, presumably for an increased premium, she neglected to
    include such a clause, and this Court should be opposed to fashioning one
    for her benefit. Thus, unless or until Appellant engages in an activity that is
    tantamount to competition, whether direct or indirect, in my view, he is not
    in violation of the accord.
    Appellant neither practiced veterinary medicine within the geographic
    area nor engaged or participated directly or indirectly, in any business in
    competition with Appellee’s practice.         To the contrary, in anticipation of
    opening a veterinary practice at some unknown future point, Appellant
    formed a limited liability company styled, “O' Laughlin Veterinary Services,”
    acquired medical equipment, purchased real estate, and applied for a special
    use zoning exception that would permit him to build and use a facility as a
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    veterinary clinic. None of the foregoing actions can be convincingly argued
    to equate with competition with Appellee’s veterinary clinic.                  Plainly,
    Appellant, who continued to practice veterinary medicine outside the
    territorial scope of the covenant, did not operate a veterinary clinic in
    contravention of the agreement.1           He did not conduct examinations, treat
    animals, or provide any other veterinary services.            At most, the evidence
    revealed Appellant’s intention to operate a clinic on the site in the future.
    However, that does not render Appellant’s actions to be in present
    competition with Appellee.
    I find instructive the Ohio Court of Appeals discussion in Berardi’s
    Fresh Roast, Inc. v. PMD Enter., Inc. 
    2008 WL 4681825
    , 2008 Ohio App.
    Lexis 4618 (Ohio Ct. App. 2008), wherein the appeals court examined
    whether an appellee’s actions violated the terms of a restrictive covenant
    negotiated as part of an agreement for the sale of a coffee roasting
    business.     The court determined that the appellee did not violate the
    restrictive covenant when he organized a new coffee roasting enterprise,
    investigated finance options, leased warehouse space, hired employees, and
    ordered     equipment      and    supplies     prior   to   the   expiration   of   the
    noncompetition agreement.            Significantly, the appellee made all of the
    ____________________________________________
    1
    Appellant testified that, after leaving Pennsylvania, he practiced at a clinic
    in Florida until July 2015. N.T., 9/24/15, at 88.
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    preparations in anticipation of operating the business immediately after the
    restriction expired. In concluding that the agreement was not violated, the
    court observed that the appellee’s actions “constituted ‘preparations’ to
    compete” rather than actual competition insofar as the appellee never
    engaged in actual competition until after the the noncompetition agreement
    expired.   
    Id. at *5.
      In short, the court reasoned, “preparing to compete
    does not equate to actively competing.”    
    Id. I would
    apply the identical
    reasoning herein to find that Appellant’s preparatory measures did not
    breach the asset transfer agreement.
    The majority discounts the appeals court’s holding in Berardi’s Fresh
    Roast, Inc. because that decision did not reveal the precise terms of the
    restrictive covenant that was under review.      However, this attempt to
    bypass the appeals court’s cogent reasoning misses the mark. It is obvious
    from the Ohio court’s opinion that the non-compete clause at the center of
    the dispute prohibited “competition” and did not specifically exclude
    “preparations”—if the covenant had precluded preparations than the case
    would have been a nonstarter. Furthermore, whether the prohibition related
    to an identified industry, e.g., coffee roasting, or included any competing
    business or practice whatsoever is of no moment.      The crux of the Ohio
    Court of Appeals’ legal rationale, which the majority is determined to avoid,
    is that preparations do not equate to competition. 
    Id. at *5
    (preparing to
    compete is not equivalent to competing.).         As the pertinent holding
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    Berardi’s Fresh Roast, Inc. was not dependent upon the specific language
    in the restrictive convent, I would apply that holding herein as persuasive
    legal authority in Appellant’s favor.
    Moreover, I observe that there was no evidence in the certified record
    to support the conclusion that Appellant’s organizational measures caused
    Appellee harm.     Indeed, Appellant’s preparations existed in chorus with
    Appellee’s continued operation of Grace Veterinary Clinic without violating
    the non-compete clause. Accordingly, I believe that the trial court erred in
    finding that the above-cited examples of Appellant’s anticipated opening of
    the O’Laughlin Veterinary Services within the territorial scope of the
    covenant evinced Appellant’s intention to initiate competition prior to the
    date that the agreement expires on December 24, 2019. To the contrary, I
    would find that Appellant’s measures did not breach the non-competition
    provisions contained in the sales agreements, and therefore, the trial court
    erred in concluding that Appellant established a clear right to injunctive relief
    based upon those actions.
    Finally, I note that, in contrast with my colleagues, I am not
    persuaded by the the trial court’s supposition that Appellant was preparing
    to violate the non-compete agreement.            First, the trial court’s theories do
    not warrant the deference reserved for factual findings and credibility
    determinations.     Since   the   facts    regarding     Appellant’s   actions   were
    unchallenged, that evidence is not subject to a credibility determination. In
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    reality, the trial court’s purported finding was, in fact, a legal conclusion
    drawn from the defendant’s preparations as well as his creation of the
    Facebook page.       It is beyond peradventure that we are not bound by the
    trial court's deductions or inferences drawn from the facts. A.V. v. S.T., 
    87 A.3d 818
    (Pa.Super. 2014) (appellate court is not bound by deductions or
    inferences made by trial court from its findings of fact). Thus, the court’s
    belief that Appellant was preparing to violate the non-compete agreement is
    not entitled to the heighten deference typically associated with its role as the
    ultimate arbiter of facts.        Moreover, whether characterized as inference,
    finding of fact, or legal conclusion, the trial court’s anticipation of a violation
    is not supported by the certified record.
    Instantly, aside from the Facebook page, none of the remaining
    activities in which Appellant engaged, i.e., incorporating a business,
    purchasing equipment, acquiring land, and seeking a zoning variance,
    announced a practice to the public or entailed the participation of a business
    or practice in competition with Appellee’s clinic.2        To the contrary, the
    evidence in this case demonstrated that the preponderance of Appellant’s
    actions were preparatory.
    ____________________________________________
    2
    I recognize that the zoning form that the defendant submitted to the
    review board indicated that the intended use of his property was for a
    “veterinary clinic,” however, I do not think that a required entry on a form
    equates with a public announcement.
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    For all of the foregoing reasons, I would affirm the order granting the
    permanent injunction insofar as it prohibited Appellant from operating a
    veterinary clinic in contravention of the restrictive covenant contained in the
    asset transfer agreement, including the solicitation of former clients,
    whether directly or indirectly, by advertisement or social media. However, I
    would reverse the order granting a permanent injunction to the extent that it
    purported to enjoin Appellant from engaging in organizational activities.
    - 12 -
    

Document Info

Docket Number: Joseph, L. v. O'Laughlin, J. No. 1706 WDA 2015

Filed Date: 8/22/2017

Precedential Status: Precedential

Modified Date: 8/22/2017