Amquip Crane Rental v. Crane & Rig Services , 199 A.3d 904 ( 2018 )

J-A25038-17
2018 PA Super 315AMQUIP CRANE RENTAL, LLC AND IN THE SUPERIOR COURT
MAXIM CRANE WORKS, L.P. OF PENNSYLVANIA
Appellees
v.
CRANE & RIG SERVICES, LLC; A CRANE
RENTAL, LLC; HARVEY RAY GRAHAM;
KRISTIAN B. BRUU; ROBBIN O. RAINEY;
AND THOMAS NEWELL
Appellants No. 871 EDA 2017
Appeal from the Order Entered February 10, 2017
In the Court of Common Pleas of Bucks County
Civil Division at No: 2016-06632
BEFORE: OTT, J., STABILE, J., and STEVENS, P.J.E.*
OPINION BY STABILE, J.: FILED NOVEMBER 27, 2018
Appellants Harvey Ray Graham, Kristian B. Bruu, Robbin O. Rainey, and
Thomas Newell (collectively “the Individuals”), along with Appellants Crane &
Rig Services, LLC (“C&R”) and A Crane Rental, LLC (“ACrane”), appeal from a
preliminary injunction prohibiting the Individuals from (1) working in the crane
rental industry in limited geographic areas, (2) soliciting customers of
Appellees Amquip Crane Rental, LLC (“AmQuip”) and Maxim Crane Works, L.P.
(“Maxim”), and (3) using AmQuip’s confidential information. AmQuip
employed the Individuals prior to their respective separations from that
*
Former Justice specially assigned to the Superior Court.
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employment. The Individuals joined a rival crane rental company, ACrane,
until they were terminated concurrent with the entry of the preliminary
injunction. In this appeal, the Individuals challenge the preliminary injunction
on the grounds that (1) Newell did not breach his duty of loyalty to AmQuip;
(2) the trial court made erroneous factual rulings; and (3) the court abused
its discretion in enforcing noncompetition covenants that Graham, Bruu and
Rainey entered into with AmQuip. We affirm.1
Appellees AmQuip and Maxim were acquired by a third party in July
2016 and are in the process of a formal operational merger. Together, they
represent one of the largest crane companies in the world. AmQuip-Maxim2
is a global crane rental company with approximately $700 million in annual
revenue. It operates forty to fifty branch locations; employs more than 2,500
individuals; serves over 6,600 customers; has a fleet of over 1,200 cranes;
and boasts the largest production crane in the world, which can lift
approximately 3,100 tons. AmQuip is valued at roughly $1.4 billion. AmQuip
1 Although C&R and ACrane have joined in this appeal, the trial court entered
the preliminary injunction against the Individuals, not against either LLC.
Accordingly, we affirm against C&R and ACrane on the ground that they lack
standing to appeal. See Pa.R.A.P. 501 (only aggrieved parties may appeal);
In Re McCune, 705 A.2d 861, 864 (Pa. Super. 1997) (to be “aggrieved party”
entitled to appeal, party’s interest in litigation must be adversely affected in
manner which is both direct and immediate).
2 For the sake of brevity, unless context requires greater specificity, we will
refer to these entities together as “Amquip.”
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and Maxim maintain principal places of business in Trevose, Pennsylvania and
Bridgeville, Pennsylvania, respectively.
In contrast, ACrane is a startup crane rental company with only 45
cranes. C&R is a crane financing company. Both companies are owned in
equal shares by Christopher Anderson and William McCabe.
The Individuals, who range in age from their mid-fifties to mid-
seventies, joined AmQuip between 2008 and 2013 and worked at AmQuip’s
Atlanta branch office. Graham was the branch manager of the Atlanta office,
and Bruu, Rainey and Newell were salesmen. As a condition of employment,
Graham, Bruu, and Rainey each signed noncompetition, nonsolicitation and
confidentiality covenants with AmQuip. These covenants prohibited Graham,
Bruu, and Rainey from competing with AmQuip and soliciting AmQuip
customers or employees for two years after their employment with AmQuip.
Newell did not sign any noncompetion, nonsolicitation or confidentiality
covenants. All four Individuals, however, signed an AmQuip Employee
Handbook that set forth a company confidentiality policy.
AmQuip’s Atlanta branch was successful during the Individuals’ tenure,
and Newell, Bruu, and Rainey were outstanding salesmen. During the
injunction hearing, there was ample evidence that AmQuip’s resources and
processes enabled the Individuals’ to obtain new customers and increase
revenue from customer relationships they had prior to joining AmQuip. Newell
admitted that he gained new customers while at AmQuip through use of
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AmQuip’s resources. N.T., 1/25/17, at 45. AmQuip acquired two of its largest
customers, Ansco and SAC Wireless, after Newell joined AmQuip in 2008; they
did not come with him to AmQuip. Likewise, Rainey testified that “it was a
good many customers that [he] began selling to for the first time after [he]
began [his] employment with AmQuip[.]” N.T., 1/26/17, at 6-7.
The Individuals had access to confidential Amquip information, such as
customer lists, customer order histories, vendor lists, pricing formulas, and
branch financial information. Graham testified that he had access to the
following information classified as confidential in AmQuip’s Code of Business
Conduct and Ethics: customer lists, customer usage histories, customer
requirements, customer contact information, confidential pricing information,
price quotations and bids made to specific customers and the customers’
responses to those quotations and bids, pricing strategies, pricing and
discount information unique to specific customers, information concerning the
prospective crane rental needs of specific customers, business leads,
confidential contractual rental terms, marketing strategies, business plans,
information concerning equipment availability and allocation, information
concerning employee compensation and incentives, financial information, and
cost information. N.T., 1/24/17, at 66-67, Reproduced Record (“R.R.”) at
191a. Graham admitted that AmQuip considered this information confidential
and would not provide this information to competitors. N.T., 1/24/17, at 67.
He also conceded that he “had a pricing formula for the [AmQuip] office” that
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he did not share with anybody outside of AmQuip while he was employed
there. Id. at 68. AmQuip’s corporate office developed these pricing
strategies, N.T., 1/26/17, at 94 and provided Graham with a customized
dashboard that allowed Graham to access a range of customer and financial
information for the AmQuip Atlanta branch, all of which Graham factored into
his pricing formula. N.T., 1/27/17, at 5, “R.R.” at 374a; N.T., 1/24/17, at 67-
68. Graham used AmQuip customer information, supplier information,
marketing plans and strategies, and “[c]orporate, financial and strategic
information” on a daily or weekly basis. N.T., 1/24/17, at 165. Graham also
admitted to having access to AmQuip’s utilization reports, financials, and all
of its client contracts for the Atlanta office. N.T., 1/24/17, at 165; N.T.,
1/25/17, at 18.
Likewise, Newell had access to AmQuip’s customer information,
including their names and contact information from billing records, rental
history, and pricing history. N.T., 1/25/17, at 45-47. He also had access to
AmQuip’s pricing information and bids. Id. at 46. Newell admitted that he
had information regarding the prospective crane rental needs of particular
customers and would not divulge such information to competitors. Id. at 46-
47. He also acknowledged that AmQuip’s pricing information “we talked about
in our AmQuip Atlanta office was confidential.” Id. at 50, 52. Bruu testified
that he could access a wide variety of AmQuip’s confidential information on its
AS400 computer systems such as customer names, customer contact
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information, customer requirements, billing information, and product
information.
In July 2016, AmQuip and Maxim were both acquired by a third party.
Subsequently, they have been merging into one operational entity. On August
11, 2016, Graham left AmQuip. The parties disagreed as to whether AmQuip
terminated Graham or whether he resigned, but the trial court found that he
resigned because he intended to join ACrane.
In August 2016, Graham met with Anderson and McCabe to discuss
forming ACrane, a new crane rental company, in Atlanta. To set up ACrane,
Anderson needed Graham’s input on crane rental pricing to evaluate the
feasibility of opening a new crane rental company in the Atlanta marketplace,
and Graham admitted providing this information to Anderson. On Sunday,
August 14, 2016, Anderson sent an email to McCabe with an attachment
forecasting ACrane’s opening in September 2016. In the body of the email,
Anderson stated that he needed Graham’s help in utilization, labor rates,
billing rates, fuel cost and permit costs. Graham testified that he provided
Anderson labor and billing rates. The email’s attachment contained a forecast
for branch profit and listed Graham and other persons as employees of the
new company’s Atlanta branch. On August 16, 2016, Graham met with
Anderson and McCabe in Pittsburgh to make further plans for ACrane’s Atlanta
Office.
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Bruu, Rainey and Newell, while still employed by AmQuip, assisted
Graham in setting up the new business. On August 23, 2016, Newell emailed,
from his AmQuip email address to his home email address, a quote template
that AmQuip used. From his home, Newell forwarded the quote template to
Judy Burns, AmQuip’s then-billing manager and ACrane’s future billing
manager, who then emailed it to Bruu. ACrane used a quote form with its
own name and logo on the top but with AmQuip locations, including its Trevose
headquarters location, on the bottom.
In an email to Anderson and McCabe on Friday, September 2, 2016,
Graham discussed recruitment of AmQuip employees and diversion of AmQuip
customers and discussed how the other Individuals would either provide or
need pickup trucks. More specifically, Graham discussed diverting AmQuip’s
largest customers to ACrane, particularly Service Electric, a significant
customer of AmQuip’s, having recently generated about $250,000 in revenue
for AmQuip’s Atlanta Branch Office with Newell overseeing the account.
Graham also stated that ACrane needed to conduct contract reviews for
Georgia Power and Pike Electric, customers who had recently paid an
aggregate of $514,000 to AmQuip and were two of Rainey’s major accounts.
Graham revealed the Individuals’ intention to hire all employees of AmQuip’s
Atlanta Branch Office and thus take over this office’s customer base.
At Graham’s invitation, Newell, Bruu and Rainey met McCabe and
Graham at a restaurant in suburban Atlanta to discuss employment at ACrane.
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On September 28, 2016, C&R sent an e-mail to Newell, Bruu and Rainey
attaching new hire paperwork, including direct deposit forms. Within the next
two days, Newell and Bruu completed this paperwork.
Prior to leaving AmQuip, the Individuals began diverting AmQuip
customers to ACrane. Newell admitted that, while still employed by AmQuip,
he told AmQuip’s customers, including its largest Atlanta customer, Ansco,
that a new crane rental company would be opening, and he offered to assist
them in transferring their business to the new company. In September 2016,
while still employed at AmQuip, Newell made arrangements for a contact he
had at Ansco to introduce him to Lindsay Triplett, Ansco’s vendor manager.
On September 30, 2016, Newell forwarded Triplett an email from Graham
attaching a Certificate of Insurance form and a W-9 form for ACrane,
documents that a crane rental company needs to do business with a customer.
Newell concluded his email by requesting Triplett to send the completed forms
to him so that ACrane could begin servicing Ansco the following Monday.
On Friday, September 30, 2016, Newell sent an email to Graham, Bruu,
Rainey, Burns, and Shannon Graham with the subject, “[p]roof read this & let
me know bf I send this to everyone.” N.T., 1/25/17, at 96-100. The email
stated:
Due to the merger of Amquip Crane Service & Maxim Crane I do
not believe the service you have been accustomed to can be
sustained {Maxim will be in charge of dispatch}. Effectively
immediately I will be resigning from Amquip & joining with a new
crane company along with all my colleagues & most of the
operators you have become accustomed to working with. With
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that being said I know there will be some transition difficulties &
I assure you we will do this as fast & accurately as possible.
The name of the company is A Crane & We have at this time 10
cranes in town & many more coming this way. I do feel like this
is the only way we can maintain the service we want to provide &
you want to receive—I do appreciate the work you have in trusted
to us over these many years & hope you will continue to allow us
to do the same. We will do everything possible
ALL our telephone #’s will remain the same but we will have new
Email addresses. {Effectively today any correspondence via email
needs to come to our new emails}
R.R. at 76a. Bruu and Rainey, who were still working for AmQuip at that time,
both responded: “Sounds good to me.” N.T., 1/25/17, at 101.
On Sunday, October 2, 2016, Newell gave notice of his intent to resign
the next day. On October 3, 2016, Newell wrapped up his affairs at AmQuip
and deleted all business information from his AmQuip-issued computer. He
then began sending AmQuip customers a modified version of the email that
the other Individuals had approved. It stated:
Effective 10/2/16 I will no longer be working with Amquip crane
service - Maxim Crane will be handling the day to day operation
of the crane service & Under these circumstances I do not feel you
will be able to receive the same quality of service that you have
been receiving & we are used to providing.
We are in the process of making sure ALL your crane & rigging
service will be handled to your complete satisfaction. Effective
IMMEDIATELY any email’s should come to this new address
tomwnewell@outlook.com My tele.# is the same 770-653-3304.
R.R. 106a.
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In just three months of operation during 2016, ACrane generated over
$2,000,000 in sales in Atlanta and was projected to generate $10,000,000 in
sales in its first year of operation.
On October 26, 2016, AmQuip filed an action against the Individuals
alleging breach of contract, tortious interference with business relations,
breach of common law duty of loyalty and civil conspiracy. Several weeks
later, AmQuip filed a motion for preliminary injunction seeking to enjoin the
Individuals from using confidential AmQuip business information and working
for a competing crane rental company. The trial court held a four-day hearing
on the injunction motion. In an opinion and order entered on February 10,
2017, the court entered the following preliminary injunction against the
Individuals:
a. [The Individuals] are hereby enjoined from engaging directly or
indirectly in the crane rental business within the geographic
territory serviced by the Atlanta, Georgia; Birmingham, Alabama;
Mobile, Alabama; and Memphis, Tennessee branch offices of
Amquip and/or Maxim Crane Works, L.P.;
b. [The Individuals] are hereby enjoined from directly or indirectly
soliciting, causing any person to solicit, or assisting in (sic) any
other person in soliciting the employment of any person who is at
the time of the solicitation, or who was within thirty (30) days of
such solicitation, an officer or employee of AmQuip’s;
c. [The Individuals] are hereby enjoined from directly or indirectly
soliciting, causing any other person to solicit, or assisting any
other person with soliciting any customer or client of Amquip’s to
become a customer or client of any other company which directly
or indirectly competes with Amquip;
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d. [The Individuals] are hereby enjoined from utilizing, for any
purpose, any confidential or proprietary business information of
Amquip’s or Maxim’s; and
e. The injunction granted herein is effective immediately and shall
remain in effect until further Order of Court.
f. Plaintiffs are directed to post of (sic) bond in the amount of
$50,000[.00] within ten (10) days of the date of this Order.
Order, 2/10/17.
The Individuals filed a timely appeal to this Court and filed a timely
statement of matters complained of on appeal. On May 9, 2017, the trial court
issued a Pa.R.A.P. 1925 opinion that relied in part on its February 10, 2017
opinion and added supplemental analysis.
Appellants raise four issues in this appeal:
1. Whether the trial court’s entry of a preliminary injunction as to
[Newell] was proper, when Newell had no effective restrictive
covenant and had no duty of loyalty to his prior employer that
could be protected to prevent any resultant irreparable harm?
2. Whether the trial court was confronted with and fairly
considered evidence sufficient to support the entry of a
preliminary injunction as to Graham, Bruu, Rainey and Newell?
3. Whether the trial court properly entered a preliminary
injunction against Graham, Bruu, Rainey, and Newell, despite
decades of Pennsylvania case law suggesting that those parties
engaged in no conduct justifying such entry?
4. Whether the trial court properly balanced the hardships of the
parties in such a manner as to meaningfully consider the rights
offended by the entry of a preliminary injunction?
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Appellants’ Brief at 4. Preliminarily, the trial court held that Pennsylvania law
governs all substantive issues between the parties. Because none of the
parties disputes this ruling, we will apply Pennsylvania law to this appeal.
To obtain a preliminary injunction, the moving party must prove six
elements:
1) the injunction is necessary to prevent immediate and
irreparable harm that cannot be adequately compensated by
damages; 2) greater injury would result from refusing an
injunction than from granting it, and, concomitantly, issuance of
an injunction will not substantially harm other interested parties
in the proceedings; 3) a preliminary injunction will properly
restore the parties to their status as it existed immediately prior
to the alleged wrongful conduct; 4) 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, [it] must show that it is likely to
prevail on the merits; 5) 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.
Hendricks v. Hendricks, 175 A.3d 323, 330 (Pa. Super. 2017). In reviewing
preliminary injunction orders, this Court must “conduct a searching inquiry of
the record. Accordingly, . . . the scope of review in preliminary injunction
matters is plenary.” Warehime v. Warehime, 860 A.2d 41, 46 n.7 (Pa.
2004). Our standard of review is “highly deferential.” Summit Towne
Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828 A.2d 995, 1000 (Pa.
2003). Under this standard, “[we do] not inquire into the merits of the
controversy, but rather examine[] only the record to ascertain whether any
apparently reasonable grounds existed for the action of the court below. We
may reverse if the trial court’s ruling amounted to an abuse of discretion or a
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misapplication of law.” Morgan Trailer Mft. Co. v. Hydraroll, Ltd., 759
A.2d 926, 932 (Pa. Super. 2000) (quotation omitted).
I.
In their first argument, the Individuals assail the entry of a preliminary
injunction against Newell, the only Individual who did not enter into a written
covenant not to compete with AmQuip. We hold that Newell breached his
common law duty of loyalty to AmQuip by diverting AmQuip’s customers to
ACrane while still employed by AmQuip and inducing the other Individuals to
breach the covenants not to compete that they entered into with AmQuip.
Moreover, the trial court properly enjoined Newell from utilizing AmQuip’s
confidential information. We address each of these rulings seriatim.
Newell’s diversion of customers. While still employed with AmQuip,
Newell told AmQuip’s customers that a new crane rental company would be
opening, offered to assist them in transferring their business to the new
company, and emailed Ansco, AmQuip’s largest customer, about setting up
the new company as a vendor. Ansco became a customer of ACrane.
Although Newell never formally entered into a covenant not to compete
with AmQuip, his conduct still constituted a breach of his common law duty of
loyalty. This Court has written:
“There can be no doubt that an agent owes a duty of loyalty to his
principal, and in all matters affecting the subject of his agency, he
must act with the utmost good faith in the furtherance and
advancement of the interests of his principal.” Sylvester v.
Beck, [] 178 A.2d 755, 757 ([Pa.] 1962). See also: 1 P.L.E.
Agency § 32. Every agent “is subject to a duty not to act or to
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agree to act during the period of his agency for persons whose
interests conflict with those of the principal in matters in which
the agent is employed.” Restatement (Second) of Agency § 394.
He is “subject to a duty to his principal to act solely for the benefit
of the principal in all matters connected with his agency.”
Restatement (Second) of Agency § 387. No man can serve two
masters. Onorato v. Wissahickon Park, Inc., [] 244 A.2d 22,
25 ([Pa.] 1968), citing Matthew 6:24. An agent is a fiduciary with
respect to matters within the scope of his agency and is required
to act solely for the benefit of his principal in all matters concerned
with the agency. Onorato v. Wissahickon Park, Inc., supra [],
244 A.2d at 26; 1 P.L.E. Agency § 32.
SHV Coal, Inc. v. Continental Grain Co., 545 A.2d 917, 920-21 (Pa. 1988),
reversed on other grounds, 587 A.2d 702 (Pa. 1991); see also Restatement
(Second) of Agency, § 393, comment (e) (“After the termination of his agency,
in the absence of a restrictive agreement, the agent can properly compete
with his principal as to matters for which he has been employed. . . . He is
not, however, entitled to solicit customers for such rival business before the
end of his employment”).
In SHV Coal, while employed by SHV, an employee set out to divert
business, which he was being paid to acquire for SHV, to a competitor with
whom he had agreed to accept employment. He did this without any
knowledge or consent by SHV, who was not even aware that he was
contemplating other employment. We held that this was “a clear violation of
[the employee’s] duty of loyalty.” Id., 545 A.2d at 921. Similarly, without
AmQuip’s knowledge or consent, and before leaving AmQuip, Newell induced
AmQuip’s customers to move their business to ACrane, a clear violation of his
duty of loyalty.
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Appellants rely erroneously on PTSI, Inc. v. Haley, 71 A.3d 304 (Pa.
Super. 2013), for the proposition that Newell did not violate his duty of loyalty.
In PTSI, two trainers who worked at a sports training facility (PTSI) decided
to form their own training facility. The employees were at-will and not subject
to any noncompetition, nondisclosure, or nonsolicitation agreements. They
resigned from PTSI, leased space for their own facility, and informed PTSI
clients that they were starting their own business. Soon thereafter, clients of
PTSI began training at the new facility. PTSI filed an action against the former
employees alleging breach of their duty of loyalty to PTSI. The trial court
entered summary judgment against PTSI, and this Court affirmed. We upheld
the trial court’s conclusion that the trainers did not contact PTSI clients before
they left PTSI. We continued:
Even if Haley and Piroli did contact PTSI’s clients while still
employed by PTSI, PTSI presents no evidence that Haley and Piroli
did so improperly. For example, text messages attached to PTSI’s
motion for summary judgment demonstrate that Piroli was
circumspect and cautious in dealing with clients just days before
resigning from PTSI.
Id. at 310. By observing that the trainers only sent “circumspect and
cautious” text messages to the employer’s customers prior to their departure,
we implied that the trainers would have violated the duty of loyalty had they
made pre-departure attempts to divert customers to their new company. That
is what Newell did in this case, and that is the crucial distinction between this
case and PTSI.
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Appellants’ reliance on Socko v. Mid-Atlantic Systems, 126 A.3d
1266 (Pa. 2015), is also misplaced. Socko held that an employment
agreement containing a covenant not to compete may be challenged for lack
of consideration even though the agreement expressly indicates that the
parties “intend to be legally bound” pursuant to the Uniform Written
Obligations Act—an issue unrelated to the present case. In passing, the
Socko court mentioned that in the absence of an agreement between an
employer and employee to the contrary, an employee may compete with his
employer after terminating his employment. Id. at 1273. Socko did not
address the issue of pre-departure solicitation that is at the center of this case.
Newell’s assistance to other Individuals in breaching their
noncompetition covenants. This Court’s analysis in Reading Radio, Inc. v.
Fink, 833 A.2d 199 (Pa. Super. 2003), is instructive on this subject. Kline,
the station manager of a radio broadcasting company (WAGO), gave thirty
days’ notice of his intention to resign his position in order to accept a position
at a rival broadcasting company (WEEU). Kline promised to work diligently
during the thirty-day period to leave WAGO in better shape after he left than
it had been before his departure. During the thirty-day period, however, the
manager transferred a significant car dealership advertising account to
defendant Reading Eagle, and he solicited his two best sales representatives
to leave WAGO and join WEEU. The sales representatives were subject to
noncompetition covenants; Kline was not. The sales representatives tendered
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their resignations to Kline directly, who, although aware of the sales
representatives’ noncompetition covenants, did not attempt to enforce them.
WAGO filed an action against Kline, WEEU, and the sales representatives
alleging breach of their common law duty of loyalty, and the jury returned a
verdict for damages against Kline and WEEU.3 This Court affirmed, reasoning:
To prevail on a claim of breach of fiduciary duty of loyalty, a
plaintiff must demonstrate that his agent acted for a person or
entity whose interests conflicted with the plaintiff. Restatement
(Second) of Agency § 394 (1958). . . .The facts demonstrate that,
while still employed by WAGO. . . . Kline actively engaged in
diverting [the sales representatives] from WAGO to . . . WEEU,
and he refused to enforce the covenants-not-to-compete to which
they were bound. . . . Kline’s failure to protect the integrity of the
covenants-not-to-compete and the sales staff at WAGO were clear
violations of his duty of loyalty[.]
Id. at 211.
Like the station manager in Fink, Newell breached his duty of loyalty by
helping other AmQuip employees—Graham, Bruu and Rainey—breach their
own noncompetition covenants by leaving AmQuip and joining ACrane. The
evidence demonstrates that before Bruu and Rainey left AmQuip, they
convened with Newell to meet ACrane’s principals to discuss employment at
AmQuip. And before leaving AmQuip, Newell forwarded AmQuip’s price
template to an intermediary, who in turn forwarded it to Bruu.
Newell’s use of and access to AmQuip’s confidential information. The
fourth provision of the preliminary injunction order precluded Newell from
3The parties stipulated to judgment against the sales representatives in the
amount of $1.00, and the claims against them were satisfied.
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utilizing AmQuip’s confidential business information. Appellants argue that
Newell did not steal AmQuip’s trade secrets before or during his departure to
ACrane. We conclude that the court properly entered this provision against
Newell, because there was sufficient evidence that Newell sent some of
AmQuip’s confidential information to ACrane, had access to other confidential
information, and, if left unchecked, would have committed more of the same
acts.
To obtain protection as confidential business information and/or as a
trade secret, the information “must be the particular secrets of the
complaining employer, not general secrets of the trade in which he is
engaged.” Trial Court Opinion (“T.C.O.”), 5/9/17, at 7. Trade secrets consist
of “any formula, pattern, device, or compilation of information which is used
in one’s business, and which gives him an opportunity to obtain an advantage
over competitors who do not know or use it.” Id. (citing Rohm and Haas
Co. v. Lin, 992 A.2d 132, 154 n.4 (Pa. Super. 2010)). Trade secrets need
not be technical in nature. Air Products and Chemicals, Inc. v. Johnson,
442 A.2d 1114, 1124 (Pa. Super. 1982). Although items like customer lists
do not automatically constitute confidential information, they do constitute
trade secrets where the compilation of that information represents a “material
investment of [the] employer’s time and money.” Colteryahn Dairy, Inc. v.
Schneider Dairy, 203 A.2d 469, 473 (Pa. 1964). Even when the employee
has not entered a noncompetition agreement, the court may enjoin him from
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accepting employment with a competitor when new employment would likely
result in the disclosure of trade secrets. Air Products, 442 A.2d at 1120.
AmQuip generated its pricing formulas by combining confidential
business information—including crane utilization schedules, market conditions
and operation costs that were unique to AmQuip’s Atlanta location—into what
it called the “AmQuip Bible” of pricing and customer information. N.T.,
1/26/17, at 93-94. AmQuip provided its salesmen with “extensive financial,
technical, and material support in order to develop customer relationships on
behalf of AmQuip.” T.C.O., 5/9/17, at 8; N.T., 1/26/17, at 89-90. AmQuip
also made significant investments in its salesmen to grow and retain important
customer relationships. T.C.O., 5/9/17, at 8. AmQuip provided Appellants
access to AmQuip’s “customer lists, utilization schedules, rental contracts,
equipment acquisition costs, vendor lists, and pricing models,” all of which
were confidential business information of AmQuip. Id. at 9; N.T., 1/25/17, at
45-46. In particular, the trial court credited testimony that Newell and the
other Individuals had access to AmQuip’s pricing formulas, which were
generated using sensitive information regarding crane utilization schedules,
market conditions, and operation costs that were unique to AmQuip branch
locations. T.C.O., 5/9/17, at 7-8; N.T., 1/26/17, at 94-96. The trial court
found it important that AmQuip salesmen “relied on AmQuip’s confidential
information to provide service to existing customers and acquire new
business.” T.C.O., 5/9/17, at 8. The court also found persuasive the fact that
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AmQuip protected its confidential information by requiring employees to sign
non-competition agreements and/or confidentiality policies. Id. While Newell
did not sign a noncompetition agreement, he did sign AmQuip’s confidentiality
policy. The court held that, under the circumstances presented by AmQuip,
“Amquip customer lists, customer rental/usage histories, rental contracts,
pricing formulas, equipment costs, branch financial information, and other
related information is entitled to protection as a trade secret.” Id. at 9.
AmQuip demonstrated that Newell had access to AmQuip’s trade
secrets, such as names and contact information of customers from billing
records, rental history, and pricing history, AmQuip’s pricing information and
bids, and information regarding prospective crane rental needs of particular
customers. While still working at AmQuip, Newell appropriated AmQuip’s
quote template by e-mailing it to a private account and ACrane merely put its
letterhead on top of that AmQuip document. This evidence, along with
Newell’s diversion of customers to ACrane and his assistance to the other
Individuals in breaching their own noncompetition covenants, provided
sufficient grounds for the trial court to enjoin Newell from making further use
of AmQuip’s confidential information.
II.
The Individuals contend that the trial court made multiple errors in its
factual conclusions. We disagree. First, the Individuals assert that the trial
court overlooked the fact that Rainey and Bruu were intentionally misled into
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believing that they were not subject to any restrictive covenant. Before
Rainey and Bruu left AmQuip, the Individuals claim, they asked Human
Resources whether there were any noncompetition agreements that applied
to them, and Human Resources responded by sending them unsigned
noncompetition forms. The evidence shows, however, that Bruu admitted
signing a noncompetition agreement when AmQuip hired him, which
agreement was attached to AmQuip’s complaint. N.T., 1/25/17, at 146-49.
The evidence also shows that Rainey signed a noncompetition agreement
when he joined AmQuip. Id. at 228-30.
The Individuals contend that they had the right to leave AmQuip for a
competitor because AmQuip’s merger with Maxim in 2016 impaired the quality
of service to AmQuip’s customers. We know of no caselaw, nor do the
Individuals cite any, that unhappiness with an employer’s merger decisions or
its alleged quality of customer service entitles employees to breach their
noncompetition covenants or (in Newell’s case) their common law duty of
loyalty.
The Individuals also argue that AmQuip failed to demonstrate
irreparable harm to its business. This argument lacks merit. AmQuip
demonstrated that the group of skilled, seasoned Individuals left AmQuip to
join a competitor, ACrane, and diverted some of AmQuip’s largest customers
to ACrane, including its largest customer, Ansco. As a result, in just three
months of operation, ACrane generated over $2,000,000 in sales in Atlanta
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and was projected to generate $10,000,000 in sales in its first year of
operation. ACrane clearly caused substantial damage to AmQuip’s Atlanta
business and would have caused even more damage absent the trial court’s
intervention.
The Individuals claim that the trial court erred in determining that
Graham voluntarily resigned from AmQuip, pointing to statements on Human
Resource documents that he was involuntarily terminated. The trial court
explained on pages 13-15 of its May 9, 2017 opinion that notwithstanding the
Human Resource documents, credible testimony during the preliminary
injunction hearing demonstrated that Graham voluntarily resigned in August
2016 due to his plan to leave AmQuip and join ACrane. Having reviewed the
evidence cited in the trial court’s opinion, we see no reason to disturb this
factual finding.
III-IV.
In their third and fourth arguments, which we review together, the
Individuals complain at length that the trial court failed to apply the balancing
test articulated by our Supreme Court in Hess v. Gebhard & Co., Inc., 808
A.2d 912 (Pa. 1988), for determining whether to enforce Rainey’s, Bruu’s and
Graham’s noncompetition covenants. This test requires the court to balance
the employer’s protectible interests against the employee’s interests in
earning a living in his chosen occupation and the public interest. Id. at 920-
21. Not only must the employer prevail under this balancing test, but also the
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employer must furnish proof that the noncompetition covenant is supported
by adequate consideration and is reasonably limited in duration and
geographic scope. WMI Group, Inc. v. Fox, 109 A.3d 740, 748 (Pa. Super.
2015).
The trial court determined, and we agree, that AmQuip met all of these
requisites. T.C.O., 2/10/17, at 7. Rainey, Bruu and Graham entered the
noncompetition covenants as a condition of employment at AmQuip. The law
is clear that the taking of employment is sufficient consideration for a
noncompetition covenant. Records Ctr. v. Comprehensive Management,
Inc., 525 A.2d 433, 435 (Pa. 1987). Appellants do not contest the
reasonableness of the duration or geographic scope of the noncompetition
covenants. In addition, as discussed above, the evidence demonstrated that
the Individuals had access to AmQuip’s confidential business information, the
value of which was shown by ACrane’s exponential growth after the
Individuals joined this fledgling company. Enforcement of the noncompetition
covenants was necessary to prevent additional misuse of this information.
The Individuals insist that any difficulties incurred by AmQuip are
miniscule compared to the difficulty that the Individuals will face in finding
new employment after working in the crane industry for decades.
Nevertheless, Rainey, Bruu and Graham brought this problem on themselves
by breaching their noncompetition covenants. See Quaker Chemical Corp.
v. Varga, 509 F. Supp. 2d 469, 480 (E.D.Pa. 2007) (applying Pennsylvania
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law) (collecting cases) (“the fact that Varga, by resigning from Quaker and
joining Stuart in spite of knowing about the non-compete covenant, brought
this dispute on himself weighs against him here”).4 To accept the Individuals’
argument would be to frustrate large employers who have substantial
interests in safeguarding against employees who would otherwise betray
them. As the court in Varga reasoned:
[I]n a case such as this, the harm to the employee almost always
seems greater than the harm to the company. The employer, as
a company—in this case, a very successful company, it appears—
will be able to financially survive an employee’s leaving for a
competitor. And the employee, as an individual, apparently will
have a hard time financially surviving if he is out of work. By this
superficial calculus, the harm to the employee is always greater
. . . If this were the rule, no restrictive covenant would be enforced
against a large and successful company.
But the numerous courts that have specifically enforced non-
compete covenants against the employee have concluded that,
regardless of the relative wealth of the employer and employee,
the harm to the employer trumps the harm to the employee.
Id. The public also has a substantial interest in the enforcement of
noncompetition covenants, for this practice “will discourage unfair
competition, the misappropriation and wrongful use of confidential information
and trade secrets, and the disavowal of freely contracted obligations.” Id. at
481 (citing Graphic Mgmt. Assocs. v. Hatt, 1998 WL 159035, at *19
(E.D.Pa. Mar.18, 1998)).
4While decisions from federal district courts are not binding on this Court, we
may rely on them for persuasive authority. EMC Mortgage, LLC v. Biddle,
114 A.3d 1057, 1064 n.6 (Pa. Super. 2015).
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For these reasons, we conclude that the trial court acted within its
discretion by entering the preliminary injunction against the Individuals. We
direct that copies of the trial court's February 10, 2017 and May 9, 2017
opinions be attached to any future filings in this case.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/27/18
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