Therapy Source, Inc. v. Lidstone, C. ( 2019 )

J-A07020-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
THERAPY SOURCE, INC. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
COLLEEN LIDSTONE, ALICE :
FORSYTHE, AND OPENING DOORS :
THERAPY, INC. : No. 2431 EDA 2018
:
Appellants :
Appeal from the Order Entered August 20, 2018
In the Court of Common Pleas of Montgomery County Civil Division at
No(s): No. 2018-00065
BEFORE: OLSON, J., DUBOW, J., and STEVENS*, P.J.E.
MEMORANDUM BY DUBOW, J.: FILED JUNE 28, 2019
Appellants, Colleen Lidstone, Alice Forsythe, and Opening Doors
Therapy, Inc., appeal from the August 20, 2018 Order entered in the
Montgomery County Court of Common Pleas granting a Preliminary Injunction
in favor of Appellee, Therapy Source, Inc. After careful review, we affirm.1
In 2001, Stacey and Joshua Cartagenova founded Appellee, a
Montgomery County-based business that provides therapy-staffing personnel
____________________________________________
1 On February 6, 2019, Appellants’ counsel filed an Application to Withdraw as
Counsel, the disposition of which this Court deferred pending disposition of
this appeal. Subsequently, counsel filed a Notice of Substitution of Counsel
and Praecipe for Withdrawal of Appearance. We, thus, deny counsel’s
Application to Withdraw as moot.
____________________________________
* Former Justice specially assigned to the Superior Court.
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to educational institutions of all kinds around the United States.2 Appellee
works almost exclusively by using a computer database to match customer
school districts with therapists.3 Appellee employs a dedicated marketing
group that keeps the database updated.
Appellee hired Forsythe in 2005, and Lidstone in 2010, in Appellee’s
sales department, and provided them with extensive training. At the time
Appellee hired them, both Forsythe and Lidstone signed employment
agreements with non-disclosure and non-compete provisions.
In 2016, Appellee gave Lidstone and Forsythe new positions and
compensation packages. Both signed new employment agreements that
included non-disclosure, non-solicitation, and non-compete provisions.
In the summer of 2017, Lidstone and Forsythe left their jobs with
Appellee and began a new business, Opening Doors Therapy. Opening Doors
Therapy provides the same educational staffing services as Appellee.
Appellee learned that Appellants had started a business in direct
competition with it. Thus, on January 2, 2018, Appellee commenced this
____________________________________________
2 Therapy-staffing personnel includes speech, physical, and occupational
therapists; psychologists; behavioralists; and other providers of early
intervention. See N.T., 3/13/18, 5. Therapy Source has approximately
600,000 therapists in its database, operates in 40 states, employs
approximately 55 people, and has approximately 360 customers. Id. at 6, 8,
10.
3 Joshua Cartagenova described the Therapy Source database as “the value
of our entire company” and “one of the most important parts of our entire
business” because it contains “a combination of about 630,000 therapists
[and] maybe about 10,000 or so clients.” N.T., 3/13/18, at 11-12.
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lawsuit by filing a Complaint seeking injunctive relief against Appellants and
raising claims of Civil Conspiracy, Tortious Interference with Existing and
Prospective Business Relationships, Common Law Unfair Competition, Breach
of Contract, and Misappropriation and Misuse of Property against Lidstone and
Forsythe individually.
On January 19, 2018, Appellee filed a Petition for a Preliminary
Injunction. The trial court held hearings on the Petition on March 13, 2018,
and July 24, 2018, at which Appellee presented the testimony of Joshua
Cartagenova; Mark Costello, Appellee’s director of finance and operations;
Edgar Brian Harris, a forensic examiner who collected and examined
Appellants’ computer hard drive;4 and Appellants Lidstone and Forsythe as on
cross. Lidstone and Forsythe acknowledged that they had non-compete
clauses in their employment agreements. Appellants’ counsel cross-examined
each witness, with the exception of Appellants themselves.
At the close of Appellee’s case, Appellants’ counsel made an oral Motion
for a “demurrer” on the Petition for Preliminary Injunction and presented
lengthy argument in support of the Motion. N.T., 7/24/18, at 115-132. The
court took the Motion under advisement and ordered the parties to submit
memoranda in support of their relative positions. Id. at 137-38. Appellants’
counsel requested that the court schedule another hearing date for Appellants
____________________________________________
4 The court qualified Mr. Harris as an expert witness in the field of computer
forensics and forensic analysis.
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to present their case in the event that the court denied their Motion for a
“demurrer.”5 Id. at 138. The court indicated that it would decide Appellants’
request after reviewing the parties’ post-hearing memoranda. Id.
On August 20, 2018, the court granted Appellee’s Petition for a
Preliminary Injunction. The following day, Appellants filed a Notice of Appeal
from that Order.6
On August 21, 2018, Appellants filed an Emergency Motion for Stay
Pending Appeal, which the trial court denied on August 23, 2018. In that
Order, the court also directed Appellants to “post bond in the amount of $500.”
Order, 8/23/18.7, 8 The trial court docket reflects, and the parties agree, that
Appellee placed $500 in escrow the next day.
Appellants raise the following three issues on appeal, which we have
reordered for ease of disposition:
____________________________________________
5 Appellants’ counsel conceded that Appellees bore the burden of proof with
respect to the Preliminary Injunction and that, therefore, “it isn’t necessarily
necessary” for Appellants’ counsel to question Lidstone and Forsythe, even
though Appellee had called them as on cross. N.T., 7/24/18, at 140.
6 Both Appellants and the trial court complied with Pa.R.A.P. 1925.
7 The trial court has acknowledged that it mistakenly required the
“defendants” to post a bond. It is clear to this Court, as it was to the parties,
that the trial court intended to direct the “plaintiff” to post a bond and the
“plaintiff”—Appellee—did so on August 24, 2018.
8 Appellants also filed an appeal from the court’s August 23, 2018 Order
denying their Emergency Motion for Stay Pending Appeal. See Therapy
Source, Inc. v. Colleen Lidstone, Alice M. Forsythe, and Opening Doors
Therapy, Inc., No. 2965 EDA 2018.
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1. Whether the trial court committed reversible error by failing to
require [Appellee] to post a bond as a condition of obtaining a
preliminary injunction?
2. Whether the trial court abused its discretion by finding
[Appellee] proved it satisfied all six essential prerequisites for
injunctive relief and effectively denied [Appellants’] Motion for
Demurrer (Nonsuit), particularly where [Appellee] failed to
introduce into evidence the contracts it sought to enforce?
3. Whether the trial court committed reversible error and/or
violated [Appellants’] due process rights by refusing to allow
[Appellants] to present its case-in-chief in opposition to
[Appellee’s] Petition for Preliminary Injunction after agreeing
[that Appellants] could preserve witness examination and the
presentation of its evidence until that point of the hearing and
then granting [Appellee’s] Petition based upon an incomplete
record?
Appellants’ Brief at 3-4.
Requirement to Post a Bond
In their first issue, Appellants claim that this Court must vacate the
August 20, 2018 Order granting Appellee’s Petition for a Preliminary Injunction
because the trial court failed to order Appellee to file a bond pursuant to
Pa.R.C.P. 1531(b). Appellants’ Brief at 17-19. Appellants argue that the court
committed reversible error when it granted the Preliminary Injunction without
requiring a bond, and that this failure “cannot be corrected or cured after an
appeal has been made to this [C]ourt.” Id. at 17-19 (quoting Rose Unifs.,
Inc. v. Lobel, 184 A.2d 261, 263 (Pa. 1962)).
Pa.R.C.P. 1531(b) provides, in relevant part, that, when granting a
preliminary injunction, the court must order the movant to file a bond. See
Pa.R.C.P. 1531(b)(1). The statutory requirement that a plaintiff seeking a
permanent injunction post a bond is, therefore, mandatory and this Court
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“must invalidate a preliminary injunction if a bond is not filed by the plaintiff.”
Walter v. Stacy, 837 A.2d 1205, 1208 (Pa. Super. 2003) (quoting Soja v.
Factoryville Sportsmen’s Club, 522 A.2d 1129, 1131 (Pa. Super. 1987)).
However, the trial court can cure this defect caused by failing to order a bond
by reissuing the preliminary injunction with a bond requirement. Walter, 837
A.2d at 1208.9
Both Rule 1531 and this Court in Walter make it clear that it is
mandatory that a plaintiff in whose favor the court has granted a preliminary
injunction post a bond. Although in the instant case the August 20, 2018
Order granting Appellee a Preliminary Injunction did not include a directive
that Appellee post a bond, three days later the court issued a separate Order
directing Appellee to post a $500 bond. Appellee posted the required bond
the next day. Thus, we conclude that Appellee and the court have complied
with Rule 1531 and Appellants are not entitled to relief on this claim.10
____________________________________________
9Significantly, Rule 1531 does not specify that the same order that grants the
preliminary injunction contain the directive that the plaintiff post a bond.
Rather, the plain language of the Rule requires only that “a preliminary or
special injunction shall be granted only if … the plaintiff files a bond in an
amount fixed by the court . . . .” Pa.R.C.P. 1531(b)(1).
10 Moreover, even if we were to conclude that the court’s failure to include in
a provision requiring Appellee to post a bond invalidated the August 20, 2018
Order, we would, in the interest of judicial economy decline to grant Appellants
relief as the trial court’s August 23, 2018 Order cured this defect by requiring
Appellee to post a bond and Appellee has complied with that Order.
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Preliminary Injunction
Next, Appellants assert that the trial court abused its discretion in
finding that Appellee proved each of the six essential prerequisites for a
preliminary injunction. Appellants’ Brief at 19-28. In particular, Appellants
complain that the court erred by relying on documents—Lidstone’s and
Forsythe’s 2016 employment agreements—and facts allegedly not in
evidence. Id. at 21-22.11
The following principles guide our review of an order granting injunctive
relief: “The standard of review applicable to preliminary injunction matters ...
is highly deferential. This highly deferential standard of review states that in
reviewing the grant or denial of a preliminary injunction, an appellate court is
directed to examine the record to determine if there were any apparently
reasonable grounds for the action of the court below.” Duquesne Light Co.
v. Longue Vue Club, 63 A.3d 270, 275 (Pa. Super. 2013) (citation and
internal quotation marks omitted).
A party must establish the following six “essential prerequisites” to
obtain injunctive relief:
____________________________________________
11 In the alternative, they contend that the non-compete provisions of
Lidstone’s and Forsythe’s employment agreements were not enforceable
because the provisions were not supported by adequate consideration and are
geographically unreasonable as a matter of law. Appellants’ Brief at 22-28.
This argument pertains to the merits of the underlying controversy, which is
beyond the scope of our review of the decision granting the preliminary
injunction. Santoro v. Morse, 781 A.2d 1220, 1225 (Pa. Super. 2001).
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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.
Warehime v. Warehime, 860 A.2d 41, 46-47 (Pa. 2004). A trial court has
“apparently reasonable grounds” for its denial of injunctive relief where it finds
that the petitioner has not satisfied any one of the “essential prerequisites.”
Id. at 46.
“We will interfere with the trial court's decisions regarding a preliminary
injunction only if there exist no grounds in the record to support the decree,
or the rule of law relied upon was palpably erroneous or misapplied. It must
be stressed that our review of a decision regarding a preliminary injunction
does not reach the merits of the controversy.” Santoro v. Morse, 781 A.2d
1220, 1225 (Pa. Super. 2001) (citations omitted).
After a careful review of the parties’ arguments and the record, we
conclude that the trial court did not abuse its discretion in granting a
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Preliminary Injunction in favor of Appellee, and we adopt the comprehensive
Opinion of the Honorable Arthur S. Tilson as to this issue as our own. See
Trial Ct. Op., 10/2/18, at 7-14 (concluding that Appellee had established each
of the six essential prerequisites to obtaining injunctive relief).12
Due Process Challenge
In their third issue, Appellants allege, relying on Pubusky v. D.M.F.
Inc., 239 A.2d 335 (Pa. 1968), that the trial court violated their due process
rights by refusing to allow them to present any evidence at the preliminary
injunction hearing. Appellants’ Brief at 12.
The burden of proving each of the essential prerequisites for the
imposition of a preliminary injunction is on the moving party. Warehime,
860 A.2d at 47. In this case, Appellee was the moving party.
Appellants’ reliance on Pubusky is unavailing. In Pubusky, supra, the
trial court initiated a hearing on a requested preliminary injunction.
Interrupting defendant’s cross-examination of plaintiff and preventing
defendant from presenting any evidence or testimony on his own behalf, the
lower court discontinued the hearing and granted plaintiff a preliminary
injunction. Our Supreme Court vacated the decree and remanded the case
____________________________________________
12Insofar as Appellants claim they are entitled to relief because the Lidstone’s
and Forsythe’s 2016 employment agreements were not part of the factual
record, we find this claim waived as Appellants did not raise this issue before
the trial court either by making a timely objection at the hearing or in their
Rule 1925(b) Statement. See Pa.R.A.P. 302 (“Issues not raised in the lower
court are waived and cannot be raised for the first time on appeal.”).
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for an evidentiary hearing after concluding that “[i]t ... is fundamental that all
of the parties are entitled to a hearing before [a preliminary] injunction should
issue.” Pubusky, 239 A.2d at 336–37. The Supreme Court in Pubusky also
explained that “a preliminary injunction should not issue at least until the
rights of the plaintiff are clearly established.” Id. at 336. This includes
protecting the rights of litigants “to fully cross-examine all adverse witnesses”
and to present relevant testimony. Id. at 337 (emphasis added).
In the instant case, Appellee—the moving party—called numerous
witnesses including both Lidstone and Forsythe as on cross, each of whom
provided lengthy testimony. Importantly, Appellants’ counsel cross-examined
each of the witnesses with the exception of Appellants 13 and moved exhibits
into evidence. Then, at the close of Appellee’s case-in-chief, rather than
present Appellants’ case, Appellants’ counsel moved for a “demurrer.” N.T.,
3/13/18, at 114-115. In support of the Motion, Appellants’ counsel noted that
“there’s a litany of cases that talk about the fact of even having a hearing on
a preliminary injunction is actually discretionary with the court” and argued
that she thought the court had enough information before it to determine
whether Appellee had proven the elements required to obtain a preliminary
injunction. Id. at 115.
____________________________________________
13 At the conclusion of Lidstone’s testimony, her counsel declined the
opportunity to question Lidstone and indicated that he “would prefer to do
that in my case.” N.T., 3/13/18, at 182. Rather than question Forsythe,
counsel informed the court that she would reserve her questions for the
defense case. N.T. 7/24/18, at 32.
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After hearing extensive argument from both parties, the court indicated
it would take Appellants’ Motion for a “demurrer” under advisement and
consider it along with the evidence and the parties’ post-hearing memoranda,
in which the court indicated the parties should articulate what they think they
had “proved and why [the court] should go forward either way[.]” N.T.,
7/24/18, at 138.
Then, even though Appellants’ counsel had previously admitted to the
court that she believed the court had all of the evidence it needed to make a
decision on the merits of the preliminary injunction, counsel nonetheless
informed the court that she was concerned that the court would be making a
decision without having heard the defense case. Id. She requested that, if
the court was not inclined to grant Appellants’ Motion for “demurrer,” the court
permit Appellants to present their case against the imposition of the
Preliminary Injunction. Id. The court indicated that it would decide whether
to bring the parties back for further testimony after it reviewed the parties’
memoranda. Id. Appellants’ counsel again reminded the court that counsel
had not presented Appellants’ case and had not questioned either Appellant
when Appellee had called them as on cross. Id. at 140. Relevantly, the court
and Appellants’ counsel agreed that questioning Appellants was not
“necessarily necessary” because Appellee bore the burden of proof on the
issue of the Injunction. Id.
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In addressing Appellants’ argument that the court denied them their
right to due process at the preliminary injunction hearing, the trial court
opined as follows:
This court held two days of hearings on [Appellee’s] Petition.
[Appellants’] counsel cross[-]examined [Appellee’s] witnesses.
Forsythe and Lidstone testified at length, and presented their view
of the evidence in their testimony. The evidence was clear, and
was in fact admitted to by Forsythe and Lidstone, that their
employment agreements contained, inter alia, non-compete, non-
solicitation[,] and non-disclosure restrictions. Evidence was
presented, and acknowledged by Forsythe and Lidstone in their
testimony at the hearings, that they had contacted former
customers and hired former employees of [Appellee]. Post[-
]hearing briefs were submitted by both parties. . . . While
[Appellants] may have additional evidence to present in defense
of the breach of contract and other claims in the [C]omplaint in
this case, the right to and need for a preliminary injunction was
clearly shown. The relief requested was needed timely and no
further testimony was required to show this need.
Trial Ct. Op., 10/2/18, at 14-15 (footnotes omitted).
Contrary to Appellants’ claim, we conclude that the court afforded
Appellants the opportunity to, and Appellants did, in fact, cross-examine the
adverse witnesses and introduce relevant evidence. Rather than present their
own case-in-chief, however, Appellants moved for a “demurrer” and conceded
that: (1) Appellee had the burden of proof, and (2) that the court had enough
information before it to make a determination on the merits of the preliminary
injunction. Appellants, thus, availed themselves of due process.
Consequently, we conclude that the court did not deprive Appellants of their
due process rights. Their claim, thus, warrants no relief.
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Order affirmed. Appellants’ counsel’s Application to Withdraw is denied
as moot.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/28/19
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Circulated 05/23/2019
2018-00065-0065 02:58 Page
Opinion, PM 1
IN THE COURT OF COMMON PLEAS OF
MONTGOMERY COUNTY, PENNSYLVANIA
CIVIL DIVISION
THERAPY SOURCE, INC. Superior Ct. No. 2431 EDA 2018
Plaintiff Comm. Pl. Ct. No. 2018-00065
v.
COLLEN LIDSTONE,
ALICE M. FORSYTHE and
OPENING DOORS THERAPY, INC.
Defendants
OPINION
Tilson, S.J. October 2, 2018
I. INTRODUCTION
Plaintiff/Appellee, Therapy Source, Inc. (hereinafter "Therapy Source" is a company
which, since 2001, has been providing school therapy staffing personnel to educational
institutions. Defendants/Appellees, Colleen Lidstone (hereinafter "Lidstone") and Alice
M. Forsythe (hereinafter "Forsythe") were employed by Therapy Source for eight years
and thirteen years, respectively. Both Lidstone and Forsthye signed Employment
Agreements with Therapy Source which included Non-Disclosure, Non-Solicitation and
Non-Competition Agreements. Lidstone and Forsythe left their jobs in the summer of
2017. In December of 2017, Therapy Source learned that Lidstone and Forsythe had
begun a new business, Opening Doors Therapy, which provides the same educational
staffing services as Therapy Source.
2018-00065-0065 Opinion, Page 2
Upon learning that Lidstone and Forsythe were, through their new company,
allegedly violating the terms of their employment agreements, Therapy Source filed this
lawsuit on January 2, 2018. On January 19, 2018, Therapy Source filed a Petition for a
Preliminary Injunction. Two days of hearings were held concerning this Petition. At the
conclusion of the hearings, based upon the evidence, including testimony by Lidstone and
Forsythe, and exhibits, including the Employment Contracts that were presented at that
hearing, this Court entered an Order granting a Preliminary Injunction on August 20,
2018. Lidstone, Forsythe and Opening Doors timely appealed this Order.
II. FACTS AND PROCEDURAL HISTORY
Therapy Source, located in Montgomery County, Pennsylvania was founded in
2001 by Joshua and Stacey Cartagenova to provide a "full spectrum" of on-line therapy
staffing services to schools and early childhood interventional providers. The positions
Therapy Source helps to fill include speech pathologists, behavioral, occupational and
physical therapists, audiologists and social workers. The work is done almost exclusively
by using a computer database of customers and therapists. Therapy Source hired
Forsythe in 2005 and Lidstone in 2010. Neither had any experience in the therapy
staffing field when they were hired, and both received extensive training by Therapy
Source. When they were hired, both Forsythe and Lidstone signed employment
agreements with non-disclosure and non-compete provisions.
In 2016, both Lidstone and Forsythe were given new compensation packages
which provided for larger bases on which they would receive commissions. Each of their
annual compensation increased under the new plan. See Notes of Testimony, March 13,
2018 hearing, (hereinafter "N.T. 3/13/18") at 188-189. At that time both, Lidstone and
2
2018-00065-0065 Opinion, Page 3
Forsythe each signed new Employment Agreements that again included non-disclosure,
non-solicitation and non-compete restrictions. The non-disclosure provisions define
"Confidential Information" as "information and knowledge pertaining to customers,
contractors, products, services, inventions, discoveries, improvements, innovations,
designs, ideas, trade secrets, proprietary information, advertising, marketing unique
business strategies, sales methods, sales and profit figures, customer and client lists,
forms, contracts invoices, databases, spreadsheets and information regarding the needs of
and relations" between Therapy Source and its customers. In signing their Employment
Agreement, Lidstone and Forsythe acknowledged that:
that the Confidential Information is a valuable and unique asset of the Company
and covenants that, during the Employee's employment by the Company and for a
period of two (2) years thereafter, Employee will not, directly or indirectly, use
the Confidential Information for Employee's own purposes, or directly or
indirectly disclose the Confidential Information to any person, firm or corporation
... except as Employee's duties on behalf of the Company may require; provided
that such obligation of confidentiality shall continue beyond the foregoing two (2)
year limitation to the extent the Confidential Information is a trade secret under
Pennsylvania law ....
The Employment Agreement further included the following "Non-Solicitation and
Non-Competition" provisions:
[d]uring the Employee's employment by the Company and for a
period of two (2) years thereafter, ("Restrictive Period") the
Employee shall not, unless acting pursuant to the terms of this
Agreement, or with prior written consent of the Company's owners,
solicit directly or indirectly or divert Customers, as defined below, or
Potential customers, as defined below to become a customer of a
competitor of the Company ....
During the Employee's employment by the Company and during the
Restrictive Period, the Employee shall not, directly or indirectly,
employ, hire, attempt to employ, solicit or assist any other person in
employing, hiring, soliciting or attempt to employ or hire any current
or former employee or contractor of the Company ....
3
2018-00065-0065 Opinion, Page 4
(d) For so long as Employee is employed by the Company, and for a
period of two (2) years after termination of such employment ...
Employee shall not directly or indirectly anywhere in the states that
the Company conducts business, (i)enter into the employ of... any
person, firm or corporation engaged in the sale or provision of the
same or similar services, provided during the term of Employee's
employment by the Company .... or (ii) engage in any business in
competition with the Company on the Employee's own account, or
become interested in any such business directly or indirectly, as an
individual, partner, shareholder, director, officer, principal, agent
employee, trustee, contractor, consultant ....
( e) In addition, the Employee that, upon termination of the
Employee's employment, the Employee agrees to return any and all
customer lists to the Employer and shall not during the terms of the
Employee's employment or any time thereafter, directly or indirectly
use the Company's customer service list for the Employee's
benefit. ...
The Employment Agreements signed by Lidstone and Forsythe contain provisions
in which they acknowledge Therapy Source's right to injunctive relief in the event
ofa breach.
The evidence shows that Therapy Source and Open Door Therapy,
Lidstone and Forsythe's new company, compete for the same business online
throughout the United States. Further the evidence shows that, and indeed
Lidstone and Forsythe testified that after they started Open Door Therapy, they
contacted customers of Therapy Source. Further both Lidstone and Forsythe
testified that their Open Door currently has contracts with and are placing
contractors with customers with whom they worked while at Therapy Source.
Former employees of Therapy Source were hired to work for Open Door Therapy.
4
2018-00065-0065 Opinion, Page 5
Evidence was presented that appears to show that documents of Therapy Source
were copied by Lidstone shortly before she left to start the new company. 1
At the hearing, Lidstone testified that she started her company, Opening
Doors, in November of 2017. She admitted that Opening Doors was in the same
line of business as Therapy Source and that Opening Doors has "attempted to
work with customers of Therapy Source" and that she had "reached out to some
of these customers herself. She further testified that these were customers for
which she had responsibility when she worked at Therapy Source. She attempted
to do business with customers of Therapy Source in South Carolina, Texas, Ohio,
and Michigan. Opening Doors is doing business with a former Therapy Source
customer with whom Forsythe and Lidstone worked at Therapy Source in
Pennsylvania.2 N.T. 3/13/18" at 136-142.
Forsythe likewise testified that Opening Doors was a direct competitor of Therapy
Source, and that she has attempted to do business with customers of Therapy Source, and
in fact has a contract with at least one such customer for whom she was responsible at
Therapy Source. N.T 3/13/18 at 208-211. She testified that Open Doors entered into a
contract with a company, with which she had worked for twelve years, while at Therapy
Source, Commonwealth Charter, after the instant lawsuit and the petition for a
preliminary injunction were filed, indeed after the first hearing on the petition was filed.
1
Evidence including expert testimony was presented by Therapy Source in an attempt to prove
that Lidstone copied Therapy Source documents shortly before her resignation from Therapy
Source. While this court finds this testimony credible as to the confidential information, any such
evidence is not main the basis for this court's order. The court does find that Lidstone and
Forsythe violated and are violating other terms of their employment agreements. The court is
merely requiring that Lidstone and Forsythe comply with their contractual agreement not to use
or disclose their former employer's confidential documents or information.
2
Lidstone said she was not attempting to do business with any additional former Therapy Source
customers in states other than those five "at the moment."
5
2018-00065-0065 Opinion, Page 6
Notes of Testimony of hearing on July 24, 2018 (hereinafter July N.T.) at 19-23. She also
communicated with therapists with whom she and Lidstone had worked at Therapy
Source. N.T. at 218-219.
After considering the evidence presented at two days of hearings, this court
granted Therapy Source's Petition for a Preliminary Injunction.
The Order entered by this Court on August 20, 2018 provides that:
1. Alice M. Forsythe and Opening Doors Therapy, Inc. are hereby enjoined from
engaging in or conducting the following activities for a period of two years
from September 15, 2017 in any state in which Therapy Source operates.
a) Engaging in business or providing services to any person or entity which
provides therapy staffing solutions to schools, educational institutions or
early intervention services providers.
b) Soliciting the business of any customer or prospective customer,
contractor or prospective contractor to breach or terminate their business
with Lidstone and Forsythe.
c) Directly or indirectly hire or assist any other person or entity in hiring any
current or former employee of Lidstone and Forsythe, Inc. who has or had
access to Confidential Information as defined in the employment
agreement signed by Alice M. Forsythe.
2. Colleen Lidstone and Opening Doors Therapy, Inc. are hereby enjoined from
engaging in or conducting the following activities for a period of two years
from August 18, 2017 in any state in which operates.
a) Engaging in business or providing services to any person or entity
which provides therapy staffing solutions to schools, educational
institutions or early intervention services providers.
b) Soliciting the business of any customer or prospective customer,
contractor or prospective contractor to breach or terminate their
business with Lidstone and Forsythe.
6
2018-00065-0065 Opinion, Page 7
c) Directly or indirectly hire or assist any other person or entity in
hiring any current or former employee of Lidstone and Forsythe,
Inc. who has or had access to Confidential Information as defined
in the employment agreement signed by Colleen Lidstone.
Lidstone, Forsythe and Opening Doors sought a stay of the Order granting the
injunction, which was denied by this court. This Order was amended to require Therapy
Source to post bond. The Superior Court also denied a motion to stay the injunction
entered pending appeal.'
III. DISCUSSION
The standard of review for a trial court's decision to issue a preliminary
injunction is as follows:
on an appeal from the grant or denial of a preliminary injunction, [the
appellate court will] not inquire into the merits of the controversy, but
only examine the record to determine if there were any apparently
reasonable grounds for the action of the court below. Only if it is
plain that no grounds exist to support the decree or that the rule of law
relied upon was palpably erroneous or misapplied will [the appellate
court] interfere with the decision of the trial court.
Jar/ Investments, L.P. v. Fleck, 937 A.2d 1113, 1125 (Pa. Super. Ct. 2007)
quoting Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 573 Pa.
637, 646, 828 A.2d 995, 1000 (2003) (quoting Roberts v. Board of Dirs. of Sch.
Dist., 341 A.2d 475, 478 (1975)). As explained by the Supreme Court in Hess v.
Gebhard & Co. Inc., 808 A.2d 912, 920 (Pa. 2002):
[t]he function of this Court on an appeal from an adjudication in
equity is not to substitute its view for that of the lower tribunal; our
task is rather to determine whether "a judicial mind, on due
consideration of all the evidence, as a whole, could reasonably
have reached the conclusion of that tribunal." Aiken Indus., Inc. v.
Estate of Wilson, 477 Pa. 34, 383 A.2d 808, 810 (1978), cert.
denied, 439 U.S. 877, 99 S. Ct. 216, 58 L.Ed.2d 191 (1978)
3
On September 24, 2018, Lidstone, Forsythe and Opening Doors filed an appeal of the Order
entered on August 23, 2018 denying the stay and requiring bond to be posted.
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2018-00065-0065 Opinion, Page 8
(quoting Masciantonio Will, 392 Pa. 362, 141 A.2d 362, 365
(1958)). As this appeal raises only an issue of law, our review is
plenary. Commonwealth v. Kelley, 801 A.2d 551 (Pa.2002).
To obtain a preliminary injunction, a party must show (1) that it is likely to
prevail on the merits; (2) that the injunction is necessary to prevent immediate and
irreparable harm that cannot be adequately compensated by damages; (3) 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; (4) that a preliminary injunction will
properly restore the parties to their status as it existed immediately prior to the
alleged wrongful conduct; (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. See Iron Age Corp. v. Dvorak, 880 A.2d 657,
662 (Pa. Super. 2005), citing Wareham v. Warehime, 860 A.2d 41, (Pa. 2004).
Equity may enforce a restrictive covenant by entry of a preliminary
injunction when the covenant when it is reasonably necessary to the protection of
the employer, is incident to the employment relationship, supported by
consideration, and when it is reasonably limited in duration and geographic
extent. Sidco Paper Company v. Aaron, 351 A.2d 250, 252 (1976). Employees
who are trying to avoid restrictive covenants bear the burden of proving that the
restriction is unreasonable. See John G. Bryant Co., Inc. v. Sling Testing &
Repair, Inc., 369 A.2d 1164, 1169- 70 (Pa. 1977). In Insulation Corp. of America
v. Brobston, 446 Pa. Super. 520, 534 667 A3d 729, 735 (1995), the court noted
that "it bears noting that there is a significant factual distinction between the
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hardship imposed by the enforcement of a restrictive covenant on an employee
who voluntarily leaves his employer and that imposed upon an employee who is
terminated for failing to do his job."
When a non-competition clause is signed after an employee has
commenced her employment, the covenant is enforceable only if the employee
receives "new and valuable consideration-that is, some corresponding benefit or
a favorable change in employment status." Socko v. mid-Atlantic Systems of CPA,
Inc., 633 Pa. 555, 126 A. 3d 1266, 1275. In Socko, the court noted, "[s]ufficient
new and valuable consideration has been found by our courts to include, inter
alia, a promotion or a change to a compensation package."
Among the interests to be protected by restrictive covenants is customer
good will, defined as "that which 'represents a preexisting relationship arising
from a continuous course of business." Zambelli Fireworks Mfg. Co. v. Wood,
592 F.3d 412, 424 (3d Cir.2010) (quoting Butler v. Butler, 541 Pa. 364, 663 A.2d
148, 152 n. 9 (Pa.1995)). Restrictive 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 v. Gebhard & Co., 570 Pa. 148, 808 A2d 912, 917
(2001). Interference with existing customer relationships constitutes irreparable
harm. See Sheridan Broad Networks, Inc. v. NBN Broad, Inc., 693 A2 989, 995
(Pa. Super. 1997). This harm results in damages that are difficult to calculate and
may not be adequately compensated by money damages. In Courier Times, Inc. v.
United Feature Syndicate, Inc., 300 Pa. Super. 40, 445 A.2d 1288 (1982) the
court noted that interference with business relationships constituted irreparable
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2018-00065-0065 Opinion, Page 10
harm, noting that it "is virtually impossible to value the impending loss of
business opportunities or market advantages resulting such interference."
Non-compete restrictions for two years are routinely upheld as reasonable
in Pennsylvania. See Worldwide Auditing Serv 's, Inc. v. Richter, 587 A.2d 772(Pa. Super. Ct. 1991) (upholding two-year restriction); see also John G. Bryant
Co., Inc. v. Sling Testing & Repair, Inc., 369 A.2d 1164 (Pa. 1977) (upholding
three-year restriction).
In this case, Therapy Source has established its right to enforcement of the
restrictive covenants to which Lidstone and Forsythe agreed to be bound. Therapy
Source is likely to succeed in its claim against Lidstone and Forsythe for breach
of his agreement because the non-compete agreement is valid and enforceable.
Lidstone and Forsythe signed the agreements as part of a restructuring of their
compensation packages.4 Lidstone and Forsythe admitted in their testimony and
pleadings that they aware of the agreements and the requirements therein and that
it was a condition of their employment. Lidstone and Forsythe breached their
obligations under their respective agreements by their work for the company they
started Open Doors Therapy, which is, they admit, a competitor of Therapy
Source.
The evidence in this case, including Lidstone and Forsythe's own testimony,
shows that the covenants which are at issue were incident to Lidstone and
Forsythe's employment with Therapy Source. Lidstone and Forsythe clearly
executed the new employment agreements at issue when provided with a new
4
Lidstone and Forsythe had also signed employment agreements containing restrictive covenants when
they were hired.
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2018-00065-0065 Opinion, Page 11
compensation package! making it incident to their employment and supported by
adequate new consideration.
The restrictive covenants in the non-compete agreements are reasonably
necessary for the protection of Therapy Source's legitimate business interests.
Therapy Source provided ample evidence as to the business needs for the
restrictive covenants to protect its customer lists, its pricing program and the
professional it placed with its customers. The covenants signed protected these
legitimate business interests.
The time duration and geographic range of the restrictions on Lidstone and
Forsythe are reasonable. The Agreements in this case prohibited Lidstone and
Forsythe's attempts to contact Therapy Source's customer base for two years.
The manner of conducting business, which does not have geographic limits,
required that the scope of the covenant be Therapy Source's customers. Forsythe
and Lidstone remain free to contact schools and other educational entities which
were not customers of Therapy Source, of which there are likely many. Lidstone
acted as Regional Director of Therapy Source and was the primary source of
contact with its many of customers. Forsythe was a Senior Account Director and
also was the primary contact with other of Therapy Source's customers. This
restriction is reasonable based on the nature of the work done by Lidstone and
Forsythe at Therapy Source, visiting customers in these geographic areas.
Accordingly, for all of the above reasons, Therapy Source is likely to prevail on
the merits.
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2018-00065-0065 Opinion, Page 12
Therapy Source will suffer immediate and irreparable harm if Lidstone
and Forsythe are not enjoined because violating a restrictive covenant such as this
clearly constitutes irreparable harm. Therapy Source has a significant interest in
protecting its customer base, and in protecting the confidentiality of its business
and pricing information. Lidstone and Forsythe have already obtained business
from some of Therapy Source's customers. Further, some of the employees5 of
Therapy Source have been hired by Open Door Therapy. Testimony shows that
Lidstone and Forsythe continued to contact customers of Therapy Source after the
lawsuit began, and even after the first hearing on the petition for an injunction
was filed. The evidence presented in this case clearly lead to the conclusion that
the threat of continuous violation of the non-compete agreement constitutes
immediate and irreparable harm to Therapy Source. Greater injury would result
to Therapy Source in not entering the injunction than would result to Lidstone and
Forsythe in not doing so. The injunction entered was narrowly tailored to reflect
the terms of the employment restrictions to which Lidstone and Forsythe agreed.
Greater injury would result to Therapy Source in not entering the injunction than
would result to Lidstone and Forsythe in not doing so. This court also finds that
the preliminary injunction will place the parties in the position they were before
the Lidstone and Forsythe breached their employment contract, and will not
adversely affect the public interest in so doing.
Lidstone and Forsythe admitted that they knowingly and willingly signed
an agreement which contained several limitations on their employment or work
5
Open Door placed "independent contractors" rather than employees.
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2018-00065-0065 Opinion, Page 13
were they to leave Therapy Source. They admit that for months they have been
contacting and soliciting the business of customers with whom they worked while
at Therapy Source, and have in fact obtained some of the business from those
customers. Now Therapy Source is seeking to enforce the limitations in their
employment agreements.
The Employment Agreement was signed when Forsythe and Lidstone
were given a new compensation package. Therapy Source has shown that it will
be irreparably harmed if no injunction is entered. The evidence is undisputed that
Lidstone and Forsythe have for months been soliciting Therapy Source's
customers and hiring its contractors or employees, in violation of the employment
contract that they signed when they were given new positions and new
compensation. The harm to Therapy Source caused by the violation of their
agreement not to contact former customers is real and on-going. 6
There is a strong likelihood it will succeed on the merits in its case.
This court finds Therapy Source's witnesses credible and its evidence
convincing. The injunction entered is limited by its terms to the scope, time and
place restrictions Lidstone and Forsythe agreed to when they signed their
Employment Agreements. Keeping in mind the type of business at issue, and
Lidstone and Forsythe's positions at Therapy Source, the court finds that the
restrictions in the Employment Agreements are reasonable and necessary to
6
Counsel for Appellants argued that Forsythe is a "solo parent" and their business is a "woman-
owned start up business" and is in the red and that they are accruing legal fees. However, these
considerations are not determinative. This court must decide the issue based upon the likelihood
Therapy Source will succeed on the merits, as well as the irreparable harm their action are
causing. While not an issue, the testimony shows that Lidstone and Forsythe were paid well at
their jobs before they voluntarily left Therapy Source.
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2018-00065-0065 Opinion, Page 14
protect the legitimate business interests of Therapy Source. Thus, the evidence in
this case clearly shows that "apparently reasonable grounds" exist for the
injunctive relief entered, which merely requires that Appellants abide by the
contract they signed.
In their Statement of Matters Complained of on Appeal,
Appellants/Defendants argue that they were denied due process because they were
not permitted additional time to present their case. This court held two days of
hearings on Therapy Source's Petition. Appellants/Defendants' counsel cross
examined Therapy Source's witnesses. Forsythe and Lidstone testified at length,
and presented their view of the evidence in their testimony. The evidence was
clear, and was in fact admitted to by Forsythe and Lidstone, that their
employment agreements contained, inter alia, non-compete, non-solicitation and
non-disclosure restrictions. Evidence was presented, and acknowledged by
Forsythe and Lidstone in their testimony at the hearings, that they had contacted
former customers and hired former employees of Therapy Source. 7 Post hearing
briefs were submitted by both parties. Based on all the evidence presented and
applicable law, this court entered an order which enjoined Appellants/Defendants
from breaching what this court finds to be valid and reasonable restrictions on
their actions. While Appellants/Defendants may have additional evidence to
present in defense of the breach of contract and other claims in the complaint in
this case, the right to and need for a preliminary injunction was clearly shown.
The relief requested was needed timely, and no further testimony was required to
7
It appears Lidstone and Forsythe continued these contacts in the time period between the two hearings.
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2018-00065-0065 Opinion, Page 15
show this need. 8 The evidence also showed that both when they began their jobs
at Therapy Source and when they were given a new compensation package,
Lidstone and Forsythe agreed to the terms which prevented them from taking the
actions they took when they left their jobs. There was consideration for the
restrictive covenants at issue. Finally, although the bond was initially omitted
from the original order, this omission was corrected within two days, and bond
has been posted.
IV. CONCLUSION
The evidence presented provided reasonable grounds supporting the entry
of the injunction in this case. It is respectfully submitted that the Order entered on
August 20, 2018, as amended on August 23, 2018, should be AFFIRMED.
ARTHUR R. TILSON, S. J.
Cc: Robert Nagle, Esquire
Melissa Murphy Weber, Esquire
8
Counsel for Defendants pointed out that there is a "litany of cases" that say that "even having a
hearing on a preliminary injunction is actually discretionary with the court." N.T. 7/24/18 at 115.
15