Centennial Lending Group v. Seckel Capital ( 2017 )

J-A04018-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
CENTENNIAL LENDING GROUP, LLC IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
SECKEL CAPITAL, LLC
Appellant No. 822 EDA 2016
Appeal from the Order Entered February 12, 2016
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): October Term, 2015 No. 01023
BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*
MEMORANDUM BY SOLANO, J.: FILED OCTOBER 26, 2017
Appellant, Seckel Capital, LLC, appeals from the order granting a
preliminary injunction in favor of Appellee Centennial Lending Group, LLC on
its claim of unfair competition. We conclude the record supports the trial
court’s issuance of a preliminary injunction; but because the trial court failed
to order the filing of a bond, we are constrained to vacate the order and
remand with instructions to reissue the preliminary injunction with a bond
requirement.
In October 2015, Centennial sued Seckel, presenting claims for
misappropriation of trade secrets under the Pennsylvania Uniform Trade
Secrets Act (“PUTSA”),1 conversion, tortious interference with contract,
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* Retired Senior Judge assigned to the Superior Court.
1 See 12 Pa.C.S. §§ 5301-5308.
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aiding and abetting breach of a fiduciary duty, unfair competition, and
tortious interference with business relations. Centennial also moved for a
preliminary injunction. Centennial requested an order mandating (1) the
return and destruction of confidential information of Centennial that was in
the possession of Seckel, (2) that Seckel be enjoined from acquiring more of
Centennial’s confidential information, and (3) that Seckel be prohibited from
soliciting Centennial’s employees for employment. Trial Ct. Op. at 2.
The court held a two-day evidentiary hearing on the motion on
February 3-4, 2016, at which the following was established.
Susan Meitner is the president and chief executive officer of
Centennial, a residential mortgage broker whose potential customers include
potential borrowers and referral sources — that is, prior customers and real
estate agents acting to buy or sell a home. N.T., 2/4/16, at 9, 65-66. When
Centennial first began operations, it did not have its employees sign any
agreements addressing confidentiality. Id. at 79. Subsequently, in 2013,
Centennial asked some of its then-current employees, including Celeste
Spadaccini,2 one of Centennial’s loan officers, to acknowledge receipt of a
handbook with a confidentiality provision and to sign a document with a
confidentiality clause. Id. at 80; R.R. at 28a-29a.3
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2 Her last name is spelled differently throughout the record; we use the
spelling reflected in her affidavit. R.R. at 196a.
3 Seckel describes this document as an unenforceable employment
agreement, Seckel’s Brief at 21; Centennial calls it an “Origination Plan” that
(Footnote Continued Next Page)
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John Seckel is the president of Seckel Capital, another mortgage
broker. During the summer and fall of 2015, Centennial had twenty-two
loan officers. N.T., 2/3/16, at 45; R.R. at 913a. That summer, Seckel hired
six of Centennial’s loan officers and one of its loan processors. N.T., 2/4/16,
at 26, 131. Mr. Seckel personally recruited two of those loan officers and
reached out to others at Centennial. Id. at 125-26. The six loan officers
hired by Seckel comprised almost 30% of Centennial’s loan officers.
Additionally, after Centennial “let go” two other loan officers, Seckel hired
them. Id. at 49, 131. Mr. Seckel also interviewed three other Centennial
employees, including a loan officer, but decided not to hire them. Id. at
138-39. As discussed in further detail below, Mr. Seckel also interviewed
and offered a job to Spadaccini, who declined the offer. Centennial contends
that it lost $500,000 in the fourth quarter of 2015, after $70 million of its
business went to Seckel as a result of Seckel’s hiring of its employees. Id.
at 58-59.
Ed Walsh, a Seckel vice president and branch manager, is one of the
six former Centennial loan officers who was hired by Seckel. Shortly after
midnight on February 4, 2016, the second day of the hearing, Walsh e-
mailed Meitner and Steven Winokur, another Centennial employee, from his
non-work account. N.T., 2/4/16, at 64-65, 68. The e-mail stated that if
(Footnote Continued) _______________________
it uses “for the purpose of providing meaning and market competitive
financial rewards” for its loan officers. R.R. at 28a.
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Centennial did not pay Walsh compensation to which he claimed to be
entitled, Walsh would destroy Centennial:
The clock is ticking. You have 3 days to pay me in full or i will
unleash the wolves. My money is too long for you. Time is to
short I will destroy your company....Period pay what you owe or
its game over. I have more in cash in my fucking safe, then
your entire family has all in. Wrong man to play games with.
Pay what you owe or it game over. Final warning I’m
undefeated in court!!!!
Centennial’s Ex. 59; R.R. at 964a (punctuation and spelling as in original). 4
That same morning of February 4, 2016, Walsh also posted on his
Facebook5 page: “FYI, if you burn me, I will destroy you, period. Money is
long. Time is short, and it did say CLG [Centennial] tick-tock to [sic].” N.T.,
2/4/16, at 70.6 Meitner is not a Facebook “friend” with Walsh, but Meitner’s
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4 Later that day, at the preliminary injunction hearing, Meitner read a
sanitized version of the e-mail into the record. N.T., 2/4/16, at 67-68. We
note that none of the exhibits introduced at the hearing were transmitted to
this Court as part of the certified electronic record. However, the exhibits
were made part of the reproduced record and no party has challenged their
authenticity.
5 Facebook is a social networking website on which “[u]sers of that Web site
may post items on their Facebook page that are accessible to other users,
including Facebook ‘friends’ who are notified when new content is posted.”
Elonis v. United States, ___ U.S. ___, 135 S. Ct. 2001, 2004 (2015). A
user may make a posted item viewable by any user of Facebook or only to
such selected users as their Facebook “friends.” A user may also edit an
item after posting it. See Daison v. Loudoun Cty. Bd. of Supervisors,
___ F. Supp. 3d ___, 2017 WL 3158389, *2 (E.D. Va. 2017); Facebook,
“How do I edit a post that I've shared from my Page?,” https://www
.facebook.com/help/1376303972644600 (as accessed on Oct. 25, 2017).
6 It appears that Walsh later edited the Facebook post to remove the
reference to Centennial (“CLG”), as a printout of the post states, “Just a FYI!
(Footnote Continued Next Page)
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assistant viewed the post and notified her of its content. N.T., 2/4/16, at
70.7
A portion of the hearing was devoted to Seckel’s attempt to hire
Spadaccini and to gain access to Centennial information on Spadaccini’s
laptop computer. Centennial typically issued laptops to its mortgage
brokers. N.T., 2/4/16, at 114. A broker could electronically store a
summary of a customer’s personal and financial information for networking
and potential future business purposes in a customized database accessible
on the laptop through software named “Encompass”. Id. at 104; N.T.,
2/3/16, at 72-73; R.R. at 27a, 196a, 215a. The laptop also could be used to
access Centennial’s customer relationship management software, called
“Mortgage Returns,” in which a broker could enter customer names and
other personal information, such as birthdays, for marketing purposes. N.T.,
2/3/16, at 21, 86; N.T. 2/4/16, at 112; R.R. at 321a-22a. The programs
appear to be integrated with each other, and information is easily shared
between the two. Ex. 1, Suppl. Decl. of Meitner, at ¶ 11, 11/13/15, to
(Footnote Continued) _______________________
If you burn me, I will destroy you! Period! Money is long, time is short!!!
Tick tock.” Centennial’s Ex. 60; R.R. at 966a.
7 After the hearing, the record reflects that Walsh, on February 9, 2016, e-
mailed Meitner and Winokur an apology for his “unprofessional email” and
disclaiming any intent to destroy Centennial. R.R. at 985a. The e-mail also
asserted that “John Seckel had no idea I wrote that e-mail and it is by no
means a representation of Seckel Capital.” Id.
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Centennial’s Reply Brief in Further Supp. of Centennial’s Pet. for a Special
and/or Prelim. Inj., 11/19/15, R.R. at 322a.
In late August and early September of 2015, Seckel contacted
Spadaccini and extended a job offer to her, which Spadaccini initially
accepted (though she later changed her mind and rejected the offer). N.T.,
2/4/16, at 98-99, 101. Spadaccini met with Mr. Seckel and Nabil Farhat,
Seckel’s chief financial officer. At that meeting, Spadaccini expressed
concern that she would be unable to start working for Seckel immediately
“because it would be very labor-intensive to extrapolate four years of
business. I had four of my best years at Centennial Lending. I closed $125
million of business. To pull all of that documentation out, I was a little
concerned that I wouldn’t be able to do it.” Id. at 103. Spadaccini was
referring to the customer relationship information that she accumulated at
Centennial. Id. at 104. According to Spadaccini, Farhat suggested that if
she brought her laptop, Seckel would be able to extract the information from
Encompass. Id. at 103, 106.
A few days later, Spadaccini again met with Farhat, and she brought
her laptop with her. N.T., 2/4/16, at 106; R.R. at 286a. At that second
meeting, Spadaccini used her password to sign into Encompass, and Farhat
used the laptop to “create those reports,” N.T., 2/4/16, at 106, that is, the
spreadsheets containing the customer information. Spadaccini’s laptop was
used to e-mail the spreadsheet reports from Spadaccini’s personal e-mail
account to Mr. Seckel. Id. at 107; see Exs. 4 & 5 to Centennial Ex. 44, R.R.
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at 930a-50a (copies of the e-mails and spreadsheet reports at issue).8
Spadaccini denies personally sending those e-mails, however. N.T., 2/4/16,
at 120. Mr. Seckel testified that the reports he received contained
Spadaccini’s customer list. Id. at 144.9 Mr. Seckel also testified that
although he deleted the e-mails upon receiving them, he was able later to
recover the deleted e-mails. Id. at 155; R.R. at 917a-18a.
On February 12, 2016, the trial court issued an injunction that
included the following terms:
1. Seckel shall not solicit employees of Centennial, until the
conclusion of this action.
2. This Order does not prevent employees of Centennial from
applying for employment at Seckel.
3. If such an employee is hired, Seckel shall contact counsel for
both parties immediately upon the acceptance of an offer of
employment, so that both parties can manage the transition of
the employee and of any information.
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8 The reports were also downloaded to Spadaccini’s computer, her personal
cloud storage, or both (the record is imprecise). See N.T., 2/4/16, at 105,
156; R.R. at 917a. “Cloud storage is a method of storing electronic data on
remote servers — in addition to or in lieu of the device itself. Data stored in
the cloud can be accessed by an electronic device connected to the
Internet.” Wertz v. State, 41 N.E.3d 276, 285 n.8 (Ind. Ct. App. 2015).
9 Centennial has not moved to seal Spadaccini’s customer list, which is
present in the filed hardcopy of the reproduced record and the electronic
record transmitted to this Court.
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Order, 2/12/16. The order did not restore Centennial’s control over its
confidential business records, including Spadaccini’s customer list.10
However, Seckel’s counsel agreed to return that list to Centennial. N.T.,
2/3/16, at 17-18.
Seckel timely appealed. The trial court filed an opinion on June 30,
2016, that briefly explained its rationale for granting injunctive relief. The
court stated that the “injunction is designed to prevent disclosure of
confidential records belonging to Centennial until the conclusion of a law
case now at the pleading stage.” Trial Ct. Op. at 1. It continued:
Testimony at the preliminary injunction hearing made clear
that Centennial has a likely chance of success at trial and that
some of the actions Seckel has undertaken are manifestations of
bad motive to permanently harm, if not destroy, Centennial’s
business. These actions included soliciting Centennial employees
to divulge confidential information directly from computer hard
drives and systematic solicitation of Centennial employees to
leave [C]entennial, work for Seckel and then divulge their old
company’s confidential work product.
...
[T]he harm taking place is both immediate and irreparable. This
injury cannot be compensated fully by monetary damages.
...
If followed, the order properly restores Centennial to its former
control over its own confidential business records.[11]
...
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10 Centennial has not filed a cross-appeal to challenge the court’s injunctive
relief as insufficiently tailored to restore the status quo.
11 As noted above, the order did not contain provisions for restoration of
such control to Centennial.
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Centennial is entitled to equitable protection and the
transcript record reveals worrisome animus by some Seckel
personnel against Centennial’s president.
Trial Ct. Op. at 2-3.
After Seckel appealed, Centennial filed an unopposed motion to set
bond for the preliminary injunction. Seckel apparently agreed that the court
must impose a bond. Centennial’s Mot. to Set Bond for Preliminary Inj.,
11/16/16, at 3 (“Counsel for Centennial has conferred with counsel for
Seckel, who agrees that the Court must impose a bond requirement”). The
court scheduled argument for June 19, 2017. After argument, without
explaining its decision, the court denied the motion to set bond, without
prejudice. Order, 6/22/17.
On appeal, Seckel raises the following issues:
1. Whether the trial court properly entered a preliminary
injunction when Centennial . . . failed to present concrete
evidence supporting that it would suffer irreparable harm if
solicitation was not prohibited?
2. Whether the trial court proper[l]y entered a preliminary
injunction when Centennial failed to establish that it had a
likelihood o[f] . . . success o[n] the merits of its unfair
competition claim?
3. Whether the trial court properly entered a preliminary
injunction without requiring Centennial to post a bond?
Seckel’s Brief at 3.
Our standard of review follows:
Our review of a trial court’s order granting or denying
preliminary injunctive relief is highly deferential. . . . [We]
examine the record to determine if there were any apparently
reasonable grounds for the action of the court below.
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WMI Grp., Inc. v. Fox, 109 A.3d 740, 747-48 (Pa. Super. 2015).12 More
specifically:
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 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.
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12 We have explained:
It is somewhat embarrassing to an appellate court to discuss the
reasons for or against a 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., 109 A.3d at 743 n.2 (citation omitted and emphasis in original).
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. . . Simply, the moving party must establish a prima facie right
to relief. If the moving party’s right to relief is unclear, then a
preliminary injunction should not issue.
Synthes USA Sales, LLC v. Harrison, 83 A.3d 242, 249-50 (Pa. Super.
2013) (citations, quotation marks, and footnote omitted). Seckel’s issues
contest only the first and fourth prerequisites.
Irreparable Harm
In justifying the injunction, the trial court inferred irreparable harm
from Seckel’s past actions, which “included soliciting Centennial employees
to divulge confidential information directly from computer hard drives and
systematic solicitation of Centennial employees to leave [C]entennial, work
for Seckel and then divulge their old company’s confidential work product.”
Trial Ct. Op. at 2. In evaluating the trial court’s assessment of irreparable
harm, we apply the aforementioned deferential standard of review. WMI
Grp., 109 A.3d at 747-48; accord, Summit Towne Centre, Inc. v. Shoe
Show of Rocky Mount, Inc., 828 A.2d 995, 1000-01 (Pa. 2003).
In challenging Centennial’s showing of irreparable harm, Seckel begins
with the premise that a preliminary injunction should issue only if the
“threatened monetary loss is so great as to threaten the existence of the
business.” Seckel’s Brief at 12 (quoting Three County Servs., Inc. v.
Phila. Inquirer, 486 A.2d 997, 1001 (Pa. Super. 1985)). Seckel points out
that the court’s order did not instruct Seckel to return or destroy any
allegedly misappropriated Centennial documents. Id. The order also did not
prohibit Seckel from using such documents. Id. Thus, according to Seckel,
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the trial court’s opinion “suggests that [it] found that irreparable harm would
be caused by the hiring of additional employees of Centennial who were not
restricted from taking unspecified documents from Centennial.” Id. at 13.
Building on that suggestion, Seckel contends that Centennial failed to
adduce sufficient evidence of monetary loss from Seckel’s past hiring of 30%
of Centennial’s loan officers. Seckel’s Brief at 13. In Seckel’s view,
Centennial’s contention that it lost $500,000 in the fourth quarter of 2015,
after $70 million of business went to Seckel, is in tension with Centennial’s
assertion, in one of its pleadings, that Centennial was one of the “fastest
growing private companies in America.” Id. at 14 (citing R.R. at 376a).
Seckel then shifts to whether irreparable harm could flow from any use
of Spadaccini’s customer list.13 Seckel’s argument necessarily presumes
that the customer list is a trade secret, though Seckel does not concede that
point. Seckel argues:
If before a trial on the merits, Seckel makes a mortgage loan to
any person listed on a customer list that is determined to be
improper, then Centennial can easily prove that Seckel made a
loan to such customer and calculate the lost revenues from any
such loan. Given that most customers do not come back for a
new mortgage loan for five to ten years, it is unlikely that there
could be a large quantity of loans that Seckel could make using
any allegedly improperly obtained customer list. Thus, the use
of Ms. Spadaccini’s customer list until that case goes to trial,
could not cause Centennial to go out of business . . . .
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13For ease of discussion, we refer to the customer list as “Spadaccini’s” list.
At trial, the parties may resolve whether the information in that list qualifies
as a Centennial trade secret or belongs to Spadaccini.
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Seckel’s Brief at 14. Therefore, according to Seckel, “the alleged harm
Centennial would suffer if Seckel solicited its employees or hired its
employees without restricting what documents the employees could take,
can be adequately compensated by money damages,” and no preliminary
injunction should have issued. Id. at 15.
Centennial counters that it introduced evidence that Seckel actively
recruited almost 30% of its sales force, which directly resulted in reduced
revenue. Centennial’s Brief at 14. Centennial emphasizes that Seckel’s
chief financial officer obtained confidential information from Spadaccini’s
laptop. Id. at 14-15. Thus, Centennial reasons that because its loss is more
than solely a monetary loss, Seckel’s reliance on Three County Servs., is
misplaced. Id. at 16. Centennial posits that the facts of this case are more
akin to Kessler v. Broder, 851 A.2d 944 (Pa. Super. 2004), in which we
recognized that under existing case law, “the impending loss of a business
opportunity or market advantage may aptly be characterized as an
‘irreparable injury’ for . . . the purpose of a preliminary injunction.” Id.
(quoting Kessler, 851 A.2d at 951).14 Centennial also points out that even
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14 In Kessler, a dispute arose between the majority and minority
shareholders of corporations that reviewed magnetic resonance images
(“MRIs”). Kessler, 851 A.2d at 945 & n.4, 948. MRI images need to be
reviewed by radiologists, and, under an oral agreement, the majority
shareholders were supposed to allocate about one-third of the MRI reviews
to the minority shareholder. Id. at 945, 948. Because the majority
shareholders failed to adhere to the allocation agreement, the trial court
issued a mandatory preliminary injunction directing them to comply. Id. at
945. In doing so, the court rejected a defense argument that the plaintiffs
(Footnote Continued Next Page)
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if the monetary loss is small, it “foreshadows the disruption of established
business relations which would result in incalculable damage should the
competition continue . . . .” Id. at 17 (quoting West Penn Specialty MSO,
Inc. v. Nolan, 737 A.2d 295, 299 (Pa. Super. 1999)).
In Nolan, this Court observed that “the purpose sought to be achieved
by the issuance of a preliminary injunction is the avoidance of irreparable
injury or gross injustice until the legality of the challenged action can be
determined.” Nolan, 737 A.2d at 299 (quotation marks and citation
omitted). The Court affirmed the issuance of preliminary injunctive relief
because, among other reasons, the defendant’s departure from the plaintiff
to work for a competitor damaged the plaintiff’s existing customer
relationships and substantially undercut the plaintiff’s competitiveness. Id.
We agreed that even if a monetary loss is small or unascertainable,
irreparable injury nevertheless may result from the disruption of established
customer relationships, as well as a potential loss of a business opportunity
or market advantage. Id.
Here, as in Nolan, Seckel’s contention that the monetary loss is
relatively minimal or unascertainable does not negate the irreparable harm
caused by its conduct. The harm flows from the disruption of established
(Footnote Continued) _______________________
failed to establish irreparable harm because their loss of revenue was “fully
compensable by money damages,” reasoning that the plaintiffs were entitled
to an injunction because they were being inhibited from competing in the
marketplace. Id. at 951-52. On appeal, we agreed with the trial court’s
reasoning in justifying injunctive relief. Id. at 953.
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customer relationships and loss of potential business opportunities should
improper competition continue. The record set forth above supports a
conclusion that Seckel’s hiring of almost one-third of Centennial’s loan
officers resulted in an immeasurable loss of business opportunities and
market advantage.
We also note that irreparable harm will have resulted if Spadaccini’s
customer list is ultimately determined to be Centennial’s trade secret. 15
Under the PUTSA, a “trade secret” is defined to include a “customer list,”
provided it is subject to, among other conditions, efforts to “maintain its
secrecy.” 12 Pa.C.S. § 5302. Injunctive relief may issue if there is an actual
or threatened misappropriation of such a trade secret. Id. § 5303(a).
“Misappropriation” is defined as either “acquisition of a trade secret of
another by a person who knows or has reason to know that the trade secret
was acquired by improper means,” or “disclosure or use of a trade secret of
another without express or implied consent . . . .” Id. Notably, “use” is not
a required element of either definition. See id.; Synthes, Inc. v. Emerge
Med., Inc., 25 F. Supp. 3d 617, 712 (E.D. Pa. 2014). 16 The PUTSA’s
protection of trade secrets is a statutory mandate, and the Supreme Court
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15The trial court has not yet decided whether the list is a protected trade
secret and we therefore do not address that issue.
16“Although the decisions of federal courts are not binding on this Court, we
may rely on them for guidance.” Cresci Const. Servs., Inc. v. Martin, 64
A.3d 254, 258 n.7 (Pa. Super. 2013) (citation omitted).
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has held “that where the offending conduct sought to be restrained through
a preliminary injunction violates a statutory mandate, irreparable injury will
have been established.” SEIU Healthcare Pa. v. Commonwealth, 104
A.3d 495, 508 (Pa. 2014) (collecting cases).17
Our review of the record supports the trial court’s conclusion that
Seckel solicited Spadaccini, accessed her Centennial laptop to retrieve her
customer list, and e-mailed the list to Mr. Seckel. N.T., 2/4/16, at 120.18
Therefore, if Centennial can prove that Seckel’s acquisition of Spadaccini’s
customer list violates the PUTSA, the requirement of irreparable injury
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17 In support of this holding, the Supreme Court cited the following
authorities in SEIU:
Commonwealth v. Coward, 489 Pa. 327, 414 A.2d 91, 98–99
(1980) (holding that where a statute prescribes certain activity,
the court need only make a finding that the illegal activity
occurred to conclude that there was irreparable injury for
purposes of issuing a preliminary injunction); Pennsylvania
Public Utility Commission v. Israel, 356 Pa. 400, 52 A.2d
317, 321 (1947) (holding that when the Legislature declares
certain conduct to be unlawful, it is tantamount to calling it
injurious to the public, and to continue such unlawful conduct
constitutes irreparable injury for purposes of seeking injunctive
relief); Commonwealth ex rel. Corbett v. Snyder, 977 A.2d
28 (Pa. Cmwlth. 2009) (affirming issuance of a preliminary
injunction and finding that irreparable harm was presumed
where there was a credible violation of the state consumer
protection statute).
SEIU Healthcare Pa., 104 A.3d at 508.
18 We note a significant distinction between retrieving and saving the
customer list for Spadaccini’s own use and what was done here: e-mailing
the customer list to Mr. Seckel, who presumably had no prior knowledge of
Spadaccini’s customers.
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automatically will have been satisfied. SEIU Healthcare Pa., 104 A.3d at
594-95.
Likelihood of Success on Centennial’s Unfair Competition Claim
Seckel’s initial premise is that Centennial failed to establish that
Spadaccini’s customer list was confidential or a trade secret. Seckel’s Brief
at 17, 21. Furthermore, Seckel argues, Centennial had no enforceable
confidentiality agreement with its employees. Seckel concedes that
Spadaccini signed a confidentiality agreement over a year after Centennial
hired her, but insists that a lack of consideration renders that agreement
unenforceable. Id. at 21. Thus, it appears Seckel is arguing that no unfair
competition claim could lie when the information at issue is not protected by
a contract or other source of legal redress. Id. at 17, 20-21. Seckel
bolsters its argument by summarizing the trial court’s oral findings that it
was unclear to the court whether the information at issue was confidential.
Id. at 23-24.
Seckel argues that Centennial failed to demonstrate that it offered
Spadaccini a job solely for the purpose of obtaining Centennial’s customer
list. Seckel references Spadaccini’s own testimony that she — not Seckel —
wanted to bring the customer list and that Seckel did not hire her for the list.
Seckel’s Brief at 24-25. Spadaccini was not aware, according to Seckel,
whether she was subject to a confidentiality provision. Id. at 25. Seckel
argues that the record was unrebutted that it never asked any Centennial
employee that Seckel hired to take away Centennial documents and bring
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them to Seckel. Id. Seckel reiterates that Centennial has not established
that Seckel (1) was aware of any alleged wrongdoing by any Centennial
employee; (2) possessed or used any of Centennial’s allegedly confidential
information; and (3) hired Centennial’s employees for the purpose of
harming Centennial. Id. at 26. With respect to the last point, Seckel notes
that it had interviewed but declined to hire three of Centennial’s employees.
Id.19
In response, Centennial notes that it presented six claims against
Seckel, but that Seckel has limited its challenge to only the unfair
competition claim. Centennial’s Brief at 18. In Centennial’s view, Seckel
waived “[a]ny challenge to Centennial’s likelihood of success on any [of] the
five other claims that independently support the trial court’s injunction.”
Id.20 Further, Centennial maintains that the record established that Seckel
“[s]ystematically induced” 30% of Centennial’s employees to leave with the
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19 Seckel acknowledges that one of its ex-Centennial employees, Walsh,
exhibited hostility to Centennial over a pay dispute. But, citing to mid-trial
commentary by the trial court (see N.T., 2/4/16, at 165-66), Seckel asserts
that the trial court found that Walsh was arguing about a “personal matter”
between Centennial and Walsh and that it would be a “stretch” to impute
Walsh’s actions to Seckel. Seckel’s Brief at 26-27. We note that we are
bound by the trial court’s order and decision setting forth its reasoning, but
not by commentary made before the parties completed and rested their
cases.
20 In reply, Seckel contends that the trial court’s opinion “does not explicitly
state to which causes of action the court’s order was directed.” Seckel’s
Reply Brief at 1. Seckel maintains that after a review of the transcript, “it is
apparent” that the “court’s finding of likelihood of success” was limited only
to Centennial’s unfair competition claim. Id. at 2.
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purpose of crippling or destroying Centennial. Id. at 18-19. Centennial
highlights Seckel’s improper pursuit of Spadaccini and access of her
Centennial laptop to obtain information that Centennial insists qualifies for
trade secret status. Id. at 19, 22.
As set forth above, a court should issue a preliminary injunction only if
the moving party has established, among other things, a prima facie right to
relief. Synthes USA Sales, 83 A.3d at 249-50. The Court in Synthes
explained:
To establish a reasonable probability of success on the merits,
the moving party must produce sufficient evidence to satisfy the
essential elements of the underlying cause of action. Whether
success is likely requires examination of legal principles
controlling the claim and potential defenses available to the
opposing party. The mere possibility that the claim might be
defeated does not preclude a finding of probable success if the
evidence clearly satisfies the essential prerequisites of the cause
of action.
Id. at 250 n.4 (citation omitted).
Initially, we note that a common law unfair competition claim is
relatively broad in scope and is not limited to the misappropriation of trade
secrets. Pennsylvania State Univ. v. Univ. Orthopedics, Ltd., 706 A.2d
863, 867 (Pa. Super. 1998) (“A claim of unfair competition encompasses
trademark infringement, but also includes a broader range of unfair
practices, which may generally be described as a misappropriation of the
skill, expenditures and labor of another” (citation omitted)). In Reading
Radio, Inc. v. Fink, 833 A.2d 199 (Pa. Super. 2003), appeal denied, 847
A.2d 1287 (Pa. 2004), this Court explained:
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Offering employment to another company’s at-will employee is
not actionable in and of itself. However, systematically inducing
employees to leave their present employment is actionable when
the purpose of such enticement is to cripple and destroy an
integral part of a competitive business organization rather than
to obtain the services of particularly gifted or skilled employees.
Further, when the inducement is made for the purpose of having
the employees commit wrongs, such as disclosing their former
employer’s trade secrets or enticing away his customers, the
injured employer is entitled to protection.
Id. at 212 (citations and quotation marks omitted) (affirming jury verdict
finding defendant liable for, among other claims, unfair competition).
“[W]hen a company hires essentially all of the sales/marketing staff of one
agency, the purpose in doing so is to induce the clients of that agency to
move their business with that sales force.” B.G. Balmer & Co. v. Frank
Crystal & Co., Inc., 148 A.3d 454, 466, 472 (Pa. Super. 2016) (affirming
award of punitive damages following plaintiff’s successful verdict on, among
other claims, unfair competition), appeal denied, 2017 WL 1015542 (Pa.
Mar. 4, 2017).
Seckel’s first argument — that the contested information is not a
protectable trade secret — assumes that an unfair competition claim is
limited in scope. But to succeed on an unfair competition claim, Centennial
was not limited to demonstrating that Spadaccini’s customer list was
confidential or a trade secret. See Reading Radio, 833 A.2d at 212.
Similarly, it was unnecessary for Centennial to establish that Seckel had the
intent of hiring Spadaccini for the customer list. See id. Centennial, as
Seckel recognized in its brief, Seckel’s Brief at 26, could succeed in its unfair
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competition claim by establishing that Seckel hired Centennial’s employees
with the intent of harming Centennial.
Recognizing our highly deferential standard of review, WMI Grp., 109
A.3d at 747-48, the record supports the trial court’s issuance of a
preliminary injunction. As noted above, Seckel acknowledged hiring one of
Centennial’s loan processors and six out of Centennial’s twenty-two loan
officers, or almost 30%. N.T, 2/4/16, at 26, 131. Of those six, Mr. Seckel
personally recruited two, and he reached out to other Centennial employees.
Id. at 125-26. Seckel also hired two former Centennial loan officers after
they were “let go.” Id. at 49, 131.
The record also reflects that Walsh, formerly a Centennial loan officer
and now a vice-president at Seckel, e-mailed threats to the president of
Centennial from his personal account. N.T., 2/4/16, at 64-65, 68. Walsh
said he would destroy Centennial unless he was paid what he believed he
was owed. Centennial’s Ex. 59; R.R. at 964a. Walsh also posted a similar
threat on his Facebook page. Centennial’s Ex. 60; R.R. at 966a. Although
the court had questioned whether Walsh’s actions could be imputed to
Seckel, N.T., 2/4/16, at 166, its opinion cited the personal threat as a basis
for injunctive relief. Trial Ct. Op. at 2.
Taking all of this evidence together, the record substantiates the trial
court’s determination that injunctive relief was warranted because
Centennial demonstrated a likelihood of success on its unfair competition
claim. Although Seckel did not hire three of Centennial’s employees, its
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hiring of almost 30% of Centennial’s loan officers, in conjunction with the
threat to destroy Centennial, is sufficient to establish that a purpose of hiring
Centennial’s employees was to cripple and destroy Centennial. See Reading
Radio, 833 A.2d at 212.21 Because Centennial has established a likelihood
of success on this claim, we need not examine whether Centennial could
similarly succeed at trial on the other five claims.
The Trial Court’s Failure To Require an Injunction Bond
Although our review of an order granting preliminary injunctive relief is
highly deferential, WMI Grp., 109 A.3d at 747-48, the trial court must still
comply with the applicable rules of law in entering the injunction. Whether
the trial court properly complied with a Rule of Civil Procedure is a question
of law. See Sahutsky v. H.H. Knoebel Sons, 782 A.2d 996, 998 (Pa.
2001).
For its last issue, Seckel asserts that Pennsylvania Rule of Civil
Procedure 1531(b) required that Centennial post a bond before an injunction
could be entered. Seckel notes that the trial court’s order failed to provide
for the posting of security and argues that “an appellate court must
invalidate a preliminary injunction if a bond is not filed by the plaintiff.”
Seckel’s Brief at 27 (citing Berger v. W. Jefferson Hill Sch. Dist., 669
A.2d 1084, 1086 (Pa. Cmwlth. 1995) (citing Christo v. Tuscany Inc., 454
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21Of course, the fact-finder may reach different conclusions following a final
hearing.
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A.2d 1042, 1044 (Pa. Super. 1982)), appeal denied, 677 A.2d 840 (Pa.
1996)).
Centennial concedes that a bond was not posted, but asserts that the
bond’s absence does not require this Court to vacate the injunction.
Centennial’s Brief at 23. Centennial posits that when issuance of an
injunction is proper, an appropriate remedy is to remand for the sole
purpose of setting a bond. Id. at 24 (citing Walter v. Stacy, 837 A.2d
1205, 1210 (Pa. Super. 2003)). Centennial does not object to posting a
reasonable bond but suggests the issue would be moot if it again filed, and
the court now granted, a motion to set bond. As the trial court did not order
a Pa.R.A.P. 1925(b) statement, the court did not address the issue of the
bond in its Rule 1925(a) opinion.
As a prefatory matter, because Centennial filed, but the court denied
without prejudice, a motion to set a bond, Order, 6/22/17, this issue is not
moot and is properly before us for disposition. The applicable rule is
Pa.R.C.P. 1531(b), which provides that —
[A] preliminary or special injunction shall be granted only if
(1) the plaintiff files a bond in an amount fixed and with
security approved by the court, naming the Commonwealth
as obligee, conditioned that if the injunction is dissolved
because improperly granted or for failure to hold a hearing,
the plaintiff shall pay to any person injured all damages
sustained by reason of granting the injunction and all legally
taxable costs and fees[.]
Pa.R.C.P. 1531(b)(1) (emphasis added).
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In Walter, the trial court issued a preliminary injunction but refused
to order a bond. Walter, 837 A.2d at 1208. This Court held that —
The bond “requirement is mandatory and an appellate court
must invalidate a preliminary injunction if a bond is not filed by
the plaintiff.” Soja v. Factoryville Sportsmen’s Club, 361 Pa.
Super. 473, 522 A.2d 1129, 1131 (1987) (emphasis supplied).
“Even if the trial court’s order was otherwise proper, its failure to
require the posting of a bond mandate[s] our reversal of its
decision.” Id.
Id. The Court concluded —
[W]e have no choice but to vacate the order of the trial court
due to its failure to require a bond. We note however, that
although the court’s failure in this regard renders the injunction
null, the error may be cured by the re-issuance of the
preliminary injunction if the order includes the requirement of a
bond.
Id. (footnote omitted). Similarly, in Christo, because the trial court erred
in not imposing a bond, we vacated the injunction and remanded to have the
court and plaintiffs comply with Rule 1531(b). Christo, 454 A.2d at 1044.
Here, notwithstanding both parties’ agreement that the trial court
must require a bond, the trial court declined to impose that requirement.
The court did not explain its reasoning, but its decision was erroneous. See
Pa.R.C.P. 1531(b); Walter, 837 A.2d at 1208; Christo, 454 A.2d at 1044.
The trial court failed to comply with the plain language of 1531(b), which
mandates a bond. See Sahutsky, 782 A.2d at 998. Therefore, we are
constrained to vacate the injunctive order and remand with instructions to
reissue the injunction with a bond.
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Order vacated. Matter remanded with instructions. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/26/2017
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